<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 9, 2000
REGISTRATION NO. 333-28455
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ONDISPLAY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------
<TABLE>
<S> <C> <C>
DELAWARE 7372 680391052
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
12667 ALCOSTA BOULEVARD, SUITE 300
SAN RAMON, CALIFORNIA 94583
(925) 480-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MARK PINE
CHIEF EXECUTIVE OFFICER
12667 ALCOSTA BOULEVARD, SUITE 300
SAN RAMON, CALIFORNIA 94583
(925) 355-3200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
MICHAEL J. KENNEDY, ESQ. JAY E. BOTHWICK, ESQ.
ROBERT JACK, ESQ. HALE AND DORR LLP
SHELLY R. DOLEV, ESQ. 60 STATE STREET
WILSON SONSINI GOODRICH & ROSATI BOSTON, MA 02109
PROFESSIONAL CORPORATION (617) 526-6000
650 PAGE MILL ROAD
PALO ALTO, CA 94304
(650) 493-9300
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
Upon consummation of the Oberon merger described herein.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(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. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) REGISTRATION FEE(3)
- -----------------------------------------------------------------------------------------------------------------------------
Common Stock $0.001 par value... 2,265,000 shares $0.10 $226,500 $0.00
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents the number of shares of the common stock of the Registrant that
may be issued to stockholders of Oberon Software Incorporated, a
Massachusetts corporation, pursuant to the merger, assuming the exercise of
3,481,639 options to purchase common stock and a warrant to purchase 20,000
shares of common stock.
(2) Estimated solely for purposes of calculating the registration fee required
by the Securities Act of 1933, as amended and computed pursuant to Rules
457(f)(2) based on the book value of Oberon's common stock as of the latest
practicable date.
(3) Pursuant to Rule 457(b) under the Securities Act, $439.50 of the $59.80
registration fee is offset by the filing fee in the same amount previously
paid by Registrant in connection with the filing of preliminary proxy
materials on Schedule 14A on February 18, 2000. Accordingly, a registration
fee is not being paid herewith.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
[ONDISPLAY LOGO]
To our stockholders:
You are cordially invited to attend the special meeting of stockholders of
OnDisplay, Inc. to be held at the principal executive offices of OnDisplay at
12667 Alcosta Boulevard, Suite 300, San Ramon, California 94583 on March 30,
2000 at 9:00 a.m., Pacific time.
The proposals to be acted upon at the meeting are the issuance of OnDisplay
shares of common stock under a merger agreement by and among OnDisplay, ObiOne
Acquisition Corporation, a wholly owned subsidiary of OnDisplay, Oberon Software
Incorporated, and Joseph Chappell as representative of the Oberon stockholders,
as amended, pursuant to which Oberon will become a subsidiary of OnDisplay, an
amendment to the 1996 Stock Plan to increase the number of shares of common
stock reserved for issuance under the plan and approval of the 1999 Employee
Stock Purchase Plan. The proposals are described in detail in the attached
notice of special meeting of stockholders and proxy statement/ prospectus.
After careful consideration, your board of directors has approved the
Oberon merger and the issuance of OnDisplay shares in the merger, and has
determined these transactions to be fair to and in the best interests of
OnDisplay and its stockholders. YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
THE ISSUANCE OF ONDISPLAY SHARES IN THE MERGER, FOR THE AMENDMENT TO THE 1996
STOCK PLAN AND FOR THE APPROVAL OF THE 1999 EMPLOYEE STOCK PURCHASE PLAN.
YOUR VOTE IS VERY IMPORTANT. Whether or not you expect to attend the
meeting, please complete, date, sign and promptly return the accompanying proxy
in the enclosed postage paid envelope so that your shares may be represented at
the meeting. Returning the proxy does not deprive you of your right to attend
the meeting and vote your shares in person.
Sincerely,
/s/ Mark Pine
Chairman of the Board and
Chief Executive Officer
Neither the Securities and Exchange Commission nor any state securities
regulator has approved or disapproved of this transaction or the securities to
be issued or passed upon the adequacy or accuracy of this proxy
statement/prospectus. Any representation to the contrary is a criminal offense.
This proxy statement/prospectus is dated March 9, 2000 and was first mailed to
OnDisplay stockholders on or about March 10, 2000
<PAGE> 3
ONDISPLAY, INC.
12667 ALCOSTA BOULEVARD, SUITE 300
SAN RAMON, CALIFORNIA 94583
(925) 355-3200
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 30, 2000 AT 9:00 A.M.
To our stockholders:
A special meeting of stockholders of OnDisplay, Inc. will be held at the
executive offices of OnDisplay located at 12667 Alcosta Boulevard, Suite 300,
San Ramon, California 94583 on March 30, 2000 at 9:00 a.m., Pacific time, for
the following purposes:
1. To approve the issuance of shares of OnDisplay common stock to
stockholders of Oberon Software Incorporated in connection with the merger
of a wholly-owned subsidiary of OnDisplay with and into Oberon as
contemplated by the Agreement and Plan of Reorganization dated as of
January 17, 2000, among OnDisplay, ObiOne Acquisition Corporation, a
wholly-owned subsidiary of OnDisplay, Oberon and Joseph Chappell as
representative of the Oberon stockholders, as amended.
2. To approve an amendment to the 1996 Stock Plan to increase the
number of shares of common stock issuable under the plan from 4,975,000 to
6,975,000 shares.
3. To approve the 1999 Employee Stock Purchase Plan.
The accompanying proxy statement/prospectus describes the proposed merger
and other proposals in more detail. We encourage you to read the entire document
carefully.
We have fixed the close of business on March 3, 2000 as the record date for
the determination of our stockholders entitled to vote at this meeting.
STOCKHOLDERS OF ONDISPLAY HOLDING IN THE AGGREGATE APPROXIMATELY 54.2% OF
THE ONDISPLAY COMMON STOCK HAVE AGREED TO VOTE ALL OF THEIR SHARES IN FAVOR OF
THE ISSUANCE OF ONDISPLAY COMMON STOCK IN ACCORDANCE WITH THE MERGER AGREEMENT.
CONSEQUENTLY, APPROVAL OF ISSUANCE OF ONDISPLAY COMMON STOCK IN ACCORDANCE WITH
THE MERGER AGREEMENT, AS AMENDED, BY THE ONDISPLAY STOCKHOLDERS IS ASSURED.
By order of the board of directors of
OnDisplay
/s/ Mario Rosati
Secretary
San Ramon, California
March 10, 2000
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE POSTAGE-PAID ENVELOPE
PROVIDED, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING. YOU CAN REVOKE YOUR
PROXY AT ANY TIME BEFORE IT IS VOTED.
<PAGE> 4
OBERON SOFTWARE INCORPORATED
215 FIRST STREET
CAMBRIDGE, MASSACHUSETTS 02142
March 10, 2000
Dear fellow stockholder,
Oberon Software Incorporated has entered into a merger agreement with
OnDisplay, Inc., ObiOne Acquisition Corporation, a Massachusetts corporation and
wholly-owned subsidiary of OnDisplay, and Joseph Chappell as representative of
Oberon's stockholders. Under that agreement, as amended, OnDisplay will acquire
Oberon through the statutory merger of ObiOne Acquisition Corporation, with and
into Oberon. This proxy statement/prospectus is being sent to you to solicit
your proxy to vote for adoption of the merger agreement, as amended, at a
special meeting of stockholders to be held on Thursday, March 30, 2000, at 10:00
a.m. local time at the headquarters of Oberon at 215 First Street, Cambridge,
Massachusetts 02142 and at any adjournment or postponement of that meeting.
In the merger, each share of Oberon common stock and preferred stock will
be exchanged for .0912 shares of OnDisplay common stock. There is no public
trading market for Oberon common stock or preferred stock. OnDisplay common
stock is quoted on the Nasdaq Stock Market under the symbol "ONDS". The closing
price for OnDisplay common stock reported on the Nasdaq Stock Market on March 6,
2000 was $101.00 per share.
The merger has been structured with the intent that you will not recognize
gain or loss for federal income tax purposes on the receipt of OnDisplay common
stock in exchange for your Oberon stock. A more detailed discussion of the
material federal income tax consequences of the merger is contained in the
accompanying proxy statement/prospectus.
Attached is a notice of special meeting of stockholders and a proxy
statement/prospectus relating to the merger. This document describes the merger
in detail. We encourage you to read it carefully and to consider the risk
factors relating to the merger that are described starting on page 22 of this
proxy statement/prospectus.
A SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS, AS WELL AS THE FULL BOARD OF
DIRECTORS, HAS CAREFULLY CONSIDERED THE TERMS OF THE PROPOSED MERGER, AND
DETERMINED THAT THE MERGER AGREEMENT, AS AMENDED, AND THE MERGER ARE IN THE BEST
INTERESTS OF OBERON AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT YOU
VOTE FOR THE ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF THE MERGER.
Your vote is important regardless of the number of shares you own. We urge
you to read the enclosed materials carefully and to complete, sign and date the
enclosed proxy card and return it promptly in the enclosed prepaid envelope,
whether or not you plan to attend the special meeting of stockholders. Your
prompt cooperation and continued support of Oberon is greatly appreciated.
Sincerely,
/s/ Joseph J. Chappell
President and Chief Executive Officer
<PAGE> 5
OBERON SOFTWARE INCORPORATED
215 FIRST STREET
CAMBRIDGE, MASSACHUSETTS 02142
March 10, 2000
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 30, 2000
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of Oberon
Software Incorporated will be held on Thursday, March 30, 2000, at 10:00 a.m.
local time at the offices of Oberon at 215 First Street, Cambridge,
Massachusetts 02142.
Pursuant to Massachusetts law only Oberon stockholders of record as of the
close of business on the next day preceding the date on which this notice is
given are entitled to attend and vote at the special meeting. At the special
meeting, you will be asked to consider and vote upon the following proposals:
1. To consider and vote upon a proposal to adopt the Agreement and
Plan of Merger, dated as of January 17, 2000, by and among OnDisplay, Inc.,
a Delaware corporation, ObiOne Acquisition Corporation, a Massachusetts
corporation, Oberon, a Massachusetts corporation, and Joseph Chappell as
representative of the Oberon stockholders, as amended, pursuant to which
Oberon will become a wholly owned subsidiary of OnDisplay.
2. To transact such other business as may properly come before the
special meeting or any adjournment(s) of the special meeting.
A SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS, AS WELL AS THE FULL BOARD OF
DIRECTORS OF OBERON, UNANIMOUSLY RECOMMEND THAT YOU VOTE FOR APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT, AS AMENDED, AND APPROVAL OF THE MERGER.
STOCKHOLDERS OF OBERON HOLDING IN THE AGGREGATE APPROXIMATELY 87.6% OF THE
OBERON CAPITAL STOCK, 100.0% OF THE OBERON SERIES 1 CONVERTIBLE PARTICIPATING
PREFERRED STOCK AND 64.7% OF THE OBERON SERIES 2 CONVERTIBLE NON-PARTICIPATING
PREFERRED STOCK HAVE AGREED TO VOTE ALL OF THEIR SHARES IN FAVOR OF THE ADOPTION
OF THE MERGER AGREEMENT AND APPROVAL OF THE MERGER. CONSEQUENTLY, STOCKHOLDER
APPROVAL OF THE MERGER AGREEMENT, AS AMENDED, AND THE MERGER IS ASSURED.
Detailed information concerning the merger agreement and the merger is
contained in the accompanying proxy statement/prospectus. We encourage you to
read this entire document carefully.
For the board of directors of Oberon
/s/ Joseph J. Chappell
President and Chief Executive Officer
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. WHETHER
OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE COMPLETE, SIGN
AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
A STOCKHOLDER WHO EXECUTED A PROXY MAY REVOKE IT ANY TIME BEFORE IT IS EXERCISED
BY GIVING WRITTEN NOTICE OF REVOCATION TO OBERON, BY SUBSEQUENTLY DELIVERING
ANOTHER PROXY OR BY ATTENDING THE SPECIAL MEETING AND VOTING IN PERSON.
<PAGE> 6
YOU SHOULD NOT SEND STOCK CERTIFICATES WITH YOUR PROXIES. A TRANSMITTAL
LETTER FOR YOUR STOCK WILL BE SENT TO YOU BY ONDISPLAY AFTER THE CLOSING.
NOTICE OF APPRAISAL RIGHTS
If the merger agreement is approved by the stockholders of Oberon and the
merger of Oberon is consummated, any Oberon stockholder:
- who, before the taking of the vote on approval of the merger agreement,
files with Oberon a written objection to the proposed merger stating that
he, she or it intends to demand payment for his, her or its Oberon shares
if the merger is consummated; and
- whose shares are not voted in favor of the merger, has or may have the
right to demand in writing from Oberon, as it exists after the merger,
within twenty days after the date of mailing to him, her or it of notice
in writing that the merger has been consummated, payment for his, her or
its shares and an appraisal for the value thereof.
Oberon and any such stockholder shall in such cases have the rights and
duties and shall follow the procedures set forth in Sections 85 to 98,
inclusive, of Chapter 156B of the General Laws of the Commonwealth of
Massachusetts. A copy of these sections of the General Laws of the Commonwealth
of Massachusetts is attached to the proxy statement/prospectus accompanying this
notice as Annex D. For a summary of these rights, duties and procedures, see
"THE OBERON SPECIAL MEETING -- Appraisal Rights" in the Proxy
Statement/Prospectus.
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
QUESTIONS AND ANSWERS FOR ONDISPLAY AND OBERON
STOCKHOLDERS.............................................. 4
SUMMARY OF THE PROXY STATEMENT/PROSPECTUS................... 7
The Companies............................................. 7
Summary of the Oberon Merger.............................. 7
SELECTED FINANCIAL DATA OF ONDISPLAY........................ 14
SELECTED FINANCIAL DATA FOR OBERON.......................... 15
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS........... 16
Unaudited Pro Forma Combined Balance Sheet.................. 16
Unaudited Pro Forma Combined Statement of Operations........ 17
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL
STATEMENTS................................................ 18
SELECTED COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER
SHARE DATA................................................ 20
MARKET PRICE INFORMATION.................................... 21
RISK FACTORS................................................ 22
THE ONDISPLAY SPECIAL MEETING............................... 32
THE OBERON SPECIAL MEETING.................................. 34
APPRAISAL RIGHTS............................................ 36
THE OBERON MERGER........................................... 38
Background of the Oberon Merger and Related Agreements.... 38
OnDisplay's Reasons for the Merger........................ 39
Recommendation of OnDisplay's Board of Directors.......... 40
Oberon's Reasons for the Oberon Merger.................... 40
Recommendation of Oberon's Board of Directors............. 40
Opinion of OnDisplay's Financial Advisor.................. 41
Opinion of Oberon's Financial Advisor..................... 46
Interests of Certain Directors, Officers and Affiliates of
Oberon in the Merger................................... 49
Indemnification and Insurance............................. 52
Completion and Effectiveness of the Merger................ 52
Structure of the Merger and Conversion of Oberon Common
Stock.................................................. 52
Exchange of Oberon Stock Certificates for OnDisplay Stock
Certificates........................................... 52
No Dividends.............................................. 53
Material United States Federal Income Tax Considerations
of the Oberon Merger................................... 53
Treatment of Oberon Common and Preferred Stock............ 55
Accounting Treatment of the Merger........................ 55
Regulatory Filings and Approvals Required to Complete the
Merger................................................. 55
Restrictions on Sales of Shares of OnDisplay to be Issued
in the Merger.......................................... 55
Listing on the Nasdaq Stock Market of OnDisplay Common
Stock to be Issued in the Merger....................... 56
THE OBERON MERGER AGREEMENT................................. 57
Representations and Warranties............................ 57
Oberon Representations and Warranties..................... 57
OnDisplay Representations and Warranties.................. 58
Oberon's Conduct of Business Before Completion of the
Merger................................................. 58
No Other Negotiations Involving Oberon; Solicitation By
Oberon................................................. 59
Oberon's Employee Benefit Plans........................... 59
Treatment of Oberon Stock Options and Warrants............ 60
Conditions to Completion of the Merger.................... 60
Escrow Fund............................................... 62
</TABLE>
1
<PAGE> 8
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Termination of the Merger Agreement....................... 62
Extension, Waiver and Amendment of the Merger Agreement... 62
AGREEMENTS RELATED TO THE MERGER............................ 63
OnDisplay Voting Agreements............................... 63
Oberon Voting Agreement................................... 63
Affiliate Agreements...................................... 64
Employment Agreements..................................... 64
Severance Agreements...................................... 64
COMPARISON OF RIGHTS OF HOLDERS OF OBERON COMMON STOCK AND
ONDISPLAY COMMON STOCK.................................... 66
CERTAIN INFORMATION REGARDING ONDISPLAY..................... 74
Overview.................................................. 74
Industry Background....................................... 74
e-Business Portals........................................ 74
e-Marketplaces............................................ 74
OnDisplay Solution........................................ 75
OnDisplay Strategy........................................ 76
Products.................................................. 77
Services.................................................. 82
Architecture.............................................. 83
Customers................................................. 84
Sales and Marketing....................................... 84
Competition............................................... 85
Intellectual Property and Proprietary Rights.............. 85
Employees................................................. 86
Facilities................................................ 86
Legal Proceedings......................................... 86
ONDISPLAY MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS....................... 87
Overview.................................................. 87
Results of Operations..................................... 88
Years Ended December 31, 1998 and 1999.................... 88
Years Ended December 31, 1997 and 1998.................... 90
Quarterly Results of Operations........................... 91
Liquidity and Capital Resources........................... 92
Year 2000 Compliance...................................... 93
ONDISPLAY MANAGEMENT........................................ 95
Executive Officers and Directors.......................... 95
Director Compensation..................................... 97
Executive Compensation.................................... 98
Option Grants in Last Fiscal Year......................... 98
Aggregate Option Exercises in Last Fiscal Year and Values
of Unvested Options at Fiscal Year End................. 99
ONDISPLAY RELATED PARTY TRANSACTIONS........................ 100
Private Stock Financings.................................. 100
Officer Loans............................................. 101
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF ONDISPLAY................................... 102
CERTAIN INFORMATION REGARDING OBERON........................ 104
</TABLE>
2
<PAGE> 9
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Business.................................................. 104
OBERON'S MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS....................... 105
Overview.................................................. 105
Results of Operations..................................... 105
Comparison of Results for the Three Months Ended December
31, 1999 and 1998...................................... 105
Comparison of Results for the Years Ended September 30,
1999 and 1998.......................................... 106
Comparison of Results for the Years Ended September 30,
1998 and 1997.......................................... 108
Liquidity and Capital Resources........................... 108
Year 2000 Readiness Disclosure............................ 109
EXECUTIVE OFFICERS AND DIRECTORS OF OBERON JOINING
ONDISPLAY................................................. 111
Executive Officers........................................ 111
Executive Compensation.................................... 111
Summary Compensation Table................................ 111
Option Grants During 1999................................. 112
Related Party Transactions................................ 112
Aggregate Option Exercises in 1999 and Option Values...... 113
Security Ownership of Certain Beneficial Holders and
Management of Oberon................................... 113
ADDITIONAL MATTERS BEING SUBMITTED TO A VOTE OF ONLY
ONDISPLAY STOCKHOLDERS.................................... 115
PROPOSAL NO. 1 -- APPROVAL OF AMENDMENT TO 1996 STOCK
PLAN................................................... 115
PROPOSAL NO. 2 -- APPROVAL OF 1999 EMPLOYEE STOCK PURCHASE
PLAN................................................... 117
LEGAL OPINION............................................... 118
EXPERTS..................................................... 118
STOCKHOLDER PROPOSALS....................................... 119
WHERE YOU CAN FIND MORE INFORMATION......................... 120
INDEX TO FINANCIAL INFORMATION.............................. F-1
ANNEX A -- The Oberon Merger Agreement
ANNEX AA -- Amendment No. 1 to the Oberon Merger Agreement
ANNEX B -- Opinion of OnDisplay Financial Advisor
ANNEX C -- Opinion of Oberon Financial Advisor
ANNEX D -- Sections 85 to 98 of Chapter 156B of the General
Laws of the Commonwealth of Massachusetts
</TABLE>
3
<PAGE> 10
QUESTIONS AND ANSWERS FOR ONDISPLAY AND OBERON STOCKHOLDERS
Q: WHY ARE THE COMPANIES PROPOSING TO MERGE? (SEE PAGES 39 AND 40)
A: OnDisplay and Oberon are proposing to merge because we believe the resulting
combination will strengthen the combined company's product offerings,
competitive position, management depth, research and development capabilities
and growth potential.
We believe that Oberon's business process automation and technology
integration solutions for business-to-business, business-to-consumer and
electronic marketplace applications are highly complimentary to existing
OnDisplay e-business offerings. Creating a combined entity that is stronger
and more competitive than either company on a standalone basis.
Q: WHAT IS THE OBERON MERGER? (SEE PAGE 38)
A: The board of directors of OnDisplay and Oberon, as well as a special
committee of the Oberon board of directors, have voted to merge a
wholly-owned subsidiary of OnDisplay into Oberon, resulting in the exchange
of Oberon's shares for shares of OnDisplay. This exchange will make Oberon a
wholly-owned subsidiary of OnDisplay.
Q: WHAT WILL OBERON COMMON AND PREFERRED STOCKHOLDERS RECEIVE IN THE MERGER?
A: When the Oberon merger is completed, Oberon stockholders will receive .0912
shares of OnDisplay common stock in exchange for each share of Oberon common
stock or preferred stock they hold. After the merger, the former stockholders
of Oberon will own approximately 8.8% of OnDisplay. No fractional shares will
be issued. Instead of any fractional share, Oberon stockholders will receive
cash, based on such fraction multiplied by $91.575.
Options or warrants to purchase shares of Oberon common stock will become
options or warrants to purchase shares of OnDisplay common stock.
Q: WHAT ARE THE TRANSFER RESTRICTIONS ON THE ONDISPLAY COMMON STOCK OBERON
STOCKHOLDERS WILL RECEIVE IN THE MERGER? (SEE PAGE 55)
A: The OnDisplay common stock to be received by the Oberon stockholders in the
merger may not be sold or otherwise transferred without the prior written
consent of OnDisplay until June 14, 2000. However, if OnDisplay stockholders
whose shares are restricted from transfer by agreements made in connection
with OnDisplay's initial public offering are permitted to sell their shares
before June 14, 2000, the former Oberon stockholders will also be permitted
to sell at that time. In addition, shares of OnDisplay issued in the merger
to Oberon directors and officers who may be deemed to be affiliates of Oberon
may be sold during the first year after the merger only under Rule 145
limitations. Any such persons who become affiliates of OnDisplay will be
under Rule 144 limitations so long as they have that status.
Q: WILL A PORTION OF THE SHARES ISSUED IN THE MERGER BE PLACED IN ESCROW?
A: Yes. Ten percent of the shares of OnDisplay common stock to be received by
the stockholders of Oberon will be deposited in escrow to serve as security
for indemnification of OnDisplay and its affiliates against losses resulting
from:
- a breach or inaccuracy of a representation or warranty of Oberon in the
merger agreement or an instrument delivered in connection with the merger
agreement;
- Oberon's failure to perform or comply with a covenant in the merger
agreement; and
- Oberon incurring expenses in excess of the amount estimated in the merger
agreement.
Escrowed shares that are not needed to satisfy indemnification claims made
within one year after the merger will be distributed to the former Oberon
stockholders.
4
<PAGE> 11
Q: DOES THE BOARD OF DIRECTORS OF ONDISPLAY RECOMMEND VOTING IN FAVOR OF THE
ISSUANCE OF ONDISPLAY SHARES IN THE MERGER?
A: Yes. After careful consideration, OnDisplay's board of directors recommends
that its stockholders vote in favor of the issuance of shares of OnDisplay
common stock in the merger.
Q: DOES THE BOARD OF DIRECTORS OF OBERON RECOMMEND VOTING IN FAVOR OF THE OBERON
MERGER?
A: Yes. Both a special committee of the Oberon board of directors, as well as
the full board of directors, unanimously recommend that Oberon stockholders
vote in favor of the Oberon merger agreement, as amended, and the proposed
merger.
Q: WHAT STOCKHOLDER VOTE IS REQUIRED TO APPROVE THE MERGER?
A: Approval of the merger agreement and the merger under Massachusetts law and
Oberon's articles of organization requires the affirmative vote of the
holders of:
- at least two-thirds of the outstanding shares of common stock and shares of
series 1 and 2 preferred stock on an as converted basis voting as a single
class; and
- at least a majority of the outstanding shares of series 1 and 2 preferred
stock, each voting as a separate class.
Holders of at least two-thirds of the outstanding shares of Oberon common
stock, series 1 and series 2 preferred stock as well as 100% of the
outstanding series 1 and approximately 64.7% of the outstanding series 2
preferred stock have agreed, by way of voting agreements, to provide the
requisite approval.
Approval of the issuance of OnDisplay common stock in the merger is required
by a majority of the shares of common stock of OnDisplay present or
represented by proxy at the special meeting. A majority of the outstanding
shares of OnDisplay common stock have agreed, by way of voting agreements,
to approve the issuance.
Q: ARE THERE RISKS I SHOULD CONSIDER IN DECIDING WHETHER TO VOTE FOR THE OBERON
MERGER?
A: Yes. In evaluating the Oberon merger, you should carefully consider the
factors discussed in the section entitled "Risk Factors" beginning on page
22.
Q: WHAT DO I NEED TO DO NOW? (SEE PAGE 52)
A: Mail your signed proxy card in the enclosed return envelope as soon as
possible so that your shares may be represented at the appropriate meeting.
Q: AS AN OBERON STOCKHOLDER, SHOULD I SEND IN MY OBERON STOCK CERTIFICATES NOW?
A: No. After the merger is completed, OnDisplay will send you written
instructions for exchanging your Oberon stock certificates for OnDisplay
stock certificates.
Q: WHEN AND WHERE IS THE ONDISPLAY SPECIAL MEETING?
A: The special meeting of OnDisplay stockholders will be held at 9:00 a.m.
Pacific time, on March 30, 2000 at 12667 Alcosta Boulevard, Suite 300, San
Ramon, California 94583.
Q: WHEN AND WHERE IS THE OBERON SPECIAL MEETING?
A: The special meeting of Oberon stockholders will be held at 10:00 a.m., local
time, on March 30, 2000 at the headquarters of Oberon at 215 First Street,
Cambridge, Massachusetts 02142.
Q: IF MY ONDISPLAY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER
VOTE MY SHARES FOR ME?
A: Your broker will vote your shares only if you provide instructions on how to
vote by following the information provided to you by your broker.
Q: WHAT DO I DO IF I WANT TO CHANGE MY VOTE? (SEE PAGES 33 AND 36)
A: If you want to change your vote, send to the secretary of OnDisplay or the
clerk of Oberon, as relevant, a later-dated, signed proxy card before your
meeting or attend the meeting in person. You may also revoke your proxy by
5
<PAGE> 12
sending written notice to the relevant secretary or clerk before the meeting
or attending the meeting. If you have signed a voting agreement, you may not
revoke your proxy.
Q: WHEN IS THE OBERON MERGER EXPECTED TO BE COMPLETED? (SEE PAGE 52)
A: We hope to complete the merger during the second calendar quarter of 2000.
Q: WILL I RECOGNIZE AN INCOME TAX GAIN OR LOSS ON THE EXCHANGE OF MY OBERON
SHARES IN THE MERGER?
A: We expect that you will not recognize gain or loss for United States federal
income tax purposes in connection with the merger, except with respect to
cash received instead of fractional shares. However, you are urged to consult
your own tax advisor to determine your particular tax consequences.
Q: AM I ENTITLED TO DISSENTERS' OR APPRAISAL RIGHTS? (SEE PAGE 36)
A: OnDisplay stockholders are not entitled to dissenter's or appraisal rights in
connection with the merger.
Each Oberon stockholder is entitled to dissenter's rights. If the merger is
consummated and if:
- before the vote on approval of the merger agreement is taken, you file with
the clerk of Oberon a written objection to the proposed merger stating your
intention to demand payment for your Oberon shares if the merger is
consummated;
- you do not vote in favor of the merger; and
- you demand in writing from Oberon, within twenty days after notice to you
that the Oberon merger has been consummated, payment for your shares and an
appraisal of the value of such shares.
In such cases, Oberon and you shall have the rights and duties set forth in
Section 85 to 98, inclusive, of Chapter 156B of the General Laws of the
Commonwealth of Massachusetts, copy of which is attached as Annex D to this
proxy statement/prospectus. See page 36 for more information.
Q: WHOM SHOULD I CALL WITH QUESTIONS?
A: OnDisplay stockholders should call Dave Larson at (925) 355-3200, with any
questions about the merger.
Oberon stockholders should call David Collard at (617) 761-4229, with any
questions about the merger.
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<PAGE> 13
SUMMARY OF THE PROXY STATEMENT/PROSPECTUS
This proxy statement/prospectus pertains to the merger of a wholly-owned
subsidiary of OnDisplay with and into Oberon, and is being sent to the holders
of capital stock of both companies. This summary may not contain all of the
information that is important to you. You should read carefully this entire
document and the other documents referenced in it for a more complete
understanding of the Oberon merger. In particular, you should read the documents
attached to this proxy statement/prospectus, including the merger agreement, as
amended, which is attached as Annex A and Annex AA, the opinion of FleetBoston
Robertson Stephens, Inc. which is attached as Annex B, and the opinion of
SoundView Technology Group, which is attached as Annex C.
THE COMPANIES
[ONDISPLAY LOGO]
ONDISPLAY, INC.
12667 Alcosta Boulevard, Suite 300
San Ramon, CA 94583
(925) 355-3200
http://www.ondisplay.com
OnDisplay offers a comprehensive suite of software applications that enable
companies to rapidly deploy and easily manage e-business portals and
e-marketplaces. OnDisplay's solution addresses the unique challenges faced by
e-business portals and e-marketplaces in both business-to-business and
business-to-consumer e-commerce. OnDisplay's infrastructure solutions allow both
business-to-business and business-to-consumer e-commerce companies to rapidly
automate and continuously manage the flow of information and transactional data
among their suppliers, distributors and customers. OnDisplay's products enable
its e-business portal and e-marketplace customers to achieve rapid
time-to-market, engage and retain customers, increase revenues and market share
and attain agile e-business relationships.
[OBERON LOGO]
OBERON SOFTWARE INCORPORATED
215 First Street
Cambridge, MA 02142
(617) 494-0990
http://www.oberon.com
Oberon offers software solutions designed to help its customers automate
the integration of multiple application software offerings. Oberon's solutions
enable the connection of customers and suppliers, the automation of internal
business processes required to work effectively with customers and suppliers,
and the ability to rapidly respond to changes in these relationships. This is
accomplished through Oberon's e-Enterprise suite of integration products, a
visual integration development environment and suite of intelligent applications
and technology adapters. Together, these simplify the integration of business
applications, and a growing network of third-party application and service
partners. Oberon's products and services are designed to support each stage of
e-business integration; including intra-enterprise, business-to-business,
business-to-consumer and e-marketplace.
SUMMARY OF THE OBERON MERGER
THE OBERON MERGER (SEE PAGE 38)
In the Oberon merger, Oberon will merge with a wholly-owned subsidiary of
OnDisplay, called ObiOne Acquisition Corporation. Oberon will survive the merger
as a wholly-owned subsidiary of OnDisplay. Following the merger, Oberon common
and preferred stockholders will be entitled to exchange each of their shares for
.0912 shares of OnDisplay common stock. The shares of OnDisplay common stock
which Oberon common and preferred stockholders will be entitled to receive may
not be sold or otherwise transferred without the prior written consent of
OnDisplay until June 14, 2000. However, if OnDisplay stockholders whose shares
are restricted from
7
<PAGE> 14
transfer by agreements made in connection with OnDisplay's initial public
offering are permitted to sell those shares prior to June 14, 2000, Oberon
stockholders will be allowed to sell at that time as well.
The merger agreement, as amended, is attached to this proxy
statement/prospectus as Annex A and Annex AA. You are encouraged to read it
carefully.
ESCROW FUND
Ten percent of the OnDisplay shares of common stock to be received by the
holders of outstanding Oberon common stock and preferred stock will be deposited
in an escrow fund for a period of one year to serve as security for
indemnification of OnDisplay and its officers, directors and affiliates against
losses resulting from:
- any breach or inaccuracy of a representation or warranty of Oberon in the
merger agreement or an instrument delivered in connection to the merger
agreement;
- any failure by Oberon to perform or comply with a covenant in the merger
agreement; or
- Oberon incurring expenses in excess of the amount estimated in the merger
agreement.
CONDITIONS TO COMPLETION OF THE OBERON MERGER (SEE PAGE 60)
OnDisplay's and Oberon's obligations to complete the Oberon merger are
subject to certain closing conditions. These conditions, which must be satisfied
or waived before the completion of the merger, include:
- No statute, rule, regulation or order is enacted or issued which prohibits
the merger or makes it illegal.
- No injunction or other legal restraint prohibiting or preventing the
consummation of the merger is entered.
- The merger agreement must be approved by the stockholders of Oberon and the
issuance of OnDisplay common stock in the merger must be approved by the
stockholders of OnDisplay.
- OnDisplay's S-4 registration statement must be declared effective with no
stop orders or proceedings for suspension pending.
- OnDisplay and Oberon must each receive from their respective tax counsel, an
opinion stating that the merger will constitute a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code.
- Approvals from any governmental entity required to consummate the merger
shall have been obtained.
If either OnDisplay or Oberon waives any conditions, we will each consider
the facts and circumstances at that time and make a determination whether a
resolicitation of proxies from our respective stockholders is appropriate.
VOTE REQUIRED FOR APPROVAL
The holders of a majority of the shares of OnDisplay common stock present
or represented by proxy at the stockholders' meeting must approve the issuance
of OnDisplay common stock in the merger. OnDisplay stockholders are entitled to
cast one vote per share of OnDisplay common stock owned as of the record date.
As of the record date, OnDisplay stockholders holding approximately 54.2% of
outstanding OnDisplay common stock have agreed to vote their shares of OnDisplay
common stock in favor of the issuance of OnDisplay common stock in the merger.
The holders of at least two-thirds of the shares of Oberon common stock and
preferred stock outstanding voting together as a single class on an as converted
basis, must approve the merger agreement and the merger. In addition, holders of
at least a majority of each of the series 1 and series 2 preferred stock
outstanding, voting as a separate class, must approve the merger agreement and
the merger. As of March 6, Oberon stockholders who collectively held
approximately 87.6% of the outstanding capital stock and 100% of the series 1
and 64.7% of the series 2 preferred stock outstanding, have agreed to vote their
shares of Oberon capital stock in favor of the merger agreement and the merger.
8
<PAGE> 15
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 62)
The merger agreement may be terminated at any time prior to completion of
the merger:
- by mutual agreement of OnDisplay and Oberon;
- by either OnDisplay or Oberon if the merger is not completed before July 31,
2000;
- by either OnDisplay or Oberon if a court order is in effect or any statute,
rule, regulation or order is enacted, prohibiting the merger or making it
illegal;
- by OnDisplay if there is any governmental action taken, prohibiting
OnDisplay's ownership or operation of any portion of the business of Oberon
or compelling either OnDisplay or Oberon to dispose of or hold separate any
portion of its business or assets as a result of the merger;
- by OnDisplay upon an uncurable breach by Oberon of its representations,
warranties, covenants or agreements contained in the merger agreement; and
- by Oberon upon an uncurable breach by OnDisplay of any of its
representations, warranties, covenants or agreements contained in the merger
agreement.
EXTENSION, WAIVER AND AMENDMENT OF THE MERGER AGREEMENT (SEE PAGE 62)
OnDisplay and Oberon may amend the merger agreement before completion of
the merger by mutual written consent.
Either OnDisplay or Oberon may, in writing, extend the other's time for any
obligation under the merger agreement, waive any inaccuracies in the other's
representations and warranties or compliance by the other with the merger
agreement.
EXCLUSIVITY (SEE PAGE 59)
Until the earlier of completion of the merger or termination of the merger
agreement, Oberon has agreed not, nor permit any of its officers, directors,
affiliates, employees, stockholders, contract workers, agents or
representatives, to directly or indirectly take any of the following actions
with any party other than OnDisplay and its designees:
- solicit, knowingly encourage, initiate, inquire about, negotiate, discuss,
or enter into any agreement or proposal to acquire any part of Oberon's
business, property or any material amount of stock;
- disclose, or afford access to, any information concerning Oberon's business,
technology or property not customarily disclosed;
- assist or cooperate with any person to make any proposal to purchase all or
any material part of Oberon's assets or common or preferred stock other than
in the ordinary course of business; and
- enter into any agreement for the acquisition of Oberon and to immediately
notify OnDisplay of any offer to do so.
THE VOTING AGREEMENTS (SEE PAGE 63)
OnDisplay stockholders who collectively hold approximately 54.2% of the
outstanding OnDisplay common stock as of the record date, entered into voting
agreements requiring them to vote their shares of OnDisplay common stock in
favor of the issuance of shares of OnDisplay common stock in the merger in
accordance with the merger agreement.
Oberon stockholders who collectively hold approximately 87.6% of the
outstanding Oberon capital stock and 100% of the series 1 and 64.7% of the
series 2 preferred stock outstanding, as of March 6, 2000, entered into voting
agreements in which they have agreed to vote their shares of Oberon capital
stock in favor of the merger agreement and the merger and against any other
alternative transaction. An alternative transaction is:
- a transaction where any third party, acquires more than 20% of the
outstanding shares of Oberon common stock;
- any business combination involving Oberon where a third party acquires
more than 20% of the outstanding shares of Oberon common stock or any
surviving entity;
9
<PAGE> 16
- any other transaction where a third party acquires assets, having a fair
market value equal to more than 20% of the fair market value of all the
assets of Oberon immediately prior to the transaction; or
- any public announcement by a third party of an intention to do any of the
above.
OPINIONS OF ONDISPLAY'S AND OBERON'S FINANCIAL ADVISORS (SEE PAGES 41 AND 46)
In deciding to approve the Oberon merger, OnDisplay's board of directors
considered an opinion from its financial advisors, Robertson Stephens. A special
committee of Oberon's board of directors, as well as the full board of
directors, considered an opinion from its financial advisors, SoundView
Technology Group, as to the fairness of the exchange ratio from a financial
point of view. The full text of the written opinions of the financial advisors
are attached to the back of this document as Annex B and Annex C, and should be
read carefully in their entireties for a description of the assumptions made,
matters considered and limitations on the review undertaken. The opinion of
Robertson Stephens is directed to the OnDisplay board and the opinion of
SoundView is directed to the special committee of Oberon's board, and these
opinions do not address the prices at which OnDisplay's common stock will trade
after the proposed merger and do not constitute a recommendation as to how to
vote with respect to any matter relating to the proposed merger.
U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER (SEE PAGE 53)
We have structured the Oberon merger so that, in general, OnDisplay,
OnDisplay's stockholders, Oberon and Oberon's stockholders will not recognize
gain or loss for United States federal income tax purposes in the merger, except
for cash payments received by Oberon stockholders instead of fractional shares.
It is a condition to the merger that both OnDisplay and Oberon receive legal
opinions to the effect that the merger will constitute a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code.
ACCOUNTING TREATMENT OF THE OBERON MERGER (SEE PAGE 55)
OnDisplay intends to account for the merger as a "purchase" for financial
accounting purposes, in accordance with generally accepted accounting
principles.
INTERESTS OF CERTAIN PERSONS IN THE OBERON MERGER (SEE PAGE 49)
When considering the recommendations of OnDisplay's board of directors and
Oberon's special committee of the board of directors, as well as its full board
of directors, you should be aware that certain OnDisplay and Oberon directors
and executive officers have interests in the merger that are different from, or
are in addition to, yours. These interests include:
- OnDisplay has agreed to cause the surviving corporation to fulfill and honor
the obligations pursuant to Oberon's articles of organization and bylaws
relating to indemnification of directors and officers and any
indemnification agreements between Oberon and its directors and officers
existing prior to completion of the merger.
- M. McMahon and M. Wick have agreed to be employees of OnDisplay after
completion of the merger and J. Chappell and D. Collard have entered into
severance agreements effective upon completion of the merger.
- Oberon has agreed to grant options to certain executive officers prior to
the completion of the merger that have exercise prices of approximately
$27.43 per OnDisplay share.
- J. Mandile is on the board of directors of both OnDisplay and Oberon.
Entities affiliated with Matrix Partners, a venture capital firm, are
stockholders of both OnDisplay and Oberon and general partners of Matrix
Partners serve as directors of both OnDisplay and Oberon.
- Upon completion of the merger, options to purchase an aggregate of
approximately 578,000 shares of Oberon common stock granted to directors and
executive officers of Oberon will accelerate. The foregoing amounts do not
include options that have
10
<PAGE> 17
been or may be issued by Oberon after December 31, 1999.
In considering the fairness of the merger to each of the OnDisplay and
Oberon stockholders, OnDisplay's board of directors and the special committee of
Oberon's board of directors, as well as its full board, took into account these
interests. J. Mandile and T. Barrows, general partners of Matrix Partners and
members of the OnDisplay board of directors were excused from the meetings of
the OnDisplay directors considering and approving the merger. J. Mandile and M.
Humphreys, general partners of Matrix Partners and members of the Oberon board
of directors, were not members of the special committee of the Oberon board of
directors that approved the merger.
DISSENTERS' RIGHTS
If the merger is completed, Oberon stockholders who object to the merger
are entitled to appraisal rights under Massachusetts law. In order to exercise
appraisal rights, Oberon stockholders must strictly adhere to the provisions of
Massachusetts law governing appraisal rights. A copy of the relevant provisions
of Massachusetts law are attached hereto as Annex D.
In order to exercise your appraisal rights, you must take the following
steps:
- send a written objection to the merger to Oberon before the special
meeting stating your intention to demand payment for your shares of
Oberon capital stock if the merger occurs;
- do NOT vote in favor of the merger; and
- send a written demand to Oberon for payment for your Oberon shares within
twenty days after you received notice from Oberon that the merger has
occurred. Oberon will send the notice within 10 days after the merger is
completed.
The written objection and written demand should be delivered registered or
certified mail, return receipt requested to Oberon Software Incorporated, 215
First Street, Cambridge, Massachusetts 02142, Attention: Clerk.
RESTRICTIONS ON THE ABILITY TO SELL ONDISPLAY STOCK (SEE PAGE 55)
All shares of OnDisplay common stock received by Oberon stockholders in
connection with the Oberon merger will be freely transferable unless the holder
is considered an affiliate of either Oberon or OnDisplay under the Securities
Act. Shares of OnDisplay held by affiliates may only be sold pursuant to a
registration statement or an exemption from the Securities Act.
The shares of OnDisplay common stock that Oberon stockholders will be
entitled to receive, may not be sold or otherwise transferred without the prior
written consent of OnDisplay until June 14, 2000. However, if OnDisplay
stockholders whose shares are restricted from transfer by agreements made in
connection with OnDisplay's initial public offering not to sell their shares of
OnDisplay common stock are permitted to sell their shares before June 14, 2000,
Oberon stockholders will also be permitted to sell at that time. In addition,
shares of OnDisplay common stock deposited on behalf of Oberon stockholders into
the escrow fund may not be transferred during the one year term of the escrow
fund unless the shares are sold by the stockholder representative on the owner's
behalf and at least $91.5750 per share from the sale is placed in the fund in
lieu of the shares sold.
FORWARD-LOOKING STATEMENTS IN THIS PROSPECTUS/ PROXY STATEMENT
This proxy statement/prospectus contains forward-looking statements within
the safe harbor provisions of the Private Securities Litigation Reform Act.
These statements include statements with respect to OnDisplay's and Oberon's
financial condition, results of operations and business and on the expected
impact of the Oberon merger on OnDisplay's financial performance. Words such as
anticipates, expects, intends, plans, believes, seeks, estimates and similar
expressions identify forward-looking statements.
These forward-looking statements are not guarantees of future performance
and are subject to certain risks and uncertainties that could cause actual
results to differ materially from the results contemplated by the
forward-looking statements.
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<PAGE> 18
These risks and uncertainties include the following:
General risks relating to the proposed merger
- OnDisplay and Oberon may not achieve the benefits they expect from the
merger which may have a material adverse effect on the combined company's
business, financial condition and operating results and/or could result
in loss of key personnel.
- Oberon stockholders will receive a fixed number of shares of OnDisplay
common stock despite changes in market value of OnDisplay common stock.
Risks relating to OnDisplay and the combined company
- We have a history of losses and expect losses in the future. If we do not
achieve or sustain profitability in the future, our viability will be in
doubt and our stock price will decline.
- We may need to raise additional capital that may not be available on
terms favorable to us, if at all.
- 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 revenues depend on a limited number of product lines.
- 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 planned growth and financial objectives will not be met.
- Our products have long and variable sales cycles; it is therefore
difficult to predict the timing of individual orders and match revenues
with operating expenses, which are relatively fixed in the short term.
- 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, we will not achieve our financial objectives.
- We need to expand our direct sales operations if we are to increase
market awareness of and revenues derived from our products and related
services.
- Our operations and growth prospects may be significantly impeded if we
are unable to retain our key personnel or attract additional key
personnel, especially because experienced and skilled personnel are in
short supply.
- If we fail to successfully manage our planned expansion of operations,
our growth prospects will be diminished and our operating expenses could
exceed budgeted amounts.
- If we fail to adequately respond to rapid technological changes, our
existing products will become obsolete or unmarketable.
- If our products contain errors, our revenues and net operating results
will be negatively impacted and our reputation and the market acceptance
of these products will be jeopardized.
- If we fail to adequately protect our intellectual property rights our
ability to compete could be seriously harmed, and if other companies
bring lawsuits claiming that we infringe their intellectual property
rights we could be liable for significant damages.
- 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.
- Our planned international operations may not be successful and will make
us susceptible to various risks.
- Our systems are susceptible to external events that may impact our
ability to conduct our business operations.
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<PAGE> 19
- Problems related to the "year 2000 issue" could adversely affect our
business.
- We may need to raise additional capital that may not be available on
terms favorable to us, if at all.
- This document contains forward-looking statements; these statements are
not guarantees of future performance and are susceptible to risks,
uncertainties and other factors, some of which are beyond our control.
In evaluating the Oberon merger, you should carefully consider the
discussion of these and other factors in the section entitled "Risk Factors" on
page 22.
MARKET PRICE INFORMATION (SEE PAGE 21)
Shares of OnDisplay common stock are listed on the Nasdaq Stock Market. On
January 14, 2000, the last full trading day prior to the public announcement of
the proposed Oberon merger, OnDisplay's common stock closed at $94.00 per share.
On March 6, 2000, OnDisplay's common stock closed at $101.00 per share.
OnDisplay and Oberon urge you to obtain current market quotations.
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<PAGE> 20
SELECTED FINANCIAL DATA OF ONDISPLAY, INC.
The statement of operations data for the three years in the period ended
December 31, 1999 and the balance sheet data as of December 31, 1998 and 1999
are derived from Financial Statements that have been audited by
PricewaterhouseCoopers LLP, independent accountants, and are included elsewhere
in this proxy statement/prospectus. The statement of operations data for the
period from inception to December 31, 1996 and the balance sheet data at
December 31, 1996 and 1997 are derived from OnDisplay's Financial Statements
audited by PricewaterhouseCoopers LLP, that are not included in this proxy
statement/prospectus.
<TABLE>
<CAPTION>
PERIOD FROM
AUGUST 14,
1996
(DATE OF
INCEPTION) TO YEAR ENDED DECEMBER 31,
DECEMBER 31, ------------------------------------
1996 1997 1998 1999
------------- ---------- ---------- ----------
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
License revenues................................ $ -- $ 265 $ 2,229 $ 6,839
Service revenues................................ -- -- 1,114 4,259
---------- ---------- ---------- ----------
Total revenues........................ -- 265 3,343 11,098
---------- ---------- ---------- ----------
Cost of license revenues........................ -- -- 2 7
Cost of service revenues........................ -- -- 1,618 4,251
---------- ---------- ---------- ----------
Total cost of revenues................ -- -- 1,620 4,258
---------- ---------- ---------- ----------
Gross profit.................................... -- 265 1,723 6,840
Operating expenses:
Sales and marketing........................... 42 2,810 5,747 11,917
Research and development...................... 393 1,986 2,636 4,714
General and administrative.................... 182 1,158 1,201 3,418
Amortization of deferred stock-based
compensation............................... -- -- 618 3,697
---------- ---------- ---------- ----------
Total operating expenses.............. 617 5,954 10,202 23,746
---------- ---------- ---------- ----------
Loss from operations............................ (617) (5,689) (8,479) (16,906)
Interest income and other....................... 46 173 174 532
Interest expense................................ (1) (18) (43) (394)
---------- ---------- ---------- ----------
Net loss........................................ $ (572) $ (5,534) $ (8,348) $ (16,768)
========== ========== ========== ==========
Net loss per share -- basic and diluted......... $ (0.17) $ (1.62) $ (2.34) $ (3.70)
========== ========== ========== ==========
Shares used in per share calculation -- basic
and diluted................................... 3,400,000 3,410,313 3,572,353 4,533,282
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------
1996 1997 1998 1999
------ ------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA
Cash and cash equivalents................................ 2,751 $ 3,900 $ 4,648 $109,617
Working capital.......................................... 2,663 3,748 4,584 107,140
Total assets............................................. 2,986 4,710 8,253 117,102
Long-term debt, less current portion..................... 3 128 240 2,338
Mandatorily redeemable convertible preferred stock....... 3 10,200 18,982 --
Accumulated deficit...................................... (572) (6,106) (14,454) 31,222
Total stockholders' equity (deficit)..................... 2,838 (6,098) (13,729) 106,697
</TABLE>
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<PAGE> 21
SELECTED FINANCIAL DATA FOR OBERON SOFTWARE INCORPORATED
The statement of operations data for the fiscal years ended September 30,
1997, 1998, and 1999 and the balance sheet data for September 30, 1998, and 1999
for Oberon are derived from its financial statements of which have been audited
by Ernst & Young LLP, independent accountants, and are included elsewhere in
this proxy statement/prospectus. The statement of operations data for the fiscal
years ended September 30, 1995 and 1996 and the balance sheet data for September
30, 1995, 1996 and 1997 have been derived from Oberon financial statements
audited by Ernst & Young LLP, independent accountants, which are not included
elsewhere in this proxy statement/prospectus. The statements of operations data
for the three month periods ended December 31, 1998 and 1999 and the balance
sheet data as of December 31, 1999 are derived from unaudited financial
statements included elsewhere in this proxy statement/prospectus. These
statements include, in the opinion of Oberon's management, all adjustments,
consisting of normal recurring adjustments, necessary to present fairly the
results of operations and financial position for such periods. The statements of
operations data for the two three month periods ended December 31, 1998 and 1999
are not necessarily indicative of the results to be expected for the entire
year.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED SEPTEMBER 30, ENDED DECEMBER 31,
--------------------------------------------------------------- ------------------------
1995 1996 1997 1998 1999 1998 1999
---------- ---------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Software licenses............. $ 219,274 $ 469,592 $1,357,917 $ 2,849,784 $ 522,638 $ 486,525
Services...................... $ 10,500 169,395 395,593 1,358,859 273,673 691,169
Royalties..................... 87,602 215,731 443,592 295,423
---------- ---------- ---------- ---------- ----------- ---------- ----------
Total revenues.......... 10,500 219,274 726,589 1,969,241 4,652,235 796,311 1,473,117
Operating expenses:
Cost of software.............. 47,088 109,723 100,229 138,530 20,637 102,585
Cost of services.............. 93,852 253,207 330,773 402,516 1,410,750 272,198 580,985
Research and development...... 1,292,145 1,442,234 1,504,174 2,376,107 3,681,413 726,205 1,233,530
Marketing and sales........... 447,349 1,207,072 3,239,253 2,869,627 4,935,750 922,000 1,516,943
General and administrative.... 666,171 860,238 1,442,921 1,298,821 1,004,124 278,616 229,349
---------- ---------- ---------- ---------- ----------- ---------- ----------
Total operating
expenses.............. 2,449,517 3,809,839 6,626,844 7,047,300 11,170,567 2,219,656 3,663,392
---------- ---------- ---------- ---------- ----------- ---------- ----------
Loss from operations............ 2,489,017 3,509,565 5,900,255 5,078,059 6,518,332 1,423,345 2,190,275
Other (income) expense:
Interest income............... (104,629) (73,390) (111,189) (208,830) (321,207) (53,500) (79,424)
Interest expense.............. 150,000 150,207 144,386 126,186 31,814 5,674 79,980
Other expense................. 85,334 1,999 16,023 7,688 56,033 1,033 14,984
---------- ---------- ---------- ---------- ----------- ---------- ----------
130,705 78,816 49,220 (74,956) (233,360) (46,793) 15,540
---------- ---------- ---------- ---------- ----------- ---------- ----------
Net loss...................... $2,619,722 $3,669,381 $5,949,475 $5,003,103 $ 6,284,972 $1,376,552 $2,205,815
========== ========== ========== ========== =========== ========== ==========
Basic and diluted loss per share
information:
Net loss...................... $5.87 $7.97 $10.18 $2.55 $1.05 $.23 $0.36
========== ========== ========== ========== =========== ========== ==========
Weighted average shares
outstanding................. 446,538 460,538 584,160 1,960,720 6,011,805 5,893,822 6,211,162
========== ========== ========== ========== =========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
AS OF
DECEMBER 31,
1995 1996 1997 1998 1999 1999
----------- ---------- ----------- ---------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalent and short-term
investments.......................... $ 1,100,731 $5,459,776 $ 692,263 $5,150,268 $10,214,307 $ 8,053,576
Working capital........................ 396,378 3,678,702 52,540 4,373,331 8,626,890 6,087,446
Total assets........................... 1,356,395 5,826,142 1,996,657 6,569,814 13,142,525 10,545,386
Long-term liabilities, net of current
portion.............................. 2,000,000 1,000,000 3,752,447 183,094 3,842,870 3,416,878
Total stockholders' equity (deficit)... (1,404,486) 2,929,744 (2,987,913) 3,216,017 4,242,776 2,053,343
</TABLE>
15
<PAGE> 22
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements give effect
to the merger using the purchase method of accounting and include pro forma
adjustments described in the accompanying notes. The unaudited pro forma
combined financial statements should be read in conjunction with the historical
financial statements of OnDisplay and Oberon included elsewhere in this proxy
statement/prospectus.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ONDISPLAY OBERON ADJUSTMENTS COMBINED
--------- -------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.................... $109,617 $ 8,053 $ -- $117,670
Trade accounts receivable, net............... 4,419 1,411 -- 5,830
Prepaid and other current assets............. 1,171 206 -- 1,377
-------- -------- -------- --------
Total current assets................. 115,207 9,670 -- 124,877
Property and equipment, net.................... 1,581 850 -- 2,431
Deposits and other assets...................... 314 25 -- 339
Goodwill and other intangible assets........... -- -- 189,320 189,320
-------- -------- -------- --------
Total assets......................... $117,102 $ 10,545 $189,320 $316,967
-------- -------- -------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable............................. $ 1,262 $ 748 $ -- $ 2,010
Accrued liabilities.......................... 2,989 742 -- 3,731
Deferred revenue............................. 2,617 1,135 (1,135) 2,617
Current portion of long term debts........... 1,199 959 -- 2,158
-------- -------- -------- --------
Total current liabilities............ 8,067 3,584 (1,135) 10,516
Long term debts, net of current portion...... 2,338 3,416 -- 5,754
Deferred credit.............................. -- 1,492 (1,492) --
-------- -------- -------- --------
Total liabilities.................... 10,405 8,492 (2,627) 16,270
Stock and additional paid in capital........... 168,882 38,903 171,097 378,882
Deferred stock-based compensation.............. (29,175) -- -- (29,175)
Notes receivable from stockholders............. (1,788) -- -- (1,788)
Accumulated deficit............................ (31,222) (36,850) 20,850 (47,222)
-------- -------- -------- --------
Total stockholders' equity........... 106,697 2,053 191,947 300,697
-------- -------- -------- --------
Total liabilities and stockholders'
equity............................. $117,102 $ 10,545 $186,947 $316,967
-------- -------- -------- --------
</TABLE>
See accompanying notes to the pro forma financial statements.
16
<PAGE> 23
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ONDISPLAY OBERON ADJUSTMENT COMBINED
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
License revenue............................ $ 6,839 $ 2,814 $ -- $ 9,653
Service and other revenue.................. 4,259 2,515 -- 6,774
---------- ---------- -------- ----------
Total revenue.................... 11,098 5,329 -- 16,427
---------- ---------- -------- ----------
Cost of license revenue.................... 7 220 -- 227
Cost of service and other revenue.......... 4,251 1,720 -- 5,971
---------- ---------- -------- ----------
Total cost of revenue............ 4,258 1,940 -- 6,198
---------- ---------- -------- ----------
Gross profit............................... 6,840 3,389 -- 10,229
Operating expenses:
Sales and marketing...................... 11,917 5,531 -- 17,448
Research and development................. 4,714 4,189 -- 8,903
General and administrative............... 3,418 954 -- 4,372
In process research and development...... -- -- 16,000 16,000
Amortization of goodwill and other
intangible assets..................... -- -- 47,722 47,722
Amortization of deferred stock-based
compensation.......................... 3,697 -- -- 3,697
---------- ---------- -------- ----------
Total operating expenses......... 23,746 10,674 63,722 81,142
---------- ---------- -------- ----------
Loss from operations....................... (16,906) (7,285) (63,722) (70,913)
Other income, net.......................... 138 171 -- 309
---------- ---------- -------- ----------
Net loss................................... $ (16,768) $ (7,114) $(63,722) $ (70,604)
========== ========== ======== ==========
Net loss per share -- basic and diluted.... $ (3.70) $ (1.15) $ (10.94)
========== ========== ==========
Shares used in per share
calculation -- basic and diluted......... 4,533,282 6,211,162 6,455,653
========== ========== ==========
</TABLE>
See accompanying notes to the pro forma financial statements.
17
<PAGE> 24
NOTES TO UNAUDITED PRO FORMA COMBINED
FINANCIAL STATEMENTS
NOTE 1 -- PRO FORMA BASIS OF PRESENTATION:
The unaudited pro forma combined balance sheet as of December 31, 1999
reflects the combination of the financial statements of OnDisplay and Oberon as
of December 31, 1999 and the unaudited pro forma combined statement of
operations reflects the combined results of operations of OnDisplay and Oberon
or if the merger had taken place on January 1, 1999.
These unaudited pro forma combined financial statements reflect the
issuance of 1,922,371 shares of OnDisplay common stock in exchange for an
aggregate of 21,088,410 shares of Oberon common and preferred stock (estimated
outstanding as of the effective date) in connection with the merger, based on
the Exchange Ratio of 0.0912 as set forth in the following table:
<TABLE>
<S> <C>
Oberon Common and preferred stock and warrants outstanding
as of December 31, 1999................................... 21,088,410
Exchange ratio.............................................. 0.0912
Number of shares of OnDisplay common stock exchanged........ 1,922,371
Number of shares of OnDisplay common stock outstanding at
December 31, 1999......................................... 19,647,303
----------
Number of shares of combined company common stock
outstanding after the completion of the merger............ 21,569,674
==========
</TABLE>
The actual number of shares of OnDisplay common stock to be issued will be
determined at the Effective Time based on the number of shares of Oberon common
stock outstanding at that date. In addition, based on the number of Oberon
options estimated to be outstanding at the Effective Time, OnDisplay would
assume options to purchase 343,180 shares of OnDisplay common stock. The actual
number of options to be assumed will depend on the actual number of Oberon
options outstanding at the Effective Time.
The total estimated purchase price of Oberon has been calculated as follows
(in thousands):
<TABLE>
<S> <C>
Value of securities issued.................................. $176,041
Assumption of Oberon options................................ 28,959
--------
205,000
Estimated transaction costs and expenses.................... 5,000
--------
Total estimated purchase cost..................... $210,000
========
</TABLE>
The value of the securities issued has been based on the average of the
closing market price of OnDisplay for the period January 10th through January
14, 2000, the date on which the merger was publicly announced.
The preliminary purchase price allocation is as follows (in thousands):
<TABLE>
<CAPTION>
ANNUAL USEFUL
AMOUNT AMORTIZATION LIVES
-------- ------------ -------
<S> <C> <C> <C>
Tangible net assets.............................. $ 4,680 N/A N/A
In-process research & development................ 16,000 N/A N/A
Developed technologies........................... 4,700 $ 1,567 3 years
Goodwill......................................... 184,620 46,155 4 years
-------- -------
$210,000 $47,722
======== =======
</TABLE>
18
<PAGE> 25
NOTE 2 -- PRO FORMA ADJUSTMENTS:
The unaudited pro forma combined financial statements give effect to the
allocation of the total purchase price to the assets and liabilities of Oberon
based on their respective fair values and the related amortization over the
estimated useful lives of amounts allocated to intangible assets, including
goodwill. The unaudited pro forma combined balance sheet also reflect the write
off of in-process research and development at December 31, 1999. The unaudited
pro forma combined statement of operations reflects the write off of in-process
research & development as of December 31, 1999. The unaudited pro forma net loss
per share is based on the weighted average number of shares of OnDisplay common
stock outstanding during the year plus the shares issued in the merger, assumed
to have been issued on January 1, 1999.
19
<PAGE> 26
SELECTED COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA
The following tabulation reflects (a) the historical net income and book
value per share of OnDisplay common stock in comparison with the pro forma net
income and book value per share after giving effect to the proposed merger,
accounted for as a "purchase", with Oberon Software Incorporated; and (b) the
historical net income and book value per share of Oberon Software Incorporated
common and preferred stock on an "as converted" basis stock in comparison with
the equivalent pro forma net income and book value per share attributable to
0.0912 of a share of OnDisplay, Inc. common stock which will be received for
each share of Oberon Software Incorporated. The information presented in this
tabulation should be read in conjunction with the unaudited pro forma combined
financial statements and the separate financial statements of the respective
companies and the notes thereto appearing elsewhere herein.
<TABLE>
<CAPTION>
ONDISPLAY, INC. (YEAR ENDED DECEMBER 31, 1999) HISTORICAL PRO FORMA
---------------------------------------------- ---------- ------------
<S> <C> <C>
Net Loss per share.......................................... $(3.70) $(10.94)
Book value per share........................................ $ 5.77 $ 14.73
</TABLE>
<TABLE>
<CAPTION>
EQUIVALENT
OBERON SOFTWARE INCORPORATED (YEAR ENDED SEPTEMBER 30, 1999) HISTORICAL PRO FORMA(1)
- ------------------------------------------------------------ ---------- ------------
<S> <C> <C>
Net loss per share.......................................... $(0.33) $ (1.00)
Book value per share........................................ $ 0.23 $ 1.34
</TABLE>
- ---------------
(1) Pro forma amounts for OnDisplay, Inc. multiplied by 0.0912, the exchange
ratio.
20
<PAGE> 27
MARKET PRICE INFORMATION
OnDisplay common stock has been traded on the Nasdaq Stock Market under the
symbol "ONDS" since December 17, 1999, the date of OnDisplay's initial public
offering. The following table sets forth, for the periods indicated, the high
and low close prices per share of OnDisplay common stock as reported on the
Nasdaq Stock Market.
<TABLE>
<CAPTION>
ONDISPLAY
-----------------
HIGH LOW
------- ------
<S> <C> <C>
Quarter ending December 31, 1999 (commencing December 17,
1999)..................................................... $104.56 $77.00
Quarter ending March 31, 2000 (through March 3, 2000)....... 129.63 74.50
</TABLE>
The table below presents the per share closing prices of OnDisplay common
stock on the Nasdaq Stock Market and the pro forma equivalent market value of
OnDisplay common stock to be issued for Oberon capital stock in the merger as of
the dates specified. January 14, 2000 was the last trading date before
announcement of the merger. Oberon pro forma equivalent market value was
determined by multiplying the closing prices of the OnDisplay common stock as of
the specified dates by the exchange ratio of .0912. March 6, 2000 was the most
recent practicable date before the date of this proxy statement/prospectus.
<TABLE>
<CAPTION>
OBERON CAPITAL STOCK
ONDISPLAY PRO FORMA
DATE COMMON STOCK EXCHANGE RATIO EQUIVALENT VALUE
---- ------------ -------------- --------------------
<S> <C> <C> <C>
January 14, 2000........... $ 94.00 .0912 $8.57
March 6, 2000.............. $101.00 .0912 $9.21
</TABLE>
Oberon stockholders are advised to obtain current market quotations for
OnDisplay common stock. No assurance can be given as to the market prices of
OnDisplay common stock at any time before the consummation of merger or at any
time after merger. Because the exchange ratio is fixed, the exchange ratio will
not be adjusted to compensate Oberon stockholders for any decrease in the market
price of OnDisplay common stock which could occur before the merger becomes
effective. In the event the market price of OnDisplay common stock decreases or
increases prior to the consummation of the merger, the value of the OnDisplay
common stock to be received in the merger in exchange for Oberon capital stock
would correspondingly decrease or increase.
OnDisplay and Oberon have never paid cash dividends on their respective
shares of capital stock. The OnDisplay board presently intends to retain any
earnings for use in its business and has no present intention to pay cash
dividends before or after the merger.
21
<PAGE> 28
RISK FACTORS
The merger involves a high degree of risk. By voting in favor of the Oberon
merger, you will be choosing to invest in OnDisplay common stock. An investment
in OnDisplay common stock involves a high degree of risk. In addition to the
other information contained in this proxy statement/prospectus, you should
carefully consider the following risk factors in deciding whether to vote for
the merger.
GENERAL RISKS RELATING TO THE PROPOSED MERGER
ONDISPLAY AND OBERON MAY NOT ACHIEVE THE BENEFITS THEY EXPECT FROM THE MERGER
WHICH MAY HAVE A MATERIAL ADVERSE EFFECT ON THE COMBINED COMPANY'S BUSINESS,
FINANCIAL CONDITION AND OPERATING RESULTS AND/OR COULD RESULT IN LOSS OF KEY
PERSONNEL.
OnDisplay will need to overcome significant issues in order to realize any
benefits or synergies from the merger, including the timely, efficient and
successful execution of a number of post-merger events. Key events include:
- integrating the operations of the two companies;
- retaining and assimilating the key personnel of each company;
- offering the existing products and services of each company to the other
company's customers;
- retaining the existing customers and strategic partners of each company;
- developing new services that utilize the assets of both companies; and
- maintaining uniform standards, controls, procedures and policies.
The successful execution of these post-merger events will involve
considerable risk and may not be successful. These risks include:
- the potential disruption of the combined company's ongoing business and
distraction of its management;
- the difficulty of incorporating acquired technology and rights into the
combined company's products and services;
- unanticipated expenses related to technology integration;
- the impairment of relationships with employees and customers as a result
of any integration of new management personnel; and
- potential unknown liabilities associated with the acquired business.
The combined company may not succeed in addressing these risks or any other
problems encountered in connection with the merger. If the benefits of the
merger do not exceed the costs associated with the merger, including any
dilution to OnDisplay's stockholders resulting from the issuance of shares in
connection with the merger, OnDisplay's financial results, including earnings
per share, could be adversely affected.
OBERON STOCKHOLDERS WILL RECEIVE A FIXED NUMBER OF SHARES OF ONDISPLAY COMMON
STOCK DESPITE CHANGES IN MARKET VALUE OF ONDISPLAY COMMON STOCK.
Upon the merger's completion, each share of Oberon common and preferred
stock, will be exchanged for .0912 shares of OnDisplay common stock. There will
be no adjustment for changes in the market price of OnDisplay common stock. In
addition, neither Oberon nor OnDisplay may terminate the merger agreement or
"walk away" from the merger solely because of changes in the market price of
OnDisplay common stock. Accordingly, the specific dollar value of OnDisplay
common stock that Oberon stockholders will receive upon the merger's completion
will depend on the market value of OnDisplay common stock when the merger is
completed and may decrease from the date you submit your proxy. The
22
<PAGE> 29
share price of OnDisplay common stock has risen substantially over a short
period which could increase its susceptibility to a sharp decline in the event
of any adverse development affecting OnDisplay or technology company stock
prices. We urge you to obtain recent market quotations for OnDisplay common
stock. OnDisplay cannot predict or give any assurances as to the market price of
OnDisplay common stock at any time before or after the completion of the merger.
THE MARKET PRICE OF ONDISPLAY COMMON STOCK MAY DECLINE AS A RESULT OF THE
MERGER.
The market price of OnDisplay common stock may decline as a result of the
merger for a number of reasons including if:
- the integration of OnDisplay and Oberon is unsuccessful;
- OnDisplay does not achieve the perceived benefits of the merger as
rapidly or to the extent anticipated by financial or industry analysts;
- the effect of the merger on OnDisplay's financial results is not
consistent with the expectations of financial or industry analysts; or
- investors react negatively to the effect on OnDisplay's net operating
results from the annual amortization over four years of the approximately
$184,620,000 of goodwill created by the merger.
OBERON'S OFFICERS AND DIRECTORS HAVE CONFLICTS OF INTEREST THAT MAY INFLUENCE
THEM TO SUPPORT OR APPROVE THE MERGER.
The directors and officers of Oberon participate in arrangements that
provide them with interests in the merger that are different from, or in
addition to, yours, including the following:
- Options to purchase shares of Oberon common stock granted to directors
and executive officers of Oberon will accelerate upon the completion of
the merger. These options cover an aggregate of approximately 578,000
shares, excluding any options that may be granted by Oberon after
December 31, 1999.
- M. McMahon and M. Wick have agreed to be employees of OnDisplay after
completion of the merger and J. Chappell and D. Collard have entered into
severance agreements in the form attached to the merger agreement.
- J. Mandile is on the board of directors of both OnDisplay and Oberon and
owns OnDisplay common stock. Entities affiliated with Matrix Partners, a
venture capital firm, are stockholders of both OnDisplay and Oberon. One
general partner of Matrix Partners serves as a director of OnDisplay and
another serves as a director of Oberon.
- OnDisplay has agreed to cause the surviving corporation in the merger to
fulfill and honor in all respects the obligations of Oberon pursuant to
its articles of organization and bylaws and any indemnification
agreements between Oberon and each of its directors and officers existing
prior to the completion of the merger.
For the above reasons, the directors and officers of Oberon could be more
likely to vote to favor the merger than if they did not hold these interests.
Oberon stockholders should consider whether these interests may have influenced
these directors and officers to support or recommend the merger.
FAILURE TO COMPLETE THE MERGER COULD NEGATIVELY IMPACT ONDISPLAY'S STOCK PRICE
AND OBERON AND/OR ONDISPLAY'S FUTURE BUSINESS AND OPERATIONS.
If the merger is not completed for any reason, Oberon and OnDisplay may be
subject to a number of material risks, including the following:
- the price of OnDisplay common stock may decline to the extent that the
relevant current market price reflects a market assumption that the
merger will be completed; and
23
<PAGE> 30
- costs related to the merger, such as legal, accounting and financial
advisor fees, must be paid even if the merger is not completed.
In addition, Oberon's and/or OnDisplay's customers and strategic partners,
in response to the announcement of the merger, may delay or defer decisions
concerning either company. Any delay or deferral of those decisions by
customers, strategic partners or suppliers could have a material adverse effect
on the business of the affected company, regardless of whether the merger is
ultimately completed. Similarly, current and prospective Oberon and/or OnDisplay
employees may experience uncertainty about their future roles with the combined
companies until OnDisplay's strategies with regard to Oberon are announced or
executed. This may adversely affect Oberon's and/or OnDisplay's ability to
attract and retain key management, sales, marketing and technical personnel.
Further, if the merger is terminated and Oberon's board of directors
determines to seek another merger or business combination, there can be no
assurance that it will be able to find a partner willing to pay an equivalent or
more attractive price than the price to be paid in the merger. In addition,
while the merger agreement is in effect, Oberon is prohibited from soliciting,
initiating or encouraging or entering into certain extraordinary transactions,
such as a merger, sale of assets or other business combination, with any party
other than OnDisplay.
RISKS RELATING TO ONDISPLAY AND THE COMBINED COMPANY
WE HAVE A HISTORY OF LOSSES AND EXPECT LOSSES IN THE FUTURE. IF WE DO NOT
ACHIEVE OR SUSTAIN PROFITABILITY IN THE FUTURE, OUR VIABILITY WILL BE IN DOUBT
AND OUR STOCK PRICE WILL DECLINE.
We were incorporated in August 1996 and first recognized revenues in the
fourth quarter of 1997. As of December 31, 1999, we had an accumulated deficit
of approximately $31.2 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 profitability 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 expanding our
direct sales and marketing activities, leading to losses at least through 2002.
Included in our expenses will be stock-based compensation as a result of stock
options granted through December 15, 1999, of $15.4 million in 2000, $8.0
million in 2001, $4.2 million in 2002 and $1.6 million in 2003. These losses
could impede our ability to compete effectively by creating doubt among our
potential customers as to our long-term viability, 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."
WE MAY NEED TO RAISE ADDITIONAL CAPITAL THAT MAY NOT BE AVAILABLE ON TERMS
FAVORABLE TO US, IF AT ALL.
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.
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
reliable indication of our future performance. Our future quarterly operating
results may be below the expectations of public market
24
<PAGE> 31
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 the numerous risk factors discussed below.
In the past, we have recognized a substantial portion of our revenues in
the last few days of a quarter, which is typical of many companies in the
software industry, and we believe is primarily due to the budgetary cycles of
and the timing of purchasing decisions by our customers. Accordingly, we cannot
accurately predict our financial results for any quarter until very late in that
quarter. In addition, we derive a significant portion of our revenues in each
quarter from a small number of large orders. A delay in completing an
anticipated sale near the end of a quarter can seriously harm our net operating
results for that quarter.
Our expense levels are relatively fixed in the short term and are based, in
part, on our expected future revenues. Our inability to adjust spending in a
timely manner to compensate for any unexpected revenue shortfall could
accentuate the negative effect on our quarterly results.
OUR REVENUES DEPEND ON A LIMITED NUMBER OF PRODUCT LINES.
Most of our revenues in 1998 and 1999, were derived from software licenses
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.
Additionally, upon completion of this offering, we will offer an
Oberon-developed product, eEnterprise. We expect that the CenterStage suite of
products will continue to account for the substantial majority of our total
revenues for at least the next several quarters.
Our products are at an early stage of commercialization, particularly our
three new products. Therefore, the level of market acceptance they will attain
is difficult to forecast. Market acceptance could be seriously impeded in the
following circumstances:
- broad standards for conducting e-business emerge and become widely
adopted, thus reducing the need for our infrastructure products;
- information services departments of potential customers choose instead 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 would have a direct negative effect on our primary
source of revenues and could cause our stock price to fall.
25
<PAGE> 32
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
PLANNED GROWTH AND FINANCIAL OBJECTIVES WILL NOT BE MET.
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. If these markets do not develop as rapidly as we expect, our
planned growth and financial objectives will not be met. 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.
OUR CENTERSTAGE PRODUCTS HAVE LONG AND VARIABLE SALES CYCLES; IT IS THEREFORE
DIFFICULT TO PREDICT THE TIMING OF INDIVIDUAL ORDERS AND MATCH REVENUES WITH
OPERATING EXPENSES, WHICH ARE RELATIVELY FIXED IN THE SHORT TERM.
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 revenue fluctuations could have an
accentuated effect on our net operating results in some future periods. While
the average sales cycle for our CenterStage products has been approximately 75
days, our sales cycles could 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, WE WILL
NOT ACHIEVE OUR FINANCIAL OBJECTIVES.
The market for e-business infrastructure applications and services is
intensely competitive, rapidly evolving and susceptible to significant
technological change. We expect the intensity of our competition to increase in
the future. 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 negatively impact our ability to sell our
products at the price levels required to support our continuing operations. See
"Business -- Competition" for a discussion of our current and potential
competitors.
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WE NEED TO EXPAND OUR DIRECT SALES OPERATIONS IF WE ARE TO INCREASE MARKET
AWARENESS OF AND REVENUES DERIVED FROM OUR CENTERSTAGE PRODUCTS AND RELATED
SERVICES.
If we fail to expand our direct sales capabilities as we have planned, our
prospects for revenue growth will be diminished. 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 OPERATIONS AND GROWTH PROSPECTS MAY BE SIGNIFICANTLY IMPEDED IF WE ARE
UNABLE TO RETAIN OUR KEY PERSONNEL OR ATTRACT ADDITIONAL KEY PERSONNEL,
ESPECIALLY BECAUSE EXPERIENCED AND SKILLED PERSONNEL ARE IN SHORT SUPPLY.
Competition for key personnel is intense, particularly in the San Francisco
Bay Area, where our headquarters are located. We have experienced difficulties
attracting, hiring, training and retaining new personnel in the past, and our
key 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 and Chief Executive Officer, M. Pine, and founder and Chief Technical
Officer, T. Dung. The loss of M. Pine's or T. Dung's services would materially
impede the operation and growth of our business. We do not maintain key person
life insurance for any of our personnel.
IF WE FAIL TO SUCCESSFULLY MANAGE OUR PLANNED EXPANSION OF OPERATIONS, OUR
GROWTH PROSPECTS WILL BE DIMINISHED AND OUR OPERATING EXPENSES COULD EXCEED
BUDGETED AMOUNTS.
Our ability to offer our CenterStage products and related services in a
quickly evolving market requires an effective planning and management process.
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
diminish our growth prospects and could result in lost opportunities as well as
operating expenses exceeding the amount budgeted.
IF WE FAIL TO ADEQUATELY RESPOND TO RAPID TECHNOLOGICAL CHANGES, OUR EXISTING
PRODUCTS WILL BECOME OBSOLETE OR UNMARKETABLE.
New approaches to gather, 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
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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 connection with the introduction of new products and enhancements,
we have experienced development delays and related cost overruns, which are not
unusual in the software industry. We could encounter these problems or more
serious delays 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 have a direct negative
effect on our revenues.
IF OUR CENTERSTAGE PRODUCTS CONTAIN ERRORS, OUR REVENUES AND NET OPERATING
RESULTS WILL BE NEGATIVELY IMPACTED AND OUR REPUTATION AND THE MARKET ACCEPTANCE
OF THESE PRODUCTS WILL BE JEOPARDIZED.
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. We have discovered software defects in our
new products after their introduction. 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;
- legal actions by customers against us; and
- increased insurance costs.
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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 from us for their losses. 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 reputation.
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 have a
significant negative impact on our results of operations and cause our stock
price to fall.
IF WE FAIL TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS OUR ABILITY TO
COMPETE COULD BE SERIOUSLY HARMED, AND IF OTHER COMPANIES BRING LAWSUITS
CLAIMING THAT WE INFRINGE THEIR INTELLECTUAL PROPERTY RIGHTS WE COULD BE LIABLE
FOR SIGNIFICANT DAMAGES.
Our success depends in large part on our ability to adequately protect our
intellectual property rights. We seek to protect our source code, documentation
and other written materials under trade secret and copyright laws, which afford
only limited protection. 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 sign
confidentiality agreements with us. However, some of these confidentiality
agreements contain provisions that may permit these persons, in some
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. 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 copy our CenterStage
products, independently develop similar technology, or design around our
intellectual property. If we fail to adequately protect our intellectual
property, our ability to compete may be seriously harmed.
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
susceptible 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 may not be available at all, which could jeopardize the
viability of our business.
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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 operating results and business
prospects. 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 some 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 VARIOUS RISKS.
We began our international operations in the fourth quarter of 1999 by
hiring our initial employees in Europe. Establishing our international
operations will require significant management attention and financial resources
and could harm our financial performance by increasing our costs. We have very
limited experience in marketing, selling and distributing our CenterStage
products and related services internationally. We may encounter difficulties in
staffing and managing offices in foreign countries because of our inexperience
and unfamiliarity with local conditions, as well as shortages of qualified
personnel in some countries. Some countries provide little or no protection of
intellectual property rights. Our products may be copied with impunity in such
countries. We may find that the costs of customizing our products in some
foreign countries exceeds our estimates or results in delays in product
readiness. Some countries provide only minimal levels of protection to trade
creditors in collecting amounts due, which could result in difficulties in
collecting accounts receivable.
OUR SYSTEMS ARE SUSCEPTIBLE TO EXTERNAL EVENTS THAT MAY IMPACT OUR ABILITY TO
CONDUCT OUR BUSINESS OPERATIONS.
We are vulnerable to a major earthquake and other calamities. Our
operational facilities are located in the San Francisco Bay area, a seismically
active region. Our computer systems, as well as the telecommunications and other
infrastructure serving our operations, are potentially vulnerable to a major
earthquake. We have not undertaken a systematic analysis of the potential
consequences to our business and financial results from a major earthquake and
do not have a recovery plan for earthquake, fire, flood, systemic power or
communication failure, sabotage or similar disasters. We are unable to predict
the effects of any such event, but the effects could be seriously harmful to our
business.
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 operating system of the host computer and any
other software used with our products are
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year 2000 compliant. 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;
- 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.
Although we have not to date experienced these problems to any significant
extent the occurrence of any of these problems later in the year 2000 is
possible and 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. 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 revenues could be adversely
affected. Regardless of whether we experience year 2000 problems, enterprises
may reduce their spending on software and systems during early 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 net operating
results. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Year 2000 Compliance." We have not developed a
contingency plan to address situations that may result if we are unable to
achieve year 2000 readiness of our critical operations or if our customers or
vendors encounter significant year 2000 compliance problems.
THIS DOCUMENT CONTAINS FORWARD-LOOKING STATEMENTS; THESE STATEMENTS ARE NOT
GUARANTEES OF FUTURE PERFORMANCE AND ARE SUSCEPTIBLE TO RISKS, UNCERTAINTIES AND
OTHER FACTORS, SOME OF WHICH ARE BEYOND OUR CONTROL.
This proxy statement/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 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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THE ONDISPLAY SPECIAL MEETING
DATE, TIME AND PLACE OF ONDISPLAY'S SPECIAL MEETING
The date, time and place of the special meeting of OnDisplay stockholders
are as follows:
March 30, 2000
9:00 a.m. Pacific Time
12667 Alcosta Boulevard, Suite 300
San Ramon, California 94583
PURPOSE OF THE SPECIAL MEETING
The special meeting is being held so that OnDisplay stockholders may
consider and vote upon a proposal to approve issuance of OnDisplay common stock
in a merger with Oberon Software Incorporated that will cause Oberon to become a
wholly-owned subsidiary of OnDisplay. The meeting is also being held so that
OnDisplay stockholders may consider and vote upon a proposal to approve an
increase of the number of shares of common stock reserved for issuance of stock
options under the 1996 Stock Plan from 4,975,000 to 6,975,000 and such other
business as may properly come before the special meeting. The merger agreement
is included as Annex A to the attached proxy statement/prospectus. If the merger
is approved, among other things:
- ObiOne Acquisition Corporation, a wholly-owned subsidiary of OnDisplay,
will merge with and into Oberon.
- OnDisplay will issue shares of common stock in the merger as contemplated
by the merger agreement. OnDisplay will issue .0912 shares of OnDisplay
common stock for each share of outstanding Oberon capital stock.
RECORD DATE AND OUTSTANDING SHARES
OnDisplay's board of directors has fixed the close of business on March 3,
2000 as the record date for the special meeting. Only holders of record of
OnDisplay common stock at the close of business on the record date are entitled
to notice of and to vote at the meeting. As of the close of business on the
record date, there were approximately 20,175,507 shares of OnDisplay common
stock outstanding and entitled to vote, held of record by approximately 177
stockholders.
VOTE AND QUORUM REQUIRED
Under OnDisplay's certificate of incorporation and bylaws, and under
Delaware law, no vote of OnDisplay stockholders is required to approve the
merger and issuance of OnDisplay shares. However, because Mr. J. Mandile is a
director of both Oberon and OnDisplay and owns OnDisplay common stock, entities
affiliated with Matrix Partners are stockholders of both Oberon and OnDisplay
and one of the general partners of Matrix Partners serves as a director of
OnDisplay while another serves as a director of Oberon, a stockholder vote is
required under rule 4460(i) of the NASD rules relating to the Nasdaq Stock
Market.
Holders of OnDisplay's common stock are entitled to one vote for each share
held as of the record date. Approval of each of the proposals to be voted upon
by OnDisplay stockholders requires the affirmative vote of a majority of the
common stock of OnDisplay present in person or represented by proxy at the
meeting. Attendance at the meeting in person or by proxy of a majority of the
outstanding common stock of OnDisplay is required for a quorum.
THE HOLDERS OF APPROXIMATELY 54.2% OF THE OUTSTANDING SHARES OF ONDISPLAY
HAVE AGREED TO VOTE FOR APPROVAL OF THE ISSUANCE OF ONDISPLAY COMMON STOCK IN
THE MERGER. THEREFORE, THE REQUISITE STOCKHOLDER APPROVAL IS ASSURED.
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On the record date, directors, executive officers and affiliates of
OnDisplay as a group beneficially owned approximately 11,039,342 shares of
OnDisplay common stock, excluding any shares that may have been purchased by
affiliates since February 15, 2000.
ABSTENTIONS; BROKER NON-VOTES
Abstentions will be included in determining the number of shares present
and voting at the meeting and will have the same effect as votes against these
proposals. In the event that a broker, bank, custodian, nominee or other record
holder of OnDisplay common stock indicates on a proxy that it does not have
discretionary authority to vote certain shares on a particular matter, which is
called a broker non-vote, those shares will not be considered for purposes of
determining the number of shares entitled to vote with respect to a particular
proposal on which the broker has expressly not voted, but will be counted for
purposes of determining the presence or absence of a quorum for the transaction
of business.
EXPENSES OF PROXY SOLICITATION
OnDisplay will pay the expenses of soliciting proxies to be voted at the
meeting. Following the original mailing of the proxies and other soliciting
materials, OnDisplay and its agents also may solicit proxies by mail, telephone,
telegraph or in person. Following the original mailing of the proxies and other
soliciting materials, OnDisplay will request brokers, custodians, nominees and
other record holders of OnDisplay common stock to forward copies of the proxy
and other soliciting materials to persons for whom they hold shares of OnDisplay
common stock and to request authority for the exercise of proxies. In such
cases, OnDisplay upon the request of the record holders, will reimburse such
holders for their reasonable expenses.
PROXIES
The proxy accompanying this proxy statement/prospectus is solicited on
behalf of the OnDisplay board of directors for use at the meeting. Please
complete, date and sign the accompanying proxy and promptly return it in the
enclosed envelope or otherwise mail it to OnDisplay. All properly signed proxies
that OnDisplay receives prior to the vote at the meeting and that are not
revoked will be voted at the meeting according to the instructions indicated on
the proxies or, if no direction is indicated, to approve the issuance of
OnDisplay common stock in connection with the Oberon merger and increase of the
number of shares reserved under the 1996 Stock Plan.
REVOCABILITY OF PROXIES
Unless you have signed a voting agreement, you may revoke your proxy at any
time before it is exercised at the meeting by taking any of the following
actions:
- delivering a written notice to the secretary of OnDisplay by any means,
including facsimile, bearing a date later than the date of the proxy,
stating that the proxy is revoked;
- signing and delivering a proxy relating to the same shares and bearing a
later date prior to the vote at the meeting; or
- attending the meeting and voting in person, although attendance at the
meeting will not, by itself, revoke a proxy. Please note, however, that
if your shares are held of record by a broker, bank or other nominee and
you wish to vote at the meeting, you must bring to the meeting a letter
from the broker, bank or other nominee confirming your beneficial
ownership of the shares.
OnDisplay's board of directors does not know of any matter that is not
referred to in this proxy statement/prospectus to be presented for action at the
meeting. If any other matters are properly brought before the meeting, the
persons named in the proxies will have discretion to vote on such matters in
accordance with their best judgment.
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THE OBERON SPECIAL MEETING
GENERAL: DATE, PLACE AND TIME
This document is being furnished to holders of Oberon stock in connection
with the solicitation of proxies by the Oberon board of directors for use at the
special meeting of stockholders of Oberon to be held on March 30, 2000, at 10:00
a.m. local time at the headquarters of Oberon located at 215 First Street,
Cambridge, Massachusetts 02142, and at any adjournment or postponement of the
meeting.
MATTERS TO BE CONSIDERED
At the special meeting, Oberon stockholders will be asked to consider and
vote upon a proposal to adopt and approve the merger agreement and the merger.
BOARD OF DIRECTORS' RECOMMENDATION
A special committee of Oberon's board of directors, as well as the full
board, has unanimously approved the merger agreement and the merger and
recommends a vote FOR adoption of the merger agreement and approval of the
merger.
RECORD DATE
Pursuant to Massachusetts law, the close of business on the next day
preceding the date on which notice is given is the record date for the special
meeting. Accordingly, only holders of Oberon capital stock of record at the
close of business will be entitled to notice of, and to vote at, the special
meeting.
STOCKHOLDERS ENTITLED TO VOTE
As of the close of business on March 6, 2000, there were approximately
6,633,062 shares of common stock, 11,300,000 shares of series 1 convertible
participating preferred stock and 3,399,598 shares of series 2 convertible
non-participating preferred stock of Oberon outstanding and entitled to vote.
The holders of common stock are entitled to cast one vote for each share of
common stock they hold on each matter submitted to the common stockholders for a
vote at the special meeting. The holders of series 1 and 2 preferred stock are
entitled to cast one vote for each share of common stock into which their series
1 and 2 preferred stock, as the case may be, could then be converted on each
matter submitted to a vote at the special meeting. The presence in person or by
proxy of the holders of a majority of the shares of Oberon stock entitled to
vote is necessary to constitute a quorum for the transaction of business at the
special meeting.
REQUIRED VOTE
Approval of the merger agreement under Massachusetts law and Oberon's
articles of organization requires the affirmative vote of the holders of:
- at least two-thirds of the outstanding shares of common stock and shares
of series 1 and 2 preferred stock voting as a single class on an as
converted basis; and
- at least a majority of the outstanding shares of series 1 and 2 preferred
stock, each voting as a separate class.
The holders of approximately 87.6% of the outstanding shares of Oberon
capital stock and 100% of the Oberon series 1 and 64.7% of the Oberon series 2
preferred stock have agreed to vote in favor of approval of the merger agreement
and the merger and against any other alternative transaction. An alternative
transaction is:
- a transaction pursuant to which any third party other than OnDisplay or
its affiliates acquires more than 20% of the outstanding shares of Oberon
common stock pursuant to a tender offer, exchange offer or otherwise;
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- a merger or other business combination involving Oberon pursuant to which
any third party acquires more than 20% of the outstanding shares of
common stock of Oberon or of the surviving entity;
- any other transaction where any third party acquires assets, of Oberon
having a fair market value equal to more than 20% of the fair market
value of all the assets of Oberon immediately prior to such transaction;
or
- any public announcement by a third party of its intention to do any of
the foregoing or any agreement to engage in any of the foregoing.
PROXIES
This document is being furnished to Oberon stockholders in connection with
the solicitation of proxies by the Oberon board of directors for use at the
special meeting, and is accompanied by a form of proxy.
All shares of Oberon stock that are entitled to vote and are represented at
the Oberon special meeting by properly executed proxies received before or at
the meeting, and not revoked, will be voted at the meeting in accordance with
the instructions indicated on the proxies. If a proxy is properly executed but
no vote is specified, the proxy will be voted for adoption of the merger
agreement and approval of the merger, except for proxies submitted by record
holders of shares of Oberon stock who indicate that they have not received
voting instructions from the beneficial holders of those shares.
If any other matters are properly presented for consideration at the Oberon
special meeting, the persons named in the enclosed form of proxy will have the
discretion to vote on those matters using their best judgment. Additional
matters which may come before the meeting include consideration of a motion to
adjourn the meeting to another time and/or place, which may be necessary for the
purpose of soliciting additional proxies from Oberon stockholders. The proxy
holders will not adjourn the meeting if there are insufficient votes to approve
the proposals at the date of the meeting.
REVOCABILITY OF PROXIES
Any person who gives a proxy pursuant to this solicitation may revoke it at
any time before it is voted. To revoke a proxy, you must:
- submit a later dated proxy with respect to the same shares at any time
before the vote on the adoption of the merger agreement;
- deliver written notice of revocation to the Clerk of Oberon at any time
before the vote; or
- attend the special meeting and vote in person.
Your attendance at the special meeting alone is not sufficient to revoke a
proxy.
Any written notice of revocation or subsequent proxy must be delivered at
or before the taking of the vote at the special meeting to Oberon Software
Incorporated, 215 First Street, Cambridge, Massachusetts 02142, Attention:
Clerk.
If you have signed a voting agreement, you may not revoke your proxy.
SOLICITATION OF PROXIES
The expense of the solicitation of proxies for the special meeting will be
borne by OnDisplay, including the cost of printing and mailing this document. In
addition to solicitation by mail, directors,
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officers and employees of Oberon may solicit proxies in person or by telephone,
fax or other means of communications. These directors, officers and employees
will not receive additional compensation.
OBERON STOCKHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR PROXY
CARDS.
APPRAISAL RIGHTS
If the merger is completed, holders of Oberon capital stock who object to
the merger are entitled to appraisal rights under Massachusetts law. In order to
exercise appraisal rights, Oberon stockholders must strictly adhere to the
provisions of Massachusetts law governing appraisal rights. The following is a
summary of the relevant provisions of Massachusetts law. The description below
is only a summary and is qualified by reference to the relevant provisions of
Massachusetts law, a copy of which is attached hereto as Annex D.
In order to exercise your appraisal rights, you must take the following
steps:
- send a written objection to the merger to Oberon before the special
meeting stating your intention to demand payment for your shares of
Oberon capital stock if the merger is approved and the merger occurs;
- do NOT vote in favor of the merger; and
- send a written demand to Oberon for payment for your Oberon shares within
twenty days after you received notice from Oberon that the merger has
occurred. Oberon will send the notice within 10 days after the merger is
completed.
The written objection and written demand should be delivered to Oberon
Software Incorporated, 215 First Street, Cambridge, Massachusetts 02142,
Attention: Clerk. We recommend that you send the objection and demand by
registered or certified mail, return receipt requested.
Please note that, if you file a written objection with Oberon prior to the
special meeting, you do not need to vote against the merger. However, if you
file a written objection with Oberon prior to the special meeting and vote in
favor of the merger, you will be deemed to have waived your right to exercise
appraisal rights.
If you have followed the procedures set forth above and the merger is
completed, Oberon will contact you within 10 days after the effective time of
the merger in order to determine the fair value of your Oberon capital stock.
The "fair value" of your Oberon capital stock will be determined as of the day
before approval of the merger by the Oberon stockholders and will exclude any
value arising from the expectation of the merger. If Oberon and you have not
agreed as to the fair value of your stock within 30 days after you receive
notice from Oberon that the merger has occurred, both you and Oberon will have
the right to have the court determine the fair value by filing a bill in equity
in the Superior Court Department of Middlesex County, Massachusetts no later
than four months after the expiration of the negotiation period.
After filing the bill in equity, the court or special master will hold a
hearing and enter a decree determining the fair value of your Oberon capital
stock and ordering Oberon to make payment to you of such value. You will also be
paid interest from the date of the special meeting to the time that you
surrender your certificates representing your shares of Oberon capital stock to
the exchange agent. The determination of fair value made by the court or special
master will be binding on and enforceable by you and the other Oberon
stockholders who have properly executed their appraisal rights.
The fair value of the Oberon capital stock could be worth more than, the
same as, or less than the value of the OnDisplay common stock you would
otherwise have received by exchanging your shares of Oberon capital stock for
share of OnDisplay common stock.
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Your appraisal rights are your only remedy if you object to the merger,
unless the merger is determined to have been illegal, fraudulent or in breach of
the fiduciary duties of the Oberon board of directors.
If you exercise your appraisal rights, after the merger is completed you
will not have any rights as an Oberon or OnDisplay stockholder, including the
right to receive notices of meetings, vote at meeting or receive dividends, if
any.
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THE OBERON MERGER
This section of the proxy statement/prospectus describes the proposed
Oberon merger. While we believe that the description covers the material terms
of the merger and the related transactions, this summary may not contain all of
the information that is important to you. You should carefully read this entire
document and the other documents we referred to for a more complete
understanding of the merger.
BACKGROUND OF THE OBERON MERGER AND RELATED AGREEMENTS
OnDisplay is regularly involved in the review of private and public
companies with which it may form strategic partnerships to further its
objectives in the Internet commerce market. During the course of 1997, OnDisplay
was made aware of Oberon by J. Mandile, an OnDisplay director and an Oberon
director who is affiliated with Sigma Partners, a venture capital firm. In 1997
the two companies were in different markets with similar challenges. The Chief
Executive Officers of each company, M. Pine of OnDisplay and J. Chappell of
Oberon, were introduced and began a series of infrequent discussions on the
markets and the companies.
On August 25, 1999, Mr. Pine met Mr. Chappell and certain executives at
Oberon's headquarters in Cambridge, Massachusetts to discuss potential strategic
opportunities for the two companies.
On September 1, 1999, Mr. Pine invited Mr. Chappell to visit OnDisplay's
headquarters in San Ramon, California, to provide an overview of Oberon and
discuss strategic opportunities for the two companies. On September 9, 1999, Mr.
Chappell made a strategic overview presentation to the OnDisplay board of
directors on the potential benefits of a strategic partnership with Oberon.
No further meetings or discussions ensued until December 16, 1999, when Mr.
Pine, who was in New York City on other business, met with Mr. Chappell for
breakfast. Mr. Pine invited Mr. Chappell to meet with OnDisplay management in
San Ramon and broaden the scope of the September discussions.
At a December 20, 1999 meeting of the Oberon board of directors, Mr.
Chappell reviewed the discussions with Mr. Pine and the potential benefits of a
strategic relationship. Mr. Chappell was authorized to begin discussions with
OnDisplay about a potential business combination.
On December 23, 1999, Mr. Pine and Mr. Chappell met with OnDisplay's V.
Mohan, Chief Operating Officer, S. Pierini, Vice President of Product Marketing,
and other managers of OnDisplay and Mr. Chappell presented an overview of
Oberon. Following the meeting, Mr. Pine and Mr. Chappell discussed the
possibility of a business combination and scheduled a visit to Cambridge,
Massachusetts for exchange of business and technical information.
On January 4, 2000, OnDisplay and Oberon both signed a confidentiality
agreement.
From January 4 through January 17, 2000 the two companies and their
respective financial and legal advisors conducted due diligence and negotiations
relating to a potential strategic relationship and proposed terms of the merger
agreement.
At a January 10, 2000 meeting of the Oberon board of directors, Mr.
Chappell updated the directors concerning ongoing discussions with OnDisplay,
including a proposed merger in which OnDisplay would issue shares having a value
of approximately $200 million for all shares of Oberon capital stock and
options. The directors discussed the proposal and authorized a special committee
composed of all of the directors other than J. Mandile and M. Humphreys, a
general partner of Matrix Partners, to engage SoundView, as financial advisor,
and authorized the execution of a letter in which Oberon agreed not to engage in
any discussions with third parties with regard to possible business combinations
prior to January 20, 2000 and directed management to continue negotiations with
OnDisplay. Following this meeting, the special committee retained SoundView as a
financial advisor.
On January 10, 2000, OnDisplay engaged Robertson Stephens, Inc. to provide
financial advisory services to OnDisplay in connection with a combination with
Oberon.
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On January 13, 2000, OnDisplay held a special board of directors meeting to
discuss the proposed business combination. At the outset of the meeting, J.
Mandile and T. Barrows, a general partner of Matrix Partners, were excused from
any discussions on the matter. The board of directors discussed the proposed key
terms of the transaction and the results of the investigations of Oberon by the
management and attorneys of OnDisplay. The board of directors received a
presentation from its financial advisor and authorized management to continue
discussions.
On January 14, 2000, the Oberon special committee met to review a draft
merger agreement, including the representations and warranties, closing
conditions and indemnification and escrow provisions. Management was directed to
continue negotiations with OnDisplay.
On January 16, 2000, the Oberon special committee met with its legal and
financial advisors. At this meeting, the special committee reviewed the terms of
the merger agreement and related agreements. Representatives of SoundView
reviewed the financial aspects of the proposed transaction and rendered an oral
opinion, subsequently confirmed in writing, that the terms of the proposed
transaction were fair, from a financial point of view, to the Oberon
stockholders. The special committee subsequently unanimously recommended
approval of the Oberon merger and merger agreement to the full Oberon board of
directors. At a meeting of the Oberon board immediately following the special
committee meeting, the Oberon board unanimously voted to approve the merger and
the merger agreement.
On January 17, 2000, the OnDisplay board of directors met. At this meeting
the board of directors reviewed final terms of the transaction documents and
received from Robertson Stephens, Inc., its financial advisor, its oral opinion,
subsequently confirmed in writing, that the consideration to be paid by
OnDisplay in the merger was fair from a financial point of view, to OnDisplay.
Thereafter, the board of directors of OnDisplay, with J. Mandile and T. Barrows
excused, unanimously approved the merger and merger agreement.
On January 18, 2000 prior to the opening of the Nasdaq Stock Market,
OnDisplay announced the execution of the merger agreement.
ONDISPLAY'S REASONS FOR THE MERGER
In deciding to approve the merger and merger agreement, the OnDisplay board
concluded that acquiring Oberon was in the best interests of OnDisplay and its
stockholders. In reaching this decision, the OnDisplay board discussed and
considered several potential benefits created by the pending business
combination:
- Merging with Oberon should expand the functionality and breadth of our
product offerings to existing and prospective OnDisplay
clients -- particularly, in fulfilling the need for business process
automation software and application integration for business-to-business,
business-to-consumer and electronic marketplace applications. OnDisplay
should be able to integrate Oberon's eEnterprise software suite and broad
selection of application adapters, or Oberon Building Blocks, into the
OnDisplay product line. Oberon's software suite and Oberon Building
Blocks represent a highly complementary solution to OnDisplay's existing
CenterStage platform for e-business portals and e-marketplaces.
- Using the combined product set, OnDisplay customers should be able to
implement standard business processes -- including order acknowledgements
and inventory status checks -- without the need to know which
applications their trading partners have deployed, and without having to
write code. When combined with our additional content aggregation,
syndication and notification products, the integrated suite provides one
of the industry's most comprehensive e-business infrastructure solutions.
- Merging with Oberon should give OnDisplay a competitive advantage in the
business-to-business integration market. The addition of Oberon's
business process automation capabilities to OnDisplay's already strong
aggregation, integration and exchange technologies creates one of the
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<PAGE> 46
most comprehensive, easy to use, and high-performance e-business
infrastructure software solutions on the market, thereby erecting a
significant competitive barrier to other vendors.
- Merging with Oberon will expand On Display's research and development
resources, making available a stable and productive engineering team in
Cambridge, Massachusetts, a visual software design environment and domain
expertise in the business process automation and application integration
market.
The discussion of the information and factors considered by the OnDisplay
board is not intended to be exhaustive. In view of the variety of factors
considered in connection with its evaluation of the merger, the OnDisplay board
did not find it practicable to, and did not quantify or otherwise assign
relative weight to, the specific factors considered in reaching its
determination.
RECOMMENDATION OF ONDISPLAY'S BOARD OF DIRECTORS
AFTER CAREFUL CONSIDERATION, THE ONDISPLAY BOARD OF DIRECTORS HAS
DETERMINED THE MERGER AGREEMENT AND THE MERGER TO BE FAIR TO AND IN THE BEST
INTERESTS OF ITS STOCKHOLDERS. IN CONNECTION WITH THE MERGER, ONDISPLAY'S BOARD
OF DIRECTORS, WITH THE EXCEPTION OF TWO DIRECTORS WHO WERE RECUSED FOR A
POTENTIAL CONFLICT OF INTEREST, RECOMMENDS APPROVAL OF THE ISSUANCE OF SHARES OF
ONDISPLAY COMMON STOCK IN THE MERGER AS DESCRIBED IN THIS PROSPECTUS/PROXY
STATEMENT.
OBERON'S REASONS FOR THE OBERON MERGER
Oberon believes the following are reasons why the merger will be beneficial
to Oberon and its stockholders:
- the exchange ratio;
- the merger will enable Oberon to capitalize on OnDisplay's strong direct
sales organization with proven marketing and distribution expertise in
the e-business market, and the significant financial resources of
OnDisplay will increase the visibility and accessibility of Oberon's
products;
- OnDisplay's research and development staff will enable Oberon to focus
and accelerate its product development activities and OnDisplay's larger
professional services staff will enable Oberon to accelerate its product
implementation activities;
- the merger will provide Oberon with immediate access to additional
financial resources to accelerate its growth, as well as access to the
public markets for further capital, if needed; and
- the consideration to be paid to Oberon's stockholders in the merger will
be shares of OnDisplay common stock, which are publicly traded on the
Nasdaq National Market and more readily marketable than shares of Oberon
stock.
RECOMMENDATION OF OBERON'S BOARD OF DIRECTORS
AFTER CAREFUL CONSIDERATION, A SPECIAL COMMITTEE OF OBERON'S BOARD OF
DIRECTORS, AS WELL AS THE FULL BOARD OF DIRECTORS, UNANIMOUSLY DETERMINED THAT
THE MERGER IS IN THE BEST INTERESTS OF ITS STOCKHOLDERS AND UNANIMOUSLY APPROVED
THE MERGER AGREEMENT AND RECOMMEND THAT THE STOCKHOLDERS VOTE FOR APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AND THE MERGER, AS DESCRIBED IN THIS
PROSPECTUS/PROXY STATEMENT.
In considering the recommendation of a special committee of Oberon's board
of directors, as well as the full board of directors, with respect to the merger
agreement, you should be aware that some directors and officers of Oberon have
interests in the merger that are different from, or are in addition to the
interests of Oberon stockholders generally. Please see the section entitled
"Interests of Certain Directors, Officers and Affiliates in the Merger" on page
49 of this proxy statement/prospectus.
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<PAGE> 47
OPINION OF ONDISPLAY'S FINANCIAL ADVISOR (SEE APPENDIX B FOR A COPY OF THE FULL
OPINION)
Under a letter agreement dated January 10, 2000, OnDisplay engaged
Robertson Stephens to render an opinion as to the fairness of the exchange
ratio, from a financial point of view, to OnDisplay.
On January 16, 2000, at a meeting of the OnDisplay board held to evaluate
the proposed merger, Robertson Stephens delivered to OnDisplay's board its oral
opinion that, as of January 16, 2000 and based on the matters considered and the
limitations on the review undertaken described in the opinion, the 0.0912
exchange ratio was fair from a financial point of view to OnDisplay. Shortly
thereafter, Robertson Stephens delivered a written opinion, dated January 17,
2000 to the same effect. The 0.0912 exchange ratio was determined through
negotiations between the respective managements of OnDisplay and Oberon.
Robertson Stephens was not asked by, and did not recommend to, OnDisplay that
any specific exchange ratio constituted the appropriate exchange ratio for the
merger.
You should consider the following when reading the discussion of the
opinion of OnDisplay's financial advisor in this document:
- We urge you to read carefully the entire opinion of Robertson Stephens,
which is set forth in appendix B to this proxy statement/prospectus and
is incorporated by reference.
- The following description of the Robertson Stephens opinion is qualified
by reference to the full opinion located in appendix B to this proxy
statement/prospectus. The full opinion sets forth, among other things,
the assumptions made by Robertson Stephens, the matters it considered and
the limitations on the review undertaken.
- The Robertson Stephens opinion was prepared for the benefit and use of
the OnDisplay board in its consideration of the merger and does not
constitute a recommendation to stockholders of OnDisplay as to how they
should vote at the special meeting, or take any other action, in
connection with the merger.
- The Robertson Stephens opinion does not address the relative merits of
the merger and any other transactions or business strategies discussed by
the OnDisplay board as alternatives to the merger agreement or the
underlying business decision of the OnDisplay board to proceed with or
effect the merger.
Although developments following the date of the Robertson Stephens opinion
may affect the opinion, Robertson Stephens assumed no obligation to update,
revise or reaffirm its opinion. The Robertson Stephens opinion is necessarily
based upon market, economic and other conditions that were in effect on, and
information made available to Robertson Stephens as of, the date of the opinion.
You should understand that subsequent developments may affect the conclusion
expressed in the Robertson Stephens opinion, and that Robertson Stephens
disclaims any undertaking or obligation to advise any person of any change in
any fact or matter affecting its opinion. The Robertson Stephens opinion is
limited to the fairness, from a financial point of view and as of the date
thereof, of the 0.0912 exchange ratio to OnDisplay.
Opinion and Analysis of Robertson Stephens
In connection with the preparation of the Robertson Stephens opinion,
Robertson Stephens:
- reviewed certain internal financial statements and other financial and
operating data, including certain financial forecasts and other forward
looking information, concerning (a) Oberon prepared by the managements of
Oberon and OnDisplay, respectively, and (b) OnDisplay prepared by the
management of OnDisplay;
- reviewed with OnDisplay certain publicly available research estimates of
research analysts regarding OnDisplay;
- held discussions with the respective managements of Oberon and OnDisplay
concerning the businesses, past and current operations, financial
condition and future prospects of both Oberon and
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<PAGE> 48
OnDisplay, independently and combined, including discussions with the
managements of Oberon and OnDisplay concerning their views regarding the
strategic rationale for the merger;
- reviewed the financial terms and conditions set forth in the draft merger
agreement;
- reviewed the stock price and trading history of OnDisplay common stock;
- compared the financial performance of Oberon with that of certain
publicly traded companies that it deemed comparable with Oberon;
- compared the financial terms of the merger with the financial terms, to
the extent publicly available, of other transactions that it deemed
relevant;
- reviewed the pro forma impact of the merger on OnDisplay's revenue per
share and earnings per share;
- prepared an analysis of the relative contributions of Oberon and
OnDisplay to the combined company;
- participated in discussions and negotiations among representatives of
Oberon and OnDisplay and their financial and legal advisors; and
- made such other studies and inquiries, and reviewed such other data, as
it deemed relevant.
In its review and analysis, and in arriving at its opinion, Robertson
Stephens assumed and relied upon the accuracy and completeness of all the
financial and other information provided to it (including information furnished
to it orally by the managements of OnDisplay and Oberon) or publicly available
and neither attempted independently to verify, nor assumed responsibility for
verifying, any of such information. Robertson Stephens relied upon the
assurances of the managements of OnDisplay and Oberon that they were not aware
of any facts that would make the information inaccurate or misleading.
Furthermore, Robertson Stephens did not make or obtain, or assume responsibility
for making or obtaining, any independent evaluation or appraisal of the
properties, assets or liabilities (contingent or otherwise) of OnDisplay or
Oberon, nor was it furnished with any such evaluations or appraisals.
With respect to the financial forecasts and projections (and the
assumptions and bases therefor) for each of OnDisplay and Oberon that Robertson
Stephens reviewed, upon the advice of the managements of OnDisplay and Oberon,
Robertson Stephens assumed that:
- these forecasts and projections were reasonably prepared in good faith on
the basis of reasonable assumptions;
- these forecasts and projections reflected the best currently available
estimates and judgments as to the future financial condition and
performance of OnDisplay and Oberon; and
- these projections and forecasts would be realized in the amounts and in
the time periods currently estimated.
In addition, Robertson Stephens assumed that:
- the merger will be consummated upon the terms set forth in the draft
merger agreement made available to it without material alteration,
including, among other things, that the merger will be accounted for as a
"purchase method" business combination in accordance with United States
generally accepted accounting principles;
- the merger will be treated as a "reorganization" as defined in the
Internal Revenue Code of 1986, as amended;
- the historical financial statements of each of OnDisplay and Oberon
reviewed by it were prepared and fairly presented in accordance with
United States generally accepted accounting principles consistently
applied; and
- the exchange ratio will not be increased as a result of provisions of the
draft merger agreement.
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Robertson Stephens relied as to all legal matters relevant to rendering its
opinion on the advice of its legal counsel.
Robertson Stephens expressed no opinion as to:
- the value of any employee agreement or other arrangements entered into in
connection with the merger;
- any tax or other consequences that may result from the merger; or
- the value of OnDisplay common stock when issued to Oberon's stockholders
in connection with the merger or the price at which shares of OnDisplay
common stock may be traded in the future.
The following is a summary of the material financial analyses performed by
Robertson Stephens in connection with rendering its opinion. The summary of the
financial analyses is not a complete description of all of the analyses
performed by Robertson Stephens. Certain of the information in this section is
presented in tabular form. IN ORDER TO BETTER UNDERSTAND THE FINANCIAL ANALYSES
PERFORMED BY ROBERTSON STEPHENS, THESE TABLES MUST BE READ TOGETHER WITH THE
TEXT OF EACH SUMMARY. THE ROBERTSON STEPHENS OPINION IS BASED ON THE TOTALITY OF
THE VARIOUS ANALYSES WHICH IT PERFORMED, AND NO PARTICULAR PORTION OF THE
ANALYSIS HAS ANY MERIT STANDING ALONE.
Comparable Company Analysis. Using publicly available information,
Robertson Stephens analyzed, among other things, the trading multiples of
OnDisplay and the following selected publicly traded companies in the Internet
infrastructure software segment:
- Active Software
- BEA Systems
- New Era of Networks
- TIBCO
- TSI Software
- Vitria
Revenues. As set forth in the following table, applying a range of
multiples for these companies for calendar years 1999 and 2000 to corresponding
revenue data for OnDisplay resulted in the following range of implied exchange
ratios and equity values for calendar years 1999 and 2000.
<TABLE>
<CAPTION>
RANGE OF IMPLIED IMPLIED
CALENDAR YEAR MULTIPLES EXCHANGE RATIO EQUITY VALUE
------------- -------------- --------------- -------------------
<S> <C> <C> <C>
1999.................................... 15.0x to 50.0x 0.038x - 0.122x $ 86 - $273 million
2000.................................... 10.0x to 30.0x 0.044x - 0.128x $ 99 - $286 million
With Control Premium(a)
1999.................................... 0.045x - 0.181x $102 - $406 million
2000.................................... 0.053x - 0.190x $118 - $427 million
</TABLE>
- ---------------
(a) Assumed a control premium in the 20% - 50% range.
Precedent Transaction Analysis. Robertson Stephens analyzed the aggregate
value and implied transaction value multiples paid or proposed to be paid in
selected precedent transactions in the Internet infrastructure software
industry, including:
Mergent Systems, Inc./Commerce One (January 5, 2000)
Signio/VeriSign (December 17, 1999)
Tradex/Ariba (December 16, 1999)
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Rubric/Broadbase Software (December 9, 1999)
NetDialog/Kana (December 6, 1999)
Business Evolution/Kana (December 6, 1999)
RightPoint Software/E.piphany (November 16, 1999)
NetEffects/Ask Jeeves (November 15, 1999)
Trading Dynamics/Ariba (November 15, 1999)
TheoryCenter/BEA Systems (November 10, 1999)
Robertson Stephens compared, among other things, the aggregate value in
these transactions as a multiple of the preceding twelve months' revenues
("LTM"), the following 12 months' revenues ("NTM") and the number of employees.
Applying these multiples to similar revenue figures for OnDisplay resulted in
the following range of implied exchange ratios and implied equity values.
Revenue data was not publicly available for a number of the companies
represented in the selected precedent transactions.
<TABLE>
<CAPTION>
RANGE OF IMPLIED IMPLIED
MULTIPLES EXCHANGE RATIO EQUITY VALUE
--------------- --------------- -------------------
<S> <C> <C> <C>
NTM Revenues........................... 30.0x to 50.0x 0.128x - 0.211x $286 - $473 million
Employees.............................. $3.0 - $8.0MM 0.136x - 0.359x $306 - $806 million
</TABLE>
Robertson Stephens analyzed the aggregate value, and compared the aggregate
value as a multiple of the last round of financing, for selected precedent
transactions in the Internet industry, including:
Signio/VeriSign (December 17, 1999)
Tradex/Ariba (December 16, 1999)
Rubric/Broadbase Software (December 9, 1999)
Netmind/Puma Technology (December 8, 1999)
Business Evolution/Kana (December 6, 1999)
RightPoint Software/E.piphany (November 16, 1999)
Net Effects/Ask Jeeves (November 15, 1999)
WebMD/Healtheon (May 20, 1999)
Applying these multiples resulted in the following range of implied
exchange ratios and implied equity values.
<TABLE>
<CAPTION>
RANGE OF IMPLIED IMPLIED
MULTIPLES EXCHANGE RATIO EQUITY VALUE
------------ --------------- -------------------
<S> <C> <C> <C>
Multiple of latest round of financing..... 5.0x - 10.0x 0.132x - 0.263x $295 - $590 million
</TABLE>
No company, transaction or business used in the Comparable Company Analysis
or the Selected Precedent Transaction Analysis as a comparison is identical to
OnDisplay, Oberon or the merger. Accordingly, an analysis of the results of the
foregoing is not entirely mathematical; rather it involves complex
considerations and judgments concerning differences in financial and operating
characteristics and other factors that could affect the acquisition, public
trading and other values of the comparable companies or the business segment,
company or transactions to which they are compared.
Contribution Analysis. Robertson Stephens analyzed the respective
contributions of OnDisplay and Oberon to the estimated revenues of the combined
company for fiscal years 1999, 2000 and 2001. The
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actual results achieved by the combined company may vary from projected results
and the variations may be material.
<TABLE>
<CAPTION>
ONDISPLAY'S OBERON'S
CONTRIBUTIONS TO CONTRIBUTIONS TO
COMBINED COMPANY'S COMBINED COMPANY'S
FISCAL YEAR ESTIMATED REVENUE ESTIMATED REVENUES
----------- ------------------ ------------------
<S> <C> <C>
1999.................................................... 65.8% 34.2%
2000.................................................... 69.2% 30.8%
2001.................................................... 71.6% 28.4%
</TABLE>
The above contribution analysis resulted in the following implied exchange
ratios and implied equity values for fiscal years 1999, 2000 and 2001.
<TABLE>
<CAPTION>
IMPLIED IMPLIED
FISCAL YEAR EXCHANGE RATIO EQUITY VALUE
----------- -------------- --------------
<S> <C> <C>
1999........................................................ 0.453x $1,016 million
2000........................................................ 0.388x $ 871 million
2001........................................................ 0.346x $ 776 million
</TABLE>
Pro Forma Merger Analysis. Robertson Stephens analyzed the impact of the
merger on the revenues of the combined company for fiscal years 2000 and 2001
based on management estimates for OnDisplay and Oberon. The following table
summarizes the results of this analysis:
<TABLE>
<S> <C>
Fiscal year 2000 estimated net revenue per share
accretion................................................. 24.0%
Fiscal year 2001 estimated net revenue per share
accretion................................................. 26.7%
</TABLE>
The actual results achieved by the combined company may vary from projected
results and such variations may be material.
Other Factors. While this summary describes the analysis and factors that
Robertson Stephens deemed material in its presentation to the OnDisplay board,
it is not a comprehensive description of all analysis and factors considered by
Robertson Stephens. The preparation of a fairness opinion is a complex process
that involves various determinations as to the most appropriate and relevant
methods of financial analysis and the application of these methods to the
particular circumstances. Therefore, a fairness opinion is not readily
susceptible to partial analysis or summary description. In arriving at its
opinion, Robertson Stephens did not attribute any particular weight to any
analysis or factor considered by it, but rather made qualitative judgments as to
the significance and relevance of each analysis and factor. Accordingly,
Robertson Stephens believes that its analyses must be considered as a whole and
that selecting portions of its analyses and of the factors considered by it,
without considering all analyses and factors, could create a misleading or
incomplete view of the evaluation process underlying its opinion. Several
analytical methodologies were employed and no one method of analysis should be
regarded as critical to the overall conclusion reached by Robertson Stephens.
Each analytical technique has inherent strengths and weaknesses, and the nature
of the available information may further affect the value of particular
techniques. The conclusion reached by Robertson Stephens is based on all
analyses and factors taken as a whole and also on application of Robertson
Stephens' own experience and judgment. This conclusion may involve significant
elements of subjective judgment and qualitative analysis. Robertson Stephens
gives no opinion as to the value or merit standing alone of any one or more
parts of the analysis it performed. In performing its analyses, Robertson
Stephens made numerous assumptions with respect to industry performance, general
business and other conditions and matters many of which are beyond the control
of Oberon or Robertson Stephens. Any estimates contained in these analyses are
not necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable than those suggested
by these analyses. Accordingly, analyses relating to the value of businesses do
not purport to be appraisals or to reflect the prices at which these businesses
actually may be sold in the future, and these estimates are inherently subject
to uncertainty. Furthermore, no opinion is being expressed as to the prices at
which shares of OnDisplay common stock may be traded at any future time.
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OnDisplay's engagement letter with Robertson Stephens provides that, for
its services, Robertson Stephens is entitled to receive $500,000 due and payable
as follows: $250,000 in cash upon execution of the engagement letter and the
remaining $250,000 in cash upon delivery of the opinion, whether or not the
opinion is favorable. OnDisplay has also agreed to reimburse Robertson Stephens
for its out-of-pocket expenses and to indemnify and hold harmless Robertson
Stephens and its affiliates and any other person, director, employee or agent of
Robertson Stephens or any of its affiliates, or any person controlling Robertson
Stephens or its affiliates, for certain losses, claims, damages, expenses and
liabilities relating to or arising out of services provided by Robertson
Stephens as financial advisor to OnDisplay. The terms of the fee arrangement
with Robertson Stephens, which OnDisplay and Robertson Stephens believe are
customary in transactions of this nature, were negotiated at arm's length
between OnDisplay and Robertson Stephens, and the OnDisplay board was aware of
these fee arrangements.
Robertson Stephens was retained based on Robertson Stephens' experience as
a financial advisor in connection with mergers and acquisitions and in
securities valuations generally, as well as Robertson Stephens' investment
banking relationship and familiarity with OnDisplay. Robertson Stephens has
provided financial advisory and investment banking services to OnDisplay from
time to time, including acting as lead managing underwriter for OnDisplay's
initial public offering. Robertson Stephens may actively trade the equity of
OnDisplay for its own account and for the account of its customers and,
accordingly, may at any time hold a long or short position in these securities.
Robertson Stephens is an internationally recognized investment banking
firm. As part of its investment banking business, Robertson Stephens is
frequently engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of securities, private placements and other purposes.
OPINION OF OBERON'S FINANCIAL ADVISOR
SoundView Technology Group was retained by the special committee of the
board of directors of Oberon to render an opinion as to whether the exchange
ratio to be offered in the merger is fair, from a financial point of view, to
the Oberon stockholders.
On January 16, 2000, SoundView delivered its opinion to the special
committee of the board of directors of Oberon that, as of such date, based upon
the facts and circumstances as they existed at that time, and subject to certain
assumptions made, matters considered and limits of review set forth therein, the
exchange ratio to be offered in the merger is fair, from a financial point of
view, to the Oberon stockholders.
The full text of the written opinion of SoundView, dated January 16, 2000,
which sets forth, among other things, the assumptions made, matters considered,
and the scope and limitations of the review undertaken and procedures followed
by SoundView in rendering its opinion, is included in Appendix C to this proxy
statement/prospectus. SoundView's opinion is directed only to the fairness of
the exchange ratio to be offered in the merger, from a financial point of view,
to the Oberon stockholders. SoundView's opinion was delivered for the use and
benefit of the special committee of the board of directors of Oberon in its
consideration of the Merger and is not intended to be and does not constitute a
recommendation to any Oberon stockholder as to how such stockholder should vote
with respect to the proposed merger. The summary of the opinion of SoundView set
forth below is qualified by reference to the full text of the opinion. Oberon
stockholders are urged to read this opinion in its entirety.
In connection with rendering its opinion, SoundView, among other things:
(i) reviewed the Agreement and Plan of Reorganization and the specific
terms of the merger set forth therein, and have assumed that the
final form of the Agreement and Plan of Reorganization would not
vary in any regard that is material to its analysis;
(ii) reviewed Oberon's financial and operating information for the
two-year period ended September 30, 1999 and the three-month period
ended December 31, 1999;
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(iii) reviewed OnDisplay's financial and operating information for the
three year period ended December 31, 1999;
(iv) reviewed certain financial and operating information regarding the
businesses, operations and prospects of Oberon and OnDisplay,
including forecasts and projections, provided to us by the
managements of Oberon and OnDisplay, respectively;
(v) reviewed certain publicly available financial information concerning
certain other companies it deemed to be reasonably similar to Oberon
and OnDisplay and the trading markets for certain of such companies'
securities;
(vi) reviewed the financial terms of the merger and compared them with the
financial terms, to the extent publicly available, of certain recent
mergers and acquisitions that it deemed relevant;
(vii) conducted discussions with certain members of senior management of
Oberon and OnDisplay concerning their respective businesses and
operations, assets, present condition and future prospects; and
(viii) performed such other analyses, examinations and procedures,
reviewed such other agreements and documents, and considered such
other factors as it deemed, in its sole judgment, to be necessary,
appropriate or relevant to render its opinion.
SoundView also took into account its assessment of general economic, market
and financial conditions and its experience in similar transactions, as well as
its experience in securities valuation in general. Its opinion is necessarily
based upon conditions as they existed and could be evaluated as of January 16,
2000.
In arriving at its opinion, SoundView did not make, obtain or assume any
responsibility for any independent evaluation or appraisal of the properties and
facilities or of the assets and liabilities, contingent or otherwise of either
Oberon or OnDisplay. SoundView assumed and relied upon the accuracy and
completeness of the financial and other information supplied to or otherwise
used by it in arriving at its opinion, and did not attempt independently to
verify, or undertake any obligation to verify, such information. SoundView
further relied upon the assurances of the managements of Oberon and OnDisplay
that they were not aware of any facts that would make such information
inaccurate or misleading. In addition, SoundView assumed that the forecasts and
projections provided to it by OnDisplay and Oberon represented the best
currently available estimates and judgments of OnDisplay's and Oberon's
managements as to the future financial condition and results of operations of
OnDisplay and Oberon, respectively, and assumed that such forecasts and
projections were reasonably prepared based on such currently available estimates
and judgments. SoundView assumed no responsibility for and expressed no view as
to such forecasts and projections or the assumptions on which they were based.
SoundView did not express any view as to the price at which OnDisplay's
stock will trade prior to or subsequent to the closing of the merger. Its
opinion did not constitute a recommendation of the merger over any other
alternative transactions which may have been available to Oberon and did not
address the underlying business decision of the special committee of the board
of directors of Oberon to proceed with or effect the merger.
The following is a brief summary of all material aspects of the analyses
performed by SoundView in connection with rendering its opinion.
Analyses Relating to Oberon:
Analysis of Selected Comparable Publicly Traded Companies
Using publicly available information, SoundView compared certain financial,
market and operating information of selected publicly traded enterprise
application integration vendors that were, in SoundView's judgment, similar to
Oberon. Companies analyzed by SoundView in connection with this analysis were
Active Software, Inc., BEA Systems, Inc., IONA Technologies plc, New Era of
Networks, Inc., Persistence Software, Inc., Tibco Software Inc., TSI
International Software Ltd. and Vitria Technology, Inc. For each of
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<PAGE> 54
the selected companies, SoundView calculated a multiple of market capitalization
to projected calendar 2000 and 2001 revenues and a multiple of market
capitalization to one-year forward revenues at the time of that company's
initial public offering. The table below sets forth the results of such
analysis.
<TABLE>
<CAPTION>
OBERON COMPARABLE COMPANIES
---------------------------------
OBERON(1) LOW MEAN MEDIAN HIGH
--------- ---- ----- ------ ------
<S> <C> <C> <C> <C> <C>
Market Capitalization/2000 Revenue 10.0x 6.8x 40.6x 16.8x 157.2x
(Projected)...................................
Market Capitalization/2001 Revenue 5.4x 5.5x 24.9x 12.0x 86.7x
(Projected)...................................
Market Capitalization/One-Year Revenue(2)....... 10.0x 1.5x 6.4x 6.4x 14.7x
</TABLE>
- -------------------------
(1) Market capitalization computed based on closing price of OnDisplay common
stock on January 13, 2000.
(2) Market capitalization at initial public offering pricing divided by
projected revenue for the one year period after the initial public offering
pricing date.
Comparable Transaction Analysis
Using publicly available information, SoundView analyzed the purchase
prices and multiples paid in selected acquisitions of enterprise application
integration software vendors that, in SoundView's judgment, were comparable to
the business of Oberon. However, SoundView noted that none of such acquisitions
took place under market conditions or competitive conditions or circumstances
that are directly comparable to a merger as of the date of SoundView's opinion
and that, accordingly, qualitative judgments must be made concerning the
difference between the characteristics of these transactions and other factors
and issues which would affect the price an acquiror is willing to pay in an
acquisition. For each of the selected targets, SoundView calculated a multiple
of transaction value to LTM revenue. Transaction value was calculated by adding
net debt to the company's market capitalization. Net debt was calculated by
subtracting cash and cash equivalents from total debt. SoundView analyzed 11
transactions that were completed between December 27, 1997 and December 27,
1999. The table below sets forth the results of such analysis.
<TABLE>
<CAPTION>
OBERON COMPARABLE TRANSACTIONS
-------------------------------
OBERON(3) LOW MEAN MEDIAN HIGH
--------- ---- ---- ------ -----
<S> <C> <C> <C> <C> <C>
Transaction Value/LTM Revenue.................... 37.8x 1.0x 8.0x 4.0x 28.7x
</TABLE>
- -------------------------
(3) Transaction value computed based on closing price on OnDisplay common Stock
on January 13, 2000.
Analyses Relating to OnDisplay:
Analysis of Selected Comparable Publicly Traded Companies
Using publicly available information, SoundView analyzed certain financial,
market and operating information of selected publicly traded Internet
infrastructure companies that were, in SoundView's judgment, similar to
OnDisplay. Companies analyzed by SoundView were Allaire Corporation, Art
Technology Group, Inc., Bluestone Software, Inc., BroadVision, Inc., InterWoven,
Inc., Open Market, Inc. Tibco Software Inc. and Vignette Corporation. For each
of the selected companies, SoundView calculated a multiple of market
capitalization to projected calendar 2000 and 2001 revenues. The table below
sets forth the results of such analysis.
<TABLE>
<CAPTION>
ONDISPLAY COMPARABLE COMPANIES
----------------------------------
ONDISPLAY(1) LOW MEAN MEDIAN HIGH
------------ ----- ----- ------ ------
<S> <C> <C> <C> <C> <C>
Market Capitalization/2000 Revenue 99.1x 16.2x 63.7x 69.7x 102.8x
(Projected)...............................
Market Capitalization/2001 Revenue 51.9x 10.8x 39.7x 41.1x 70.x
(Projected)...............................
</TABLE>
- -------------------------
(1) Revenues are for the Calendar Years Ended December 31.
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Implied Exchange Ratio Analysis
SoundView calculated ranges of implied exchange ratios using the implied
share prices of OnDisplay and Oberon. SoundView derived implied market
capitalizations for Oberon and OnDisplay from the comparable company analyses
discussed above and from OnDisplay's multiple of market capitalization calendar
2000 revenue as of January 13, 2000, respectively. SoundView then derived an
implied market capitalization of Oberon from the comparable company analyses
discussed above and discounted this market capitalization by a range of private
company discounts between 30% and 50%. Based on calendar 2000 revenue multiples
and an implied market capitalization for OnDisplay based on the comparable
company analyses, the analysis implied an exchange ratio range of 0.10225 to
0.14315. Assuming OnDisplay's multiple of market capitalization to calendar 2000
revenue as of January 13, 2000, the analysis implied an exchange ratio range of
0.07189 to 0.10065.
In arriving at its opinion and in discussing its opinion with Oberon's
special committee of the board of directors, SoundView performed various
financial analyses. While the foregoing summary describes all material analyses
and factors considered by SoundView in rendering its opinion, such summary does
not purport to be a complete description of SoundView's analyses. SoundView
believes that its analyses and summaries should be considered as a whole, and
that selecting portions of its analyses or the factors considered by it, without
considering all factors and analyses, could create a misleading view of the
process underlying its opinion. The preparation of a fairness opinion is a
complex process and is not necessarily susceptible to partial analyses and
summary description. In performing its analyses, SoundView considered general
economic, market and financial conditions and other matters, many of which are
beyond the control of Oberon and OnDisplay. The analyses performed by SoundView
are not necessarily indicative of actual values or future results, which may be
significantly more or less favorable than those suggested by such analyses.
Accordingly, such analyses and estimates are inherently subject to substantial
uncertainty.
SoundView is a nationally recognized investment banking firm. As part of
its investment banking services, SoundView is frequently engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions, underwritings, secondary distributions of securities, private
placements and valuations for estate, corporate and other purposes. SoundView
was retained by the special committee of the Oberon board of directors to act as
its financial advisor in connection with the merger based upon SoundView's
experience as a financial advisor in mergers and acquisitions as well as
SoundView's familiarity with the enterprise application integration and Internet
infrastructure industries.
SoundView was retained by the Oberon special committee pursuant to an
engagement letter dated January 10, 2000. Oberon agreed to pay SoundView a fee
of $290,000, one half at the time of the agreement and one half at the time the
fairness opinion was rendered. Oberon has also agreed to indemnify and hold
harmless SoundView and its affiliates and any other person, director, employee
or agent of SoundView or any of its affiliates, or any person controlling
SoundView or its affiliates, for certain losses, claims, damages, expenses and
liabilities arising out of services provided by SoundView as financial advisor
to Oberon.
Except as described above, SoundView has not rendered material financial
advisory or investment banking services to Oberon or to OnDisplay during the
last three years. In the ordinary course of its business, SoundView may actively
trade in the equity securities of OnDisplay for its own account and for the
accounts of its customers and, accordingly, may at any time hold a long or short
position in such security.
INTERESTS OF CERTAIN DIRECTORS, OFFICERS AND AFFILIATES OF OBERON IN THE MERGER
When considering the recommendation of the special committee of Oberon's
board of directors, as well as the full board of directors, you should be aware
that certain Oberon directors and officers have interests in the merger that are
different from, or are in addition to, your interests. The Oberon board of
directors was aware of these potential conflicts and considered them.
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<PAGE> 56
As of January 31, 2000, Matrix Partners, a venture capital firm, owns
24.05% of shares of the series 1 and series 2 preferred stock and 15.44% of the
common stock of Oberon and 15% of shares of the common stock of OnDisplay. T.
Barrows, a general partner of Matrix Partners, serves on the board of directors
of OnDisplay and M. Humphreys, a general partner of Matrix Partners, serves on
the board of directors of Oberon. J. Mandile, a general partner of Sigma
Partners, a venture capital firm, serves on the board of directors of Oberon and
OnDisplay. In addition, as of February 15, 2000, J. Mandile holds 145,551 shares
of common stock of OnDisplay.
Oberon Stock Options and Common Stock Subject to Repurchase. Assuming the
merger is completed on February 29, 2000, options to purchase an aggregate of
approximately 578,000 shares of Oberon common stock granted to directors and
executive officers of Oberon will accelerate upon the completion of the merger.
The foregoing amounts do not include options that have been or may be issued by
Oberon after December 31, 1999.
The option acceleration and termination of repurchase rights for the
executive officers and directors of Oberon are set forth below as of December
31, 1999, assuming the merger occurs on February 29, 2000.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF SHARES OPTION
SHARES OF OF COMMON STOCK SHARES
DATE OF COMMON STOCK SUBJECT TO OPTIONS ACCELERATED IN
OPTION SUBJECT TO EXERCISE THAT ARE VESTED CONNECTION
OFFICER OR DIRECTOR GRANT OPTIONS PRICE AS OF 12/31/1999* WITH MERGER
------------------- -------- ------------ -------- ------------------ --------------
<S> <C> <C> <C> <C> <C>
Joseph Chappell.................... 10/04/96 61,000 $0.15 48,600 12,400
01/07/97 100,000 0.20 70,000 30,000
David Collard...................... 04/28/99 50,000 0.50 -- 50,000
Michael McMahon.................... 11/06/95 120,000 0.15 120,000 --
10/4/96 110,000 0.15 88,000 22,000
Mark Wick.......................... 11/06/95 24,000 0.15 24,000 --
10/04/96 93,000 0.15 74,400 18,600
04/28/98 100,000 0.50 -- 45,000
James Burkhardt.................... 9/1/99 400,000 0.50 -- 400,000
Alexander Kuli..................... -- -- -- -- --
Douglas Percy...................... -- -- -- -- --
Michael Humphreys.................. -- -- -- -- --
John Mandile....................... -- -- -- -- --
</TABLE>
- ---------------
* Under the 1990 Plan, options have a term of five years from the date of grant
and become exercisable as to 20% at the date of grant and as to an additional
10% of the original number of shares at the end of each successive full,
six-month period. Under the 1998 Plan, some options have a term of 5 1/2 years
from the date of grant and become exercisable as to 20% of the shares covered
at the end of the first anniversary following the date of grant and as to an
additional 5% of the original number of shares at the end of each successive
full, three-month period and other options have a term of 4 1/2 years from the
date of grant and become exercisable as to 25% of the shares covered at the
end of the first anniversary following the date of grant and as to an
additional 6.25% of the original number of shares at the end of each
successive full three-month period.
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<PAGE> 57
<TABLE>
<CAPTION>
NUMBER OF
NUMBER SHARES OF NUMBER OF SHARES
OF SHARES COMMON FOR WHICH
BENEFICIALLY OWNED STOCK NO LONGER REPURCHASE RIGHTS
SUBJECT TO SUBJECT TO TERMINATE IN
REPURCHASE REPURCHASE RIGHTS CONNECTION WITH
OFFICER OR DIRECTOR RIGHTS* AS OF 2/29/2000 MERGER
------------------- ------------------ ----------------- -----------------
<S> <C> <C> <C>
Joseph Chappell............................ 938,000(1) 328,300 609,700
David Collard.............................. 350,000(2) 105,000 245,000
Michael McMahon............................ 235,000(3) 82,250 70,500
Mark Wick.................................. 158,400(4) 55,458 47,535
Alexander Kuli............................. 50,000(5) 15,000 35,000
Douglas Percy.............................. 50,000(6) 15,000 35,000
James Burkhardt............................ -- -- --
Michael Humphreys.......................... -- -- --
John Mandile............................... -- -- --
</TABLE>
- ---------------
* For shares issued under the five-year vesting agreement, Oberon's repurchase
rights terminate at a rate of 5% per quarter.
(1) 938,000 shares issued on April 20, 1998.
(2) 350,000 shares issued on July 23, 1998.
(3) 235,000 shares issued on April 20, 1998.
(4) 158,400 shares issued on April 20, 1998.
(5) 50,000 shares issued on July 23, 1998.
(6) 50,000 shares issued on July 23, 1998.
Employment Agreements. M. McMahon and M. Wick have agreed to be employees
of OnDisplay after completion of the merger. They have executed employment
agreements with OnDisplay that become effective upon the completion of the
merger and terminate two years after the merger. Each of these agreements
provides for the following:
- a minimum of six months severance payments unless the employee's
termination is for cause or at the election of the employee;
- each employee is entitled to participate in the employee benefit plans
and programs of OnDisplay; and
- each employee shall be considered for any employee bonus program,
including retention bonus programs.
Severance Agreements. Certain officers of Oberon have entered into
severance agreements with Oberon including J. Chappell and D. Collard. J.
Chappell's agreement provides for the following:
- $150,000 in severance pay paid in one lump sum payment on the date of
termination of his employment;
- each outstanding option to purchase shares of common stock becoming
immediately exercisable and each outstanding restricted stock award fully
vesting on the date of termination of his employment; and
- eligibility for continuing benefits under COBRA and reimbursement for
COBRA premiums until the earlier of one year from termination of his
employment or the loss of COBRA eligibility.
D. Collard's agreement provides for the following:
- $70,000 in severance pay paid in one lump sum payment on the date of
termination of his employment;
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- each outstanding option to purchase shares of common stock becoming
immediately exercisable and each outstanding restricted stock award fully
vesting on the date of termination of his employment; and
- eligibility for continuing benefits under COBRA and reimbursement for
COBRA premiums until the earlier of six months from termination of his
employment or the loss of COBRA benefits.
Retention Options. Pursuant to the merger agreement, on January 16, 2000
Oberon granted options to certain of its employees, including M. McMahon and M.
Wick, to acquire shares of Oberon common stock. These options have an exercise
price of $2.50 per share and become exercisable as to 50% of the shares subject
to options on the first anniversary of the merger, with the balance becoming
exercisable over the next 36 months. M. McMahon was granted options to purchase
305,789 shares and M. Wick was granted options to purchase 175,000 shares.
INDEMNIFICATION AND INSURANCE
The merger agreement provides that for six years after the completion of
the merger, OnDisplay will not alter or impair any exculpatory or
indemnification provision now existing in the Oberon bylaws. In addition, the
merger agreement provides that OnDisplay will fulfill and honor in all respects
the obligations of Oberon pursuant to Oberon's articles of organization and
bylaws and any indemnification agreements between Oberon of its respective
directors and officers existing prior to the closing of the merger. Oberon has
entered into indemnification agreements with each of its directors and with J.
Chappell, D. Collard, M. McMahon and M. Wick.
Insofar as indemnification for liabilities arising under the Securities Act
or 1933 is permitted to directors or officers, the companies have been informed
that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed on the Act and is therefor
unenforceable.
COMPLETION AND EFFECTIVENESS OF THE MERGER
The merger will be completed when all of the conditions to completion of
the merger are satisfied or waived, including approval and adoption of the
merger agreement and the merger by the stockholders of Oberon and approval of
the issuance of OnDisplay common stock in the merger by stockholders of
OnDisplay. The merger will become effective upon the filing of the certificate
of merger with the State of Massachusetts.
STRUCTURE OF THE MERGER AND CONVERSION OF OBERON COMMON STOCK
Pursuant to the merger agreement, ObiOne Acquisition Corporation, a
wholly-owned subsidiary of OnDisplay, will merge with and into Oberon. Oberon
will then be a wholly-owned subsidiary of OnDisplay.
Upon completion of the Oberon merger, each outstanding share of Oberon
capital stock will be converted into the right to receive .0912 shares of
OnDisplay common stock. No fractional shares of OnDisplay common stock will be
issued pursuant to the merger. In lieu of the issuance of any fractional shares
of OnDisplay common stock, OnDisplay will distribute cash equal to the product
of any fractional share amount, after aggregating all fractional shares
otherwise due to such holder otherwise due to a former Oberon stockholder and
$91.575.
EXCHANGE OF OBERON STOCK CERTIFICATES FOR ONDISPLAY STOCK CERTIFICATES
When the Oberon merger is completed, OnDisplay's exchange agent will mail
to Oberon stockholders a letter of transmittal and instructions for use in
surrendering Oberon stock certificates in exchange for OnDisplay stock
certificates. When you deliver your Oberon stock certificates to the exchange
agent along with an executed letter of transmittal and any other required
documents, your Oberon stock certificates will be canceled and you will receive
OnDisplay stock certificates representing the number of full shares of OnDisplay
common stock to which you are entitled under the merger agreement. You will
receive
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<PAGE> 59
payment in cash, without interest, in lieu of any fractional shares of OnDisplay
common stock which would have been otherwise issuable to you in the merger.
OBERON STOCKHOLDERS SHOULD NOT SUBMIT THEIR OBERON STOCK CERTIFICATES FOR
EXCHANGE UNTIL THEY RECEIVE THE TRANSMITTAL INSTRUCTIONS AND A FORM OF LETTER OF
TRANSMITTAL FROM THE EXCHANGE AGENT.
NO DIVIDENDS
Oberon stockholders are not entitled to receive any dividends or other
distributions on OnDisplay common stock until the Oberon merger is completed and
they have surrendered their Oberon stock certificates in exchange for OnDisplay
stock certificates.
Subject to the effect of applicable laws, promptly following surrender of
Oberon stock certificates and the issuance of the corresponding OnDisplay
certificates, Oberon stockholders will be paid the amount of dividends or other
distributions, without interest, with a record date after the completion of the
merger which were previously paid with respect to their whole shares of
OnDisplay common stock. At the appropriate payment date, Oberon stockholders
will also receive the amount of dividends or other distributions, without
interest, with a record date after the completion of the merger and a payment
date after they exchange their Oberon stock certificates for OnDisplay stock
certificates.
OnDisplay will only issue Oberon stockholders an OnDisplay stock
certificate or a check in lieu of a fractional share in a name in which the
surrendered Oberon stock certificate is registered. If Oberon stockholders wish
to have their certificates issued in another name they must present the exchange
agent with all documents required to show and effect the unrecorded transfer of
ownership and show that they paid any applicable stock transfer taxes.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS OF THE OBERON MERGER
In the opinion of Wilson Sonsini Goodrich & Rosati, PC, and Hale and Dorr
LLP, the following are the material United States federal income tax
consideration of the merger assuming that the merger is effected as described in
the merger agreement and in this proxy-statement prospectus. These opinions and
the following discussion are based on and subject to the Internal Revenue Code
of 1986, as amended, the regulations promulgated under the Internal Revenue
Code, existing administrative rulings and court decisions, all of which are
subject to change, possibly with retroactive effect, and assumptions,
limitations, representations and covenants, including those contained in
certificates of officers of OnDisplay and Oberon. We do not discuss all United
States federal income tax considerations that may be relevant to you in light of
your particular circumstances or if you are subject to special rules. Factors
which could alter the tax consequences of the merger to you include:
- if you are a dealer in securities;
- if you are subject to the alternative minimum tax provisions of the
Internal Revenue Code;
- if you are a foreign person or entity;
- if you are a financial institution or insurance company;
- if you do not hold your Oberon shares as capital assets;
- if you acquired your shares in connection with stock option or stock
purchase plans or in other compensatory transactions;
- if you hold Oberon capital stock as part of an integrated investment,
including a "straddle," comprised of shares of Oberon capital stock and
one or more other positions; or
- if you hold Oberon capital stock subject to the constructive sale
provisions of Section 1259 of the Internal Revenue Code.
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<PAGE> 60
In addition, we do not discuss the tax consequences of the merger under
foreign, state or local tax laws, the tax consequences of transactions
effectuated prior or subsequent to, or concurrently with, the merger whether or
not any such transactions are undertaken in connection with the merger,
including, without limitation, any transactions in which Oberon shares are
acquired or shares of OnDisplay are disposed of, or the tax consequences to
holders of options, warrants or similar rights to acquire Oberon capital stock.
The obligations of OnDisplay and Oberon to complete the merger are
conditioned on, among other things, the receipt by OnDisplay of an opinion from
Wilson Sonsini Goodrich & Rosati, PC and the receipt of an opinion by Oberon
from Hale and Dorr LLP, in each case dated as of the completion of the merger
and stating that the merger will constitute a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code. Alternatively, this condition
also will be satisfied upon the delivery of such tax opinion to OnDisplay and
Oberon from either Wilson Sonsini Goodrich & Rosati, PC or Hale and Dorr LLP.
The opinions of counsel to be provided at the completion of the merger will be
based on the existing law, will assume the absence of changes in existing facts,
and will rely on assumptions, representations and covenants including those
contained in certificates executed by officers of OnDisplay, ObiOne Acquisition
Corporation and Oberon. The opinions neither bind nor preclude the Internal
Revenue Service from adopting a contrary position, and it is possible that the
Internal Revenue Service may assert successfully a contrary position in
litigation or other proceedings. Neither OnDisplay nor Oberon intends to obtain
a ruling from the Internal Revenue Service with respect to the tax consequences
of the merger.
In the opinion of counsel to OnDisplay and Oberon, the following material
federal income tax consequences will result from the merger constituting a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code:
- You will not recognize any gain or loss upon your receipt of OnDisplay
common stock in the merger, except on cash received for a fractional
share of OnDisplay common stock.
- The aggregate tax basis of the OnDisplay common stock received by you in
the merger, including any fractional share of OnDisplay common stock not
actually received, will be the same as the aggregate tax basis as the
Oberon capital stock surrendered in exchange therefor.
- If you hold your Oberon shares as a capital asset at the time of the
merger, the holding period of the OnDisplay common stock received by you
in the merger will include the period for which the Oberon capital stock
surrendered in exchange therefor was considered to be held.
- Cash payments received by you for a fractional share of OnDisplay common
stock will be treated as if such fractional share had been issued in the
merger and then redeemed by OnDisplay. You will recognize gain or loss
with respect to such cash payment, measured by the difference, if any,
between the amount of cash received and the basis in such fractional
share.
- You will be treated as having received the OnDisplay common stock
deposited into the escrow fund upon consummation of the merger. Until
such shares are released, the interim basis of the OnDisplay stock you
received will be determined as though you received the maximum number of
shares of OnDisplay. You will not recognize gain or loss and no amount
will be included in your income by reason of the release of the OnDisplay
shares from escrow. However, you may recognize gain or loss upon the
return of such shares to OnDisplay. If gain is recognized, the value of
such returned shares will be added to the tax basis of the OnDisplay
common stock you retain.
- You will recognize gain or loss if you exercise appraisal rights and
receive payment for Oberon capital stock in cash, measured by the
difference, if any, between the amount of cash received and the basis in
such shares, provided that the payment is not treated as a dividend
distribution for tax purposes. An appraisal rights payment should not be
treated as a dividend distribution if, after the payment, you own no
shares of OnDisplay or Oberon, actually or constructively.
- OnDisplay, ObiOne Acquisition Corporation and Oberon will not recognize
gain or loss solely as a result of the merger.
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Even if the merger qualifies as a reorganization, you could recognize gain
to the extent that shares of OnDisplay common stock are considered to be
received in exchange for services or property, other than solely for Oberon
capital stock. All or a portion of such gain may be taxable as ordinary income.
Gain also may have to be recognized to the extent that you are treated as
receiving, directly or indirectly, consideration other than OnDisplay common
stock in exchange for your Oberon capital stock.
If the Internal Revenue Service successfully challenges the status of the
merger as a reorganization, you would recognize taxable gain or loss with
respect to each share of Oberon capital stock surrendered equal to the
difference between your basis in such share and (a) the fair market value, as of
the completion of the merger, of the OnDisplay common stock, and (b) cash in
lieu of a fractional share of OnDisplay common stock received in exchange
therefor. In such event, your aggregate basis in the OnDisplay common stock so
received would equal its fair market value as of the effective time of the
merger, and your holding period for such stock would begin the day after the
merger.
THE FOREGOING DISCUSSION IS NOT INTENDED TO BE A COMPLETE ANALYSIS OR
DESCRIPTION OF ALL POTENTIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OR
ANY OTHER CONSEQUENCES OF THE MERGER. IN ADDITION, THE DISCUSSION DOES NOT
ADDRESS TAX CONSEQUENCES WHICH MAY VARY WITH, OR ARE CONTINGENT ON, YOUR
INDIVIDUAL CIRCUMSTANCES. ACCORDINGLY, WE URGE YOU TO CONSULT YOUR OWN TAX
ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER, INCLUDING THE
APPLICABLE FEDERAL, STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES TO YOU OF THE
MERGER.
TREATMENT OF OBERON COMMON AND PREFERRED STOCK
In the merger, each share of Oberon capital stock will be exchanged for
shares of OnDisplay common stock.
HOLDERS OF OBERON CAPITAL STOCK SHOULD NOT SEND THEIR OBERON CAPITAL STOCK
CERTIFICATES AT THIS TIME. FOLLOWING THE EFFECTIVE TIME OF THE MERGER, HOLDERS
OF OBERON CAPITAL STOCK WILL RECEIVE INSTRUCTIONS FOR THE SURRENDER AND EXCHANGE
OF SUCH STOCK CERTIFICATES.
ACCOUNTING TREATMENT OF THE MERGER
OnDisplay intends to account for the merger as a "purchase" for financial
reporting and accounting purposes, under generally accepted accounting
principles.
REGULATORY FILINGS AND APPROVALS REQUIRED TO COMPLETE THE MERGER
OnDisplay is not aware of any material governmental or regulatory approval
required for completion of the merger, other than the effectiveness of the
registration statement of which this proxy statement/prospectus is a part, and
compliance with applicable corporate laws of Massachusetts.
RESTRICTIONS ON SALES OF SHARES OF ONDISPLAY TO BE ISSUED IN THE MERGER
The OnDisplay common stock to be received by the Oberon stockholders in the
merger may not be sold or otherwise transferred without the prior written
consent of OnDisplay until June 14, 2000. However, if OnDisplay stockholders
whose shares are restricted from transfer by agreements made in connection with
OnDisplay's initial public offering are permitted to sell their shares before
June 14, 2000, the former Oberon stockholders will also be permitted to sell at
that time.
Ten percent of the OnDisplay shares of common stock to be received by the
holders of Oberon common stock and preferred stock will be deposited in an
escrow fund to serve security for indemnification of OnDisplay and its officers,
directors and affiliates against losses resulting from:
- a breach or inaccuracy of a representation or warranty of Oberon in the
merger agreement or an instrument delivered pursuant to the merger
agreement;
- Oberon's failure to perform or comply with a covenant in the merger
agreement; and
- expenses in excess of the amount estimated in the merger agreement.
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Escrowed shares that are not needed to satisfy indemnification claims made
within one year after the merger will be distributed to the former Oberon
stockholders.
These shares may not be transferred during the one year period unless a
sale is effectuated through the stockholder representative, J. Chappell, and at
least $91.575 per share from the sale of such shares is placed in the escrow
fund in lieu of such shares.
The shares of OnDisplay common stock to be issued in the merger will be
registered under the Securities Act. These shares will be freely transferable
under the Securities Act, except for shares of OnDisplay common stock issued to
any person who is an affiliate of Oberon. Persons who may be deemed to be
affiliates include individuals or entities that control, are controlled by, or
are under common control of Oberon and may include some of their respective
officers and directors, as well as their respective principal stockholders.
Affiliates may not sell their shares of OnDisplay common stock acquired in the
merger except pursuant to an effective registration statement under the
Securities Act covering the resale of those shares, an exemption under paragraph
(d) of Rule 145 under the Securities Act or any other applicable exemption under
the Securities Act.
LISTING ON THE NASDAQ STOCK MARKET OF ONDISPLAY COMMON STOCK TO BE ISSUED IN THE
MERGER
OnDisplay has agreed to cause the shares of OnDisplay common stock to be
issued in the merger to be approved for listing on Nasdaq.
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THE OBERON MERGER AGREEMENT
This section of the proxy statement/prospectus describes the Oberon merger
agreement. While we believe that the description covers the material terms of
the merger agreement, this summary may not contain all of the information that
is important to you. The merger agreement, as amended, is attached to this proxy
statement/prospectus as Annex A and Annex AA and we urge you to read it
carefully
REPRESENTATIONS AND WARRANTIES
OnDisplay and Oberon each made a number of representations and warranties
in the merger agreement regarding aspects of its respective businesses,
financial condition, structure and other facts pertinent to the Oberon merger.
OBERON REPRESENTATIONS AND WARRANTIES
Oberon's representations and warranties include representations as to:
- Oberon's corporate organization and its qualification to do business;
- Oberon's articles of incorporation and bylaws;
- Oberon's capitalization;
- authorization of Oberon to enter into the merger agreement and related
agreements;
- the effect of the merger on obligations of Oberon and under applicable
laws;
- regulatory approvals required to complete the merger;
- Oberon's compliance with applicable laws;
- Oberon's financial statements;
- Oberon's liabilities;
- changes in Oberon's business since September 30, 1999;
- Oberon's taxes;
- restrictions on the conduct of Oberon's business;
- Oberon's title to the properties it owns and leases;
- intellectual property used, owned and/or sold by Oberon;
- Oberon's material contracts;
- permits required to conduct Oberon's business and compliance with those
permits;
- litigation involving Oberon;
- Oberon's minute books;
- Oberon's employee benefit plans;
- information supplied by Oberon in the merger agreement and this proxy
statement/prospectus and the related registration statement filed by
OnDisplay;
- environmental laws that apply to Oberon;
- payments, if any, required to be made by Oberon to brokers and agents on
account of the merger;
- approval by the Oberon board;
- Oberon's insurance; and
- the lack of any interested party transactions.
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The representations and warranties of Oberon expire at the effective time
of the merger.
ONDISPLAY REPRESENTATIONS AND WARRANTIES
The representations and warranties of OnDisplay and ObiOne Acquisition
Corporation include representations as to:
- corporate organization and qualification to do business;
- authorization of OnDisplay and ObiOne Acquisition Corporation to enter
into the merger agreement;
- regulatory approvals required to complete the merger;
- OnDisplay common stock to be used in the merger;
- OnDisplay's filings and reports with the Securities and Exchange
Commission;
- OnDisplay's intellectual property;
- litigation involving OnDisplay and ObiOne Acquisition Corporation;
- information supplied by OnDisplay and ObiOne Acquisition Corporation in
this proxy statement/prospectus and the related registration statement
filed by OnDisplay; and
- approval by the OnDisplay board.
The representations and warranties in the merger agreement are complicated
and not easily summarized. You are urged to carefully read the articles of the
merger agreement entitled "Representations and Warranties of Company" and
"Representations and Warranties of Parent and Sub."
OBERON'S CONDUCT OF BUSINESS BEFORE COMPLETION OF THE MERGER
Oberon agreed that, until the earlier of the completion of the merger or
termination of the merger agreement or unless OnDisplay consents in writing,
with the goal of preserving unimpaired its goodwill and ongoing businesses, it
will carry on its business in the usual, regular and ordinary course in
substantially the same manner as it has prior to signing the merger agreement,
pay its debts and taxes when due and use its reasonable efforts consistent with
past practices and policies to:
- preserve intact its present business organization;
- keep available the services of its present officers and employees; and
- preserve its relationships with customers, suppliers, distributors,
licensors, licensees, and others with which it has business dealings.
Oberon also agreed that unless OnDisplay consents in writing, Oberon would
conduct its business in compliance with certain specific restrictions contained
in the merger agreement relating to the following:
- commitments or transactions exceeding $100,000;
- restricted stock and stock options;
- employees and employee benefits, including severance and termination
payments;
- intellectual property;
- marketing, distribution, development or similar rights to Oberon's
products or technology;
- the issuance of dividends or other distributions;
- the issuance of securities;
- modification of Oberon's articles of incorporation and bylaws;
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- the acquisition of assets or other entities;
- the sale, lease, license and disposition of assets;
- the incurrence of indebtedness;
- the grant of loans or purchase of debt securities;
- payment or settlements of liabilities;
- modification or violation of contracts;
- commencement or settlement of any litigation;
- accounting policies and procedures;
- strategic alliances or joint marketing arrangements;
- hiring or termination of employees or contract workers; and
- making of tax elections.
The provisions related to the conduct of Oberon's business in the merger
agreement are complicated and not easily summarized. You are urged to carefully
read the sections of the merger agreement entitled "Conduct Prior to the
Effective Time."
NO OTHER NEGOTIATIONS INVOLVING OBERON; SOLICITATION BY OBERON
Until the merger is completed or the merger agreement is terminated, Oberon
has agreed not to, nor permit any of its officers, directors, affiliates,
employees, stockholders, agents or representatives to, directly or indirectly
take any of the following actions with any party other than OnDisplay and its
designees:
- solicit, knowingly encourage, initiate or participate in any inquiry,
negotiations or discussions, or enter into any agreement, with respect to
any proposal to acquire any material part of Oberon's business, properties
or technologies, or any material amount of Oberon's stock, whether or not
outstanding; by merger, purchase of assets, tender offer, license or
otherwise, or effect any such transaction;
- disclose any information not customarily disclosed concerning Oberon's
business, technologies or properties, or afford access to its properties,
technologies, books or records, not customarily afforded such access;
- assist or cooperate in any proposal to purchase all or any material part of
Oberon's stock or assets other than inventory in the ordinary course of
business; or
- enter into any agreement providing for the acquisition of Oberon, whether by
merger, purchase of assets, license, tender offer or otherwise.
In the event Oberon receives any offer, proposal or request of the type
discussed above, it has agreed to immediately notify OnDisplay and provide
information as to the identity of the offeror and the specific terms of such
offer or proposal, and such other information related thereto as OnDisplay may
reasonably request.
OBERON'S EMPLOYEE BENEFIT PLANS
OnDisplay has agreed, to the extent permitted by applicable law and
existing benefit plans and arrangements provided by Oberon are terminated after
completion of the merger, to provide benefits to Oberon employees that are on
parity with the benefits currently provided to employees of OnDisplay. Oberon
employees will get credit for all service with Oberon prior to the merger for
eligibility and vesting purposes and vacation accrual, to the extent possible.
With respect to any medical or dental benefit plan of OnDisplay, OnDisplay shall
waive any preexisting condition exclusion and actively-at-work requirements and
any covered expenses incurred before the merger will be taken into account for
satisfying applicable deductible, coinsurance and maximum out-of-pocket
provisions.
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TREATMENT OF OBERON STOCK OPTIONS AND WARRANTS
Upon completion of the merger, each outstanding option to purchase Oberon
common stock will be converted into an option to purchase the number of shares
of OnDisplay common stock adjusted based on the exchange ratio, rounded down to
the nearest whole number of shares. The exercise price will be equal to the
exercise price per share of Oberon common stock divided by the exchange ratio,
rounded up to the nearest whole cent. Upon completion of the merger, all
outstanding warrants to purchase Oberon common stock will be assumed by
OnDisplay, except that each warrant will be exercisable for the number of shares
of OnDisplay common stock adjusted based on the exchange ratio, rounded down to
the nearest whole number of shares. The exercise price of the warrants will be
equal to the exercise price per share for Oberon common stock divided by the
exchange ratio, rounded up to the nearest whole cent.
Prior to the completion of the merger, outstanding purchase rights under
Oberon's Employee Stock Purchase Plan will be exercised, and each share of
Oberon common stock purchased will be converted into the right to receive a
number of shares of OnDisplay common stock equal to the exchange ratio in the
merger.
OnDisplay will file a registration statement on Form S-8 for the shares of
OnDisplay common stock issuable with respect to options under the Oberon stock
option plans.
CONDITIONS TO COMPLETION OF THE MERGER
The obligations of OnDisplay and Oberon to complete the merger and the
other transactions contemplated by the merger agreement are subject to the
satisfaction or waiver of each of the following closing conditions before
completion of the merger:
- No statute, rule, regulation or other order must be enacted or issued
which has the effect of prohibiting the merger or making it illegal.
- No injunction or other order issued by a court preventing the
consummation of the merger shall be in effect, nor shall any proceeding
brought by a governmental authority or instrumentality, domestic or
foreign, seeking an injunction be pending.
- The merger agreement must be approved by the stockholders of Oberon and
the issuance of OnDisplay common stock in the merger must be approved by
the stockholders of OnDisplay.
- OnDisplay's S-4 registration statement must be effective, no stop order
suspending its effectiveness will be in effect and no proceedings for
suspension of its effectiveness or similar proceeding with respect to the
proxy statement/prospectus it contains will be initiated before or
threatened in writing by the Securities and Exchange Commission.
- OnDisplay and Oberon must each receive from their respective tax counsel,
an opinion to the effect that the merger will constitute a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code.
- Approvals from any governmental authority that are required to consummate
the merger shall have been timely obtained.
OnDisplay's and ObiOne Acquisition Corporation's obligations to complete
the merger and the other transactions contemplated by the merger agreement are
subject to the satisfaction or waiver of each of the following additional
closing conditions before completion of the merger:
- Oberon's representations and warranties must be true and correct as of
January 17, 2000, and at and as of the date the merger is to be completed
as if made at and as of such time except:
- if any of these representations and warranties are not true and correct
but the effect in each case, or in the aggregate does not constitute a
material adverse effect on Oberon, then this condition will be deemed
satisfied; or
- for changes contemplated by the merger agreement.
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- Oberon must perform or comply in all material respects with all of the
agreements and covenants required by the merger agreement to be performed
by Oberon at or before completion of the merger.
- There shall be no action or proceeding of any nature pending, or overtly
threatened by or on behalf of a governmental entity, against OnDisplay or
Oberon, their respective properties or officers or directors, arising out
of, or in any way connected with, the merger or the other transactions
contemplated by the terms of the merger agreement.
- Holders of no more than 7.5% of the outstanding shares of Oberon's common
stock and preferred stock shall have exercised dissenters' rights with
respect to the transactions contemplated by the merger agreement.
- OnDisplay shall have received a written resignation from each of the
directors of Oberon effective as of the completion of the merger.
- OnDisplay shall have received a legal opinion from legal counsel to
Oberon in a form reasonably acceptable to legal counsel to OnDisplay.
- Certain Oberon employees shall have executed and delivered to OnDisplay
non-competition agreements in the form attached to the merger agreement.
- Certain Oberon employees shall have agreed to be employees of OnDisplay
after completion of the merger and certain Oberon employees shall have
executed severance agreements in the form attached to the merger
agreement.
- Oberon shall have obtained all consents, waivers, approvals and
assignments listed in the schedule attached to the merger agreement.
- To the extent Oberon's representations and warranties address matters
only as of a particular date, they must be true and correct as of that
date.
Oberon's obligations to complete the merger and the other transactions
contemplated by the merger agreement are subject to the satisfaction or waiver
of each of the following additional conditions before completion of the merger:
- OnDisplay's representations and warranties must be true and correct as of
January 17, 2000 and at and as of the date the merger is to be completed
as if made at and as of such time except:
- if any of these representations and warranties are not true and correct
but the effect in each case, or in the aggregate, does not constitute a
material adverse effect on OnDisplay, then this condition will be deemed
satisfied; or
- for changes contemplated by the merger agreement.
- OnDisplay and ObiOne Acquisition Corporation must perform or comply in
all material respects with all of the agreements and covenants required
by the merger agreement to be performed by OnDisplay at or before
completion of the merger.
- The shares of OnDisplay common stock to be issued or reserved for
issuance in the merger must have been approved for quotation on the
Nasdaq National Market System subject to notice of issuance.
- No law, regulation or order must be enacted or issued which has the
effect of making the merger illegal or otherwise prohibiting the merger
substantially on the terms contemplated by the merger agreement.
- To the extent OnDisplay's representations and warranties address matters
only as of a particular date, they must be true and correct as of that
date.
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ESCROW FUND
Ten percent of the OnDisplay shares of common stock to be received by the
holders of outstanding Oberon common stock and preferred stock will be deposited
in an escrow fund for a period of one year to serve as security for
indemnification of OnDisplay and its officers, directors and affiliates against
losses resulting from:
- any breach or inaccuracy of a representation or warranty of Oberon in the
merger agreement or an instrument delivered pursuant to the merger
agreement;
- any failure by Oberon to perform or comply with a covenant in the merger
agreement; or
- Oberon incurring third party expenses in excess of the amount estimated
in the merger agreement.
Shares of OnDisplay common stock deposited on behalf of Oberon stockholders
into the escrow fund may not be transferred during the one year term of the
escrow fund unless the shares are sold by the stockholder representative on the
owner's behalf and at least $91.575 per share from the sale is placed in the
fund in lieu of the shares sold.
TERMINATION OF THE MERGER AGREEMENT
The merger agreement may be terminated at any time prior to completion of
the merger:
- By mutual written consent of OnDisplay and Oberon.
- By OnDisplay or Oberon, if the merger is not completed before July 31,
2000, except that this right of termination is not available to any party
whose action or failure to act has been a principal cause of or resulted
in the failure of the merger to occur on or before July 31, 2000, and
such action or failure to act constitutes a breach of the merger
agreement.
- By OnDisplay or Oberon, if there shall be a final order of any court in
effect preventing consummation of the merger, or there shall be any
statute, rule, regulation or order enacted, promulgated or issued that
would make it illegal.
- By OnDisplay if there shall be any action taken, or any statute, rule,
regulation or order enacted, promulgated or issued by any governmental
entity, which would prohibit OnDisplay's ownership or operation of any
portion of Oberon's business or compel OnDisplay or Oberon to dispose of
or hold separate all or any portion of their business or assets as a
result of the merger.
- By OnDisplay, upon a breach of any representation, warranty, covenant or
agreement of OnDisplay contained in the merger agreement so that the
corresponding condition to completion of the merger would not be met.
However, if the breach or inaccuracy is curable by OnDisplay, Oberon may
not terminate the merger agreement for 10 days after delivery of written
notice from OnDisplay of the breach.
- By Oberon, upon a breach of any representation, warranty, covenant or
agreement of Oberon contained in the merger agreement so that the
corresponding condition to completion of the merger would not be met.
However, if the breach or inaccuracy is curable by Oberon, OnDisplay may
not terminate the merger agreement for 10 days after delivery of written
notice from Oberon of the breach.
EXTENSION, WAIVER AND AMENDMENT OF THE MERGER AGREEMENT
OnDisplay, Oberon and J. Chappell, as representative at the Oberon
stockholders, may amend the merger agreement before completion of the merger by
unanimous written consent.
Either OnDisplay or Oberon may, to the extent legally allowed, in writing,
extend the other's time for the performance of any of the obligations or other
acts under the merger agreement, waive any inaccuracies in the other's
representations and warranties and waive compliance by the other with any of the
agreements or conditions contained in the merger agreement, prior to completion
of the merger.
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AGREEMENTS RELATED TO THE MERGER
This section of the proxy statement/prospectus describes agreements related
to the merger agreement, including the OnDisplay voting agreements and the
Oberon voting agreements. While we believe that these descriptions cover the
material terms of these agreements, these summaries may not contain all of the
information that is important to you.
ONDISPLAY VOTING AGREEMENTS
As a condition to Oberon's entering into the merger agreement, Oberon and
each of Matrix IV Entrepreneurs Fund, L.P., Matrix IV Management Co. L.L.C.,
Atlas Venture Fund II, L.P., O. Sermet, D. Larson, M. Pine, V. Mohan, T. Dung,
Norwest Venture Partners VI, M. Deppe, M. Taylor, and C. Villani entered into
voting agreements. By entering into the voting agreements these OnDisplay
stockholders have irrevocably appointed Oberon as their lawful attorney and
proxy. These proxies give Oberon the limited right to vote the shares of
OnDisplay common stock beneficially owned by these OnDisplay stockholders,
including shares of OnDisplay common stock acquired after the date of the voting
agreements, in favor of issuance of shares of OnDisplay common stock in the
merger in accordance with the merger agreement. These OnDisplay stockholders may
vote their shares of OnDisplay common stock on all other matters.
As of the record date, 10,927,330 shares, all the shares owned by these
individuals, or approximately 54.2% of the outstanding OnDisplay common stock,
are subject to the voting agreement. None of the OnDisplay stockholders who are
parties to the voting agreements were paid any consideration in connection with
this agreement.
Under these voting agreements, each of these OnDisplay stockholders agrees
not to sell the OnDisplay common stock and options owned, controlled or
acquired, either directly or indirectly, by that person until the earlier of the
termination of the merger agreement or the completion of the merger, unless the
transfer is in accordance with the stockholder agreement and each person to
which any shares or any interest in any shares is transferred agrees to be bound
by the terms and provisions of the voting agreement. These voting agreements
will terminate upon the earlier to occur of the termination of the merger
agreement and the completion of the merger.
OBERON VOTING AGREEMENT
As a condition to OnDisplay's entering into the merger agreement, OnDisplay
and each of M. McMahon, M. Wick, Toyo Information Systems Co., Ltd., J.
Chappell, D. Collard, D. Percy, A. Kuli, Matrix Partners IV, L.P., Sigma
Partners IV, L.P., Sigma Associates IV, L.P., Sigma Investors IV, L.P., Matrix
IV Entrepreneurs Fund, L.P., Charles River VIII-A L.L.C., and Charles River
Partnership VIII entered into voting agreements. By entering into the voting
agreements these Oberon stockholders have irrevocably appointed OnDisplay as
their lawful attorney and proxy. These proxies give OnDisplay the limited right
to vote all the shares of Oberon capital stock beneficially owned by these
Oberon stockholders, including shares of Oberon common stock acquired after the
date of the voting agreements in favor of approval of the merger agreement as
modified or amended from time to time, and the merger and against any other
alternative transaction. These Oberon stockholders may vote their shares of
Oberon common stock on all other matters.
As of March 6, 2000, these individuals and entities collectively
beneficially owned approximately 87.6% of the outstanding capital stock and 100%
of the series 1 and 64.7% of the series 2 preferred stock outstanding and have
agreed to vote their shares of Oberon capital stock in favor of the merger
agreement and the merger. None of the Oberon stockholders who are parties to the
voting agreements were paid additional consideration in connection with this
agreement.
Under these voting agreements, each of these Oberon stockholders agreed not
to sell the Oberon common stock and options owned, controlled or acquired,
either directly or indirectly, by that person until the earlier of the
termination of the merger agreement or the completion of the merger, unless the
transfer
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is in accordance with the stockholder agreement and each person to which any
shares or any interest in any shares is transferred agrees to be bound by the
terms and provisions of the voting agreement. These voting agreements will
terminate upon the earlier to occur of the termination of the merger agreement
and the completion of the merger.
AFFILIATE AGREEMENTS
OnDisplay will be entitled to place appropriate legends on the certificates
evidencing any OnDisplay common stock to be received by these persons and to
issue stop transfer instructions to the transfer agent for the OnDisplay common
stock. These persons have acknowledged the resale restrictions imposed by Rule
145 under the Securities Act on shares of OnDisplay common stock to be received
by them in the merger. OnDisplay and Oberon have agreed to use commercially
reasonable efforts to cause its affiliates to execute affiliate agreements as
promptly as possible.
EMPLOYMENT AGREEMENTS
M. McMahon and M. Wick have agreed to be employees of OnDisplay after
completion of the merger. They have executed employment agreements with
OnDisplay that become effective upon the merger and terminate two years after
the merger. Each of these agreements provides for the following:
- a minimum of six months severance payments unless the employee's
termination is for cause or at the election of the employee;
- an agreement to enter into non-competition agreements;
- each employee is entitled to participate in the employee benefit plans
and programs of OnDisplay; and
- each employee shall be considered for any employee bonus program,
including retention bonus programs.
SEVERANCE AGREEMENTS
Certain officers of Oberon have entered into severance agreements with
Oberon. These persons include J. Chappell and D. Collard. Mr. Chappell's
agreement provides for the following:
- $150,000 in severance pay paid in one lump sum on the date of termination
of his employment;
- each outstanding option to purchase shares of common stock will
accelerate and become immediately exercisable and each outstanding
restricted stock award shall fully vest; and
- eligibility for continuing benefits under COBRA and reimbursement for
COBRA premiums until the earlier of one year from termination of his
employment or the loss of COBRA eligibility.
Mr. Collard's agreement provides for the following:
- $70,000 in severance pay paid in one lump sum on the date of termination
of his employment;
- each outstanding option to purchase shares of common stock will
accelerate and become immediately exercisable and each outstanding
restricted stock award shall fully vest; and
- eligibility for continuing benefits under COBRA or reimbursement for
COBRA premiums until the earlier of six months from termination of his
employment or the loss of COBRA eligibility.
Indemnification and Insurance. The merger agreement provides that for six
years after the completion of the merger, OnDisplay will not alter or impair any
exculpatory or indemnification provision now existing in the Oberon bylaws. In
addition, the merger agreement provides that OnDisplay will fulfill and honor in
all respects the obligations of Oberon pursuant to Oberon's articles of
organization and bylaws relating to indemnification and any indemnification
agreements between Oberon and its respective directors and officers existing
prior to the closing of the merger. In connection with the merger agreement,
Oberon has entered into indemnification agreements with each of its directors
and with J. Chappell, D. Collard, M. McMahon and M. Wick.
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Insofar as indemnification for liabilities arising under the Securities Act
of 1933 is permitted to directors or officers, the companies have been informed
that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is therefor
unenforceable.
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COMPARISON OF RIGHTS OF HOLDERS OF
OBERON COMMON STOCK AND
ONDISPLAY COMMON STOCK
This section of the proxy statement/prospectus describes certain
differences between Oberon capital stock and OnDisplay capital stock. While we
believe that the description covers the material differences between the two,
this summary may not contain all of the information that is important to Oberon
stockholders, including the certificate of incorporation and bylaws of OnDisplay
and the articles of incorporation and bylaws of Oberon. Oberon stockholders
should read this entire document and the other documents referred to carefully
for a more complete understanding of the differences between Oberon common stock
and OnDisplay common stock.
Oberon's articles of incorporation and bylaws currently govern the rights
of stockholders of Oberon. After the completion of the Oberon merger, Oberon's
common stockholders will become stockholders of OnDisplay. As a result, former
Oberon stockholders' rights will be governed by OnDisplay's certification of
incorporation and bylaws. Furthermore, because OnDisplay is a Delaware
corporation, after the Oberon merger former Oberon stockholders' rights will be
governed by the Delaware General Corporation Law, rather than by Massachusetts
law. The following paragraphs summarize certain differences between the rights
of OnDisplay stockholders and Oberon stockholders under the certificate of
incorporation and bylaws of OnDisplay and articles of incorporation and bylaws
of Oberon, and under Delaware and Massachusetts law, as applicable.
<TABLE>
<CAPTION>
ONDISPLAY OBERON
(DELAWARE) (MASSACHUSETTS)
---------- ---------------
<S> <C> <C>
Common stock......... OnDisplay is authorized to issue Oberon is authorized to issue 25,000,000
25,000,000 shares of common stock. On shares of common stock. On March 3, 2000,
March 3, 2000, the record date, approximately 6,633,862 shares of common
approximately 20,175,507 shares of common stock were outstanding. One class is
stock were outstanding. One class is issued and outstanding. Holders are
issued and outstanding. Holders are entitled to one vote per share.
entitled to one vote per share.
Preferred stock...... The OnDisplay certificate of incorporation Oberon is authorized to issue 11,300,000
authorizes the board of directors to issue shares of series 1 convertible
shares of preferred stock in series, to participating preferred stock and
establish from time to time the number of 4,200,000 shares of series 2 convertible
shares to be included in such series, and non-participating preferred stock. On
to fix the designation, powers preferences March 3, 2000, all of the authorized
and rights of the shares to be included in shares of series 1 participating preferred
each series and the qualifications, stock outstanding and approximately
limitations and restrictions thereof. The 3,399,598 of series 2 convertible non-
OnDisplay certificate of incorporation participating preferred stock were
reserves for issuance 11,600,000 shares of outstanding.
preferred stock. On the record date, there
were no shares of preferred stock
outstanding.
Special meeting of
stockholders....... Under Delaware law, a special meeting of Oberon's bylaws provide that a special
stockholders may be called by the board of meeting of stockholders may be called by
directors or any other person authorized the president or the directors. A special
to do so in the certificate of meeting must be called by the clerk upon
incorporation or the bylaws. OnDisplay's written application of one or more
bylaws authorize the board of directors, stockholders who are entitled to vote at
the chairman of the Board or the president the meeting and hold at least a one-tenth
to call a special meeting of stockholders. part in the stock entitled to vote at the
Therefore, stockholders of OnDisplay are meeting.
not authorized to call special meeting of
stockholders.
</TABLE>
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<TABLE>
<CAPTION>
ONDISPLAY OBERON
(DELAWARE) (MASSACHUSETTS)
---------- ---------------
<S> <C> <C>
Action by written
consent lieu of a
stockholders'
meeting............ Under Delaware law, stockholders may take Under Massachusetts law, any action to be
action by written consent in lieu of taken by stockholders may be taken without
voting at a stockholders meeting. Delaware a meeting only by unanimous written
law permits a corporation, pursuant to a consent and a corporation may not provide
provision in such corporation's otherwise in its articles of organization
certificate of incorporation, to eliminate or bylaws.
the ability of stockholders to act by Oberon's bylaws provide that any action by
written consent. stockholders may be taken without a
meeting and by written consent if all the
stockholders entitled to vote on the
matter consent.
Record date for
determining
stockholders....... The OnDisplay bylaws provide that the The Oberon bylaws provide that the
board of directors may fix a record date directors may fix, in advance, a record
that: shall not be more than 60 days, nor date not more than sixty days prior to the
less than 10 days, before the date of the date of any stockholder meeting, the date
meeting. for the payment of any dividend or the
Furthermore, the bylaws provide that if making of any distribution to stockholders
the board of directors does not fix a or the last day on which the consent or
record date in the manner described above, dissent of stockholders may be effectively
then the record date for determining expressed for any purpose.
stockholders entitled to notice of or to If no record date is fixed and the
vote at a meeting of stockholders shall be transfer books are not closed:
at the close of business on the day next - The record date for determining
preceding the day on which notice is stockholders having the right to notice
given, or, if notice is waived, at the of or to vote at a meeting of
close of business on the day next stockholders shall be at the close of
preceding the day on which the meeting is business on the day next preceding the
held. day on which notice is given.
- 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 acts
with respect thereto.
Additionally, pursuant to Oberon's
articles of incorporation, if any
reorganization or merger of Oberon occurs,
Oberon must provide the holders of
preferred stock with 20 days notice of any
record date. The date the merger or
reorganization is expected to become
effective and the date holders of common
stock can exchange these stock for
securities or property of the acquiror.
Advance notice
provisions for
board nomination
and other
stockholders
business -- annual
meetings........... The OnDisplay bylaws require that Oberon's bylaws provide that the annual
nominations of persons for election to the meeting of stockholders must be held
board of directors and the proposal of within six months of the end of
business to be considered at any corporation's fiscal year. The date
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<TABLE>
<CAPTION>
ONDISPLAY OBERON
(DELAWARE) (MASSACHUSETTS)
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<S> <C> <C>
meeting of stockholders must be made by: and hour of the annual meeting is fixed by
- the board of directors, or proxy the board of directors. In the event that
committee appointed by the board of no date for the annual meeting is
directors: or established or if no annual meeting is
- a stockholder who gives proper notice held, a special meeting may be held in
For nominations or other business to be lieu of the annual meeting.
properly brought before a stockholders
meeting by a stockholder, the stockholder
must have given timely notice thereof in
writing to the secretary of OnDisplay and
such other business must otherwise be a
proper matter for stockholder action. To
be timely, stockholders notice shall be
delivered to the principal executive
offices of OnDisplay not later than the
close of business on the 60th day nor
earlier than the close of business on the
90th day prior to the meeting; provided,
however, that in the event that less than
65 days' notice of the meeting is given to
the stockholders, notice by the
stockholder to be timely must be delivered
not later than the close of business on
the 7th day following the day on which the
notice of the meeting was mailed.
Advance notice
provisions for
board nomination
and other
stockholders
business -- special
meetings........... The OnDisplay bylaws provide for the same Under Massachusetts law, seven days notice
requirements for raising business at is required before any shareholder
special meetings of stockholders as for meeting.
raising business at annual meetings. Oberon's bylaws provide that a special
meeting of stockholders may be called by
the president or the directors. A special
meeting must be called by the clerk upon
written application of one or more
stockholders who are entitled to vote at
the meeting and hold at least a one-tenth
part in the stock entitled to vote at the
meeting.
Number of
directors.......... The OnDisplay bylaws provide that the Oberon's articles and bylaws provide that
board of directors shall consist of 7 its board of directors shall not have less
members. This number may be changed by a than three (3) members, unless there are
duly adopted amendment to the certificate less than three (3) shareholders.
of incorporation or by an amendment to the
bylaws adopted by the vote or written
consent of holders of a majority of the
stock issued and outstanding and entitled
to vote or by a resolution of a majority
of the board of directors.
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<TABLE>
<CAPTION>
ONDISPLAY OBERON
(DELAWARE) (MASSACHUSETTS)
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<S> <C> <C>
Classified board of
directors.......... Delaware law provides that a corporation's Massachusetts law provides that a
board of directors may be divided into corporation's board of directors may be
various classes with staggered terms of divided into various classes with
office. OnDisplay directors are elected to staggered terms of office. Oberon's bylaws
a term of one year and until their provide for a single class of directors
successors are elected and qualified. who are elected at the annual
stockholder's meeting and hold office
until their successors are elected and
qualified.
Removal of
directors.......... Under Delaware law, except as otherwise Oberon's articles of incorporation do not
provided in the corporation's certificate contain any provisions regarding the
of incorporation, a director of a removal of directors. Oberon's bylaws
corporation that has a classified board of provide that a director may be removed
directors may be removed only with cause. from office, with or without cause, by the
The OnDisplay bylaws provide that any holders of a majority of the shares
director or the entire board of directors entitled to vote in the election of
may be removed by the holders of a directors. A director may be removed for
majority of the shares then entitled to cause by vote of a majority of the
vote at an election of directors. directors then in office after reasonable
notice and an opportunity to be heard.
Board of director
vacancies.......... Under Delaware law, vacancies and newly Oberon's articles of incorporation do not
created directorships may be filled by a contain any provisions regarding the
majority of the directors then in office, filling of vacancies. Oberon's bylaws
even though less than a quorum, unless provide that vacancies may be filled by
otherwise provided in the certificate of the directors then in office or the
incorporation or bylaws. The OnDisplay stockholders at a special meeting called
bylaws provide that vacancies on the board at least in part for the purpose of
of directors may only be filled by the filling the vacancy. Any director chosen
vote of the majority of directors then in by the stockholders shall displace any
office, including, in the case of any chosen by the directors.
vacancy created by resignation which is to
be effective at a future date, those
directors who have so resigned. The
OnDisplay bylaws also provide that
vacancies and newly created directorships
resulting from any increase in the
authorized number of directors may be
filled by a majority of the directors that
are in office, although less than a
quorum, or by a sole remaining director.
Notice of special
meetings of the
board of
directors.......... The OnDisplay bylaws provide that special Oberon's bylaws provide that special
meetings of the board of directors may be meetings of the board of directors may be
called by the chairman of the board, the called by the president, clerk, secretary,
president, any vice president, the any two directors or one in the event
secretary or any two directors. Notice of there is only one director.
the time and place of special meeting
shall be delivered by mail, facsimile or
electronic delivery. If by mail, the
notice must be deposited in the United
States mail at least four days before the
time of the holding of the meeting. If the
notice is delivered personally or
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<TABLE>
<CAPTION>
ONDISPLAY OBERON
(DELAWARE) (MASSACHUSETTS)
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<S> <C> <C>
by telephone, or by facsimile or
electronic delivery, it must be delivered
at least 48 hours before the time of the
holding of the meeting.
Approval of loans to
officers........... The OnDisplay bylaws provide that Oberon's bylaws do not provide for loans
OnDisplay may lend money to or otherwise to officers. Under Massachusetts law, the
assist any officer or other employee directors and officers who participate in
whenever the directors judge such a loan a loan by Oberon to any of its officers
or assistance reasonably to be expected to shall be jointly and severely liable for
benefit the corporation. any unpaid portions of the loan, unless a
majority of disinterested shares entitled
to vote for directors approve or ratify
the loan as one reasonably expected to
benefit the Oberon.
Indemnification...... The OnDisplay certificate of incorporation Under Massachusetts law, a director is
and bylaws provide that the directors and generally not exculpated from liability
officers shall be indemnified to the under provisions of Massachusetts law
fullest extent authorized by law against relating to unauthorized distributions and
any action, proceeding or suit brought loans to insiders. Massachusetts law
against such a person by reason of the provides that no indemnification may be
fact that he or she is or was a director, provided with respect to any matter in
officer, employee or agent of the which the director or officer shall have
corporation or serves or served at any been adjudicated not to have acted in good
other enterprise as at the request of the faith in the reasonable belief that his
corporation. Under Delaware law, such action was:
provision may not eliminate or limit - in the best interest of the corporation,
director monetary liability for: or
- breaches of the director's duty of - to the extent that such matter relates
loyalty to the corporation or its to service with respect to any employee
stockholders; benefit plan, in the best interests of
- acts or omissions not in good faith the participants or beneficiaries of
involving intentional misconduct or such employee benefit plan.
knowing violations of law; Massachusetts law does not explicitly
- the payment of unlawful dividends or address indemnifying persons against
unlawful stock repurchases or judgments in actions brought by or in the
redemptions; or right of the corporation. The previously
- any transaction in which the director discussed standard applies to such cases.
received an improper personal benefit. Oberon's bylaws provide that Oberon will,
The OnDisplay bylaws provide that the to the extent legally permissible,
corporation indemnifies each of its indemnify any person who is or was serving
directors and officers against expenses as a director or officer of Oberon against
including attorneys fees, judgments, all liabilities and expenses, including
fines, settlements and other amounts attorney's fees, reasonably incurred by
actually and reasonably incurred in him in connection with the defense of a
connection with any proceeding, arising by civil or criminal proceeding, while in
reason of the fact that such person is or office or thereafter, by reason of his
was an agent of the corporation. being or having been a director or
Insofar as indemnification for liabilities officer. No amendment to or repeal of this
arising under the Securities Act of 1933 provision of the Oberon articles shall
as permitted to directors or officers, the apply to or have any effect on the
companies have been informed that, in the liability or alleged liability of any
opinion of the Securities and Exchange director for or with respect to any acts
Commission, such indemnification is or omissions of such director occurring
against public policy as expressed in the prior to such amendment or repeal.
Act and is therefor unenforceable. Insofar as indemnification for
liabilities arising under the Securities
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<TABLE>
<CAPTION>
ONDISPLAY OBERON
(DELAWARE) (MASSACHUSETTS)
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<S> <C> <C>
Act of 1933 is permitted to directors or
officers, the companies have been informed
that, in the opinion of the Securities and
Exchange Commission, such indemnification
is against public policy as expressed in
the Act and is therefor unenforceable.
Stockholder
approval of certain
business
combinations....... Under Delaware law, "business Massachusetts law prohibits a business
combinations" by corporations with combination with an interested
"interested stockholders" are subject to a stockholder, general defined as a person
moratorium of three or five years, beneficially owning 5% or more of Oberon's
respectively, unless specified conditions outstanding voting stock, or an interested
are met. The prohibited transactions stockholder's affiliate or associate, for
include, a merger with, disposition of a three-year period following the date
assets to, or the issuance of stock to, that a stockholder becomes an interested
the interested stockholder, or certain stockholder. This only applies to
transactions that have the effect of corporations with 200 or more stockholders
increasing the proportionate share of the of record. As a result, this statute is
outstanding securities held by the inapplicable to this transaction because
interested stockholder. Under Delaware Oberon has fewer than two hundred
law, an interested stockholder may avoid stockholders of record.
the prohibition against effecting certain Massachusetts law provides that a merger
significant transactions with the agreement must be approved by a vote of
corporation if the board of directors, two-thirds of the shares of each class of
prior to the time such stockholder becomes stock, unless the articles of organization
an interested stockholder, approves such of the corporation provide otherwise, but
transaction or the transaction by which it may not be less than a majority of
such stockholder becomes an interested shares outstanding and entitled to vote.
stockholder or if at or subsequent to such See "The Oberon Special Meeting --
time the board of directors and the Required Vote" on page 55 for a discussion
stockholders approve such transaction. on the voting provisions in the Oberon
These provisions of Delaware law apply to articles with respect to the merger.
a Delaware corporation unless the
corporation "opts out" of the provisions
in its certificate of incorporation or
bylaws. OnDisplay has not opted out of
these provisions in its certificate of
incorporation or bylaws and consequently
is subject to these provisions.
Par value,
dividends and
repurchases of
shares............. The concepts of par value, capital and Under Massachusetts law, corporations
surplus are retained under Delaware law. generally are permitted to pay dividends
Delaware law permits a corporation to as long as the action is not taken when
declare and pay dividends out of surplus the corporation is insolvent, does not
or, if there is no surplus, out of the net render the corporation insolvent and does
profits for the fiscal year in which the not violate the corporation's articles of
dividend is declared and/or for the organization. The directors of
preceding fiscal year as long as the Massachusetts corporations may be jointly
amount of capital of the corporation and severally liable to the corporation to
following the declaration and payment of the extent that the directors authorize a
the dividend is not less than the dividend when the corporation is insolvent
aggregate amount of the capital or where the amount of the dividend
represented by the issued and outstanding exceeds the
stock of all
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<TABLE>
<CAPTION>
ONDISPLAY OBERON
(DELAWARE) (MASSACHUSETTS)
---------- ---------------
<S> <C> <C>
classes having a preference upon the permissible amounts and is not repaid to
distribution of assets. In addition, the corporation.
Delaware law generally provides that a Oberon's charter provides that the holders
corporation may redeem or repurchase its of the preferred stock are entitled to
shares only if such redemption or receive dividends, out of funds legally
repurchase would not impair the capital of available for dividend payment, at the
the corporation. Notwithstanding the same rate as dividends are paid to the
foregoing, a Delaware corporation may common stock. So long as shares of
redeem or repurchase shares having a preferred stock are outstanding, Oberon
preference upon the distribution of any of shall not declare or pay any dividends on
its assets if such shares will be retired any other class of stock unless each of
upon acquisition, and provided that, after the preferred stockholders have been paid
the reduction in capital made in all dividends in full.
connection with such retirement of shares,
the corporation's remaining assets are
sufficient to pay any debts not otherwise
provided for.
Dissenters' or
appraisal rights... Such rights are not available with respect Under Massachusetts law, a stockholder
to a merger or consolidation by a may, before the taking of the vote on
corporation the shares of which are either approval of a merger agreement, file with
listed on a national securities exchange Oberon a written objection to the proposed
or held of record by more than 2,000 merger stating that he intends to demand
stockholders if such stockholders are payment for his Oberon shares if the
required to receive only shares of the merger is consummated. If the shares are
surviving corporation, shares of any other not voted in favor of the merger, the
corporation which are either listed on a shareholder may have the right to demand
national securities exchange or held of in writing from Oberon, as it exists after
record by more than 2,000 holders, cash in the Oberon merger, within twenty days
lieu of fractional shares or a combination after the date of mailing to him of notice
of the foregoing. in writing that the merger has been
consummated, payment for his shares and an
appraisal for the value thereof.
Description of common
stock.............. The holders of OnDisplay common stock are The holders of Oberon common stock are
entitled to one vote for each share held entitled to one vote for each share held
of record on all matters submitted to a of record on all matters submitted to a
vote of stockholders. Holders of common vote of stockholders. Holders of common
stock have no preemptive rights or rights stock have no preemptive rights or rights
to convert their common stock into any to convert their common stock into any
other securities. There are no redemption other securities. There are no redemption
or sinking fund provisions applicable to or sinking fund provisions applicable to
the common stock. All outstanding shares the common stock. All outstanding shares
of common stock are fully paid and of common stock are fully paid and
non-assessable and have a par value of non-assessable and have a par value of
$0.001 per share. $0.001 per share.
Description of
preferred stock.... Pursuant to the restated certificate of Pursuant to Oberon's articles of
incorporation, the board of directors has organization, each holder of series 1 or
the authority, without further action by series 2 preferred stock is entitled to
the stockholders, to issue up to one vote for each share of common stock
11,600,000 shares of preferred stock, into which the shares of series 1
$0.001 par value per share, in one or more preferred stock and series 2 preferred
series and to fix the designations, stock are then convertible. The holders of
powers, preferences, privileges and preferred stock and common stock will vote
relative participating, optional or together as a single class on
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<TABLE>
<CAPTION>
ONDISPLAY OBERON
(DELAWARE) (MASSACHUSETTS)
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<S> <C> <C>
special rights and the qualifications, all matters except as provided in the
limitations or restrictions thereof, articles. Oberon also gives the holders of
including dividend rights, conversion each of series 1 preferred stock and
rights, voting rights, terms of redemption series 2 preferred stock the right to vote
and liquidation preferences, any or all of on enumerated actions that if taken by
which may be greater than the rights of Oberon would impair their rights,
the common stock. The board, without preferences and privileges. Accordingly,
stockholder approval, can issue preferred Oberon must first obtain the affirmative
stock with voting, conversion or other vote or written consent of the holders of
rights that could adversely affect the a majority of the outstanding shares of
voting power and other rights of the such series of preferred stock being
holders of common stock. Preferred stock adversely affected, before taking actions
could thus be issued quickly with terms such as:
calculated to delay or prevent a change in - changing the rights, preferences or
control of OnDisplay or make removal of privileges of preferred stock or any
management more difficult. Additionally, other capital stock of Oberon;
the issuance of preferred stock may have - increasing the number of authorized
the effect of decreasing the market price shares of preferred stock;
of the common stock, and may adversely - authorizing or issuing any new class or
affect the voting and other rights of the series of securities senior or equal to
holders of common stock. There are no such series of preferred stock;
shares of preferred stock outstanding and - amend the articles of organization and
OnDisplay has no plans to issue any of the bylaws of Oberon; and
preferred stock. - incur new obligations in the nature of
debt for money borrowed, leases or
guarantees of third party obligations in
excess of $500,000.
Stockholder
derivative suits... Under Delaware law, a stockholder may only Under Massachusetts law, a stockholder may
bring a derivative action on behalf of the only bring a derivative action if the
corporation if the stockholder was a stockholder owned stock in Oberon at the
stockholder at the time of the transaction time of the act or omission complained of
in question or his or her stock thereafter or acquired the stock by operation of law
devolved upon him or her by operation of from one who was a stockholder at such
law. time.
</TABLE>
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CERTAIN INFORMATION REGARDING ONDISPLAY
OVERVIEW
We offer a comprehensive suite of software applications that enable
companies to rapidly deploy and easily manage 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 infrastructure solutions allow both business-to-business and
business-to-consumer e-commerce companies to rapidly automate and continuously
manage the flow of information and transactional data among their suppliers,
distributors 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 agile e-business
relationships. Our e-business portal and e-marketplace customers include Aspect
Development, ClubComputer.com, FASTXchange, Harbinger Corporation, Moore North
America Ltd., PurchasePro.com, TRIP.com, Travelocity.com and W.W. Grainger, Inc.
INDUSTRY BACKGROUND
Companies in all industries around the world face the strategic imperative
of re-creating themselves into electronic commerce, or e-commerce, companies. By
augmenting or even replacing their traditional distribution, supply chain and
customer-service channels with Internet-based channels, these companies seek to
build new revenue streams and gain competitive advantage. Although the first
generation of e-commerce consisted primarily of basic Web sites offering product
information for marketing purposes, today the stakes are higher. We believe
successful companies now need to create value-added relationships with suppliers
and distributors and offer differentiated and unique online services to
customers. By extending core business processes over the Internet and
integrating systems with suppliers, distributors 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 suppliers, distributors 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
an 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 suppliers,
distributors and customers 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 manage 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 trading partners, 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;
- Integration -- integrating e-business portals and e-marketplaces with
operational systems to synchronize and automate services and
transactions; and
- Exchange -- enabling the exchange of business documents, including
purchase orders and invoices, for secure, real-time business process
automation.
Given these requirements, e-business portals and e-marketplaces face
significant challenges in effectively expanding 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 suppliers,
distributors 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;
- ability 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 enabling e-business portals and
e-marketplaces. This solution must be open, expandable to many concurrent users
and adaptable to enable the rapid aggregation, integration, and exchange of
dynamic information and services.
ONDISPLAY SOLUTION
We provide a comprehensive suite of software applications that enable
companies to rapidly deploy and easily manage 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 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
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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 reduce 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, distributors and other business affiliates.
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 EXPANDABLE 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 capable of growing to support thousands of participants,
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 solutions that enable the creation of 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 major
opportunity as e-marketplace businesses become pioneers in the use of
automated, robust and expandable information exchange solutions.
- ADDITIONAL EXPOSURE THROUGH NETWORK EFFECTS. As our customers use our
solution across their network of suppliers, buyers and other market
participants, numerous other e-businesses become aware of our products
and their features and are continually exposed to our products with
subsequent exchanges of critical business information. We believe this
allows participants in e-business transactions to experience the benefits
that our products deliver first hand, which creates a powerful network
effect to drive more rapid product recognition and adoption. We intend to
take maximum advantage of this visibility across our targeted markets in
order to drive increased sales.
- CONTINUE OUR TECHNOLOGICAL INNOVATION. 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 among 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, or XML, as
the software protocol upon which to base their interactions with
suppliers, distributors and customers. We intend
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to take advantage of this trend by continually enhancing our highly
automated, easy-to-use XML solution.
- BUILD UPON OUR NETWORK OF RELATIONSHIPS. We are building 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
by establishing a worldwide field sales, marketing, and services
organization. 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 deployment and
seamless management of 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.
The license fee for each CenterStage product is based on the number of
servers running the software and the number of different information sources
accessed. The list price of each CenterStage product starts at $75,000. License
fees for installations typically range from $100,000 to $400,000. The
CenterStage product suite includes:
- CENTERSTAGE ECONTENT -- Our CenterStage eContent application enables our
customers to aggregate, or gather, and transform a wide range of
information, or content, for their e-business portals and e-marketplaces.
Whether the source format is structured, as with database or application
data, or unstructured, as with Web pages, CenterStage eContent lets users
specify, select, transform, update and manage diverse content rapidly and
easily. CenterStage eContent can handle high volumes of data, for
example, aggregating text and graphics on hundreds of thousands of
products. As a result, CenterStage eContent enables e-business portals
and e-marketplaces to deliver a wide array of rich, relevant information
to keep their customers from having to leave their Web sites to access
this information.
Travel portals, for example, use CenterStage eContent to pull up-to-date
airline, hotel, cruise package, car rental and weather information onto
their Web sites from hundreds of affiliated companies. By presenting
customers with this pertinent and timely information, these travel
portals are better able to engage and retain their customers and increase
their bookings.
- CENTERSTAGE EBIZXCHANGE -- Our CenterStage eBizXchange application takes
advantage of advanced technologies to rapidly and securely exchange
business transaction information across a wide array of trading partners.
This information exchange can be accomplished across corporate security
systems, or firewalls, using both "tight" and "loose" collaboration
models. CenterStage eBizXchange's tight collaboration model allows
business partners to define a standard approach for secure
business-to-business information exchange, using a mutually agreed upon
format. The product's loose collaboration model, enables the e-business
to complete a transaction with its online trading partner by mimicking a
user's actions on the trading partner's Web site, without the need for an
explicit format agreement between the partners. CenterStage eBizXchange
can handle thousands of transactions simultaneously, which enables our
customers to expand their e-business applications to meet the needs of
increasing numbers of users.
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Industrial supplies e-marketplaces, for example, use CenterStage
eBizXchange to manage transactions among multiple buyers and sellers,
using a range of transaction formats and protocols. These e-marketplaces
use CenterStage eBizXchange to automatically request and route electronic
business documents including purchase orders, requisitions, inventories
and pick lists. These e-marketplaces may use tight collaboration for
large buyers and suppliers, while they employ loose collaboration for
smaller groups that might not have the resources to implement specific
technology formats.
- CENTERSTAGE eINTEGRATE -- Our CenterStage eIntegrate product provides a
complete solution for linking the e-business portal or e-marketplace with
its existing internal applications, including enterprise resource
planning, or ERP, systems. This linking, or integration, enables the
portal's customers, partners and suppliers to perform a range of
functions on the Web-based portal, including placing an order with the
source data, such as inventory availability, accessible from an internal
system. CenterStage eIntegrate can handle thousands of internal
application updates and data requests simultaneously, which enables our
customers to expand their e-business applications to meet the needs of
increasing numbers of users. CenterStage eIntegrate can use existing
technologies, including popular message brokers, to request and route
data. In addition, customers can purchase and use integration toolkits to
create tighter links between their e-business portals and their internal
applications, including those from Oracle, PeopleSoft and SAP.
A computer and electronics portal, for example, may use CenterStage
eIntegrate to process customer orders and enter these orders directly
into the e-business's internal accounting system. The portal's customers
could also check the status of their orders by accessing that information
directly from the internal accounting system using CenterStage
eIntegrate.
- CENTERSTAGE eNOTIFY -- Our CenterStage eNotify product allows
e-businesses to offer customer-requested updates, or alerts, to build
relationships with their customers. Unlike many existing programs that
track each user's behavior patterns to create targeted sales offers,
CenterStage eNotify enables online visitors to enter their own
information requests about specific events on the e-business Web site.
The CenterStage eNotify system would then deliver notifications of new
requested information via email or pager update directly to the customer.
CenterStage eNotify can support thousands of information requests, which
enables our customers to meet the needs of increasing numbers of users.
This event-based execution enables customers to receive notifications
based on timely information.
An online gift store, for example, can use CenterStage eNotify to invite
customers to specify the product and price they want, and to then alert
those customers when the requested item is available.
- CENTERSTAGE eSYNDICATE -- Our CenterStage eSyndicate product enables
e-businesses to offer, or publish, select information from their
e-business portals or e-marketplaces, based on customers' information
requests, or subscriptions. CenterStage eSyndicate intelligently manages
and routes the requested information using any electronic format, open
standard or industry protocol. CenterStage eSyndicate is capable of
routing a wide range of continuously changing information from an array
of original sources, including databases and Web pages.
An automotive manufacturer, for example, may use CenterStage eSyndicate
to publish parts catalogs to its dealer network. Dealers in the network
would select the parts information they need and specify how often they
want the manufacturer to update the information. As the manufacturer adds
new parts or changes prices on its Web site, CenterStage eSyndicate would
automatically update dealers on the changes relevant to them.
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- XML CONNECT(TM) -- Our XML Connect product is a free, downloadable
software product that allows e-commerce participants -- including buyers,
suppliers and e-marketplaces -- to establish secure, reliable, guaranteed
XML business document exchange, without the need to install and manage
closed or proprietary XML servers. With XML Connect acting as a
standardized XML transport, e-commerce participants can achieve secure
online document exchange quickly and easily.
A chemical supplies e-marketplace, for example, may use XML Connect to
quickly establish secure online document exchange with multiple suppliers
of laboratory equipment. The e-marketplace and each of its suppliers
would simply download the free XML Connect product, and then use XML
Connect to select and schedule documents for exchange.
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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
- Access to structured and - Fresh content delivered
unstructured data automatically
- Easy-to-use interface - Reduces deployment cost by not
requiring programmer support
- Expandable to many concurrent - Supports data from a variety of
users sources and multiple concurrent
users
- --------------------------------------------------------------------------------------------------
CenterStage eBizXchange - Automated transaction exchange - Time and cost savings from
between market participants 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
- 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
- Expandable, 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
optimizing existing enterprise
infrastructures
- PeopleSoft, Oracle and SAP - Tight integration with leading
Integration Toolkits enterprise resource planning
applications
- --------------------------------------------------------------------------------------------------
CenterStage eNotify - Customer request-based - Proactive, permission-based
notification interaction to engage and
retain customers
- Event-based execution - Notifications based on fresh,
relevant content
- Delivery of alerts via email - Immediate, reliable
and pager notification using customer's
preferred medium
- --------------------------------------------------------------------------------------------------
CenterStage eSyndicate - Automated content publication - Customized information based on
based upon user subscriptions company specific requirements
- Content publishing in multiple - Flexibility to syndicate
formats content to a wide range of
market participants
- Continuous routing of dynamic - Automatic support for fast-
data using industry standards changing information
- --------------------------------------------------------------------------------------------------
</TABLE>
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[GRAPHIC]
[Diagram labeled "e-Business Portals" of a server with arrows pointing from
it to images of computer screens labeled "suppliers" on the right, to images of
computer terminals labeled "buyers" and "affiliates" and servers labeled
"e-Marketplace" on the left, and to a cylinder shape labeled "internal
applications" below.]
Using the CenterStage application suite, an e-business portal can rapidly
automate and continuously manage the flow of information among its suppliers,
distributors and customers. 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
affiliates. CenterStage eIntegrate is used to link the e-business portal with
internal systems. The e-business portal may use CenterStage eNotify to
proactively deliver requested 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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[GRAPHIC]
[Diagram labeled "e-marketplaces" of a server with arrows pointing from it
to images of computer screens labeled "suppliers" on the right and to images of
computer terminals labeled "Buyers/Affiliates" on the left. The computer screens
have a two way arrow pointing between them and a cylinder labeled "Internal
Applications." The computer terminals also have a two way arrow pointing between
them and a cylinder labeled "Internal Applications."]
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 distributors. The e-marketplace is able to use CenterStage
eContent to capture 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 publish information of interest to buyers and affiliates using a
variety of formats. Concurrently, participant buyers and suppliers can use
CenterStage eIntegrate to link their e-business operations with their internal
applications.
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:
- design system and application architectures that best utilize the
functionality of our software;
- installation of our software and implementation within customers'
existing information technology infrastructure;
- transformation of data from one format to another;
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- development of interfaces between disparate software applications;
- training of users at the location of implementation; and
- maintenance and support of our software by skilled professional services
providers.
ARCHITECTURE
Our CenterStage product suite is based on the CenterStage technology
platform. This platform provides a means to develop and execute agents for
accessing, gathering, transforming and distributing information and transactions
using multiple approaches. Our CenterStage technology platform provides easy
application customization capabilities along with a high-performance execution
engine for production environments.
The CenterStage architecture provides the following environments:
- rapid development environment -- graphical development environment for
creating CenterStage agents and for customizing the resulting information
display; and
- execution/routing environment -- featuring a high-volume execution server
for processing information agents.
[Graphic]
[Diagram labeled "CenterStage Architecture" of an arch labeled "Destinations"
overlaying a semi-circle labeled "products" resting on three rectangles stacked
one above another. The uppermost rectangle is labeled "Execution/Routing
Environment," the rectangle it rests upon is labeled "Development Environment"
and the rectangle on the bottom is labeled "Sources."]
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
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information from multiple sources in many different formats. Some of these
sources include the Web, databases, software applications and various
information systems.
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 representative list of our customers as of December 31,
1999 who have purchased CenterStage products for use in e-business portal or
e-marketplace applications.
<TABLE>
<S> <C>
AltaVistaShopping.com Moore North America Ltd.
Aspect Development OrderTrust
Carlson Travel Group Orlando Sentinel Communications
Classified Ventures PurchasePro.com
Corporate Software and Technologies RMI.NET
Extricity Software, Inc. SciQuest.com
Fashionmall.com TPN Register
FASTXchange Travelocity.com
Harbinger Corporation TRIP.com
W.W. Grainger, Inc. Vignette Corporation
</TABLE>
No customer accounted for more than 10% of our revenues in the year ended
December 31, 1999. For the year ended December 31, 1998, one customer accounted
for 13% of total revenue and a second customer accounted for 11%.
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,
California and in offices located in the following metropolitan areas: Atlanta,
Boston, Denver, Farmington, Connecticut, Houston, Indianapolis, Kansas City, Los
Angeles, Mt. Laurel, New Jersey, Vienna, Virginia and West Orange, New Jersey.
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 are expanding 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 these companies
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introduce our products and services to prospective customers to generate
qualified sales leads. In some cases we pay a referral fee for these leads.
These fees are based on the net license revenue we receive from these leads and
are included in marketing expense when paid. These agreements enable us to
expand our potential market and help to validate our solution.
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 prone 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 business to business integration market, we
encounter competition from webMethods and Vitria Technology, Inc. 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
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and trademark law. We also enter into confidentiality or license agreements with
our employees and consultants, and other companies with whom we have concluded
marketing agreements 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 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 December 31, 1999, we employed 175 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 38,000 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, Farmington, Connecticut,
Houston, Indianapolis, Kansas City, Missouri, Los Angeles, Mt. Laurel and West
Orange, New Jersey and Vienna, Virginia. 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 a party to any material legal proceeding.
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ONDISPLAY 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 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 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, $3.3 million and $11.1 million for the years
ended December 31, 1997, 1998, and 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 servers running the software and the number
of different information sources accessed by each customer. Service revenues
consist of fees received for consulting, maintenance, customer support and
training.
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
co-marketing arrangements 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.
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.
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 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, and to 175 as of December 31, 1999. As a result
of these expenses, we have incurred net losses in each fiscal quarter since
inception and, as of December 31, 1999, had an accumulated deficit of $31.2
million. We intend to continue expanding our sales and marketing groups and to
implement significant marketing programs to solidify our market position, gain
name recognition, establish an international presence and introduce new products
and services. We also intend to increase our research and development and
professional services groups so that we can continue investing in new products
and adding additional services to benefit our customers. As a result of these
anticipated expenditures we expect to incur net losses in the foreseeable
future.
Through December 31, 1999, we have recorded aggregate deferred stock-based
compensation of $33.5 million in connection with stock option grants. This
compensation will be amortized over the four-
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year vesting period of the options. Included in our expenses will be stock-based
compensation as a result of stock options granted through December 31, 1999, of
$15.4 million in 2000, $8.0 million in 2001, $4.2 million in 2002 and $1.6
million in 2003.
We believe that period-to-period comparisons of our operating results
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 revenue growth recently, this growth may not continue. In addition,
we may not achieve or maintain profitability in the future.
RESULTS OF OPERATIONS
The following table sets forth statement of operations data as a percentage
of total revenues for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------
1999 1998
----------- -------
<S> <C> <C>
License revenues............................................ 61.6% 66.7%
Service revenues............................................ 38.4 33.3
------- -------
Total revenues......................................... 100.0 100.0
Cost of license revenues.................................... -- --
Cost of service revenues.................................... 38.4 48.5
Total cost of revenues................................. 38.4 48.5
------- -------
Gross profit................................................ 61.6 51.5
------- -------
Operating expenses:
Sales and marketing....................................... 107.4 171.9
Research and development.................................. 42.5 78.9
General and administrative................................ 30.8 35.9
Amortization of deferred stock-based compensation......... 33.3 18.5
------- -------
Total operating expenses............................... 214.0 305.2
Loss from operations........................................ (152.3) (253.6)
Interest income and other, net.............................. 1.2 3.9
------- -------
Net loss.................................................... (151.1) (249.7)
======= =======
</TABLE>
YEARS ENDED DECEMBER 31, 1998 AND 1999
Revenues
Our revenues are derived from software licenses and related services. Our
revenues were $3.3 million and $11.1 million for the years ended December 31,
1998 and 1999. In 1998 two customers accounted for more than 10.0% of our total
revenues. In 1999 no customer accounted for more than 10.0% of our total
revenues.
License Revenues. Our license revenues were $2.2 million and $6.8 million
for 1998 and 1999, and represented 66.7% and 61.6% of total revenues. This
dollar increase reflected initial market acceptance of our CenterStage products
in the e-commerce markets in 1999, and an increase in the size and productivity
of the sales force. During 1998, license revenues were derived primarily from
enterprise resource planning markets.
Service Revenues. Our service revenues were $1.1 million and $4.3 million
for 1998 and 1999, and represented 33.3% and 38.4% of total revenues. The
increase in 1999 service revenues, compared to the 1998 service revenues, was
primarily due to the increase in our customer base and service contracts
performed during this period. 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.
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Cost of Revenues
Our cost of revenues was $1.6 million, representing 48.5% of revenues, and
$4.3 million, representing 38.4% of revenues, for 1998 and 1999. This dollar
increase was primarily due to an increase in professional service support
personnel to manage and support our growing customer base. Cost of service
revenues, which constitutes substantially all of cost of 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 and the
extent to which we utilize outside subcontractors to perform our service work.
Operating Expenses
Sales and Marketing. Our sales and marketing expenses increased 107.4% from
$5.7 million, representing 171.9% of revenues, in 1998 to $11.9 million,
representing 107.4% of revenues, in 1999. This dollar increase was primarily due
to an increase of approximately $3.7 million in compensation and recruiting
expenses, resulting principally from increased staffing and higher sales
commissions related to the period to period increase in revenues, and increased
spending of $1.5 million on marketing programs. We believe sales and marketing
will increase substantially in future periods as we continue to expand our sales
force, establish our international presence and expand our marketing programs.
Research and Development. Our research and development expenses increased
78.8% from $2.6 million, representing 78.9% of revenues, in 1998 to $4.7
million, representing 42.5% of revenues, in 1999. This dollar increase was
primarily due to an increased personnel costs of approximately $900,000 as well
as increased costs related to contract development personnel of approximately
$823,000. We believe that research and development expenditures will increase
substantially in future periods as we continue to develop additional products
and enhance existing products. 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
increased 184.6% from $1.2 million, representing 35.9% of revenues in 1998, to
$3.4 million, representing 30.8% of revenues, in 1999. This dollar increase was
primarily due to increased personnel costs of approximately $777,000, facilities
expansion costs of approximately $446,000, professional and outside service fees
of approximately $586,000, and other costs related to supporting the expansion
of our business. We believe that general and administrative costs will increase
in future periods as we incur additional costs related to the overall growth of
our company.
Amortization of Deferred Stock-Based Compensation. During 1998 and 1999, we
recorded deferred compensation of $2.2 million and $31.3 million in connection
with stock option grants. We are amortizing this amount over the vesting periods
of the applicable options, resulting in amortization expense of $618,000 and
$3.7 million for 1998 and 1999.
Loss From Operations. For 1999 we had an operating loss of $16.9 million
compared to an operating loss of $8.5 million for 1998. The increase in our
operating loss from the prior year period was the result of our operating
expenses increasing $13.5 million, the largest components of which were the $6.2
million increase in sales and marketing expenses and the $3.1 million increase
in amortization of stock-based compensation, while gross profit increased $5.1
million.
Interest Income and Other. Our Interest income and other was $174,000 and
$532,000 for 1998 and 1999. The increase in interest income was primarily the
result of higher average cash balances available for investment.
Interest Expense. Our interest expense was $43,000 and $394,000 for 1998
and 1999. Increased interest expense resulted from additional borrowings and
higher capital lease obligations during 1999; including the expense related to
the valuation of warrants granted to a lender as part of these borrowings.
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<PAGE> 96
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 established our consulting and customer support
organization, which required hiring and training of personnel prior to selling
and recognizing revenues for such services.
Operating Expenses
Sales and Marketing. Our sales and marketing expenses were $2.8 million and
$5.7 million, in 1997 and 1998. This increase was primarily due to our
investment in our sales and marketing infrastructure, which included significant
personnel-related expenses such as salaries, benefits and commissions,
recruiting fees, and related costs of hiring sales management, sales
representatives, sales engineers and marketing personnel. Personnel-related
expenses increased approximately $2.0 million in 1998.
Research and Development. Our research and development expenses were $2.0
million and $2.6 million, in 1997 and 1998. These increases were primarily due
to the increase in the number of software developers, 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. Personnel-related expenses increased approximately $644,000 in 1998.
General and Administrative. Our general and administrative expenses were
$1.2 million in both 1997 and 1998. These expenses remained flat from 1997 to
1998, as we directed our resources toward growing our sales and marketing and
our research and development organizations, rather than expanding our general
and administrative organization.
Amortization of Deferred Stock-Based Compensation. During 1998 we recorded
deferred compensation of $2.2 million in connection with stock option grants. We
are amortizing this amount over the vesting periods of the applicable options,
resulting in amortization expenses of $618,000 in 1998.
Loss From Operations. Our operating losses were $5.7 million and $8.5
million for 1997 and 1998. The year to year increase in our operating loss from
the prior year period was the result of our operating expenses increasing at a
rate higher than our revenues and gross profit.
Interest Income and Other. Our interest income and other were $173,000 and
$174,000 in 1997 and 1998. Interest income and other was earned from the
investment of cash generated from the proceeds of preferred stock sales.
Interest Expense. Our interest expense was $18,000 and $43,000 in 1997 and
1998. Interest expense resulted from a financing agreement established in June
1997 to purchase equipment.
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QUARTERLY RESULTS OF OPERATIONS
The following table sets forth unaudited statement of operations data for
the eight quarters in the two year period ended December 31, 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. Our quarterly
results have been in the past and may in the future be susceptible 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, SEPT. 30, DEC. 31,
1998 1998 1998 1998 1999 1999 1999 1999
-------- -------- --------- -------- -------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
License revenues................ $ 445 $ 431 $ 692 $ 661 $ 628 $ 1,309 $ 2,081 $ 2,821
Service revenues................ 87 189 376 462 922 796 832 1,709
------- ------- ------- ------- ------- ------- ------- -------
Total revenues.............. 532 620 1,068 1,123 1,550 2,105 2,913 4,530
Cost of license revenue......... -- -- 1 1 1 2 2 2
Cost of service revenue......... 114 356 484 664 877 1,101 644 1,629
Total cost of revenue....... 114 356 485 665 878 1,103 646 1,631
------- ------- ------- ------- ------- ------- ------- -------
Gross profit.................... 418 264 583 458 672 1,002 2,267 2,899
------- ------- ------- ------- ------- ------- ------- -------
Operating expenses:
Sales and marketing........... 1,092 1,296 1,737 1,622 1,600 2,493 2,838 4,986
Research and development...... 673 682 648 633 738 900 1,187 1,889
General and administrative.... 194 167 324 516 564 686 641 1,527
Amortization of deferred
stock-based compensation.... 77 117 182 242 322 447 782 2,146
------- ------- ------- ------- ------- ------- ------- -------
Total operating expenses.... 2,036 2,262 2,891 3,013 3,224 4,526 5,448 10,548
Loss from operations............ (1,618) (1,998) (2,308) (2,555) (2,552) (3,524) (3,181) (7,649)
Interest income and other....... 39 17 59 59 85 -- 150 297
Interest expense................ (10) (11) (11) (11) (12) (71) (162) (149)
------- ------- ------- ------- ------- ------- ------- -------
Net loss........................ $(1,589) $(1,992) $(2,260) $(2,507) $(2,479) $(3,595) $(3,193) $(7,501)
======= ======= ======= ======= ======= ======= ======= =======
AS A PERCENTAGE OF TOTAL
REVENUES
License revenues................ 83.6% 69.5% 64.8% 58.9% 40.5% 62.2% 71.4% 62.3%
Service revenues................ 16.4 30.5 35.2 41.1 59.5 37.8 28.6 37.7
------- ------- ------- ------- ------- ------- ------- -------
Total revenues.............. 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Cost of license revenue..... -- -- -- -- -- -- -- --
Cost of service revenue..... 21.4 57.4 45.5 59.2 56.6 52.4 22.2 36.0
Total cost of revenue....... 21.4 57.4 45.4 59.2 56.6 52.4 22.2 36.0
------- ------- ------- ------- ------- ------- ------- -------
Gross profit.................... 78.6 42.6 54.6 40.8 43.4 47.6 77.8 64.0
------- ------- ------- ------- ------- ------- ------- -------
Operating expenses:
Sales and marketing........... 205.3 209.0 162.6 144.4 103.2 118.4 97.4 110.7
Research and development...... 126.5 110.0 60.7 56.4 47.6 42.8 40.7 41.9
General and administrative.... 36.5 26.9 30.3 45.9 36.4 32.6 22.0 33.9
Amortization of deferred
stock-based compensation.... 14.5 18.9 17.0 21.5 20.8 21.2 26.8 47.6
------- ------- ------- ------- ------- ------- ------- -------
Total operating expenses.... 382.7 364.8 270.7 268.3 208.0 215.0 187.0 234.2
Loss from operations............ (304.1) (322.3) (216.1) (227.5) (164.6) (167.4) (109.2) (169.8)
Interest income and other....... 7.3 2.8 5.5 5.2 5.4 -- 5.2 6.6
Interest expenses............... (1.9) (1.8) (1.0) (0.9) (0.7) (3.4) (5.6) 3.3
------- ------- ------- ------- ------- ------- ------- -------
Net loss........................ (298.7)% (321.3)% (211.6)% (223.2)% ( 159.9)% (170.8)% (109.6)% (166.5)%
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
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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.
We expect that, based on seasonal factors that typically affect companies
in the software industry, our license revenues in the first quarter may in the
future tend to be lower than those in the fourth quarter.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1999 we had cash and equivalents of $109.6 million,
compared to $4.6 million at December 31, 1998, an increase of $105 million.
In December 1999, we completed our initial public offering of 3,500,000
shares of common stock and, concurrently, completed a private offering of
300,000 shares of common stock, generating total net proceeds of $97.6 million.
During 1999 we generated an additional $16.4 million from the sale of preferred
stock. We also raised $3.0 million from the issuance of long-term debt, and had
financed equipment purchases totaling approximately $729,000.
During 1999 $11.2 million in cash was used in operating activities
primarily to fund ongoing operations.
In 1999, our investing activities consisted of purchases of property and
equipment. Capital expenditures, including those under capital leases, totaled
$1.4 million.
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 we have working capital sufficient to meet our
operational and capital 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.
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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. However, we cannot assure you that all
other hardware and software products used by our customers in conjunction with
our products can properly exchange accurate date data.
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 was charged
with the responsibility of formulating and implementing our year 2000 readiness
and applied a phased approach to analyzing our operations and relationships as
they relate to the year 2000 problem. The phases of our year 2000 program were
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;
Phase 3: inventory of all aspects of our operations and relationships
susceptible to the year 2000 problem; and
Phase 4: remediation and testing.
We have completed all of the phases of our program and have not experienced
any year 2000 issues.
Cost of Product and Internal Systems Preparation
To date, the total cost of year 2000 preparation and remediation have not
been material.
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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, some 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 some
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 susceptible 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, could have a
material adverse effect on our business, operating results and financial
condition.
Purchases of our products by 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 to
deal with the consequences of any failures to achieve year 2000 compliance. 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.
To date, we have not encountered any material year 2000 problems with our
internal computer systems or any other equipment that might be susceptible to
such problems. Our plan for the year 2000 called 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. To date we have found none
of our suppliers to be year 2000 noncompliant. In the event that any such third
parties' products, services or systems do not meet year 2000 requirements on a
timely basis, we could experience substantial disruptions to our business. 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. 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 cause major
disruptions to our continuing operations and may lead to delays, lost sales and
material losses.
We are unable to determine at this time whether these or other year 2000
failures will occur and will have a material impact on our business, results of
operations, or financial condition. This inability is particularly due to the
potential scope of the year 2000 problem and our inability to assure the year
2000 compliance of customers or to confirm the assurances received from vendors
and service providers such as utilities. Although we have considered our
possible responses to some year 2000 contingencies, we have not developed and
have no current effort underway to develop a contingency plan to attempt to deal
with the complex and extreme circumstances that could accompany a likely worst
case scenario involving year 2000 related failures in our internal systems, our
supply channels, our customers' businesses and the general business
infrastructure.
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ONDISPLAY MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information concerning our executive
officers and directors as of February 15, 2000:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Mark Pine.................................... 45 Chairman of the Board and Chief Executive
Officer
Venkat Mohan................................. 47 President, Chief Operating Officer and Director
David Larson................................. 52 Vice President and Chief Financial Officer
Trung Dung................................... 32 Chief Technology Officer
Mark Deppe................................... 47 Vice President, Software Development
Olivier Sermet............................... 35 Vice President, Worldwide Field Operations
Carol Richwood............................... 38 Vice President, Corporate Controller
Santi Pierini................................ 36 Vice President, Global Product Management
Peter Buzzard................................ 33 Vice President, Product Marketing
Janet Azevedo................................ 40 Vice President, Human Resources
Timothy Barrows(1)........................... 42 Director
Promod Haque(1)(2)........................... 51 Director
John Mandile................................. 38 Director
Christopher Spray............................ 44 Director
Margaret Taylor.............................. 48 Director
Carmine Villani(2)........................... 57 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 Chief Executive
Officer and as a member of our board of directors since August 1996, and also as
our President until November 1999. From 1994 to August 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., a database software company, overseeing Sybase's largest product division.
Prior to joining Sybase, Mr. Pine was a part of the founding management team of
ARIX Corporation, a computer manufacturer, and Parallel Computers, a computer
manufacturer. Mr. Pine holds a B.A. from University of California, San Diego.
Venkat Mohan became our President and Chief Operating Officer in November
1999 and became a director in January 2000. Prior to joining OnDisplay, he had
been Vice President, Global Marketing and E-Commerce at General Electric
Information Services, Inc., a subsidiary of General Electric Company, since
August 1996. Mr. Mohan was the President and Chief Operating Officer of Cadis
Inc., a software company, from November 1993 to August 1996, and was the
Executive Vice President, Marketing of VMX, Inc., a voice processing technology
company, from 1990 to 1993. He holds a technology degree from the Indian
Institute of Technology, an MS degree in Industrial and System Engineering from
the University of Florida and an MBA degree from the Harvard Business School,
where he was a Baker Scholar.
David Larson has served as our Vice President and Chief Financial Officer
since October 1999. From November 1998 to September 1999, Mr. Larson served as
Senior Vice President and Chief Financial Officer of AboveNet Communications
Inc., a provider of managed co-location and Internet connectivity solutions.
From December 1997 to November 1998, Mr. Larson served as Vice President and
Treasurer of Silicon Valley Group, Inc., a manufacturer of semiconductor
equipment. From August 1993 to December
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1997, Mr. Larson served as Silicon Valley Group's Director of Planning and from
July 1991 to August 1993, Mr. Larson served as Silicon Valley Group's Corporate
Controller. Mr. Larson received a B.S. from California Polytechnic State
University, San Luis Obispo.
Trung Dung is a founder of OnDisplay and has served as our Chief Technology
Officer since August 1996. From August 1995 to June 1996, Mr. Dung was a senior
software engineer at Open Market, Inc., an e-commerce software provider. From
August 1994 to July 1995, Mr. Dung was a senior software engineer with Software
Emancipation Technology, a software company. 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.,
a software company. Prior to joining Sybase, Mr. Deppe held senior management
positions at Hewlett-Packard Company, a manufacturer of computers and other
automated systems, Apple Computer, a computer manufacturer, Software Publishing
Corporation, a software company and Cooperative Solutions, a software company.
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, a software
company. From 1994 to June 1995 Mr. Sermet served as Regional Sales Manager at
Racal Datacom, a manufacturer of telecommunications equipment. Mr. Sermet holds
a Baccalaureate from Ecole de Provence (Marseille, France) and an M.B.A. from
Northern Illinois University.
Carol Richwood has served as our Vice President, Corporate Controller since
April 1999. From June 1997 to April 1999, Ms. Richwood served in various senior
accounting positions at PeopleSoft, Inc., an enterprise software supplier,
including as a divisional controller of PeopleSoft. From June 1994 to June 1997,
she served as controller of various divisions of VeriFone, Inc., a supplier of
transaction automated systems. Ms. Richwood holds a B.S. from San Francisco
State University and is a certified public accountant.
Santi Pierini has served as Vice President, Global Product Management since
November 1999, and also held positions as our Vice President of Technology from
February to November 1999, and as our Director of Worldwide Presales (technical
support) from July 1997 to February 1999. From August 1994 to July 1997, Mr.
Pierini served as Director, Presales of Dun & Bradstreet Software, Inc. Mr.
Pierini holds a B.S. from California Polytechnic State University, San Luis
Obispo.
Peter Buzzard has served as Vice President of Product Marketing since
September 1999. From February 1996 to November 1998, Mr. Buzzard served as
Manager of Worldwide Channel Marketing at Open Market, Inc., a software company.
From May 1995 to February 1996, Mr. Buzzard served as Senior Product Marketing
Manager at ON Technology, Inc., a software company. From July 1993 to May 1995,
Mr. Buzzard served as Marketing Manager at MathSoft, Inc., a software company.
Mr. Buzzard holds a B.S. from the College of Idaho and an M.I.M. from the
American Graduate School of International Management.
Janet Azevedo became our Vice President of Human Resources in November
1999. From October 1998 to November 1999, Ms. Azevedo performed independent
consulting services. From May 1996 to September 1998, Ms. Azevedo served as Vice
President, Human Resources of Genstar Container Corporation, a subsidiary of
General Electric Company. From September 1993 to May 1996, Ms. Azevedo served as
Vice President, Human Resources and Administration of GE Capital Computer
Leasing, a subsidiary of General Electric Company. Ms. Azevedo holds a B.B.A.
from Baylor University.
Timothy Barrows has served as one of our directors since September 1996.
Since 1985, Mr. Barrows has been a general partner of Matrix Partners, a venture
capital firm. Mr. Barrows serves as director of 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.
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Promod Haque has served as one of our directors since August 1997. Dr.
Haque has since November 1990 served as a general partner of various of the
Norwest Venture Partners venture capital funds. He is currently managing general
partner of Norwest Venture Partners VII. 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, a
venture capital firm. From August 1995 to April 1996, Mr. Mandile was the
President & Chief Executive Officer 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, a software company, 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, a venture
capital firm. 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 served at PeopleSoft, Inc. as Senior Vice President of
Operations. 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., a health information services company. Mr. Villani holds
a B.A. from Rutgers University.
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 J. Mandile an option to purchase 42,500 shares at a per
share exercise price of $0.10. In April 1997, we granted C. Villani an option to
purchase 20,000 shares at per share exercise price of $0.10 and in January 1999,
we granted C. Villani an option to purchase an additional 20,000 shares at a per
share exercise price of $0.40. In March 1999, we granted M. Taylor an option to
purchase 30,000 shares at per share exercise price of $0.40. In December 1999,
we granted options to T. Barrows, P. Haque and C. Spray each to purchase 30,000
shares at a per share exercise price of $8.00.
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EXECUTIVE COMPENSATION
The following table sets forth the compensation paid by us during the year
ended December 31, 1999, to our chief executive officer and to our four other
most highly compensated executive officers during that fiscal year. This proxy
statement/prospectus refers to these executives as OnDisplay's named executive
officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
--------------------- UNDERLYING
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) OPTIONS
--------------------------- --------- -------- ------------
<S> <C> <C> <C>
Mark Pine................................................ 180,000 159,000 250,000
Chairman of the Board and Chief Executive Officer
Mark Deppe............................................... 163,750 75,375 50,000
Vice President, Software Development
Olivier Sermet........................................... 163,750 45,626 60,000
Vice President, Worldwide Field Operations
Santi Pierini............................................ 123,750 17,286 55,000
Vice President, Global Product Management
Venkat Mohan............................................. 25,852 165,312 350,000
President and Chief Operating Officer
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information relating to stock options granted
to each of OnDisplay's named executive officers during the fiscal year ended
December 31, 1999. All of these options were granted under our 1996 stock plan
and have a term of 10 years, subject to earlier termination in the event the
optionee's services terminate. The options vest over a four year period from the
date of grant but are exercisable at any time for all the option shares. If the
optionee exercises an option to purchase shares that are unvested and the
optionee's services to OnDisplay terminate before all the shares have vested, we
have the right to repurchase the then unvested shares at the original exercise
price. The exercise prices of the options are equal to the fair market value of
our common stock on the date of grant, as determined by our board of directors.
The potential realizable value in the table is calculated by assuming that
the price of our common stock increases from $28.00 per share at assumed
appreciation rates of 5% and 10%, compounded annually over the 10-year term of
the option, and subtracting from that result the total option exercise price.
These assumed appreciation rates comply with the rules of the Securities and
Exchange Commission and do not represent our prediction of the performance of
our stock price. The base of $28.00 per share was the initial offering price of
the OnDisplay common stock in our public offering on December 17, 1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED ANNUAL
NUMBER OF TOTAL OPTIONS RATES OF
SECURITIES GRANTED TO STOCK APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION TERM
OPTIONS DURING PER PRICE EXPIRATION -------------------------
NAME GRANTED PERIOD SHARE DATE 5% 10%
---- ---------- ------------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Mark Pine................... 250,000 7.93% $2.50 09/09/09 $10,384,203 $16,535,108
Mark Deppe.................. 50,000 1.59% $4.22 09/28/09 $ 1,936,756 $ 3,083,960
Olivier Sermet.............. 60,000 1.90% $3.45 09/28/09 $ 2,399,362 $ 3,820,583
Santi Pierini............... 55,000 1.74% $7.17 12/13/09 $ 1,866,062 $ 2,971,391
Venkat Mohan................ 350,000 11.10% $6.50 11/08/09 $12,257,432 $19,517,912
</TABLE>
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<PAGE> 105
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND VALUES OF UNVESTED OPTIONS AT
FISCAL YEAR END
The following table sets forth for each of OnDisplay's named executive
officers information relating to option exercises during the fiscal year ended
December 31, 1999 and the number and value of securities underlying vested and
unvested options they held at December 31, 1999. As discussed in the text above
the preceding table, all options are fully exercisable from the date of grant,
but the underlying shares vest over a four year period. The "Value Realized for
Exercised Options" is based on $28.00 per share, the initial offering price of
our public offering on December 17, 1999. The "Value of Unexercised In-the-Money
Options" at December 31, 1999 is based on $90.875 per share, the closing price
on December 31, 1999. In each case, the per share exercise price is subtracted
and the resulting amount is multiplied by the applicable number of shares.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES VALUE OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED ON REALIZED DECEMBER 31, 1999 DECEMBER 31, 1999
EXERCISE OF FOR EXERCISED ---------------------- --------------------------
NAME OPTIONS OPTIONS($) VESTED UNVESTED VESTED UNVESTED
---- ----------- ------------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Mark Pine............ 125,000 $3,187,500 -- 125,000 $ -- $11,046,850
Mark Deppe........... -- $ -- 294,844 137,656 $26,764,441 $12,289,746
Olivier Sermet....... 185,000 $5,176,000 -- 50,000 $ -- $ 4,340,750
Santi Pierini........ 76,000 $2,118,250 -- 49,000 $ -- $ 4,060,875
Venkat Mohan......... 100,000 $2,150,000 -- 250,000 $ -- $21,093,750
</TABLE>
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<PAGE> 106
ONDISPLAY RELATED PARTY TRANSACTIONS
PRIVATE 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. Each share of each series of preferred stock converted into one
share of common stock in OnDisplay's initial public offering in December 1999.
In December 1999, OnDisplay issued to various investors in a private
transaction occurring concurrently with OnDisplay's initial public offering, an
aggregate of 300,000 shares of common stock at a purchase price of $26.04, which
equalled the price at which shares of common stock were first offered to the
public, less the underwriter discount. These shares are "restricted" under Rule
144 and not currently freely tradable.
The following directors and holders of more than 5% of the outstanding
stock purchased shares in these private offerings:
<TABLE>
<CAPTION>
PREFERRED STOCK
------------------------------------------- COMMON
SERIES A SERIES B SERIES C SERIES D STOCK
--------- --------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
HOLDERS OF MORE THAN 5%:
Amerindo Investment Advisers, Inc. and 26,783
affiliates(1)............................ -- -- 945,000 52,521
Matrix Partners IV, L.P(2).................. 1,800,000 629,870 340,909 137,214 15,920
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 30,862
DIRECTORS:
Timothy Barrows(3).......................... 1,800,000 629,870 340,909 137,214 15,920
Christopher Spray(4)........................ 1,500,000 524,892 284,091 52,521 --
Promod Haque(5)............................. -- 1,904,762 500,000 119,088 30,362
John Mandile................................ 100,000 11,905 -- -- --
Margaret Taylor............................. -- -- 25,000 -- --
</TABLE>
- ---------------
(1) Amerindo Investment Advisors Inc. and its affiliates, which manages the
accounts holding these shares, disclaims beneficial ownership of the shares.
(2) Includes 145,400 shares held by the Matrix IV Entrepreneurs Fund, L.P.
(3) Includes shares held by Matrix Partners IV, L.P and Matrix IV Entrepreneurs
Fund, L.P. T. 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.
(4) Includes shares held by Atlas Venture Fund II, L.P. C. 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.
(5) Includes shares held by Norwest Venture Partners VI, LP. P. 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.
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<PAGE> 107
OFFICER LOANS
In December 1999, OnDisplay made loans to the following executive officers
in order to fund the exercise of a portion of the stock options held by each of
them:
<TABLE>
<CAPTION>
NUMBER OF
NAME AMOUNT SHARES
---- -------- ---------
<S> <C> <C>
Mark Pine............................................ $312,500 125,000
Venkat Mohan......................................... $650,000 100,000
Trung Dung........................................... $325,000 50,000
David Larson......................................... $500,000 100,000
</TABLE>
OnDisplay has the right to repurchase unvested shares if the executive's
employment terminates under some circumstances. Each loan was made under a
full-recourse promissory note secured by pledge of the purchased shares. The
notes will mature June, 2001 and bear interest at 5.66% compounded semiannually
and payable at maturity.
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<PAGE> 108
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF ONDISPLAY
The following table sets forth information regarding the beneficial
ownership of OnDisplay common stock as of December 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 Named 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 in this table
is c/o OnDisplay, Inc., 12667 Alcosta Boulevard, Suite 300, San Ramon, CA 94583.
Except as otherwise noted, and dependent on 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 sets forth percentage ownership based on 20,175,507 shares of
common stock outstanding as of February 15, 2000 as adjusted to reflect the
1,938,971 shares of common stock which would be issued in the merger if such
merger had been completed as of February 15, 2000. Options to purchase shares of
our common stock that are exercisable within 60 days of February 28, 2000 are
deemed to be beneficially owned by the persons holding these options 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. Options held by the persons in the table are fully exercisable and
are therefore included in the table because the underlying shares are deemed to
be beneficially owned. However, some of the underlying shares, as well as some
shares that are held by such persons as a result of option exercises, are not
fully vested. See "OnDisplay Management -- Option Grants in Last Fiscal Year."
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
--------------------------------------------
PERCENT BEFORE PERCENT AFTER
BENEFICIAL OWNER NUMBER MERGER MERGER**
---------------- --------- -------------- -------------
<S> <C> <C> <C>
Matrix Partners IV, L.P(1)............................ 2,949,002 14.6% 13.3%
Bay Colony Corporate Center
1000 Winter Street, Suite 4500
Waltham, MA 02154
Norwest Venture Partners VI, LP....................... 2,594,181 12.9% 11.7%
245 Lytton Avenue, Suite 250
Palo Alto, CA 94111
Atlas Venture Fund II, L.P............................ 2,365,004 11.7% 10.7%
222 Berkeley Street
Boston, MA 02116
Amerindo Investment Advisors, Inc. and
affiliates(2)....................................... 1,720,263 8.5% 7.8%
One Embarcadero, Suite 2300
San Francisco, CA 94111
Mark Pine(3).......................................... 1,585,275 7.8% 7.1%
Trung Dung............................................ 987,175 4.9% 4.5%
Venkat Mohan(4)....................................... 350,000 1.7% 1.6%
Mark Deppe(5)......................................... 496,250 2.4% 2.2%
Olivier Sermet(6)..................................... 235,000 1.2% 1.1%
Santi Pierini(7)...................................... 125,000 * *
Timothy Barrows(8).................................... 2,979,802 14.8% 13.5%
Promod Haque(9)....................................... 2,624,181 13.0% 11.9%
John Mandile(10)...................................... 154,405 * *
</TABLE>
102
<PAGE> 109
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
--------------------------------------------
PERCENT BEFORE PERCENT AFTER
BENEFICIAL OWNER NUMBER MERGER MERGER**
---------------- --------- -------------- -------------
<S> <C> <C> <C>
Christopher Spray(11)................................. 2,395,004 11.9% 10.8
Margaret Taylor....................................... 55,000 * *
Carmine Villani....................................... 40,000 * *
All directors and executive officers as a group (16
persons)............................................ 12,402,092 58.09% 53.25%
</TABLE>
- ---------------
* Less than 1% of the outstanding shares of common stock.
** Does not include shares any such person may receive in the merger as a
result of being an Oberon Shareholder.
(1) Includes 147,599 shares held by the Matrix IV Entrepreneurs Fund, L.P.
(2) Amerindo Investment Advisors Inc. and its affiliates, which manages the
accounts holding these shares, disclaims beneficial ownership of the
shares.
(3) Includes 246,000 shares beneficially held by trusts for the benefit of M.
Pine's minor children and other family members. Also includes 125,000
shares of common stock issuable upon the exercise of stock options
exercisable within 60 days of February 15, 2000.
(4) Includes 250,000 shares of common stock issuable upon the exercise of stock
options exercisable within 60 days of February 15, 2000.
(5) Includes 432,500 shares of common stock issuable upon the exercise of stock
options exercisable within 60 days of February 15, 2000.
(6) Includes 50,000 shares of common stock issuable upon the exercise of stock
options exercisable within 60 days of February 15, 2000.
(7) Includes 49,000 shares of common stock issuable upon the exercise of stock
options exercisable within 60 days of February 15, 2000.
(8) Includes shares held by Matrix Partners IV, L.P and Matrix IV Entrepreneurs
Fund, L.P. T. 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.
Also includes 30,000 shares of common stock issuable upon the exercise of
stock options exercisable within 60 days of February 15, 2000.
(9) Includes shares held by Norwest Venture Partners VI, LP. P. 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. Also includes
30,000 shares of common stock issuable upon the exercise of stock options
exercisable within 60 days of February 15, 2000.
(10) Includes 42,500 shares of common stock issuable upon the exercise of stock
options exercisable within 60 days of February 15, 2000.
(11) Includes shares held by Atlas Venture Fund II, L.P. C. 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. Also includes 30,000 shares of
common stock issuable upon the exercise of stock options exercisable within
60 days of February 15, 2000.
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<PAGE> 110
CERTAIN INFORMATION REGARDING OBERON
DESCRIPTION OF OBERON
BUSINESS
Oberon is a leading developer of software solutions designed to automate
the integration required to enable a business's effective transition to an
e-business platform. Oberon's solutions enable the connection of customers and
suppliers, the automation of internal business processes required to work
effectively with customers and suppliers, and the ability to rapidly respond to
changes in these relationships. This is accomplished through Oberon's
e-Enterprise suite of integration products, a visual integration development
environment and suite of intelligent applications and technology adapters that
together simplify the integration of business applications, also known as Oberon
Building Blocks, and a growing network of third-party and service partners.
Oberon's products and services are designed to support each stage of e-business
integration including intra-enterprise, business-to-business,
business-to-consumer and e-marketplace.
Oberon first shipped Oberon Prospero, now enhanced and reengineered for
e-business and renamed Oberon e-Enterprise, in November 1999. E-business is the
single largest factor influencing change in today's business community. It
continues to take hold in both traditional organizations and the expanding
number of Internet related companies. E-business will affect how every large
organization does business and will enable the creation of many new forms of
business. Oberon believes that a basic premise of enabling e-business is an
effective integration strategy. A strategy that leverages the high quality
information found in enterprise systems, and in the systems of outside services
and suppliers, and connects such information to the many systems that link to
the extended enterprise. Oberon's Oberon e-Enterprise product family fulfills
that premise by providing a continuous optimization of multi-company business
processes through a secure Internet-based platform architecture that integrates
suppliers, customers, and partners.
A key strength of Oberon e-Enterprise is its visual integration environment
which allows customers to achieve the integration they desire using a unique
object-oriented approach and to develop a visual plan for integrating enterprise
systems. Using Oberon e-Enterprise Oberon's customers mix, match, and manipulate
Oberon Building Blocks, connecting them together and designing the business
processes which become the customer's integration solution. Oberon Building
Blocks are pre-packaged, intelligent components that automate function
integration that would otherwise require custom written interface codes. Oberon
Building Blocks completely remove the complexity of implementing business-level
processes that span enterprise applications, infrastructure, businesses, and
e-commerce systems.
Currently, Oberon directly markets its products in North America and Europe
and has established distribution agreements in South America and Japan. Oberon
has OEM relationships on a worldwide basis with leading application and
technology vendors. As of December 31, 1999, Oberon's field operations
organization consisted of 16 sales executives and sales engineers.
As of December 31, 1999, Oberon had a total of 91 employees: 39 in
engineering, 27 in sales and marketing, 16 in consulting services and customer
support, and 7 in finance and administration. From time to time Oberon also
employs independent contractors.
Oberon was incorporated in Massachusetts in October 1989. Its executive
offices are located at 215 First Street, Cambridge, Massachusetts 02142. Its
telephone number is (617) 494-0990, and its Internet web site is located at
http://www.oberon.com, "Oberon Software Incorporated", "Oberon e-Enterprise" and
"Oberon Prospero" are all trademarks owned by Oberon.
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<PAGE> 111
OBERON'S MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Oberon has experienced substantial losses since its inception, and as of
December 31, 1999, it had an accumulated deficit of $36.8 million. These net
losses and accumulated deficit resulted from Oberon's lack of substantial
revenue and the significant costs incurred in the development of its products
and the establishment of its sales and marketing organization. Oberon expects to
increase its expenditures in all areas in order to execute its business plan,
particularly in sales and marketing and customer support. The planned increases
in sales and marketing will primarily result from the hiring of additional
business development personnel, expansion of direct sales into Europe and
expansion of marketing programs to increase awareness of Oberon. The planned
increase in customer support will be a combination of additional support
personnel and increasing the staffing in the professional service organization
to support its customers. Oberon will also continue to increase investments in
research and development.
Although Oberon has experienced revenue growth in recent periods, there can
be no assurance that such growth rates are sustainable, and therefore such
growth rates should not be considered indicative of future operating results.
There can also be no assurance that Oberon will be able to continue to increase
its revenue or attain profitability or, if increases in revenue and
profitability are achieved, that they can be sustained. Oberon believes that
period-to-period comparisons of its historical operating results are not
meaningful and should not be relied upon as an indication of future performance.
RESULTS OF OPERATIONS
COMPARISON OF RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998
Revenue
Total revenue increased to $1.5 million for the three month period ended
December 31, 1999 from $796,000 for the three month period ended December 31,
1998.
Software Licenses. Software license revenue decreased to $487,000 for the
three month period ended December 31, 1999 from $523,000 for the three month
period ended December 31, 1998. Software license revenue was below Oberon's
expectations as a number of potential customers delayed their purchase
decisions.
Services Revenue. Services revenue increased to $691,000 for the three
month period ended December 31, 1999 from $274,000 for the three month period
ended December 31, 1998. This increase was primarily attributable to increasing
Oberon's consulting service capacity.
Royalties Revenue. Royalties revenue was $295,000 in the three month period
ended December 31, 1999 versus zero in the three month period ended December 31,
1998. The increase in royalties revenue can be attributed to the commencement of
shipping of Oberon's software by its licensees as part of their integrated
solution.
Cost of Revenue
Cost of Software. Cost of software increased to $103,000, or 13.1% of
software and royalties revenue, for the three month period ended December 31,
1999 from $21,000, or 3.9% of software license and royalties revenue, for the
three month period ended December 31, 1998. This increase was primarily
attributable to incorporating more third party software into Oberon's products.
Oberon anticipates that the cost of software as a percentage of software license
and royalties revenue, primarily royalty obligations to third parties whose
products are incorporated into Oberon's products, will decrease as these
revenues increases.
Cost of Services Revenue. Cost of services revenue increased to $581,000,
or 84.1% of services revenue, for the three month period ended December 31, 1999
from $272,000, or 99.4% of services
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<PAGE> 112
revenue, for the three month period ended December 31, 1998. The increase in the
cost of services was primarily attributed to increased staffing as the number of
service employees increased to 16 as of December 31, 1999 from 8 as of December
31, 1998.
Operating Expenses
Research and Development. Research and development expenses consist
primarily of personnel and related costs associated with developing its family
of software products. Research and development expenses increased to $1.2
million, or 83.7% of total revenue, for the three month period ended December
31, 1999 from $726,000, or 91.2% of total revenue, for the three month period
ended December 31, 1998. The increase primarily resulted from costs associated
with an increase in the number of research and development employees to 39 as of
December 31, 1999 from 26 as of December 31, 1998. Oberon anticipates that
research and development expenses will continue to increase in absolute dollars
but at a lower rate than revenue growth.
Sales and Marketing. Sales and marketing expenses consist primarily of
compensation costs for sales and marketing personnel, including sales
commissions, travel expenses, trade shows, and other costs related to product
promotion and marketing programs. Sales and marketing expenses increased to $1.5
million, or 103.0% of total revenue, for the three month period ended December
31, 1999 from $922,000, or 115.8% of total revenue, for the three month period
ended December 31, 1998. The increase was primarily due to increasing the size
of the direct sales and business development organizations. Total sales and
marketing personnel increased to 29 as of December 31, 1999 from 17 as of
December 31, 1998. In addition, the increase in total sales and marketing
expense was attributable to costs associated with an increase in public
relations and marketing programs. Sales and marketing expenses are anticipated
to continue to increase with the expansion into international markets and higher
marketing expenditures to increase the awareness of Oberon.
General and Administrative. General and administrative expenses consist
primarily of compensation costs for finance, administration and executive
management. General and administrative expenses decreased to $229,000, or 15.6%
of total revenue, for the three month period ended December 31, 1999 from
$279,000, or 35.0% of total revenue, for the three month period ended December
31, 1998.
Other Income (Expense). Interest income increased to $79,000, or 5.4% of
total revenue, for the three month period ended December 31, 1999 from $54,000,
or 6.7% of total revenue for the three month period ended December 31, 1998. The
increase was due to higher average cash balances. Interest expense increased to
$80,000, or 5.4% of total revenue, for the three month period ended December 31,
1999 from $5,700, or 0.7% of total revenue, for the three month period ended
December 31, 1998. The increase in interest expense was the result of Oberon's
borrowing $4 million from Comdisco Ventures as of September 30, 1999. Other
expense increased to $15,000 or 1.0% of total revenue, for the three month
period ended December 31, 1999 from $1,000, or 0.1% of total revenue, for the
three month period ended December 31, 1998.
COMPARISON OF RESULTS FOR THE YEARS ENDED SEPTEMBER 30, 1999 AND 1998
Revenue
Total revenue, consisting of software license, services revenue and
royalties, increased to $4.7 million for the year ended September 30, 1999 from
$2.0 million for the year ended September 30, 1998.
Software Licenses. Software licenses revenue increased to $2.8 million for
the year ended September 30, 1999 from $1.4 million for the year ended September
30, 1998. Oberon's Prospero 2.0 product was released for sale in March 1998 and
was well received in the enterprise application integration, market place.
Services Revenue. Services revenue increased to $1.4 million for the year
ended September 30, 1999 from $396,000 for the year ended September 30, 1998.
This increase was primarily attributable to
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<PAGE> 113
implementation services for the new sales of Prospero 2.0 and to a lesser extent
the increase in software maintenance contracts associated with the increase in
license sales in 1999.
Royalties Revenue. Royalties revenue increased to $444,000 for the year
ended September 30, 1999 from $216,000 for the year ended September 30, 1998.
The increase in royalties revenue can be primarily attributed to the
commencement of shipping Oberon's software by its licensees as part of their
integrated solution.
Cost of Revenue
Cost of Software. Cost of software and royalty revenue increased to
$139,000, or 4.2% of software license and royalties revenue, for the year ended
September 30, 1999 from $100,000, or 6.4% of software license and royalties
revenue, for the year ended September 30, 1998. The major cost component consist
of royalty paid to third party software companies for the right to incorporate
their product in Oberon's software.
Cost of Services Revenue. Cost of services revenue increased to $1.4
million, or 104% of services revenue, for the year ended September 30, 1999 from
$403,000, or 102% of services revenue, for the year ended September 30, 1998.
The increase in the cost of services was primarily attributable to an increase
in personnel as the number of service employees increased to 13 as of September
30, 1999 from 7 as of September 30, 1998.
Operating Expenses
Research and Development. Research and development expenses increased to
$3.7 million, or 79.1% of total revenue for the year ended September 30, 1999
from $2.4 million, or 120.7% of total revenue, for the year ended September 30,
1998. The increase primarily resulted from costs associated with an increase in
the number of research and development employees to 40 as of September 30, 1999
from 26 as of September 30, 1998.
Sales and Marketing. Sales and marketing expenses increased to $4.9
million, or 106.1% of total revenue, for the year ended September 30, 1999 from
$2.9 million, or 145.7% of total revenue, for the year ended September 30, 1998.
The increase was primarily due to:
- costs associated with increasing the size of direct sales organization;
- investments in a business development organization to sign up software
companies to incorporate the Oberon software into their integration
solution; and
- higher costs associated with a substantial marketing effort to increase
market awareness of Oberon and its products.
General and Administrative. General and administrative expenses consist
primarily of compensation costs for finance, administration and executive
management, legal and audit. General and administrative expenses decreased to $1
million, or 21.6% of total revenue, for the year ended September 30, 1999 from
$1.3 million, or 66% of total revenue, for the year ended September 30, 1998.
The decrease primarily resulted from a reduction in legal expenses.
Other Income (Expense). Interest income increased to $321,000, or 6.9% of
total revenue, for the year ended September 30, 1999 from $209,000, or 10.6% of
total revenue, for the year ended September 30, 1998 as a result of higher
average cash balances during 1999. Interest expense decreased to $32,000 or 0.7%
of total revenue, for the year ended September 30, 1999 from $126,000, or 6.4%
of total revenue, for the year ended September 30, 1998. The decrease in
interest expense was the result of less debt financing as a result of the
recapitalization of the company in February 1998. Other expense increased to
$56,000 or 1.2% of total revenue, for the year ended September 30, 1999 from
$8,000, or 0.4% of total revenue, for the year ended September 30, 1998.
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COMPARISON OF RESULTS FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1997
Revenue
Total revenue increased to $2.0 million for the year ended September 30,
1998 from $727,000 for the year ended September 30, 1997. The increase was due
to refocusing Oberon's activities from providing developer licenses, as well as
to providing broader applications for the enterprise application integration
market place. The average sales price is significantly higher in the enterprise
application integration market versus the developer market.
Cost of Revenue
Cost of Software. Cost of software and royalty revenue decreased to
$100,000, or 6.4% of software license and royalties revenue, for the year ended
September 30, 1998 from $110,000, or 19.7% of software license and royalties
revenue, for the year ended September 30, 1997. The major cost component
consists of royalty paid to third party software companies for the right to
incorporate their product in Oberon's software.
Cost of Services Revenue. Cost of services revenue increased to $403,000,
or 104% of services revenue, for the year ended September 30, 1998 from
$331,000, or 195% of services revenue, for the year ended September 30, 1998.
The increase in the cost of services was primarily attributed to increased
staffing personnel as Oberon hired consultants to assist the customers in the
implementation of the software.
Operating Expenses
Research and Development. Research and development expenses increased to
$2.4 million for the year ended September 30, 1998 from $1.5 million for the
year ended September 30, 1997. The increase primarily resulted from an increase
in staffing as the company started investing in software development to assist
in the implementation of software from the enterprise revenue planning software
companies.
Sales and Marketing. Sales and marketing expenses decreased to $2.9 million
for the year ended September 30, 1998 from $3.2 million for the year ended
September 30, 1997. The decrease was primarily attributable to reducing costs
associated with the indirect sales channel on a world wide basis as part of
Oberon's strategy to emphasize sales to major corporations in North America
through direct sales.
General and Administrative. General and administrative expenses decreased
to $1.3 million for the year ended September 30, 1998 from $1.4 million for the
year ended December 31, 1997.
Other Income (Expense). Interest income increased to $209,000 for the year
ended September 30, 1998 from $111,000 for the year ended September 30, 1997 due
to higher average cash balance. Interest expense decreased to $126,000 for the
year ended September 30, 1998 from $144,000 for the year ended September 30,
1997. Other expense decreased to $8,000 for the year ended September 30, 1998
from $16,000 for the year ended September 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, Oberon has funded operations primarily through net
cash proceeds from private placements of preferred stock totaling $38.9 million
through December 31, 1999. As of December 31, 1999, Oberon had cash and cash
equivalents totaling $8.0 million.
Cash used for operating activities for the three month period ended
December 31, 1999 was $2.1 million, primarily due to a net loss of $2.2 million
and a decrease in accounts payable, accruals and deferred revenue partially
offset by decreases in accounts receivables and prepaid expenses. Cash used for
operating activities for the year ended September 30, 1999 was $5.8 million,
primarily due to a net loss of $6.3 million and an increase in accounts
receivable, partially offset by increases in accrued expenses and deferred
revenue.
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Cash used for investing purposes for the three month period ended December
31, 1999 was $89,000 and for the year ended September 30, 1999 was $615,000.
Investing activities for both periods primarily consisted of purchases of
computers, networking equipment and software for internal use.
No cash was provided by financing activities for the three month period
ended December 31, 1999. Cash provided by financing activities for the year
ended September 30, 1999 was $11.5 million, due to the issuance of preferred
stock for net proceeds totaling $7.3 million, the borrowing of $4 million from
Comdisco Ventures and $284,000 on an available equipment line of credit to
finance investing activities.
Oberon's primary financial commitments consisted of $165,000 payable under
an equipment lease, a loan payable under the equipment line of credit of
$284,000 and a loan payable to Comdisco Ventures in the amount of $4 million as
of December 31, 1999 and $183,000, $284,000 and $4 million respectively as of
September 30, 1999.
As of September 30, 1999, Oberon has net operating loss carryforwards and
research tax credit carryforwards of approximately $32 million and $1.13
million, respectively, available to reduce future federal and state income taxes
payable to the extent permitted under the Internal Revenue Code, expiring in
varying amounts through 2014. The net operating loss carryforwards and research
tax credit carryforwards will be subject to the limitations provided in Internal
Revenue Code sections 382 and 383.
Oberon has a deferred tax asset at September 30, 1999 of approximately
$12.1 million, attributable primarily to net operating loss and research tax
credit carryforwards. This asset has been fully offset by a valuation allowance
at September 30, 1999. The valuation allowance increased approximately $2.3
million during 1999.
Management believes that the company has the financial resources and
ability to meet its business and financial obligations in the normal course of
business through December 31, 2000.
YEAR 2000 READINESS DISCLOSURE
The "Year 2000 Issue" refers generally to problems that some software
programs may have in determining the correct century for the year. For example,
software and computer systems with date-sensitive functions that are 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.
Oberon has defined "Year 2000 compliant" as the ability to:
- correctly handle date information needed for changes after December 31,
1999;
- function according to the product documentation provided for this date
change, without changes in operation, assuming correct configuration;
- where appropriate, respond to two-digit date input in a way that resolves
the ambiguity as to century in a disclosed, defined, and predetermined
manner;
- store and provide output of date information in ways that are unambiguous
as to the century if the date elements in interfaces and data storage
specify the century; and
- recognize the year 2000 as a leap year.
The risks imposed by Year 2000 issues could adversely affect Oberon's
business in a number of significant ways. Although Oberon believes that its
internally developed systems and technology are Year 2000 compliant, the
information and non-information technology systems Oberon uses nevertheless
could be substantially impaired or cease to operate due to Year 2000 problems.
Additionally, Oberon relies on information technology supplied by third parties.
To date, Oberon has experienced no material adverse effects on any of its
products due to the transition to Year 2000. Oberon cannot assure you that it
will not experience problems resulting from any of the foregoing which could
have a material adverse impact on its business, operating results or financial
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condition, that the implementation of modifications to any embedded products
will not be delayed or that Oberon will not experience unexpected Year 2000
problems with its products.
Oberon has conducted a Year 2000 readiness review for all versions of its
products after version 2.0. This review included assessment, validation, testing
and, where necessary, remediation, upgrading and replacement of product
versions. Oberon continues to respond to customer questions about prior versions
of its products on a case-by-case basis.
Based on Oberon's review, it believes the versions of its products that it
currently ships are Year 2000 compliant, when configured and used in accordance
with the related documentation, so long as the underlying operating system of
the host machine and any other software used with or in the host machine or with
its products are also Year 2000 compliant. Oberon is currently shipping version
3.0 of its product. Oberon does not believe that versions of its products prior
to version 2.0 are Year 2000 compliant, and has notified its customers of this
fact and encouraged users of these versions to upgrade to the latest version.
Oberon does not provide software patches or remedial software programs for
versions of its products prior to version 2.0. Oberon's customers who have
maintenance agreements with it each have the right to receive the latest version
of our products without additional charge. Oberon's customers who do not have
maintenance agreements may purchase the latest version of its products.
Oberon has not separately tested software obtained from third parties that
is incorporated into its products. Oberon has tested this third-party software
as incorporated in its products as part of its product review. While Oberon
believes that the third party software as incorporated in the current versions
of its products is Year 2000 compliant, it has not been able to obtain
assurances from all vendors.
Errors or defects in Oberon's products could result in delay or loss of
revenues, diversion of development resources, damage to reputation, increased
service and warranty costs, or liability to its customers, any of which could
materially and negatively affect Oberon's business and operating results. Some
commentators have predicted significant litigation regarding Year 2000
compliance issues.
Oberon has completed an assessment of its material internal information
technology systems, including both software products and third-party software
and hardware. Oberon has also completed an assessment of its non-information
technology systems. To the extent that Oberon is not able to test the technology
provided by third party vendors, it is seeking assurances from these vendors
that their systems are Year 2000 compliant. Oberon is not currently aware of any
material operational issues associated with preparing its internal information
technology and non-information technology systems for the Year 2000. However,
Oberon may experience material unanticipated problems and costs caused by
undetected errors or defects in the technology used in its internal information
technology and non-information technology systems.
If Oberon's customers are not Year 2000 compliant, they may incur material
costs to remedy problems, or they may face litigation expenses.
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EXECUTIVE OFFICERS AND DIRECTORS
OF OBERON JOINING ONDISPLAY
EXECUTIVE OFFICERS
Set forth below is each person who will become an executive officer of
OnDisplay following the merger, collectively, referred to as the "Oberon named
executive officers":
<TABLE>
<CAPTION>
NAME AGE POSITION AT OBERON
---- --- ------------------
<S> <C> <C>
Michael McMahon... 42 Chief Technology Officer and Vice President
Mark Wick......... 33 Vice President of Product Development
</TABLE>
Michael McMahon. Before founding Oberon in 1989, Mr. McMahon founded
Symbolics, Inc. in 1980 and was the principal architect of Symbolics'
object-oriented user interface management and generic networking systems. Prior
to Symbolics, between 1978 and 1979, Mr. McMahon conducted research at the
Massachusetts Institute of Technology Artificial Intelligence Laboratory as part
of the LISP Machine team.
Mark Wick. Prior to joining Oberon in 1992, Mr. Wick was with Oracle
Corporation between 1989 and 1992, where he helped design and develop Oracle's
data browser. He earned a Bachelor of Science in computer science from the
Massachusetts Institute of Technology in 1989.
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth the total compensation
paid or accrued for the fiscal year ended September 30, 1999 for each of
Oberon's named executive officers who was employed by Oberon on September 30,
1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------------------------------
LONG-TERM
COMPENSATION AWARDS
------------------------
NUMBER OF
SECURITIES RESTRICTED
OTHER ANNUAL UNDERLYING STOCK
NAME AND PRINCIPAL POSITION IN FISCAL 1999 SALARY BONUS COMPENSATION OPTIONS AWARDS
- ------------------------------------------ -------- ----- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Michael McMahon......................... $136,500 -- $130(1) -- --
Chief Technology Officer and Vice
President
Mark Wick............................... $115,000 -- $ 77(1) 100,000 --
Vice President of Product Development
</TABLE>
- -------------------------
(1) Reflects insurance premiums paid by Oberon.
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OPTION GRANTS DURING 1999
The following table sets forth certain information regarding stock options
granted in fiscal 1999 to Oberon's named executive officers.
<TABLE>
<CAPTION>
POTENTIAL
INDIVIDUAL GRANTS(1) REALIZABLE VALUE
----------------------------------------------------- AT ASSUMED
% OF TOTAL ANNUAL RATES OF
OPTIONS STOCK PRICE
SECURITIES GRANTED TO EXERCISE APPRECIATION FOR
UNDERLYING EMPLOYEES IN OR BASE OPTION TERM(2)
OPTIONS FISCAL YEAR PRICE EXPIRATION ------------------
NAME GRANTED(1) 1999 ($/SHARE) DATE 5%($) 10%($)
---- ---------- ------------ --------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Michael McMahon............ -- -- -- -- -- --
Mark Wick.................. 100,000 6.2% $0.50 10/28/04 $13,814 $30,525
</TABLE>
- ---------------
(1) Stock options were granted under Oberon's 1998 Stock Incentive Plan, as
amended, at an exercise price equal to the fair market value of the Oberon
common stock on the date of grant. Some options have a term of 5 1/2 years
from the date of grant and become exercisable as to 20% of the shares
covered on the first anniversary following the date of grant and as to an
additional 5% of the original number of shares at the end of each successive
full, three-month period. Other options have a term of 4 1/2 years from the
date of grant and become exercisable as to 25% of the shares covered at the
end of the first anniversary following the date of grant and as to an
additional 6.25% of the original number of shares at the end of each
successive full three-month period. Any shares subject to the Plan which
have not already vested but would vest within 18 months after the closing of
the merger will vest and become exercisable upon the closing of the merger.
(2) Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to the expiration of their
term assuming specified compounded rates of appreciation (5% and 10%) on
Oberon common stock over the term of the options. These numbers are
calculated based on rules promulgated by the Securities and Exchange
Commission and do not reflect Oberon's estimate of future stock price
growth. Actual gains, if any, on stock option exercises and common stock
holdings are dependent on the timing of such exercise and the future
performance of Oberon's common stock. There can be no assurance that the
rates of appreciation assumed in this table can be achieved or that the
amounts reflected will be received by the individuals.
RELATED PARTY TRANSACTIONS
Upon completion of the merger, M. McMahon and M. Wick, have agreed to be
employees of OnDisplay and J. Chappell and D. Collard have agreed to enter into
severance agreements with OnDisplay in the form attached to the merger
agreement. For more information relating to these employment agreements, please
see the section entitled "Employment Agreements" under the caption "Agreements
Related to the Merger" on page 64 of this proxy statement/prospectus.
Some of the directors and officers of Oberon participate in arrangements
and have continuing indemnification against liabilities that provide them with
interests in the merger that are different from, or are in addition to, your
interests.
Under the merger agreement, OnDisplay has agreed to cause the corporation
surviving the merger to honor Oberon's obligations under indemnification
agreements between Oberon and its directors and officers in effect before the
completion of the merger and any indemnification provisions of Oberon's articles
of incorporation and bylaws. OnDisplay has also agreed to provide for
indemnification provisions in the articles of incorporation and bylaws of the
surviving corporation of the merger that are at least as favorable as Oberon's
provisions.
As a result of these interests, these directors and officers of Oberon
could be more likely to vote to approve the merger agreement than if they did
not hold these interests. Oberon's stockholders should
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consider whether these interests may have influenced these directors and
officers to support or recommend the merger.
AGGREGATE OPTION EXERCISES IN FISCAL 1999 AND OPTION VALUES
The following table sets forth certain information regarding stock options
exercised during the fiscal year ended September 30, 1999. There was no public
trading market for Oberon common stock as of September 30, 1999. Accordingly,
the unexercised stock options had no value as of September 30, 1999.
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED IN-THE-
UNEXERCISED MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL FISCAL YEAR-END($)
ACQUIRED ON VALUE YEAR-END(#) EXERCISABLE/
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------------- -------------------
<S> <C> <C> <C> <C>
Michael McMahon.......................... 100,000 $35,000 230,000 $80,500
Mark Wick................................ 11,300 $ 1,955 217,000 $75,950
</TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL HOLDERS AND MANAGEMENT OF OBERON
The following table sets forth certain information as to the number of
shares of Oberon common stock that will be beneficially owned as of December 31,
1999 by each person that beneficially owns more than 5% of the outstanding
shares of Oberon common stock or preferred stock, each director of Oberon, the
chief executive officer of Oberon, the four other most highly compensated Oberon
executive officers who received annual compensation in excess of $100,000,
collectively referred to below as the "executive officers," and all Oberon
executive officers and directors as a group. Except as indicated by the notes to
the following table, the holders listed below will have sole voting power and
investment power over the shares beneficially owned by them.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP AS OF
DECEMBER 31, 1999(1)
---------------------------------------
PERCENT
NAME OF BENEFICIAL OWNER CLASS OF STOCK SHARES(#) OF CLASS
------------------------ -------------- --------- --------
<S> <C> <C> <C>
5% BENEFICIAL HOLDERS
Matrix Partners........................................... Preferred(2) 3,419,859 24.05%
Bay Colony Corporate Center Common(3) 1,068,751 15.44
1000 Winter Street, Suite 3300
Waltham, MA 02154
Sigma Partners............................................ Preferred(4) 3,419,859 24.05
20 Custom House Common(5) 1,068,750 15.44
Boston, MA 02109
Toyo Information Systems Co., Ltd......................... Preferred 3,200,000 22.50
7-24, Nihonbashi 2-chome, Chou-ku
Tokyo 103 Japan
Charles River Ventures.................................... Preferred(6) 2,759,886 19.41
Bay Colony Corporate Center Common(7) 862,500 12.46
1000 Winter Street, Suite 3300
Waltham, MA 02154
Sterling Commerce Inc..................................... Preferred 1,200,000 8.44
4600 Lakehurst Court
Dublin, OH 43016
DIRECTORS AND EXECUTIVE OFFICERS
Joseph Chappell........................................... Common(8) 1,100,000 15.89
Michael McMahon........................................... Common(9) 952,750 13.76
Mark Wick................................................. Common(10) 448,020 6.47
David Collard............................................. Common(11) 400,000 5.78
</TABLE>
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<PAGE> 120
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP AS OF
DECEMBER 31, 1999(1)
---------------------------------------
PERCENT
NAME OF BENEFICIAL OWNER CLASS OF STOCK SHARES(#) OF CLASS
------------------------ -------------- --------- --------
<S> <C> <C> <C>
James Burkhardt........................................... Common(12) 400,000 5.78
Alexander Kuli............................................ Preferred 59,997 *
Common 68,750 *
Douglas Percy............................................. Preferred 59,997 *
Common 68,750 *
Michael Humphreys......................................... -- -- --
John Mandile.............................................. -- -- --
All executive officers and directors as a................. Preferred 119,994 *
group (9 individuals)................................... Common(13) 3,038,270 43.89
</TABLE>
- ---------------
* Beneficial ownership does not exceed 1% of the outstanding Oberon common
stock.
(1) Includes shares subject to options which will be exercisable within 60 days
following February 29, 1999 and shares which become exercisable upon the
completion of the merger assuming that the merger is completed February 29,
2000. All percentages assume that the options of the particular person or
group in question, and no others, have been exercised.
(2) Includes 3,248,866 held by Matrix Partners IV, L.P. and 170,993 held by
Matrix IV Entrepreneurs Fund L.P.
(3) Includes 1,015,313 held by Matrix Partners IV, L.P. and 53,438 held by
Matrix IV Entrepreneurs Fund L.P.
(4) Includes 2,597,231 held by Sigma Partners IV, L.P., 735,371 held by Sigma
Associates IV, L.P. and 87,257 held by Sigma Investors IV, L.P.
(5) Includes 826,119 held by Sigma Partners IV, L.P., 215,824 held by Sigma
Associates IV, L.P. and 26,807 held by Sigma Investors IV, L.P.
(6) Includes 2,709,967 held by Charles River Partnership VIII and 49,914 held
by Charles River VIII-A LLC.
(7) Includes 846,884 held by Charles River Partnership VIII and 15,616 held by
Charles River VIII-A LCC.
(8) Includes 161,000 shares subject to options which will be exercisable within
60 days following February 29, 1999 and shares which become exercisable
upon the completion of the merger.
(9) Includes 230,000 shares subject to options which will be exercisable within
60 days following February 29, 1999 and shares which become exercisable
upon the completion of the merger.
(10) Includes 162,000 shares subject to options which will be exercisable within
60 days following February 29, 1999 and shares which become exercisable
upon the completion of the merger.
(11) Includes 50,000 shares subject to options which will be exercisable within
60 days following February 29, 1999 and shares which become exercisable
upon the completion of the merger.
(12) Includes 400,000 shares subject to options which will be exercisable within
60 days following February 29, 1999 and shares which become exercisable
upon the completion of the merger.
(13) Includes 1,003,000 shares subject to options which will be exercisable
within 60 days following February 29, 1999 and shares which become
exercisable upon the completion of the merger.
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ADDITIONAL MATTERS BEING SUBMITTED TO A
VOTE OF ONLY ONDISPLAY STOCKHOLDERS
PROPOSAL NO. 1
APPROVAL OF AMENDMENT TO 1996 STOCK PLAN
OnDisplay stockholders are being asked to approve an amendment to the 1996
Stock Plan to provide for an increase in the number of shares of common stock
reserved for issuance from 4,975,000 shares to 6,975,000 shares. The board
believes that adding these shares to the plan is in the best interests of
OnDisplay because they will be needed to attract and retain key employees whose
efforts are critical to OnDisplay's success. Competition for key personnel is
intense, particularly in the San Francisco Bay area where our headquarters is
located. The plan plays an important role in OnDisplay's efforts to attract and
retain employees of outstanding ability.
The board of directors adopted the 1996 Stock Plan on August 13, 1996 and
the stockholders initially approved the 1996 Stock Plan on September 17, 1996.
Set forth below is a summary of the principal features of the 1996 Stock Plan.
OnDisplay will provide, without charge, to each person to whom a proxy statement
is delivered, upon request of such person and by first class mail within three
business days of receipt of such request, a copy of the 1996 Stock Plan. Any
such request should be directed as follows: Secretary, OnDisplay, Inc., 12667
Alcosta Boulevard, Suite 300, San Ramon, CA 94583; telephone number (925)
480-2000.
ONDISPLAY'S 1996 STOCK PLAN
The 1996 Stock Plan provides for the grant of incentive stock options
within the meaning of Section 422 of the Internal Revenue Code to employees, and
for the grant of nonstatutory stock options and stock purchase rights to
employees, directors and consultants.
Number of Shares of Common Stock Available under the 1996 Stock Plan
As of December 31, 1999, 4,975,000 shares of common stock were authorized
for issuance pursuant to the 1996 Stock Plan, of which options to acquire
2,986,985 shares were issued and outstanding as of that date and 182,225 shares
remained available for future option grants. On January 25, 2000 and February
29, 2000, the board of directors approved an increase of a total of 2,000,000
shares under the plan. The stockholders are being asked to approve this increase
at the special meeting. The 1996 Stock 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
4.0% of the outstanding shares of common stock on the first day of the fiscal
year, or 1,000,000 shares.
Administration of the 1996 Stock Plan
The administrator of the 1996 Stock Plan, which may be either the board of
directors or a committee of the board of directors, administers the 1996 Stock
Plan. In the case of options intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Internal Revenue Code,
the committee will consist of two or more "outside directors" within the meaning
of Section 162(m) of the Internal Revenue Code. The administrator has the power
to determine the terms of the options or stock purchase rights granted,
including the exercise price, the number of shares issuable upon exercise of
each option or stock purchase right, the exercisability of the options and the
form of consideration payable upon exercise.
Options
The administrator determines the exercise price of nonstatutory stock
options granted under the 1996 Stock Plan, but with respect to nonstatutory
stock options intended to qualify as "performance-based compensation" within the
meaning of Section 162(m) of the Internal Revenue 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
Stock Plan must be at least equal to the fair
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<PAGE> 122
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 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 500,000 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 500,000 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 Stock
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
The administrator determines the exercise price of stock purchase rights
granted under the 1996 Stock Plan. In the case of stock purchase rights, unless
the administrator determines otherwise, the restricted stock purchase agreement
entered into in connection with the exercise of the stock purchase right shall
grant us a repurchase option that we may exercise upon the voluntary or
involuntary termination of the purchaser's service with 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 Stock Purchase Rights
An optionee generally may not transfer options and stock purchase rights
granted under the 1996 Stock Plan and only the optionee may exercise an option
and stock purchase right during his or her lifetime.
Adjustments upon Merger or Asset Sale
The 1996 Stock 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, vesting of outstanding options shall accelerate by 18
months. The 1996 Stock Plan also provides that in the event of a merger of
OnDisplay with or into another corporation, the successor corporation shall
assume or substitute for each option or stock purchase right. If the outstanding
options or stock purchase rights 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 stock purchase right as to all of the shares issuable
upon exercise of the option or stock purchase right, including unvested shares,
for a period of 15 days from the date of the notice. Any unexercised portion of
an option or stock purchase right will terminate upon the expiration of the
15-day period.
Amendment and Termination of the 1996 Stock Plan
Unless terminated sooner, the 1996 Stock Plan will terminate automatically
in 2006. In addition, the Board of Directors has the authority to amend, suspend
or terminate the 1996 Stock 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 Stock Plan.
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Stock Options Granted to Executive Officers
The table on page 98 shows the stock options granted to the Named Executive
Officers in 1999. There were no grants to the Named Executive Officers from the
shares added to the 1996 Stock Plan by the amendment that is proposed to be
approved at the special meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE
AMENDMENT TO THE 1996 STOCK PLAN.
PROPOSAL NO. 2
APPROVAL OF 1999 EMPLOYEE STOCK PURCHASE PLAN
OnDisplay stockholders are being asked to approve the 1999 Employee Stock
Purchase Plan. The purchase plan, which is intended to qualify under Section 423
of the Internal Revenue Code, is similar to purchase plans adopted by many
companies with which OnDisplay competes to hire and retain qualified personnel.
Our board of directors, which approved the purchase plan in July 1999, believes
that it provides an incentive to such personnel by affording them an attractive
opportunity to purchase OnDisplay share.
Set forth below is a summary of the principal features of the 1999 Employee
Stock Purchase Plan. OnDisplay will provide, without charge, to each person to
whom a proxy statement is delivered, upon request of such person and by first
class mail within three business days of receipt of such request, a copy of the
1999 Employee Stock Purchase Plan. Any such request should be directed as
follows: Secretary, OnDisplay, Inc., 12667 Alcosta Boulevard, Suite 300, San
Ramon, CA 94583; telephone number (925) 480-2000.
ONDISPLAY'S 1999 EMPLOYEE STOCK PURCHASE PLAN
Number of Shares of Common Stock Available under the Purchase Plan
A total of 1,500,000 shares of common stock is available for issuance under
the purchase plan. 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 2001, equal to the
lesser of 1.5% of the outstanding shares of common stock on the first day of the
fiscal year, 350,000 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
exclusive authority to interpret the terms of the purchase plan.
Eligibility to Participate
Employees are eligible to participate if they are customarily employed by
OnDisplay 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
participate:
- if such employee owns or holds options to purchase (including purchase
rights under the purchase plan) 5% or more of the total capital stock of
OnDisplay; or
- if such employee's rights to purchase stock under all employee stock
purchase plans of OnDisplay accrues at a rate that exceeds $25,000 for
the calendar year.
Offering Periods, Payroll Deductions and Purchases
The purchase plan 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
117
<PAGE> 124
after May 1 and November 1 of each year, except for the first such offering
period which commenced on December 17, 1999 and will end on the last trading day
on or before October 31, 2001.
The purchase plan permits participants to purchase common stock through
payroll deductions of up to 15% of the participant's eligible compensation,
which includes the participant's base straight time gross earnings, commissions
and cash incentive compensation, but exclusive of payments for overtime, shift
premium, bonuses and other compensation. The maximum number of shares a
participant may purchase during a six-month purchase period is 10,000 shares.
Amounts deducted and accumulated by the participant are used to purchase
shares of OnDisplay common stock at the end of each six-month purchase period.
The price is 85% of the market value of OnDisplay common stock at the beginning
of the offering period, or, if lower, at the end of the purchase period. In the
event the market value at the end of a purchase period is less than the market
value at the beginning of the offering period, participants will be withdrawn
from the current offering period following their purchase of shares and will be
automatically re-enrolled in the new offering period that begins immediately
after the date of their purchase. Participants may end their participation at
any time during an offering period, and they will be paid their accumulated
payroll deductions through the withdrawal date. Participation ends automatically
upon termination of employment.
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 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 purchase plan will terminate in 2009. However, the board of directors
has the authority to amend or terminate the purchase plan, except that,
contingent on some exceptions described in the purchase plan, no such action may
adversely affect any outstanding rights to purchase stock under the purchase
plan.
LEGAL OPINION
The validity of the shares of OnDisplay common stock offered by this proxy
statement/prospectus will be passed upon for OnDisplay by Wilson Sonsini
Goodrich & Rosati, Professional Corporation.
EXPERTS
The financial statements of OnDisplay, Inc. as of December 31, 1998 and
1999 and for each of the three years in the period ended December 31, 1999
appearing in this proxy statement/prospectus have been so included in reliance
on the report of PricewaterhouseCoopers LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
Ernst & Young LLP, independent auditors have audited Oberon Software
Incorporated's financial statements at September 30, 1999 and 1998 and for each
of the three years in the period ended September 30, 1999, as set forth in their
report. We've included these financial statements in this document in reliance
on Ernst & Young LLP's report, given on their authority as experts in accounting
and auditing.
118
<PAGE> 125
STOCKHOLDER PROPOSALS
Under Rule 14a-8 of the Exchange Act, OnDisplay stockholders may present
proper proposals for inclusion in OnDisplay's proxy statement and for
consideration at the next annual meeting of its stockholders by submitting such
proposals to OnDisplay in a timely manner. In order to be so included for the
2000 annual meeting, stockholder proposals must have been received by OnDisplay
no later than a reasonable time before OnDisplay begins to print and mail its
proxy materials, and must have otherwise complied with the requirements of Rule
14a-8.
In order to be considered at stockholder meetings, a stockholder proposal
must, under OnDisplay's bylaws, be received not later than the 60th day nor
earlier than the close of business on the 90th day prior to the meetings,
provided, however, that in the event that less than 65 days' notice of the
meeting is given to the stockholders, notice by the stockholder to be timely
must be delivered not later than the close of business on the 7th day following
the day on which the notice of the meeting was mailed.
119
<PAGE> 126
WHERE YOU CAN FIND MORE INFORMATION
<TABLE>
<S> <C>
Reports, proxy statements and other Reports, proxy statements and other
information concerning OnDisplay information regarding Oberon may
may be inspected at: be inspected at:
The National Association of The National Association of
Securities Dealers Securities Dealers
1735 K Street, N.W. 1735 K Street, N.W.
Washington, D.C. 20006 Washington, D.C. 20006
Requests for documents relating to Requests for documents relating to
OnDisplay should be directed to: Oberon should be directed to:
OnDisplay, Inc. Oberon Software Incorporated
12667 Alcosta Boulevard, Suite 300 215 First Street
San Ramon, CA 94583 Cambridge, MA 02142
(925) 480-2000 (617) 761-4206
</TABLE>
OnDisplay files reports, proxy statements and other information with the
SEC. Copies of its reports, proxy statements and other information may be
inspected and copied at the public reference facilities maintained by the SEC:
<TABLE>
<S> <C> <C>
Judiciary Plaza Citicorp Center Seven World Trade Center
Room 1024 500 West Madison Street 13th Floor
450 Fifth Street, N.W. Suite 1400 New York, New York 10048
Washington, D.C. 20549 Chicago, Illinois 60661
</TABLE>
Copies of these materials can also be obtained by mail at prescribed rates
from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549 or by calling the SEC at 1-800-SEC-0330. The SEC
maintains a website that contains reports, proxy statements and other
information regarding each of us. The address of the SEC website is
http://www.sec.gov.
OnDisplay has filed a registration statement under the Securities Act with
the SEC with respect to OnDisplay's common stock to be issued to Oberon
stockholders in the merger. This proxy statement/prospectus constitutes the
prospectus of OnDisplay filed as part of the registration statement. This proxy
statement/prospectus does not contain all of the information set forth in the
registration statement because certain parts of the registration statement are
omitted as provided by the rules and regulations of the SEC. You may inspect and
copy the registration statement at any of the addresses listed above.
THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO PURCHASE, THE ONDISPLAY COMMON STOCK OR THE SOLICITATION OF A PROXY, IN
ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO
MAKE THE OFFER, SOLICITATION OF AN OFFER OR PROXY SOLICITATION IN THAT
JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY
DISTRIBUTION OF SECURITIES MEANS, UNDER ANY CIRCUMSTANCES, THAT THERE HAS BEEN
NO CHANGE IN THE INFORMATION SET FORTH OR INCORPORATED IN THIS DOCUMENT BY
REFERENCE OR IN ITS AFFAIRS SINCE THE DATE OF THIS PROXY STATEMENT/PROSPECTUS.
THE INFORMATION CONTAINED IN THIS DOCUMENT WITH RESPECT TO OBERON AND ITS
SUBSIDIARIES WAS PROVIDED BY OBERON. THE INFORMATION CONTAINED IN THIS DOCUMENT
WITH RESPECT TO ONDISPLAY WAS PROVIDED BY ONDISPLAY.
120
<PAGE> 127
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ONDISPLAY, INC.
Report of Independent Accountants........................... F-2
Balance Sheet............................................... F-3
Statement of Operations..................................... F-4
Statement of Changes in Stockholders' Equity (Deficit)...... F-5
Statement of Cash Flows..................................... F-6
Notes to Financial Statements............................... F-7
OBERON SOFTWARE INCORPORATED
Report of Independent Auditors.............................. F-18
Balance Sheets.............................................. F-19
Statements of Operations.................................... F-20
Statements of Stockholders' Equity (Deficit)................ F-21
Statements of Cash Flows.................................... F-22
Notes to Financial Statements............................... F-23
</TABLE>
F-1
<PAGE> 128
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
OnDisplay, Inc.
In our opinion, the accompanying balance sheet and the related statements
of operations, changes in stockholders' equity (deficit) and cash flows present
fairly, in all material respects, the financial position of OnDisplay, Inc. at
December 31, 1999 and 1998 and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999, in conformity
with generally accepted accounting principles in the United States. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
/s/ PRICEWATERHOUSECOOPERS LLP
San Jose, California
February 16, 2000
F-2
<PAGE> 129
ONDISPLAY, INC.
BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1999
-------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 4,648 $109,617
Accounts receivable, net of allowance for doubtful
accounts of $250 in 1998 and $728 in 1999.............. 2,600 4,419
Prepaid and other current assets.......................... 96 1,171
-------- --------
Total current assets.............................. 7,344 115,207
Property and equipment, net................................. 720 1,581
Deposits and other assets................................... 189 314
-------- --------
Total assets...................................... $ 8,253 $117,102
======== ========
LIABILITIES, PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.......................................... $ 386 $ 1,262
Accrued liabilities....................................... 823 2,989
Deferred revenue.......................................... 1,402 2,617
Current portion of long term debts........................ 149 1,199
-------- --------
Total current liabilities......................... 2,760 8,067
-------- --------
Long term debts, net of current portion..................... 240 2,338
-------- --------
Total liabilities................................. 3,000 10,405
-------- --------
Commitments (Note 4)
Preferred stock, Series A, B and C, $0.001 par value:
Authorized: 11,600,000 shares issued and outstanding:
8,891,554 shares at December 31, 1998 and none at
December 31, 1999..................................... 18,982 --
-------- --------
Stockholders' equity (deficit) Common stock, $0.001 par
value:
Authorized: 25,000,000 shares; issued and outstanding:
19,647,303 and 4,133,751 at December 31, 1998 and
December 31, 1999..................................... 1 16
Additional paid-in capital.................................. 2,328 168,866
Deferred stock-based compensation........................... (1,604) (29,175)
Notes receivable from shareholders.......................... -- (1,788)
Accumulated deficit......................................... (14,454) (31,222)
-------- --------
Total stockholders' equity (deficit).............. 5,253 106,697
-------- --------
Total liabilities, preferred stock and
stockholders' equity (deficit).................. $ 8,253 $117,102
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 130
ONDISPLAY, INC.
STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1997 1998 1999
---------- ---------- ----------
<S> <C> <C> <C>
License revenues....................................... $ 265 $ 2,229 $ 6,839
Service revenue........................................ -- 1,114 4,259
---------- ---------- ----------
Total revenue................................ 265 3,343 11,098
---------- ---------- ----------
Cost of license revenue................................ -- 2 7
Cost of service revenues............................... -- 1,618 4,251
---------- ---------- ----------
Total cost of revenues....................... -- 1,620 4,258
---------- ---------- ----------
Gross profit........................................... 265 1,723 6,840
Operating expenses:
Sales and marketing.................................. 2,810 5,747 11,917
Research and development............................. 1,986 2,636 4,714
General and administrative........................... 1,158 1,201 3,418
Amortization of deferred stock-based compensation.... -- 618 3,697
---------- ---------- ----------
Total operating expenses..................... 5,954 10,202 23,746
---------- ---------- ----------
Loss from operations................................... (5,689) (8,479) (16,906)
Interest income and other.............................. 173 174 532
Interest expense....................................... (18) (43) (394)
---------- ---------- ----------
Net loss............................................... $ (5,534) $ (8,348) $ (16,768)
========== ========== ==========
Net loss per share-basic and diluted................... $ (1.62) $ (2.34) $ (3.70)
========== ========== ==========
Shares used in per share calculation-basic and
diluted.............................................. 3,410,313 3,572,353 4,533,282
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 131
ONDISPLAY, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NOTES
COMMON STOCK ADDITIONAL DEFERRED RECEIVABLE TOTAL
------------------- PAID-IN STOCK-BASED FROM ACCUMULATED STOCKHOLDERS' EQUITY
SHARES AMOUNT CAPITAL COMPENSATION SHAREHOLDERS DEFICIT (DEFICIT)
---------- ------ ---------- ------------ ------------ ----------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1997... 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)
Conversion of Mandatorily
Redeemable Convertible
Preferred Stock to common
stock..................... 10,615,293 11 35,381 -- -- -- 35,392
Issuance of common stock in
connection with initial
public offering, net of
issuance costs............ 3,500,000 4 89,763 -- -- -- 89,767
Issuance of common stock in
connection with private
placement................. 300,000 -- 7,812 -- -- -- 7,812
Issuance of common stock in
connection with options
exercised................. 1,163,563 -- 2,170 -- (1,788) -- 382
Repurchase of unvested
common stock.............. (71,554) -- (15) -- -- -- (15)
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................. -- -- 121 -- -- -- 121
Deferred compensation
related to stock options
grants.................... -- -- 31,268 (31,268) -- -- --
Amortization of deferred
stock-based
compensation.............. -- -- -- 3,697 -- -- 3,697
Net loss.................... -- -- -- -- -- (16,768) (16,768)
---------- --- -------- -------- ------- -------- --------
Balances, December 31,
1999...................... 19,647,303 $16 $168,866 $(29,175) $(1,788) $(31,222) $106,697
========== === ======== ======== ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 132
ONDISPLAY, INC.
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(5,534) $(8,348) $(16,768)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization.......................... 123 306 518
Loss from sale of property and equipment............... -- 9 --
Provision for doubtful accounts........................ -- 250 478
Amortization of deferred stock-based compensation...... -- 618 3,697
Amortization of discount related to warrants issued in
connection with long term loan....................... -- -- 121
Issuance of common stock in connection with services
rendered............................................. -- -- 38
Change in operating assets and liabilities:
Accounts receivable.................................. (187) (2,661) (2,297)
Prepaid and other current assets..................... (96) 43 (1,075)
Accounts payable..................................... 125 166 876
Accrued liabilities.................................. 163 627 2,166
Deferred revenue..................................... 11 1,391 1,215
Other long term assets............................... -- (189) (125)
------- ------- --------
Net cash used in operating activities............. (5,395) (7,788) (11,156)
------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment..................... (428) (219) (650)
Proceeds from sales of property and equipment............. -- 3 --
------- ------- --------
Net cash used in investing activities............. (428) (216) (650)
------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sales and lease back of property and
equipment.............................................. 200 -- --
Proceeds from issuance of preferred stock................. 6,800 8,782 16,410
Proceeds from issuance of common stock, net............... -- 107 97,961
Principal payment under capital lease obligations......... (28) (129) (78)
Proceeds from borrowings under long term loan received.... -- -- 3,000
Repayment of long term loan............................... -- -- (503)
Repurchases of unvested common stock...................... -- (8) (15)
------- ------- --------
Net cash provided by financing activities......... 6,972 8,752 116,775
------- ------- --------
Net increase in cash and cash equivalents................... 1,149 748 104,969
Cash and cash equivalents at beginning of year.............. 2,751 3,900 4,648
------- ------- --------
Cash and cash equivalents at end of year.................... $ 3,900 $ 4,648 $109,617
======= ======= ========
NONCASH INVESTING AND FINANCING ACTIVITIES:
Property and equipment acquired under capital lease
obligations............................................ $ 196 $ 337 $ 729
======= ======= ========
Deferred stock-based compensation......................... $ -- $ 2,222 $ 31,268
======= ======= ========
Issuance of common stock for notes receivable from
shareholders........................................... $ -- $ -- $ 1,788
======= ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 133
ONDISPLAY, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- BUSINESS:
OnDisplay, Inc. (the "Company") develops and markets 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 align information systems of business
allies without modification to existing applications or to migrate rapidly from
their existing systems to new enterprise applications. The Company operates in a
single business segment and does not have any separately reportable business
segments as of December 31, 1999.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES:
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 reserves 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 no
excessive at December 31, 1998 and 1999.
At December 31, 1999 two customers accounted for 21% and 15% of accounts
receivable and at December 31, 1998 two different customers accounted for 24%
and 12% of accounts receivable.
The Company derives most of its license service and support revenues from
one suite of products.
In 1997, these customers represented 21%, 30% and 37% of total revenues and
in 1998 two customers represented 11% and 13% of total revenues. No customer
accounted for more than 10% of total revenues in 1999.
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 debt approximates fair value.
F-7
<PAGE> 134
ONDISPLAY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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. In cases where a fee
is due to a referring party under the Company's referral agreements, such fees
are recorded as sales and marketing expenses when the accompanying sales are
recorded.
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 installation and training and for such
services sold separately, the Company recognizes revenue 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.
COST OF REVENUES
Cost of license revenues includes costs associated with the electronic
transmission of software and royalties for third party embedded software which
were not material. Cost of service revenue includes salaries and related
expenses for the service organization and cost of third parties contracted to
provide services to customers.
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 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
F-8
<PAGE> 135
ONDISPLAY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
disclosure-only provisions of SFAS 123. Under APB No. 25, compensation expense
is based on the difference, if any, on the date of grant, between the estimated
fair value of the Company's 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 nonvested common stock,
options, warrants and preferred stock. Options, warrants, common stock subject
to repurchase 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.
Antidilutive securities not included in net loss per share calculation for
the periods:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1997 1998 1999
--------- ---------- ---------
<S> <C> <C> <C>
Common stock subject to repurchase................ -- 377,732 1,154,521
Common stock options.............................. 1,602,750 1,366,188 2,986,985
Warrants.......................................... -- -- 85,537
Preferred Stock................................... 6,690,476 8,891,554 --
--------- ---------- ---------
8,293,226 10,635,474 4,227,043
========= ========== =========
</TABLE>
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 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 believes the adoption
of 98-9 will not have a material impact on its results of operation.
F-9
<PAGE> 136
ONDISPLAY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 -- BALANCE SHEET ACCOUNTS:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1998 1999
------ ------
(IN THOUSANDS)
<S> <C> <C>
Property and equipment
Computer hardware......................................... $ 869 $1,510
Computer software......................................... 177 428
Furniture and fixtures.................................... 93 510
Leasehold improvements.................................... 13 83
------ ------
1,152 2,531
Less: accumulated depreciation and amortization........... (432) (950)
------ ------
$ 720 $1,581
====== ======
</TABLE>
Included in property and equipment at December 31, 1998 and 1999 is
approximately $537,000 and $1,266,000 of computer equipment purchased under
capital leases. Accumulated amortization of assets acquired under capital leases
is approximately $241,000 and $479,000 at December 31, 1998 and 1999.
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1998 1999
---- ------
(IN THOUSANDS)
<S> <C> <C>
Accrued liabilities
Accrued commissions....................................... $275 $1,413
Accrued professional fees................................. 132 565
Accrued vacation.......................................... 190 372
Accrued bonuses........................................... 226 372
Other..................................................... -- 267
---- ------
$823 $2,989
==== ======
</TABLE>
NOTE 4 -- COMMITMENTS:
OPERATING LEASE
The Company leases various facilities under operating leases expiring
through 2004. Under these leases, the Company is responsible for maintenance and
insurance.
The minimum lease payments, net of sublease income, required under these
operating leases are as of December 31, 1999 are as follows (in thousands):
<TABLE>
<S> <C>
2000................................................ $1,012
2001................................................ 884
2002................................................ 559
2003................................................ 114
2004................................................ 99
------
$2,668
======
</TABLE>
Rent expense, net of sublease income, for the years ended December 31,
1999, 1998 and 1997 approximately was $740,000, $270,000 and $186,000,
respectively.
F-10
<PAGE> 137
ONDISPLAY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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, 1999, the Company had a total of approximately
$537,000 under this line. 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.
As of December 31, 1999, the Company had drawn a total of approximately
$729,000 under this line.
Future minimum lease payment under capital lease agreements as of December
31, 1999 are as follows (in thousands):
<TABLE>
<S> <C>
2000........................................................ $1,048
2001........................................................ 486
------
Total minimum lease payments................................ 1,534
Less amount representing interest........................... 494
------
Present value of minimum lease payments..................... 1,040
Less: current portion....................................... (784)
------
$ 256
======
</TABLE>
NOTE 5 -- LONG TERM DEBT:
Long term debt consists of (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1998 1999
----- -------
<S> <C> <C>
Long term loan.............................................. $ -- $ 2,497
Capital lease obligations (see Note 4)...................... 389 1,040
----- -------
389 3,537
Less: current portion....................................... (149) (1,199)
----- -------
$ 240 $ 2,338
===== =======
</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 1999 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. The amounts borrowed are 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 December 31, 1999 are as follows (in
thousands):
<TABLE>
<CAPTION>
FISCAL YEARS ENDING DECEMBER 31,
--------------------------------
<S> <C>
2000........................................................ $ 943
2001........................................................ 1,068
2002........................................................ 486
------
Total............................................. $2,497
======
</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
F-11
<PAGE> 138
ONDISPLAY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
compensation not to exceed standard limitations provided by the Internal Revenue
Service. The Company maintains the right to match employee contributions, no
Company matching contributions have been made to date.
NOTE 7 -- PREFERRED STOCK:
As of December 31, 1998 the convertible preferred stock comprises:
<TABLE>
<CAPTION>
NUMBER
NUMBER OF SHARES ANNUAL 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
Series D............................. 2,100,000 1,723,739 $0.76 $9.52
---------- ----------
11,600,000 10,615,293
========== ==========
</TABLE>
DIVIDENDS
The holders of Series A, Series B, Series C and Series D 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, Series C and Series D stockholders, declared dividends shall be
distributed among all holders of common stock and all holders of Series A,
Series B, Series C and Series D 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, Series C and Series D preferred stock were converted to
common stock. Dividends declared by the Company are contingent on approval by
the lender of the long-term loan.
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, Series C and
Series D 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, $4.00
and $9.52 for each outstanding share of Series A, Series B, Series C and Series
D 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.
F-12
<PAGE> 139
ONDISPLAY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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, Series C and Series D preferred stock are $1.00, $2.10, $4.00
and $9.52. 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 prices of Series A, B, C and D preferred stock
may be adjusted under circumstances described in the Company's Restated Articles
of Incorporation. At December 31, 1998 and September 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
at an aggregate offering price to the public of not less than 20 million
provided that the Series A, B and C preferred stock shall not be converted
without the majority approval of such series, and the Series D preferred stock
shall not be converted without the approval by more than 2/3 of the holders of
Series D preferred stock.
VOTING
The holders of Series A, Series B, Series C and 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 at the 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 AND STOCK PURCHASE PLANS:
STOCK OPTION PLAN
Under the Company's 1996 Stock Plan as amended, 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
F-13
<PAGE> 140
ONDISPLAY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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, 41,394 and 71,554
in 1997, 1998 and 1999.
At December 31, 1997, 1998 and 1999, the Company's repurchase rights
applied to none, 377,732 and 1,154,521 shares of common stock outstanding.
Activity under the Plan is set forth below:
<TABLE>
<CAPTION>
NUMBER WEIGHTED
NUMBER OF SHARES 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
Shares reserved.................................. 2,425,000 -- -- --
Options granted.................................. (3,152,650) 3,152,650 $4.88 15,395,700
Options exercised................................ -- (1,163,563) $1.86 (2,170,000)
Options repurchased.............................. 71,554 -- -- --
Options cancelled................................ 368,260 (368,290) $0.46 (168,245)
---------- ---------- ----- -----------
Balances, December 31, 1999...................... 182,225 2,986,985 $4.45 $13,302,277
========== ========== ===== ===========
</TABLE>
For financial reporting purposes, the Company has determined that the
estimated value of common stock was in excess of the exercise price, which was
considered to be the fair market value as of the date of grant for 781,750
options issued in 1998 and 3,152,650 options issued in 1999. In connection with
the grants of such options, the Company has recognized deferred compensation of
approximately $2,220,000 in 1998 and $31,268,000 in 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 $3,697,000 in the year ended December 31, 1999.
Future amortization based on options granted through December 31, 1999 is
expected to be $15,441,000 and $7,987,000, $4,166,000 and $1,581,000 in the
years 2000, 2001, 2002 and 2003.
F-14
<PAGE> 141
ONDISPLAY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Options outstanding and vested by exercise price at December 31, 1999 are
as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS CURRENTLY
------------------------------------ VESTED
WEIGHTED ----------------------
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICE OUTSTANDING LIFE PRICE VESTED PRICE
-------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$0.10 482,500 6.86 $0.10 386,078 $0.10
$0.21 49,000 8.18 $0.21 22,659 $0.21
$0.40 254,250 9.02 $0.40 36,402 $0.40
$0.80 123,835 9.43 $0.80 -- $0.80
$1.20 51,000 9.55 $1.20 -- $1.20
$2.50 314,500 9.69 $2.50 -- $2.50
$5.00 163,000 9.72 $5.00 -- $5.00
$6.50 812,400 9.82 $6.50 -- $6.50
$8.00 736,500 9.95 $8.00 -- $8.00
--------- -------
2,986,985 445,139
========= =======
</TABLE>
At December 31, 1997 and 1998, 130,844 and 381,707 options at a weighted
average prices of $0.10 and $0.10 were vested.
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>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Net loss:
As reported............................................... $(5,534) $(8,348) $(16,768)
Pro forma................................................. $(5,542) $(8,364) $(17,039)
Basic and diluted net loss per share:
As reported............................................... $ (1.62) $ (2.34) $ (3.70)
Pro forma................................................. $ (1.62) $ (2.34) $ (3.76)
</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>
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Risk-free interest rate..................................... 6.3% 5.0% 5.2%
Expected life............................................... 5 years 5 years 5 years
Expected dividends.......................................... $-- $-- $--
</TABLE>
The weighted average per share fair value of common stock options granted
during 1997, 1998 and 1999 were $0.10, $0.27 and $12.23.
EMPLOYEE STOCK PURCHASE PLAN
In September 1999, the Company adopted an employee stock purchase plan (the
"Purchase Plan"). 1,500,000 shares of common stock have been reserved for
issuance under the Purchase Plan (subject to an annual increase), none of which
had been issued at December 31, 1999.
F-15
<PAGE> 142
ONDISPLAY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 9 -- WARRANTS:
As part of a long-term borrowing agreement entered into in February 1999,
the Company issued a warrant to purchase an aggregate of 85,537 shares of common
stock at an exercise price of $6.05 per share. The warrant were exercisable upon
grant and expire in January 2009.
The Company valued the warrant using the Black-Scholes method. The fair
value of $535,000 is amortized to interest expense over the term of the
long-term loan.
NOTE 10 -- INCOME TAXES:
At December 31, 1999, the Company had net operating loss carryforwards of
approximately $23,800,000 and $18,600,000 for Federal and California purposes,
respectively, available to reduce future taxable income, if any. These
carryforwards expire through 2019 and 2004 for Federal and California purposes,
respectively, if not utilized beforehand.
At December 31, 1999, the Company had research and development credit
carryforwards of approximately $479,000 and $302,000 for Federal and California
income tax purposes, respectively. The research and development credit
carryforwards expire beginning in the year 2011.
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.
Temporary differences which gave rise to significant portions of deferred
tax assets and liabilities are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
------- --------
<S> <C> <C>
Net operating losses........................................ $ 4,761 $ 9,181
Research and development credits............................ 548 678
Depreciation and amortization............................... (10) 9
Accrued liabilities......................................... 467 875
Other....................................................... -- 1
------- --------
5,766 10,745
Less: valuation allowance................................... (5,766) (10,745)
------- --------
$ -- $ --
======= ========
</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.
F-16
<PAGE> 143
ONDISPLAY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The difference between the Company's effective income tax rate and the
federal statutory rate is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Statutory tax benefit....................................... $(1,882) $(2,838) $(5,701)
Permanent differences -- non-deductible expenses............ 79 364 33
State taxes, net of federal tax benefit..................... (327) (510) (756)
Stock option compensation................................... -- -- 1,257
Research and development experimentation credit............. (273) (276) (266)
Change in valuation allowance............................... 2,402 3,138 4,979
Other....................................................... 1 122 454
------- ------- -------
Net tax provision........................................... $ -- $ -- $ --
======= ======= =======
</TABLE>
NOTE 11 -- SUBSEQUENT EVENT:
The Company entered into a merger agreement with Oberon Software
Incorporated ("Oberon") on January 17, 2000. The Company expects the merger,
which will be accounted for under the purchase method, to be completed by March
31, 2000.
F-17
<PAGE> 144
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Oberon Software Incorporated
We have audited the accompanying balance sheets of Oberon Software
Incorporated (the Company) as of September 30, 1999 and 1998, and the related
statements of operations, stockholders' equity (deficit), and cash flows for
each of the three years in the period ended September 30, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Oberon Software Incorporated
at September 30, 1999 and 1998, and the results of its operations and its cash
flows for each of the three years in the period ended September 30, 1999 in
conformity with accounting principles generally accepted in the United States.
November 12, 1999, except for
Note 12, as to which the date
is January 17, 2000
F-18
<PAGE> 145
OBERON SOFTWARE INCORPORATED
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------- DECEMBER 31,
1999 1998 1999
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents...................... $ 10,214,307 $ 5,150,268 $ 8,053,576
Accounts receivable, less allowance of $20,000
for 1999 and $0 for 1998 for doubtful
accounts.................................... 1,670,429 626,622 1,410,807
Prepaid expenses............................... 357,514 135,456 206,499
------------ ------------ ------------
Total current assets................... 12,242,250 5,912,346 9,670,882
Property and equipment, net...................... 875,564 629,288 849,791
Other assets..................................... 24,711 28,180 24,713
------------ ------------ ------------
Total assets........................... $ 13,142,525 $ 6,569,814 $ 10,545,386
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable............................... $ 668,887 $ 364,250 $ 747,809
Accrued expenses............................... 511,227 315,246 235,895
Accrued compensation and benefits.............. 327,525 336,565 432,763
Deferred revenue............................... 1,383,607 455,762 1,134,649
Current portion of capital lease obligations... 73,678 67,192 73,678
Current portion of long-term debt.............. 550,436 958,642
------------ ------------ ------------
Total current liabilities.............. 3,515,360 1,539,015 3,583,436
Capital lease obligations, net of current
portion........................................ 109,416 183,094 91,629
Long term-debt, net of current portion........... 3,733,454 3,325,249
Deferred credit.................................. 1,541,519 1,631,688 1,491,729
Stockholders' equity:
Convertible Preferred Stock, 31,000,000 in 1999
and 22,800,000 in 1998, authorized shares
designated as:
Series 1, Participating -- $.01 par value;
11,300,000 shares issued and outstanding
(liquidation preference of $1.00 per
share).................................... 11,300,000 11,300,000 11,300,000
Series 2, Non-Participating -- $0.01 par
value; 2,919,598 shares issued and
outstanding (liquidation preference of
$2.50 per share).......................... 7,298,995 7,298,995
Common stock, $.01 par value, 25,000,000 in
1999 and 20,700,000 in 1998 shares
authorized, 6,139,862, 5,887,447 and
6,289,242 shares issued and outstanding at
September 30, 1999 and 1998 and December 31,
1999........................................ 61,399 58,874 62,892
Treasury stock, at cost, 3,700 shares.......... (37) (37) (37)
Additional paid-in capital..................... 20,226,330 20,216,119 20,241,219
Accumulated deficit............................ (34,643,911) (28,358,939) (36,849,726)
------------ ------------ ------------
Total stockholders' equity............. 4,242,776 3,216,017 2,053,343
------------ ------------ ------------
Total liabilities and stockholders'
equity............................... $ 13,142,525 $ 6,569,814 $ 10,545,386
============ ============ ============
</TABLE>
See accompanying notes.
F-19
<PAGE> 146
OBERON SOFTWARE INCORPORATED
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, DECEMBER 31,
------------------------------------- --------------------------
1999 1998 1997 1999 1998
----------- ---------- ---------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Software licenses............... $ 2,849,784 $1,357,917 $ 469,592 $ 486,525 $ 522,638
Services........................ 1,358,859 395,593 169,395 691,169 273,673
Royalties....................... 443,592 215,731 87,602 295,423
----------- ---------- ---------- ---------- ----------
Total revenues.......... 4,652,235 1,969,241 726,589 1,473,117 796,311
Operating expenses:
Cost of software................ 138,530 100,229 109,723 102,585 20,637
Cost of services................ 1,410,750 402,516 330,773 580,985 272,198
Research and development........ 3,681,413 2,376,107 1,504,174 1,233,530 726,205
Marketing and sales............. 4,935,750 2,869,627 3,239,253 1,516,943 922,000
General and administrative...... 1,004,124 1,298,821 1,442,921 229,349 278,616
----------- ---------- ---------- ---------- ----------
Total operating
expenses.............. 11,170,567 7,047,300 6,626,844 3,663,392 2,219,656
----------- ---------- ---------- ---------- ----------
Loss from operations.............. 6,518,332 5,078,059 5,900,255 2,190,275 1,423,345
Other (income) expense:
Interest income................. (321,207) (208,830) (111,189) (79,424) (53,500)
Interest expense................ 31,814 126,186 144,386 79,980 5,674
Other expense................... 56,033 7,688 16,023 14,984 1033
----------- ---------- ---------- ---------- ----------
(233,360) (74,956) 49,220 15,540 (46,793)
----------- ---------- ---------- ---------- ----------
Net loss.......................... $ 6,284,972 $5,003,103 $5,949,475 $2,205,815 $1,376,552
----------- ---------- ---------- ---------- ----------
Basic and diluted loss per share
information:
Net loss........................ $ 1.05 $ 2.55 $ 10.18 $ 0.36 $ 0.23
=========== ========== ========== ========== ==========
Weighted average shares
outstanding.................. 6,011,805 1,960,720 584,160 6,211,162 5,893,822
=========== ========== ========== ========== ==========
</TABLE>
See accompanying notes.
F-20
<PAGE> 147
OBERON SOFTWARE INCORPORATED
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES 1 SERIES 2
PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK
------------------------ ------------------------ ------------------------ ---------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES
---------- ----------- ---------- ----------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30,
1996...................... 6,040,000 $ 6,040,000 5,650,000 $ 5,650,000
Issuance of Common Stock
upon exercise of stock
options...................
Repurchase of Common
Stock.....................
Net loss...................
---------- ----------- ---------- -----------
Balance at September 30,
1997...................... 6,040,000 $ 6,040,000 5,650,000 $ 5,650,000
Issuance of Common Stock
upon exercise of stock
options...................
Issuance of Common Stock
upon exercise of
warrants..................
Recapitalization of
Preferred Stock........... (6,040,000) (6,040,000) (5,650,000) (5,650,000) 3,200,000 $ 3,200,000
Issuance of Series 1
Preferred Stock, net of
offering costs............ 8,100,000 8,100,000
Net loss...................
---------- ----------- ---------- ----------- ---------- ----------- ---------
Balance at September 30,
1998...................... -- -- -- -- 11,300,000 11,300,000 --
Issuance of Common Stock
upon exercise of stock
options...................
Issuance of Common Stock
upon exercise of
warrants..................
Issuance of Series 2
Preferred Stock, net of
offering costs............ 2,919,598
Net loss...................
---------- ----------- ---------- ----------- ---------- ----------- ---------
Balance at September 30,
1999...................... -- -- -- -- 11,300,000 11,300,000 2,919,598
Issuance of Common Stock
upon exercise of stock
options...................
Net loss...................
---------- ----------- ---------- ----------- ---------- ----------- ---------
Balance at December 31,
1999...................... -- -- -- -- 11,300,000 $11,300,000 2,919,598
========== =========== ========== =========== ========== =========== =========
<CAPTION>
SERIES 2
FERRED STOCK
------------- ------------------- --------------- PAID-IN ACCUMULATED EQUITY
AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT (DEFICIT)
---------- --------- ------- ------ ------ ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30,
1996...................... 474,429 $ 4,744 $ 8,641,361 $(17,406,361) $ 2,929,744
Issuance of Common Stock
upon exercise of stock
options................... 219,462 2,195 29,716 31,911
Repurchase of Common
Stock..................... 3,700 $(37) (56) (93)
Net loss................... (5,949,475) (5,949,475)
--------- ------- ----- ---- ----------- ------------ -----------
Balance at September 30,
1997...................... 693,891 $ 6,939 3,700 $(37) $ 8,671,021 $(23,355,836) $(2,987,913)
Issuance of Common Stock
upon exercise of stock
options................... 2,174,800 21,748 42,394 64,142
Issuance of Common Stock
upon exercise of
warrants.................. 3,018,756 30,187 21,563 51,750
Recapitalization of
Preferred Stock........... 11,527,926 3,037,926
Issuance of Series 1
Preferred Stock, net of
offering costs............ (46,785) 8,053,215
Net loss................... (5,003,103) (5,003,103)
---------- --------- ------- ----- ---- ----------- ------------ -----------
Balance at September 30,
1998...................... -- 5,887,447 58,874 3,700 (37) 20,216,119 (28,358,939) 3,216,017
Issuance of Common Stock
upon exercise of stock
options................... 233,670 2,337 31,360 33,697
Issuance of Common Stock
upon exercise of
warrants.................. 18,750 188 8,813 9,001
Issuance of Series 2
Preferred Stock, net of
offering costs............ $7,298,995 (29,962) 7,269,033
Net loss................... (6,284,972) (6,284,972)
---------- --------- ------- ----- ---- ----------- ------------ -----------
Balance at September 30,
1999...................... 7,298,995 6,139,867 61,399 3,700 (37) 20,226,330 (34,643,911) 4,242,776
Issuance of Common Stock
upon exercise of stock
options................... 149,375 1,493 14,889 16,382
Net loss................... (2,205,815) (2,205,815)
---------- --------- ------- ----- ---- ----------- ------------ -----------
Balance at December 31,
1999...................... $7,298,995 6,289,242 $62,892 3,700 $(37) $20,241,219 $(36,849,726) $ 2,053,343
========== ========= ======= ===== ==== =========== ============ ===========
</TABLE>
See accompanying notes.
F-21
<PAGE> 148
OBERON SOFTWARE INCORPORATED
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED SEPTEMBER 30, DECEMBER 31,
--------------------------------------- -------------------------
1999 1998 1997 1999 1998
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss................................. $(6,284,972) $(5,003,103) $(5,949,475) $(2,205,816) $(1,376,552)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation........................... 368,942 311,408 149,764 115,052 70,662
Loss on sales of equipment............. 7,112
Provision for doubtful accounts........ 20,000
Recapitalization of note payable
interest............................ 137,926
Income recognized on deferred credit... (90,169) (168,312) (47,891)
Changes in operating assets and
liabilities:
Accounts receivable................. (1,063,807) (113,903) (471,359) 259,622 (10,284)
Prepaid expenses.................... (222,058) (55,775) (5,717) 151,014 35,033
Other assets........................ 3,469 19,604 (13,453) (2,301)
Accounts payable and accrued
expenses.......................... 500,618 172,913 246,443 (198,308) (26,524)
Accrued compensation and benefits... (9,040) 27,084 173,223 105,238 (68,223)
Deferred revenue.................... 927,845 100,980 354,782 (248,958) 776,174
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in) operating
activities............................. (5,849,172) (4,571,178) (5,508,680) (2,070,047) 602,015
INVESTING ACTIVITIES
Purchases of property and equipment...... (615,218) (276,486) (253,665) (89,278) (98,138)
Proceeds from sales of equipment......... 1,371
----------- ----------- ----------- ----------- -----------
Net cash used in investing activity...... (615,218) (276,486) (252,294) (89,278) (98,138)
FINANCING ACTIVITIES
Proceeds from notes payable.............. 1,200,000 2,000,000
Payments on notes payable................ (1,000,000)
Proceeds from long-term debt............. 4,283,890
Payments on capital lease obligations.... (67,192) (63,438) (38,357) (17,788) (16,222)
Proceeds from issuance of Series 1
Preferred Stock, net................... 8,053,215
Proceeds from issuance of Series 2
Preferred Stock, net................... 7,269,033
Proceeds from issuance of Common Stock... 42,698 115,892 31,911 16,382 1,452
Repurchase of common stock............... (93)
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in) financing
activities............................. 11,528,429 9,305,669 993,461 (1,406) (14,770)
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents............................ 5,064,039 4,458,005 (4,767,513) (2,160,731) (714,923)
Cash and cash equivalents at beginning of
period................................. 5,150,268 692,263 5,459,776 10,214,307 5,150,268
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end of
period................................. $10,214,307 $ 5,150,268 $ 692,263 $ 8,053,576 $ 4,435,345
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes.
F-22
<PAGE> 149
OBERON SOFTWARE INCORPORATED
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
1. THE COMPANY AND ITS CAPITALIZATION
Oberon Software Incorporated (the Company) is a leading provider of
e-business integration solutions. The Company's software provides an
unparalleled approach to integration that delivers rapid, flexible and highly
maintainable solutions for dynamic collaboration among employees, partners,
suppliers and their customers. The Company operates and reviews the performance
of the business as one segment and substantially all its sales are with in the
United States
The environment of rapid technological change and intense competition which
is characteristic of the software development industry results in frequent new
products and evolving industry standards. The Company's ultimate success depends
largely upon its ability to enhance current products and develop new products on
a timely basis which keep pace with the changes in technology and competitors'
innovations.
In 1999, the Company issued 2,919,598 shares of Series 2 Convertible
Non-Participating Preferred Stock in exchange for net proceeds of $7,269,033 in
cash. The Company also entered into a subordinated loan and security agreement
from which the Company received $4,000,000 in cash. Management believes that the
proceeds from these transactions combined with cash from operations will allow
the Company to operate through 2000.
2. SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
The Company recognizes revenues in accordance with Statement of Position
97-2, (SOP 97-2), Software Revenue Recognition, issued by the American Institute
of Certified Public Accountants. Under the provisions of SOP 97-2, revenue
related to the elements of software arrangements are recognized separately if no
significant modification or customization of the software is required and vendor
specific objective evidence of the pricing of each element of the arrangement
exists. Accordingly, revenue from software product sales is recognized upon
delivery of the software; services revenues are recognized as provided and
maintenance fees are recognized ratably over the term of the maintenance
agreement. The Company accrues the estimated cost of warranty and product
returns in the period in which the product revenue is recognized; historically,
these amounts have not been material.
Royalties are recognized at the time the Company's third-party distributors
license the Company's software to their customers.
RESEARCH AND DEVELOPMENT COSTS
Development costs incurred in the research and development of new software
products and enhancements are expensed as incurred to research and development
until technological feasibility has been established. After technological
feasibility is established, any additional development costs are capitalized in
accordance with Statement of Financial Accounting Standards No. 86, Accounting
for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed.
Capitalized software costs are amortized over their estimated economic lives. As
of September 30, 1999, no eligible costs have been capitalized due to the
uncertainty of their recoverability.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash equivalents and
accounts receivable. Cash equivalents consist of temporary investments in money
market funds with maturity dates of three months or less and have limited credit
exposure. The risk with respect to accounts receivable is minimized by the
creditworthiness of the Company's customers and the Company's credit and
collection policies.
F-23
<PAGE> 150
OBERON SOFTWARE INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
USE OF ESTIMATES
The preparation of the Company's financial statements under generally
accepted accounting principles requires management to make significant estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated by the
straight-line method over estimated useful lives of three years. Capital lease
assets are depreciated over the estimated useful life or the term of the lease,
whichever is shorter.
STOCK-BASED COMPENSATION
The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares at the date of the
grant. The Company accounts for stock option grants to employees and directors
in accordance with Accounting Principles Board Opinion (APB) No. 25, Accounting
for Stock Issued to Employees, which is based on the intrinsic value method of
measuring stock-based compensation. The Company has adopted the disclosure
provisions only of Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation (SFAS 123), which is based on the
fair-value method of measuring stock-based compensation.
LOSS PER SHARE
Loss per share is presented in accordance with SFAS No. 128, Earnings Per
Share, which requires the disclosure of basic and diluted earnings (loss) per
share. Basic loss per share is based upon the Company's net loss divided by the
number of weighted shares outstanding during the reporting period. Diluted loss
per share for loss periods is the same as basic loss per share since the effects
of including the conversion of preferred stock and common stock equivalents of
warrants and options is anti-dilutive.
INCOME TAXES
The Company provides for income taxes under Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109). Under SFAS
109, the liability method is used in accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
RECLASSIFICATIONS
Certain amounts in 1998 have been reclassified to permit comparison with
1999.
INTERIM REPORTING
The interim unaudited condensed financial statements have been prepared by
the Company pursuant to the rules and regulations of the Securities and Exchange
Commission and in accordance with generally accepted accounting principles.
Accordingly, certain information and footnotes disclosure normally included in
annual financial statements have been omitted or condensed. In the opinion of
management, all necessary adjustments (consisting of only normal recurring
accruals) have been made to provide a fair presentation.
F-24
<PAGE> 151
OBERON SOFTWARE INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------------
1999 1998
---------- ----------
<S> <C> <C>
Computer equipment and software............................. $1,047,775 $ 830,164
Furniture and fixtures...................................... 599,483 452,572
Leasehold improvements...................................... 45,520
---------- ----------
1,692,778 1,282,736
Less accumulated depreciation............................... (817,214) (653,448)
---------- ----------
Total....................................................... $ 875,564 $ 629,288
========== ==========
</TABLE>
4. LEASES
The Company leases certain equipment and office space under noncancelable
operating leases. Amortization expense is included in depreciation. The net book
value of all capital leases at September 30, 1999 is $164,305.
Future minimum annual lease payments of the Company under noncancelable
leases as of September 30, 1999 are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
-------- ---------
<S> <C> <C>
Year ending September 30:
2000...................................................... $ 87,542 $316,328
2001...................................................... 87,542 305,255
2002...................................................... 29,181 25,700
-------- --------
Total minimum lease payments................................ 204,265 $647,283
========
Less amounts representing interest........................ (21,171)
--------
183,094
Less amounts currently due................................ (73,678)
--------
$109,416
========
</TABLE>
Aggregated future minimum rentals of $19,711 at September 30, 1999 will be
received under noncancelable subleases through December 31, 1999.
Rent expense under operating leases amounted to $254,298, $212,597 and
$221,941 during the years ended September 30, 1999, 1998 and 1997, respectively.
In July 1999, the Company entered into a Lease Agreement with Comdisco
Incorporated which enables the Company to lease equipment and software up to
$1,000,000 during the period of July 6, 1999 to July 6, 2000 with an annual
interest rate of 7.5%. The Company has not leased any equipment or software as
of September 30, 1999 under this agreement.
5. FINANCING ARRANGEMENTS
In July 1999, the Company executed a Subordinated Loan and Security
Agreement (the Agreement) with Comdisco Incorporated (Comdisco) which allows the
Company to borrow up to $4,000,000. The terms of the Agreement provide for an
annual interest rate of 10%. The Agreement requires the payment of interest only
during the first nine months, and thereafter, equal payments representing the
amortization of the principal and interest for 27 months.
F-25
<PAGE> 152
OBERON SOFTWARE INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
Under the terms of the Agreement, the Company granted Comdisco a security
interest in substantially all of the Company's assets, subject to the Company's
Loan and Security Agreement with Silicon Valley Bank described below.
As part of the Agreement, Comdisco has the right to purchase 480,000 shares
of the Company's Series 2 Convertible Non-Participating Preferred Stock at a
price of $2.50 per share. The purchase option is exercisable, in whole or part,
at any time, or from time to time, prior to the earlier of (i) an Initial Public
Offering, or (ii) Merger Event, as defined in the Agreement. As of September 30,
1999, Comdisco has not exercised any of its purchase rights. The fair market
value of these rights is being amortized as interest expense over the term of
the Agreement.
In March 1999, the Company entered into a Loan and Security Agreement with
Silicon Valley Bank which enables the Company to borrow up to $1,500,000 under a
working capital line of credit based on eligible accounts receivables and to
borrow up to $600,000 under an equipment line of credit. The terms of the
agreement have an annual interest rate of prime plus 0.50% for the working
capital line of credit and prime plus 0.75% for the equipment line of credit.
Substantially all of the assets of the Company serve as collateral under the
agreement.
Long-term debt consisted of the following as of September 30, 1999:
<TABLE>
<S> <C>
Obligation under the subordinated loan and security
agreement................................................. $4,000,000
Obligation under the loan and security agreement............ 283,890
----------
4,283,890
Less current portion........................................ (550,436)
----------
Long-term debt.............................................. $3,733,454
==========
</TABLE>
Maturities of long-term debt of the Company as of September 30, 1999 are as
follow:
<TABLE>
<S> <C>
Year ending September 30:
2000........................................... $ 550,436
2001........................................... 1,695,610
2002........................................... 1,873,163
2003........................................... 164,681
----------
$4,283,890
==========
</TABLE>
6. RECAPITALIZATION
On February 13, 1998, the Company's then majority stockholder, Toyo
Information Systems (TIS), relinquished all of its shares of Preferred Stock
Series A and B and notes payable, together with accrued interest thereon of
$4,837,926, for 3,200,000 shares of Preferred Stock Series 1. In connection with
this transaction (Recapitalization), the Company surrendered certain rights
under an existing license agreement with TIS. Prior to the Recapitalization, the
Company and TIS were parties to a license agreement (License Agreement) whereby
TIS was obligated to pay the Company a 30% royalty on certain sales in Japan of
its product containing the Company's proprietary technology. Contemporaneous
with the Recapitalization, the Company waived its rights to future royalties
under this License Agreement for up to ten years. The Company obtained an
independent appraisal of the value of the royalty waiver to determine the amount
attributable to the transfer of the license to TIS as a return of capital in
conjunction with the relinquishment of previously outstanding Preferred Stock
and notes payable. The value of the royalty waiver of $1,800,000 has been
recognized as a deferred credit on the balance sheet, with a corresponding
reduction to stockholders' equity. The deferred credit will be recognized in
income as TIS completes sales
F-26
<PAGE> 153
OBERON SOFTWARE INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
of the Company's products in Japan for which a royalty would otherwise have been
payable. In the event the deferred credit is not fully recognized in income upon
the expiration of the License Agreement, the remaining balance will be credited
to additional paid-in capital.
7. PREFERRED STOCK
The Company's authorized capital includes Convertible Preferred Stock,
Series 1 Participating (Series 1) and Series 2 Non-Participating (Series 2).
Series 1 and 2 have been designated and issued. At September 30, 1999, Series 1
and 2 Preferred Stock represented all of the issued Convertible Preferred Stock.
CONVERSION
Each share of Series 1 and 2 Preferred Stock is convertible at the
stockholder's option. Each share of Series 1 and 2 Preferred Stock may be
converted into shares of Common Stock at an initial conversion prices of $1.00
and $2.50 per share, respectively, as adjusted from time to time by a conversion
factor (the Conversion Price).
The shares will automatically convert into Common Stock at the then
effective Conversion Price upon the closing of a public offering of the
Company's Common Stock pursuant to an effective registration statement under the
Securities Act of 1933.
DIVIDENDS
The holders of Series 1 and 2 Preferred Stock shall be entitled to receive,
when and if declared by the Board of Directors of the Company, dividends in the
same amount per share as would be payable on the number of shares of Common
Stock into which the Preferred Stock is then convertible, payable in preference
and priority to any payment of any cash dividend on Common Stock or any other
class of stock or series thereof.
VOTING
Series 1 and Series 2 Preferred shares are entitled to a number of votes on
any matter submitted to the stockholders of the Company equal to the number of
shares of Common Stock into which they are convertible.
LIQUIDATION
Upon any liquidation of the Company, the holder of each share of Series 1
Preferred Stock shall be first entitled, before any distribution or payment is
made to holders of Series 2 Preferred Stock and Common Stock, to be paid $1.00
per share plus any declared and unpaid dividends thereon. Additionally, after
such payments have been made in full to the holders of Series 1 Preferred Stock,
Series 2 Preferred Stock shall be entitled, before any distribution or payment
is made to holders of Common Stock, to be paid $2.50 per share plus any declared
and unpaid dividends thereon. After payments have been made in full, such
holders of Series 1 Preferred Stock will participate with the holders of Common
Stock in the distribution of any remaining assets not to exceed $4.00 per share,
adjusted appropriately for stock splits, stock dividends and the like.
WARRANTS
During 1998, in connection with the issuance of Series 1 Convertible
Preferred Stock, the Company issued warrants to purchase 3,075,006 shares of the
Company's Common Stock. The warrants are not
F-27
<PAGE> 154
OBERON SOFTWARE INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
detachable, have an exercise price of $.02 and a term of five years. As of
September 30, 1999, warrants to purchase 3,037,506 shares of common stock had
been exercised.
In connection with entering into a Lease Agreement with Comdisco
Incorporated, the Company issued warrants to purchase 20,000 shares of the
Company's Series 2 Convertible Non-Participating Preferred Stock at an exercise
price of $2.50. The exercise period is ten years or five years from the
effective date of the Company's initial public offering, whichever is earlier.
As of September 30, 1999, none of the warrants issued had been exercised. The
fair market value of these warrants is being amortized over the term of the
Lease Agreement.
8. STOCK OPTION PLANS
On December 27, 1990 (as amended on August 20, 1998), the Company
established a Stock Option Plan (the Plan) whereby 2,100,766 shares of Common
Stock were reserved for issuance for the benefit of employees, directors and
consultants of the Company as authorized by the Board of Directors. Under the
Plan, incentive stock options may be granted to employees and nonstatutory
options may be granted to employees, directors and consultants of the Company.
The purchase price per share of stock deliverable upon the exercise of an
incentive stock option is required to be at least 100% of the fair market value
of the stock at the date of grant. Each option granted under the Plan is
exercisable either in full or in installments as set forth in each recipient's
option agreement. Options may expire at periods set forth in each recipient's
option agreement, but no longer than ten years from the date of grant. No
options under the Plan may be granted after December 27, 2007. On August 20,
1998, the unissued options for the purchase of 102,300 shares of common stock
were transferred to the 1998 Stock Option Plan described below.
1998 STOCK OPTION PLAN
On March 23, 1998, the Company established a Stock Option Plan (1998 Plan)
whereby 3,999,234 shares of Common Stock were reserved for issuance for the
benefit of employees, directors and consultants of the Company as authorized by
the Board of Directors. Under the 1998 Plan, incentive stock options may be
granted to employees and nonstatutory options may be granted to employees,
directors and consultants of the Company.
The purchase price per share of stock deliverable upon the exercise of an
incentive stock option is required to be at least 100% of the fair market value
of the stock at the date of grant. Each option granted under the Plan is
exercisable either in full or in installments as set forth in each recipient's
option agreement. Options may expire at periods set forth in each recipient's
option agreement, but no longer than five and one-half years from the date of
grant.
F-28
<PAGE> 155
OBERON SOFTWARE INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
The following table presents the activity of the Plan for each of the three
years in the period ended September 30, 1999.
<TABLE>
<CAPTION>
1999 1998 1997
-------------------- --------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- -------- ---------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding options at beginning of
year............................. 1,782,925 $0.11 1,359,275 $0.17 846,050 $0.15
Granted............................ 1,604,000 .34 2,839,950 .03 1,175,000 .17
Exercised.......................... (233,670) .14 (2,173,600) .03 (219,462) .15
Terminated......................... (196,105) .15 (242,700) .15 (442,313) .15
--------- ----- ---------- ----- --------- -----
Outstanding options at end of
year............................. 2,957,150 .23 1,782,925 .11 1,359,275 .17
Exercisable at end of year......... 732,125 $0.14 742,304 $0.15 617,040 $0.16
========= ===== ========== ===== ========= =====
Available for grant at end of
year............................. 44,189 1,452,084 47,600
========= ========== =========
Weighted average fair value per
share of options granted during
the year......................... $0.09 $0.01 $0.04
===== ===== =====
</TABLE>
The following table represents weighted average price and life information
about significant option groups outstanding at September 30, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------------
WEIGHTED OPTIONS EXERCISABLE
AVERAGE WEIGHTED ----------------------------
OPTION REMAINING AVERAGE WEIGHTED
GRANT NUMBER CONTRACTUAL EXERCISE NUMBER AVERAGE
DATE OUTSTANDING LIFE (YRS.) PRICE EXERCISABLE EXERCISE PRICE
------ ----------- ----------- -------- ----------- --------------
<S> <C> <C> <C> <C> <C>
1990 Plan 812,850 1.9 $.17 607,750 $0.17
1998 Plan 2,144,300 4.5 .25 124,375 0.02
--------- -------
2,957,150 732,125
========= =======
</TABLE>
The pro-forma net loss and net loss per share for 1999, 1998 and 1997, if
compensation cost for the Plan had been recognized based on the fair value at
the grant date in accordance with the provisions of FAS 123, is as follows:
<TABLE>
<CAPTION>
NET LOSS
NET LOSS PER SHARE
--------- ----------
<S> <C> <C>
1999 6,302,696 $ 1.05
1998 5,019,458 2.56
1997 5,958,660 10.20
</TABLE>
The fair value of options at the date of grant were estimated using the
Minimum Value model with an estimated weighted average life of five years from
the date of grant, assuming a risk free interest rate of approximately 6.0%. The
Company does not intend to declare dividends on its common stock.
9. 401(k) PLAN
In April 1997, the Company established the Oberon Software Incorporated
401(k) Plan (the Plan) without employer contributions. The Plan is maintained in
accordance with the provisions of section 401(k) of the Internal Revenue Code
(the Code) and allows all employees who have attained the age 21 to make annual
tax-deferred voluntary contributions of up to the maximum percentage allowable
under the Code.
F-29
<PAGE> 156
OBERON SOFTWARE INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1999
10. INCOME TAXES
As of September 30, 1999, the Company has net operating loss carryforwards
and research tax credit carryforwards of approximately $32,000,000 and
$1,130,000, respectively, available to reduce future federal and state income
taxes payable to the extent permitted under the Internal Revenue Code, expiring
in varying amounts through 2014. The net operating loss carryforwards and
research tax credit carryforwards will be subject to the limitations provided in
IRC sections 382 and 383.
The Company has a net deferred tax asset balance at September 30, 1999 and
1998 which is comprised as follows:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Net loss carry forward...................................... $ 12,800,000 $ 10,500,000
Research and development credit carry forward............... 1,130,000 818,000
Deferred credit............................................. 617,000 653,000
Accrued expenses............................................ 77,000 42,000
Depreciation and amortization............................... 131,000 4,000
------------ ------------
Total deferred tax assets................................... 14,755,000 12,017,000
Valuation allowance......................................... (14,755,000) (12,017,000)
------------ ------------
Net deferred tax assets..................................... $ 0 $ 0
============ ============
</TABLE>
11. RELATED-PARTY TRANSACTION
The Company has a long-term loan receivable of $15,008 due from related
party of the Company. Revenue recognized by the Company for the years ended
September 30, 1999 and 1998 includes software product sales and royalties to a
preferred stockholder of $90,169 and $215,731, respectively.
12. SUBSEQUENT EVENTS
The Company entered into a merger agreement with OnDisplay, Inc. on January
17, 2000. The Company expects the merger to be completed by March 31, 2000.
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<PAGE> 157
EXECUTION COPY
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
ONDISPLAY, INC.,
OBIONE ACQUISITION CORPORATION
AND
OBERON SOFTWARE INCORPORATED
AND
JOSEPH CHAPPELL,
AS STOCKHOLDER REPRESENTATIVE
DATED AS OF JANUARY 17, 2000
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Article I THE MERGER.................................................. A-5
1.1 The Merger............................................. A-5
1.2 Effective Time......................................... A-6
1.3 Effect of the Merger................................... A-6
1.4 Certificate of Incorporation and Bylaws................ A-6
1.5 Directors and Officers................................. A-6
1.6 Effect of Merger on the Capital Stock of the
Constituent Corporations.................................... A-6
1.7 Surrender of Certificates.............................. A-8
1.8 No Further Ownership Rights in Company Common Stock.... A-9
1.9 Lost, Stolen or Destroyed Certificates................. A-9
1.10 Tax Consequences....................................... A-9
1.11 Lock-up................................................ A-9
1.12 Definitions............................................ A-10
1.13 Taking of Necessary Action; Further Action............. A-11
Article II REPRESENTATIONS AND WARRANTIES OF THE COMPANY............... A-11
2.1 Organization of the Company............................ A-12
2.2 Company Capital Structure.............................. A-12
2.3 Authority.............................................. A-12
2.4 No Conflict............................................ A-13
2.5 Consents............................................... A-13
2.6 Company Financial Statements........................... A-13
2.7 No Undisclosed Liabilities............................. A-13
2.8 No Changes............................................. A-13
2.9 Tax Matters............................................ A-15
2.10 Restrictions on Business Activities.................... A-16
2.11 Title of Properties; Absence of Liens and
Encumbrances................................................ A-17
2.12 Intellectual Property.................................. A-17
2.13 Agreements, Contracts and Commitments.................. A-19
2.14 Interested Party Transactions.......................... A-20
2.15 Governmental Authorization............................. A-20
2.16 Litigation............................................. A-20
2.17 Minute Books........................................... A-20
2.18 Environmental Matters.................................. A-20
2.19 Brokers' and Finders' Fees; Third Party Expenses....... A-21
2.20 Employee Benefit Plan and Compensation................. A-21
2.21 Insurance.............................................. A-24
2.22 Compliance with Laws................................... A-24
2.23 Representations Complete............................... A-24
Article III REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB............ A-24
3.1 Organization, Standing and Power....................... A-24
3.2 Authority.............................................. A-24
3.3 Consents............................................... A-25
3.4 Parent Common Stock.................................... A-25
3.5 Intellectual Property.................................. A-25
</TABLE>
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<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
3.6 Litigation............................................. A-25
3.7 SEC Reports; Financial Statements...................... A-25
3.8 Representations Complete............................... A-26
Article IV CONDUCT PRIOR TO THE EFFECTIVE TIME......................... A-26
4.1 Conduct of Business of the Company..................... A-26
4.2 No Solicitation........................................ A-28
Article V ADDITIONAL AGREEMENTS....................................... A-28
5.1 Information Statement; Registration Statement; Other
Filings..................................................... A-28
5.2 Access to Information.................................. A-30
5.3 Confidentiality........................................ A-30
5.4 Expenses............................................... A-30
5.5 Public Disclosure...................................... A-30
5.6 FIRPTA Compliance...................................... A-30
5.7 Reasonable Efforts..................................... A-30
5.8 Notification of Certain Matters........................ A-30
5.9 Additional Documents and Further Assurances............ A-31
5.10 S-8 Registration....................................... A-31
5.11 Employee Arrangements and Items........................ A-31
5.12 Affiliate Agreements................................... A-31
5.13 Nasdaq Listing......................................... A-32
5.14 Indemnification and Insurance.......................... A-32
5.15 Termination of 401(k) Plan............................. A-32
5.16 Termination of Severance Plans......................... A-32
Article VI CONDITIONS TO THE MERGER.................................... A-32
6.1 Conditions to Obligations of Each Party to Effect the
Merger...................................................... A-32
6.2 Conditions to the Obligations of Parent and Sub........ A-33
6.3 Conditions to Obligations of the Company............... A-34
Article VII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW.......... A-34
7.1 Survival of Representations, Warranties and
Covenants................................................... A-34
7.2 Indemnification........................................ A-35
7.3 Escrow Arrangements.................................... A-35
7.4 Stockholder Representative............................. A-40
7.5 Maximum Payments; Remedy............................... A-40
Article VIII TERMINATION, AMENDMENT AND WAIVER........................... A-41
8.1 Termination............................................ A-41
8.2 Effect of Termination.................................. A-41
8.3 Amendment.............................................. A-41
8.4 Extension; Waiver...................................... A-41
Article IX GENERAL PROVISIONS.......................................... A-42
9.1 Notices................................................ A-42
9.2 Interpretation......................................... A-42
9.3 Counterparts........................................... A-42
9.4 Entire Agreement; Assignment........................... A-43
</TABLE>
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<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
9.5 Severability........................................... A-43
9.6 Other Remedies......................................... A-43
9.7 Governing Law.......................................... A-43
9.8 Rules of Construction.................................. A-43
9.8 Rules of Construction.................................. A-43
</TABLE>
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EXECUTION COPY
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into as of January 17, 2000 by and among OnDisplay, Inc., a Delaware
corporation ("Parent"), ObiOne Acquisition Corporation, a Delaware corporation
and a wholly-owned subsidiary of Parent ("Sub"), Oberon Software Incorporated, a
Massachusetts corporation (the "Company"), and with respect to Article VII and
Article IX hereof, Joseph Chappell (the "Stockholder Representative").
RECITALS
A. The Boards of Directors of each of Parent, Sub and the Company believe
it is in the best interests of each company and its respective stockholders that
Parent acquire the Company through the statutory merger of Sub with and into the
Company (the "Merger") and, in furtherance thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, (i) all of the issued and
outstanding Company Capital Stock shall be converted into the right to receive
the consideration set forth herein, and (ii) the stock option plans of the
Company and all issued and outstanding options to purchase capital stock of the
Company shall be assumed by the Surviving Corporation with shares of common
stock of Parent being substituted for the shares of capital stock of the Company
issuable thereunder.
C. A portion of the consideration otherwise payable by Parent in connection
with the Merger in respect of outstanding Company Capital Stock shall be placed
in escrow by Parent as security for the indemnification obligations set forth in
this Agreement.
D. Concurrent with the execution and delivery of this Agreement, as a
material inducement to Parent and Sub to enter into this Agreement, certain
stockholders of the Company are entering into Voting Agreements, in the form
attached hereto as Exhibit A (the "Voting Agreements"), with Parent, certain
employees of the Company are entering into Non-Competition Agreements in the
form attached hereto as Exhibit B, and certain other employees of the Company
are entering into Non-Competition Agreements in the form attached hereto as
Exhibit B-1 (together with Exhibit B, the "Non-Competition Agreements").
E. Concurrent with the execution and delivery of this Agreement, as a
material inducement to the Company to enter into this Agreement, certain
stockholders of Parent are entering Parent Voting Agreements in the form
attached hereto as Exhibit C (the "Parent Voting Agreements").
F. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended.
NOW, THEREFORE, in consideration of the mutual agreements, covenants and
other promises set forth herein, the mutual benefits to be gained by the
performance thereof, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged and accepted, the parties
hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2 hereof)
and subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the General Corporation Law of the Commonwealth of
Massachusetts ("Massachusetts Law"), Sub shall be merged with and into the
Company, the separate corporate existence of Sub shall cease and the Company
shall continue as the surviving corporation and as a wholly-owned subsidiary of
Parent. The surviving corporation after the Merger is sometimes referred to
hereinafter as the "Surviving Corporation."
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1.2 Effective Time. Unless this Agreement is earlier terminated pursuant
to Section 8.1 hereof, the closing of the Merger (the "Closing") will take place
as promptly as practicable after the execution and delivery hereof by the
parties hereto, but no later than five (5) business days following satisfaction
or waiver of the conditions set forth in Article VI hereof, at the offices of
Wilson Sonsini Goodrich & Rosati, Professional Corporation, Spear Street Tower,
One Market, San Francisco, California, 94105, unless another time and/or place
is mutually agreed upon in writing by Parent and the Company. The date upon
which the Closing actually occurs shall be referred to herein as the "Closing
Date." On the Closing Date, the parties hereto shall cause the Merger to be
consummated by filing Articles of Merger (or like instrument) with the Secretary
of the Commonwealth of Massachusetts (the "Articles of Merger"), in accordance
with the applicable provisions of Massachusetts Law (the time of acceptance by
the Secretary of the Commonwealth of Massachusetts of such filing, or such later
time as may be specified in the Articles of Merger, shall be referred to herein
as the "Effective Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in the applicable provisions of Massachusetts Law. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, except as otherwise agreed to pursuant to the terms of this Agreement, all
the property, rights, privileges, powers and franchises of the Company and Sub
shall vest in the Surviving Corporation, and all debts, liabilities and duties
of the Company and Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
1.4 Certificate of Incorporation and Bylaws.
(a) Unless otherwise determined by Parent prior to the Effective Time, the
articles of organization of Sub, as in effect immediately prior to the Effective
Time, shall be the articles of organization of the Surviving Corporation at the
Effective Time until thereafter amended in accordance with Massachusetts Law and
as provided in such articles of organization; provided, however, that at the
Effective Time, Article I of the Articles of Organization of the Surviving
Corporation shall be amended and restated in its entirety to read as follows:
"The name of the corporation is Oberon Software Incorporated."
(b) Unless otherwise determined by Parent prior to the Effective Time, the
bylaws of Sub immediately prior to the Effective Time, shall be the bylaws of
the Surviving Corporation at the Effective Time until thereafter amended in
accordance with Massachusetts Law and as provided in the articles of
organization of the Surviving Corporation and such bylaws.
1.5 Directors and Officers.
(a) Unless otherwise determined by Parent prior to the Effective Time, the
directors of Sub immediately prior to the Effective Time shall be the directors
of the Surviving Corporation immediately after the Effective Time, each to hold
the office of a director of the Surviving Corporation in accordance with the
provisions of Massachusetts Law and the articles of organization and bylaws of
the Surviving Corporation until their successors are duly elected and qualified.
(b) Unless otherwise determined by Parent prior to the Effective Time or as
otherwise provided herein, the officers of the Company immediately prior to the
Effective Time shall be the officers of the Surviving Corporation immediately
after the Effective Time, each to hold office in accordance with the provisions
of the bylaws of the Surviving Corporation.
1.6 Effect of Merger on the Capital Stock of the Constituent
Corporations.
(a) Conversion of Company Capital Stock. At the Effective Time, each
outstanding share of Company Common Stock and Preferred (collectively, the
"Company Capital Stock"), upon the terms and subject to the conditions set forth
below and throughout this Agreement, will be canceled and extinguished and be
converted automatically into the right to receive such number of shares of
Parent Common Stock equal to the Exchange Ratio, upon the terms and subject to
conditions set forth in this Section 1.6 and throughout this Agreement,
including, without limitation, the escrow provisions set forth in Article VII
hereof.
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<PAGE> 163
(b) Assumption of Company Plans and Options. As soon as practicable
following the Closing but effective as of the Effective Time, the Company's 1990
and 1998 Stock Incentive Plans (collectively, the "Plan") and each Company
Option shall be assumed by the Surviving Corporation. Each Company Option so
assumed by Parent pursuant to this Section 1.6(b) shall continue to have, and be
subject to, the same terms and conditions (including vesting terms) set forth in
the Plan, and the option agreements relating thereto, as in effect immediately
prior to the Effective Time, except that (A) such assumed Company Option will be
exercisable for that number of whole shares of Parent Common Stock equal to the
product of the number of shares of Company Common Stock that were issuable upon
exercise of such Company Option immediately prior to the Effective Time
multiplied by the Exchange Ratio, rounded down to the nearest whole number of
shares of Parent Common Stock, and (B) the per share exercise price for the
shares of Parent Common Stock issuable upon exercise of such assumed Company
Option shall be equal to the quotient obtained by dividing the exercise price
per share of Company Common Stock at which such assumed Company Option was
exercisable immediately prior to the Closing Date by the Exchange Ratio, rounded
up to the nearest whole cent. Parent will issue to each holder of an outstanding
Company Stock Option a notice describing the foregoing assumption of such
Company Stock Option by Parent. It is intended that Company Stock Options
assumed by the Surviving Corporation shall qualify following the Effective Time
as incentive stock options as defined in Section 422 of the Code to the extent
Company Stock Options qualified as incentive stock options immediately prior to
the Effective Time and the provisions of this Section 1.6(b) shall be applied
consistent with such intent.
(c) Withholding Taxes. Any amounts payable to any Stockholder pursuant to
this Section 1.6 shall be subject to, and reduced by an amount equal to, the
amount of any state, federal and foreign withholding taxes incurred (and not
previously paid by or on behalf of such stockholder of the Company) in
connection with the acquisition of Company Common Stock or Preferred upon the
exercise of Company Options, upon the lapsing of repurchase rights in respect of
shares of Company Common Stock, or upon payment of a bonus in the form of
Company Common Stock, if any, to such stockholder.
(d) Stockholder Loans. In the event that any Stockholder has outstanding
loans from the Company as of the Effective Time, the consideration payable to
such stockholder pursuant to this Section 1.6 shall be reduced by an amount
equal to the outstanding principal plus accrued interest of such stockholder's
loans as of the Effective Time.
(e) Capital Stock of Sub. Each share of common stock of Sub issued and
outstanding immediately prior to the Effective Time shall be converted into and
exchanged for one validly issued, fully paid and nonassessable share of common
stock of the Surviving Corporation. Each stock certificate of Sub evidencing
ownership of any such shares shall continue to evidence ownership of such shares
of capital stock of the Surviving Corporation.
(f) Fractional Shares. No fraction of a share of Parent Common Stock will
be issued, but in lieu thereof, each holder of shares of Company Common Stock
and Preferred (including Company Common Stock issuable upon exercise of
outstanding Company Options at the Effective Time) who would otherwise be
entitled to a fraction of a share of Parent Common Stock (after aggregating all
fractional shares of Parent Common Stock to be received by such holder) shall be
entitled to receive from Parent an amount of cash (rounded to the nearest whole
cent) equal to the product of (i) such fraction, multiplied by (ii) the Trading
Price.
(g) Sufficient Reserved Shares. Parent will reserve sufficient shares of
Parent Common Stock for issuance under this Section 1.6.
(h) Adjustments to Exchange Ratio. The Exchange Ratio shall be adjusted to
reflect appropriately the effect of any stock split, reverse stock split, stock
dividend (including any dividend or distribution of securities convertible into
Parent Common Stock or Company Common Stock or Preferred), reorganization,
recapitalization, reclassification or other like change with respect to Parent
Common Stock or Company Common Stock or Preferred occurring on or after the date
hereof and prior to the Effective Time.
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1.7 Surrender of Certificates.
(a) Exchange Agent. The Corporate Secretary of Parent shall serve as the
exchange agent (the "Exchange Agent") for the Merger.
(b) Parent to Provide Parent Common Stock. Promptly after the Effective
Time, Parent shall make available to the Exchange Agent for exchange in
accordance with this Article I the shares of Parent Common Stock issuable
pursuant to Section 1.6 in exchange for outstanding shares of Company Common
Stock and Preferred; provided that, on behalf of the Stockholders, Parent shall
deposit into the Escrow Fund (as defined in Section 7.3(a)) a number of shares
of Parent Common Stock equal to the Escrow Amount out of the aggregate number of
shares of Parent Common Stock otherwise issuable to the Stockholders pursuant to
Section 1.6. Each Stockholder shall be deemed to have contributed his or her Pro
Rata Portion of the Escrow Amount to the Escrow Fund (as defined in Section
7.3(a) below).
(c) Exchange Procedures. On or promptly after the Effective Time, the
Stockholders will surrender the certificates representing their Company Common
Stock and Preferred (the "Stock Certificates") to the Exchange Agent for
cancellation together with a letter of transmittal in such form and having such
provisions that Parent may reasonably request. Upon surrender of a Stock
Certificate for cancellation to the Exchange Agent, or such other agent or
agents as may be appointed by Parent, together with such letter of transmittal,
duly completed and validly executed in accordance with the instructions thereto,
subject to the terms of Section 1.7(f) hereof, the holder of such Stock
Certificate shall be entitled to receive from the Exchange Agent in exchange
therefor a certificate representing the number of whole shares of Parent Common
Stock (less the number of shares of Parent Common Stock to be deposited in the
Escrow Fund on such holder's behalf pursuant to Section 1.7(b) above and Article
VII hereof), and the Stock Certificate so surrendered shall be canceled. Until
so surrendered, each outstanding Stock Certificate will be deemed from and after
the Effective Time, and for all corporate purposes, to evidence only the
ownership of the number of full shares of Parent Common Stock into which such
shares of Company Common Stock and Preferred shall have been so converted.
(d) Dissenting Stockholders.
(i) Notwithstanding any provision of this Agreement to the contrary,
any shares of Company Common Stock or Preferred held by a holder who,
immediately prior to the Effective Time, acting in accordance with Sections
86 to 98 of Chapter 156B of the Massachusetts Law, (i) prior to the special
meeting at which the Stockholders vote to approve the Merger (the "Special
Meeting") has delivered to the Company written notice of his intention to
demand payment for his shares of Company Common Stock or Preferred if the
Merger is effectuated and (ii) has not voted in favor of the Merger, shall
not have his shares of Company Common Stock or Preferred converted into a
right to receive shares of Parent Common Stock. If, however, after the
Effective Time such holder withdraws or loses his right to demand payment
for his Company Common Stock or Preferred, such Company Common Stock or
Preferred shall be treated as if it had been converted as of the Effective
Time and (i) as of the occurrence of such event, such holder's Company
Common Stock or Preferred shall treated as if it had been converted as of
the Effective Time into the right to receive that number of shares of
Parent Common Stock as is set forth Section 1.6 hereof, and (ii) promptly
following the occurrence of such event, the Parent shall deliver to the
Exchange Agent a certificate representing 90% of the shares of Parent
Common Stock to which such holder is entitled pursuant to Section 1.6(a)
and shall deliver to the Escrow Agent a certificate representing the
remaining 10% of the shares of Parent Common Stock to which such holder is
entitled pursuant to Section 1.6(a) (which shares shall be considered part
of the Escrow Fund for all purposes of this Agreement).
(ii) The Company shall give the Parent (i) prompt notice of any
written demands for payment of any Company Common Stock or Preferred,
withdrawals of such demands, and any other instruments that relate to such
demands received by the Company and (ii) the opportunity to direct all
negotiations and proceedings with respect to demands for appraisal under
the Massachusetts Law. The Company shall not, except with the prior written
consent of Parent, make any payment with
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respect to any demands for appraisal of Company Common Stock or Preferred
or offer to settle or settle any such demands.
(e) Distributions With Respect to Unexchanged Shares. No dividends or other
distributions declared or made after the Effective Time with respect to Parent
Common Stock with a record date after the Effective Time will be paid to the
holder of any unsurrendered Stock Certificate with respect to the shares of
Parent Common Stock represented thereby until the holder of record of such Stock
Certificate shall surrender such Stock Certificate. Subject to applicable law,
following surrender of any such Stock Certificate, there shall be paid to the
record holder of the certificates representing whole shares of Parent Common
Stock issued in exchange therefor, without interest, at the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such whole shares of
Parent Common Stock.
(f) Transfers of Ownership. If any certificate for shares of Parent Common
Stock is to be issued in a name other than that in which the certificate
surrendered in exchange therefor is registered, it will be a condition of the
issuance and/or delivery thereof that the certificate so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange will have paid to Parent or any agent designated by it
any transfer or other taxes required by reason of the issuance of a certificate
for shares of Parent Common Stock in any name other than that of the registered
holder of the certificate surrendered, or established to the satisfaction of
Parent or any agent designated by it that such tax has been paid or is not
payable.
(g) No Liability. Notwithstanding anything to the contrary in this Section
1.7 hereof, neither the Exchange Agent, the Surviving Corporation nor any party
hereto shall be liable to a holder of shares of Company Common Stock or
Preferred for any amount properly paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
1.8 No Further Ownership Rights in Company Common Stock. The shares of
Parent Common Stock paid in respect of the surrender for exchange of shares of
Company Common Stock and Preferred in accordance with the terms hereof, shall be
deemed to be full satisfaction of all rights pertaining to such shares of
Company Common Stock and Preferred, and there shall be no further registration
of transfers on the records of the Surviving Corporation of shares of Company
Common Stock and Preferred which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Stock Certificates are presented
to the Surviving Corporation for any reason, they shall be canceled and
exchanged as provided in this Article I.
1.9 Lost, Stolen or Destroyed Certificates. In the event any certificates
evidencing shares of Company Common Stock/Preferred shall have been lost, stolen
or destroyed, the Exchange Agent shall issue in exchange for such lost, stolen
or destroyed certificates, upon the making of an affidavit of that fact by the
holder thereof, such amount, if any, as may be required pursuant to Section 1.6
hereof; provided, however, that Parent may, in its discretion and as a condition
precedent to the issuance thereof, require the stockholder who is the owner of
such lost, stolen or destroyed certificates to deliver a bond in such amount as
it may reasonably direct against any claim that may be made against Parent or
the Exchange Agent with respect to the certificates alleged to have been lost,
stolen or destroyed.
1.10 Tax Consequences. It is intended by the parties hereto that the
Merger shall constitute a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code").
1.11 Lock-up. Each share of Parent Common Stock constituting Merger Shares
may not be sold, transferred, hypothecated, pledged or otherwise transferred,
without the prior written consent of Parent, prior to the earlier of (i) July
18, 2000 or (ii) the date on which any holders of Parent Common Stock that
executed agreements with Fleet Boston, Robertson Stephens, Inc., Deutsche Bank
AG, London Alex. Brown and Society General S.A. in connection with the initial
public offering of the Parent Common Stock are permitted to sell shares of
Parent Common Stock in an offering or otherwise. Parent may, in its
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sole discretion, legend the Merger Shares to give effect to this Section 1.11
and place stop transfer instructions with Parent's stock transfer agent to
enforce this Section 1.11.
1.12 Definitions. For all purposes of this Agreement, the following terms
shall have the following respective meanings:
"Company Common Stock" shall mean shares of common stock, $.01 par
value, of the Company.
"Company Material Adverse Effect" shall mean, for purposes of this
Agreement, any change, event or effect that is materially adverse to the
business, assets (including intangible assets), condition (financial or
otherwise) or results of operations of the Company and its subsidiaries,
taken as a whole except for those changes, events and effects that are
caused by (i) conditions affecting the United States economy as a whole,
(ii) conditions affecting the industry in which Company competes as a
whole, (iii) conditions resulting from the announcement or the pendency of
the Merger, or (iv) actions that the Parent may take or not take in
response to requests made by the Company for permission to take actions
prohibited by, or to refrain from taking actions required by, Section 4.1.
"Company Options" shall mean all issued and outstanding options,
warrants or other rights to purchase or otherwise acquire Company Common
Stock (whether or not vested) held by any person or entity.
"Escrow Agent" means a financial institution selected by Parent and
reasonably acceptable to the Company to act hereunder as escrow agent.
"Escrow Amount" shall mean, with respect to each Stockholder, an
amount of Parent Common Stock equal to ten (10%) percent of the Merger
Shares issued to such Stockholder pursuant to Section 1.6.
"Estimated Third Party Expenses" shall mean the amount of Third Party
Expenses (as defined in Section 5.4) payable by the Company estimated by
the Company in good faith and based on reasonable assumptions of the
Closing Date.
"Exchange Ratio" shall mean an amount equal to the quotient obtained
by dividing (x) the Merger Shares, by (y) the Total Outstanding Shares.
"GAAP" shall mean United States generally accepted accounting
principles consistently applied.
"Knowledge" shall mean with respect to the Company, the knowledge of
the Company's officers, directors and other managers, provided that such
persons shall have made due and diligent inquiry of those employees and
contract workers of the Company whom such officers, directors and managers
reasonably believe would have actual knowledge of the matters represented.
"Merger Shares" shall mean the number of shares of Parent Common Stock
equal to the quotient of (x) the Total Consideration divided by (y) the
Trading Price.
"Parent Common Stock" shall mean registered shares of common stock,
par value $0.001 per share, of Parent.
"Parent Material Adverse Effect" shall mean, for purposes of this
Agreement, any change, event or effect that is materially adverse to the
business, assets (including intangible assets), condition (financial or
otherwise) or results of operations of Parent and its subsidiaries, taken
as a whole (except for those changes, events and effects that are caused by
(i) conditions affecting the United States economy as a whole, (ii)
conditions affecting the industry in which Parent competes as a whole,
(iii) conditions resulting from the announcement or the pendency of the
Merger, (iv) or any decline in Parent's stock price).
"Parent Option" shall mean any option to purchase shares of Parent
Common Stock issued pursuant to the terms of Section 1.6(e) hereof in
connection with the assumption of a Company Option.
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"Preferred" shall mean the Series 1 Participating Convertible
Preferred Stock, $0.01 par value and the Series 2, Non-Participating
Convertible Preferred Stock, $0.01 par value, of the Company.
"Pro Rata Portion" shall mean with respect to each Stockholder an
amount equal to the quotient obtained by dividing (x) the number of shares
of Company Common Stock owned by such Stockholder as of the Effective Time,
including shares of Company Common Stock obtainable upon conversion of the
Preferred by (y) the aggregate number of shares of Company Common Stock
owned by all Stockholders as of the Effective Time, including all shares of
Company Common Stock obtainable upon conversion of all Preferred issued and
outstanding immediately prior to the Effective Time.
"Retention Options" means up to 680,789 options to be granted, unless
otherwise determined by Parent, to the persons indicated, and in the
amounts indicated on Exhibit D-1 hereto which options shall (i) be granted
under the Company's 1998 Stock Incentive Plan, (ii) shall have no
acceleration or similar provisions (other than acceleration upon a change
of control of Parent), (iii) 25% of which shall vest on the one-year
anniversary of the Effective Time and the remainder quarterly over the
ensuing 36 months following such one-year anniversary, (iv) shall have an
exercise price of not less than $2.50 per share and (v) which shall be
otherwise in form and substance satisfactory to Parent.
"Stockholder" shall mean each holder of any Company Common Stock and
Preferred immediately prior to the Effective Time.
"Total Consideration" shall be an amount equal to (x) $200,000,000
less the amount, if any, by which the Estimated Third Party Expenses exceed
$750,000 plus an amount equal to the exercise price of all unexercised
Company options, warrants and conversion of Comdisco debt referred to in
the Company Disclosure Schedule immediately prior to the Effective Time
(excluding the Retention Options).
"Total Outstanding Shares" shall be the sum of (i) the aggregate
number of shares of Company Common Stock (including any other rights
convertible into, or exercisable or exchangeable for, shares of Company
Common Stock on an as-converted, exercised or exchanged basis including,
without limitation, the Preferred) issued and outstanding immediately prior
to the Effective Time, and (ii) the aggregate number of shares of Company
Common Stock issued or issuable upon the exercise of all Company Options
and warrants outstanding immediately prior to the Effective Time, whether
vested or unvested, but excluding the Retention Options.
"Trading Price" shall mean $91.5750.
1.13 Taking of Necessary Action; Further Action. If at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company, Parent, Sub, and the officers and directors of
the Company, Parent and Sub are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY
The Company hereby represents and warrants to Parent and Sub, subject to
such exceptions as are specifically disclosed in the disclosure letter
(referencing the appropriate section and paragraph numbers) supplied by the
Company to Parent (the "Company Disclosure Schedule") and dated as of the date
hereof, that on the date hereof and (except as otherwise noted) as of the
Effective Time as though made at the Effective Time as follows.
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2.1 Organization of the Company. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts. The Company has the corporate power to own its
properties and to carry on its business as currently conducted and as currently
contemplated to be conducted. The Company is duly qualified or licensed to do
business and in good standing as a foreign corporation in each jurisdiction in
which it conducts business except where the failure to so qualify would not have
a Company Material Adverse Effect. The Company has delivered a true and correct
copy of its articles of organization and bylaws, each as amended to date and in
full force and effect on the date hereof, to Parent. The operations now being
conducted by the Company are not now and have never been conducted by the
Company under any other name.
2.2 Company Capital Structure.
(a) The authorized capital stock of the Company consists of 25,000,000
shares of Common Stock, of which 6,368,812 shares are issued and outstanding as
of the date hereof and 31,000,000 shares of Preferred of which 14,219,598 shares
are issued and outstanding as of the date hereof. The Company Common Stock and
Preferred are held by the persons and in the amounts set forth in Section 2.2(a)
of the Company Disclosure Schedule. All outstanding shares of Company Common
Stock and Preferred are duly authorized, validly issued, fully paid and
non-assessable and not subject to preemptive rights created by statute, the
articles of organization or bylaws of the Company, and were issued free of any
similar rights under any agreement to which the Company is a party or by which
it is bound, and have been issued in compliance with federal and state
securities laws. There are no declared or accrued but unpaid dividends with
respect to any shares of Company Common Stock or Preferred. The Company has no
other capital stock authorized, issued or outstanding.
(b) Except for the Plan, the Company has never adopted or maintained any
stock option plan or other plan providing for equity compensation of any person.
The Company has reserved 3,764,689 shares of Company Common Stock for issuance
to employees, contract workers and directors of, and consultants to, the Company
upon the exercise of options granted under the Plan, of which 3,058,400 shares
are issuable, as of the date hereof, upon the exercise of outstanding,
unexercised options granted under the Plan. Section 2.2(b) of the Company
Disclosure Schedule sets forth for each outstanding Company Option, the name of
the holder of such option and the number of shares of Company Common Stock
issuable upon the exercise of such option, the exercise price of such option,
the vesting schedule for such option, including the extent vested to date and
whether the vesting of such option will be accelerated by the transactions
contemplated by this Agreement, and whether such option is intended to qualify
as an incentive stock option as defined in Section 422 of the Code. Except for
the Company Options, there are no options, warrants, calls, rights, commitments
or agreements of any character, written or oral, to which the Company is a party
or by which it is bound obligating the Company to issue, deliver, sell,
repurchase or redeem, or cause to be issued, delivered, sold, repurchased or
redeemed, any shares of the capital stock of the Company or obligating the
Company to grant, extend, accelerate the vesting of, change the price of,
otherwise amend or enter into any such option, warrant, call, right, commitment
or agreement. There are no outstanding or authorized stock appreciation, phantom
stock, profit participation, or other similar rights with respect to the
Company. Except as contemplated hereby, there are no voting trusts, proxies, or
other agreements or understandings with respect to the voting stock of the
Company.
2.3 Authority. The Company has all requisite corporate power and authority
to enter into this Agreement and any Related Agreements (as hereinafter defined
in this Section 2.3) to which it is a party and to consummate the transactions
contemplated hereby and thereby, subject to approval of this Agreement and the
Merger by the Stockholders. The execution and delivery of this Agreement and any
Related Agreements to which the Company is a party and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of the Company, and no further action is
required on the part of the Company to authorize the Agreement and any Related
Agreements to which it is a party and the transactions contemplated hereby and
thereby, subject only to the approval of this Agreement and the Merger by the
Stockholders. This Agreement and the Merger have been unanimously approved by
the Board of Directors of the Company. This Agreement and each of the Related
Agreements to which the Company is a party has been duly executed and
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delivered by the Company and assuming the due authorization, execution and
delivery by the other parties hereto and thereto, constitute the valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as such enforceability may be
subject to the laws of general application relating to bankruptcy, insolvency
and the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies. For all purposes of this
Agreement, the term "Related Agreements" shall mean the Voting Agreements and
the Articles of Merger.
2.4 No Conflict. The execution and delivery by the Company of this
Agreement and any Related Agreement to which the Company is a party, and the
consummation of the transactions contemplated hereby and thereby, will not
conflict with or result in any violation of or default under (with or without
notice or lapse of time, or both) or give rise to a right of termination,
cancellation, modification or acceleration of any obligation or loss of any
benefit under (any such event, a "Conflict") (i) any provision of the articles
of organization or bylaws of the Company, (ii) any mortgage, indenture, lease,
contract, covenant or other agreement, instrument or commitment, permit,
concession, franchise or license to which the Company or any of its properties
or assets (including intangible assets), is subject, or (iii) any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to the
Company or any of its properties (tangible and intangible) or assets except with
respect to such conflicts, violations or defaults, in the case of clauses (ii)
and (iii), that would not in the aggregate have a Company Material Adverse
Effect.
2.5 No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with any court, administrative agency or
commission or other federal, state, county, local or other foreign governmental
authority, instrumentality, agency or commission (each, a "Governmental Entity")
or any third party, including a party to any agreement with the Company (so as
not to trigger any Conflict), is required by or with respect to the Company in
connection with the execution and delivery of this Agreement and any Related
Agreement to which the Company is a party or the consummation of the
transactions contemplated hereby and thereby, except for (i) orders,
authorizations, registrations, declarations and filings as may be required under
applicable securities laws, (ii) the filing of the Articles of Merger with the
Secretary of the Commonwealth of the Commonwealth of Massachusetts, and (iii)
such other consents, waivers, approvals, orders, authorizations, registrations,
declarations or filings which if not obtained or made would not have a Company
Material Adverse Effect or otherwise have a material adverse effect on the
ability of the parties to consummate the Merger.
2.6 Company Financial Statements. The Company has provided to Parent its
balance sheet as of December 31, 1999 (the "Current Balance Sheet"), and the
related unaudited statements of income, cash flow and stockholders' equity for
the periods then ended (the "Financials"). The Financials are correct in all
material respects and have been prepared in accordance with GAAP consistently
applied on a basis consistent throughout the periods indicated and consistent
with each other (except that such financials do not contain footnotes and other
presentation items that may be required by GAAP). The Financials present fairly
the financial condition, operating results and cash flows of the Company as of
the dates and during the periods indicated therein.
2.7 No Undisclosed Liabilities. The Company has no liability,
indebtedness, obligation, expense, claim, deficiency, guaranty or endorsement of
any type, whether accrued, absolute, contingent, matured, unmatured or other,
that are required to be reflected in financial statements in accordance with
GAAP, except for liabilities (i) reflected in the Financials, or (ii)
liabilities that have arisen in the ordinary course of business consistent with
past practices since December 31, 1999.
2.8 No Changes. Since September 30 ,1999 there has not been, occurred or
arisen any:
(a) amendments or changes to the articles of organization of the
Company;
(b) amendments or changes to the bylaws of the Company;
(c) payment, discharge or satisfaction, in any amount in excess of
$25,000 in any one case, or $100,000 in the aggregate, of any claim,
liability or obligation (absolute, accrued, asserted or
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unasserted, contingent or otherwise), other than payment, discharge or
satisfaction in the ordinary course of business;
(d) destruction of, damage to or loss of any material assets, material
business or material customer of the Company (whether or not covered by
insurance);
(e) claim of wrongful discharge or other unlawful labor practice or
action or any attempt to unionize employees;
(f) change in accounting methods or practices (including any change in
depreciation or amortization policies or rates) by the Company other than
as required by GAAP;
(g) change in any material election in respect of Taxes (as defined
below), adoption or change in any accounting method in respect of Taxes,
agreement or settlement of any claim or assessment in respect of Taxes, or
extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes;
(h) revaluation by the Company of any of its assets;
(i) declaration, setting aside or payment of a dividend or other
distribution (whether in cash, stock or property) in respect of any Company
Common Stock or Preferred, or any split, combination or reclassification in
respect of any shares of Company Common Stock or Preferred, or any issuance
or authorization of any issuance of any other securities in respect of, in
lieu of or in substitution for shares of Company Common Stock or Preferred,
or any direct or indirect repurchase, redemption, or other acquisition by
the Company of any shares of Company Common Stock or Preferred (or options,
warrants or other rights convertible into, exercisable or exchangeable
therefor), except for the issuance of Company Options set forth in Section
2.2(b) of the Company Disclosure Schedule or issuance of shares of Company
Common Stock in accordance with the agreements evidencing Company Options;
(j) increase in the salary or other compensation payable or to become
payable by the Company to any of its officers, directors, employees,
contract workers or advisors, or the declaration, payment or commitment or
obligation of any kind for the payment by the Company of a severance
payment, termination payment, bonus or other additional salary or
compensation to any such person;
(k) other than in the ordinary course of business (which shall exclude
exclusive licenses or arrangements) entered into any agreement, contract,
covenant, instrument, lease, license or commitment to which the Company is
a party or by which it or any of its assets (including intangible assets)
are bound or permitted any termination, extension, amendment or
modification the terms of any agreement, contract, covenant, instrument,
lease, license or commitment to which the Company is a party or by which it
or any of its assets are bound;
(l) sale, lease, license (outside of the ordinary course of business)
or other disposition of any of the material assets or material properties
of the Company or any creation of any security interest in such material
assets or material properties;
(m) loan by the Company to any person or entity, incurring by the
Company of any indebtedness, guaranteeing by the Company of any
indebtedness, issuance or sale of any debt securities of the Company or
guaranteeing of any debt securities of others, except for advances to
employees or contract workers for travel and business expenses in the
ordinary course of business consistent with past practices;
(n) waiver or release of any material right or claim of the Company,
including any write-off of any account receivable of the Company;
(o) commencement, settlement, receipt of written notice of, or to the
Knowledge of the Company threat of, any lawsuit or proceeding or other
investigation against the Company or its affairs, or any reasonable basis
for any of the foregoing;
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(p) notice of any claim or potential claim of ownership by any person
other than the Company of the Company Intellectual Property (as defined in
Section 2.12 hereof) owned by or developed or created by the Company or of
infringement by the Company of any other persons Intellectual Property (as
defined in Section 2.12 hereof);
(q) issuance or sale, or contract to issue or sell, by the Company of
any shares of Company Common Stock or securities convertible into, or
exercisable or exchangeable for, shares of Company Common Stock, or any
securities, warrants, options or rights to purchase any of the foregoing,
except for issuance of Company Common Stock upon the exercise thereof;
(r) other than in the ordinary course of business (which shall exclude
exclusive licenses, distribution or similar agreements) (i) sale or
licenses of any Company Intellectual Property or entering into of any
agreement with respect to the Company Intellectual Property with any person
or entity or with respect to the intellectual property of any person or
entity, or (ii) purchase or license of any intellectual property or enter
into of any agreement with respect to the intellectual property of any
person or entity, (iii) agreement with respect to the development of any
intellectual property with a third party, or (iv) taken any action
prohibited under Section 4.1(b)(iii);
(s) agreement or modification to any agreement pursuant to which any
other party was granted marketing, distribution or similar rights of any
type or scope with respect to any products or technology of the Company
outside of the ordinary course of business;
(t) any Company Material Adverse Effect; or
(u) agreement by the Company or any officer or employee on behalf of
the Company to do any of the things described in the preceding clauses (a)
through (t) of this Section 2.8 (other than negotiations with Parent and
its representatives regarding the transactions contemplated by this
Agreement).
2.9 Tax Matters.
(a) Definition of Taxes. For the purposes of this Agreement, the term "Tax"
or, collectively, "Taxes" shall mean (i) any and all federal, state, local and
foreign taxes and other assessments, governmental charges, duties, impositions
and liabilities in the nature of a tax, including taxes based upon or measured
by gross receipts, income, profits, sales, use and occupation, and value added,
ad valorem, transfer, franchise, withholding, payroll, recapture, employment,
excise and property taxes, together with all interest, penalties and additions
imposed with respect to such amounts, (ii) any liability for the payment of any
amounts of the type described in clause (i) of this Section 2.9(a) as a result
of being a member of an affiliated, consolidated, combined or unitary group for
any period, and (iii) any liability for the payment of any amounts of the type
described in clauses (i) or (ii) of this Section 2.9(a) as a result of any
express or implied obligation to indemnify any other person or as a result of
any obligations under any agreements or arrangements with any other person with
respect to such amounts and including any liability for taxes of a predecessor
entity.
(b) Tax Returns and Audits.
(i) As of the Effective Time, the Company will have timely filed all
required federal, state, local and foreign returns, estimates, information
statements and reports ("Returns") relating to any and all Taxes concerning
or attributable to the Company or its operations and such Returns are true
and correct in all material respects and have been completed in all
material respects in accordance with applicable law.
(ii) As of the Effective Time, the Company (A) will have paid all
Taxes it is required to pay and will have withheld with respect to its
employees and contract workers all federal and state income taxes, Federal
Insurance Contribution Act ("FICA"), Federal Unemployment Tax Act ("FUTA")
and other Taxes required to be withheld, and (B) will have accrued on the
Current Balance Sheet all unpaid Taxes attributable to the periods
preceding the date of the Current Balance Sheet and will not have incurred
any liability for Taxes for the period commencing on the date of the
Current Balance Sheet and ending immediately prior to the Effective Time,
other than in the ordinary course of business.
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(iii) The Company has not been materially delinquent in the payment of
any Tax, nor is there any Tax deficiency outstanding, assessed or proposed
against the Company, nor has the Company executed any waiver of any statute
of limitations on or extending the period for the assessment or collection
of any Tax, which waiver remains in effect.
(iv) No audit or other examination of any Return of the Company is
presently in progress, nor has the Company been notified of any request for
such an audit or other examination.
(v) The Company has no liabilities for unpaid federal, state, local
and foreign Taxes which have not been accrued or reserved on the
Financials, whether asserted or unasserted, contingent or otherwise, and
the Company has not incurred any liability for Taxes since the date of the
Financials other than in the ordinary course of business.
(vi) The Company has made available to Parent or its legal counsel,
copies of all foreign, federal, state and local income and all state and
local sales and use Returns for the Company filed for all periods since the
taxable year ended December 31, 1997.
(vii) There are (and immediately following the Effective Time there
will be) no material liens, pledges, charges, claims, restrictions on
transfer, mortgages, security interests or other encumbrances of any sort
(collectively, "Liens") on the assets of the Company relating to or
attributable to Taxes other than Liens for Taxes not yet due and payable.
(viii) Neither the Company nor any Principal Stockholder has Knowledge
of any assertion of any claim relating or attributable to Taxes which, if
adversely determined, would result in any material Lien on the assets of
the Company.
(ix) None of the Company's assets is treated as "tax-exempt use
property," within the meaning of Section 168(h) of the Code.
(x) The Company has not filed any consent agreement under Section
341(f) of the Code or agreed to have Section 341(f)(4) of the Code apply to
any disposition of a subsection (f) asset (as defined in Section 341(f)(4)
of the Code) owned by the Company.
(xi) The Company is not a party to any tax sharing, indemnification or
allocation agreement nor does the Company owe any amount under any such
agreement.
(xii) The Company is not, and has not been at any time during the
period specified in Section 897(c)(1)(A)(ii), a "United States Real
Property Holding Corporation" within the meaning of Section 897(c)(2) of
the Code.
(xiii) No adjustment relating to any Return filed by the Company has
been proposed formally or, to the Knowledge of the Company, informally by
any Tax authority to the Company or any representative thereof.
(c) Executive Compensation Tax. There is no contract, agreement, plan or
arrangement to which the Company is a party, including, without limitation, the
provisions of this Agreement, covering any employee, former employee or contract
worker of the Company, which, individually or collectively, could give rise to
the payment of any amount that would not be deductible pursuant to Sections
280G, 404 or 162(m) of the Code.
(d) Neither the Company nor any of its Subsidiaries has constituted either
a "distributing corporation" or a "controlled corporation" in a distribution of
stock qualifying for tax-free treatment under Section 355 of the Code (x) in the
two years prior to the date of this Agreement or (y) in a distribution which
could otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) in conjunction with the
Merger.
2.10 Restrictions on Business Activities. There is no agreement
(non-compete or otherwise), commitment, judgment, injunction, order or decree to
which the Company is a party or otherwise binding upon the Company which has or
may reasonably be expected to have the effect of prohibiting or impairing
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any business practice of the Company, any acquisition of property (tangible or
intangible) by the Company, or the conduct of business by the Company or
otherwise limiting the freedom of the Company to engage in any line of business
or to compete with any person. Without limiting the generality of the foregoing,
the Company has not entered into any agreement under which the Company is
restricted from selling, licensing or otherwise distributing any of its
technology or products to or providing services to, customers or potential
customers or any class of customers, in any geographic area, during any period
of time or in any segment of the market.
2.11 Title of Properties; Absence of Liens and Encumbrances. The Company
owns no real property, nor has it ever owned any real property. The Company has
good and valid title to, or, in the case of leased properties and assets, valid
leasehold interests in, all of its tangible properties and assets, real,
personal and mixed, used or held for use in its business, free and clear of any
Liens, except (i) as reflected in the Current Balance Sheet, (ii) Liens for
Taxes not yet due and payable, and (iii) such imperfections of title and
encumbrances, if any, which do not materially detract from the value or
interfere with the present use of the property subject thereto or affected
thereby.
2.12 Intellectual Property.
(a) All patents (including, without limitation, all U.S. and foreign
patents, patent applications, patent disclosures, and any and all divisions,
continuations, continuations-in-part, reissues, re-examinations and extensions
thereof), design rights, trademarks, trade names and service marks (whether or
not registered), trade dress, Internet domain names, copyrights (whether or not
registered) and any renewal rights therefor, sui generis database rights,
statistical models, technology, inventions, supplier lists, trade secrets,
know-how, computer software programs or applications in both source and object
code form, databases, technical documentation of such software programs
("Technical Documentation"), registrations and applications for any of the
foregoing and all other tangible or intangible proprietary information or
materials that are or have been used in (including, without limitation, in the
development of) Company's business and/or in any product, technology or process
(i) currently being or formerly manufactured, published or marketed by Company
or (ii) previously or currently under development for possible future
manufacturing, publication, marketing or other use by Company are hereinafter
referred to as the "Company Intellectual Property."
(b) The Company Disclosure Schedule contains a true and complete list of
Company's patents, patent applications, trademarks, trademark applications,
trade names, service marks, service mark applications, Internet domain names,
copyright registrations and applications and other filings and formal actions
made or taken pursuant to Federal, state, local and foreign laws by Company to
protect its interests in Company Intellectual Property, and includes details of
all due dates for further filings, maintenance, payments or other actions
falling due in respect of Company Intellectual Property within twelve (12)
months of the Effective Time. All of Company's patents, patent applications,
registered trademarks, and trademark applications, and registered copyrights
remain in good standing with all fees and filings due as of the Effective Time
duly made and the due dates specified in the Company Disclosure Schedule are
accurate and complete.
(c) Company Intellectual Property contains only those items and rights
which are: (i) owned by Company; (ii) in the public domain; or (iii) rightfully
used by Company pursuant to a valid and enforceable license (the "Company
Licensed Intellectual Property"), the parties, date, term and subject matter of
each such license agreement (each, a "License Agreement") being set forth on
Section 2.12(c) of the Company Disclosure Schedule. Company has all rights in
Company Intellectual Property necessary to carry out Company's current
activities (and had all rights necessary to carry out its former activities at
the time such activities were being conducted), including without limitation, to
the extent required to carry out such activities, rights to use, and, other than
with respect to Company Licensed Intellectual Property, make, reproduce, modify,
adopt, create derivative works based on, translate, distribute (directly and
indirectly), transmit, display and perform publicly, license, rent and lease
assign and sell, Company Intellectual Property.
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(d) To Company's knowledge, the reproduction, manufacturing, distribution,
licensing, sublicensing, and/or sale of Company's products and services does not
infringe on any patent, design right, trademark, trade name, service mark, trade
dress, Internet domain name, copyright, database, trade secret, know-how,
computer software program or application of any person, anywhere in the world.
Other than with respect to claims made against licensors of Company Licensed
Intellectual Property no claims (i) challenging the validity, effectiveness or
ownership by Company of any Company Intellectual Property, or (ii) to the effect
that the use, distribution, licensing, sublicensing, sale or any other exercise
of rights in any product, work, technology or process as now used or offered or
proposed for use, licensing, sublicensing or sale by the Company or its agents
or use by its customers and/or sale or any of Company's products or services,
infringes or will infringe on any intellectual property or other proprietary or
personal right of any person, have been asserted or, to the knowledge of
Company, are threatened by any person, nor are there, to Company's knowledge,
any valid grounds for any bona fide claim of any such kind. All of the rights
within Company Intellectual Property are enforceable and subsisting. To the
knowledge of Company, other than with respect to Company Licensed Intellectual
Property, there is no unauthorized use, infringement or misappropriation of any
Company Intellectual Property by any third party, employee, former employee or
contract worker.
(e) All personnel, including employees, contract worker, agents,
consultants and contractors, who have contributed to or participated in the
conception and development of Company Intellectual Property on behalf of
Company, have executed nondisclosure agreements in substantially the form set
forth on the Company Disclosure Schedule and either (i) have been a party to an
enforceable "work-for-hire" arrangement or agreements with Company in accordance
with applicable national and state law that has accorded Company full,
effective, exclusive and original ownership of all tangible and intangible
property thereby arising, or (ii) have executed appropriate instruments of
assignment in favor of Company as assignee that have conveyed to Company
effective and exclusive ownership of all tangible and intangible property
thereby arising.
(f) Company is not, nor as a result of the execution or delivery of this
Agreement, or performance of Company's obligations hereunder, will Company be,
in violation of any license, sublicense, agreement or instrument to which
Company is a party or otherwise bound, nor, except as provided in Section
2.12(f) of the Company Disclosure Schedule will execution or delivery of this
Agreement, or performance of Company's obligations hereunder, cause the
diminution, termination or forfeiture of any Company Intellectual Property.
(g) Section 2.12(g) of the Company Disclosure Schedule contains a true and
complete list of all of software programs developed by Company for distribution
to its customers (the "Company Software Programs"). To the knowledge of the
Company, Company owns full and unencumbered right and good, valid and marketable
title to such the Company Software Programs free and clear of all mortgages,
pledges, liens, security interests, conditional sales agreements, encumbrances
or charges of any kind.
(h) The source code and system documentation relating to the Company
Software Programs (i) have at all times been maintained in strict confidence,
(ii) have been disclosed by Company only to employees or contract workers who
have a "need to know" the contents thereof in connection with the performance of
their duties to Company and who have executed the nondisclosure agreements
referred to in this Section 2.12, and (iii) have not been disclosed to any third
party.
(i) Company has taken all reasonable steps, in accordance with normal
industry practice, to preserve and maintain complete notes and records relating
to Company Intellectual Property to cause the same to be readily understood,
identified and available.
(j) The Company Software Programs distributed to Customers of Company (i)
have been designed to ensure year 2000 compatibility, which includes, but is not
limited to, date data century recognition, and calculations that accommodate
same century and multi-century formulas and date values; (ii) operate and will
operate in substantial accordance with their specifications prior to, during and
after the calendar year 2000 AD; and (iii) shall not end abnormally or provide
invalid or incorrect results as a result of properly
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entered and formatted date data, specifically including date data which
represents or references different centuries or more than one century.
(k) The Company Intellectual Property is free and clear of any and all
mortgages, pledges, liens, security interests, conditional sale agreements,
encumbrances or charges of any kind.
(l) Except as set forth in the Company Disclosure Schedule, the Company
does not owe any royalties or other payments to third parties in respect of
Company Intellectual Property. All royalties or other payments set forth in the
Company Disclosure Schedule that have accrued prior to the Effective Time have
been paid.
(m) To the Company's knowledge, the Company Software Programs and other
Company Intellectual Property contain no "viruses." For the purposes of this
Agreement, "virus" means any computer code intentionally designed to disrupt,
disable or harm in any manner the operation of any software or hardware. None of
the foregoing contains any worm, bomb, backdoor, clock, timer, or other
disabling device code, design or routine which causes the software to be erased,
inoperable, or otherwise incapable of being used, either automatically or upon
command by any party.
(n) The Company has implemented all reasonable steps which are known in the
information systems industry and in accordance with normal industry practice in
the physical and electronic protection of its information assets from
unauthorized disclosure, use or modification. Section 2.12(n) of the Company
Disclosure Schedule sets forth (i) each breach of security of which Company is
aware, (ii) its known consequences, and (iii) the steps Company has taken to
remedy such breach.
2.13 Agreements, Contracts and Commitments. Set forth on Section 2.13 of
the Company Disclosure Schedule is a list or description of each of the
following to which the Company is a party (each, a "Company Contract" and
collectively the "Company Contracts"):
(i) any employment or consulting agreement, contract or commitment
with an employee, contract worker or consultant or salesperson;
(ii) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation rights plan or stock purchase plan (other
than the Plan), any of the benefits of which will be increased, or the
vesting of benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement;
(iii) any fidelity or surety bond or completion bond;
(iv) any lease of personal property having rent in excess of $10,000;
(v) any agreement, contract or commitment relating to capital
expenditures and involving future payments in excess of $10,000
individually or $20,000 in the aggregate;
(vi) any agreement, contract or commitment relating to the disposition
or acquisition of assets or any interest in any business enterprise outside
the ordinary course of the Company's business;
(vii) any mortgages, indentures, guarantees, loans or credit
agreements, security agreements or other agreements or instruments relating
to the borrowing of money or extension of credit;
(viii) any purchase order or contract for the purchase of materials
involving in excess of $2,500 individually or $10,000 in the aggregate;
(ix) any construction contracts;
(x) any dealer, distribution, joint marketing or development
agreement;
(xi) any sales representative, original equipment manufacturer, value
added, remarketer, reseller or independent software vendor or other
agreement for use or distribution of the Company's products, technology or
services; or
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(xii) any other agreement, contract or commitment that involves
$10,000 individually or $500,000 in the aggregate or more and is not
cancelable without penalty within thirty (30) days.
Each Company Contract is in full force and effect. Neither the Company nor
to the Company's Knowledge, any other party to a Company Contract, is in breach,
violation or default under, and the Company has not received notice that it has
breached, violated or defaulted under, any of the material terms or conditions
of any Company Contract in such a manner as would permit any other party to
cancel or terminate any such Company Contract, or would permit any other party
to seek damages, which would be reasonably likely to exceed $50,000 (for any or
all of such breaches, violations or defaults, in the aggregate).
2.14 Interested Party Transactions. No officer, director or, to the
Knowledge of the Company, Stockholder of the Company (nor any ancestor, sibling,
descendant or spouse of any of such persons, or any trust, partnership or
corporation in which any of such persons has or has had an interest), has or has
had, directly or indirectly, (i) an interest in any entity which furnished or
sold, or furnishes or sells, services, products or technology that the Company
furnishes or sells, or proposes to furnish or sell, or (ii) any interest in any
entity that purchases from or sells or furnishes to the Company, any goods or
services, or (iii) a beneficial interest in any Contract to which the Company is
a party; provided, however, that ownership of no more than one percent (1%) of
the outstanding voting stock of a publicly traded corporation shall not be
deemed to be an "interest in any entity" for purposes of this Section 2.14.
2.15 Governmental Authorization. Each consent, license, permit, grant or
other authorization from any Governmental Authority (i) pursuant to which the
Company currently operates or holds any interest in any of its properties, or
(ii) which is required for the operation of the Company's business as currently
conducted or currently contemplated to be conducted or the holding of any such
interest (collectively, "Company Authorizations") has been issued or granted to
the Company. The Company Authorizations are in full force and effect and
constitute all Company Authorizations required to permit the Company to operate
or conduct its business or hold any interest in its properties or assets, except
for those the failure of which to hold would not have a Company Material Adverse
Effect.
2.16 Litigation. There is no action, suit, claim or proceeding of any
nature pending, or to the Knowledge of the Company threatened, against the
Company, its properties (tangible or intangible) or any of its officers or
directors, nor to the Knowledge of the Company is there any reasonable basis
therefor. There is no investigation or other proceeding pending or to the
Knowledge of the Company threatened, against the Company, any of its properties
(tangible or intangible) or any of their officers or directors by or before any
Governmental Entity, nor to the Knowledge of the Company is there any reasonable
basis therefor. No Governmental Entity has at any time challenged or questioned
the legal right of the Company to conduct its operations as presently or
previously conducted or as presently contemplated to be conducted.
2.17 Minute Books. The minutes of the Company made available to counsel
for Parent are the only minutes of the Company and contain materially complete
summaries of all meetings of the Board of Directors (or committees thereof) of
the Company and its stockholders or actions by written consent since the time of
incorporation of the Company.
2.18 Environmental Matters. Except as would not reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse Effect, (i)
the Company is in compliance with all applicable Environmental Laws and all
Company Permits required by Environmental Laws; (ii) all past noncompliance of
the Company with Environmental Laws or Environmental Permits has been resolved
without any pending, ongoing or future obligation, cost or liability; and (iii)
the Company has not released a Hazardous Material at, or transported a Hazardous
Material to or from, any real property currently or formerly owned, leased or
occupied by the Company, in violation of any Environmental Law. For purposes of
this Agreement, "Environmental Law" shall mean any Law and any enforceable
judicial or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, relating to pollution or
protection of the environment or natural resources, including, without
limitation, those relating to the use, handling, transportation, treatment,
storage, disposal, release or
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discharge of Hazardous Material, as in effect as of the date hereof.
"Environmental Permit" shall mean any permit, approval, identification number,
license or other authorization required under or issued pursuant to any
applicable Environmental Law. "Hazardous Material" shall mean (i) any petroleum,
petroleum products, byproducts or breakdown products, radioactive materials,
asbestos-containing materials or polychlorinated biphenyls or (ii) any chemical,
material or substance defined or regulated as toxic or hazardous or as a
pollutant or contaminant or waste under any applicable Environmental Law.
2.19 Brokers' and Finders' Fees; Third Party Expenses. Except for fees
payable to SoundView Technology Group, Inc., the Company has not incurred, nor
will it incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or any similar charges in connection with the
Agreement or any transaction contemplated hereby. Section 2.19 of the Company
Disclosure Schedule sets forth the Company's current estimate of all Third Party
Expenses (as defined in Section 5.4 hereof) expected to be incurred by the
Company in connection with the negotiation and effectuation of the terms and
conditions of this Agreement and the transactions contemplated hereby.
2.20 Employee Benefit Plan and Compensation.
(a) Definitions. For all purposes of this Agreement, the following terms
shall have the following respective meanings:
"Affiliate" shall mean any other person or entity under common control
with the Company within the meaning of Section 414(b), (c), (m) or (o) of
the Code, and the regulations issued thereunder.
"Company Employee Plan" shall mean any plan, program, policy,
practice, contract, agreement or other material arrangement providing for
compensation, severance, termination pay, deferred compensation,
performance awards, stock or stock-related awards, fringe benefits or other
employee benefits or remuneration of any kind, whether written, unwritten
or otherwise, funded or unfunded, including without limitation, each
"employee benefit plan," within the meaning of Section 3(3) of ERISA which
is or has been maintained, contributed to, or required to be contributed
to, by the Company or any Affiliate for the benefit of any Employee, or
with respect to which the Company or any Affiliate has or may have any
liability or obligation.
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended.
"DOL" shall mean the United States Department of Labor.
"Employee" shall mean any current or former employee, contract worker,
consultant or director of the Company or any Affiliate.
"Employment Agreement" shall mean each management, employment,
severance, consulting, relocation, repatriation, expatriation, visas, work
permit or other agreement, or contract between the Company or any Affiliate
and any Employee other than a Company Employee Plan.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"FMLA" shall mean the Family Medical Leave Act of 1993, as amended.
"International Employee Plan" shall mean each Company Employee Plan
that has been adopted or maintained by the Company or any Affiliate,
whether informally or formally, or with respect to which the Company or any
Affiliate will or may have any liability, for the benefit of Employees who
perform services outside the United States.
"IRS" shall mean the United States Internal Revenue Service.
"Multiemployer Plan" shall mean any "Pension Plan" (as defined below)
which is a "multiemployer plan," as defined in Section 3(37) of ERISA.
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"Pension Plan" shall mean each Company Employee Plan which is an
"employee pension benefit plan," within the meaning of Section 3(2) of
ERISA.
(b) Schedule. Section 2.20(b) of the Company Disclosure Schedule contains
an accurate and complete list of each Company Employee Plan, International
Employee Plan, and each Employment Agreement under each Company Employee Plan or
Employment Agreement. The Company has no plan or commitment to establish any new
Company Employee Plan, International Employee Plan, or Employee Agreement, to
modify any Company Employee Plan or Employment Agreement (except to the extent
required by law or to conform any such Company Employee Plan or Employment
Agreement to the requirements of any applicable law, in each case as previously
disclosed to Parent in writing, or as required by this Agreement), or to enter
into any Company Employee Plan, International Employee Plan or Employment
Agreement.
(c) Documents. The Company has made available to Parent (i) correct and
complete copies of all documents embodying each Company Employee Plan,
International Employee Plan, and each Employment Agreement including, without
limitation, all amendments thereto and all related trust documents, (ii) the
three (3) most recent annual reports (Form Series 5500 and all schedules and
financial statements attached thereto), if any, required under ERISA or the Code
in connection with each Company Employee Plan, (iii) if the Company Employee
Plan is funded, the most recent annual and periodic accounting of Company
Employee Plan assets, (iv) the most recent summary plan description together
with the summary(ies) of material modifications thereto, if any, required under
ERISA with respect to each Company Employee Plan, (v) all material written
agreements and contracts relating to each Company Employee Plan, including,
without limitation, administrative service agreements and group insurance
contracts, (vi) all communications material to any Employee or Employees
relating to any Company Employee Plan and any proposed Company Employee Plan, in
each case, relating to any amendments, terminations, establishments, increases
or decreases in benefits, acceleration of payments or vesting schedules or other
events which would result in any liability to the Company, (vii) all
correspondence to or from any governmental agency relating to any Company
Employee Plan, (viii) all COBRA forms and related notices, (ix) all policies
pertaining to fiduciary liability insurance covering the fiduciaries for each
Company Employee Plan, (x) the three (3) most recent plan years discrimination
tests for each Company Employee Plan, and (xi) all registration statements,
annual reports (Form 11-K and all attachments thereto) and prospectuses prepared
in connection with each Company Employee Plan.
(d) Employee Plan Compliance. The Company has performed in all material
respects all obligations required to be performed by it under, is not in
material default or violation of, and has no Knowledge of any default or
violation by any other party to each Company Employee Plan, and each Company
Employee Plan has been established and maintained in all material respects in
accordance with its terms and in compliance with all applicable laws, statutes,
orders, rules and regulations, including but not limited to ERISA or the Code.
Each Company Employee Plan intended to qualify under Section 401(a) of the Code
and each trust intended to qualify under Section 501(a) of the Code has either
received a favorable determination, opinion, notification or advisory letter
from the IRS with respect to each such Company Employee Plan as to its qualified
status under the Code, including all amendments to the Code effected by the Tax
Reform Act of 1986 and subsequent legislation, or has remaining a period of time
under applicable Treasury regulations or IRS pronouncements in which to apply
for such a letter and make any amendments necessary to obtain a favorable
determination as to the qualified status of each such Company Employee Plan. No
"prohibited transaction," within the meaning of Section 4975 of the Code or
Sections 406 and 407 of ERISA, and not otherwise exempt under Section 4975 of
the Code or Section 408 of ERISA (or any administrative class exemption issued
thereunder), has occurred with respect to any Company Employee Plan which would
result in material liability to the Company. There are no actions, suits or
claims pending, or to the Knowledge of the Company and the Principal
Stockholders threatened or reasonably anticipated (other than routine claims for
benefits) against any Company Employee Plan or against the assets of any Company
Employee Plan that could reasonably be expected to result in material liability.
Each Company Employee Plan (other than any stock option plan) can be amended,
terminated or otherwise discontinued after the Effective Time in accordance with
its
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terms, without liability to Parent, the Company or any Affiliate (other than
ordinary administration expenses and already accrued benefits). There are no
audits, inquiries or proceedings pending or to the Knowledge of the Company and
the Principal Stockholders or any Affiliates, threatened by the IRS or DOL with
respect to any Company Employee Plan. Neither the Company nor any Affiliate is
subject to any material penalty or tax with respect to any Company Employee Plan
under Section 502(i) of ERISA or Sections 4975 through 4980 of the Code.
(e) No Pension Plan. Neither the Company nor any other Affiliate has ever
maintained, established, sponsored, participated in, or contributed to, any (i)
Pension Plan subject to Title IV of ERISA or Section 412 of the Code
(f) Collectively Bargained, Multiemployer and Multiple Employer Plans. At
no time has the Company or any Affiliate contributed to or been obligated to
contribute to any Multiemployer Plan. Neither the Company, nor any Affiliate has
at any time ever maintained, established, sponsored, participated in, or
contributed to any multiple employer plan, or to any plan described in Section
413 of the Code.
(g) No Post-Employment Obligations. No Company Employee Plan provides, or
reflects or represents any liability to provide, retiree life insurance, retiree
health or other retiree employee welfare benefits to any person for any reason,
except as may be required by COBRA or other applicable statute, and the Company
has never represented, promised or contracted (whether in oral or written form)
to any Employee (either individually or to Employees as a group) or any other
person that such Employee(s) or other person would be provided with retiree life
insurance, retiree health or other retiree employee welfare benefit, except to
the extent required by statute.
(g) Health Care Compliance. Neither the Company nor any Affiliate has,
prior to the Effective Time and in any material respect, violated any of the
health care continuation requirements of COBRA, the requirements of FMLA, the
requirements of the Health Insurance Portability and Accountability Act of 1996,
the requirements of the Women's Health and Cancer Rights Act of 1998, the
requirements of the Newborns' and Mothers' Health Protection Act of 1996, or any
amendment to each such act, or any similar provisions of state law applicable to
its Employees.
(h) Effect of Transaction. The execution of this Agreement and the
consummation of the transactions contemplated hereby will not (either alone or
upon the occurrence of any additional or subsequent events) constitute an event
under any Company Employee Plan, Employment Agreement, trust or loan that will
or may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase in
benefits or obligation to fund benefits with respect to any Employee, except as
expressly required by this Agreement.
(i) Employment Matters. The Company: (i) is in compliance in all material
respects with all applicable foreign, federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to Employees,
including all applicable laws of foreign jurisdictions where the Company has
Employees; (ii) has withheld and reported all amounts required by law or by
agreement to be withheld and reported with respect to wages, salaries and other
payments to Employees, (iii) is not liable for any arrears of wages or any taxes
or any penalty for failure to comply with any of the foregoing, and (iv) is not
liable for any payment to any trust or other fund governed by or maintained by
or on behalf of any governmental authority, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
Employees (other than routine payments to be made in the normal course of
business and consistent with past practice). There are no pending, or to the
Knowledge of the Company threatened, claims or actions against the Company under
any worker's compensation policy or long-term disability policy.
(j) International Employee Plan. Each International Employee Plan has been
established, maintained and administered in compliance with its terms and
conditions and with the requirements prescribed by any and all statutory or
regulatory laws that are applicable to such International Employee Plan.
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Furthermore, no International Employee Plan has unfunded liabilities, that as of
the Effective Time, will not be offset by insurance or fully accrued. Except as
required by law, no condition exists that would prevent the Company or Parent
from terminating or amending any International Employee Plan at any time for any
reason without liability to the Company, the Parent or its Affiliates (other
than ordinary administration expenses or routine claims for benefits).
2.21 Insurance. The Company maintains insurance policies and fidelity
bonds covering the assets, business, equipment, properties, operations,
employees, contract workers, officers and directors of the Company or any
Affiliate. There is no claim by the Company or any Affiliate pending under any
of such policies or bonds as to which coverage has been questioned, denied or
disputed by the underwriters of such policies or bonds. All premiums due and
payable under all such policies and bonds have been paid, and the Company and
its Affiliates are otherwise in material compliance with the terms of such
policies and bonds (or other policies and bonds providing substantially similar
insurance coverage). The Company has no Knowledge of threatened termination of,
or premium increase with respect to, any of such policies.
2.22 Compliance with Laws. The Company has complied with and is not in
violation of any foreign, federal, state or local statute, law or regulation
except when the failure to comply would not have a Company Material Adverse
Effect. The Company has not received any notices of violation with respect to
any such statute, law or regulation.
2.23 Representations Complete. Neither any of the representations or
warranties made by the Company (as modified by the Company Disclosure Schedule)
in this Agreement, contains or will contain at the Effective Time, any untrue
statement of a material fact, or omits or will omit at the Effective Time to
state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading. The information furnished by the Company for inclusion in any
documents mailed, delivered or otherwise furnished to Stockholders in connection
with the solicitation of their consent to this Agreement and the Merger, will
not contain, at or prior to the Effective Time, any untrue statement of a
material fact and will not omit to state any material fact necessary in order to
make the statements made therein, in light of the circumstances under which
made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF PARENT AND SUB
Parent and Sub hereby represent and warrant to the Company, subject to such
exceptions as are specifically disclosed in the disclosure letter (referencing
the appropriate section and paragraph numbers) supplied by the Parent and Sub to
the Company (the "Parent Disclosure Schedule") and dated as of the date hereof,
that on the date hereof and as of the Effective Time as though made at the
Effective Time as follows:
3.1 Organization, Standing and Power. Parent is a corporation duly
organized, validly existing and in good standing under the laws of Delaware. Sub
is a corporation duly organized, validly existing and in good standing under the
laws of Delaware. Each of Parent and Sub has the corporate power to own its
properties and to carry on its business as now being conducted and is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the failure to be so qualified or licensed would have a
Parent Material Adverse Effect, provided that a drop in the Parent's stock price
shall not constitute such a material adverse effect.
3.2 Authority. Each of Parent and Sub has all requisite corporate power
and authority to enter into this Agreement and any Related Agreements to which
it is a party and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and any Related Agreements
to which it is a party and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of Parent and Sub, subject only to stockholder approval. This
Agreement and any Related Agreements to which Parent and Sub are
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parties have been duly executed and delivered by Parent and Sub and constitute
the valid and binding obligations of Parent and Sub, enforceable in accordance
with their terms, except as such enforceability may be limited by principles of
public policy and subject to the laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies.
3.3 Consents. No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, or any third
party is required by or with respect to Parent or Sub in connection with the
execution and delivery of this Agreement and any Related Agreements to which
Parent or Sub is a party or the consummation of the transactions contemplated
hereby and thereby, except for (i) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable securities laws, (ii) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings which, if not obtained
or made, would not have a Parent Material Adverse Effect, and (iii) the filing
of the Merger Agreement with the Secretary of the Commonwealth of Massachusetts.
3.4 Parent Common Stock. The Parent Common Stock which constitutes the
Merger Shares has been duly authorized, and upon consummation of the
transactions contemplated by this Agreement, will be validly issued, fully paid
and nonassessable.
3.5 Intellectual Property. To Parent's knowledge, the reproduction,
manufacturing, distribution, licensing, sublicensing, and/or sale of Parent's
products and services does not infringe on any patent, design right, trademark,
trade name, service mark, trade dress, Internet domain name, copyright,
database, trade secret, know-how, of any person, anywhere in the world. No
claims, other than with respect to Parent's licensed intellectual property, (i)
challenging the validity, effectiveness or, ownership by Parent's of any Parent
intellectual property, or (ii) to the effect that the use, distribution,
licensing, sublicensing, and/or sale or any of Parent's products or services,
infringes or will infringe on any intellectual property or other proprietary or
personal right of any person, have been asserted or, to the knowledge of Parent,
are threatened by any person, nor are there, to Parent's knowledge, any valid
grounds for any bona fide claim of any such kind. To Parent's knowledge, no
third party is materially infringing Parent owned intellectual property.
3.6 Litigation. There is no material action, suit, claim or proceeding of
any nature pending, or to the Knowledge of Parent threatened, against Parent,
its properties (tangible or intangible) or any of its officers or directors.
There is no investigation or other proceeding pending or to the Knowledge of
Parent threatened, against Parent, any of its properties (tangible or
intangible) or any of their officers or directors by or before any Governmental
Entity. No Governmental Entity has at any time challenged or questioned the
legal right of Parent to develop or distribute any of its products.
3.7 SEC Reports; Financial Statements. Parent has made available to
Company a correct and complete copy of each report, schedule, registration
statement and definitive proxy statement filed by Purchaser with the SEC on or
after September 30, 1999 (the "SEC Reports"), which are all the forms, reports
and documents required to be filed by Parent with the SEC since September 30,
1999. The Parent SEC Reports (A) were prepared in accordance with the
requirements of the Securities Act or the Exchange Act, as the case may be, and
(B) did not at the time they were filed (or if amended or superseded by a filing
prior to the date of this Agreement, then on the date of such filing) contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Since September 30, 1999, there has not occurred a Parent Material
Adverse Effect. Each set of consolidated financial statements (including, in
each case, any related notes thereto) contained in the Parent SEC Reports was
prepared in accordance with U.S. GAAP applied on a consistent basis throughout
the periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited statements, do not contain footnotes as permitted by Form 10-Q
of the Exchange Act) and each fairly presents the consolidated financial
position of Parent and its subsidiaries at the respective dates thereof and the
consolidated results of its operations and cash flows for the periods indicated,
except that
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the unaudited interim financial statements were or are subject to normal
adjustments which are not material in the aggregate.
3.8 Representations Complete. Neither any of the representations or
warranties made by Parent (as modified by the Parent Disclosure Schedule) in
this Agreement contains or will contain at the Effective Time, any untrue
statement of a material fact, or omits or will omit at the Effective Time to
state any material fact necessary in order to make the statements contained
herein or therein, in the light of the circumstances under which made, not
misleading. The information furnished by Parent for inclusion in any documents
mailed, delivered or otherwise furnished to the stockholders of Parent in
connection with the solicitation of their consent to this Agreement and the
Merger, will not contain, at or prior to the Effective Time, any untrue
statement of a material fact and will not omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which made, not misleading.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of the Company. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, the Company agrees, except to the extent that
Parent shall otherwise consent in writing, to carry on the Company's business in
the usual, regular and ordinary course in substantially the same manner as
heretofore conducted, to pay the debts and Taxes of the Company when due, to pay
or perform other obligations when due, and, to the extent consistent with such
business, use its reasonable best efforts consistent with past practice and
policies to preserve intact the Company's present business organizations, keep
available the services of the Company's present officers and key employees and
preserve the Company's relationships with customers, suppliers, distributors,
licensors, licensees, and others having business dealings with it, all with the
goal of preserving unimpaired the Company's goodwill and ongoing businesses at
the Effective Time. The Company shall promptly notify Parent of any event or
occurrence or emergency not in the ordinary course of business of the Company
and any material event involving the Company. Except as expressly required by
this Agreement or as set forth in Section 4.1 of the Company Disclosure
Schedule, the Company shall not, without the prior written consent of Parent:
(a) make any expenditures or enter into any commitment or transaction
exceeding $100,000;
(b) (i) sell, license or transfer to any person or entity any rights
to any Company Intellectual Property except for non-exclusive license
agreements entered into in the ordinary course of business or enter into
any agreement with respect to any intellectual property of any person or
entity, except for licenses of commercially available software, (ii) enter
into any agreement with respect to the development of any intellectual
property with a third party except for consulting agreements entered in to
in the ordinary course of business which provide for exclusive ownership by
the Company of any intellectual property developed thereunder or (iii) or
change the methods of establishing pricing or royalties charged by the
Company to its customers or licensees, or the methods of establishing
pricing or royalties set or charged by persons who have licensed
intellectual property to the Company except as required by the terms of
agreements currently in effect;
(c) enter into or amend any Contract pursuant to which any other party
is granted marketing, distribution, development or similar rights of any
type or scope with respect to any products or technology of the Company;
(d) amend or otherwise modify (or agree to do so), or violate the
terms of, any Company Contracts or License Agreements;
(e) commence or settle any litigation;
(f) declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any
Company Common Stock or Preferred, or split, combine or
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reclassify any Company Common Stock or Preferred or issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of Company Common Stock or Preferred, or
repurchase, redeem or otherwise acquire, directly or indirectly, any shares
of Company Common Stock or Preferred (or options, warrants or other rights
exercisable therefor) except in accordance with the agreements evidencing
Company Options or restricted stock awards;
(g) issue, grant, deliver or sell or authorize or propose the
issuance, grant, delivery or sale of, or purchase or propose the purchase
of, any shares of capital stock of the Company or securities convertible
into, or subscriptions, rights, warrants or options to acquire, or other
agreements or commitments of any character obligating it to issue or
purchase any such shares or other convertible securities, except for shares
of Company Common Stock issued upon exercise of Company Options outstanding
on the date hereof or pursuant to the Comdisco warrant and debt referred to
in the Company Disclosure Schedule;
(h) cause or permit any amendments to its articles of organization,
bylaws or other organizational documents of the Company;
(i) acquire or agree to acquire by merging or consolidating with, or
by purchasing any assets or equity securities of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire
any assets which are material, individually or in the aggregate, to the
Company's business;
(j) except as allowed pursuant to Section 4.1(b) hereof, sell, lease,
license or otherwise dispose of any of its properties or assets, except
properties or assets which are not Company Intellectual Property and only
in the ordinary course of business and consistent with past practices;
(k) incur any indebtedness or guarantee any indebtedness or issue or
sell any debt securities or guarantee any debt securities of others;
(l) grant any loans to others or purchase debt securities of others or
amend the terms of any outstanding loan agreement;
(m) grant any severance or termination pay (i) to any director or
officer, or (ii) to any other employee or contract worker except payments
made pursuant to standard written agreements outstanding on the date hereof
and disclosed in the Company Disclosure Schedule;
(n) adopt or amend any employee benefit plan, or enter into any
employment contract, pay or agree to pay any special bonus or special
remuneration to any director, employee or contract worker, or increase the
salaries or wage rates of its employees or contract workers except payments
made pursuant to standard written agreements in place on the date hereof
and disclosed in the Company Disclosure Schedule;
(o) revalue any of its assets, including without limitation writing
down the value of inventory or writing off notes or accounts receivable
other than in the ordinary course of business;
(p) pay, discharge or satisfy, in an amount in excess of $100,000 in
any one case, any claim, liability or obligation (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than such payment,
discharge or satisfaction in the ordinary course of business of liabilities
reflected or reserved against in the Financials or arising in the ordinary
course of business after the date of the Current Balance Sheet;
(q) make or change any material election in respect of Taxes, adopt or
change any material accounting method in respect of Taxes, enter into any
material closing agreement, settle any material claim or assessment in
respect of Taxes, or consent to any extension or waiver of the limitation
period applicable to any claim or assessment in respect of Taxes;
(r) enter into any strategic alliance or joint marketing arrangement
or agreement;
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(s) take any action to accelerate the vesting schedule of any of the
outstanding Company Options or Company Common Stock;
(t) hire or terminate any employees or contract workers, or encourage
any employees or contract workers to resign from the Company; or
(u) take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.1(a) through 4.1(u) hereof, or any other action
that would (x) prevent the Company from performing or cause the Company not
to perform their respective covenants hereunder or (y) cause or result in
any representations and warranties contained in Article II herein being
untrue or incorrect.
4.2 No Solicitation. Until the earlier of (i) the Effective Time, or (ii)
the date of termination of this Agreement pursuant to the provisions of Section
8.1 hereof, the Company shall not (nor shall the Company permit, as applicable,
any of the Company's officers, directors, employees, contract workers,
stockholders, agents, representatives or affiliates to), directly or indirectly,
take any of the following actions with any party other than Parent and its
designees: (a) solicit, knowingly encourage, initiate or participate in any
inquiry, negotiations or discussions, or enter into any agreement, with respect
to any offer or proposal to acquire all or any material part of the Company's
business, properties or technologies, or any material amount of the Company
Common Stock or Preferred (whether or not outstanding), whether by merger,
purchase of assets, tender offer, license or otherwise, or effect any such
transaction, (b) disclose any information not customarily disclosed to any
person concerning the Company's business, technologies or properties, or afford
to any person or entity access to its properties, technologies, books or
records, not customarily afforded such access, (c) assist or cooperate with any
person to make any proposal to purchase all or any material part of the Company
Common Stock or Preferred or assets of the Company, other than inventory in the
ordinary course of business, or (d) enter into any agreement with any person
providing for the acquisition of the Company, whether by merger, purchase of
assets, license, tender offer or otherwise. In the event that the Company or any
of the Company's affiliates shall receive, prior to the Effective Time or the
termination of this Agreement, any offer, proposal, or request, directly or
indirectly, of the type referenced in clause (a) or (c) above, or any request
for disclosure or access pursuant to clause (b) above, the Company shall
immediately notify Parent thereof, including information as to the identity of
the offeror or the party making any such offer or proposal and the specific
terms of such offer or proposal, as the case may be, and such other information
related thereto as Parent may reasonably request. The parties hereto agree that
irreparable damage would occur in the event that the provisions of this Section
4.2 were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed by the parties hereto that Parent shall be
entitled to seek an injunction or injunctions to prevent breaches of the
provisions of this Section 4.2 and to enforce specifically the terms and
provisions hereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which Parent may be
entitled at law or in equity.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Information Statement; Registration Statement; Other Filings. As
promptly as practicable after the execution of this Agreement, Company and
Parent will prepare, and file with the SEC, a joint proxy/information statement
(the "Proxy Statement/Prospectus"), and Parent will prepare and file with the
SEC a registration statement on Form S-4 (the "S-4") in which the Proxy
Statement/Prospectus will be included as a prospectus. Each of Parent and
Company shall provide promptly to the other such information concerning its
business and financial statements and affairs as, in the reasonable judgment of
the providing party or its counsel, may be required or appropriate for inclusion
in the Proxy Statement/ Prospectus and the S-4, or in any amendments or
supplements thereto, and to cause its counsel and auditors to cooperate with the
other's counsel and auditors in the preparation of the Proxy Statement/
Prospectus and the S-4. Each of Company and Parent will respond to any comments
of the SEC, and will use its respective commercially reasonable efforts to have
the S-4 declared effective under the Securities Act as promptly as practicable
after such filing, and Company and Parent will cause the Proxy Statement/
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Prospectus to be mailed to its respective stockholders at the earliest
practicable time after the S-4 is declared effective by the SEC. As promptly as
practicable after the date of this Agreement, each of Company and Parent will
prepare and file any other filings required to be filed by it under the Exchange
Act, the Securities Act or any other Federal, foreign or Blue Sky or related
laws relating to the Merger and the transactions contemplated by this Agreement
(the "Other Filings"). Each of Company and Parent will notify the other promptly
upon the receipt of any comments from the SEC or its staff or any other
government officials and of any request by the SEC or its staff or any other
government officials for amendments or supplements to the S-4, the Proxy
Statement/Prospectus or any Other Filing or for additional information and will
supply the other with copies of all correspondence between such party or any of
its representatives, on the one hand, and the SEC or its staff or any other
government officials, on the other hand, with respect to the S-4, the Proxy
Statement/Prospectus, the Merger or any Other Filing. Each of Company and Parent
will cause all documents that it is responsible for filing with the SEC or other
regulatory authorities under this Section 5.1(a) to comply in all material
respects with all applicable requirements of law and the rules and regulations
promulgated thereunder. Whenever any event occurs which is required to be set
forth in an amendment or supplement to the Proxy Statement/Prospectus, the S-4
or any Other Filing, Company or Parent, as the case may be, will promptly inform
the other of such occurrence and cooperate in filing with the SEC or its staff
or any other government officials, and/or mailing to stockholders of Company,
such amendment or supplement.
(a) The Proxy Statement/Prospectus will include the recommendation of the
Board of Directors of Company and Parent in favor of adoption and approval of
this Agreement and approval of the Merger.
(b) Promptly after the date hereof, Company will take all action necessary
in accordance with Massachusetts Law to convene a Stockholders' meeting
("Company Stockholders' Meeting") to be held as promptly as practicable, and in
any event (to the extent permissible under applicable law) within 45 days after
the declaration of effectiveness of the S-4, for the purpose of voting upon this
Agreement and the Merger. The Company will use its commercially reasonable
efforts to solicit from its stockholders proxies in favor of the adoption and
approval of this Agreement and the approval of the Merger and will take all
other action necessary or advisable to secure the vote or consent of its
stockholders required by the rules of Nasdaq or Massachusetts Law to obtain such
approvals. Notwithstanding anything to the contrary contained in this Agreement,
the Company may adjourn or postpone the Company Stockholders' Meeting to the
extent necessary to ensure that any necessary supplement or amendment to the
Prospectus/Proxy Statement is provided to the Company stockholders in advance of
a vote on the Merger and this Agreement. The Company shall ensure that the
Company Stockholders' Meeting is called, noticed, convened, held and conducted,
and that all proxies solicited by the Company in connection with the Company
Stockholders' Meeting are solicited, in compliance with Massachusetts Law, the
rules of Nasdaq and all other applicable legal requirements.
(c) Promptly after the date hereof, Parent will take all action necessary
in accordance with Delaware Law to convene a meeting of Parent's stockholders
(the "Parent Stockholder Agreement") to be held as promptly as practicable, and
in any event (to the extent permissible under applicable law) within 45 days
after the declaration of effectiveness of the S-4, for the purpose of voting
upon this Agreement and the Merger. Parent will use its commercially reasonable
efforts to solicit from its stockholders proxies in favor of the adoption and
approval of this Agreement and the approval of the Merger and will take all
other action necessary or advisable to secure the vote or consent of its
stockholders required by the rules of Nasdaq or Delaware Law to obtain such
approvals. Notwithstanding anything to the contrary contained in this Agreement,
Parent may adjourn or postpone the Parent Stockholders' Meeting to the extent
necessary to ensure that any necessary supplement or amendment to the
Prospectus/Proxy Statement is provided to Parent's stockholders in advance of a
vote on the Merger and this Agreement.
(d) Parent shall ensure that the Parent Stockholders' Meeting is called,
noticed, convened, held and conducted, and that all proxies solicited by the
Parent in connection with the Parent's Stockholders' Meeting are solicited, in
compliance with Delaware Law, the rules of Nasdaq and all other applicable legal
requirements.
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5.2 Access to Information. Each of the Company and the Parent shall afford
to the other and its respective accountants, counsel and other representatives,
reasonable access during the period prior to the Effective Time to (i) all of
its properties, books, contracts, commitments and records, (ii) all other
information concerning its business, properties and personnel (subject to
restrictions imposed by applicable law) as the other may reasonably request, and
(iii) in the case of the Company, all employees and contract workers of the
Company as identified by Parent. Each of the Company and the Parent agrees to
provide to the other and its respective accountants, counsel and other
representatives copies of internal financial statements (including Tax returns
and supporting documentation) promptly upon request. No information or knowledge
obtained in any investigation pursuant to this Section 5.2 shall affect or be
deemed to modify any representation or warranty contained herein or the
conditions to the obligations of the parties to consummate the Merger in
accordance with the terms and provisions hereof.
5.3 Confidentiality. Each of the parties hereto hereby agrees that the
information obtained in any investigation pursuant to Section 5.3 hereof, or
pursuant to the negotiation and execution of this Agreement or the effectuation
of the transactions contemplated hereby, shall be governed by the terms of the
Confidential Disclosure Agreement among the Company and Parent (the
"Confidential Disclosure Agreement").
5.4 Expenses. Whether or not the Merger is consummated, all fees and
expenses incurred in connection with the Merger including, without limitation,
all legal, accounting, financial advisory, consulting and all other fees and
expenses of third parties ("Third Party Expenses") incurred by a party in
connection with the negotiation and effectuation of the terms and conditions of
this Agreement and the transactions contemplated hereby, shall be the obligation
of the respective party incurring such fees and expenses; provided that, in the
event the Merger is consummated, Parent agrees to pay up to $750,000 of such
unpaid reasonable and documented Third Party Expenses incurred by the Company,
and any Third Party Expenses incurred by the Company in excess of $750,000 shall
be paid out of the Escrow Amount and shall not be limited by the Basket Amount.
5.5 Public Disclosure. Neither party shall issue any statement or
communication to any third party (other than their respective agents) regarding
the subject matter of this Agreement or the transactions contemplated hereby,
including, if applicable, the termination of this Agreement and the reasons
therefor, without the consent of the other party, which consent shall not be
unreasonably withheld, except that this restriction shall be subject to Parent's
obligation to comply with applicable securities laws.
5.6 FIRPTA Compliance. On the Effective Time, the Company shall deliver to
Parent a properly executed statement (a "FIRPTA Compliance Certificate") in a
form reasonably acceptable to Parent for purposes of satisfying Parent's
obligations under Treasury Regulation Section 1.1445-2(c)(3).
5.7 Reasonable Efforts. Subject to the terms and conditions provided in
this Agreement, each of the parties hereto shall use commercially reasonable
efforts to take promptly, or cause to be taken, all actions, and to do promptly,
or cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated hereby, to obtain all necessary waivers, consents and approvals and
to effect all necessary registrations (including those required to register the
Merger Shares (or failing that, the granting of rights designed to replicate as
closely as possible the benefits of registered Merger Shares) and filings and to
remove any injunctions or other impediments or delays, legal or otherwise, in
order to consummate and make effective the transactions contemplated by this
Agreement for the purpose of securing to the parties hereto the benefits
contemplated by this Agreement.
5.8 Notification of Certain Matters. Each of the Company and the Parent
shall give prompt notice to the other of: (i) the occurrence or non-occurrence
of any event, the occurrence or non-occurrence of which is likely to cause any
representation or warranty made by it in this Agreement to be materially untrue
or inaccurate at or prior to the Effective Time, and (ii) any failure by it to
materially comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the delivery
of any notice pursuant to this Section 5.8 shall not (a) limit or otherwise
affect any remedies available to the party receiving such notice or (b)
constitute an acknowledgment or
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admission of a breach of this Agreement. No disclosure by either party pursuant
to this Section 5.8, however, shall be deemed to amend or supplement the Company
Disclosure Schedule or prevent or cure any misrepresentations, breach of
warranty or breach of covenant.
5.9 Additional Documents and Further Assurances. Each party hereto, at the
request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of the Merger and the
transactions contemplated hereby.
5.10 S-8 Registration. Not later than thirty (30) days after the Effective
Time, Parent agrees to file, if available for use by Parent, with the Securities
and Exchange Commission a registration statement on Form S-8 registering a
number of shares of Parent Common Stock equal to the number of shares of Parent
Common Stock issuable upon the exercise of all Company Options assumed by Parent
pursuant to Section 1.6(b) hereof.
5.11 Employment Arrangements and Items.
(a) Retention Options. Prior to the Effective Time, the Company shall issue
the Retention Options to the persons listed on Exhibit D-1 in the amounts
indicated therein provided, that the form of the option agreement governing such
Retention Options shall have been delivered to Parent prior to being furnished
to such person and such agreement shall comply with the restrictions set forth
in the definition of "Retention Options."
(b) Benefit Arrangements. Parent covenants and agrees that to the extent
permitted by applicable law and to the extent the existing benefit plans and
arrangements provided by Company to its employees are terminated on or after the
Effective Time, such employees shall be entitled to benefits which are available
or subsequently become available to Parent's employees, and on a basis which is
on parity with Parent's employees. For purposes of satisfying the terms and
conditions of such plans, Parent shall give full credit for eligibility, vesting
or benefit accrual to the extent possible for each participant's period of
service at the Company prior to the Effective Time.
(c) Employee Plan Compliance.
(i) The Company shall prepare, or have prepared on its behalf, in
compliance with the requirements of ERISA, as provided in 29 CFR Parts 2560
and 2570, a Delinquent Filer Voluntary Compliance Program filing ("DFVC")
for its Premium Only Plan for the 1998 plan year; provided, however, that
Parent shall have the opportunity to review and approve such DFVC filing
(with Parent approval not to be unreasonably withheld), prior to the actual
filing thereof. The Company shall have prepared, have provided Parent the
opportunity to review, and have filed such DFVC filing by the later of: (i)
thirty (30) days after the execution of this Agreement; or (ii) the Closing
Date.
(ii) The Company shall prepare, or have prepared on its behalf, in
compliance with the requirements of the Code and ERISA, a Form 5500 for its
Premium Only Plan for the 1998 plan year; provided, however, that Parent
shall have the opportunity to review and approve such Form 5500 (with
Parent approval not to be unreasonably withheld), prior to the actual
filing thereof. The Company shall have prepared, have provided Parent with
opportunity to review, and have filed such Form 5500 by the later of: (i)
thirty (30) days after the execution of this Agreement; or (ii) the Closing
Date.
5.12 Affiliate Agreements. Section 5.12 of the Company Disclosure Schedule
sets forth those persons who, in the Company's reasonable judgment, are or may
be "affiliates" of the Company within the meaning of Rule 145 (each such person,
an "Affiliate") promulgated under the Securities Act ("Rule 145"). The Company
shall provide Parent such information and documents as Parent shall reasonably
request for purposes of reviewing such list. The Company shall use its best
efforts to deliver or cause to be delivered to Parent prior to the Closing Date
from each of the Affiliates of the Company, an executed Affiliate Agreement in
the form attached hereto as Exhibit F. Parent and Sub shall be entitled to place
appropriate legends on the certificates evidencing any Parent Common Stock to be
received by such
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Affiliates pursuant to the terms of this Agreement, and to issue appropriate
stop transfer instructions to the transfer agent for Parent Common Stock,
consistent with the terms of such Affiliate Agreements.
5.13 Nasdaq Listing. Parent agrees (i) to have the shares of Parent Common
Stock issuable, and those required to be reserved for issuance, in connection
with the Merger, approved for quotation on the Nasdaq National Market System
subject only to official notice of issuance and (ii) to continue the inclusion
of the Parent Common Stock on the Nasdaq National Market until the Effective
Time.
5.14 Indemnification and Insurance. From and after the Effective Time,
Parent will, or will cause the Surviving Corporation to, fulfill and honor in
all respects the obligations of the Company pursuant to its articles of
organization and bylaws and any indemnification agreements between the Company
and each of its respective directors and officers existing prior to the
Effective Time. The articles of organization and bylaws of the Surviving
Corporation will contain the provisions with respect to indemnification set
forth in the articles of organization and bylaws of the Company prior to the
Effective Time, which provisions will not be amended, repealed or otherwise
modified for a period of six years from the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who, immediately
prior to the Effective Time, were directors, officers, employees or agents of
the Company, unless such modification is required by law.
5.15 Termination of 401(k) Plan. The Company and its Affiliates, as
applicable, each agrees to terminate its 401(k) plan immediately prior to
Closing, unless the Parent, in its sole and absolute discretion, agrees to
sponsor and maintain such plans by providing the Company with written notice of
such election at least three (3) days before the Effective Time. Unless the
Parent provides such notice to the Company, the Parent shall receive from the
Company evidence that the Company's and each Affiliate's (as applicable) 401(k)
plan has been terminated pursuant to resolutions of each such entity's Board of
Directors (the form and substance of which resolutions shall be subject to
review and approval of the Parent), effective as of the day immediately
preceding the Effective Time.
5.16 Termination of Severance Plans. The Company and its Affiliates, as
applicable, each agrees to terminate any and all group severance, separation or
salary continuation plans, programs or arrangements that are covered under ERISA
immediately prior to Closing. The Parent shall receive from the Company evidence
that the Company's and each Affiliate's (as applicable) plan(s) has been
terminated pursuant to each such entity's Board of Directors (the form and
substance of which resolutions shall be subject to review and approval of the
Parent), effective as of the day immediately preceding the Effective Time.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of the Company and Parent to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) No Order. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive
order, decree, injunction or other order (whether temporary, preliminary or
permanent) which is in effect and which has the effect of making the Merger
illegal or otherwise prohibiting consummation of the Merger.
(b) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any
court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any
of the foregoing be pending.
(c) Votes. This Agreement shall have been approved by the requisite
vote of the Stockholders by written consent or at a duly called meeting of
the Stockholders, and for the purposes of Rule 4460 of the NASD Rules by
Parent's stockholders.
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(d) Registration Statement Effective. The SEC shall have declared the
S-4 effective. No stop order suspending the effectiveness of the S-4 or any
part thereof shall have been issued and no proceeding for that purpose, and
no similar proceeding in respect of the Proxy Statement/Prospectus, shall
have been initiated or threatened in writing by the SEC.
(e) Tax Opinions. Parent and Company shall each have received written
opinions from their respective tax counsel (Wilson Sonsini Goodrich &
Rosati, Professional Corporation, and Hale and Dorr LLP, respectively), in
form and substance reasonably satisfactory to them, to the effect that the
Merger will constitute a reorganization within the meaning of Section
368(a) of the Code and such opinions shall not have been withdrawn;
provided, however, that if the counsel to either Parent or Company does not
render such opinion, this condition shall nonetheless be deemed to be
satisfied with respect to such party if counsel to the other party renders
such opinion to such party. The parties to this Agreement agree to make
such reasonable representations as requested by such counsel for the
purpose of rendering such opinions.
(f) Governmental Approval. Approvals from any court, administrative
agency or commission or other federal, state, county, local or other
foreign governmental authority, instrumentality, agency or commission that
are required to consummate the Merger shall have been timely obtained.
6.2 Conditions to the Obligations of Parent and Sub. The obligation of
Parent and Sub to effect the Merger shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, exclusively by Parent and Sub:
(a) Representations and Warranties. The representations and warranties
of the Company contained in this Agreement shall have been true and correct
as of the date of this Agreement and as of the Effective Time except (i) to
the extent that the failure of such representations and warranties to be
true and correct in each case or in the aggregate does not constitute a
Company Material Adverse Effect, (ii) for changes contemplated by this
Agreement and (iii) for those representations and warranties which address
matters only as of the date of this Agreement or any other particular date
(which shall have been true and correct as of such particular date except
to the extent that the failure of such representations and warranties to be
true and correct as of such particular date does not constitute a Company
Material Adverse Effect) (it being understood that, for purposes of
determining the accuracy of such representations and warranties all
"Material Adverse Effect" qualifications and other qualifications based on
the word "material" or similar phrases contained in such representations
and warranties shall be disregarded). Parent shall have received a
certificate with respect to the foregoing signed on behalf of the Company
by the Chief Executive Officer and the Chief Financial Officer of the
Company.
(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it at or
prior to the Effective Time, and Parent shall have received a certificate
to such effect signed on behalf of the Company by the Chief Executive
Officer and the Chief Financial Officer of the Company.
(c) Litigation. There shall be no action, suit, claim or proceeding of
any nature pending, or overtly threatened brought by or on behalf of a
governmental entity, against Parent or the Company, their respective
properties or any of their respective officers or directors, arising out
of, or in any way connected with, the Merger or the other transactions
contemplated by the terms of this Agreement.
(d) No Dissenters. Holders of no more than 7.5% of the outstanding
shares of Company Common Stock and Preferred shall have exercised
dissenters' rights with respect to the transactions contemplated by this
Agreement.
(e) Third Party Consents. Parent shall have received all consents,
waivers, approvals, and assignments listed in Schedule 6.2(d) to this
Agreement.
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(f) Resignation of Directors. Parent shall have received a written
resignation from each of the directors of the Company effective as of the
Effective Time.
(g) Legal Opinion. Parent shall have received a legal opinion from
legal counsel to the Company in a form reasonably acceptable to legal
counsel to Parent.
(h) Non-Competition Agreements. The individuals listed on Exhibit D-2
shall have executed and delivered to Parent a Non-Competition Agreement in
the form attached hereto as Exhibit B and the individuals listed on Exhibit
D-5 shall have executed and delivered to Parent a Non-Competition Agreement
in the form attached hereto as Exhibit B-1, and all of such Non-Competition
Agreements shall be in full force and effect.
(i) New Employment/Severance Arrangements. Each of the employees
listed in Exhibit D-3 hereto shall have agreed to be employees of Parent
after the Closing, each employee listed on Exhibit D-4 shall have executed
a severance agreement, and, in each case, shall have executed the
appropriate version of Exhibit E-1 and Exhibit E-2, respectively.
6.3 Conditions to Obligations of the Company. The obligations of the
Company to consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be waived,
in writing, exclusively by the Company:
(a) Representations and Warranties. The representations and warranties
of Parent and Sub contained in this Agreement shall have been true and
correct as of the date of this Agreement and as of the Effective Time
except (i) to the extent that the failure of such representations and
warranties to be true and correct in each case or in the aggregate does not
constitute a Parent Material Adverse Effect, (ii) for changes contemplated
by this Agreement and (iii) for those representations and warranties which
address matters only as of the date of this Agreement or any other
particular date (which shall have been true and correct as of such
particular date except to the extent that the failure of such
representations and warranties to have been true and correct as of such
particular date does not constitute a Parent Material Adverse Effect) (it
being understood that, for purposes of determining the accuracy of such
representations and warranties all "Material Adverse Effect" qualifications
and other qualifications based on the word "material" or similar phrases
contained in such representations and warranties shall be disregarded). The
Company shall have received a certificate with respect to the foregoing
signed on behalf of Parent by the Chief Executive Officer and the Chief
Financial Officer of Parent.
(b) Agreements and Covenants. Parent and Sub shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or
prior to the Effective Time, and the Company shall have received a
certificate to such effect signed on behalf of Parent by the Chief
Executive Officer and the Chief Financial Officer of Parent.
(c) Nasdaq National Market Listing. The shares of Parent Common Stock
issuable to Stockholders pursuant to this Agreement and such other shares
of Parent Common Stock required to be reserved for issuance in connection
with the Merger shall have been approved for quotation on the Nasdaq
National Market System subject only to official notice of issuance.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW
7.1 Survival of Representations, Warranties and Covenants. The
representations and warranties of the Company contained in this Agreement, or in
any certificate or other instrument delivered pursuant to this Agreement, shall
terminate one year following the Closing Date. The representations and
warranties of Parent and Sub contained in this Agreement, or in any certificate
or other instrument delivered pursuant to this Agreement, shall terminate at the
Closing.
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7.2 Indemnification. The Stockholders jointly and severally (severally in
the case of claims and Losses (or portions thereof), as defined below, after
exhaustion of the Escrow Fund) agree to indemnify and hold Parent and its
officers, directors and affiliates, including the Company after the Closing (the
"Indemnified Parties"), harmless against all claims, losses, liabilities,
damages, deficiencies, costs and expenses, including reasonable attorneys' fees
and expenses of investigation and defense relating to such claim, loss,
liability, damage, deficiency, cost or expense (hereinafter individually a
"Loss" and collectively "Losses") incurred or suffered by the Indemnified
Parties, or any of them (including the Company after the Closing), directly or
indirectly, as a result of (i) any breach or inaccuracy of a representation or
warranty of the Company contained in this Agreement or any certificate or
instrument delivered pursuant to this Agreement, (ii) any failure by the Company
to perform or comply with any covenant applicable to them contained in this
Agreement, and (iii) the failure of Estimated Third Party Expenses to equal or
exceed Third Party Expenses. The Stockholders shall not have any right of
contribution from the Company with respect to any Loss claimed by an Indemnified
Party after the Effective Time.
7.3 Escrow Arrangements.
(a) Escrow Fund. As partial security for the indemnity provided for in
Section 7.2 hereof and by virtue of this Agreement, the Stockholders will be
deemed to have received and deposited with the Escrow Agent the Escrow Amount
without any act of any Stockholder. The Escrow Fund shall be available to
compensate the Indemnified Parties, or any of them, for any claims by such
Indemnified Parties for any Losses suffered or incurred by them; provided,
however, that if the Escrow Period (as defined below) has terminated, and a
claim for Losses is made with respect to fraud, the claim shall be made directly
against the Stockholders. Within three days after the Closing, the Escrow
Amount, without any act of the Stockholders, will be deposited with the Escrow
Agent hereunder, or another institution acceptable to Parent and the Stockholder
Representative (as defined in Section 7.4 hereof), such deposit of the Escrow
Amount to constitute an escrow fund (the "Escrow Fund") to be governed by the
terms set forth herein. The Escrow Agent may execute this Agreement following
the date hereof and prior to the Closing, and such later execution, if so
executed after the date hereof, shall not affect the binding nature of this
Agreement as of the date hereof between the other signatories hereto. Nothing
herein shall limit the liability of the Company for any breach or inaccuracy of
any representation, warranty or covenant contained in this Agreement if the
Merger does not close. Parent may not receive any proceeds from the Escrow Fund
unless and until one or more Officer's Certificates (as defined in Section
7.3(d) hereof) identifying Losses in excess of $1,000,000 in the aggregate (the
"Basket Amount") has or have been delivered to the Escrow Agent as provided in
Section 7.3(d) hereof, in which case Parent shall be entitled to recover all
Losses so identified in excess of the Basket Amount. Notwithstanding the
foregoing, Parent shall be entitled to receive payments out of the Escrow Fund
for, and the Basket Amount shall not apply as a threshold to, any and all claims
or payments made with respect to Third Party Expenses in excess of $750,000.
(b) Escrow Period; Distribution upon Termination of Escrow Periods. Subject
to the following requirements, the Escrow Fund shall be in existence immediately
following the Effective Time and shall terminate at 5:00 p.m., P.S.T., on
January 18, 2001 (the "Escrow Termination Period"); provided, however, that the
Escrow Period shall not terminate with respect to any amount which, in the
reasonable good faith judgment of Parent, subject to the objection of the
Stockholder Representative and the subsequent arbitration of the matter in the
manner provided in Section 7.3(f) hereof, is necessary to satisfy any then
pending and unsatisfied claims specified in any Officer's Certificate delivered
to the Escrow Agent prior to the thirtieth (30th) calendar day following the
termination of the Escrow Period with respect to facts and circumstances
existing prior to the termination of such Escrow Period. As soon as all such
claims have been resolved, the Escrow Agent shall deliver to the Stockholders
the remaining portion of the Escrow Fund, if any, not required to satisfy such
claims (the "Remaining Portion"). Deliveries of the Escrow Amount out of the
Escrow Fund to the Stockholders pursuant to this Section 7.3(b) shall be made in
proportion to their respective Pro Rata Portions of the Escrow Fund.
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(c) Protection of Escrow Fund; Distribution of Interest from Escrow Fund;
Substitution of Cash.
(i) The Escrow Agent shall hold and safeguard the Escrow Fund during
the Escrow Period, shall treat such fund as a trust fund in accordance with
the terms of this Agreement and not as the property of Parent and shall
hold and dispose of the Escrow Fund only in accordance with the terms
hereof.
(ii) Any shares of Parent Common Stock or other equity securities
issued or distributed by Parent (including shares issued upon a stock
split) ("New Shares") in respect of Parent Common Stock in the Escrow Fund
which have not been released from the Escrow Fund shall be added to the
Escrow Fund and become a part thereof. New Shares issued in respect of
shares of Parent Common Stock which have been released from the Escrow Fund
shall not be added to the Escrow Fund but shall be distributed to the
record holders thereof. Cash dividends on Parent Common Stock shall not be
added to the Escrow Fund but shall be distributed to the record holders
thereof.
(iii) Each Stockholder shall have voting rights with respect to the
shares of Parent Common Stock contributed to the Escrow Fund by such
Stockholder (and on any voting securities added to the Escrow Fund in
respect of such shares of Parent Common Stock).
(iv) Subject to Section 1.11, the Stockholder Representative may
effect a sale of any or all of the shares comprising the Escrow Fund by
written direction given to the Escrow Agent provided that (i) the net
proceeds per share are at least equal to the Trading Price and (ii) the net
proceeds equal to the Trading Price multiplied by the number of shares of
Parent Common Stock so sold (the "Equivalent Net Proceeds") are retained in
the Escrow Fund and are held at the election of the Stockholder
Representative in an interest-bearing or non-interest bearing demand
deposit account on behalf of the Stockholders. The Equivalent Net Proceeds
from any such disposition and any interest accruing thereon shall be
allocated among the Stockholders in accordance with their Pro Rata Portions
of the Escrow Fund. Any net proceeds in excess of the Equivalent Net
Proceeds shall be distributed to the Stockholders in accordance with their
Pro Rata Portions of the Escrow Fund. This sale will occur at the written
direction of the Stockholder Representative.
(v) In connection with the release to Parent of any shares in the
Escrow Fund as a result of Losses incurred by Parent under the Merger
Agreement, a Stockholder shall be permitted to deposit cash in escrow equal
to the Trading Price times that number of shares in the Escrow Fund held on
behalf of such Stockholder which are to be delivered to Parent as Losses
(the "Cash Out Amount") and to obtain the release of such shares in the
Escrow Fund held on behalf of such Stockholder (the "Cash Out Shares")
equal to the amount of cash so deposited divided by the Trading Price. The
Cash Out Amount shall be in the form of a cashier's check payable to the
Escrow Agent. Parent shall provide the Escrow Agent with such instructions
as may be required to cause the release of any shares to a Stockholder
paying the Cash Out Amount.
(d) Claims for Indemnification.
(i) Upon receipt by the Escrow Agent at any time on or before the
thirtieth (30th) day following the last day of the Escrow Period of an
Officer's Certificate (as defined below) and, subject to the provisions of
Section 7.3(e) and Section 7.5 hereof, the Escrow Agent shall deliver to
Parent out of the Escrow Fund, as promptly as practicable, Parent Common
Stock (or cash in lien thereof) held in the Escrow Fund equal to Losses
specified in the Officer's Certificate. For purposes hereof, "Officer's
Certificate" shall mean a certificate signed by any officer of Parent: (a)
stating that Parent has paid or incurred or properly accrued or reasonably
anticipates that it will have to pay, incur or accrue Losses, and (b)
specifying in reasonable detail the individual items of Losses included in
the amount so stated, the date each such item was paid, incurred or
properly accrued, or the basis for such anticipated liability, and the
nature of the misrepresentation, breach of warranty or covenant to which
such item is related.
(ii) For the purposes of determining the number of shares of Parent
Common Stock or cash in lieu of such shares to be delivered to Parent out
of the Escrow Fund as indemnity pursuant to
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Section 7.2 hereof, the shares of Parent Common Stock shall be valued at
the Trading Price and any cash paid in lieu of such shares shall be
calculated accordingly.
(e) Objections to Claims. At the time of delivery of any Officer's
Certificate to the Escrow Agent, a duplicate copy of such certificate shall
be delivered to the Stockholder Representative, and for a period of thirty
(30) days after such delivery, the Escrow Agent shall make no delivery to
Parent of any Escrow Amounts pursuant to Section 7.3(d) hereof unless and
until the Escrow Agent shall have received written authorization from the
Stockholder Representative to make such delivery. After the expiration of
such thirty (30) day period, the Escrow Agent shall make delivery of the
Parent Common Stock (or cash in lieu thereof) from the Escrow Fund in
accordance with Section 7.3(d) hereof; provided, however, that no such
payment or delivery may be made if the Stockholder Representative shall
object in a written statement to the claim made in the Officer's
Certificate, and such statement shall have been delivered to the Escrow
Agent prior to the expiration of such thirty (30) day period.
(f) Resolution of Conflicts; Arbitration.
(i) In case the Stockholder Representative shall object in writing to
any claim or claims made in any Officer's Certificate to recover Losses
from the Escrow Fund within thirty (30) days after delivery of such
Officer's Certificate, the Stockholder Representative and Parent shall
attempt in good faith to agree upon the rights of the respective parties
with respect to each of such claims. If the Stockholder Representative and
Parent should so agree, a memorandum setting forth such agreement shall be
prepared and signed by both parties and, in the case of a claim against the
Escrow Fund, shall be furnished to the Escrow Agent. The Escrow Agent shall
be entitled to rely on any such memorandum and distribute amounts from the
Escrow Fund in accordance with the terms thereof.
(ii) If no such agreement can be reached after good faith negotiation,
either Parent or the Stockholder Representative may demand arbitration of
the matter unless the amount of the Loss is at issue in pending litigation
with a third party, in which event arbitration shall not be commenced until
such amount is ascertained or both parties agree to arbitration, and in
either such event the matter shall be settled by arbitration conducted by
one arbitrator mutually agreeable to Parent and the Stockholder
Representative. In the event that within forty-five (45) days after
submission of any dispute to arbitration, Parent and the Stockholder
Representative cannot mutually agree on one arbitrator, Parent and the
Stockholder Representative shall each select one arbitrator, and the two
arbitrators so selected shall select a third arbitrator. The arbitrator or
arbitrators, as the case may be, shall set a limited time period and
establish procedures designed to reduce the cost and time for discovery
while allowing the parties an opportunity, adequate in the sole judgment of
the arbitrator or majority of the three arbitrators, as the case may be, to
discover relevant information from the opposing parties about the subject
matter of the dispute. The arbitrator or a majority of the three
arbitrators, as the case may be, shall rule upon motions to compel or limit
discovery and shall have the authority to impose sanctions, including
attorneys' fees and costs, to the extent as a competent court of law or
equity, should the arbitrators or a majority of the three arbitrators, as
the case may be, determine that discovery was sought without substantial
justification or that discovery was refused or objected to without
substantial justification. The decision of the arbitrator or a majority of
the three arbitrators, as the case may be, as to the validity and amount of
any claim in such Officer's Certificate shall be binding and conclusive
upon the parties to this Agreement. Such decision shall be written and
shall be supported by written findings of fact and conclusions which shall
set forth the award, judgment, decree or order awarded by the
arbitrator(s).
(iii) Judgment upon any award rendered by the arbitrator(s) may be
entered in any court having jurisdiction. Any such arbitration shall be
held in San Francisco County, California, under the rules then in effect of
the American Arbitration Association. The arbitrator(s) shall determine how
all expenses relating to the arbitration shall be paid, including without
limitation, the respective expenses of each party, the fees of each
arbitrator and the administrative fee of the American Arbitration
Association.
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(g) Third-Party Claims. In the event Parent becomes aware of a third-party
claim which Parent reasonably believes may result in a demand against the Escrow
Fund, Parent shall notify the Stockholder Representative of such claim, and the
Stockholder Representative shall be entitled on behalf of the Stockholders, at
its expense, to participate in, but not to determine or conduct, the defense of
such claim. Parent shall have the right in its sole discretion to conduct the
defense of and settle any such claim; provided, however, that except with the
consent of the Stockholder Representative, no settlement of any such claim with
third-party claimants shall be determinative of the amount of Losses relating to
such matter. In the event that the Stockholder Representative has consented in
writing to any such settlement, the Stockholders shall have no power or
authority to object under any provision of this Article VII to the amount of any
claim by Parent against the Escrow Fund with respect to such settlement.
(h) Escrow Agent's Duties. Prior to the Effective Time, Parent shall select
the Escrow Agent. Unless otherwise set forth in a separate escrow agreement with
the Escrow Agent:
(i) The Escrow Agent shall be obligated only for the performance of
such duties as are specifically set forth herein, and as set forth in any
additional written escrow instructions which the Escrow Agent may receive
after the date of this Agreement which are signed by an officer of Parent
and the Stockholder Representative, and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed to
be genuine and to have been signed or presented by the proper party or
parties. The Escrow Agent shall not be liable for any act done or omitted
hereunder as Escrow Agent while acting in good faith and in the exercise of
reasonable judgment, and any act done or omitted pursuant to the advice of
legal counsel shall be conclusive evidence of such good faith.
(ii) The Escrow Agent is hereby expressly authorized to disregard any
and all warnings given by any of the parties hereto or by any other person,
excepting only orders or process of courts of law, and is hereby expressly
authorized to comply with and obey orders, judgments or decrees of any
court. In case the Escrow Agent obeys or complies with any such order,
judgment or decree of any court, the Escrow Agent shall not be liable to
any of the parties hereto or to any other person by reason of such
compliance, notwithstanding any such order, judgment or decree being
subsequently reversed, modified, annulled, set aside, vacated or found to
have been entered without jurisdiction.
(iii) The Escrow Agent shall not be liable in any respect on account
of the identity, authority or rights of the parties executing or delivering
or purporting to execute or deliver this Agreement or any documents or
papers deposited or called for hereunder.
(iv) The Escrow Agent shall not be liable for the expiration of any
rights under any statute of limitations with respect to this Agreement or
any documents deposited with the Escrow Agent.
(v) In performing any duties under this Agreement, the Escrow Agent
shall not be liable to any party for damages, losses, or expenses, except
for negligence or willful misconduct on the part of the Escrow Agent. The
Escrow Agent shall not incur any such liability for (A) any act or failure
to act made or omitted in good faith, or (B) any action taken or omitted in
reliance upon any instrument, including any written statement of affidavit
provided for in this Agreement that the Escrow Agent shall in good faith
believe to be genuine, nor will the Escrow Agent be liable or responsible
for forgeries, fraud, impersonations, or determining the scope of any
representative authority. In addition, the Escrow Agent may consult with
legal counsel in connection with performing the Escrow Agent's duties under
this Agreement and shall be fully protected in any act taken, suffered, or
permitted by him/her in good faith in accordance with the advice of
counsel. The Escrow Agent is not responsible for determining and verifying
the authority of any person acting or purporting to act on behalf of any
party to this Agreement.
(vi) If any controversy arises between the parties to this Agreement,
or with any other party, concerning the subject matter of this Agreement,
its terms or conditions, the Escrow Agent will not be required to determine
the controversy or to take any action regarding it. The Escrow Agent may
hold all documents and the Escrow Amount and may wait for settlement of any
such controversy by
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final appropriate legal proceedings or other means as, in the Escrow
Agent's discretion, may be required, despite what may be set forth
elsewhere in this Agreement. In such event, the Escrow Agent will not be
liable for damages. Furthermore, the Escrow Agent may at its option, file
an action of interpleader requiring the parties to answer and litigate any
claims and rights among themselves. The Escrow Agent is authorized to
deposit with the clerk of the court all documents and the Escrow Amounts
held in escrow, except all costs, expenses, charges and reasonable attorney
fees incurred by the Escrow Agent due to the interpleader action and which
the parties jointly and severally agree to pay. Upon initiating such
action, the Escrow Agent shall be fully released and discharged of and from
all obligations and liability imposed by the terms of this Agreement.
(vii) The parties and their respective successors and assigns agree
jointly and severally to indemnify and hold Escrow Agent harmless against
any and all losses, claims, damages, liabilities, and expenses, including
reasonable costs of investigation, counsel fees, including allocated costs
of in-house counsel and disbursements that may be imposed on Escrow Agent
or incurred by Escrow Agent in connection with the performance of his/her
duties under this Agreement, including but not limited to any litigation
arising from this Agreement or involving its subject matter, other than
those arising out of the negligence or willful misconduct of the Escrow
Agent.
(viii) The Escrow Agent may resign at any time upon giving at least
thirty (30) days written notice to the Parent and the Stockholder
Representative; provided, however, that no such resignation shall become
effective until the appointment of a successor escrow agent which shall be
accomplished as follows: Parent and the Stockholder Representative shall
use their best efforts to mutually agree on a successor escrow agent within
thirty (30) days after receiving such notice. If the parties fail to agree
upon a successor escrow agent within such time, the Escrow Agent shall have
the right to appoint a successor escrow agent authorized to do business in
the Commonwealth of Massachusetts. The successor escrow agent shall execute
and deliver an instrument accepting such appointment and it shall, without
further acts, be vested with all the estates, properties, rights, powers,
and duties of the predecessor escrow agent as if originally named as escrow
agent. Upon appointment of a successor escrow agent, the Escrow Agent shall
be discharged from any further duties and liability under this Agreement.
(i) Fees. All fees of the Escrow Agent for performance of its duties
hereunder shall be paid by Parent in accordance with the standard fee schedule
of the Escrow Agent. It is understood that the fees and usual charges agreed
upon for services of the Escrow Agent shall be considered compensation for
ordinary services as contemplated by this Agreement. In the event that the
conditions of this Agreement are not promptly fulfilled, or if the Escrow Agent
renders any service not provided for in this Agreement, or if the parties
request a substantial modification of its terms, or if any controversy arises,
or if the Escrow Agent is made a party to, or intervenes in, any litigation
pertaining to the Escrow Fund or its subject matter, the Escrow Agent shall be
reasonably compensated for such extraordinary services and reimbursed for all
costs, attorney's fees, including allocated costs of in-house counsel, and
expenses occasioned by such default, delay, controversy or litigation.
(j) Consequential Damages. In no event shall the Escrow Agent be liable for
special, indirect or consequential loss or damage of any kind whatsoever
(including but not limited to lost profits), even if the Escrow Agent has been
advised of the likelihood of such loss or damage and regardless of the form of
action.
(k) Successor Escrow Agents. Any corporation into which the Escrow Agent in
its individual capacity may be merged or converted or with which it may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Escrow Agent in its individual capacity shall be a
party, or any corporation to which substantially all the corporate trust
business of the Escrow Agent in its individual capacity may be transferred,
shall be the Escrow Agent under this Escrow Agreement without further act.
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7.4 Stockholder Representative.
(a) Each of the Stockholders hereby appoints Joseph Chappell its agent and
attorney-in-fact, as the Stockholder Representative for and on behalf of the
Stockholders, to give and receive notices and communications, to authorize
payment to Parent of shares of Parent Common Stock or cash from the Escrow Fund
in satisfaction of claims by Parent, to object to such payments, to agree to,
negotiate, enter into settlements and compromises of, and demand arbitration and
comply with orders of courts and awards of arbitrators with respect to such
claims, and to take all other actions that are either (i) necessary or
appropriate in the judgment of the Stockholder Representative for the
accomplishment of the foregoing or (ii) specifically mandated by the terms of
this Agreement. Such agency may be changed by the Stockholders from time to time
upon not less than thirty (30) days prior written notice to Parent; provided,
however, that the Stockholder Representative may not be removed unless holders
of a two-thirds interest of the Escrow Fund agree to such removal and to the
identity of the substituted agent. Any vacancy in the position of Stockholder
Representative may be filled by the holders of a majority in interest of the
Escrow Fund. No bond shall be required of the Stockholder Representative, and
the Stockholder Representative shall not receive compensation for its services.
Notices or communications to or from the Stockholder Representative shall
constitute notice to or from the Stockholders.
(b) The Stockholder Representative shall not be liable for any act done or
omitted hereunder as the Stockholder Representative while acting in good faith
and in the exercise of reasonable judgment. The Stockholders on whose behalf the
Escrow Amount was contributed to the Escrow Fund shall indemnify the Stockholder
Representative and hold the Stockholder Representative harmless against any
loss, liability or expense incurred without negligence or bad faith on the part
of the Stockholder Representative and arising out of or in connection with the
acceptance or administration of the Stockholder Representative's duties
hereunder, including the reasonable fees and expenses of any legal counsel
retained by the Stockholder Representative. After all claims for Losses by
Parent set forth in Officers' Certificates delivered to the Escrow Agent and the
Stockholder Representative has been satisfied, or reserved against, the
Stockholder Representative, with the consent of the majority in interest in the
Escrow Fund, may recover from the Escrow Fund at the end of the Escrow Period
payments not yet paid for any expenses incurred in connection with the
Stockholder Representative's representation hereby.
(c) A decision, act, consent or instruction of the Stockholder
Representative, including but not limited to an amendment, extension or waiver
of this Agreement pursuant to Section 8.3 and Section 8.4 hereof, shall
constitute a decision of the Stockholders and shall be final, binding and
conclusive upon the Stockholders; and the Escrow Agent and Parent may rely upon
any such decision, act, consent or instruction of the Stockholder Representative
as being the decision, act, consent or instruction of the Stockholders. The
Escrow Agent and Parent are hereby relieved from any liability to any person for
any acts done by them in accordance with such decision, act, consent or
instruction of the Stockholder Representative.
(d) Subject to Parent's prior claims for indemnification against the Escrow
Fund, the Stockholder Representative shall be entitled to receive payment for
its reasonable and documented expenses therefrom, prior to any payments to the
Stockholders.
7.5 Maximum Payments; Remedy. Notwithstanding anything to the contrary set
forth in this Article VII or elsewhere in this Agreement, if the Merger is
consummated the maximum amount the Indemnified Parties may recover from the
Stockholders pursuant to the indemnity obligations set forth in Section 7.2
hereof shall be limited to an amount equal to each such Stockholder's Pro Rata
Portion of the Escrow Fund; provided however, that such limitation shall not
apply with respect to fraud claims by taxing authorities relating to Taxes or
liabilities related to, assessable upon, or based upon, the transactions
undertaken in connection with that certain Recapitalization, Stock Purchase and
Shareholders Agreement, dated as of February 13, 1998 among the Company, Toyo
Information Systems Co. Ltd. and the other parties thereto.
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ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. Except as provided in Section 8.2 hereof, this Agreement
may be terminated and the Merger abandoned at any time prior to the Closing:
(a) by mutual agreement of the Company and Parent;
(b) by Parent or the Company if the Effective Time shall not have
occurred by July 31, 2000; provided, however, that the right to terminate
this Agreement under this Section 8.1(b) shall not be available to any
party whose action or failure to act has been a principal cause of or
resulted in the failure of the Merger to occur on or before such date and
such action or failure to act constitutes breach of this Agreement;
(c) by Parent or the Company if: (i) there shall be a final
non-appealable order of a federal or state court in effect preventing
consummation of the Merger, or (ii) there shall be any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to
the Closing by any Governmental Entity that would make consummation of the
Closing illegal;
(d) by Parent if there shall be any action taken, or any statute,
rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Merger by any Governmental Entity, which would: (i)
prohibit Parent's ownership or operation of any portion of the business of
the Company or (ii) compel Parent or the Company to dispose of or hold
separate all or any portion of the business or assets of the Company or
Parent as a result of the Merger;
(e) by Parent if there has been a breach of any representation,
warranty, covenant or agreement of the Company contained in this Agreement
such that the conditions set forth in Section 6.2(a) would not be satisfied
and such breach has not been cured within ten (10) calendar days after
written notice thereof to the Company; provided, however, that no cure
period shall be required for a breach which by its nature cannot be cured;
or
(f) by the Company if there has been a breach of any representation,
warranty, covenant or agreement contained in this Agreement such that the
conditions set forth in Section 6.3(a) would not be satisfied and such
breach has not been cured within ten (10) calendar days after written
notice thereof to Parent; provided, however, that no cure period shall be
required for a breach which by its nature cannot be cured.
8.2 Effect of Termination. In the event of termination of this Agreement
as provided in Section 8.1 hereof, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Parent or the
Company, or their respective officers, directors or stockholders, if applicable;
provided, however, that each party hereto shall remain liable for any breaches
of this Agreement prior to its termination; and provided further, however, that,
the provisions of Sections 5.4, 5.5 and 5.6 hereof, Article IX hereof and this
Section 8.2 shall remain in full force and effect and survive any termination of
this Agreement pursuant to the terms of this Article VIII.
8.3 Amendment. This Agreement may be amended by the parties hereto at any
time by execution of an instrument in writing signed on behalf of each of the
parties hereto. For purposes of this Section 8.3, the Stockholders agree that
any amendment of this Agreement signed by the Stockholder Representative shall
be binding upon and effective against the Stockholders whether or not they have
signed such amendment.
8.4 Extension; Waiver. At any time prior to the Closing, Parent, on the
one hand, and the Company, on the other hand, may, to the extent legally
allowed, (i) extend the time for the performance of any of the obligations of
the other party hereto, (ii) waive any inaccuracies in the representations and
warranties made to such party contained herein or in any document delivered
pursuant hereto, and (iii) waive compliance with any of the agreements or
conditions for the benefit of such party contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
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set forth in an instrument in writing signed on behalf of such party. For
purposes of this Section 8.4, the Stockholders agree that any extension or
waiver signed by the Stockholder Representative shall be binding upon and
effective against all Stockholders whether or not they have signed such
extension or waiver.
ARTICLE IX
GENERAL PROVISIONS
9.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
messenger or courier service, or mailed by registered or certified mail (return
receipt requested) or sent via facsimile (with acknowledgment of complete
transmission) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice); provided, however,
that notices sent by mail will not be deemed given until received:
(a) if to Parent, to:
OnDisplay, Inc.
12667 Alcosta Boulevard, Suite 300
San Ramon, CA 94583
Attention: David Larson
Facsimile No.: (925) 480-1000
with a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
Spear Street Tower
One Market Street
San Francisco, CA 94105
Attention: Michael J. Kennedy, Esq.
Facsimile No.: (415) 222-9633
(b)if to the Company or the Stockholder Representative, to:
Oberon Software Incorporated
215 First Street
Cambridge, MA 02142-1268
Attention: Joseph Chappell
Facsimile No.: (617) 494-0434
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attention: Jay E. Bothwick
Facsimile No.: (617) 526-5000
(c) If to the Escrow Agent, to its address as it may notify each party
hereto from time to time.
9.2 Interpretation. The words "include," "includes" and "including" when
used herein shall be deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
9.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
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9.4 Entire Agreement; Assignment. This Agreement, the exhibits hereto, the
Company Disclosure Schedule, the Confidential Disclosure Agreement, and the
documents and instruments and other agreements among the parties hereto
referenced herein: (i) constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings both written and oral, among the parties with respect to the
subject matter hereof, (ii) are not intended to confer upon any other person any
rights or remedies hereunder, and (iii) shall not be assigned by operation of
law or otherwise, except that Parent and Merger Sub may assign its rights and
delegate its obligations hereunder to its affiliates as long as Parent remains
ultimately liable for all of Parent's and Merger Sub's obligations hereunder.
Parent intends to substitute a Massachusetts corporation for Merger Sub as a
party to the Agreement.
9.5 Severability. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.
9.6 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
9.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts, regardless of the
laws that might otherwise govern under applicable principles of conflicts of
laws thereof. Each of the parties hereto irrevocably consents to the exclusive
jurisdiction and venue of any court within the Commonwealth of Massachusetts, in
connection with any matter based upon or arising out of this Agreement or the
matters contemplated herein, agrees that process may be served upon them in any
manner authorized by the laws of the Commonwealth of Massachusetts for such
persons and waives and covenants not to assert or plead any objection which they
might otherwise have to such jurisdiction, venue and such process.
9.8 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefor, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, Parent, Sub, the Company, the Principal Stockholders,
the Escrow Agent and the Stockholder Representative have caused this Agreement
to be signed, all as of the date first written above.
<TABLE>
<S> <C>
OBERON SOFTWARE INCORPORATED
By: /s/ JOSEPH CHAPPELL
--------------------------------------------
Name: Joseph Chappell
Title: President and CEO
ONDISPLAY, INC.
By: /s/ MARK PINE
--------------------------------------------
Name: Mark Pine
Title: CEO
OBIONE ACQUISITION CORPORATION
By: /s/ DAVID F. LARSON
--------------------------------------------
Name: David F. Larson
Title: CFO
STOCKHOLDERS' REPRESENTATIVE:
By: /s/ JOSEPH CHAPPELL
--------------------------------------------
Name: Joseph Chappell
Title: President and CEO
</TABLE>
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION]
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INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
------- -----------
<S> <C>
Exhibit A............... Form of Voting Agreement
Exhibit B............... Form of Non-Competition Agreement
Exhibit B-1............. Form of Non-Competition Agreement
Exhibit C............... Parent Voting Agreement
Exhibit D (2-5)......... Schedule of Designated Employees
Exhibit E-1............. Form of Employment Agreement
Exhibit E-2............. Form of Severance Agreement
Exhibit F............... Form of Affiliate Agreement
</TABLE>
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<PAGE> 202
EXHIBIT A
FORM OF VOTING AGREEMENT
VOTING AGREEMENT
THIS VOTING AGREEMENT (this "Agreement") is made and entered into as of
January , 2000, among OnDisplay, Inc., a Delaware corporation ("Parent"), and
the undersigned stockholder and/or option holder (the "Stockholder") of Oberon
Software Incorporated, a Massachusetts corporation (the "Company").
RECITALS
A. The Company, Merger Sub (as defined below) and Parent have entered into
an Agreement and Plan of Reorganization (the "Reorganization Agreement"), which
provides for the merger (the "Merger") of a wholly-owned subsidiary of Parent
("Merger Sub") with and into the Company. Pursuant to the Merger, all
outstanding capital stock of the Company shall be converted into the right to
receive common stock of Parent, as set forth in the Reorganization Agreement;
B. Stockholder is the beneficial owner (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of such number
of shares of the outstanding capital stock of the Company and shares subject to
outstanding options and warrants as is indicated on the signature page of this
Agreement; and
C. In consideration of the execution of the Reorganization Agreement by
Parent, Stockholder agrees to vote the Shares (as defined below) and other such
shares of capital stock of the Company over which Stockholder has voting power
so as to facilitate consummation of the Merger.
NOW, THEREFORE, intending to be legally bound, the parties hereto agree as
follows:
1. Certain Definitions. Capitalized terms not defined herein shall have the
meanings ascribed to them in the Reorganization Agreement. For purposes of this
Agreement:
(a) "Alternative Transaction" shall mean (i) a transaction pursuant to
which any person (or group of persons) other than the Parent or its affiliates
(a "Third Party"), acquires more than 20% of the outstanding shares of the
Company common stock pursuant to a tender offer or exchange offer or otherwise,
(ii) a merger or other business combination involving the Company pursuant to
which any Third Party acquires more than 20% of the outstanding shares of
Company common stock or of the entity surviving such merger or business
combination, (iii) any other transaction pursuant to which any Third Party
acquires control assets (including for this purpose the outstanding equity
securities of Subsidiaries of the Company, and the entity surviving any merger
or business combination including any of them) of the Company having a fair
market value equal to more than 20% of the fair market value of all the assets
of the Company immediately prior to such transaction, or (iv) any public
announcement by a Third Party of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing.
(a) "Expiration Date" shall mean the earlier to occur of (i) such date and
time as the Reorganization Agreement shall have been terminated pursuant to
Article VIII thereof, or (ii) such date and time as the Merger shall become
effective in accordance with the terms and provisions of the Reorganization
Agreement.
(b) "Person" shall mean any (i) individual, (ii) corporation, limited
liability company, partnership or other entity, or (iii) governmental authority.
(c) "Shares" shall mean: (i) all securities of the Company (including all
shares of Company common stock and all options, warrants and other rights to
acquire shares of Company common stock) owned by Stockholder as of the date of
this Agreement; and (ii) all additional securities of the Company (including all
additional shares of Company common stock and all additional options, warrants
and other
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rights to acquire shares of Company common stock) of which Stockholder acquires
ownership during the period from the date of this Agreement through the
Expiration Date.
(d) Transfer. A Person shall be deemed to have effected a "Transfer" of a
security if such person directly or indirectly: (i) sells, pledges, encumbers,
grants an option with respect to, transfers or disposes of such security or any
interest in such security; or (ii) enters into an agreement or commitment
providing for the sale of, pledge of, encumbrance of, grant of an option with
respect to, transfer of or disposition of such security or any interest therein.
2. Transfer of Shares.
(a) Transferee of Shares to be Bound by this Agreement. Stockholder agrees
that, during the period from the date of this Agreement through the Expiration
Date, Stockholder shall not cause or permit any Transfer of any of the Shares to
be effected unless prior to any such Transfer the Person to which any of such
Shares, or any interest in any of such Shares, is or may be transferred shall
have: (a) executed a counterpart of this Agreement and a proxy in the form
attached hereto as Exhibit 1 (with such modifications as Parent may reasonably
request); and (b) agreed in writing to hold such Shares (or interest in such
Shares) subject to all of the terms and provisions of this Agreement.
(b) Transfer of Voting Rights. Stockholder agrees that, during the period
from the date of this Agreement through the Expiration Date, Stockholder shall
not deposit (or permit the deposit of) any Shares in a voting trust or grant any
proxy or enter into any voting agreement or similar agreement in contravention
of the obligations of Stockholder under this Agreement with respect to any of
the Shares.
3. Agreement to Vote Shares. At every meeting of the stockholders of the
Company called, and at every adjournment thereof, and on every action or
approval by written consent of the stockholders of the Company, Stockholder
shall cause the Shares to be voted (a) in favor of approval of the
Reorganization Agreement, as modified or amended from time to time in accordance
with its terms and with the approval of the Board of Directors of the Company,
and the Merger and (b) against any other Alternative Transaction.
4. Irrevocable Proxy. Concurrently with the execution of this Agreement,
Stockholder agrees to deliver to Parent a proxy in the form attached hereto as
Exhibit A (the "Proxy"), which shall be irrevocable to the fullest extent
permissible by law, with respect to the Shares.
5. Representations and Warranties of the Stockholder. Stockholder (i) is
the beneficial owner of the shares of common stock of the Company, Preferred
Stock of the Company and the options and warrants to purchase shares of common
stock of the Company indicated on the final page of this Agreement, free and
clear of any liens, claims, options, rights of first refusal, co-sale rights,
charges or other encumbrances; (ii) does not beneficially own any securities of
the Company other than the shares of common stock of the Company, Preferred
Stock of the Company and options and warrants to purchase shares of common stock
of the Company indicated on the final page of this Agreement; and (iii) has full
power and authority to make, enter into and carry out the terms of this
Agreement and the Proxy.
6. Additional Documents. Stockholder hereby covenants and agrees, as a
stockholder, to execute and delivery any additional documents necessary or
desirable, in the reasonable opinion of Parent, to carry out the intent of this
Agreement.
7. Consent and Waiver. Stockholder (not in any other capacity) hereby gives
any consents or waivers that are reasonably required for the consummation of the
Merger under the terms of any agreements to which Stockholder is a party or
pursuant to any rights Stockholder may have.
8. Legending of Shares. If so requested by Parent, Stockholder agrees that
the Shares shall bear a legend stating that they are subject to this Agreement
and to an irrevocable proxy. Subject to the terms of Section 2 hereof,
Stockholder agrees that Stockholder shall not Transfer the Shares without first
having the aforementioned legend affixed to the certificates representing the
Shares.
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<PAGE> 204
9. Termination. This Agreement shall terminate and shall have no further
force or effect as of the Expiration Date.
10. Miscellaneous.
(a) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, then the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
(b) Binding Effect and Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, but, except as otherwise
specifically provided herein, either this Agreement nor any of the rights,
interests or obligations of the parties hereto may be assigned by either of the
parties without prior written consent of the other.
(c) Amendments and Modification. This Agreement may not be modified,
amended, altered or supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
(d) Specific Performance; Injunctive Relief. The parties hereto acknowledge
that Parent shall be irreparably harmed and that there shall be no adequate
remedy at law for a violation of any of the covenants or agreements of
Stockholder set forth herein. Therefore, it is agreed that, in addition to any
other remedies that may be available to Parent upon any such violation, Parent
shall have the right to enforce such covenants and agreements by specific
performance, injunctive relief or by any other means available to Parent at law
or in equity.
(e) Notices. All notices and other communications pursuant to this
Agreement shall be in writing and deemed to be sufficient if contained in a
written instrument and shall be deemed given if delivered personally,
telecopied, sent by nationally-recognized overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the following address (or at such other address for a party as shall
be specified by like notice):
<TABLE>
<S> <C>
If to Parent: OnDisplay, Inc.
12667 Alcosta Boulevard, Suite 300
San Ramon, CA 94583
Attention: Dave Larson
Facsimile: (925) 480-1000
With a copy to: Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304
Attention: Michael Kennedy
Facsimile: (650) 493-6811
If to Stockholder: To the address for notice set forth on the signature page
hereof.
With a copy to: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attention: Jay E. Bothwick
Facsimile: (617) 526-5000
</TABLE>
(f) Governing Law. This Agreement shall be governed by the laws of the
Commonwealth of Massachusetts, without reference to rules of conflicts of law.
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<PAGE> 205
(g) Entire Agreement. This Agreement and the Proxy contain the entire
understanding of the parties in respect of the subject matter hereof, and
supersede all prior negotiations and understandings between the parties with
respect to such subject matter.
(h) Effect of Headings. The section headings are for convenience only and
shall not affect the construction or interpretation of this Agreement.
(i) Counterparts. This Agreement may be executed in several counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
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<PAGE> 206
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the day and year first above written.
<TABLE>
<S> <C>
ONDISPLAY, INC. STOCKHOLDER
By: _________________________________ By: ______________________________________
Signature of Authorized Signatory Signature
Name: _______________________________ Name: ____________________________________
Title: ______________________________ Address: _________________________________
Telephone No.: ___________________________
Facsimile No.: ___________________________
Shares beneficially owned:
____________ shares of Company common stock
____________ shares of Company Preferred Stock
____________ shares of Company common stock issuable
upon exercise of outstanding options or warrants
</TABLE>
[SIGNATURE PAGE TO VOTING AGREEMENT]
A-50
<PAGE> 207
IRREVOCABLE PROXY
The undersigned stockholder of Oberon Software Incorporated, a
Massachusetts corporation (the "Company"), hereby irrevocably (to the fullest
extent permitted by law) appoints the directors on the Board of Directors of
OnDisplay, a Delaware corporation ("Parent"), and each of them, as the sole and
exclusive attorneys and proxies of the undersigned, with full power of
substitution and resubstitution, to vote and exercise all voting an related
rights (to the full extent that the undersigned is entitled to do so) with
respect to all of the shares of capital stock of the Company that now are or
hereafter may be beneficially owned by the undersigned, and any and all other
shares or securities of the Company issued or issuable in respect thereof on or
after the date hereof (collectively, the "Shares") in accordance with the terms
of this Proxy. The Shares beneficially owned by the undersigned stockholder of
the Company as of the date of this Proxy are listed on the final page of this
Proxy. Upon the undersigned's execution of this Proxy, any and all prior proxies
given by the undersigned with respect to voting any Shares with respect to the
matters set forth herein are hereby revoked and the undersigned agrees not to
grant any subsequent proxies with respect to the Shares until after the
Expiration Date (as defined below).
This Proxy is irrevocable (to the fullest extent permitted by law), is
coupled with an interest and is granted pursuant to that certain Voting
Agreement of even date herewith by and among Parent and the undersigned
stockholder (the "Voting Agreement"), and is granted in consideration of Parent
entering into that certain Agreement and Plan of Reorganization (the
"Reorganization Agreement"), among Parent, ObiOne Acquisition Corporation, a
Delaware corporation and a wholly-owned subsidiary of Parent ("Merger Sub"), and
the Company. The Reorganization Agreement provides for the merger of Merger Sub
with and into the Company in accordance with its terms (the "Merger"). As used
herein, the term "Expiration Date" shall mean the earlier to occur of (i) such
date and time as the Reorganization Agreement shall have been validly terminated
pursuant to Article VIII thereof or (ii) such date and time as the Merger shall
become effective in accordance with the terms and provisions of the
Reorganization Agreement.
The attorneys and proxies named above, and each of them, are hereby
authorized and empowered by the undersigned, at any time prior to the Expiration
Date, to act as the undersigned's attorney and proxy to vote the Shares, and to
exercise all voting, consent and similar rights of the undersigned with respect
to the Shares (including, without limitation, the power to execute and deliver
written consents) at every annual, special or adjourned meeting of stockholders
of the Company and in every written consent in lieu of such meeting (x) in favor
of approval of the Reorganization Agreement and the Merger and (y) against any
Alternative Transaction (as defined in the Voting Agreement).
The attorneys and proxies named above may not exercise this Proxy on any
other matter except as provided above. The undersigned stockholder may vote the
Shares on all other matters, free from any provisions of this proxy.
Any obligation of the undersigned hereunder shall be binding upon the
successors and assigns of the undersigned.
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<PAGE> 208
This Proxy is irrevocable (to the fullest extent permitted by law). This
Proxy shall terminate, and be of no further force and effect, automatically upon
the Expiration Date.
Dated: January , 2000 STOCKHOLDER
By:
------------------------------------
Signature
Name:
----------------------------------
Shares beneficially owned:
____________ shares of Company common
stock
____________ shares of Company
Preferred Stock
____________ shares of Company common
stock issuable upon
exercise of outstanding
options or warrants
[SIGNATURE PAGE TO IRREVOCABLE PROXY]
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<PAGE> 209
EXHIBIT B
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT (the "AGREEMENT") is made as of the
Effective Date (as defined below) by and among OnDisplay, Inc., a Delaware
corporation ("ONDISPLAY"), Oberon Software Incorporated, a Massachusetts
corporation, including any and all of its subsidiaries (collectively, "OSI") and
the undersigned employee ("EMPLOYEE"). Capitalized terms used but not otherwise
defined herein shall have the meanings ascribed to them in the Reorganization
Agreement (as defined below).
BACKGROUND
A. OnDisplay, ObiOne Acquisition Corporation, a Delaware corporation and
wholly-owned subsidiary of OnDisplay ("SUB"), and OSI have entered into an
Agreement and Plan of Reorganization dated as of January , 2000 (the
"REORGANIZATION AGREEMENT"), which provides for the merger (the "MERGER") of Sub
with and into OSI. The effective date of the consummation of the Merger shall be
the "EFFECTIVE DATE" of this Agreement.
B. Employee is receiving significant consideration pursuant to the terms of
the Reorganization Agreement.
C. As a condition to the Merger, to preserve the value of the business
being acquired by OnDisplay, the Reorganization Agreement contemplates, among
other things, that Employee enter into this Agreement and that this Agreement
become effective upon the closing of the Merger.
D. OSI is currently engaged or planning to engage in its business in each
of the fifty (50) states of the United States and worldwide. OnDisplay,
following the Merger, will continue conducting such business in all parts of the
United States and worldwide.
NOW THEREFORE, in consideration of the mutual promises made herein,
OnDisplay and Employee (collectively referred to as the "PARTIES") hereby agree
as follows:
1. Covenant Not to Compete or Solicit.
(a) For the later of twenty-four (24) months after the Effective Date
(the "NON-COMPETE PERIOD") or twelve (12) months after the date Employee
ceases to be employed by OnDisplay, or OSI, Employee shall not directly or
indirectly, without the prior written consent of OnDisplay, (i) as an
individual proprietor, partner, stockholder, officer, employee, director,
consultant, joint venturer, investor, lender or in any other capacity
whatsoever (other than as the holder of not more than one percent (1%) of
the total outstanding stock of a publicly held company), engage in any
business which develops, produces, markets or offers any products or
services which are competitive with any products being developed, produced
or marketed, or with any services being offered or being proposed to be
offered, by OSI or OnDisplay at any time during the term of my employment
with OSI or OnDisplay; or (ii) approach, contact, solicit or interfere with
the business of OnDisplay's or OSI's customers which are presently existing
or which are existing on the date of Employee's termination from OnDisplay
or OSI to the extent relating to a competing business purpose.
(b) During the Non-Compete Period, Employee shall not, directly or
indirectly, without the prior written consent of OnDisplay, (i) solicit,
encourage, hire or take any other action which is intended to induce any
employee of OnDisplay or OSI to terminate his or her employment with
OnDisplay or OSI or (ii) interfere in any manner with the contractual or
employment relationship between either OnDisplay or OSI and any employee of
OnDisplay or OSI, respectively.
(c) The covenants contained in the preceding paragraphs shall be
construed as a series of separate covenants, one for each county, city and
state of any geographic area where any business is presently carried on by
OSI or OnDisplay. Except for geographic coverage, each such separate
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<PAGE> 210
covenant shall be identical in terms to the covenant contained in the
preceding paragraphs. If, in any judicial proceeding, a court refuses to
enforce any of such separate covenants (or any part thereof), then such
unenforceable covenant (or such part) shall be eliminated from this
Agreement to the extent necessary to permit the remaining separate
covenants (or portions thereof) to be enforced. In the event that the
provisions of this Section 1 are deemed to exceed the time, geographic or
scope limitations permitted by applicable law, then such provisions shall
be reformed to the maximum time, geographic or scope limitations, as the
case may be, permitted by applicable laws.
(d) Employee acknowledges that breach of this Section 1 would cause
irreparable injury to OnDisplay and OSI and agrees that in the event of
such breach, OnDisplay or OSI shall be entitled to seek injunctive relief
without the necessity of proving actual damages.
2. Miscellaneous.
(a) Severability. If any portion of this Agreement is held by a court of
competent jurisdiction to conflict with any federal, state or local laws, such
portion of this Agreement shall be of no force or effect and this Agreement
shall otherwise remain in full force and effect and be construed as if such
portion had not been included in this Agreement.
(b) No Assignment. Employee shall not assign this Agreement or any rights
or obligations under this Agreement without the prior written consent of
OnDisplay and OSI.
(c) Notice. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with acknowledgement of complete transmission)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(i) if to OnDisplay, to:
OnDisplay, Inc.
12667 Alcosta Boulevard, Suite 300
San Ramon, CA 94583
Attention: Janet Azevedo
Telephone No.: (925) 480-2000
Facsimile No.: (925) 480-1000
with a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Michael J. Kennedy
Telephone No.: (650) 493-9300
Facsimile No.: (650) 493-6811
(ii) if to OSI or Employee to the address which appears below
Employee's name and signature below, and to:
Oberon Software Incorporated
215 First Street
Cambridge, MA 02142-1268
Attention: Kay Meckes
Telephone No.: (617) 494-0990
Facsimile No.: (617) 494-0434
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<PAGE> 211
with a copy to:
Hale & Dorr
60 State Street
Boston, MA 02109
Attn: Jay Bothwick
Telephone No.: (617) 526-6526
Facsimile No.: (617) 526-5000
(d) Entire Agreement. This Agreement contains the entire agreement and
understanding of the parties and supersedes all prior discussions,
agreements and understandings relating to the subject matter of this
Agreement. This Agreement may not be changed or modified, except by an
agreement in writing executed by OnDisplay, OSI and Employee.
(e) Waiver of Breach. The waiver of a breach of any term or provision
of this Agreement, which must be in writing, shall not operate as or be
construed to be a waiver of any other previous or subsequent breach of this
Agreement.
(f) Governing Law. This Agreement shall be governed, construed and
enforced by the internal laws of the State of Massachusetts without giving
effect to any choice or conflict of law provision or rule (whether of the
State of Massachusetts or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of
Massachusetts.
(b) Headings. All captions and section headings used in this Agreement
are for convenient reference only and do not form a part of this Agreement.
(h) Counterparts. This Agreement may be executed in counterparts, and
each counterpart shall have the same force and effect as an original and
shall constitute an effective, binding agreement on the part of each of the
undersigned.
(i) Attorneys Fees. In the event of any action under this Agreement,
the substantially prevailing party shall be entitled to the fees of such
party's attorneys and similar professionals.
(j) Successors. This Agreement will be binding upon and inure to the
benefit of the successors and assigns of OnDisplay or OSI and Employee's
heirs, executors, administrators, successors and assigns.
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<PAGE> 212
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
<TABLE>
<S> <C>
ONDISPLAY, INC. EMPLOYEE
By: By:
---------------------------------------- ----------------------------------
Name: Name:
---------------------------------------- -----------------------------
Title: Title:
---------------------------------------- ----------------------------
OBERON SOFTWARE INCORPORATED
By:
----------------------------------------
Name:
----------------------------------------
Title:
----------------------------------------
</TABLE>
[SIGNATURE PAGE TO NON-COMPETITION AGREEMENT]
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<PAGE> 213
EXHIBIT B-1
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT (the "AGREEMENT") is made as of the
Effective Date (as defined below) by and among OnDisplay, Inc., a Delaware
corporation ("ONDISPLAY"), Oberon Software Incorporated, a Massachusetts
corporation, including any and all of its subsidiaries (collectively, "OSI") and
the undersigned employee ("EMPLOYEE"). Capitalized terms used but not otherwise
defined herein shall have the meanings ascribed to them in the Reorganization
Agreement (as defined below).
BACKGROUND
A. OnDisplay, ObiOne Acquisition Corporation, a Delaware corporation and
wholly-owned subsidiary of OnDisplay ("SUB"), and OSI have entered into an
Agreement and Plan of Reorganization dated as of January , 2000 (the
"REORGANIZATION AGREEMENT"), which provides for the merger (the "MERGER") of Sub
with and into OSI. The effective date of the consummation of the Merger shall be
the "EFFECTIVE DATE" of this Agreement.
B. Employee is receiving significant consideration pursuant to the terms of
the Reorganization Agreement.
C. As a condition to the Merger, to preserve the value of the business
being acquired by OnDisplay, the Reorganization Agreement contemplates, among
other things, that Employee enter into this Agreement and that this Agreement
become effective upon the closing of the Merger.
D. OSI is currently engaged or planning to engage in its business in each
of the fifty (50) states of the United States and worldwide. OnDisplay,
following the Merger, will continue conducting such business in all parts of the
United States and worldwide.
NOW THEREFORE, in consideration of the mutual promises made herein,
OnDisplay and Employee (collectively referred to as the "PARTIES") hereby agree
as follows:
1. Covenant Not to Compete or Solicit.
(a) For the later of eighteen (18) months after the Effective Date (the
"NON-COMPETE PERIOD") or twelve (12) months after the date Employee ceases to be
employed by OnDisplay, or OSI, Employee shall not directly or indirectly,
without the prior written consent of OnDisplay, (i) as an individual proprietor,
partner, stockholder, officer, employee, director, consultant, joint venturer,
investor, lender or in any other capacity whatsoever (other than (i) as the
holder of not more than one percent (1%) of the total outstanding stock of a
publicly held company or as a "passive" investment in a limited partnership or
similar entity in which Employee owns not more than 2.5% of the equity interest,
(ii) investments in mutual funds which hold solely publicly traded securities,
or (iii) investments in a blind trust in which Employee has no input or control
over the investment selection), engage in any business which develops, produces,
markets or offers any products or services which are competitive with any
products being developed, produced or marketed, or with any services being
offered or being proposed to be offered, by OSI or OnDisplay at any time during
the term of my employment with OSI or OnDisplay; or (ii) approach, contact,
solicit or interfere with the business of OnDisplay's or OSI's customers which
are presently existing or which are existing on the date of Employee's
termination from OnDisplay or OSI to the extent relating to a competing business
purpose.
(b) During the Non-Compete Period, Employee shall not, directly or
indirectly, without the prior written consent of OnDisplay, (i) solicit,
encourage, hire or take any other action which is intended to induce any
employee of OnDisplay or OSI to terminate his or her employment with OnDisplay
or OSI or (ii) interfere in any manner with the contractual or employment
relationship between either OnDisplay or OSI and any employee of OnDisplay or
OSI, respectively.
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<PAGE> 214
(c) The covenants contained in the preceding paragraphs shall be construed
as a series of separate covenants, one for each county, city and state of any
geographic area where any business is presently carried on by OSI or OnDisplay.
Except for geographic coverage, each such separate covenant shall be identical
in terms to the covenant contained in the preceding paragraphs. If, in any
judicial proceeding, a court refuses to enforce any of such separate covenants
(or any part thereof), then such unenforceable covenant (or such part) shall be
eliminated from this Agreement to the extent necessary to permit the remaining
separate covenants (or portions thereof) to be enforced. In the event that the
provisions of this Section 1 are deemed to exceed the time, geographic or scope
limitations permitted by applicable law, then such provisions shall be reformed
to the maximum time, geographic or scope limitations, as the case may be,
permitted by applicable laws.
(d) Employee acknowledges that breach of this Section 1 would cause
irreparable injury to OnDisplay and OSI and agrees that in the event of such
breach, OnDisplay or OSI shall be entitled to seek injunctive relief without the
necessity of proving actual damages.
2. Miscellaneous.
(a) Severability. If any portion of this Agreement is held by a court of
competent jurisdiction to conflict with any federal, state or local law, such
portion of this Agreement shall be of no force or effect and this Agreement
shall otherwise remain in full force and effect and be construed as if such
portion had not been included in this Agreement.
(b) No Assignment. Employee shall not assign this Agreement or any rights
or obligations under this Agreement without the prior written consent of
OnDisplay and OSI.
(c) Notice. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with acknowledgment of complete transmission)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(i) if to OnDisplay, to:
OnDisplay, Inc.
12667 Alcosta Boulevard, Suite 300
San Ramon, CA 94583
Attention: Janet Azevedo
Telephone No.: (925) 480-2000
Facsimile No.: (925) 480-1000
with a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Michael J. Kennedy
Telephone No.: (650) 493-9300
Facsimile No.: (650) 493-6811
(ii) if to OSI or Employee to the address which appears below Employee's
name and signature below, and to:
Oberon Software Incorporated
215 First Street
Cambridge, MA 02142-1268
Attention: Kay Meckes
Telephone No.: (617) 494-0990
Facsimile No.: (617) 494-0434
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with a copy to:
Hale & Dorr
60 State Street
Boston, MA 02109
Attn: Jay Bothwick
Telephone No.: (617) 526-6526
Facsimile No.: (617) 526-5000
(d) Entire Agreement. This Agreement contains the entire agreement and
understanding of the parties and supersedes all prior discussions, agreements
and understandings relating to the subject matter of this Agreement. This
Agreement may not be changed or modified, except by an agreement in writing
executed by OnDisplay, OSI and Employee.
(e) Waiver of Breach. The waiver of a breach of any term or provision of
this Agreement, which must be in writing, shall not operate as or be construed
to be a waiver of any other previous or subsequent breach of this Agreement.
(f) Governing Law. This Agreement shall be governed, construed and enforced
by the internal laws of the State of Massachusetts without giving effect to any
choice or conflict of law provision or rule (whether of the State of
Massachusetts or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of Massachusetts.
(g) Headings. All captions and section headings used in this Agreement are
for convenient reference only and do not form a part of this Agreement.
(h) Counterparts. This Agreement may be executed in counterparts, and each
counterpart shall have the same force and effect as an original and shall
constitute an effective, binding agreement on the part of each of the
undersigned.
(i) Attorneys Fees. In the event of any action under this Agreement, the
substantially prevailing party shall be entitled to the fees of such party's
attorneys and similar professionals.
(j) Successors. This Agreement will be binding upon and inure to the
benefit of the successors and assigns of OnDisplay or OSI and Employee's heirs,
executors, administrators, successors and assigns.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
<TABLE>
<S> <C>
ONDISPLAY, INC. EMPLOYEE
By: By:
- -------------------------------------------- --------------------------------------------
Name: Name: Joseph Chappell
- -------------------------------------------- -------------------------------------
Title: Address:
- -------------------------------------------- --------------------------------------------
--------------------------------------------
OBERON SOFTWARE INCORPORATED
By:
- --------------------------------------------
Name:
- --------------------------------------------
Title:
- --------------------------------------------
</TABLE>
[SIGNATURE PAGE TO NON-COMPETITION AGREEMENT]
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EXHIBIT C
PARENT VOTING AGREEMENT
This Parent Voting Agreement (this "Agreement") is made and entered into as
of January , 2000, among Oberon Software Incorporated, a Massachusetts
corporation ("Company"), and the undersigned stockholder and/or option holder
(the "Stockholder") of OnDisplay, Inc., a Delaware corporation (the "Parent").
RECITALS
A. The Parent, Merger Sub (as defined below) and Company have entered into
an Agreement and Plan of Reorganization (the "Reorganization Agreement"), which
provides for the merger (the "Merger") of a wholly-owned subsidiary of Parent
("Merger Sub") with and into the Company. Pursuant to the Merger, all
outstanding capital stock of the Company shall be converted into the right to
receive common stock of Parent, as set forth in the Reorganization Agreement;
B. Stockholder is the beneficial owner (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of such number
of shares of the outstanding capital stock of Parent and shares subject to
outstanding options and warrants as is indicated on the signature page of this
Agreement; and
C. In consideration of the execution of the Reorganization Agreement by
Company, Stockholder agrees to vote the Shares (as defined below) and other such
shares of capital stock of the Parent over which Stockholder has voting power so
as to facilitate consummation of the Merger.
NOW, THEREFORE, intending to be legally bound, the parties hereto agree as
follows:
1. Certain Definitions. Capitalized terms not defined herein shall have the
meanings ascribed to them in the Reorganization Agreement. For purposes of this
Agreement:
(a) "Expiration Date" shall mean the earlier to occur of (i) such date
and time as the Reorganization Agreement shall have been terminated
pursuant to Article VIII thereof, or (ii) such date and time as the Merger
shall become effective in accordance with the terms and provisions of the
Reorganization Agreement.
(b) "Person" shall mean any (i) individual, (ii) corporation, limited
liability company, partnership or other entity, or (iii) governmental
authority.
(c) "Shares" shall mean: (i) all securities of the Parent (including
all shares of Parent common stock and all options, warrants and other
rights to acquire shares of Parent common stock) owned by Stockholder as of
the date of this Agreement; and (ii) all additional securities of Parent
(including all additional shares of Parent common stock and all additional
options, warrants and other rights to acquire shares of Parent common
stock) of which Stockholder acquires ownership during the period from the
date of this Agreement through the Expiration Date.
(d) Transfer. A Person shall be deemed to have effected a "Transfer"
of a security if such person directly or indirectly: (i) sells, pledges,
encumbers, grants an option with respect to, transfers or disposes of such
security or any interest in such security; or (ii) enters into an agreement
or commitment providing for the sale of, pledge of, encumbrance of, grant
of an option with respect to, transfer of or disposition of such security
or any interest therein.
2. Transfer of Shares.
(a) Transferee of Shares to be Bound by this Agreement. Stockholder agrees
that, during the period from the date of this Agreement through the Expiration
Date, Stockholder shall not cause or permit any Transfer of any of the Shares to
be effected unless prior to any such Transfer the Person to which any of such
Shares, or any interest in any of such Shares, is or may be transferred shall
have: (a) executed a counterpart of this Agreement and a proxy in the form
attached hereto as Exhibit A (with such
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modifications as Company may reasonably request); and (b) agreed in writing to
hold such Shares (or interest in such Shares) subject to all of the terms and
provisions of this Agreement.
(b) Transfer of Voting Rights. Stockholder agrees that, during the period
from the date of this Agreement through the Expiration Date, Stockholder shall
not deposit (or permit the deposit of) any Shares in a voting trust or grant any
proxy or enter into any voting agreement or similar agreement in contravention
of the obligations of Stockholder under this Agreement with respect to any of
the Shares.
3. Agreement to Vote Shares. At every meeting of the stockholders of the
Parent called, and at every adjournment thereof, and on every action or approval
by written consent of the stockholders of the Parent, Stockholder shall cause
the Shares to be voted in favor of issuance of shares of common stock of Parent
in the Merger in accordance with the Reorganization Agreement.
4. Irrevocable Proxy. Concurrently with the execution of this Agreement,
Stockholder agrees to deliver to Company a proxy in the form attached hereto as
Exhibit 1 (the "Proxy"), which shall be irrevocable to the fullest extent
permissible by law, with respect to voting of the Shares in accordance with the
provisions hereof.
5. Representations and Warranties of the Stockholder. Stockholder (i) is
the beneficial owner of the shares of common stock of the Company, Preferred
Stock of the Company and the options and warrants to purchase shares of common
stock of the Company indicated on the final page of this Agreement, free and
clear of any liens, claims, options, rights of first refusal, co-sale rights,
charges or other encumbrances; (ii) does not beneficially own any securities of
the Company other than the shares of common stock of the Company, Preferred
Stock of the Company and options and warrants to purchase shares of common stock
of the Company indicated on the final page of this Agreement; and (iii) has full
power and authority to make, enter into and carry out the terms of this
Agreement and the Proxy.
6. Additional Documents. Stockholder hereby covenants and agrees to execute
and deliver any additional documents necessary or desirable, in the reasonable
opinion of Company, to carry out the intent of this Agreement.
7. Consent and Waiver. Stockholder (not in his capacity as a director or
officer of the Company) hereby gives any consents or waivers that are reasonably
required for the consummation of the Merger under the terms of any agreements to
which Stockholder is a party or pursuant to any rights Stockholder may have.
8. Legending of Shares. If so requested by Company, Stockholder agrees that
the Shares shall bear a legend stating that they are subject to this Agreement
and to an irrevocable proxy. Subject to the terms of Section 2 hereof,
Stockholder agrees that Stockholder shall not Transfer the Shares without first
having the aforementioned legend affixed to the certificates representing the
Shares.
9. Termination. This Agreement shall terminate and shall have no further
force or effect as of the Expiration Date.
10. Miscellaneous.
(a) Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, then the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
(b) Binding Effect and Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and permitted assigns, but, except as otherwise
specifically provided herein, neither this Agreement nor any of the rights,
interests or obligations of the parties hereto may be assigned by either of the
parties without prior written consent of the other.
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(c) Amendments and Modification. This Agreement may not be modified,
amended, altered or supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
(d) Specific Performance; Injunctive Relief. The parties hereto acknowledge
that Company shall be irreparably harmed and that there shall be no adequate
remedy at law for a violation of any of the covenants or agreements of
Stockholder set forth herein. Therefore, it is agreed that, in addition to any
other remedies that may be available to Company upon any such violation, Company
shall have the right to enforce such covenants and agreements by specific
performance, injunctive relief or by any other means available to Company at law
or in equity.
(e) Notices. All notices and other communications pursuant to this
Agreement shall be in writing and deemed to be sufficient if contained in a
written instrument and shall be deemed given if delivered personally,
telecopied, sent by nationally-recognized overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the following address (or at such other address for a party as shall
be specified by like notice):
If to Company:
OnDisplay, Inc.
12667 Alcosta Boulevard, Suite 300
San Ramon, CA 94583
Attention: Dave Larson
Facsimile: (925) 480-1000
With a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
Page Mill Road
Palo Alto, CA 94304
Attention: Michael Kennedy, Esq.
Facsimile: (650) 493-6811
If to Stockholder:
To the address for notice set forth on the
signature page hereof.
(f) Governing Law. This Agreement shall be governed by the laws of the
State of Delaware, without reference to rules of conflicts of law.
(g) Entire Agreement. This Agreement and the Proxy contain the entire
understanding of the parties in respect of the subject matter hereof, and
supersede all prior negotiations and understandings between the parties with
respect to such subject matter.
(h) Effect of Headings. The section headings are for convenience only and
shall not affect the construction or interpretation of this Agreement.
(i) Counterparts. This Agreement may be executed in several counterparts,
each of which shall be an original, but all of which together shall constitute
one and the same agreement.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
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<PAGE> 220
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the day and year first above written.
<TABLE>
<S> <C>
OBERON SOFTWARE INCORPORATED STOCKHOLDER
By: By:
------------------------------------- -----------------------------------------
Signature of Authorized Signatory Signature
Name: Name:
----------------------------------- ---------------------------------------
Title: Title:
---------------------------------- --------------------------------------
--------------------------------------------
--------------------------------------------
Print Address
--------------------------------------------
Telephone
--------------------------------------------
Facsimile No.
Shares beneficially owned:
____________ shares of Company common stock
____________ shares of Company Preferred
Stock
____________ shares of Company common stock
issuable upon exercise of outstanding
options or warrants
</TABLE>
[SIGNATURE PAGE TO PARENT VOTING AGREEMENT]
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<PAGE> 221
EXHIBIT 1
IRREVOCABLE PROXY
The undersigned stockholder of OnDisplay, a Delaware corporation (the
"Parent"), hereby irrevocably (to the fullest extent permitted by law) appoints
the directors on the Board of Directors of Oberon Software Incorporated, a
Massachusetts corporation ("Company"), and each of them, as the sole and
exclusive attorneys and proxies of the undersigned, with full power of
substitution and resubstitution, to vote and exercise all voting and related
rights (to the full extent that the undersigned is entitled to do so) with
respect to all of the shares of capital stock of the Parent that now are or
hereafter may be beneficially owned by the undersigned, and any and all other
shares or securities of the Parent issued or issuable in respect thereof on or
after the date hereof (collectively, the "Shares") in accordance with the terms
of this Proxy. The Shares beneficially owned by the undersigned stockholder of
Parent as of the date of this Proxy are listed on the final page of this Proxy.
Upon the undersigned's execution of this Proxy, any and all prior proxies given
by the undersigned with respect to voting any Shares with respect to the matters
set forth herein are hereby revoked and the undersigned agrees not to grant any
subsequent proxies with respect to the Shares with respect to the matters set
forth herein until after the Expiration Date (as defined below).
This Proxy is irrevocable (to the fullest extent permitted by law), is
coupled with an interest and is granted pursuant to that certain Parent Voting
Agreement of even date herewith by and among Company and the undersigned
stockholder (the "Parent Voting Agreement"), and is granted in consideration of
Company entering into that certain Agreement and Plan of Merger and
Reorganization (the "Reorganization Agreement"), among Parent, ObiOne
Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of
Parent ("Merger Sub"), and Company. The Reorganization Agreement provides for
the merger of Merger Sub with and into the Company in accordance with its terms
(the "Merger"). As used herein, the term "Expiration Date" shall mean the
earlier to occur of (i) such date and time as the Reorganization Agreement shall
have been validly terminated pursuant to Article VIII thereof or (ii) such date
and time as the Merger shall become effective in accordance with the terms and
provisions of the Reorganization Agreement.
The attorneys and proxies named above, and each of them, are hereby
authorized and empowered by the undersigned, at any time prior to the Expiration
Date, to act as the undersigned's attorney and proxy to vote the Shares, and to
exercise all voting, consent and similar rights of the undersigned with respect
to the Shares (including, without limitation, the power to execute and deliver
written consents) at every annual, special or adjourned meeting of stockholders
of the Parent and in every written consent in lieu of such meeting in favor of
issuance of shares of common stock of Parent in the Merger in accordance with
the Reorganization Agreement.
The attorneys and proxies named above may not exercise this Proxy on any
other matter except as provided above. The undersigned stockholder may vote the
Shares on all other matters, free from any provisions of this Proxy.
Any obligation of the undersigned hereunder shall be binding upon the
successors and assigns of the undersigned.
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<PAGE> 222
This Proxy is irrevocable (to the fullest extent permitted by law). This
Proxy shall terminate, and be of no further force and effect, automatically upon
the Expiration Date.
Dated: , 2000
Signature of Stockholder:_____________
Print Name of Stockholder:____________
Shares beneficially owned:
____________ shares of Company common
stock
____________ shares of Company
Preferred Stock
____________ shares of Company common
stock issuable upon
exercise of outstanding
options or warrants
[SIGNATURE PAGE TO IRREVOCABLE PROXY]
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<PAGE> 223
EXHIBIT D
SCHEDULE OF DESIGNATED EMPLOYEES
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<PAGE> 224
EXHIBIT D-2
<TABLE>
<S> <C>
D. Collard
M. McMahon
M. Wick
R. Surratt
P. McMahon
J. Stansfield
A. Groh
R. Frechette
M. J. Kahn
</TABLE>
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<PAGE> 225
EXHIBIT D-3
<TABLE>
<S> <C>
M. McMahon
M. Wick
</TABLE>
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<PAGE> 226
EXHIBIT D-4
J. Chappell
D. Collard
A-70
<PAGE> 227
EXHIBIT D-5
J. Chappell
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<PAGE> 228
EXHIBIT E-1
(VERSION 1 OF 2)
OBERON SOFTWARE INCORPORATED
EMPLOYMENT AGREEMENT
This Agreement is entered into as of the Effective Time (as such term is
defined in the Merger Agreement) by and between Oberon Software Incorporated
(the "Company"), and (the "Employee").
1. Duties and Scope of Employment. As of the Effective Time, Employee will
continue to serve as [POSITION] of the Company, reporting to the Company's Chief
Executive Officer ("CEO") and assuming and discharging such responsibilities as
are commensurate with Employee's position. Employee will perform his duties
faithfully and to the best of his ability and will devote his full business
efforts and time to the performance of his duties hereunder.
2. Term. The term of Employee's employment under this Agreement (the
"Employment Term") shall commence on the Effective Time and shall terminate on
the first anniversary of the Closing Date (the "Employment Term Date"). At the
end of the Employment Term, Employee's employment with the Company shall become
"at-will," as defined under applicable law.
3. Base Salary. For all services to be rendered by Employee pursuant to
this Agreement, Employee shall receive Employee's annual salary of
$ which was Employee's salary in effect immediately prior to the
Effective Time (the "Base Salary"), payable in accordance with the Company's
normal payroll practices. Employee's salary shall be reviewed by the Company on
an annual basis for possible raises in light of Employee's performance of his or
her duties.
4. Bonus. The Company shall consider Employee for any bonus program,
including any retention bonus program, the Company may implement.
5. Employee Benefits. Employee shall be entitled to participate in the
employee benefit plans and programs of the Company, if any, on the same terms
and conditions as other similarly-situated employees to the extent that
Employee's position, tenure, salary, age, health and other qualifications make
Employee eligible to participate in such plans or programs, subject to the rules
and regulations applicable thereto. The Company reserves the right to cancel or
change the benefit plans and programs it offers to its employees at any time.
6. Expenses. The Company will reimburse Employee for reasonable travel,
entertainment or other expenses incurred by Employee in the furtherance of or in
connection with the performance of Employee's duties hereunder, in accordance
with the Company's expense reimbursement policy as in effect from time to time.
7. Severance.
(a) Involuntary Termination. If Employee's employment with the Company
terminates other than (i) for "Cause" (as defined herein), or (ii) as a
result of Employee's voluntary resignation, and Employee signs and does not
revoke a standard release of claims with the Company, then, subject to
Employee's compliance with the provisions of the Non-Competition Agreement
(referred to in Section 9), Employee shall receive Employee's Base Salary
for a period equal to the longer of (i) the term of this Agreement
(pursuant to Section 2) or (ii) six (6) months, to be paid in accordance
with the Company's normal payroll practices.
(b) Voluntary Termination; Termination for Cause. If Employee's
employment with the Company terminates (i) voluntarily by Employee or (ii)
for "Cause" by the Company, then Employee shall not be entitled to receive
severance or other benefits hereunder.
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8. Definitions.
(a) Cause. For purposes of this Agreement, "Cause" is defined as (i)
failure of Employee to perform Employee's assigned duties in a manner
acceptable to the Company, after written notice of such performance
problems and a reasonable opportunity to cure; (ii) Employee's material
nonconformance with the Company's standard business practices and policies
made known in writing to Employee; (iii) the commission in bad faith by
Employee of any act which materially injures or could reasonably be
expected to materially injure the reputation, business, or business
relationships of the Company or its affiliates; (iv) conduct of a criminal
nature by Employee which has or which is reasonably expected to have an
adverse effect on the Company's or any of its affiliates' reputation or
standing in the community or on its continuing relationships with its
customers or those who purchase or use its products or services; (v) the
conviction of Employee of, or the entry of a pleading of guilty or nolo
contendre by Employee to, any felony or any crime involving moral
turpitude, dishonesty or theft; (vi) fraudulent conduct by Employee in
connection with the business or affairs of the Company or any of its
affiliates; or (vii) dishonesty of a material nature, gross negligence or
gross misconduct by Employee in connection with Employee's employment.
(b) Merger Agreement. For purposes of this Agreement, "Merger
Agreement" shall mean the Agreement and Plan of Reorganization By and Among
OnDisplay, Inc., ObiOne Acquisition Corporation and Oberon Software, Inc.
dated January , 2000.
9. Confidential Information and Non-Competition. If Employee has not
previously done so, Employee agrees to enter into the Employee Confidential
Information and Invention Assignment Agreement, the form of which is Exhibit B-2
of the Merger Agreement (the "Confidential Information Agreement") and the
Non-Competition Agreement, the form of which is Exhibit B-1 of the Merger
Agreement (the "Non-Competition Agreement"), both of which documents are
incorporated herein by reference, as a condition of employment hereunder.
10. Assignment. This Agreement will be binding upon and inure to the
benefit of (a) the heirs, executors and legal representatives of Employee upon
Employee's death and (b) any successor of the Company. Any such successor of the
Company will be deemed substituted for the Company under the terms of this
Agreement for all purposes. For this purpose, "successor" means any person,
firm, corporation or other business entity which at any time, whether by
purchase, merger or otherwise, directly or indirectly acquires all or
substantially all of the assets or business of the Company. None of the rights
of Employee to receive any form of compensation payable pursuant to this
Agreement may be assigned or transferred except by will or the laws of descent
and distribution. Any other attempted assignment, transfer, conveyance or other
disposition of Employee's right to compensation or other benefits will be null
and void.
11. Notices. All notices, requests, demands and other communications called
for hereunder shall be in writing and shall be deemed given (i) on the date of
delivery if delivered personally, (ii) one (1) day after being sent by a well
established commercial overnight service, or (iii) four (4) days after being
mailed by registered or certified mail, return receipt requested, prepaid and
addressed to the parties or their successors at the following addresses, or at
such other addresses as the parties may later designate in writing:
If to the Company:
Oberon Software Incorporated
215 First Street
Cambridge, MA 02142-1268
Attn: [KAY MECKES]
If to Employee:
at the last residential address known by the Company.
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<PAGE> 230
12. Severability. In the event that any provision hereof becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement will continue in full force and effect without said
provision.
13. Arbitration.
(a) Employee agrees that any dispute or controversy arising out of,
relating to, or in connection with this Agreement, or the interpretation,
validity, construction, performance, breach, or termination thereof, shall
be settled by binding arbitration to be held in [COUNTY, MASSACHUSETTS] in
accordance with the National Rules for the Resolution of Employment
Disputes then in effect of the American Arbitration Association (the
"Rules"). The arbitrator may grant injunctions or other relief in such
dispute or controversy. The decision of the arbitrator will be final,
conclusive and binding on the parties to the arbitration. Judgment may be
entered on the arbitrator's decision in any court having jurisdiction.
(b) The arbitrator(s) will apply Massachusetts law to the merits of
any dispute or claim, without reference to rules of conflicts of law. The
arbitration proceedings will be governed by federal arbitration law and by
the Rules, without reference to state arbitration law. The Employee hereby
consents to the personal jurisdiction of the state and federal courts
located in Massachusetts for any action or proceeding arising from or
relating to this Agreement or relating to any arbitration in which the
parties are participants.
(c) EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION, WHICH DISCUSSES
ARBITRATION. EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT,
EXECUTIVE AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN
CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY,
CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING
ARBITRATION, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF
EXECUTIVE'S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL
DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE RELATIONSHIP,
INCLUDING BUT NOT LIMITED TO, DISCRIMINATION CLAIMS.
14. Integration. This Agreement, together with the Option Plan, Option
Agreement, the Confidential Information Agreement and the Non-Competition
Agreement represent the entire agreement and understanding between the parties
as to the subject matter herein and supersede all prior or contemporaneous
agreements whether written or oral. No waiver, alteration, or modification of
any of the provisions of this Agreement will be binding unless in writing and
signed by duly authorized representatives of the parties hereto.
15. Waiver of Breach. The waiver of a breach of any term or provision of
this Agreement, which must be in writing, shall not operate as or be construed
to be a waiver of any other previous or subsequent breach of this Agreement.
16. Headings. All captions and section headings used in this Agreement are
for convenient reference only and do not form a part of this Agreement.
17. Tax Withholding. All payments made pursuant to this Agreement will be
subject to withholding of applicable taxes.
18. Governing Law. This Agreement will be governed by the laws of the State
of Massachusetts (with the exception of its conflict of laws provisions).
19. Acknowledgment. Employee acknowledges that he has had the opportunity
to discuss this matter with and obtain advice from his private attorney, has had
sufficient time to, and has carefully read and fully understands all the
provisions of this Agreement, and is knowingly and voluntarily entering into
this Agreement.
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20. Contingency of Agreement upon Merger. This Agreement shall be null and
void and have no effect unless the merger and plan of reorganization by and
between OnDisplay, Inc., [OBIONE ACQUISITION CORPORATION] and the Company is
consummated.
21. Counterparts. This Agreement may be executed in counterparts, and each
counterpart shall have the same force and effect as an original and shall
constitute an effective, binding agreement on the part of each of the
undersigned.
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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Company by their duly authorized officers, as of the day and year
first above written.
<TABLE>
<S> <C>
OBERON SOFTWARE INCORPORATED
By: Date:
- --------------------------------------------
Title:
- --------------------------------------------
[EMPLOYEE]
Date:
- --------------------------------------------
[EMPLOYEE]
</TABLE>
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<PAGE> 233
EXHIBIT E-1
(VERSION 2 OF 2)
OBERON SOFTWARE INCORPORATED
EMPLOYMENT AGREEMENT
This Agreement is entered into as of the Effective Time (as such term is
defined in the Merger Agreement) by and between Oberon Software Incorporated
(the "Company"), and Mark Wick (the "Employee").
1. Duties and Scope of Employment. As of the Effective Time, Employee will
continue to serve as [POSITION] of the Company, reporting to the Company's Chief
Executive Officer ("CEO") and assuming and discharging such responsibilities as
are commensurate with Employee's position. Employee will perform his duties
faithfully and to the best of his ability and will devote his full business
efforts and time to the performance of his duties hereunder.
2. Term. The term of Employee's employment under this Agreement (the
"Employment Term") shall commence on the Effective Time and shall terminate on
the first anniversary of the Closing Date (the "Employment Term Date"). At the
end of the Employment Term, Employee's employment with the Company shall become
"at-will," as defined under applicable law.
3. Base Salary. For all services to be rendered by Employee pursuant to
this Agreement, Employee shall receive Employee's annual salary of
$ which was Employee's salary in effect immediately prior to the
Effective Time (the "Base Salary"), payable in accordance with the Company's
normal payroll practices. Employee's salary shall be reviewed by the Company on
an annual basis for possible raises in light of Employee's performance of his or
her duties.
4. Bonus. The Company shall consider Employee for any bonus program,
including any retention bonus program, the Company may implement.
5. Employee Benefits. Employee shall be entitled to participate in the
employee benefit plans and programs of the Company, if any, on the same terms
and conditions as other similarly-situated employees to the extent that
Employee's position, tenure, salary, age, health and other qualifications make
Employee eligible to participate in such plans or programs, subject to the rules
and regulations applicable thereto. The Company reserves the right to cancel or
change the benefit plans and programs it offers to its employees at any time.
6. Expenses. The Company will reimburse Employee for reasonable travel,
entertainment or other expenses incurred by Employee in the furtherance of or in
connection with the performance of Employee's duties hereunder, in accordance
with the Company's expense reimbursement policy as in effect from time to time.
7. Severance.
(a) Involuntary Termination. If Employee's employment with the Company
terminates other than (i) for "Cause" (as defined herein), or (ii) as a
result of Employee's voluntary resignation, and Employee signs and does not
revoke a standard release of claims with the Company, then, subject to
Employee's compliance with the provisions of the Non-Competition Agreement
(referred to in Section 9), Employee shall receive Employee's Base Salary
for a period equal to the longer of (i) the term of this Agreement
(pursuant to Section 2) or (ii) six (6) months, to be paid in accordance
with the Company's normal payroll practices.
(b) Voluntary Termination; Termination for Cause. If Employee's
employment with the Company terminates (i) voluntarily by Employee or (ii)
for "Cause" by the Company, then Employee shall not be entitled to receive
severance or other benefits hereunder.
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8. Definitions.
(a) Cause. For purposes of this Agreement, "Cause" is defined as (i)
failure of Employee to perform Employee's assigned duties in a manner
acceptable to the Company, after written notice of such performance
problems and a reasonable opportunity to cure; (ii) Employee's material
nonconformance with the Company's standard business practices and policies
made known in writing to Employee; (iii) the commission in bad faith by
Employee of any act which materially injures or could reasonably be
expected to materially injure the reputation, business, or business
relationships of the Company or its affiliates; (iv) conduct of a criminal
nature by Employee which has or which is reasonably expected to have an
adverse effect on the Company's or any of its affiliates' reputation or
standing in the community or on its continuing relationships with its
customers or those who purchase or use its products or services; (v) the
conviction of Employee of, or the entry of a pleading of guilty or nolo
contendre by Employee to, any felony or any crime involving moral
turpitude, dishonesty or theft; (vi) fraudulent conduct by Employee in
connection with the business or affairs of the Company or any of its
affiliates; or (vii) dishonesty of a material nature, gross negligence or
gross misconduct by Employee in connection with Employee's employment.
(b) Merger Agreement. For purposes of this Agreement, "Merger
Agreement" shall mean the Agreement and Plan of Reorganization By and Among
OnDisplay, Inc., ObiOne Acquisition Corporation and Oberon Software, Inc.
dated January , 2000.
9. Confidential Information and Non-Competition. If Employee has not
previously done so, Employee agrees to enter into the Employee Confidential
Information and Invention Assignment Agreement, the form of which is Exhibit B-2
of the Merger Agreement (the "Confidential Information Agreement") and the
Non-Competition Agreement, the form of which is Exhibit B-1 of the Merger
Agreement (the "Non-Competition Agreement"), both of which documents are
incorporated herein by reference, as a condition of employment hereunder.
10. Assignment. This Agreement will be binding upon and inure to the
benefit of (a) the heirs, executors and legal representatives of Employee upon
Employee's death and (b) any successor of the Company. Any such successor of the
Company will be deemed substituted for the Company under the terms of this
Agreement for all purposes. For this purpose, "successor" means any person,
firm, corporation or other business entity which at any time, whether by
purchase, merger or otherwise, directly or indirectly acquires all or
substantially all of the assets or business of the Company. None of the rights
of Employee to receive any form of compensation payable pursuant to this
Agreement may be assigned or transferred except by will or the laws of descent
and distribution. Any other attempted assignment, transfer, conveyance or other
disposition of Employee's right to compensation or other benefits will be null
and void.
11. Notices. All notices, requests, demands and other communications called
for hereunder shall be in writing and shall be deemed given (i) on the date of
delivery if delivered personally, (ii) one (1) day after being sent by a well
established commercial overnight service, or (iii) four (4) days after being
mailed by registered or certified mail, return receipt requested, prepaid and
addressed to the parties or their successors at the following addresses, or at
such other addresses as the parties may later designate in writing:
If to the Company:
Oberon Software Incorporated
215 First Street
Cambridge, MA 02142-1268
Attn: [KAY MECKES]
If to Employee:
at the last residential address known by the Company.
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12. Severability. In the event that any provision hereof becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement will continue in full force and effect without said
provision.
13. Arbitration.
(a) Employee agrees that any dispute or controversy arising out of,
relating to, or in connection with this Agreement, or the interpretation,
validity, construction, performance, breach, or termination thereof, shall
be settled by binding arbitration to be held in [COUNTY, MASSACHUSETTS] in
accordance with the National Rules for the Resolution of Employment
Disputes then in effect of the American Arbitration Association (the
"Rules"). The arbitrator may grant injunctions or other relief in such
dispute or controversy. The decision of the arbitrator will be final,
conclusive and binding on the parties to the arbitration. Judgment may be
entered on the arbitrator's decision in any court having jurisdiction.
(b) The arbitrator(s) will apply Massachusetts law to the merits of
any dispute or claim, without reference to rules of conflicts of law. The
arbitration proceedings will be governed by federal arbitration law and by
the Rules, without reference to state arbitration law. The Employee hereby
consents to the personal jurisdiction of the state and federal courts
located in Massachusetts for any action or proceeding arising from or
relating to this Agreement or relating to any arbitration in which the
parties are participants.
(c) EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION, WHICH DISCUSSES
ARBITRATION. EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT,
EXECUTIVE AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN
CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY,
CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING
ARBITRATION, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF
EXECUTIVE'S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL
DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE RELATIONSHIP,
INCLUDING BUT NOT LIMITED TO, DISCRIMINATION CLAIMS.
14. Integration. This Agreement, together with the Option Plan, Option
Agreement, the Confidential Information Agreement and the Non-Competition
Agreement represent the entire agreement and understanding between the parties
as to the subject matter herein and supersede all prior or contemporaneous
agreements whether written or oral. No waiver, alteration, or modification of
any of the provisions of this Agreement will be binding unless in writing and
signed by duly authorized representatives of the parties hereto.
15. Waiver of Breach. The waiver of a breach of any term or provision of
this Agreement, which must be in writing, shall not operate as or be construed
to be a waiver of any other previous or subsequent breach of this Agreement.
16. Headings. All captions and section headings used in this Agreement are
for convenient reference only and do not form a part of this Agreement.
17. Tax Withholding. All payments made pursuant to this Agreement will be
subject to withholding of applicable taxes.
18. Governing Law. This Agreement will be governed by the laws of the State
of Massachusetts (with the exception of its conflict of laws provisions).
19. Acknowledgment. Employee acknowledges that he has had the opportunity
to discuss this matter with and obtain advice from his private attorney, has had
sufficient time to, and has carefully read and fully understands all the
provisions of this Agreement, and is knowingly and voluntarily entering into
this Agreement.
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20. Contingency of Agreement upon Merger. This Agreement shall be null and
void and have no effect unless the merger and plan of reorganization by and
between OnDisplay, Inc., [OBIONE ACQUISITION CORPORATION] and the Company is
consummated.
21. Counterparts. This Agreement may be executed in counterparts, and each
counterpart shall have the same force and effect as an original and shall
constitute an effective, binding agreement on the part of each of the
undersigned.
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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Company by their duly authorized officers, as of the day and year
first above written.
<TABLE>
<S> <C>
OBERON SOFTWARE INCORPORATED
By: Date:
- --------------------------------------------
Title:
- --------------------------------------------
[EMPLOYEE]
Date:
- --------------------------------------------
[EMPLOYEE]
</TABLE>
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EXHIBIT E-2
VERSION 1 OF 2
SEVERANCE AGREEMENT
AGREEMENT made as of the day of January, 2000 by and between
Oberon Software, Incorporated (the "Company") and David Collard (the
"Employee").
WHEREAS, the Company, OnDisplay, Inc., a Delaware corporation ("Parent")
and ObiOne Acquisition Corporation, a Massachusetts corporation and a
wholly-owned subsidiary of Parent ("Sub") have entered into an Agreement and
Plan of Reorganization (the "Merger Agreement") and have agreed that Parent
shall acquire the Company through the statutory merger of Sub with and into the
Company (the "Merger");
WHEREAS, the Parent, the Company and the Sub acknowledge that upon the
closing of the Merger (the "Closing"), the Employee's level of responsibility
shall be materially reduced within the meaning of 8(c)(1)(c) of the 1998 Stock
Incentive Plan, as amended, and that the Employee shall separate from the
Company after a transition period of two(2) months following the Closing (the
"Termination Date");
WHEREAS, concurrent with the execution and delivery of the Merger
Agreement, as a material inducement to Parent and Sub to enter into the Merger
Agreement, the Employee has agreed to enter into this Agreement;
WHEREAS, the parties wish to resolve amicably the Employee's separation
from the Company and establish the terms of the Employee's severance
arrangement;
NOW, THEREFORE, in consideration of the promises and conditions set forth
herein, the sufficiency of which is hereby acknowledged, the Company and the
Employee agree as follows:
1. Monetary Consideration. The Company agrees to pay the Employee 70,000.
less all applicable state and federal taxes as severance pay in a lump sum on
the Termination Date contingent upon Employee signing the Release of Claims
pursuant to Section 4 below.
2. Stock Acceleration. Effective upon the Termination Date, but contingent
upon Employee signing the Release of Claims pursuant to Section 4 below, (a)
each outstanding option to purchase shares of Common Stock of the Company held
by the Employee shall become immediately exercisable in full and (b) each
outstanding restricted stock award shall be deemed to be fully vested and no
longer subject to a right of repurchase by the Company.
3. Benefits.
(i) provided that Employee is eligible for and elects continuation
coverage pursuant to COBRA, the Company will reimburse Employee for his
COBRA premiums until the earlier of (i) six (6) months from the Termination
Date; or (ii) the date Employee is no longer eligible to receive
continuation coverage pursuant to COBRA. Employee shall be responsible for
payment of his COBRA premiums for the remaining COBRA period.
(ii) to the extent not previously paid or provided, the Company shall
timely pay or provide to the Employee any other amounts or benefits
required to be paid or provided or which the Employee is eligible to
receive following the Employee's termination of employment under any plan,
program, policy, practice, contract or agreement of the Company and its
affiliated companies, including, but not limited to, any accrued vacation
time.
4. Release of Claims. The Employee agrees to execute a Release of Claims
(in the form attached hereto as Exhibit A) as of the Termination Date and the
Employee understands and agrees that all severance payments and vesting
acceleration provided in Sections 1 and 2 of this Agreement are contingent upon
execution of the Release of Claims.
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5. Non-Disclosure and Non-Competition.
(a) Non-Disclosure. The Employee acknowledges his obligation to keep
confidential all non-public information concerning the Company which he
acquired during the course of his employment with the Company, as stated
more fully in the confidential information, invention and writings and
non-competition agreement ("Confidentiality and Non-Competition Agreement")
executed by the Employee which remains in full force and effect. The
Employee also acknowledges payment to him of the amount described herein in
consideration for his obligations under the Confidentiality and Non-
Competition Agreement.
(b) Non-Compete. Employee agrees to sign the form of Non-Compete
Agreement included as Exhibit B-1 of the Merger Agreement contemporaneously
with this Agreement.
6. Return of Company Property. The Employee agrees to return within seven
(7) days of the Termination Date all Company property which is in his possession
or control. The Employee further agrees to leave intact all electronic Company
documents, including those which he developed or help develop during his
employment.
7. Confidentiality. The Employee understands and agrees that as a condition
for payment to him of the consideration herein described, the terms and contents
of this Agreement, and the contents of the negotiations and discussions
resulting in this Agreement, shall be maintained as confidential by the
Employee, his agents and representatives and none of the above shall be
disclosed except to the extent required by federal or state law or as otherwise
agreed to in writing by the Company.
8. Nature of Agreement. The Employee understands and agrees that this
Agreement is a severance agreement and does not constitute an admission of
liability or wrongdoing on the part of the Company.
9. Amendment. This Agreement shall be binding upon the parties and may not
be abandoned, supplemented, changed or modified in any manner, orally or
otherwise, except by an instrument in writing of concurrent or subsequent date
signed by a duly authorized representative of the parties hereto. This Agreement
is binding upon and shall inure to the benefit of the parties and their
respective agents, assigns, heirs, executors, successors and administrators.
10. Waiver of Rights. No delay or omission by the Company in exercising any
rights under this Agreement shall operate as a waiver of that or any other
right. A waiver or consent given by the Company on any one occasion shall be
effective only in that instance and shall not be construed as a bar or waiver of
any right on any other occasion.
11. Validity. Should any provision of this Agreement be declared or be
determined by any court of competent jurisdiction to be illegal or invalid, the
validity of the remaining parts, terms, or provisions shall not be affected
thereby and said illegal or invalid part, term or provision shall be deemed not
to be a part of this Agreement.
12. Arbitration. The Parties agree that any and all disputes arising out of
the terms of this Agreement, their interpretation, and any of the matters herein
released, including any potential claims of harassment, discrimination or
wrongful termination shall be subject to binding arbitration, to the extent
permitted by law, in [NAME OF COUNTY], Massachusetts, before the American
Arbitration Association under its National Rules for the Resolution of
Employment Disputes. EMPLOYEE AGREES AND HEREBY WAIVES HIS RIGHT TO JURY TRIAL
AS TO MATTERS ARISING OUT OF THE TERMS OF THIS AGREEMENT AND ANY MATTERS HEREIN
RELEASED TO THE EXTENT PERMITTED BY LAW. The Parties agree that the prevailing
party in any arbitration shall be entitled to injunctive relief in any court of
competent jurisdiction to enforce the arbitration award.
13. Applicable Law. This Agreement shall be governed by the laws of the
Commonwealth of Massachusetts, without regard to conflict of laws provisions.
14. Voluntary Assent. The Employee affirms that no other promises or
agreements of any kind have been made to or with him by any person or entity
whatsoever to cause him to sign this Agreement, and
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that he fully understands the meaning and intent of this Agreement. The Employee
states and represents that he has had an opportunity to fully discuss and review
the terms of this Agreement with an attorney. The Employee further states and
represents that he has carefully read this Agreement, understands the contents
herein, freely and voluntarily assents to all of the terms and conditions
hereof, and signs his name of his own free act.
15. Entire Agreement. This Agreement contains and constitutes the entire
understanding and agreement between the parties hereto with respect to the
severance and supersedes all previous oral and written negotiations, agreements,
commitments, and writings in connection therewith. To the extent of any conflict
between this Agreement and Employee's respective stock option agreements,
restricted stock agreements or the 1998 Stock Option Plan, this Agreement shall
prevail. Nothing in this Section shall, however, modify, cancel or supercede the
Employee's obligations set forth in Section 5.
16. Counterparts. This Agreement may be executed in two (2) signature
counterparts, each of which shall constitute an original, but all of which taken
together shall constitute but one and the same instrument.
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IN WITNESS WHEREOF, all parties have set their hand and seal to this
Agreement as of the date written above.
By:
- ------------------------------------------------------ Date:
By:
- ------------------------------------------------------ Date:
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EXHIBIT A
SETTLEMENT AGREEMENT AND RELEASE
This Settlement Agreement and Release ("Agreement") is made by and between
Oberon Software, Inc. (the "Company"), and ("Employee").
WHEREAS, Employee was employed by the Company;
WHEREAS, the Company and Employee have entered into an Employment,
Confidential Information, Invention Assignment and Arbitration Agreement (the
"Confidentiality Agreement");
NOW THEREFORE, in consideration of the mutual promises made herein, the
Company and Employee (collectively referred to as "the Parties") hereby agree as
follows:
1. Termination. Employee's employment from the Company terminated on .
2. Consideration. The Company agrees to pay Employee at the rate of
Dollars ($ ) per month, less applicable withholding, for
the time period from , 2000 through , 2000 (the
"payment period") in accordance with the Company's payroll practices. During the
payment period, Employee will not be entitled to accrual of any employee
benefits, including, but not limited to, vacation benefits or bonuses.
3. Confidential Information. Employee shall continue to maintain the
confidentiality of all confidential and proprietary information of the Company
and shall continue to comply with the terms and conditions of the
Confidentiality Agreement between Employee and the Company. Employee shall
return all the Company property and confidential and proprietary information in
his possession to the Company on the Effective Date of this Agreement.
4. Payment of Salary. Employee acknowledges and represents that the Company
has paid all salary, wages, bonuses, accrued vacation, commissions and any and
all other benefits due to Employee.
5. Release of Claims. Employee agrees that the foregoing consideration
represents settlement in full of all outstanding obligations owed to Employee by
the Company. Employee, on behalf of himself, and his respective heirs, family
members, executors and assigns, hereby fully and forever releases the Company
and its past, present and future officers, agents, directors, employees,
investors, shareholders, administrators, affiliates, divisions, subsidiaries,
parents, predecessor and successor corporations, and assigns, from, and agrees
not to sue or otherwise institute or cause to be instituted any legal or
administrative proceedings concerning any claim, duty, obligation or cause of
action relating to any matters of any kind, whether presently known or unknown,
suspected or unsuspected, that he may possess arising from any omissions, acts
or facts that have occurred up until and including the Effective Date of this
Agreement including, without limitation,
i. any and all claims relating to or arising from Employee's
employment relationship with the Company and the termination of that
relationship;
ii. any and all claims relating to, or arising from, Employee's right
to purchase, or actual purchase of shares of stock of the Company,
including, without limitation, any claims for fraud, misrepresentation,
breach of fiduciary duty, breach of duty under applicable state corporate
law, and securities fraud under any state or federal law;
iii. any and all claims for wrongful discharge of employment;
termination in violation of public policy; discrimination; breach of
contract, both express and implied; breach of a covenant of good faith and
fair dealing, both express and implied; promissory estoppel; negligent or
intentional infliction of emotional distress; negligent or intentional
misrepresentation; negligent or intentional interference with contract or
prospective economic advantage; unfair business practices; defamation;
libel; slander; negligence; personal injury; assault; battery; invasion of
privacy; false imprisonment; and conversion;
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iv. any and all claims for violation of any federal, state or
municipal statute, including, but not limited to, Title VII of the Civil
Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in
Employment Act of 1967, the Americans with Disabilities Act of 1990, the
Fair Labor Standards Act, the Employee Retirement Income Security Act of
1974, The Worker Adjustment and Retraining Notification Act, the California
Fair Employment and Housing Act, and Labor Code section 201, et seq. and
section 970, et seq. and all amendments to each such Act as well as the
regulations issued thereunder;
v. any and all claims for violation of the federal, or any state,
constitution;
vi. any and all claims arising out of any other laws and regulations
relating to employment or employment discrimination; and
vii. any and all claims for attorneys' fees and costs.
viii. Employee agrees that the release set forth in this section shall
be and remain in effect in all respects as a complete general release as to
the matters released. This release does not extend to any obligations
incurred under this Agreement. Employee acknowledges and agrees that any
breach of this paragraph shall constitute a material breach of the
Agreement and in the case of a breach by Employee, shall entitle the
Company immediately to recover the monetary consideration discussed in
paragraph 2 above. Employee shall also be responsible to the Company for
all costs, attorneys' fees and any and all damages incurred by the Company
(a) enforcing the obligation, including the bringing of any suit to recover
the monetary consideration, and (b) defending against a claim or suit
brought or pursued by Employee in violation of this provision.
6. Acknowledgment of Waiver of Claims under ADEA. Employee acknowledges
that he/she is waiving and releasing any rights he/she may have under the Age
Discrimination in Employment Act of 1967 ("ADEA") and that this waiver and
release is knowing and voluntary. Employee and the Company agree that this
waiver and release does not apply to any rights or claims that may arise under
the ADEA after the Effective Date of this Agreement. Employee acknowledges that
the consideration given for this waiver and release Agreement is in addition to
anything of value to which Employee was already entitled. Employee further
acknowledges that he/she has been advised by this writing that (a) he/she should
consult with an attorney prior to executing this Agreement; (b) he/she has
twenty-one (21) days within which to consider this Agreement; (c) he/she has
seven (7) days following the execution of this Agreement by the parties to
revoke the Agreement; and (d) this Agreement shall not be effective until the
revocation period has expired. Any revocation should be in writing and delivered
to Janet Azevedo at OnDisplay, Inc. 12667 Alcosta Road, Suite 300, San Ramon, CA
94583, by close of business on the seventh day from the date that Employee signs
this Agreement.
7. No Pending or Future Lawsuits. Employee represents that he has no
lawsuits, claims, or actions pending in his name, or on behalf of any other
person or entity, against the Company or any other person or entity referred to
herein. Employee also represents that he does not intend to bring any claims on
his own behalf or on behalf of any other person or entity against the Company or
any other person or entity referred to herein.
8. Application for Employment. Employee understands and agrees that, as a
condition of this Agreement, he shall not be entitled to any employment with the
Company, its subsidiaries, or any successor, and he hereby waives any right, or
alleged right, of employment or re-employment with the Company. Employee further
agrees that he will not apply for employment with the Company, its subsidiaries,
its parents, or related companies, or any successor and will not apply to work
as an independent contractor for the Company, its parents, its subsidiaries or
any successor.
9. Confidentiality. Employee agrees to use his best efforts to maintain in
confidence the existence of this Agreement, the contents and terms of this
Agreement, and the consideration for this Agreement (hereinafter collectively
referred to as "Settlement Information"). Employee agrees to take every
reasonable precaution to prevent disclosure of any Settlement Information to
third parties, and agrees that there will be no publicity, directly or
indirectly, concerning any Settlement Information. Employee agrees
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to take every precaution to disclose Settlement Information only to those
attorneys, accountants, governmental entities, and family members who have a
reasonable need to know of such Settlement Information.
10. No Cooperation. Employee agrees he will not act in any manner that
might damage the business of the Company. Employee agrees that he will not
counsel or assist any attorneys or their clients in the presentation or
prosecution of any disputes, differences, grievances, claims, charges, or
complaints by any third party against the Company and/or any officer, director,
employee, agent, representative, shareholder or attorney of the Company, unless
under a subpoena or other court order to do so.
11. Non-Disparagement. Employee agrees to refrain from any defamation,
libel or slander of the Company and its respective officers, directors,
employees, investors, shareholders, administrators, affiliates, divisions,
subsidiaries, predecessor and successor corporations, and assigns or tortious
interference with the contracts and relationships of the Company and its
respective officers, directors, employees, investors, shareholders,
administrators, affiliates, divisions, subsidiaries, predecessor and successor
corporations, and assigns.
12. No Admission of Liability. Employee understands and acknowledges that
this Agreement constitutes a compromise and settlement of disputed claims. No
action taken by the Company, either previously or in connection with this
Agreement shall be deemed or construed to be (a) an admission of the truth or
falsity of any claims heretofore made or (b) an acknowledgment or admission by
the Company of any fault or liability whatsoever to the Employee or to any third
party.
13. Costs. The Parties shall each bear their own costs, expert fees,
attorneys' fees and other fees incurred in connection with this Agreement.
14. Arbitration. The Parties agree that any and all disputes arising out of
the terms of this Agreement, their interpretation, and any of the matters herein
released, including any potential claims of harassment, discrimination or
wrongful termination shall be subject to binding arbitration, to the extent
permitted by law, in [NAME OF COUNTY], Massachusetts, before the American
Arbitration Association under its National Rules for the Resolution of
Employment Disputes. EMPLOYEE AGREES AND HEREBY WAIVES HIS RIGHT TO JURY TRIAL
AS TO MATTERS ARISING OUT OF THE TERMS OF THIS Agreement AND ANY MATTERS HEREIN
RELEASED TO THE EXTENT PERMITTED BY LAW. The Parties agree that the prevailing
party in any arbitration shall be entitled to injunctive relief in any court of
competent jurisdiction to enforce the arbitration award.
15. Authority. Employee represents and warrants that he has the capacity to
act on his own behalf and on behalf of all who might claim through him to bind
them to the terms and conditions of this Agreement.
16. No Representations. Employee represents that he has had the opportunity
to consult with an attorney, and has carefully read and understands the scope
and effect of the provisions of this Agreement. Neither party has relied upon
any representations or statements made by the other party hereto which are not
specifically set forth in this Agreement.
17. Severability. In the event that any provision hereof becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision.
18. Entire Agreement. This Agreement and the Confidentiality Agreement
represent the entire agreement and understanding between the Company and
Employee concerning Employee's separation from the Company, and supersede and
replace any and all prior agreements and understandings concerning Employee's
relationship with the Company and his compensation by the Company.
19. No Oral Modification. This Agreement may only be amended in writing
signed by Employee and the President of the Company.
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20. Governing Law. This Agreement shall be governed by the internal
substantive laws, but not the choice of law rules, of the State of California.
21. Effective Date. This Agreement is effective the day or eight days after
it has been signed by both Parties.
22. Counterparts. This Agreement may be executed in counterparts, and each
counterpart shall have the same force and effect as an original and shall
constitute an effective, binding agreement on the part of each of the
undersigned.
23. Voluntary Execution of Agreement. This Agreement is executed
voluntarily and without any duress or undue influence on the part or behalf of
the Parties hereto, with the full intent of releasing all claims. The Parties
acknowledge that:
i. They have read this Agreement;
ii. They have been represented in the preparation, negotiation, and
execution of this Agreement by legal counsel of their own choice or that
they have voluntarily declined to seek such counsel;
iii. They understand the terms and consequences of this Agreement and
of the releases it contains;
iv. They are fully aware of the legal and binding effect of this
Agreement.
IN WITNESS WHEREOF, the Parties have executed this Agreement on the
respective dates set forth below.
OBERON SOFTWARE, INC.
Dated: , 2000 By
--------------------------------------
[Typed officer name]
[Title]
DAVID COLLARD, an individual
Dated: , 2000 By
--------------------------------------
[Typed Employee name]
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EXHIBIT E-2
(VERSION 2 OF 2)
SEVERANCE AGREEMENT AND RELEASE
AGREEMENT made as of the day of January, 2000 by and between
Oberon Software, Incorporated (the "Company") and Joseph J. Chappell (the
"Employee").
WHEREAS, the Company, OnDisplay, Inc., a Delaware corporation ("Parent")
and ObiOne Acquisition Corporation, a Massachusetts corporation and a
wholly-owned subsidiary of Parent ("Sub") have entered into an Agreement and
Plan of Reorganization (the "Merger Agreement") and have agreed that Parent
shall acquire the Company through the statutory merger of Sub with and into the
Company (the "Merger");
WHEREAS, the Parent, the Company and the Sub acknowledge that upon the
closing of the Merger (the "Closing"), the Employee shall separate from the
Company (the "Termination Date") and that such termination shall be considered a
termination not for Cause for purposes of Section 8 of the 1998 Stock Incentive
Plan;
WHEREAS, concurrent with the execution and delivery of the Merger
Agreement, as a material inducement to Parent and Sub to enter into the Merger
Agreement, the Employee has agreed to enter into this Agreement;
WHEREAS, the parties wish to resolve amicably the Employee's separation
from the Company and establish the terms of the Employee's severance
arrangement;
NOW, THEREFORE, in consideration of the promises and conditions set forth
herein, the sufficiency of which is hereby acknowledged, the Company and the
Employee agree as follows:
1. Monetary Consideration. The Company agrees to pay the Employee $150,000
less all applicable state and federal taxes as severance pay in a lump-sum on
the Termination Date.
2. Stock Acceleration. Effective upon the Termination Date, (a) each
outstanding option to purchase shares of Common Stock of the Company held by the
Employee shall become immediately exercisable in full, and (b) each outstanding
restricted stock award shall be deemed to be fully vested and no longer subject
to a right of repurchase by the Company.
3. Consulting Services. As a condition to, and in consideration for, the
severance benefits Employee is to receive herein, Employee agrees to make
himself available for up to ten (10) hours per month to perform consulting
services reasonably requested of him by the Chief Executive Officer of the
Company during the twelve(12) month period beginning on the Closing (the
"Consultancy Period"). All assignments will come from the Chief Executive
Officer of the Company, and Employee will report directly to such person with
respect to each assignment. Employee shall be reimbursed for all reasonable
travel expenses incurred in rendering such consulting services upon Employee's
submission of appropriate documentation for those expenses. During the
Consultancy Period, Employee will not make any representations to any third
party that he is an officer, employee or director of the Company. Any
proprietary information or other confidential information of the Company to
which Employee may have access in the performance of his consulting services
will be held in confidence and will not be disclosed to any third party, except
to the extent necessary to perform his consulting services.
4. Benefits.
(i) provided that Employee is eligible for and elects continuation
coverage pursuant to COBRA, the Company will reimburse Employee for his
COBRA premiums until the earlier of (i) twelve (12) months from the
Termination Date; or (ii) the date Employee is no longer eligible to
receive continuation coverage pursuant to COBRA. Employee shall be
responsible for payment of his COBRA premiums for the remaining COBRA
period.
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(ii) to the extent not previously paid or provided, the Company shall
timely pay or provide to the Employee any other amounts or benefits
required to be paid or provided or which the Employee is eligible to
receive following the Employee's termination of employment under any plan,
program, policy, practice, contract or agreement of the Company and its
affiliated companies, including, but not limited to, any accrued vacation
time.
5. Release of Claims. Employee agrees that as of the Termination Date the
foregoing consideration represents settlement in full of all outstanding
obligations owed to Employee by the Company. Employee, on behalf of himself, and
his respective heirs, family members, executors and assigns, hereby fully and
forever releases the Company and its past, present and future officers, agents,
directors, employees, investors, shareholders, administrators, affiliates,
divisions, subsidiaries, parents, predecessor and successor corporations, and
assigns, from, and agrees not to sue or otherwise institute or cause to be
instituted any legal or administrative proceedings concerning any claim, duty,
obligation or cause of action relating to any matters of any kind, whether
presently known or unknown, suspected or unsuspected, that he may possess
arising from any omissions, acts or facts that have occurred up until and
including the Effective Date of this Agreement including, without limitation,
(i) any and all claims relating to or arising from Employee's
employment relationship with the Company and the termination of that
relationship;
(ii) any and all claims relating to, or arising from, Employee's right
to purchase, or actual purchase of shares of stock of the Company,
including, without limitation, any claims for fraud, misrepresentation,
breach of fiduciary duty, breach of duty under applicable state corporate
law, and securities fraud under any state or federal law;
(iii) any and all claims for wrongful discharge of employment;
termination in violation of public policy; discrimination; breach of
contract, both express and implied; breach of a covenant of good faith and
fair dealing, both express and implied; promissory estoppel; negligent or
intentional infliction of emotional distress; negligent or intentional
misrepresentation; negligent or intentional interference with contract or
prospective economic advantage; unfair business practices; defamation;
libel; slander; negligence; personal injury; assault; battery; invasion of
privacy; false imprisonment; and conversion;
(iv) any and all claims for violation of any federal, state or
municipal statute, including, but not limited to, Title VII of the Civil
Rights Act of 1964, the Civil Rights Act of 1991, the Age Discrimination in
Employment Act of 1967, the Americans with Disabilities Act of 1990, the
Fair Labor Standards Act, the Employee Retirement Income Security Act of
1974, The Worker Adjustment and Retraining Notification Act, the California
Fair Employment and Housing Act, and Labor Code section 201, et seq. and
section 970, et seq. and all amendments to each such Act as well as the
regulations issued thereunder;
(v) any and all claims for violation of the federal, or any state,
constitution;
(vi) any and all claims arising out of any other laws and regulations
relating to employment or employment discrimination; and
(vii) any and all claims for attorneys' fees and costs.
Employee agrees that the release set forth in this section shall be and remain
in effect in all respects as a complete general release as to the matters
released. This release does not extend to any obligations incurred under this
Agreement. Employee acknowledges and agrees that any breach of this paragraph
shall constitute a material breach of the Agreement and in the case of a breach
by Employee, shall entitle the Company immediately to recover the monetary
consideration discussed in Section 1 above. Employee shall also be responsible
to the Company for all costs, attorneys' fees and any and all damages incurred
by the Company (a) enforcing the obligation, including the bringing of any suit
to recover the monetary consideration, and (b) defending against a claim or suit
brought or pursued by Employee in violation of this provision.
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6. Non-Disclosure and Non-Competition.
(a) Non-Disclosure. The Employee acknowledges his obligation to keep
confidential all non-public information concerning the Company which he
acquired during the course of his employment with the Company, as stated
more fully in the confidential information, invention and writings and
non-competition agreement ("Confidentiality and Non-Competition Agreement")
executed by the Employee which remains in full force and effect. The
Employee also acknowledges payment to him of the amount described herein in
consideration for his obligations under the Confidentiality and Non-
Competition Agreement
(b) Non-Compete. Employee agrees to sign the Non-Compete Agreement
included as Exhibit B-1 of the Merger Agreement contemporaneously with this
Agreement.
7. Return of Company Property. The Employee agrees to return within seven
(7) days of the Termination Date all Company property which is in his possession
or control. The Employee further agrees to leave intact all electronic Company
documents, including those which he developed or help develop during his
employment.
8. No Cooperation. Employee agrees he will not act in any manner that might
damage the business of the Company. Employee agrees that he will not counsel or
assist any attorneys or their clients in the presentation or prosecution of any
disputes, differences, grievances, claims, charges, or complaints by any third
party against the Company and/or any officer, director, employee, agent,
representative, shareholder or attorney of the Company, unless under a subpoena
or other court order to do so.
9. Non-Disparagement. Employee agrees to refrain from any defamation, libel
or slander of the Company and its respective officers, directors, employees,
investors, shareholders, administrators, affiliates, divisions, subsidiaries,
predecessor and successor corporations, and assigns or tortious interference
with the contracts and relationships of the Company and its respective officers,
directors, employees, investors, shareholders, administrators, affiliates,
divisions, subsidiaries, predecessor and successor corporations, and assigns.
10. Confidentiality. The Employee understands and agrees that as a
condition for payment to him of the consideration herein described, the terms
and contents of this Agreement, and the contents of the negotiations and
discussions resulting in this Agreement, shall be maintained as confidential by
the Employee, his agents and representatives and none of the above shall be
disclosed except to the extent required by federal or state law or as otherwise
agreed to in writing by the Company.
11. Nature of Agreement. The Employee understands and agrees that this
Agreement is a severance agreement and does not constitute an admission of
liability or wrongdoing on the part of the Company.
12. Amendment. This Agreement shall be binding upon the parties and may not
be abandoned, supplemented, changed or modified in any manner, orally or
otherwise, except by an instrument in writing of concurrent or subsequent date
signed by a duly authorized representative of the parties hereto. This Agreement
is binding upon and shall inure to the benefit of the parties and their
respective agents, assigns, heirs, executors, successors and administrators.
13. Waiver of Rights. No delay or omission by the Company in exercising any
rights under this Agreement shall operate as a waiver of that or any other
right. A waiver or consent given by the Company on any one occasion shall be
effective only in that instance and shall not be construed as a bar or waiver of
any right on any other occasion.
14. Validity. Should any provision of this Agreement be declared or be
determined by any court of competent jurisdiction to be illegal or invalid, the
validity of the remaining parts, terms, or provisions shall not be affected
thereby and said illegal or invalid part, term or provision shall be deemed not
to be a part of this Agreement.
15. Arbitration. The Parties agree that any and all disputes arising out of
the terms of this Agreement, their interpretation, and any of the matters herein
released, including any potential claims of
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harassment, discrimination or wrongful termination shall be subject to binding
arbitration, to the extent permitted by law, in [NAME OF COUNTY], Massachusetts,
before the American Arbitration Association under its National Rules for the
Resolution of Employment Disputes. EMPLOYEE AGREES AND HEREBY WAIVES HIS RIGHT
TO JURY TRIAL AS TO MATTERS ARISING OUT OF THE TERMS OF THIS AGREEMENT AND ANY
MATTERS HEREIN RELEASED TO THE EXTENT PERMITTED BY LAW. The Parties agree that
the prevailing party in any arbitration shall be entitled to injunctive relief
in any court of competent jurisdiction to enforce the arbitration award.
16. Applicable Law. This Agreement shall be governed by the laws of the
Commonwealth of Massachusetts, without regard to conflict of laws provisions.
17. Voluntary Assent. The Employee affirms that no other promises or
agreements of any kind have been made to or with him by any person or entity
whatsoever to cause him to sign this Agreement, and that he fully understands
the meaning and intent of this Agreement. The Employee states and represents
that he has had an opportunity to fully discuss and review the terms of this
Agreement with an attorney. The Employee further states and represents that he
has carefully read this Agreement, understands the contents herein, freely and
voluntarily assents to all of the terms and conditions hereof, and signs his
name of his own free act.
18. Entire Agreement. This Agreement contains and constitutes the entire
understanding and agreement between the parties hereto with respect to the
severance and supercedes all previous oral and written negotiations, agreements,
commitments, and writings in connection therewith. TO THE EXTENT OF ANY CONFLICT
BETWEEN THIS AGREEMENT AND EMPLOYEE'S RESPECTIVE STOCK OPTION AGREEMENTS,
RESTRICTED STOCK AGREEMENTS OR THE 1998 STOCK OPTION PLAN, THIS AGREEMENT SHALL
PREVAIL. Nothing in this Section shall, however, modify, cancel or supercede the
Employee's obligations set forth in Section 6.
19. Counterparts. This Agreement may be executed in two (2) signature
counterparts, each of which shall constitute an original, but all of which taken
together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, all parties have set their hand and seal to this
Agreement as of the date written above.
By: Date:
- ---------------------------------------------
By: Date:
- ---------------------------------------------
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EXHIBIT F
FORM OF AFFILIATE AGREEMENT
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EXHIBIT F
FORM OF COMPANY AFFILIATE AGREEMENT
THIS COMPANY AFFILIATE AGREEMENT (this "Agreement") is made and entered
into as of , 2000, by and between OnDisplay, Inc., a Delaware
corporation ("Parent"), and the undersigned stockholder who may be deemed an
affiliate ("Affiliate") of Oberon Software, Inc., a Massachusetts corporation
("Company"). Capitalized terms used but not otherwise defined herein shall have
the meanings ascribed to them in the Reorganization Agreement (as defined
below).
RECITALS
A. The Company, Merger Sub (as defined below) and Parent have entered into
an Agreement and Plan of Reorganization (the "Reorganization Agreement") which
provides for the merger (the "Merger") of a wholly-owned subsidiary of Parent
("Merger Sub") with and into the Company. Pursuant to the Merger, all
outstanding capital stock of the Company (the "Company capital stock") shall be
converted into the right to receive common stock of Parent;
B. Affiliate has been advised that Affiliate may be deemed to be an
"affiliate" of the Company, as the term "affiliate" is used for purposes of Rule
145 of the Rules and Regulations (the "Rules and Regulations") of the Securities
and Exchange Commission (the "SEC") and of Opinion 16 of the Accounting
Principles Board and applicable SEC rules and regulations.
C. The execution and delivery of this Agreement by Affiliate is a material
inducement to Parent to enter into the Reorganization Agreement.
NOW, THEREFORE, intending to be legally bound, the parties hereto agree as
follows:
1. Acknowledgments by Affiliate. Affiliate acknowledges and understands
that the representations, warranties and covenants by Affiliate set forth herein
shall be relied upon by Parent, the Company and their respective affiliates,
counsel and accounting firms, and that substantial losses and damages may be
incurred by these persons if Affiliate's representations, warranties or
covenants are breached. Affiliate has carefully read this Agreement and the
Reorganization Agreement and has discussed the requirements of this Agreement
with Affiliate's professional advisors, who are qualified to advise Affiliate
with regard to such matters.
2. Beneficial Ownership of Company capital stock. The Affiliate is the sole
record and beneficial owner of the number of shares of Company capital stock set
forth next to its name on the signature page hereto (the "Shares"). The Shares
are not subject to any claim, lien, pledge, charge, security interest or other
encumbrance or to any rights of first refusal of any kind. There are no options,
warrants, calls, rights, commitments or agreements of any character, written or
oral, to which the Affiliate is party or by which it is bound obligating the
Affiliate to issue, deliver, sell, repurchase or redeem, or cause to be issued,
delivered, sold, repurchased or redeemed, any Shares or obligating the Affiliate
to grant or enter into any such option, warrant, call, right, commitment or
agreement. The Affiliate has the sole right to transfer such Shares. The Shares
constitute all shares of Company capital stock owned, beneficially or of record,
by the Affiliate. The Shares are not subject to preemptive rights created by any
agreement to which the Affiliate is party. The Affiliate has not engaged in any
sale or other transfer of the Shares in contemplation of the Merger. All shares
of Company capital stock and common stock of Parent ("Parent common stock")
acquired by Affiliate subsequent to the date hereof (including shares of Parent
common stock acquired in the Merger) shall be subject to the provisions of this
Agreement as if held by Affiliate as of the date hereof.
3. Compliance with Rule 145 and the Securities Act.
(a) Affiliate has been advised that (i) the issuance of shares of
Parent common stock in connection with the Merger is expected to be
effected pursuant to a registration statement on Form S-4 promulgated under
the Securities Act of 1933, as amended (the "Securities Act"), and the
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resale of such shares shall be subject to restrictions set forth in Rule
145 under the Securities Act, and (ii) Affiliate may be deemed to be an
affiliate of the Company. Affiliate accordingly agrees not to sell,
transfer or otherwise dispose of any Parent common stock issued to
Affiliate in the Merger unless (i) such sale, transfer or other disposition
is made in conformity with the requirements of Rule 145(d) promulgated
under the Securities Act, or (ii) such sale, transfer or other disposition
is made pursuant to an effective registration statement under the
Securities Act or an appropriate exemption from registration, or (iii)
Affiliate delivers to Parent a written opinion of counsel, reasonably
acceptable to Parent in form and substance, that such sale, transfer or
other disposition is otherwise exempt from registration under the
Securities Act.
(b) Parent shall give stop transfer instructions to its transfer agent
with respect to any Parent common stock received by Affiliate pursuant to
the Merger and there shall be placed on the certificates representing such
common stock, or any substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION
TO WHICH RULE 145 APPLIES AND MAY ONLY BE TRANSFERRED IN CONFORMITY WITH
RULE 145(d) OR PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR IN ACCORDANCE WITH A WRITTEN
OPINION OF COUNSEL, REASONABLY ACCEPTABLE TO THE ISSUER IN FORM AND
SUBSTANCE, THAT SUCH TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED."
The legend set forth above shall be removed (by delivery of a substitute
certificate without such legend) and Parent shall so instruct its transfer
agent, if Affiliate delivers to Parent (i) satisfactory written evidence that
the shares have been sold in compliance with Rule 145 (in which case, the
substitute certificate shall be issued in the name of the transferee), or (ii)
an opinion of counsel, in form and substance reasonably satisfactory to Parent,
to the effect that public sale of the shares by the holder thereof is no longer
subject to Rule 145.
4. Termination. This Agreement shall be terminated and shall be of no
further force and effect in the event of the termination of the Reorganization
Agreement pursuant to Article VIII of the Reorganization Agreement.
5. Miscellaneous.
(a) Waiver; Severability. No waiver by any party hereto of any
condition or of any breach of any provision of this Agreement shall be
effective unless in writing and signed by each party hereto. In the event
that any provision of this Agreement, or the application of any such
provision to any person, entity or set of circumstances, shall be
determined to be invalid, unlawful, void or unenforceable to any extent,
the remainder of this Agreement, and the application of such provision to
persons, entities or circumstances other than those as to which it is
determined to be invalid, unlawful, void or unenforceable, shall not be
impaired or otherwise affected and shall continue to be valid and
enforceable to the fullest extent permitted by law.
(b) Binding Effect and Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns, but,
except as otherwise specifically provided herein, neither this Agreement
nor any of the rights, interests or obligations of the parties hereto may
be assigned by either of the parties without prior written consent of the
other party hereto.
(c) Amendments and Modification. This Agreement may not be modified,
amended, altered or supplemented except upon the execution and delivery of
a written agreement executed by the parties hereto.
(d) Injunctive Relief. Each of the parties acknowledge that (i) the
covenants and the restrictions contained in this Agreement are necessary,
fundamental, and required for the protection of Parent and the Company and
to preserve for Parent the benefits of the Merger; (ii) such covenants
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relate to matters which are of a special, unique, and extraordinary
character that gives each of such covenants a special, unique, and
extraordinary value; and (iii) a breach of any such covenants or any other
provision of this Agreement shall result in irreparable harm and damages to
Parent and the Company which cannot be adequately compensated by a monetary
award. Accordingly, it is expressly agreed that in addition to all other
remedies available at law or in equity, Parent and the Company shall be
entitled to the immediate remedy of a temporary restraining order,
preliminary injunction, or such other form of injunctive or equitable
relief as may be used by any court of competent jurisdiction to restrain or
enjoin any of the parties hereto from breaching any such covenant or
provision or to specifically enforce the provisions hereof.
(e) Governing Law. This Agreement shall be governed by and construed,
interpreted and enforced in accordance with the internal laws of the State
of Delaware without giving effect to any choice or conflict of law
provision or rule (whether of the State of Delaware or any other
jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Delaware.
(f) Entire Agreement. This Agreement, the Reorganization Agreement and
any other agreements referred to in the Reorganization Agreement set forth
the entire understanding of Affiliate and Parent relating to the subject
matter hereof and thereof and supersede all prior agreements and
understandings between Affiliate and Parent relating to the subject matter
hereof and thereof.
(g) Attorneys' Fees. In the event of any legal actions or proceeding
to enforce or interpret the provisions hereof, the prevailing party shall
be entitled to reasonable attorneys' fees, whether or not the proceeding
results in a final judgment.
(h) Further Assurances. Affiliate shall execute and/or cause to be
delivered to Parent such instruments and other documents and shall take
such other actions as Parent may reasonably request to effectuate the
intent and purposes of this Agreement.
(i) Third Party Reliance. Counsel to and independent auditors for
Parent and the Company shall be entitled to rely upon this Affiliate
Agreement.
(j) Survival. The representations, warranties, covenants and other
provisions contained in this Agreement shall survive the Merger.
(k) Notices. All notices and other communications pursuant to this
Agreement shall be in writing and deemed to be sufficient if contained in a
written instrument and shall be deemed given if delivered personally,
telecopied, sent by nationally-recognized overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid,
to the parties at the following address (or at such other address for a
party as shall be specified by like notice):
<TABLE>
<S> <C>
If to Parent: OnDisplay, Inc.
12667 Alcosta Boulevard, Suite 300
San Ramon, CA 94583
Attention:
Facsimile:
With a copy to: Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304
Attention: Michael Kennedy, Esq.
Facsimile: (650) 493-6811
If to To the address for notice set forth on the signature page
Affiliate: hereof.
</TABLE>
(l) Counterparts. This Agreement shall be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties have caused this Affiliate Agreement to be
duly executed on the day and year first above written.
<TABLE>
<S> <C>
DANCE AFFILIATE
By: ____________________________________ By: ________________________________________
Name: __________________________________ Affiliate's Address for Notice:
_____________________________________________________
Title: _________________________________ _____________________________________________________
_____________________________________________________
Shares beneficially owned:
____________ shares of Company common stock
____________ shares of Company common stock issuable
upon exercise of outstanding options and warrants
____________ shares of Parent common stock
</TABLE>
[SIGNATURE PAGE TO COMPANY AFFILIATE AGREEMENT]
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ANNEX AA
AMENDMENT NO. 1 TO THE AGREEMENT AND PLAN OF REORGANIZATION
THIS AMENDMENT NO. 1 (this "AMENDMENT") to the AGREEMENT AND PLAN OF
REORGANIZATION dated January 17, 2000 (the "MERGER AGREEMENT," capitalized terms
not otherwise defined herein are used herein as therein defined), among
OnDisplay, Inc., a Delaware corporation ("PARENT"), ObiOne Acquisition
Corporation, a Massachusetts corporation and a wholly-owned subsidiary of Parent
("MERGER SUB"), and Oberon Software Incorporated, a Massachusetts corporation
(the "COMPANY"), is made this 2nd day of March, 2000 by and among Parent, Merger
Sub and Company.
RECITALS
WHEREAS, Parent, Merger Sub and Company desire to amend the Merger
Agreement as provided herein.
NOW THEREFORE in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
SECTION 1. Amendments to Merger Agreement.
(a) The definition of "Exchange Ratio" in Section 1.12 of the Merger
Agreement is hereby amended and restated in its entirety as follows:
"Exchange Ratio" shall mean an amount equal to .0912.
(b) The definitions of "Total Consideration" and "Total Outstanding Shares"
in Section 1.12 of the Merger Agreement are hereby deleted.
(c) The references to "Exhibit D-1" in Section 5.11(a) and in the
definition of "Retention Options" in Section 1.12 are hereby deleted and
replaced with "Schedule 5.11."
SECTION 2. Representations and Warranties.
(a) Representations and Warranties of the Company. The Company hereby
represents and warrants to Parent and Merger Sub that Company has all necessary
corporate power and authority to execute and delivery this Amendment, to perform
its obligations under the Merger Agreement as amended hereby and to consummate
the transactions contemplated hereby.
(b) Representations and Warranties of Parent and Merger Sub. Parent and
Merger Sub hereby jointly and severally represent and warrant to Company that
Parent and Merger Sub have all necessary corporate power and authority to
execute and deliver this Amendment, to perform their respective obligations
under the Merger Agreement as amended hereby and to consummate the transactions
contemplated hereby.
SECTION 3. Effect on Merger Agreement. Except as otherwise specifically
provided herein, the Merger Agreement shall not be amended but shall remain in
full force and effect, subject to the terms thereof.
SECTION 4. Counterparts. This Amendment may be signed in one or more
counterparts, each of which shall be an original but all of which, taken
together, shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their duly authorized respective officers as of the date first
written above.
<TABLE>
<S> <C>
OBERON SOFTWARE INCORPORATED ONDISPLAY, INC.
By: /s/ JOSEPH CHAPPELL By: /s/ MARK PINE
Name: Joseph J. Chappell Name: Mark Pine
Title: President and CEO Title: Chairman and CEO
OBIONE ACQUISITION CORPORATION
By: /s/ DAVID F. LARSON
Name: David F. Larson
Title: CFO
STOCKHOLDERS' REPRESENTATIVE:
By: /s/ JOSEPH J. CHAPPELL
Name: Joseph J. Chappell
Title: President and CEO
</TABLE>
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ANNEX B
January 17, 2000
Board of Directors
OnDisplay, Inc.
12667 Alcosta Blvd.,
Suite 300
San Ramon, CA 94583
Members of the Board:
We understand that Oberon Software Incorporated (the "Company"), OnDisplay,
Inc. ("Acquiror") and ObiOne Acquisition Corporation (a wholly owned subsidiary
of Acquiror, "Merger Sub") are proposing to enter into an Agreement and Plan of
Reorganization (the "Agreement") which will provide, among other things, for the
merger (the "Merger") of Merger Sub with and into the Company. Upon consummation
of the Merger, the Company will become a wholly owned subsidiary of Acquiror.
Under the terms set forth in a draft of the Agreement dated January 17, 2000
(the "Draft Agreement"), at the effective time of the Merger, each of the
outstanding shares of common stock of the Company, par value $.01 per share,
Series 1 Participating Convertible Preferred Stock, par value $.01 per share and
Series 2, Non-Participating Convertible Preferred Stock, par value $.01 per
share (collectively, "Company Capital Stock") other than certain shares to be
canceled pursuant to the Agreement and shares held by stockholders who properly
exercise dissenters' rights ("Dissenting Shares"), will be converted into the
right to receive .0912 shares (the "Exchange Ratio") of the common stock of
Acquiror, par value $0.001 per share ("Acquiror Common Stock"). Outstanding
options to acquire Company Capital Stock will be assumed and converted into
options to acquire Acquiror Common Stock pursuant to the terms of the Agreement.
The terms and conditions of the Merger are set out more fully in the Agreement.
You have asked us whether, in our opinion, the Exchange Ratio is fair from
a financial point of view and as of the date hereof to Acquiror.
For purposes of this opinion we have, among other things:
(i) reviewed certain internal financial statements and other financial
and operating data, including certain financial forecasts and other
forward looking information, concerning (a) the Company prepared by
the managements of the Company and Acquiror, respectively, and (b)
Acquiror prepared by the management of Acquiror;
(ii) reviewed with Acquiror certain publicly available research estimates
of research analysts regarding Acquiror;
(iii) held discussions with the respective managements of the Company and
Acquiror concerning the businesses, past and current operations,
financial condition and future prospects of both the Company and
Acquiror, independently and combined, including discussions with the
managements of the Company and Acquiror concerning their views
regarding the strategic rationale for the Merger;
(iv) reviewed the financial terms and conditions set forth in the Draft
Agreement, dated January 17, 2000;
(v) reviewed the stock price and trading history of Acquiror Common
Stock;
(vi) compared the financial performance of the Company with that of
certain publicly traded companies that we deemed comparable with the
Company;
(vii) compared the financial terms of the Merger with the financial terms,
to the extent publicly available, of other transactions that we
deemed relevant;
(viii) reviewed the pro forma impact of the Merger on Acquiror's revenue
per share and earnings per share;
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Board of Directors
OnDisplay, Inc.
January 17, 2000
Page 2
(ix) prepared an analysis of the relative contributions of the Company and
Acquiror to the combined company;
(x) participated in discussions and negotiations among representatives of
the Company and Acquiror and their financial and legal advisors; and
(xi) made such other studies and inquiries, and reviewed such other data,
as we deemed relevant.
In our review and analysis, and in arriving at our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information provided to us (including information furnished to us orally or
otherwise discussed with us by the managements of the Company and Acquiror) or
publicly available and have neither attempted to verify, nor assumed
responsibility for verifying, any of such information. We have relied upon the
assurances of the managements of the Company and Acquiror that they are not
aware of any facts that would make such information inaccurate or misleading.
Furthermore, we did not obtain or make, or assume any responsibility for
obtaining or making, any independent evaluation or appraisal of the properties,
assets or liabilities (contingent or otherwise) of the Company or Acquiror, nor
were we furnished with any such evaluation or appraisal. With respect to the
financial forecasts and projections (and the assumptions and bases therefor) for
each of the Company and Acquiror that we have reviewed, upon the advice of the
managements of the Company and Acquiror, we have assumed that such forecasts and
projections have been reasonably prepared in good faith on the basis of
reasonable assumptions and reflect the best currently available estimates and
judgments as to the future financial condition and performance of the Company
and Acquiror, respectively, and we have further assumed that such projections
and forecasts will be realized in the amounts and in the time periods currently
estimated. In this regard, we note that each of the Company and the Acquiror
face exposure to the Year 2000 problem. We have not undertaken any independent
analysis to evaluate the reliability or accuracy of the assumptions made with
respect to the potential effect that the Year 2000 problem might have on the
Company's and the Acquiror's respective forecasts. We have assumed that the
Merger will be consummated upon the terms set forth in the Draft Agreement
without material alteration thereof, including, among other things, that the
Merger will be accounted for as a "purchase method" business combination in
accordance with U.S. generally accepted accounting principles ("GAAP") and that
the Merger will be treated as a tax-free reorganization pursuant to the Internal
Revenue Code of 1986, as amended. In addition, we have assumed that the
historical financial statements of each of the Company and Acquiror reviewed by
us have been prepared and fairly presented in accordance with U.S. GAAP
consistently applied. We have also assumed that the Exchange Ratio will not be
increased as a result of provisions of the Draft Agreement. We have relied as to
all legal matters relevant to rendering our opinion on the advice of counsel.
This opinion is necessarily based upon market, economic and other
conditions as in effect on, and information made available to us as of, the date
hereof. It should be understood that subsequent developments may affect the
conclusion expressed in this opinion and that we disclaim any undertaking or
obligation to advise any person of any change in any matter affecting this
opinion which may come or be brought to our attention after the date of this
opinion. Our opinion is limited to the fairness, from a financial point of view
and as of the date hereof, to Acquiror of the Exchange Ratio. We do not express
any opinion as to (i) the value of any employee agreement or other arrangement
entered into in connection with the Merger, (ii) any tax or other consequences
that might result from the Merger or (iii) what the value of Acquiror Common
Stock will be when issued to the Company's stockholders pursuant to the Merger
or the price at which shares of Acquiror Common Stock may be traded in the
future. Our opinion does not address the relative merits of the Merger and the
other business strategies that Acquiror's Board of Directors has considered or
may be considering, nor does it address the decision of Acquiror's Board of
Directors to proceed with the Merger.
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Board of Directors
OnDisplay, Inc.
January 17, 2000
Page 3
We will receive a fee contingent upon the delivery of this opinion, and
Acquiror has agreed to indemnify us for certain liabilities that may arise out
of our engagement. In the past, we have provided certain investment banking
services to the Acquiror for which we have been paid fees, including acting as
lead manager for the initial public offering of Acquiror Common Stock. We
maintain a market in the shares of Acquiror Common Stock. In the ordinary course
of business, we may trade in Acquiror's securities for our own account and the
account of our customers and, accordingly, may at any time hold a long or short
position in Acquiror's securities.
Our opinion expressed herein is provided for the information of the Board
of Directors of Acquiror in connection with its evaluation of the Merger. Our
opinion is not intended to be and does not constitute a recommendation to any
stockholder of Acquiror or the Company as to how such stockholder should vote,
or take any other action, with respect to the Merger. This opinion may not be
summarized, described or referred to or furnished to any party except with our
express prior written consent.
Based upon and subject to the foregoing considerations, it is our opinion
that, as of the date hereof, the Exchange Ratio is fair to Acquiror from a
financial point of view.
Very truly yours,
/s/ FLEETBOSTON ROBERTSON STEPHENS INC.
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ANNEX C
January 16, 2000
Special Committee of the Board of Directors
Oberon Software Incorporated
215 First Street
Cambridge, MA 02142
Gentlemen:
We understand that OnDisplay, Inc. ("OnDisplay"), ObiOne Acquisition Corp.
("Merger Sub"), a wholly owned subsidiary of OnDisplay, and Oberon Software
Incorporated ("Oberon" or the "Company") are considering entering into an
agreement and plan of reorganization substantially in the form of the draft
dated January 13, 2000 (the "Draft Merger Agreement") pursuant to which, among
other things, Merger Sub shall be merged with and into the Company in a
transaction (the "Merger") in which each share of Common Stock and Preferred
Stock of the Company, subject to the conditions and limitations set forth in the
Draft Merger Agreement, shall be converted into the right to receive, without
interest, 0.0911596 shares (the "Exchange Ratio") of the Common Stock of
OnDisplay. The terms and conditions of the Merger are set forth in more detail
in the Draft Merger Agreement, a copy of which has been furnished to us.
You have requested the opinion of SoundView Technology Group, Inc.
("SoundView"), as of this date, as to the fairness, from a financial point of
view, to the stockholders of the Company, of the Exchange Ratio.
In conducting our analysis and arriving at our opinion as expressed herein,
we have, among other things:
(i) reviewed the Draft Merger Agreement and the specific terms of the
Merger set forth therein, and have assumed that the final form of the Draft
Merger Agreement will not vary in any regard that is material to our
analysis;
(ii) reviewed Oberon's financial and operating information for the
two-year period ended September 30, 1999 and the three-month period ended
December 31, 1999;
(iii) reviewed OnDisplay's financial and operating information for the
two year period ended December 31, 1999;
(iv) reviewed certain financial and operating information regarding
the businesses, operations and prospects of Oberon and OnDisplay, including
forecasts and projections, provided to us by the managements of the Company
and OnDisplay, respectively;
(v) reviewed certain publicly available financial information
concerning certain other companies we deemed to be reasonably similar to
the Company and OnDisplay and the trading markets for certain of such
companies' securities;
(vi) reviewed the financial terms of the Merger and compared them with
the financial terms, to the extent publicly available, of certain recent
mergers and acquisitions that we deemed relevant;
(vii) conducted discussions with certain members of senior management
of the Company and OnDisplay concerning their respective business and
operations, assets, present condition and future prospects; and
(viii) performed such other analyses, examinations and procedures,
reviewed such other agreements and documents, and considered such other
factors as we have deemed, in our sole judgment, to be necessary,
appropriate or relevant to render the opinion set forth herein.
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<PAGE> 261
Special Committee of the Board of Directors of
Oberon Software Corporation
January 16, 2000
Page 2
We have also taken into account our assessment of general economic, market
and financial conditions and our experience in similar transactions, as well as
our experience in securities valuation in general. Our opinion is necessarily
based upon conditions as they exist and can be evaluated on the date hereof.
In arriving at our opinion, we have not made, obtained or assumed any
responsibility for any independent evaluation or appraisal of the properties and
facilities or of the assets and liabilities (contingent or otherwise) of either
the Company or OnDisplay. We have assumed and relied upon the accuracy and
completeness of the financial and other information supplied to or otherwise
used by us in arriving at our opinion and have not attempted independently to
verify, or undertaken any obligation to verify, such information. We have
further relied upon the assurances of the managements of Oberon and OnDisplay
that they were not aware of any facts that would make such information
inaccurate or misleading. In addition, we have assumed that the forecasts and
projections provided to SoundView by OnDiplay and the Company represent the best
currently available estimates and judgments of OnDisplay's and the Company's
managements as to the future financial condition and results of operations of
OnDisplay and the Company, respectively, and have assumed that such forecasts
and projects have been reasonably prepared based on such currently available
estimates and judgments. We assume no responsibility for and express no view as
to such forecasts and projections or the assumptions on which they are based.
We do not express any opinion as to the price at which OnDisplay's stock
will trade prior to or subsequent to the closing of the Merger. This letter does
not constitute a recommendation of the Merger over any other alternative
transactions which may be available to the Company and does not address the
underlying business decision of the Special Committee of the Board of Directors
of the Company to proceed with or effect the Merger.
SoundView, as part of its investment banking services, is regularly engaged
in the valuation of businesses and their securities in connection with mergers,
acquisitions, divestitures, restructurings, recapitalizations, underwritings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. We have been engaged to render
the financial opinion as expressed herein and we will receive a fee upon
delivery of this opinion. We also, from time to time, may in the future perform
certain financial advisory services for the Company for which we may receive a
fee. In the ordinary course of business, we may actively trade the securities of
OnDisplay for our own account and for the accounts of our customers and,
accordingly, may at any time hold a short or long position in such securities.
The Company has agreed to indemnify us for certain liabilities that may arise
out of the rendering of this opinion.
This opinion has been prepared for the confidential use and benefit of the
Special Committee of the Board of Directors of the Company in its consideration
of the Merger, supersedes any previously rendered opinion and may not be
reproduced, summarized, described or referred to or given to any other person or
otherwise made public without our prior written consent.
Based upon and subject to the foregoing, it is our opinion as investment
bankers that, as of the date hereof, the Exchange Ratio pursuant to the Draft
Merger Agreement is fair, from a financial point of view, to the Company's
stockholders.
Very truly yours,
/s/ SoundView Technology Group, Inc.
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ANNEX D
156B SEC. 85. DISSENTING STOCKHOLDER; RIGHT TO DEMAND PAYMENT FOR STOCK;
EXCEPTION
A stockholder in any corporation organized under the laws of Massachusetts
which shall have duly voted to consolidate or merge with another corporation or
corporations under the provisions of sections seventy-eight or seventy-nine who
objects to such consolidation or merger may demand payment for his stock from
the resulting or surviving corporation and an appraisal in accordance with the
provisions of sections eight-six to ninety-eight, inclusive, and such
stockholder and the resulting or surviving corporation shall have the rights and
duties and follow the procedure set forth in those sections. This section shall
not apply to the holders of any shares of stock of a constituent corporation
surviving a merger if, as permitted by subsection (c) of section seventy-eight,
the merger did not require for its approval a vote of the stockholders of the
surviving corporation.
Added by St.1964, c. 723, sec. 1. Amended by St.1969, c. 392, sec. 22.
HISTORICAL AND STATUTORY NOTES
St.1969, c. 392, sec. 22, approved June 5, 1969, added the second sentence.
156B SEC. 86. SECTIONS APPLICABLE TO APPRAISAL; PREREQUISITES
If a corporation proposes to take a corporate action as to which any
section of this chapter provides that a stockholder who objects to such action
shall have the right to demand payment for his shares and an appraisal thereof,
sections eighty-seven to ninety-eight, inclusive, shall apply except as
otherwise specifically provided in any section of this chapter. Except as
provided in sections eighty-two and eighty-three, no stockholder shall have such
right unless (1) he files with the corporation before the taking of the vote of
the shareholders on such corporate action, written objection to the proposed
action stating that he intends to demand payment for his shares if the action is
taken and (2) his shares are not voted in favor of the proposed action.
Added by St.1964, c. 723, sec. 1. Amended by St.1965, c. 685, sec. 40; St.1973,
c. 749, sec. 1.
HISTORICAL AND STATUTORY NOTES
St.1965, c. 685, sec. 40, an emergency act, approved Sept 9, 1965, and by
sec. 57 made effective Oct. 1, 1965, in the second sentence, redesignated cls.
(i) and (ii) as cls. (1) and (2), respectively.
St.1973, c. 749, sec. 1, approved Sept. 7, 1973, in the second sentence,
rewrote cl. (1), which prior thereto read, "he files with the corporation
written objection to the proposed action before the taking of the vote thereon
and".
156B SEC. 87. STATEMENT OF RIGHTS OF OBJECTING STOCKHOLDERS IN NOTICE OF
MEETING; FORM
The notice of the meeting of stockholders at which the approval of such
proposed action is to be considered shall contain a statement of the rights of
objecting stockholders. The giving of such notice shall not be deemed to create
any rights in any stockholder receiving the same to demand payment for his
stock, and the directors may authorize the inclusion in any such notice of a
statement of opinion by the management as to the existence or non-existence of
the right of the stockholders to demand payment for their stock on account of
the proposed corporate action.
St.1973, c. 749, sec. 749, approved Sept. 7, 1973, in the first sentence,
substituted "meeting the requirements of section eighty-six" for "thereto with
such corporation before the taking of the vote on the approval of such action":
and inserted the second sentence.
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156B SEC. 89. DEMAND FOR PAYMENT; TIME FOR PAYMENT
If within twenty days after the date of mailing of a notice under
subsection (e) of section eighty-two, subsection (f) of section eighty-three, or
section eighty-eight, any stockholder to whom the corporation was required to
give such notice shall demand in writing from the corporation taking such
action, or in the case of a consolidation or merger from the resulting or
surviving corporation, payment for his stock, the corporation upon which such
demand is made shall pay to him the fair value of his stock within thirty days
after the expiration of the period during which such demand may be made.
Added by St.1964, c. 723 sec. 1. Amended by St.1973, c. 749, sec. 4.
HISTORICAL AND STATUTORY NOTES
St.1973, c. 749, sec. 4, approved Sept. 7, 1973, substituted "within twenty
days" and "any such stockholder to whom the corporation was required to give
such notice shall" for "any such stockholder shall within twenty days."
156 SEC. 90. DEMAND FOR DETERMINATION OF VALUE; BILL IN EQUITY; VENUE
If during the period of thirty days provided for in section eighty-nine the
corporation upon which such demand is made and any such objecting stockholder
fail to agree as to the value of such stock, such corporation or any such
stockholder may within four months after the expiration of such thirty-day
period demand a determination of the value of the stock of all such objecting
stockholders by a bill in equity filed in the superior court in the county where
the corporation in which such objecting stockholders held stock had or has its
principal office in the commonwealth.
Added by St.1964, c. 723, sec. 1.
156B SEC. 91. PARTIES TO SUIT TO DETERMINE VALUE; SERVICE
If the bill is filed by the corporation, it shall name as parties
respondent all stockholders who have demanded payment for their shares and with
whom the corporation has not reached agreement as to the value thereof. If the
bill is filed by a stockholder, he shall bring the bill in his own behalf and in
behalf of all other stockholders who have demanded payment for their shares and
with whom the corporation has not reached agreement as to the value thereof, and
service of the bill shall be made upon the corporation by subpoena with a copy
of the bill annexed. The corporation shall file with its answer a duly verified
list of all such other stockholders, and such stockholders shall thereupon be
deemed to have been added as parties to the bill. The corporation shall give
notice in such form and returnable on such date as the court shall order to each
stockholder party to the bill by registered or certified mail, addressed to the
last known address of such stockholder as shown in the records of the
corporation, and the court may order such additional notice by publication or
otherwise as it deems advisable. Each stockholder who makes demand as provided
in section eighty-nine shall be deemed to have consented to the provisions of
this section relating to notice, and the giving of notice by the corporation to
any such stockholder in compliance with the order of the court shall be a
sufficient service of process on him. Failure to give notice to any stockholder
making demand shall not invalidate the proceedings as to other stockholders to
whom notice was properly given, and the court may at any time before the entry
of a final decree make supplementary orders of notice.
Added by St.1964, c. 723, sec. 1.
156B SEC. 92. DECREE DETERMINING VALUE AND ORDERING PAYMENT; VALUATION DATE
After hearing the court shall enter a decree determining the fair value of
the stock of those stockholders who have become entitled to the valuation of any
payment for their shares, and shall order the corporation to make payment of
such value, together with interest, if any, as hereinafter provided, to the
stockholders entitled thereto upon the transfer by them to the corporation of
the certificates
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representing such stock if certificated or, if uncertificated, upon receipt of
an instruction transferring such stock to the corporation. For this purpose, the
value of the shares shall be determined as of the day preceding the date of the
vote approving the proposed corporate action and shall be exclusive of any
element of value arising from the expectation or accomplishment of the proposed
corporate action.
Added by St.1964, c. 723, sec. 1. Amended by St.1983, c. 522, sec. 22.
HISTORICAL AND STATUTORY NOTES
St.1983, c. S22, sec. 22, approved Nov. 29, 1983, and by sec. 24 made
effective March 1, 1984, in the first sentence, inserted "if certificated or, if
uncertificated, upon receipt of an instruction transferring such stock to the
corporation".
156B SEC. 93. REFERENCE TO SPECIAL MASTER
The court in its discretion may refer the bill or any question arising
thereunder to a special master to hear the parties, make findings and report the
same to the court, all in accordance with the usual practice in suits in equity
in the superior court.
Added by St.1964, c. 723, sec. 1.
156B SEC. 94. NOTATION ON STOCK CERTIFICATES OF PENDENCY OF BILL
On motion the court may order stockholder parties to the bill to submit
their certificates of stock to the corporation for the notation thereon of the
pendency of the bill and may order the corporation to note such pendency in its
records with respect to any uncertificated shares held by such stockholder
parties, and may on motion dismiss the bill as to any stockholder who fails to
comply with such order.
Added by St.1964, c. 723, sec. 1. Amended by St.1983, c. 522, sec. 23.
HISTORICAL AND STATUTORY NOTES
St. 1983, c. 522, sec. 23, approved Nov. 29, 1983 and by sec. 24 made
effective March 1, 1984, inserted "and may order the corporation to note such
pendency in its records with respect to any uncertificated shares held by such
stockholder parties".
156B SEC. 95. COSTS; INTEREST
The costs of the bill, including the reasonably compensation and expenses
of any master appointed by the court, but exclusive of fees of counsel or of
experts retained by any party, shall be determined by the court and taxed upon
the parties to the bill, or any of them, in such manner as appears to be
equitable, except that all costs of giving notice to stockholders as provided in
this chapter shall be paid by the corporation. Interest shall be paid upon any
award from the date of the vote approving the proposed corporate action, and the
court may on application of any interested party determine the amount of
interest to be paid in the case of any stockholder.
Added by St.1964, c. 723, sec. 1. Amended by St.1965, c. 685, sec. 41.
HISTORICAL AND STATUTORY NOTES
St.1965, c. 685, sec. 41, an emergency act, approved Sept. 9, 1965, and by
sec. 57 made effective October 1, 1965, in the first sentence, substituted
"provided in this chapter" for "hereinabove provided".
156B SEC. 96. DIVIDENDS AND VOTING RIGHTS AFTER DEMAND FOR PAYMENT
Any stockholder who has demanded payment for his stock as provided in this
chapter shall not thereafter be entitled to notice of any meeting of
stockholders or to vote such stock for any purpose and
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<PAGE> 265
shall not be entitled to the payment of dividends or other distribution on the
stock (except dividends or other distributions payable to stockholders of record
at a date which is prior to the date of the vote approving the proposed
corporate action) unless:
(1) A bill shall not be filed within the time provided in section
ninety;
(2) A bill, if filed, shall be dismissed as to such stockholder; or
(3) Such stockholder shall with the written approval of the
corporation, or in the case of a consolidation or merger, the resulting or
surviving corporation, delivery to it a written withdrawal of his
objections to and an acceptance of such corporate action.
Notwithstanding the provisions of clauses (1) to (3), inclusive, said
stockholder shall have only the rights of a stockholder who did not so demand
payment for his stock as provided in this chapter.
Added by St.1964, c. 723, sec. 1. Amended by St.1982, c. 149.
HISTORICAL AND STATUTORY NOTES
St.1982, c. 149, approved June 14, 1982, added the second paragraph.
156B SEC. 97. STATUS OF SHARES PAID FOR
The shares of the corporation paid for by the corporation pursuant to the
provisions of this chapter shall have the status of treasury stock, or in the
case of a consolidation or merger the shares or the securities of the resulting
or surviving corporation into which the shares of such objecting stockholder
would have been converted had he not objected to such consolidation or merger
shall have the status of treasury stock or securities.
Added by St.1964, c. 723, sec. 1. Amended by St.1965, c. 685, sec. 42.
HISTORICAL AND STATUTORY NOTES
St.1965, c. 685, sec. 42, an emergency act, approved Sept. 9, 1965, and by
sec. 57 made effective Oct. 1, 1965, substituted "chapter" for "section".
156B SEC. 98. EXCLUSIVE REMEDY, EXCEPTION
The enforcement by a stockholder of his right to receive payment for his
shares in the manner provided in this chapter shall be an exclusive remedy
except that this chapter shall not exclude the right of such stockholder to
bring or maintain an appropriate proceeding to obtain relief on the ground that
such corporate action will be or is illegal or fraudulent as to him.
Added by St.1964, c. 723, sec. 1. Amended by St.1965, c. 685. sec. 43.
HISTORICAL AND STATUTORY NOTES
St.1965, c. 685, sec. 43, an emergency act, approved Sept. 9, 1965, and by
sec. 57 made effective Oct. 1, 1965, substituted "chapter" for "section" in two
places.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's Board of Directors to grant, indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act. The
Registrant's Bylaws provide for the mandatory indemnification of its directors,
officers, employees and other agents to the maximum extent permitted by Delaware
General Corporation Law, and the Company has entered into agreements with its
officers, directors and certain key employees implementing such indemnification.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
2.1 Agreement and Plan or Reorganization by and among OnDisplay,
Inc., ObiOne Acquisition Corporation, Oberon Software
Incorporated and Joseph Chapell, as stockholder
representative, dated as of January 17, 2000 and Amendment
No. 1 to the Agreement and Plan of Reorganization dated as
of March 2, 2000 (included as Annex A and Annex AA,
respectively, to the Proxy Statement/Prospectus included as
part of this Registration Statement).
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
8.1 Tax Opinion of Wilson Sonsini Goodrich & Rosati,
Professional Corporation, together with consent.
8.2 Tax Opinion of Hale and Dorr L.L.P., together with consent.
23.1 Consent of PricewaterhouseCoopers LLP, Independent Auditors.
23.2 Consent of Ernst & Young LLP, Independent Auditors.
23.3 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (contained in exhibit 8.1).
23.4 Consent of Hale and Dorr L.L.P. (contained in exhibit 8.2)
23.5 Consent of Fleet Boston Robertson Stephens, Inc.
23.6 Consent of SoundView Technology Group
24.1 Power of Attorney (included on page II-3).
99.1 Opinion of Fleet Boston Robertson Stephens, Inc. (included
as Annex B to the proxy statement/ prospectus filed as part
of this Registration Statement and incorporated herein by
reference).
99.2 Opinion of SoundView Technology Group (included as Annex C
to the proxy statement/ prospectus filed as part of this
Registration Statement and incorporated herein by
reference).
99.3 Proxy Card for OnDisplay Special Meeting of Stockholders.
99.4 Proxy Card for Oberon Special Meeting of Shareholders.
</TABLE>
(b) FINANCIAL STATEMENT SCHEDULES
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements, management's discussion and analysis or notes thereto.
ITEM 22. UNDERTAKINGS
(1) The undersigned Registrant hereby undertakes as follows: that prior to
any public offering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
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<PAGE> 267
undersigned Registrant undertakes that such offering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
(2) The Registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) Insofar as the indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to Directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(4) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
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SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON THE 3RD DAY OF MARCH
2000.
ONDISPLAY, INC.
By: /s/ VENKAT MOHAN
------------------------------------
Venkat Mohan
President,
Chief Operating Officer and Director
POWER OF ATTORNEY
KNOW ALL THESE PERSONS BY THESE PRESENTS, that the person whose signature
appears below constitutes and appoints Venkat Mohan, as his attorney-in-fact,
each with full power of substitution for him in any and all capacities, to sign
any and all amendments to this Registration Statement, and to file the same,
with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each said attorneys-in-fact or his substitute or substitutes, may do or cause to
be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<S> <C> <C>
/s/ MARK PINE Chief Executive Officer and March 3, 2000
- ----------------------------------------------------- Chairman of the Board
Mark Pine
/s/ DAVID LARSON Vice President Finance, Chief March 3, 2000
- ----------------------------------------------------- Financial Officer
David Larson
/s/ CHRISTOPHER SPRAY Director March 3, 2000
- -----------------------------------------------------
Christopher Spray
/s/ TIMOTHY BARROWS Director March 3, 2000
- -----------------------------------------------------
Timothy Barrows
/s/ VENKAT MOHAN Director March 3, 2000
- -----------------------------------------------------
Venkat Mohan
/s/ JOHN MANDILE Director March 3, 2000
- -----------------------------------------------------
John Mandile
/s/ CARMINE VILLANI Director March 3, 2000
- -----------------------------------------------------
Carmine Villani
/s/ PROMOD HAQUE Director March 3, 2000
- -----------------------------------------------------
Promod Haque
/s/ MARGARET TAYLOR Director March 3, 2000
- -----------------------------------------------------
Margaret Taylor
</TABLE>
II-3
<PAGE> 269
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
2.1 Agreement and Plan or Reorganization by and among OnDisplay,
Inc., ObiOne Acquisition Corporation, Oberon Software
Incorporated and Joseph Chapell, as stockholder
representative, dated as of January 17, 2000 and Amendment
No. 1 to the Agreement and Plan of Reorganization dated as
of March 2, 2000 (included as Annex A and Annex AA,
respectively, to the Proxy Statement/Prospectus included as
part of this Registration Statement).
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
8.1 Tax Opinion of Wilson Sonsini Goodrich & Rosati,
Professional Corporation, together with consent.
8.2 Tax Opinion of Hale and Dorr L.L.P., together with consent.
23.1 Consent of PricewaterhouseCoopers LLP, Independent Auditors.
23.2 Consent of Ernst & Young LLP, Independent Auditors.
23.3 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (contained in exhibit 8.1).
23.4 Consent of Hale and Dorr L.L.P. (contained in exhibit 8.2)
23.5 Consent of Fleet Boston Robertson Stephens, Inc.
23.6 Consent of SoundView Technology Group
24.1 Power of Attorney (included on page II-3).
99.1 Opinion of Fleet Boston Robertson Stephens, Inc. (included
as Annex B to the proxy statement/ prospectus filed as part
of this Registration Statement and incorporated herein by
reference).
99.2 Opinion of SoundView Technology Group (included as Annex C
to the proxy statement/ prospectus filed as part of this
Registration Statement and incorporated herein by
reference).
99.3 Proxy Card for OnDisplay Special Meeting of Stockholders.
99.4 Proxy Card for Oberon Special Meeting of Shareholders.
</TABLE>
- ---------------
<PAGE> 1
Exhibit 5.1
[LETTERHEAD OF WILSON SONSINI GOODRICH & ROSATI, PROFESSIONAL CORPORATION]
March 3, 2000
OnDisplay, Inc.
12667 Alcosta Boulevard,
Suite 300
San Ramon, California 94583
RE: REGISTRATION STATEMENT ON FORM S-4
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-4 to be filed by you
with the Securities and Exchange Commission on or about March 3, 2000 (the
"Registration Statement") in connection with the registration under the
Securities Act of 1933, as amended, of shares of your Common Stock (the
"Shares"). As your counsel in connection with this transaction, we have
examined the proceedings taken and are familiar with the proceedings proposed
to be taken by you in connection with the issuance of the Shares pursuant to
the acquisition transaction set forth and described in the Registration
Statement.
It is our opinion that, when issued in the manner described in the
Registration Statement, the Shares will be legally and validly issued,
fully-paid and non-assessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and further consent to the use of our name whenever appearing in the
Registration Statement and any amendments thereto.
Very truly yours,
/s/ Wilson Sonsini Goodrich & Rosati
----------------------------------------
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
<PAGE> 1
EXHIBIT 8.1
March 3, 2000
OnDisplay, Inc.
12667 Alcosta Boulevard, Suite 300
San Ramon, CA 94583
Ladies and Gentlemen:
We have acted as counsel to OnDisplay, Inc., a Delaware corporation
("OnDisplay") in connection with the proposed merger (the "Merger") among
OnDisplay, ObiOne Acquisition Corporation, a Delaware corporation (?Merger Sub?)
and wholly-owned transitory merger subsidiary of OnDisplay, and Oberon Software
Incorporated, a Massachusetts corporation ("Oberon") pursuant to an Agreement
and Plan of Reorganization dated as of January 17, 2000, (the "Merger
Agreement"). The Merger and certain proposed transactions incident thereto are
described in the Registration Statement on Form S-4 (the "Registration
Statement") of OnDisplay which includes the Proxy Statement/Prospectus of Oberon
and OnDisplay (the "Proxy Statement/Prospectus"). This opinion is being rendered
pursuant to the requirements of Item 21(a) of Form S-4 under the Securities Act
of 1933, as amended. Unless otherwise indicated, any capitalized terms used
herein and not otherwise defined have the meaning ascribed to them in the Proxy
Statement/Prospectus.
In connection with this opinion, we have examined and are familiar with
the Merger Agreement, the Registration Statement, and such other presently
existing documents, records and matters of law as we have deemed necessary or
appropriate for purposes of our opinion. In addition, we have assumed (i) that
the Merger will be consummated in the manner contemplated by the Proxy
Statement/Prospectus and in accordance with the provisions of the Merger
Agreement, (ii) the truth and accuracy of the representations and warranties
made by OnDisplay and Oberon in the Merger Agreement, and (iii) the truth and
accuracy of the certificates of representations to be provided to us by
OnDisplay, Oberon and Merger Sub.
Based upon and subject to the foregoing, in our opinion, the discussion
contained in the Registration Statement under the caption "Material United
States federal income tax considerations of the Oberon merger," subject to the
limitations and qualifications described therein, sets forth the material United
States Federal income tax considerations generally applicable to the Merger.
Because this opinion is being delivered prior to the Effective Time of the
Merger, it must be considered prospective and dependent on future events. There
can be no assurance that changes in the law will not take place which could
affect
<PAGE> 2
OnDisplay, Inc.
March 3, 2000
Page 2
the United States Federal income tax consequences of the Merger or that contrary
positions may not be taken by the Internal Revenue Service.
This opinion is furnished to you solely for use in connection with the
Registration Statement. We hereby consent to the filing of this opinion as
Exhibit 8.1 to the Registration Statement. We also consent to the reference to
our firm name wherever appearing in the Registration Statement with respect to
the discussion of the material federal income tax consequences of the Merger,
including the Proxy Statement/Prospectus constituting a part thereof, and any
amendment thereto. In giving this consent, we do not thereby admit that we are
in the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder, nor do we thereby admit that we
are experts with respect to any part of such Registration Statement within the
meaning of the term "experts" as used in the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
thereunder.
Very truly yours,
/s/ Wilson Sonsini Goodrich & Rosati
------------------------------------
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
<PAGE> 1
EXHIBIT 8.2
[HALE AND DORR LLP LETTERHEAD]
March 3, 2000
Oberon Software Incorporated
215 First Street
Cambridge, MA 02142-1268
Re: Merger pursuant to Agreement and Plan of Reorganization
among OnDisplay, Inc., ObiOne Acquisition Corporation,
and Oberon Software Incorporated
Ladies and Gentlemen:
This opinion is being delivered to you in connection with the filing of
a registration statement (the "Registration Statement") on Form S-4, which
includes the Proxy Statement and Prospectus relating to the Agreement and Plan
of Reorganization dated as of January 17, 2000 (the "Merger Agreement"), by and
among OnDisplay, Inc., a Delaware corporation ("Parent"), ObiOne Acquisition
Corporation, a Delaware corporation and wholly owned subsidiary of Parent
("Sub"), and Oberon Software Incorporated, a Massachusetts corporation
("Target"). Pursuant to the Merger Agreement, Sub will merge with and into
Target (the "Merger"). Except as otherwise provided, capitalized terms not
defined herein have the meanings set forth in the Merger Agreement and the
exhibits thereto or in the letters delivered to Hale and Dorr LLP by Parent and
Target containing certain representations of Parent and Target relevant to this
opinion (the "Representation Letters"). All section references, unless otherwise
indicated, are to the United States Internal Revenue Code of 1986, as amended
(the "Code").
In our capacity as counsel to Target in the Merger, and for purposes of
rendering this opinion, we have examined and relied upon the Registration
Statement, the Merger Agreement and the exhibits thereto, including the Escrow
Agreement, the Representation Letters, and such other documents as we considered
relevant to our analysis. In our examination of documents, we have assumed the
authenticity of original documents, the accuracy of copies, the genuineness of
signatures, and the legal capacity of signatories.
We have assumed that all parties to the Merger Agreement and to any
other documents examined by us have acted, and will act, in accordance with the
terms of such Merger Agreement and documents and that the Merger will be
consummated at the Effective Time pursuant to the terms and conditions set forth
in the Merger Agreement without the waiver or modification of any such terms and
conditions. Furthermore, we
<PAGE> 2
Oberon Software Incorporated
March 3, 2000
Page 2
have assumed that all representations contained in the Merger Agreement, as well
as those representations contained in the Representation Letters, are, and at
the Effective Time will be, true and complete in all material respects, and that
any representation made in any of the documents referred to herein "to the best
of the knowledge and belief" (or similar qualification) of any person or party
is, and at the Effective Time will be, correct without such qualification. We
have also assumed that as to all matters for which a person or entity has
represented that such person or entity is not a party to, does not have, or is
not aware of, any plan, intention, understanding, or agreement, there is no such
plan, intention, understanding, or agreement. We have not attempted to verify
independently such representations, but in the course of our representation,
nothing has come to our attention that would cause us to question the accuracy
thereof.
The conclusions expressed herein represent our judgment as to the proper
treatment of certain aspects of the Merger under the income tax laws of the
United States based upon the Code, Treasury Regulations, case law, and rulings
and other pronouncements of the Internal Revenue Service (the "IRS") as in
effect on the date of this opinion. No assurances can be given that such laws
will not be amended or otherwise changed prior to the Effective Time, or at any
other time, or that such changes will not affect the conclusions expressed
herein. Nevertheless, we undertake no responsibility to advise you of any
developments after the Effective Time in the application or interpretation of
the income tax laws of the United States.
Our opinion represents our best judgment of how a court would decide if
presented with the issues addressed herein and is not binding upon either the
IRS or any court. Thus, no assurances can be given that a position taken in
reliance on our opinion will not be challenged by the IRS or rejected by a
court.
This opinion addresses only the specific United States federal income
tax consequences of the Merger set forth below, and does not address any other
federal, state, local, or foreign income, estate, gift, transfer, sales, use, or
other tax consequences that may result from the Merger or any other transaction
(including any transaction undertaken in connection with the Merger). We express
no opinion regarding the tax consequences of the Merger to shareholders of
Target that are subject to special tax rules, and we express no opinion
regarding the tax consequences of the Merger arising in connection with the
ownership of options or warrants for Target stock.
On the basis of, and subject to, the foregoing, and in reliance upon the
representations and assumptions described above, we are of the opinion that the
discussion under the section "Material United States Federal Income Tax
Consequences of the Merger" in the Registration Statement, subject to the
limitations and qualifications described therein, accurately describes the
material federal income tax considerations relevant to Target stockholders
receiving Parent Common Stock in the Merger.
<PAGE> 3
Oberon Software Incorporated
March 3, 2000
Page 3
In rendering this opinion, we have assumed that Wilson, Sonsini,
Goodrich & Rosati has delivered, and has not withdrawn, an opinion that is
substantially similar to this one. No opinion is expressed as to any federal
income tax consequence of the Merger except as specifically set forth herein,
and this opinion may not be relied upon except with respect to the consequences
specifically discussed herein.
This opinion is intended solely for the purpose of inclusion as an
exhibit to the Registration Statement. It may not be relied upon for any other
purpose or by any other person or entity, and may not be made available to any
other person or entity without our prior written consent. We hereby consent to
the filing of this opinion as an exhibit to the Registration Statement and
further consent to the use of our name in the Registration Statement in
connection with references to this opinion and the tax consequences of the
Merger. In giving this consent, however, we do not hereby admit that we are in
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended.
Very truly yours,
/s/ Hale and Dorr LLP
-----------------------------
HALE AND DORR LLP
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this registration statement/proxy form
on Form S-4 of our report dated February 16, 2000 which appears in such
registration statement/proxy. We also consent to the references to us under the
heading "Experts" in such registration statement/proxy.
/s/ PricewaterhouseCoopers LLP
San Jose, California
March 3, 2000
<PAGE> 1
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selective
Financials" and "Experts" and to the use of our report dated November 12, 1999,
except for Note 12, as to which the date is January 17, 2000, included in the
Proxy Statement of Oberon Software Incorporated, that is made a part of the
Registration Statement (Form S-4) and related Prospectus of OnDisplay, Inc. for
the registration of shares of its common stock.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
March 3, 2000
<PAGE> 1
EXHIBIT 23.5
CONSENT OF FLEETBOSTON ROBERTSON STEPHENS INC.
We hereby consent to the inclusion of and reference to our opinion dated
January 17, 2000 to the Board of Directors of OnDisplay, Inc. ("OnDisplay") in
the Registration Statement on Form S-4 (the "Registration Statement") of
OnDisplay, covering common stock of OnDisplay to be issued in connection with
the proposed business combination involving OnDisplay and Oberon Software
Incorporated. In giving the foregoing consent, we do not admit that we come
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended (the "Securities Act"), or the rules and
regulations promulgated thereunder, nor do we admit that we are experts with
respect to any part of the Registration Statement within the meaning of the
term "experts" as used in the Securities Act or the rules and regulations
promulgated thereunder.
FLEETBOSTON ROBERTSON STEPHENS INC.
/s/ FleetBoston Robertson Stephens Inc.
---------------------------------------
San Francisco, California
March 3, 2000
<PAGE> 1
EXHIBIT 23.6
CONSENT
OF
SOUNDVIEW TECHNOLOGY GROUP
We hereby consent to (i) the inclusion of our opinion letter, dated January
16, 2000, to the Special Committee of the Board of Directors of Oberon Software
Incorporated as Annex C to the Proxy Statement/Prospectus forming part of this
Registration Statement on Form S-4, and (ii) references made to our firm and
such opinion in such Proxy Statement/Prospectus under the captions entitled
"Summary -- Opinion of Financial Advisor," "Summary -- Interests of Financial
Advisor," "The Oberon Merger -- Background of the Oberon Merger and Related
Agreements," "The Oberon Merger -- Oberon's Reasons for the Oberon Merger,"
"Recommendation of Oberon's Board of Directors," and "The Oberon Merger --
Opinion of Oberon's Financial Advisor." In giving such consent, we do not admit
that we come within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations of the Securities and Exchange Commission promulgated thereunder,
and we do not admit that we are experts with respect to any part of the
Registration Statement within the meaning of the term "expert" as used in the
Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission promulgated thereunder.
SOUNDVIEW TECHNOLOGY GROUP
By: /s/ P.J. Mejean
-------------------------
Name: P.J. Mejean
Title: Managing Director
March 6, 2000
<PAGE> 1
Exhibit 99.3
ONDISPLAY, INC.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of ONDISPLAY, INC., a Delaware corporation,
hereby acknowledges receipt of the Notice of Special Meeting of Stockholders
and Proxy Statement/Prospectus, dated as of March 10, 2000 and March 9 2000,
respectively, for the Special Meeting of Stockholders to be held on March 30,
2000, and at any and all adjournments thereof, and hereby appoints Mark Pine
and David Larson, and each of them, proxies and attorneys-in-fact, with full
power of substitution, on behalf and in the name of the undersigned, to
represent the undersigned at the Special Meeting and to vote all shares of
common stock which the undersigned would be entitled to vote, if then and there
personally present, on the matters set forth on the reverse side and as they
deem advisable.
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR EACH OF ITEMS 1, 2 AND 3 ON THE REVERSE SIDE OF
THIS PROXY, AND AS SAID PROXIES DEEM ADVISABLE on such other matters as may
properly come before the special meeting.
SEE REVERSE (Continued and to be signed and dated on reverse side) SEE REVERSE
SIDE SIDE
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR EACH OF THE
PROPOSALS.
FOR AGAINST ABSTAIN
------ ------- -------
1. To approve the issuance of shares
of OnDisplay common stock to
stockholders of Oberon Software
Incorporated in connection with the
merger of a wholly-owned subsidiary
of OnDisplay with Oberon. [ ] [ ] [ ]
2. To approve an amendment to the 1996
Stock Plan to increase the number
of shares of common stock issuable
under the plan from 4,975,000 to
6,975,000 shares. [ ] [ ] [ ]
3. To approve the 1999 Employee Stock
Purchase Plan. [ ] [ ] [ ]
Mark here for address
change and note at left [ ]
Mark here if you plan to
attend the meeting [ ]
This Proxy should be marked, dated and
signed by the stockholder(s) exactly as his,
her or its name appears hereon, and returned
promptly in the enclosed envelope. Persons
signing in a fiduciary capacity should so
indicate. If a corporation, please sign in
full corporate name by an authorized
officer. If a partnership, please sign in
partnership name by an authorized person. If
shares are held by joint tenants or as
community property, both should sign.
_________________________ DATE:________ ________________________DATE:__________
Signature Signature
<PAGE> 1
Exhibit 99.4
OBERON SOFTWARE, INC.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of OBERON SOFTWARE, INC., a Massachusetts
corporation, hereby acknowledges receipt of the Notice of Special Meeting of
Stockholders and Proxy Statement/Prospectus, each dated as of ___________,
_____, the Special Meeting of Stockholders to be held on ___________,
___________ ___, 2000, at ______ a.m., local time, at the headquarters of Oberon
Software, Inc. at 215 First Street, Cambridge, Massachusetts 02142, and at any
and all adjournment(s) thereof, and to vote all shares of common stock which the
undersigned would be entitled to vote, if then and there personally present, on
the matters set forth on the reverse side.
The attorney-in-fact shall be present and shall act at said meeting or
any and all adjournment(s) thereof.
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR APPROVAL AND ADOPTION OF THE AGREEMENT AND PLAN OF
MERGER, DATED AS OF JANUARY 17, 2000, BY AND AMONG ONDISPLAY, INC., OBIONE
ACQUISITION CORPORATION, A WHOLLY OWNED SUBSIDIARY OF ONDISPLAY, INC., AND
OBERON SOFTWARE, INC., THE RELATED MERGER AND, AS SAID PROXIES DEEM ADVISABLE,
ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE SPECIAL MEETING.
SEE REVERSE (CONTINUED AND TO BE SIGNED AND DATED ON REVERSE SIDE) SEE REVERSE
SIDE SIDE
[X] Please mark your votes as in this example.
A SPECIAL COMMITTEE OF THE BOARD OF DIRECTORS, AS WELL AS THE FULL BOARD OF
DIRECTORS, UNANIMOUSLY RECOMMEND THAT YOU VOTE FOR THE PROPOSAL.
FOR AGAINST ABSTAIN
------ ------- -------
1. Proposal to approve and adopt the
Agreement and Plan of Merger, dated
as of January 17, 2000, by and
among OnDisplay, Inc., ObiOne
Acquisition Corporation, a wholly
owned subsidiary of OnDisplay, Inc.
Oberon Software Incorporated and
and the related Merger.
[ ] [ ] [ ]
2. To approve and adopt, in their
discretion, such other matter or
matters which may properly come
before the Special Meeting or any
and all or adjournment(s) thereof. [ ] [ ] [ ]
Mark here for address
change and note at left [ ]
Mark here if you plan to
attend the meeting [ ]
This Proxy should be marked, dated and
signed by the stockholder(s) exactly as his,
her or its name appears hereon, and returned
promptly in the enclosed envelope. Persons
signing in a fiduciary capacity should so
indicate. If a corporation, please sign in
full corporate name by an authorized
officer. If a partnership, please sign in
partnership name by an authorized person. If
shares are held by joint tenants or as
community property, both should sign.
_________________________ DATE:________ ________________________DATE:__________
Signature Signature
