<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 27, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
CENTRA SOFTWARE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7379 04-3268918
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
430 BEDFORD STREET
LEXINGTON, MASSACHUSETTS 02420
(781) 861-7000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------------------
MR. LEON NAVICKAS
CENTRA SOFTWARE, INC.
430 BEDFORD STREET
LEXINGTON, MASSACHUSETTS 02420
(781) 861-7000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
--------------------------
COPIES TO:
<TABLE>
<S> <C>
ROBERT L. BIRNBAUM, JR., ESQ. PETER B. TARR, ESQ.
MARK L. JOHNSON, ESQ. HALE AND DORR LLP
FOLEY, HOAG & ELIOT LLP 60 STATE STREET
ONE POST OFFICE SQUARE BOSTON, MASSACHUSETTS 02109
BOSTON, MASSACHUSETTS 02109 TELEPHONE: (617) 526-6000
TELEPHONE: (617) 832-1000 TELECOPY: (617) 526-5000
TELECOPY: (617) 832-7000
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, 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 of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
AGGREGATE OFFERING AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED PRICE(1) REGISTRATION FEE
<S> <C> <C>
Common Stock, $.001 par value............................... $57,500,000 $15,985
</TABLE>
(1) Estimated solely for the purpose of determining the amount of the
registration fee pursuant to Rule 457(o) under the Securities Act of 1933.
Includes the offering price attributable to shares that the underwriters
have the option to purchase from the registrant solely to cover
over-allotments, if any.
--------------------------
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>
EXPLANATORY NOTE
This registration statement contains two forms of prospectus: (a) one
prospectus to be used in connection with an offering in the United States and
Canada and (b) one prospectus to be used in connection with a concurrent
offering outside of the United States and Canada. The U.S. prospectus and the
international prospectus are identical in all respects except for the front
cover page and the "Underwriting" section. The front cover page and the
"Underwriting" section of the international prospectus are included immediately
before Part II of this registration statement.
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 27, 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL SECURITIES, AND WE ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES, IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
[LOGO]
SHARES
COMMON STOCK
Centra Software, Inc. is offering shares of its common stock. This
is our initial public offering and no public market currently exists for our
shares. We have applied to have the shares being offered approved for quotation
on the Nasdaq National Market under the symbol "CTRA." We anticipate that the
initial public offering price will be between $ and $ per share.
------------------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.
---------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- ----------
<S> <C> <C>
Public Offering Price....................................... $ $
Underwriting Discounts and Commissions...................... $ $
Proceeds to Centra.......................................... $ $
</TABLE>
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
We have granted the underwriters a 30-day option to purchase up to an
additional shares of common stock to cover over-allotments.
------------------------
ROBERTSON STEPHENS
HAMBRECHT & QUIST
DAIN RAUSCHER WESSELS
A DIVISION OF DAIN RAUSCHER INCORPORATED
THE DATE OF THIS PROSPECTUS IS .
<PAGE>
[Description of gatefold artwork
The words ""Centra Live eBusiness Collaboration'' appear at the top of the
gatefold. A ""cloud'' shape appears in the center of the gatefold, on which
the words ""Live eBusiness Interaction'' are surrounded by the words
""Marketing.'' ""Services,'' ""Training'' and ""Selling.'' The cloud is
positioned in the middle of a three-dimensionally rendered circle divided into
slices labeled ""Partners'' (with icon of personal computer user), ""CentraNow
Users'' (with icons of computer users), ""Content'' (with document icons),
""Network Channels'' (with icons of three monitors labeled ""Education.''
""e-commerce'' and ""Services''), ""Remote Teams'' (with an icon of a
laptop user), ""Employees'' (with an icon of a computer user), ""Prospects''
(with an icon of a computer user), ""Customers'' (with an icon of a computer
user) and ""Distribution Channels'' (with an icon of a computer user). The front
edge of the circle displays the phrases ""Shared Workspace,''
""Voice-over-IP,'' ""Collaboration Management'' and ""Enterprise
System Integration.'' An arrow pointing from the upper left corner of the page
to the cluster of spheres bears the phrases ""BUSINESS RELATIONSHIPS,''
""BUSINESS CONTENT'' and ""BUSINESS KNOWLEDGE.'' A dialog box on the upper left
edge of the circle states ""Centra 99/Centra 99 is an enterprise application
that improves business performance and flexibility by enabling live
collaboration to support internal and external business processes.'' A dialog
box on the lower left edge of the circle states ""CentraNow/CentraNow provides
live collaboration to business professionals and their teams through the
centra.com Web site.'' A dialog box on the right edge of the circle states
""Centra Business Collaboration Network/The Centra Business Collaboration
Network, or Centra BCN, is a global eBusiness network that enables content and
service providers and users to conduct business-to-business
interactions over the Web.'' The Centra logo appears in the bottom righthand
corner of the gatefold.]
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK. IN THIS PROSPECTUS, "CENTRA,"
"WE," "US" AND "OUR" REFER TO CENTRA SOFTWARE, INC., A DELAWARE CORPORATION, AND
ITS WHOLLY OWNED SUBSIDIARY, UNLESS THE CONTEXT REQUIRES OTHERWISE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Summary..................................................... 3
Risk Factors................................................ 6
Use of Proceeds............................................. 16
Dividend Policy............................................. 16
Capitalization.............................................. 17
Dilution.................................................... 18
Selected Consolidated Financial Data........................ 19
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 20
Business.................................................... 31
Management.................................................. 45
Transactions with Related Parties........................... 55
Principal Stockholders...................................... 58
Description of Capital Stock................................ 60
Shares Eligible for Future Sale............................. 62
Underwriting................................................ 64
Legal Matters............................................... 66
Experts..................................................... 66
Where You Can Find More Information......................... 66
Index to Consolidated Financial Statements.................. F-1
</TABLE>
------------------------
We own or have rights to trademarks or trade names that we use in
conjunction with the sale of our products and services. Centra is a registered
trademark owned by us. Adaptive Connectivity, CentraNow and Centra Symposium are
trademarks owned by us. This prospectus also contains trademarks and trade names
of other companies.
2
<PAGE>
SUMMARY
YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION IN THIS PROSPECTUS, INCLUDING RISK FACTORS, REGARDING OUR COMPANY
AND THE COMMON STOCK SOLD IN THIS OFFERING.
OUR COMPANY
OUR BUSINESS
We are a leading provider of software and services that support live
business collaboration over the Internet, enabling the development of stronger
customer, partner and employee relationships, collaborative commerce and
corporate learning. Our solution provides Internet infrastructure for
comprehensive live collaboration and includes functionality such as voice over
the Internet, application sharing, real-time data exchange and shared
workspaces. Our solution is accessible by users of intranets, business partners
on extranets and remote constituents over the Internet. Our products provide for
the exchange of business-critical information in a variety of contexts,
including one-to-one customer and sales interactions, one-to-many knowledge
transfer events, and many-to-many learning and interactive teamwork sessions.
OUR MARKET
Companies are increasingly using the Internet as a means for conducting
business online. Forrester Research estimates that business-to-business
e-commerce will increase from $43 billion in 1998 to $1.3 trillion in 2003. To
date, companies have focused their Internet infrastructure spending primarily on
technologies designed to enhance the efficiency of processing commercial
transactions. Companies increasingly seek solutions that complement the
transactional processing of electronic commerce applications with a live,
interactive environment for the exchange of important information with their
constituents, including customers, partners and employees. In order to
collaborate with multiple constituents more effectively and efficiently,
companies need a comprehensive, flexible and broadly accessible Web-based
solution that supports collaboration across a broad range of live interactions.
OUR PRODUCTS
Our products and services are designed to enable companies to strengthen
their customer, partner and employee relationships, promote revenue growth
through frequent customer interaction, leverage their concentrated intellectual
capital, improve the productivity of their employees and reduce the costs
associated with traditional live collaboration. Our comprehensive live
electronic business, or eBusiness, collaboration solution leverages the power
and accessibility of the Internet to provide broad reach, scalability and
interoperability with existing enterprise systems and emerging Web technologies.
Our solution consists of three elements: Centra 99, a Web-based enterprise-class
software application; CentraNow, a Web collaboration service; and the Centra
Business Collaboration Network of partners and users, or Centra BCN. We intend
to continue to partner with leading online content and service providers for
Centra BCN, which we believe will increase overall awareness of the value of
live eBusiness collaboration as well as the benefits of our products and
services.
OUR CUSTOMERS
As of September 30, 1999, we had over 150 customers, including Clarke
American, Compaq, i2 Technologies, Kraft Foods, MCI WorldCom, Nationwide Mutual
Insurance, Nortel Networks, PricewaterhouseCoopers, Schering Plough, University
of Tennessee and Viacom.
OUR ADDRESS
Our executive offices are located at 430 Bedford Street, Lexington,
Massachusetts 02420, and our telephone number at that location is
(781) 861-7000. Our Web site address is WWW.CENTRA.COM. Information contained on
our Web site is not part of this prospectus.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common stock offered by Centra............... shares
Common stock to be outstanding after the
offering................................... shares
Use of proceeds.............................. To pay $6.5 million due to holders of our
series A and series B preferred stock upon
completion of the offering and to fund
working capital and other general corporate
purposes. See "Use of Proceeds."
Proposed Nasdaq National Market symbol....... CTRA
</TABLE>
The number of shares of common stock to be outstanding after the offering is
based on shares outstanding as of October 25, 1999. This number includes
13,746,735 shares of common stock to be issued upon conversion of our
outstanding preferred stock upon completion of the offering. It excludes
(a) 1,929,000 shares issuable upon exercise of options outstanding as of
October 25, 1999, which have a weighted average exercise price of $0.83 per
share, and (b) 5,200,000 additional shares reserved as of October 25, 1999 for
future issuance under our stock-based compensation plans.
------------------------
EXCEPT WHERE WE STATE OTHERWISE, THE INFORMATION WE PRESENT IN THIS
PROSPECTUS REFLECTS:
- A THREE-FOR-TWO COMMON STOCK SPLIT EFFECTED AS OF OCTOBER 27, 1999,
- THE AUTOMATIC CONVERSION OF OUR OUTSTANDING PREFERRED STOCK INTO COMMON
STOCK UPON COMPLETION OF THIS OFFERING,
- AMENDMENTS TO OUR CERTIFICATE OF INCORPORATION AND BY-LAWS EFFECTIVE UPON
COMPLETION OF THIS OFFERING, AND
- NO EXERCISE OF THE UNDERWRITERS' OPTION TO PURCHASE ADDITIONAL SHARES IN
THE OFFERING.
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following tables summarize the financial data of our business. The pro
forma share information included in the consolidated statement of operations
data have been computed as described in note 1(l) of the notes to consolidated
financial statements included elsewhere in this prospectus. The pro forma column
in the consolidated balance sheet data reflects the conversion of our
outstanding preferred stock into common stock upon completion of this offering
and an increase in the book value of the series A and series B preferred stock
to reflect amounts payable to holders upon conversion. The pro forma as adjusted
column in the consolidated balance sheet data also reflects our sale of the
shares of common stock offered by us at an assumed public offering price
of $ per share and after deducting the estimated underwriting discounts and
commissions and the estimated offering expenses that we will pay, and the
application of the estimated net proceeds as described under "Use of Proceeds,"
including our payment of $6.5 million to holders of series A and series B
preferred stock.
<TABLE>
<CAPTION>
PERIOD FROM NINE MONTHS
INCEPTION ENDED
(APRIL 4, 1995) YEAR ENDED DECEMBER 31, SEPTEMBER 30,
TO DECEMBER 31, ------------------------------ -------------------
1995 1996 1997 1998 1998 1999
--------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues:
License................................... -- -- $ 234 $ 3,356 $ 2,117 $ 4,534
Service................................... -- -- 55 870 599 1,048
Total revenues.......................... -- -- 289 4,226 2,716 5,582
Gross profit.............................. -- -- 84 3,122 1,912 4,386
Operating loss............................ $ (646) $(2,634) (6,406) (6,464) (4,721) (5,750)
Net loss.................................. (614) (2,569) (6,371) (6,253) (4,528) (5,539)
Net loss attributable to common
stockholders............................ (699) (2,942) (6,877) (6,759) (4,908) (5,919)
Basic and diluted net loss per common
share................................... $(0.45) $ (0.75) $ (1.33) $ (1.16) $ (0.86) $ (0.92)
Weighted average common shares
outstanding............................. 1,561 3,935 5,156 5,845 5,706 6,457
Pro forma basic and diluted net loss per
common share............................ $ (0.68) $ (0.45)
Pro forma weighted average common shares
outstanding............................. 11,725 14,736
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........... $ 9,652 $ 9,652 $
Working capital............................................. 9,548 9,548
Total assets................................................ 13,620 13,620
Term loan, net of current maturities........................ 455 455 455
Redeemable convertible preferred stock...................... 32,353 6,480 --
Total stockholders' equity (deficit)........................ (22,221) 3,652
</TABLE>
5
<PAGE>
RISK FACTORS
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CONSIDER CAREFULLY
THE RISKS AND UNCERTAINTIES DESCRIBED BELOW AND THE OTHER INFORMATION IN THIS
PROSPECTUS BEFORE DECIDING WHETHER TO INVEST IN SHARES OF OUR COMMON STOCK. IF
ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, OPERATING RESULTS OR
FINANCIAL CONDITION COULD BE MATERIALLY ADVERSELY AFFECTED. THIS COULD CAUSE THE
MARKET PRICE OF OUR COMMON STOCK TO DECLINE, AND COULD CAUSE YOU TO LOSE ALL OR
PART OF YOUR INVESTMENT.
RISKS RELATED TO OUR BUSINESS
OUR LIMITED OPERATING HISTORY MAKES IT DIFFICULT TO EVALUATE OUR FUTURE
PROSPECTS.
Our company was founded in April 1995 and has a limited operating history,
which makes it difficult for investors to evaluate our future prospects. We
began shipping our first product in July 1997 and began to operate our CentraNow
Web service and Centra BCN in October 1999. We will encounter risks and
difficulties frequently encountered by early-stage companies in new and rapidly
developing markets. If we do not successfully address these risks, our business
could be seriously harmed.
WE HAVE INCURRED SUBSTANTIAL LOSSES IN THE PAST AND MAY NOT BE PROFITABLE IN THE
FUTURE.
Since we began operations, we have incurred substantial net losses in every
fiscal period. We cannot predict when we will become profitable, if at all, and
if we do, we may not remain profitable for any substantial period of time. If we
fail to achieve profitability within the time frame expected by investors, the
market price of our common stock may fall. We had net losses of $6.4 million in
1997, $6.3 million in 1998 and $5.5 million in the nine months ended
September 30, 1999. As a result of ongoing operating losses, we had an
accumulated deficit of $23.3 million at September 30, 1999. We have generated
limited amounts of revenues while increasing operating expenditures in all
areas, particularly in product development and sales and marketing. Although we
have experienced revenue growth in recent periods, the growth has been off of a
small base and it is unlikely that the rate of our recent revenue growth is
sustainable.
DISAPPOINTING QUARTERLY RESULTS COULD CAUSE THE MARKET PRICE OF OUR COMMON STOCK
TO FALL.
Our quarterly revenues and operating results are difficult to predict and
may fluctuate significantly from quarter to quarter. If our quarterly revenues
or operating results fall below the expectations of securities analysts or
investors, the price of our common stock could fall substantially.
Our quarterly revenues and operating results may fluctuate for numerous
reasons, including the following:
- market acceptance of our live eBusiness collaboration products and
services;
- the timing of larger, enterprise-wide sales of our products and services;
- our ability to hire and retain qualified personnel, particularly in sales
and marketing;
- the timing of our introduction of, and market demand for,
revenue-generating offerings on our CentraNow Web service and Centra BCN;
- the development of our indirect distribution channel; and
- the introduction of product and service offerings by our competitors.
Most of our expenses, such as employee compensation and rent, are relatively
fixed. Moreover, our expense levels are based, in part, on our expectations
regarding future revenue increases. As a result,
6
<PAGE>
any shortfall in revenues in relation to our expectations could cause
significant changes in our operating results from quarter to quarter and could
result in increased quarterly losses.
OUR SALES CYCLE MAKES IT DIFFICULT TO PREDICT OUR QUARTERLY OPERATING RESULTS.
We have a long sales cycle because we generally need to educate potential
customers regarding the benefits of our live eBusiness collaboration products
and services prior to sale. Our sales cycle varies depending on the size and
type of customer contemplating a purchase and whether we have conducted business
with a potential customer in the past. Potential customers frequently need to
obtain approvals from multiple decision makers within their organization prior
to making purchase decisions. Our long sales cycle, which can range from several
weeks to several months or more, makes it difficult to predict the quarter in
which sales may occur. Delays in sales could cause significant variability in
our revenues and operating results for any particular period.
THE DEVELOPMENT OF A MARKET FOR OUR LIVE eBUSINESS COLLABORATION PRODUCTS AND
SERVICES IS UNCERTAIN.
The market for live eBusiness collaboration products and services is
immature and rapidly evolving. If the market for eBusiness collaboration
solutions does not grow at the rate we expect, this will have a material adverse
effect on our business, operating results and financial condition. As is typical
for new and rapidly evolving industries, customer demand for recently introduced
eBusiness collaboration products and services is highly uncertain.
WE EXPECT TO DEPEND ON SALES OF OUR CENTRA 99 SOLUTION FOR SUBSTANTIALLY ALL OF
OUR REVENUES FOR THE FORESEEABLE FUTURE.
Our Centra 99 software products and related services accounted for all of
our revenues in the nine months ended September 30, 1999. We anticipate that
revenues from Centra 99 products and related services will continue to
constitute substantially all of our revenues for the foreseeable future.
Consequently, any decline in the demand for Centra 99, or its failure to achieve
broad market acceptance, would seriously harm our business.
OUR CENTRANOW WEB SERVICE AND CENTRA BCN ARE AT AN EXTREMELY EARLY STAGE OF
DEVELOPMENT AND MARKET ACCEPTANCE.
We began operating our CentraNow Web service and Centra BCN in
October 1999. To date, the CentraNow Web collaboration service offers only free
services. Broad and timely acceptance of our CentraNow Web service and Centra
BCN is critical to our future success and is subject to a number of significant
risks, many of which are outside our control. These risks include:
- our system's ability to support large numbers of users, content and
service providers and purchasers is unproven;
- we must significantly expand our internal resources and increase our
operating expenses to support the anticipated growth of the Web service
and the network;
- the idea for an online marketplace for content and services is new and
unproven, and it is not clear whether we can attract participants and
advertisers to the service; and
- we must identify and partner with a large number of industry-leading
content and service providers that want to market and sell their offerings
over the network.
Although we expect to derive a significant portion of our future revenues
from our CentraNow Web service and Centra BCN, we have not yet introduced priced
offerings for the Web service and we do not have a proven pricing, expense and
revenue model for the services we provide in connection with Centra BCN. If we
are unable to introduce priced offerings on CentraNow successfully or if our
7
<PAGE>
pricing, expense and revenue model for the network is not acceptable to our
customers, either or both of CentraNow and Centra BCN may not be commercially
viable. This would seriously harm our business, particularly if the failure of
CentraNow or Centra BCN to achieve market acceptance negatively affects our
sales of our other products and services.
WE FACE SIGNIFICANT COMPETITION FROM OTHER TECHNOLOGY COMPANIES AND WE MAY NOT
BE ABLE TO COMPETE EFFECTIVELY.
The market for live eBusiness collaboration solutions is immature, intensely
competitive, developing rapidly and subject to rapid technological change. We
expect that the intensity of our competition will increase in the future.
Increased competition is likely to result in price reductions, reduced gross
margins and loss of market share, any one of which could seriously harm our
business. Competitors vary in size and in the scope and breadth of the products
and services offered. We encounter competition with respect to different aspects
of our collaboration solution from a variety of software and services vendors
including Interwise, LearnLinc, the Lotus division of IBM, Placeware and WebEx.
Major enterprise software vendors may choose to extend their applications with
collaborative features that could make it more difficult for us to sell our
products to these vendors' customers. In addition, current and potential
competitors have established, and may in the future establish, cooperative
relationships with third parties to increase the availability of their products
to the marketplace. Accordingly, new competitors or alliances may emerge and
rapidly acquire significant market share. Potential competitors may have
significantly greater financial, marketing, technical and other competitive
resources than we have. The entry of new competitors or alliances into our
market could reduce our sales, require us to lower our prices, or both. Many of
these factors are outside our control, and there can be no assurance that we can
maintain or enhance our competitive position against current and future
competitors.
OUR SUCCESS DEPENDS ON OUR ABILITY TO EXPAND OUR SALES FORCE AND DISTRIBUTION
CHANNELS.
To increase our revenues, we must increase the size of our sales force and
the number of our indirect channel partners, including original equipment
manufacturers, value-added resellers and systems integrators. There is intense
competition for sales personnel in our business, and we cannot assure you that
we will be successful in attracting, integrating, motivating and retaining new
sales personnel. Our existing or future channel partners may choose to devote
greater resources to marketing and supporting the products of other companies.
In addition, we may face conflicts among our sales force and channel partners.
Our inability to increase our direct sales force and our number of indirect
channel partners may limit our future revenue growth and hurt our future
operating results.
OUR PERFORMANCE DEPENDS ON OUR ABILITY TO OBTAIN FOLLOW-ON SALES.
Customers typically place limited initial orders for Centra 99 installations
that allow the customers to evaluate the software's performance. Our strategy is
to pursue more significant follow-on sales after these initial installations.
Our future financial performance will depend on successful initial deployments
of our products that, in turn, lead to follow-on sales. We cannot be sure that
initial deployments of our products by our customers will meet their needs and
expectations, or that we will be able to generate follow-on sales.
WE MUST HIRE AND RETAIN SKILLED PERSONNEL IN A COMPETITIVE LABOR MARKET.
Qualified personnel are in great demand throughout the software and Internet
industries. Our success depends in large part upon our ability to attract,
train, motivate and retain highly skilled employees, particularly sales and
marketing personnel, professional services personnel, software engineers and
other senior personnel. Our failure to attract and retain the highly trained
technical personnel that are integral to our direct sales, professional services
and product development teams
8
<PAGE>
may limit the rate at which we can generate sales and develop new products or
product enhancements. This could have a material adverse effect on our business,
operating results and financial condition.
IF WE LOSE THE SERVICES OF OUR CHIEF EXECUTIVE OFFICER, CHIEF OPERATING OFFICER
OR ANY OTHER MEMBER OF OUR MANAGEMENT TEAM, OUR BUSINESS COULD SUFFER.
Our future success depends to a significant degree on the skill, experience
and efforts of Leon Navickas, our chief executive officer, Anthony Mark, our
president and chief operating officer, and the other members of our management
team. The loss of any member of our management team could have a material
adverse effect on our business. We do not have employment agreements with any of
our executive officers. We do not maintain keyman life insurance on our
officers, except for a $2.0 million policy with respect to Mr. Navickas.
OUR BUSINESS WILL BE ADVERSELY AFFECTED IF THE INTERNET DOES NOT BECOME A VIABLE
AND SUBSTANTIAL COMMERCIAL MEDIUM.
Our future success depends heavily on the acceptance and wide use of the
Internet for e-commerce. If e-commerce does not continue to grow or grows more
slowly than expected, demand for our products and services may fail to develop.
Consumers and businesses may reject the Internet as a viable commercial medium
for a number of reasons, including potentially inadequate network
infrastructure, slow development of enabling technologies, insufficient
commercial support or privacy concerns. In addition, delays in the development
or adoption of new standards and protocols required to handle increased levels
of e-commerce, or increased government regulation or taxation, could cause the
Internet to lose its viability as a commercial medium.
FUTURE REGULATIONS COULD BE ENACTED THAT EITHER DIRECTLY RESTRICT OUR BUSINESS
OR INDIRECTLY IMPACT OUR BUSINESS BY LIMITING THE GROWTH OF ELECTRONIC COMMERCE.
As commercial use of the Internet increases, federal, state and foreign
agencies could adopt regulations covering issues such as user privacy, content
and taxation of products and services. If enacted, government regulations could
limit the market for our products and services. Although many regulations might
not apply to our business directly, we expect that laws regulating personal and
consumer information could indirectly affect our business. The
Telecommunications Act of 1996 prohibits certain types of information and
content from being transmitted over the Internet. The prohibition's scope and
the liability associated with a violation are currently unsettled. In addition,
although substantial portions of the Communications Decency Act were held to be
unconstitutional, we cannot be certain that similar legislation will not be
enacted and upheld in the future. It is possible that legislation could expose
companies involved in e-commerce to liability, which could limit the growth of
e-commerce generally. Legislation like the Telecommunications Act and the
Communications Decency Act could dampen the growth in Web usage and decrease its
acceptance as a medium of communications and commerce.
OUR FAILURE TO MANAGE OUR RAPID GROWTH EFFECTIVELY COULD HURT OUR BUSINESS.
Our failure to manage our rapid growth effectively could have a material
adverse effect on the quality of our products, our ability to retain key
personnel, and our business, operating results and financial condition. We have
been experiencing a period of rapid growth that has been placing a significant
strain on all of our resources. From January 1, 1999 to September 30, 1999, the
number of our employees increased from 72 to 104. To manage our anticipated
future growth effectively, we must enhance our information technology
infrastructure, financial and accounting systems, controls and personnel,
integrate a significant number of new hires, and manage expanded operations in
geographically distributed locations. In addition, we may need to identify and
move to alternative
9
<PAGE>
facilities to accommodate our anticipated growth which could disrupt our
business and hurt our operating results.
OUR FUTURE SUCCESS WILL DEPEND ON OUR ABILITY TO ENHANCE OUR EXISTING PRODUCTS
AND SERVICES AND TO DEVELOP AND INTRODUCE NEW PRODUCTS AND SERVICES.
We believe our future success will depend in large part on our ability to
enhance and broaden our live eBusiness collaboration solution to meet the
evolving needs of the market. Our market is characterized by rapidly changing
technologies, frequent new product and service introductions, and evolving
industry standards. The recent growth of the Internet and intense competition in
our industry exacerbate these market characteristics. To achieve our goals, we
need to respond effectively to technological changes and new industry standards
and developments. In the past, we have experienced delays in the introduction of
new products. In addition, our product enhancements must meet the requirements
of our current and prospective customers and must achieve significant market
acceptance. We could also incur substantial costs if we need to modify our
products, services or information technology infrastructure to adapt to these
changes, standards and developments.
IF OUR PRODUCTS DO NOT SCALE TO OPERATE IN A COMPANY-WIDE ENVIRONMENT, WE MAY
LOSE SALES AND SUFFER DECREASED REVENUES.
Our strategy requires that our software be highly scalable, or able to
accomodate substantial increases in the number of users concurrently using the
product. We are just beginning to deploy large-scale Web-based solutions, and
none of our large-scale deployments has been operating at any customer site for
an extended period of time. If our solutions do not perform adequately in
large-scale implementations, we may lose customer sales, resulting in decreased
revenues.
AS WE EXPAND OUR INTERNATIONAL OPERATIONS, WE WILL FACE NEW BUSINESS RISKS THAT
WE HAVE NOT ENCOUNTERED PREVIOUSLY.
Historically, we have not derived a significant portion of our total
revenues from sales to customers outside the United States. Recently, we have
begun to develop our international operations, and we expect to continue to do
so in the future. This expansion will require additional resources and
management attention and will subject us to new regulatory, economic and
political risks. Given our limited experience in international markets, we
cannot be sure that our international expansion will be successful. In addition,
we will face new risks in doing business internationally. These risks could
reduce demand for our products and services, lower the prices at which we can
sell our products and services, or otherwise have an adverse effect on our
operating results. Among the risks we believe are most likely to affect us are:
- longer payment cycles and problems in collecting accounts receivable;
- adverse changes in trade and tax regulations;
- the absence or significant lack of legal protection for intellectual
property rights;
- the adoption of data privacy laws or regulations;
- political and economic instability; and
- currency risks.
OUR SUCCESS DEPENDS ON OUR ABILITY TO PROTECT OUR PROPRIETARY RIGHTS.
Our success depends to a significant degree upon the protection of our
software and other proprietary technology. The unauthorized reproduction or
other misappropriation of our proprietary technology could enable third parties
to benefit from our technology without paying us for it. This
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<PAGE>
could have a material adverse effect on our business, operating results and
financial condition We depend upon a combination of patent and trademark laws,
license agreements, non-disclosure and other contractual provisions to protect
proprietary and distribution rights in our products. In addition, we attempt to
protect our proprietary information and those of our vendors and partners
through confidentiality and license agreements with our employees and others.
Although we have taken steps to protect our proprietary technology, they may be
inadequate. Existing trade secret, copyright and trademark laws offer only
limited protection. Moreover, the laws of other countries in which we market our
products may afford little or no effective protection of our intellectual
property. If we resort to legal proceedings to enforce our intellectual property
rights, the proceedings could be burdensome and expensive, even if we were to
prevail.
CLAIMS BY OTHER COMPANIES THAT WE INFRINGE THEIR PROPRIETARY TECHNOLOGY COULD
FORCE US TO REDESIGN OUR PRODUCTS OR OTHERWISE HURT OUR FINANCIAL CONDITION.
If we were to discover that any of our products violated third-party
proprietary rights, there can be no assurance that we would be able to
reengineer the product or to obtain a license on commercially reasonable terms,
if at all, to continue offering the product without substantial reengineering.
We do not conduct comprehensive patent searches to determine whether the
technology used in our products infringes patents held by third parties. In
addition, product development is inherently uncertain in a rapidly developing
technology environment in which there may be numerous patent applications
pending, many of which are confidential when filed, with regard to similar
technologies. Any claim of infringement could cause us to incur substantial
costs defending against the claim, even if the claim is invalid, and could
distract our management from our business. Furthermore, a party making such a
claim could secure a judgment that requires us to pay substantial damages. A
judgment could also include an injunction or other court order that could
prevent us from selling our products or cause our customers to stop using our
products.
OUR BUSINESS COULD BE ADVERSELY AFFECTED IF OUR PRODUCTS CONTAIN ERRORS.
Software products as complex as ours may contain undetected errors or "bugs"
that result in product failures. The occurrence of errors could result in loss
of or delay in revenues, loss of market share, diversion of product development
resources, injury to our reputation or damage to our efforts to build brand
awareness, any of which could have a material adverse effect on our business,
operating results and financial condition.
WE COULD INCUR SUBSTANTIAL COSTS RESULTING FROM PRODUCT LIABILITY CLAIMS
RELATING TO OUR CUSTOMERS' USE OF OUR PRODUCTS.
Many of the business interactions supported by our products and services are
critical to our customers' businesses. Any failure in a customer's business
interaction or other collaborative activity caused or allegedly caused by our
products could result in a claim for substantial damages against us, regardless
of our responsibility for the failure. Although we maintain general liability
insurance, including coverage for errors and omissions, there can be no
assurance that our existing coverage will continue to be available on reasonable
terms or will be available in amounts sufficient to cover one or more large
claims, or that the insurer will not disclaim coverage as to any future claim.
IF WE ACQUIRE OTHER COMPANIES OR BUSINESSES, WE WILL BE SUBJECT TO RISKS THAT
COULD HURT OUR COMPANY.
In the future, we may pursue acquisitions to obtain complementary products,
services and technologies. An acquisition may not produce the revenues, earnings
or business synergies that we anticipated, and an acquired product, service or
technology might not perform as we expected. If we pursue any acquisition, our
management could spend a significant amount of time and effort in identifying
and completing the acquisition. If we complete an acquisition, we would probably
have to
11
<PAGE>
devote a significant amount of management resources to integrating the acquired
business with our existing business.
To pay for an acquisition, we might use our stock or cash. Alternatively, we
might borrow money from a bank or other lender. If we use our stock, our
stockholders would experience dilution of their ownership interests. If we use
cash or debt financing, our financial liquidity would be reduced.
WE MAY REQUIRE ADDITIONAL FUNDS.
We may need to raise additional capital in order to fund the development and
marketing of our products. Although we expect that this offering will provide us
with sufficient working capital for at least the next 12 months, our current
plans and projections may prove to be inaccurate or our expected cash flow may
prove to be insufficient to fund our operations because of product delays,
unanticipated expenses or other unforeseen difficulties.
Our ability to obtain additional financing will depend on a number of
factors, including market conditions, our operating performance and investor
interest, particularly in business collaboration software companies. These
factors may make the timing, amount, terms and conditions of any financing
unattractive. They may also result in our incurring additional indebtedness or
accepting stockholder dilution. If adequate funds are not available or are not
available on acceptable terms, we may have to forego strategic acquisitions or
investments, defer our product development activities, or delay our continued
roll out of new products and product versions. Any of these actions may
seriously harm our business and operating results.
WE MAY BE ADVERSELY AFFECTED BY UNEXPECTED YEAR 2000 ISSUES.
The Year 2000 issue is the result of computer programs being written using
two digits rather than four digits to define the applicable year. This could
result in a system failure or miscalculations if a computer program recognizes a
date of "00" as the year 1900 instead of 2000. If not corrected, many computer
systems could fail or create erroneous results in 2000. Although we believe the
current versions of our products and services are Year 2000 compliant, we may
face claims based on Year 2000 issues arising from the integration of multiple
products within an overall system. In addition, although we have received
compliance reports from a number of our vendors, there can be no assurance that
Year 2000 errors or defects will not be discovered in our internal software
systems and, if such errors or defects are discovered, there can be no assurance
that the costs of making these systems Year 2000 compliant will not be material.
Some of our customers and potential customers have implemented policies that
prohibit or discourage changing their internal computer systems until after
January 1, 2000. Our revenues may suffer if potential customers delay the
purchase of our products and services until after January 1, 2000. Purchasing
decisions may be delayed as potential customers halt development of their
internal computer systems or use their information technology budgets to address
Year 2000 issues. If our potential customers delay purchasing or implementing
our products and services in preparation for the Year 2000 problem, our business
could be harmed.
THE FORWARD-LOOKING STATEMENTS WE MAKE IN THIS PROSPECTUS MIGHT PROVE
INACCURATE. AS A RESULT, OUR ACTUAL RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR
ACHIEVEMENTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED IN THE FORWARD-LOOKING
STATEMENTS.
Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and elsewhere in this prospectus constitute
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "will," "should," "could," "expects,"
"plans," "intends," "anticipates," "believes," "estimates," "predicts,"
"potential" or "continue" or other comparable
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<PAGE>
terminology. These statements involve known and unknown risks and uncertainties
that may cause our actual results, levels of activity, performance or
achievements to differ materially from any future results, levels of activity,
performance or achievements expressed or implied by such forward-looking
statements. These factors include, among other things, those listed under "Risk
Factors" and elsewhere in this prospectus.
We cannot guarantee any future results, levels of activity, performance or
achievements. Moreover, neither we nor anyone else assumes responsibility for
the accuracy and completeness of these statements. We undertake no obligation to
update any of the forward-looking statements after the date of this prospectus.
This prospectus contains market data related to the Internet and to us.
These data have been included in studies published by the Internet market
research firms of Forrester Research and International Data Corporation.
International Data Corporation's estimate that the number of Web users in
commercial businesses will increase from 59 million in 1998 to 250 million by
2003, is based on several assumptions, including that:
- all devices using the Internet for email will also be using the Web;
- by 2003, one-third of commercial business Web users will be purchasing via
the Web; and
- e-commerce will rapidly increase as the Web becomes an accepted vehicle
for volume business-to-business purchases.
Forrester Research's estimate that business-to-business e-commerce will
increase from $43 billion in 1998 to $1.3 trillion in 2003, is based on several
assumptions, including that:
- the business trade in hard goods conducted over the Internet will rise
dramatically;
- technology vendors and service providers will continue to shift priorities
to support Internet commerce;
- buyers will continue to press their suppliers to offer frequently
purchased goods over the Internet;
- suppliers will continue to incentivize buyers not to use high-cost
channels like phone and fax; and
- three industries--aerospace, utilities, and motor vehicles--will increase
Internet sales.
International Data Corporation's estimate that corporate spending on
Internet software will increase from $1.7 billion in 1998 to $13.6 billion in
2002, is based on several assumptions, including that:
- the reengineering of business processes that span departmental functions
will continue through the millennium; and
- organizations will use Web-enabled analytical applications to control
expenses and find new business opportunities.
If any of these assumptions is incorrect, actual results may differ from the
projections based on those assumptions. The applications and Internet related
markets may not grow at rates projected by International Data Corporation or
Forrester Research. The failure of these markets to grow at projected rates may
seriously harm our business and may cause the price of our common stock to
decline.
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<PAGE>
RISKS RELATED TO THIS OFFERING AND OWNERSHIP OF OUR COMMON STOCK
THE MARKET PRICE OF OUR COMMON STOCK MAY BE VOLATILE, WHICH COULD RESULT IN
SUBSTANTIAL LOSSES FOR INVESTORS PURCHASING SHARES IN THIS OFFERING.
Prior to this offering, you could not buy or sell our common stock publicly.
An active public market for our common stock may not develop or be sustained
after this offering. We will negotiate and determine the initial public offering
price with the representatives of the underwriters based on several factors.
This price may vary from the market price of our common stock after this
offering. You may be unable to sell your shares of common stock at or above the
initial offering price. The market price of our common stock may fluctuate
significantly in response to the following factors, some of which are beyond our
control:
- variations in our quarterly operating results;
- changes in securities analysts' estimates of our financial performance;
- changes in market valuations of similar companies;
- announcements by us or our competitors of significant products, contracts,
acquisitions or strategic partnerships;
- additions or departures of key personnel; and
- general fluctuations in stock market prices and volume, which are
particularly common among highly volatile securities of software and
Internet-based companies.
WE COULD BE THE SUBJECT OF SECURITIES CLASS ACTION LITIGATION DUE TO FUTURE
STOCK PRICE VOLATILITY.
The stock market in general, and market prices for Internet-related
companies in particular, recently have experienced extreme volatility that often
has been unrelated to the operating performance of the underlying companies.
These broad market and industry fluctuations may adversely affect the market
price of our common stock, regardless of our operating performance. Recently,
when the market price of a stock has been volatile, holders of that stock have
often instituted securities class action litigation against the company that
issued the stock. If any of our stockholders brought a lawsuit against us, we
could incur substantial costs defending the lawsuit. The lawsuit could also
divert the time and attention of our management.
FUTURE SALES OF COMMON STOCK BY OUR EXISTING SHAREHOLDERS COULD CAUSE OUR STOCK
PRICE TO FALL.
The market price of our common stock could decline as a result of sales by
our existing stockholders of shares of common stock in the market after this
offering, or the perception that these sales could occur. These sales might also
make it more difficult for us to sell equity securities at a time and price that
we deem appropriate. Please see "Shares Eligible for Future Sale."
OUR DIRECTORS AND MANAGEMENT WILL EXERCISE SIGNIFICANT CONTROL OVER OUR COMPANY.
After this offering, our directors and executive officers and their
affiliates will collectively control approximately % of our outstanding common
stock. As a result, these stockholders, if they act together, will be able to
influence our management and affairs and all matters requiring stockholder
approval, including the election of directors and approval of significant
corporate transactions. This concentration of ownership may have the effect of
delaying or preventing a change in control of our company and might affect the
market price of our common stock.
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<PAGE>
CERTAIN PROVISIONS OF DELAWARE LAW AND OUR CORPORATE DOCUMENTS MAKE A TAKEOVER
OF OUR COMPANY MORE DIFFICULT.
Delaware law and our charter and by-laws contain provisions that might
enable our management to resist a takeover of our company. These provisions
might discourage, delay or prevent a change in the control of Centra or a change
in our management. These provisions could also discourage proxy contests and
make it more difficult for you and other stockholders to elect directors and
take other corporate actions. The existence of these provisions could limit the
price that investors might be willing to pay in the future for shares of our
common stock.
OUR HOLDERS OF SERIES A AND SERIES B PREFERRED STOCK WILL RECEIVE A SUBSTANTIAL
BENEFIT FROM THIS OFFERING.
Pursuant to the terms of our charter, the holders of our series A and
series B preferred stock will receive an aggregate payment of $6.5 million from
us upon the closing of this offering. In addition, all of series A and series B
preferred stock will convert into common stock.
WE MAY USE OUR PROCEEDS FROM THIS OFFERING IN WAYS WITH WHICH YOU MAY NOT AGREE.
We have not identified specific uses for most of our proceeds from this
offering, and we will have broad discretion in how we use them. You will not
have the opportunity to evaluate the economic, financial or other information on
which we base our decisions on how to use our proceeds.
INVESTORS IN THIS OFFERING WILL PAY A MUCH HIGHER PRICE THAN THE BOOK VALUE OF
OUR COMMON STOCK.
The initial public offering price of our common stock is substantially
higher than the book value per share of our common stock. As a result, investors
purchasing common stock in this offering will incur immediate and substantial
dilution. In the past, we issued options to acquire common stock at prices
significantly below the initial public offering price. To the extent these
outstanding options are ultimately exercised, there will be further dilution to
investors.
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<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds from our sale of the shares of
common stock offered by us will be $ million, based on an assumed public
offering price of $ per share and after deducting estimated underwriting
discounts and commissions and estimated offering expenses that we will pay.
We intend to pay $6.5 million of our net proceeds to entities and persons
who hold series A and series B preferred stock immediately before the completion
of this offering. Under the provisions of our certificate of incorporation, this
amount, which equals 150% of the original purchase price paid for the series A
and series B preferred stock, will be payable as a result of the completion of
this offering. The series A and series B preferred stock, along with our other
outstanding series of preferred stock, will convert into common stock
automatically upon the completion of this offering.
We intend to use the balance of our net proceeds for working capital and
other general corporate purposes, which may include acquisitions of businesses,
products and technologies that are complementary to our business. Although we
have evaluated possible acquisitions, from time to time, we currently have no
commitments or agreements to make any acquisitions and we cannot assure you that
we will make any acquisitions in the future. Pending those uses, we intend to
invest the net proceeds in U.S. government securities and other short-term,
investment-grade, interest-bearing instruments, repurchase agreements or
high-grade corporate notes.
DIVIDEND POLICY
We have never declared or paid any cash dividends on shares of our capital
stock. We currently intend to retain earnings, if any, to fund the development
and growth of our business and do not anticipate paying cash dividends in the
foreseeable future. Our payment of any future dividends will be at the
discretion of our board of directors after taking into account various factors,
including our financial condition, operating results, cash needs and growth
plans. Our credit facility contains restrictive covenants that prohibit us from
paying cash dividends or making stock repurchases or redemptions without the
prior written consent of the lender bank.
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CAPITALIZATION
The following table sets forth our capitalization as of September 30, 1999:
- on an actual basis, giving effect to a three-for-two common stock split,
and a related charter amendment, effected as of October 27, 1999;
- on a pro forma basis to reflect (a) the conversion of all of our
outstanding preferred stock into common stock upon completion of this
offering, (b) an increase in the book value of the series A and series B
preferred stock to reflect amounts payable to holders upon conversion, and
(c) amendments to our certificate of incorporation effective upon
completion of this offering; and
- on a pro forma as adjusted basis to reflect (a) our sale of shares
of common stock at an assumed public offering price of $ per share
and after deducting estimated underwriting discounts and commissions and
estimated offering expenses that we will pay and (b) the application of
our net proceeds from that sale as described in "Use of Proceeds."
This table should be read together with the consolidated financial
statements and related notes appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Term loan, net of current maturities........................ $ 455 $ 455 $ 455
-------- -------- -------
Redeemable convertible preferred stock, $0.001 par value;
9,164,490 shares authorized, issued, actual; no shares
authorized, issued, pro forma and pro forma as adjusted... 32,353 6,480 --
-------- -------- -------
Stockholders' equity (deficit):
Preferred stock (undesignated), $0.001 par value; no
shares authorized, actual; 10,000,000 shares authorized,
pro forma and pro forma as adjusted; no shares issued... -- -- --
Common stock, $0.001 par value; 25,000,000 shares
authorized, actual; 100,000,000 shares authorized, pro
forma and pro forma as adjusted; 4,572,003 shares
issued, actual; 18,318,738 shares issued, pro forma;
shares issued, pro forma as adjusted.............. 4 18
Additional paid-in capital................................ 2,709 29,345
Accumulated deficit....................................... (23,325) (24,102)
Deferred compensation..................................... (1,561) (1,561) (1,561)
Stock subscription receivable............................. (11) (11) (11)
Less--treasury stock, at cost; 641,901 shares actual, pro
forma and pro forma as adjusted......................... (37) (37) (37)
-------- -------- -------
Total stockholders' equity (deficit).................... (22,221) 3,652
-------- -------- -------
Total capitalization.................................. $ 10,587 $ 10,587 $
======== ======== =======
</TABLE>
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DILUTION
Our pro forma net tangible book value as of September 30, 1999 was
approximately $3.7 million, or $0.21 per share of common stock. Pro forma net
tangible book value per share is determined by dividing (a) the amount of our
total tangible assets less our total liabilities; including $6.5 million payable
to the holders of series A and series B preferred stock, by (b) the pro forma
number of shares of common stock outstanding, after giving effect to the
conversion of our preferred stock into common stock. After giving effect to our
sale of shares of common stock at an assumed public offering price of
$ per share and after deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by us, our adjusted pro
forma net tangible book value as of September 30, 1999 would have been
$ million, or $ per share. This amount represents an immediate increase in
pro forma net tangible book value to our existing stockholders of $ per share
and an immediate dilution to new investors of $ per share. The following
table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed public offering price per share..................... $
Pro forma net tangible book value per share as of
September 30, 1999...................................... $0.21
Increase per share attributable to new investors..........
-----
Adjusted pro forma net tangible book value per share after
this offering.............................................
-----
Dilution per share to new investors......................... $
=====
</TABLE>
If the underwriters exercise their option to purchase additional shares in
this offering, our adjusted pro forma net tangible book value at September 30,
1999 would $ million, or $ per share, representing an immediate increase
in pro forma net tangible book value to our existing stockholders of $ per
share and an immediate dilution to new investors of $ per share.
The following table summarizes as of September 30, 1999, on a pro forma
basis after giving effect to the conversion of our preferred stock, the number
of shares of common stock purchased from us, the total consideration paid to us
and the average price per share paid by our existing stockholders and by new
investors, based upon an assumed public offering price of $ per share and
before deducting estimated underwriting discounts and commissions and estimated
offering expenses payable by us.
<TABLE>
<CAPTION>
SHARES TOTAL
PURCHASED CONSIDERATION
--------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- -------- ----------- -------- -----------------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.................... 17,676,837 % $31,374,000 % $ 1.77
New investors............................
---------- ----- ----------- -----
Total.................................. 100.0% $ 100.0%
========== ===== =========== =====
</TABLE>
The preceding discussion and tables assume no exercise of any stock options
outstanding as of September 30, 1999. As of September 30, 1999, there were
options outstanding to purchase a total of 1,695,525 shares of common stock.
Those options had a weighted average exercise price of $0.26 per share. To the
extent any of these options are exercised, there will be further dilution to new
investors.
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SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below should be read in
conjunction with our consolidated financial statements and related notes and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this prospectus. The consolidated statement
of operations data for the years ended December 31, 1996, 1997 and 1998 and the
consolidated balance sheet data as of December 31, 1997 and 1998 are derived
from financial statements audited by Arthur Andersen LLP and included elsewhere
in this prospectus. The consolidated statement of operations data for the period
from our inception, April 4, 1995, to December 31, 1995 and the consolidated
balance sheet data as of December 31, 1995 and 1996 are derived from audited
financial statements not included in this prospectus. The consolidated statement
of operations data for the nine months ended September 30, 1998 and 1999 and the
consolidated balance sheet data as of September 30, 1999 are derived from
unaudited consolidated financial statements appearing elsewhere in this
prospectus. The unaudited consolidated financial statements have been prepared
on the same basis as the audited consolidated financial statements and, in the
opinion of our management, include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the information set
forth therein. Historical results are not necessarily indicative of operating
results to be expected in the future.
<TABLE>
<CAPTION>
PERIOD FROM NINE MONTHS
INCEPTION ENDED
(APRIL 4, 1995) YEAR ENDED DECEMBER 31, SEPTEMBER 30,
TO DECEMBER 31, ------------------------------ -------------------
1995 1996 1997 1998 1998 1999
--------------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues:
License.............................................. -- -- $ 234 $ 3,356 $ 2,117 $ 4,534
Service.............................................. -- -- 55 870 599 1,048
------- ------- ------- -------
Total revenues..................................... -- -- 289 4,226 2,716 5,582
------- ------- ------- -------
Cost of revenues:
License.............................................. -- -- 75 185 120 138
Service.............................................. -- -- 130 919 684 1,058
------- ------- ------- -------
Total cost of revenues............................. -- -- 205 1,104 804 1,196
------- ------- ------- -------
Gross profit........................................... -- -- 84 3,122 1,912 4,386
------- ------- ------- -------
Operating expenses:
Sales and marketing.................................. $ 94 $ 607 2,465 5,066 3,534 5,218
Product development.................................. 411 1,564 3,042 3,078 2,035 3,138
General and administrative........................... 141 463 983 1,442 1,064 1,544
Compensation charge for issuance of stock options.... -- -- -- -- -- 236
------ ------- ------- ------- ------- -------
Total operating expenses........................... 646 2,634 6,490 9,586 6,633 10,136
------ ------- ------- ------- ------- -------
Operating loss......................................... (646) (2,634) (6,406) (6,464) (4,721) (5,750)
Interest income, net................................... 32 65 35 211 193 211
------ ------- ------- ------- ------- -------
Net loss............................................... (614) (2,569) (6,371) (6,253) (4,528) (5,539)
Accretion of discount on preferred stock............... 85 373 506 506 380 380
------ ------- ------- ------- ------- -------
Net loss attributable to common stockholders........... $ (699) $(2,942) $(6,877) $(6,759) $(4,908) $(5,919)
====== ======= ======= ======= ======= =======
Basic and diluted net loss per common share............ $(0.45) $ (0.75) $ (1.33) $ (1.16) $ (0.86) $ (0.92)
====== ======= ======= ======= ======= =======
Weighted average common shares outstanding............. 1,561 3,935 5,156 5,845 5,706 6,457
====== ======= ======= ======= ======= =======
Pro forma basic and diluted net loss per common
share................................................ $ (0.68) $ (0.45)
======= =======
Pro forma weighted average common shares outstanding... 11,725 14,736
======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------- SEPTEMBER 30,
1995 1996 1997 1998 1999
-------- -------- -------- -------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........... $ 514 $ 964 $ 8,079 $ 1,979 $ 9,652
Working capital............................................. 396 681 7,241 1,541 9,548
Total assets................................................ 676 1,503 9,238 4,753 13,620
Term loan, net of current maturities........................ 48 55 158 530 455
Redeemable convertible preferred stock...................... 1,105 4,240 17,992 18,498 32,353
Total stockholders' equity (deficit)........................ 438 828 (9,977) (16,672) (22,221)
</TABLE>
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS OF OUR FINANCIAL CONDITION AND RESULTS
OF OPERATIONS SHOULD BE READ TOGETHER WITH "SELECTED CONSOLIDATED FINANCIAL
DATA" AND OUR CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES APPEARING
ELSEWHERE IN THIS PROSPECTUS. THIS DISCUSSION AND ANALYSIS CONTAINS
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS, UNCERTAINTIES AND ASSUMPTIONS.
THE ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE
FORWARD-LOOKING STATEMENTS AS A RESULT OF MANY FACTORS, INCLUDING THOSE SET
FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
We are a leading provider of comprehensive Web-based solutions for live
eBusiness collaboration. From our incorporation in April 1995 through
June 1997, we were in the development stage. In July 1997, we began commercial
shipment of the initial version of our software product. In April 1999, we
significantly expanded the functionality of this product and introduced the
enhanced version under the name Centra 99. In October 1999, we announced the
introduction of our Web collaboration service, CentraNow, and the Centra
Business Collaboration Network.
Through September 30, 1999, our revenues were derived from licenses of our
software products, from related maintenance and support contracts, and from the
delivery of implementation consulting, training and hosting services. We price
licenses of Centra 99 on a rental or purchase basis under a variety of licensing
models, including named-user licenses, concurrent-user licenses, time-limited
licenses and revenue-sharing. Customers who license Centra 99 typically purchase
renewable maintenance contracts that provide software upgrades and technical
support over a stated term, usually a twelve-month period. Maintenance is priced
as a percentage of our license fees. We also offer implementation consulting,
training and education services to our customers on a time-and-materials basis.
In August 1999, we began providing hosting services for customers on a temporary
basis under hosting agreements, with terms ranging from six to twelve months, to
outsource the administration and infrastructure necessary to operate Centra 99.
The hosting fees include a set-up fee and monthly service fees, in addition to
license fees for the software. While CentraNow currently is a free service, we
intend to offer priced services with expanded functionality on CentraNow in the
future.
We recognize our software license revenues in accordance with AICPA
Statement of Position 97-2, "Software Revenue Recognition," and related
amendments and interpretations contained in the AICPA's Statement of Position
98-4. We generally recognize revenues allocated to software licenses upon
delivery of the software products, when all of the following conditions have
been met:
- we have signed a non-cancelable license agreement with the customer;
- the license fee is fixed or determinable; and
- the license fee is collectible.
Because substantially all of our software license agreements include related
services, these agreements are multiple-element arrangements. We allocate the
fees in multiple-element arrangements based on vendor-specific objective
evidence of value for each element. Delivery of the software generally is deemed
to occur upon shipment of the software. In situations where we provide
application hosting services, delivery of the software occurs upon initiation of
the hosting service. Revenues from maintenance and support services and hosting
services are recognized ratably over the related contractual period.
We record as deferred revenues any billed amounts due from customers in
excess of revenues recognized.
We sell our products and services primarily through a direct sales force and
through relationships with distributors and other strategic partners. We have
established European sales operations based in the United Kingdom and have a
master distributor in Japan. Revenues from international sales were
20
<PAGE>
$435,000 for the nine months ended September 30, 1999, or 8% of total revenues.
We intend to continue to build our international presence and anticipate that
the percentage of revenues derived from outside the United States will increase.
Our cost of license revenues includes royalties due to third parties for
technology included in our products, as well as costs of product documentation,
media used to deliver our products and fulfillment. Our cost of service revenues
includes (a) salaries and related expenses for our consulting, education and
technical support services organizations, (b) an overhead allocation consisting
primarily of our facilities, communications and depreciation expenses, and
(c) direct costs related to our hosting services.
Our operating expenses are classified into four general categories: sales
and marketing, product development, general and administrative, and compensation
charge for issuance of stock options.
- Sales and marketing expenses consist primarily of (a) salaries and other
related costs for sales and marketing personnel and (b) costs associated
with marketing programs, including trade shows and seminars, public
relations activities and new product launches.
- Product development expenses consist primarily of employee salaries and
benefits, fees for outside consultants and related costs associated with
the development of new products, the enhancement of existing products,
quality assurance, testing and documentation.
- General and administrative expenses consist primarily of salaries and
other related costs for executive, financial, administrative and
information technology personnel, as well as accounting and legal costs.
- Compensation charge for issuance of stock options represents the
amortization, over the vesting period of the option, of the difference
between the exercise price of options granted to employees and the deemed
fair market value of the options for financial reporting purposes.
In the development of new products and enhancements of existing products,
the technological feasibility of the software is not established until
substantially all product development is complete. Historically, our software
development costs eligible for capitalization have been insignificant and all
costs related to internal product development have been expensed as incurred.
Our series A and series B preferred stock have participation rights that
allow holders to receive a liquidation premium equal to 150% of their original
investment upon the redemption, liquidation and automatic conversion of the
preferred stock into common stock. For financial reporting purposes, we
discounted the value of series A and series B preferred stock by the value of
these participating rights. We have been increasing the carrying value of the
series A and series B preferred stock for the liquidation premium and
participation discount through charges to stockholders' deficit over the
redemption period. This increase is also reflected in the accretion of discount
on preferred stock in our statement of operations. Upon the automatic conversion
of the series A and series B preferred stock into common stock at the completion
of this offering, any unamortized liquidation premium and participating discount
on the series A and series B preferred stock will be accreted. This accretion
will have a significant adverse impact on net income (loss) attributable to
common stockholders and basic and diluted net income (loss) per share in the
period in which the conversion occurs.
We have experienced substantial losses in each fiscal period since our
inception. As of September 30, 1999, we had an accumulated deficit of
$23.3 million. These losses and our accumulated deficit have resulted from our
lack of substantial revenues, as well as the significant costs incurred in the
development of our products and services and in the preliminary establishment of
our infrastructure. We expect to increase our expenditures in all areas in order
to execute our business plan, particularly in sales and marketing. The planned
increase in sales and marketing expense will result principally from the hiring
of additional sales force personnel to focus on major account sales and from
marketing programs to increase brand awareness. Accordingly, we expect to
experience additional losses for the foreseeable future.
21
<PAGE>
Although we have experienced revenue growth in recent periods, our recent
rate of revenue growth may not be sustainable. We may not be able to continue to
increase our revenues or to attain profitability and, if we do achieve
profitability, we may not be able to sustain profitability for any period. We
believe that period-to-period comparisons of our historical operating results
may not be meaningful, and you should not rely upon them as an indication of our
future financial performance.
RESULTS OF OPERATIONS
The following table sets forth operating data expressed as percentages of
total revenues for each period indicated. We had no revenues in 1996.
<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
---------------------- ----------------------
1997 1998 1998 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues:
License................................................... 81% 79% 78% 81%
Service................................................... 19 21 22 19
------ ---- ---- ----
Total revenues.......................................... 100 100 100 100
------ ---- ---- ----
Cost of revenues:
License................................................... 26 4 4 2
Service................................................... 45 22 26 19
------ ---- ---- ----
Total cost of revenues.................................. 71 26 30 21
------ ---- ---- ----
Gross margin................................................ 29 74 70 79
------ ---- ---- ----
Operating expenses:
Sales and marketing....................................... 853 120 130 94
Product development....................................... 1,053 73 75 56
General and administrative................................ 340 34 39 28
Compensation charge for issuance of stock options......... -- -- -- 4
------ ---- ---- ----
Total operating expenses................................ 2,246 227 244 182
------ ---- ---- ----
Operating loss.............................................. (2,217) (153) (174) (103)
Interest income, net........................................ 12 5 7 4
------ ---- ---- ----
Net loss.................................................... (2,205)% (148)% (167)% (99)%
====== ==== ==== ====
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1998
REVENUES. Total revenues increased by $2.9 million, or 106%, to
$5.6 million for the nine months ended September 30, 1999, from $2.7 million for
the nine months ended September 30, 1998. The increase was attributable to an
increase in our customer base resulting in substantial growth in license and
service revenues.
- License revenues increased by $2.4 million, or 114%, to $4.5 million for
the nine months ended September 30, 1999, from $2.1 million for the nine
months ended September 30, 1998. The increase was attributable to the
expansion of our sales force, additions and changes to our sales
management, expanded sales to our existing customer base, and an increase
in the average selling prices of software licenses resulting from the
introduction and release of Centra 99 in April 1999.
- Service revenues increased by $449,000, or 75%, to $1.0 million for the
nine months ended September 30, 1999, from $599,000 for the nine months
ended September 30, 1998. The increase
22
<PAGE>
related primarily to an increase in maintenance support contracts and
consulting services sold to new customers. Service revenues represented
19% of total revenues for the nine months ended September 30, 1999 and 22%
of total revenues for the nine months ended September 30, 1998.
COST OF LICENSE REVENUES. Cost of license revenues increased by $18,000, or
15%, to $138,000 for the nine months ended September 30, 1999, from $120,000 for
the nine months ended September 30, 1998. The increase was primarily the result
of increased license revenues. Cost of license revenues was 3% of license
revenues for the nine months ended September 30, 1999 and 6% of license revenues
for the nine months ended September 30, 1998. The decrease as a percentage of
license revenues was attributable to a decrease in royalty obligations to third
parties resulting from our purchase in 1999 of technology that we previously
licensed. We anticipate that costs of license revenues will increase in the
future in absolute dollars due to additional customers licensing our products
and the licensing of additional technologies from third parties.
COST OF SERVICE REVENUES. Cost of service revenues increased by $374,000,
or 55%, to $1.1 million for the nine months ended September 30, 1999, from
$684,000 for the nine months ended September 30, 1998. The increase was due
primarily to an increase in the number of technical support, consulting and
education personnel providing services to our customers. Cost of service
revenues was 101% of service revenues for the nine months ended September 30,
1999 and 114% of service revenues for the nine months ended September 30, 1998.
The decrease as a percentage of service revenues was due primarily to the growth
in service revenues resulting from a larger installed customer base. We
anticipate that the cost of service revenues will continue to increase in
absolute dollars to the extent that we continue to generate new customers and
associated license and service revenues. Cost of service revenues as a
percentage of service revenues can be expected to vary significantly from period
to period depending on the mix of services that we provide and overall
utilization rates of our service personnel.
SALES AND MARKETING EXPENSES. Sales and marketing expenses increased by
$1.7 million, or 48%, to $5.2 million for the nine months ended September 30,
1999, from $3.5 million for the nine months ended September 30, 1998. The
increase was primarily attributable to an increase in the number of direct
sales, telemarketing and sales management employees. To a lesser extent, the
increase was related to an increase in marketing programs, including trade
shows, and advertising and public relations related to product launch
activities. Sales and marketing expenses were 94% of total revenues for the nine
months ended September 30, 1999 and 130% of total revenues for the nine months
ended September 30, 1998. The decrease as a percentage of total revenues was due
primarily to the increase in total revenues. We expect that sales and marketing
expenses will continue to increase in absolute dollars to support marketing
programs for new product launches, international expansion and increased sales
efforts.
PRODUCT DEVELOPMENT EXPENSES. Product development expenses increased by
$1.1 million, or 54%, to $3.1 million for the nine months ended September 30,
1999, from $2.0 million for the nine months ended September 30, 1998. The
increase primarily resulted from salaries associated with newly hired product
development personnel, increased fees for outside consultants and, to a lesser
extent, the purchase of certain source code. Product development expenses were
56% of total revenues for the nine months ended September 30, 1999 and 75% of
total revenues for the nine months ended September 30, 1998. The decrease as a
percentage of total revenues was due primarily to the increase in total
revenues. We believe that continued investment in product development is
critical to attaining our strategic objectives, and, as a result, we expect
product development expenses will continue to increase in absolute dollars as
additional product development personnel are added.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased by $480,000, or 45%, to $1.5 million for the nine months ended
September 30, 1999, from $1.1 million for the nine months ended September 30,
1998. The increase primarily resulted from salaries associated with newly
23
<PAGE>
hired personnel and related operational costs required to manage our growth.
General and administrative expenses were 28% of total revenues for the nine
months ended September 30, 1999 and 39% of total revenues for the nine months
ended September 30, 1998. The decrease as a percentage of total revenues was due
primarily to the increase in total revenues. We expect that general and
administrative expenses will continue to increase in absolute dollars, as we
continue to add personnel to support our expanding operations, incur additional
costs related to the growth of our business, and assume the responsibilities and
the costs associated with becoming a public company.
COMPENSATION CHARGE FOR ISSUANCE OF STOCK OPTIONS. We incurred a charge of
$236,000 for the nine months ended September 30, 1999 related to the issuance of
stock options during 1999 with exercise prices less than the deemed fair market
value for financial reporting purposes on the date of grant. These options vest
over four years, which will result in additional compensation expense of up to
$2.3 million for periods ending subsequent to September 30, 1999.
INTEREST INCOME, NET. Interest income, net increased by $18,000, or 9%, to
$211,000 for the nine months ended September 30, 1999, from $193,000 for the
nine months ended September 30, 1998. The increase resulted from a higher
average cash balance for the nine months ended September 30, 1999 compared to
the nine months ended September 30, 1998 due to the receipt of proceeds from our
sale of equity securities in April 1999.
COMPARISON OF 1998, 1997 AND 1996
REVENUES. Total revenues increased by $3.9 million to $4.2 million for 1998
from $289,000 for 1997, due to the release of our initial product in July 1997
and increased acceptance of our products. We had no revenues in 1996. Bay
Networks, which was subsequently acquired by Nortel Networks, accounted for 11%
of total revenues for 1998.
- License revenues increased by $3.1 million to $3.4 million for 1998 from
$234,000 for 1997. The increase in license revenues reflected a full year
of sales in 1998, the release of a new product version in October 1997 and
the expansion of the direct sales force in 1998. License revenues
represented 79% of total revenues for 1998 and 81% of total revenues for
1997.
- Service revenues increased by $815,000 to $870,000 for 1998 from $55,000
for 1997. The increase related primarily to an increase in maintenance
support contracts and consulting services sold to new customers. Service
revenues represented 21% of total revenues for 1998 and 19% of total
revenues for 1997.
COST OF LICENSE REVENUES. Cost of license revenues increased by $110,000 to
$185,000 for 1998 from $75,000 for 1997. The increase was attributable to
increases in license revenues and third-party royalties. Cost of license
revenues was 6% of license revenues for 1998 and 32% of license revenues for
1997. The improvement in margins for license revenues was related primarily to
the increase in license revenues.
COST OF SERVICE REVENUES. Cost of service revenues increased by $789,000 to
$919,000 for 1998 from $130,000 for 1997. The increase was principally a result
of an increase in the number of service personnel, as well as a full year of
service costs in 1998. Cost of service revenues was 106% of service revenues for
1998 and 236% of service revenues for 1997. During 1997 and 1998, we realized
negative margins on service revenues as we increased the number of our service
employees in anticipation of a larger customer base.
SALES AND MARKETING EXPENSES. Sales and marketing expenses increased by
$1.9 million, or 306%, to $2.5 million for 1997 from $607,000 for 1996, and
increased by $2.6 million, or 106%, to $5.1 million for 1998 from $2.5 million
for 1997. The increases in these periods were due to increases in sales and
marketing personnel and marketing program expenditures.
24
<PAGE>
PRODUCT DEVELOPMENT EXPENSES. Product development expenses increased by
$1.4 million, or 95%, to $3.0 million for 1997 from $1.6 million for 1996, and
increased by $36,000, or 1%, to $3.1 million for 1998 from $3.0 million for
1997. The increases in these periods were primarily related to an increase in
the number of product development personnel.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased by $520,000, or 112%, to $983,000 for 1997 from $463,000 for 1996, and
increased by $459,000, or 47%, to $1.4 million for 1998 from $983,000 for 1997.
The increases in these periods were primarily due to salaries associated with an
increase in the number of general and administrative employees.
INTEREST INCOME, NET. Interest income, net decreased by $30,000, or 46%, to
$35,000 for 1997 from $65,000 for 1996, and increased by $176,000 to $211,000
for 1998 from $35,000 for 1997. The decrease from 1996 to 1997 was due primarily
to an increase in debt obligations in 1997, combined with a lower average cash
balance in 1997 compared with 1996 resulting from the timing of capital
financing activities. The increase from 1997 to 1998 resulted from an increase
in average cash balances in 1998 compared to 1997 due to the receipt of proceeds
from our sale of equity securities in December 1997.
QUARTERLY RESULTS OF OPERATIONS
The following table presents our unaudited quarterly results of operations
for 1998 and the nine months ended September 30, 1999 both in absolute dollars
and as a percentage of our total revenues for each quarter. You should read the
following table in conjunction with our consolidated financial statements and
related notes appearing elsewhere in this prospectus. We have prepared this
unaudited information on a basis consistent with the audited consolidated
financial statements contained in this prospectus and includes all adjustments,
consisting only of normal recurring adjustments, that we consider necessary for
a fair presentation of our financial position and operating results for the
quarters presented. You should not draw any conclusions about our future results
from the results of operations for any quarter.
25
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30,
1998 1998 1998 1998 1999 1999 1999
--------- --------- ---------- --------- --------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues:
License................................... $ 645 $ 674 $ 798 $ 1,239 $ 686 $ 1,503 $ 2,345
Service................................... 169 228 202 271 340 337 371
------- ------- ------- ------- ------- ------- -------
Total revenues.......................... 814 902 1,000 1,510 1,026 1,840 2,716
------- ------- ------- ------- ------- ------- -------
Cost of revenues:
License................................... 35 43 42 65 36 55 47
Service................................... 178 265 241 235 327 320 411
------- ------- ------- ------- ------- ------- -------
Total cost of revenues.................. 213 308 283 300 363 375 458
------- ------- ------- ------- ------- ------- -------
Gross profit................................ 601 594 717 1,210 663 1,465 2,258
------- ------- ------- ------- ------- ------- -------
Operating expenses:
Sales and marketing....................... 1,270 1,123 1,141 1,532 1,356 1,861 2,001
Product development....................... 629 715 691 1,043 1,122 1,041 975
General and administrative................ 343 389 332 378 417 492 635
Compensation charge for issuance of stock
options................................. -- -- -- -- 21 103 112
------- ------- ------- ------- ------- ------- -------
Total operating expenses................ 2,242 2,227 2,164 2,953 2,916 3,497 3,723
------- ------- ------- ------- ------- ------- -------
Operating loss.............................. (1,641) (1,633) (1,447) (1,743) (2,253) (2,032) (1,465)
Interest income, net........................ 93 57 43 18 5 80 126
------- ------- ------- ------- ------- ------- -------
Net loss.................................... (1,548) (1,576) (1,404) (1,725) (2,248) (1,952) (1,339)
Accretion of discount on preferred stock.... 127 127 126 126 127 127 126
------- ------- ------- ------- ------- ------- -------
Net loss attributable to common
stockholders.............................. $(1,675) $(1,703) $(1,530) $(1,851) $(2,375) $(2,079) $(1,465)
======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30,
1998 1998 1998 1998 1999 1999 1999
--------- --------- ---------- --------- --------- --------- ----------
(AS PERCENTAGES OF TOTAL REVENUES)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues:
License................................... 79% 75% 80% 82% 67% 82% 86%
Service................................... 21 25 20 18 33 18 14
---- ---- ---- ---- ---- ---- ---
Total revenues.......................... 100 100 100 100 100 100 100
---- ---- ---- ---- ---- ---- ---
Cost of revenues:
License................................... 4 5 4 4 3 3 2
Service................................... 22 29 24 16 32 17 15
---- ---- ---- ---- ---- ---- ---
Total cost of revenues.................. 26 34 28 20 35 20 17
---- ---- ---- ---- ---- ---- ---
Gross margin................................ 74 66 72 80 65 80 83
---- ---- ---- ---- ---- ---- ---
Operating expenses:
Sales and marketing....................... 156 125 114 101 132 101 74
Product development....................... 77 79 69 69 109 57 36
General and administrative................ 42 43 33 25 41 27 23
Compensation charge for issuance of stock
options................................. -- -- -- -- 2 5 4
---- ---- ---- ---- ---- ---- ---
Total operating expenses................ 275 247 216 195 284 190 137
---- ---- ---- ---- ---- ---- ---
Operating loss.............................. (201) (181) (144) (115) (219) (110) (54)
Interest income, net........................ 11 6 4 1 -- 4 5
---- ---- ---- ---- ---- ---- ---
Net loss.................................... (190) (175) (140) (114) (219) (106) (49)
Accretion of discount on preferred stock.... 16 14 13 8 12 7 5
---- ---- ---- ---- ---- ---- ---
Net loss attributable to common
stockholders.............................. (206)% (189)% (153)% (122)% (231)% (113)% (54)%
==== ==== ==== ==== ==== ==== ===
</TABLE>
26
<PAGE>
Our total revenues have increased each period except for a decrease for the
three months ended March 31, 1999, which resulted from a change in sales
management. These increases have primarily been due to increased acceptance of
our products, the expansion of our sales force and increased service revenues as
our installed customer base has grown. Total cost of revenues also have
generally increased in absolute dollars over the periods presented due to
increased royalty costs and an increase in the number of customer support
personnel. A significant portion of our revenues has been generated from a
limited number of customers, and it is difficult to predict the timing of future
orders and shipment to these and other customers. We anticipate that our
operating results in any given period will continue to depend to a significant
extent upon sales to a small number of customers.
Operating expenses have experienced significant variations from quarter to
quarter primarily as the result of the timing and number of additions of
personnel and related compensation costs for sales and marketing, product
development and general and administrative expenses. In addition, variations in
sales and marketing are also related to the timing, number and significance of
specific marketing activities, such as trade shows, product launches and other
promotional activities. Operating expenses will continue to increase as we grow
our infrastructure to support our expanding operations.
A variety of factors, many of which are outside of our control, may affect
our quarterly operating results. These factors include:
- the evolution of the market for live eBusiness collaboration solutions;
- market acceptance of our products and services;
- our success and timing in developing and introducing new products and
enhancements to existing products;
- the introduction of products and services by our competitors;
- changes in pricing policies by us or our competitors;
- the length of our sales cycle;
- changes in customer buying patterns; and
- market entry by new competitors.
Our quarterly operating results have varied widely in the past, and we
expect that they will continue to fluctuate in the future as a result of a
number of factors, many of which are outside our control. Our limited operating
history and the undeveloped nature of the market for live eBusiness
collaboration solutions make predicting future revenues difficult. Our expense
levels are based, in part, on expectations regarding future revenue increases,
and to a large extent, such expenses are fixed, particularly in the short term.
There can be no assurance that our expectations regarding future revenues are
accurate. Moreover, we may be unable to adjust spending in a timely manner to
compensate for any unexpected revenue shortfall. Accordingly, any significant
shortfall in revenues in relation to our expectations would likely cause
significant increases in our net losses for that period.
Due to the foregoing factors, our operating results are difficult to
forecast. We believe that period-to-period comparisons of our operating results
are not meaningful, and you should not rely on them as indicative of our future
performance. You should also evaluate our prospects in light of the risks,
expenses and difficulties commonly encountered by comparable early-stage
companies in new and rapidly emerging markets. We cannot assure you that we will
successfully address the risks and challenges that face us. In addition,
although we have experienced significant revenue growth recently, we cannot
assure you that our revenues will continue to grow or that we will become or
remain profitable in the future.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have financed our operations primarily through
private sales of equity securities, resulting in net proceeds of $31.4 million
through September 30, 1999. To a lesser extent, we
27
<PAGE>
have financed our operations with equipment financing through a line of credit
and term loan arrangements with a bank.
As of September 30, 1999, we had cash and cash equivalents totaling
$3.9 million, an increase from $2.0 million of cash and cash equivalents held as
of December 31, 1998. This increase primarily resulted from our sale of equity
securities in April 1999, which provided net proceeds of $13.4 million, reduced
by cash used to fund operations and investing activities for the first nine
months of 1999.
Our operating activities resulted in a net cash outflow of $5.2 million for
the nine months ended September 30, 1999, primarily due to operating losses, as
well as increases in account receivables and prepaid expenses, partially offset
by increases in depreciation and amortization and deferred revenue. Our
operating activities resulted in net cash outflows of $2.3 million for 1996,
$5.6 million for 1997 and $6.5 million for 1998. The operating cash outflows
primarily resulted from operating losses and increases in accounts receivable,
partially offset by increases in accounts payable, accrued expenses and deferred
revenues.
Our investing activities resulted in a net cash outflow of $6.4 million for
the nine months ended September 30, 1999, primarily due to increases in
short-term investments. Our investing activities resulted in net cash inflows of
$51,000 for 1996 and net cash outflows of $661,000 for 1997 and $181,000 for
1998. Our investing activities principally consist of purchases of property and
equipment.
Our financing activities resulted in a net cash inflow of $13.5 million for
the nine months ended September 30, 1999, primarily due to our sale of equity
securities in April 1999. Our financing activities resulted in net cash inflows
of $3.2 million for 1996, $13.3 million for 1997 and $632,000 for 1998. Our
financing activities principally consist of sales of equity securities and the
issuance and repayment of bank loans.
As of September 30, 1999, under an equipment term loan line of credit, we
had outstanding loans of $734,000 that bear interest at annual rates of 8.75%
and 9.25%. Principal payments are due in 36 equal monthly installments through
September 30, 2002, and all borrowings are secured by substantially all of our
assets. We have a $750,000 bank revolving line of credit that expires on
December 30, 1999. Borrowings under the revolving line of credit bear interest
at the bank's prime rate plus .50% and are secured by substantially all of our
assets. As of September 30, 1999, no amounts were outstanding under the
revolving line of credit. All of our lending facilities require us to comply
with financial covenants, including requirements that we maintain specified
financial ratios. We were in compliance with these financial covenants as of
September 30, 1999.
Capital expenditures totalled $315,000 for 1996, $543,000 for 1997, $472,000
for 1998 and $557,000 for the nine months ended September 30, 1999. Our capital
expenditures consisted of purchases of operating resources to manage our
operations, including computer hardware and software, office furniture and
equipment and leasehold improvements. Purchases of computer equipment represent
the largest component of our capital expenditures. We expect capital
expenditures to increase for the foreseeable future as we increase our number of
employees, increase the size of our operating facilities, and improve and expand
our information systems. Since inception, we have generally funded capital
expenditures either through the use of working capital or with equipment bank
loans.
As of December 31, 1998, we had net operating loss carryforwards of
$14.6 million and research and development credit carryforwards of $278,000. The
net operating loss and credit carryforwards will expire at various dates,
beginning in 2000, if not used. Under the provisions of the Internal Revenue
Code, substantial changes in our ownership may limit the amount of net operating
loss carryforwards that could be utilized annually in the future to offset
taxable income. A full valuation allowance has been established in our financial
statements to reflect the uncertainty of our ability to use available tax loss
carryforwards and other deferred tax assets.
We expect to experience significant growth in our operating expenses,
particularly product development and sales and marketing expenses, for the
foreseeable future in order to execute our
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business plan. As a result, we anticipate that such operating expenses, as well
as planned capital expenditures, international sales expansion and the launch of
our Web-based service will constitute a material use of our cash resources. In
addition, we may utilize cash resources to fund acquisitions of, or investments
in, complementary businesses, technologies or product lines. We believe that the
net proceeds from the sale of common stock in this offering, together with our
existing cash and cash equivalents, will be sufficient to finance our operations
through at least the next 12 months. Thereafter, we may find it necessary to
obtain additional equity or debt financing. If additional financing is needed,
there can be no assurance that such financing will be available to us on
commercially reasonable terms, if at all.
IMPACT OF THE YEAR 2000 ISSUE
Many currently installed computer systems and software products are unable
to distinguish between twentieth and twenty-first century dates because those
systems and products were developed using two digits rather than four to
determine the applicable year. 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 such "Year
2000" requirements.
STATE OF READINESS OF OUR OPERATIONS. 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:
- the software products we sell to customers;
- hardware and software systems used by us in our operations;
- communication networks such as our client/server network, the Internet and
our corporate intranet;
- the hardware and software systems of our customers and suppliers; and
- non-information technology systems and services, such as utilities,
telephone systems and building systems.
We have conducted an assessment of the potential overall impact of the Year
2000 on our operations. To date, we have identified and tested the material
systems used in our business that may be affected by the Year 2000 and we have
not identified any non-compliant systems used in our operations.
READINESS OF OUR PRODUCTS. Based on a third-party review of the use of
dates within our products, each of the current versions of our products was
found to be Year 2000 compliant when used in accordance with the related
documentation, subject to the Year 2000 compliance of the underlying host
machine and any other software used in connection with our products.
RISKS. Although we have not been party to any litigation or arbitration
proceedings to date involving our products or services related to Year 2000
compliance issues, we may in the future 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.
CONTINGENCY PLAN. To date, we have not encountered any material Year 2000
problems with the hardware and software systems we use in our operations.
However, we could experience material adverse effects on our business if we fail
to identify all Year 2000 dependencies in our systems and in
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the systems of our suppliers, customers and financial institutions. We have not
completed a comprehensive contingency plan for handling Year 2000 problems that
are not detected and corrected prior to their occurrence, but we expect to
continue developing such a plan, to the extent possible, throughout 1999.
Despite our efforts, we may not identify and remediate all significant Year 2000
problems on a timely basis, remediation efforts may involve significant time and
expense, and unremediated problems may have a material adverse effect on our
business. We do not plan to assess the specific Year 2000 compliance of external
forces such as utility and transportation systems or Year 2000 compliance
failures that might generally affect industry and commerce. Any Year 2000
failure of this type, or any other significant unforeseen Year 2000 failure,
could have a material adverse effect on our business and operating results.
COSTS. To date, we have not incurred any material costs directly associated
with our Year 2000 compliance efforts, except for compensation expense
associated with our salaried employees who have devoted some of their time to
our Year 2000 assessment and remediation efforts and the costs of a third party
hired by us to test our products and internal systems for Year 2000 problems. We
do not expect the total cost of Year 2000 problems to be material to our
business, operating results and financial condition. Costs associated with Year
2000 issues totalled less than $50,000 through September 30, 1999. We anticipate
that we will spend less than $50,000 in future costs associated with our Year
2000 readiness.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." SFAS No. 133 establishes accounting and reporting
standards requiring that every derivative instrument be recorded in the balance
sheet as either an asset or liability measured at its fair value. SFAS No. 133,
as recently amended, is effective for fiscal years beginning after June 15,
2000. Because we do not currently hold any derivative instruments and do not
currently engage in hedging activities, we expect the adoption of SFAS No. 133
will not have a material effect on our financial position or operating results.
In December 1998, the AICPA issued Statement of Position 98-9, "Modification
of SOP 97-2, Software Revenue Recognition, With Respect to Certain
Transactions." SOP 98-9 requires use of the residual method of recognition of
revenues when vendor-specific objective evidence exists for undelivered elements
but does not exist for delivered elements of a software arrangement. We will be
required to comply with the provisions of SOP 98-9 for transactions entered into
beginning January 1, 2000. We do not expect the adoption of SOP 98-9 will have a
material effect on our financial position or operating results.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We develop products in the United States and sell them worldwide. As a
result, our financial results could be affected by factors such as changes in
foreign currency exchange rates or weak economic conditions in foreign markets.
Since our sales are currently priced in U.S. dollars and translated to local
currency amounts, a strengthening of the dollar could make our products less
competitive in foreign markets. Interest income and expense are sensitive to
changes in the general level of U.S. interest rates, particularly since our
investments are in short-term instruments and our long-term debt and available
line of credit require interest payments calculated at variable rates. Based on
the nature and current levels of our investments and debt, however, we have
concluded that there is no material market risk exposure.
Our general investing policy is to limit the risk of principal loss and
ensure the safety of invested funds by limiting market and credit risk. We
currently use a registered investment manager to place our investments in highly
liquid money market accounts and short-term investments. All highly liquid
investments with original maturities of three months or less are considered to
be cash equivalents.
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BUSINESS
OVERVIEW
We are a leading provider of software and services that support live
eBusiness collaboration, enabling the development of stronger customer, partner
and employee relationships, collaborative commerce and corporate learning. Our
solution provides Internet infrastructure for comprehensive live collaboration
and includes functionality such as voice over the Internet, application sharing,
real-time data exchange and shared workspaces. Companies can use our products
for selling, marketing, services and learning. Our solution is scalable,
reliable and easy to use, and is designed to integrate with our customers'
existing systems and emerging Internet technologies. As of September 30, 1999,
we had over 150 customers, including Clarke American, Compaq, i2 Technologies,
Kraft Foods, MCI WorldCom, Nationwide Mutual Insurance, Nortel Networks,
PricewaterhouseCoopers, Schering Plough, University of Tennessee and Viacom. In
October 1999, we introduced CentraNow, a Web service for live eBusiness
collaboration, as well as the Centra Business Collaboration Network or Centra
BCN, a global eBusiness network that enables content and service providers and
users to conduct business-to-business interactions over the Web.
INDUSTRY BACKGROUND
The Internet is experiencing dramatic growth, both in the number of users
and as a means of conducting business. International Data Corporation estimates
that the number of Web users in commercial businesses will increase from
59 million in 1998 to 250 million by 2003. According to Forrester Research,
business-to-business e-commerce will increase from $43 billion in 1998 to
$1.3 trillion in 2003. As e-commerce and the number of online constituents
grows, companies are making substantial investments in the development of the
software infrastructure necessary to leverage the power and accessibility of the
Internet. International Data Corporation also estimates that corporate spending
on Internet software will increase from $1.7 billion in 1998 to $13.6 billion in
2002.
To date, companies have focused their Internet infrastructure spending
primarily on technologies designed to enhance the efficiency of processing
commercial transactions. Companies increasingly seek solutions that complement
the transactional processing of e-commerce applications with a live, interactive
environment for the exchange of important information with their constituents,
including customers, partners and employees. These companies seek to leverage
the capabilities of the Internet for business interactions in order to enhance
relationships, create revenue-generating opportunities through customer
collaboration, leverage their concentrated intellectual capital, improve
employee productivity and lower operating costs. In order to achieve these
goals, companies need collaborative technologies that enable the sharing of
business-critical information across geographically distributed enterprises.
These technologies must support the numerous ways in which people collaborate,
including one-to-one customer and sales interactions, one-to-many knowledge
transfer events and many-to-many learning and interactive teamwork sessions.
In order to develop and maintain strong business relationships, companies
historically have relied on in-person meetings and traditional business
collaboration technologies, such as the telephone and videoconferencing. To
support in-person meetings, companies incur significant costs resulting from
lost productivity and from employee travel. More importantly, the time and
expense required for in-person collaboration limit a company's ability to
deliver the frequent and spontaneous real-time interactions that are necessary
to strengthen customer and partner relationships and to improve employee
productivity. While the telephone offers broad accessibility and live
interaction, it supports only voice communication and lacks support for other
critical elements of effective business collaboration, such as shared workspaces
and live software applications. Videoconferencing provides real-time video and
voice communication, but it is expensive and generally limited to specifically
configured corporate sites.
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The Internet provides a new medium for live collaboration between a company
and its constituents. However, most existing Internet-based solutions, including
text chat, instant messaging and screen sharing, address only discrete live
collaboration needs and are not integrated with each other around a common user
interface or back-end management system. As a result, these point-solution
products do not support the broad range of live interaction required by business
professionals for effective live collaboration, and they are not suitable for
organizations seeking to simplify their information technology systems around
corporate standards.
To leverage their investments in Internet infrastructure and harness the
power and accessibility of the Internet for conducting business interactions,
companies require a solution that can integrate voice communication,
conferencing, content sharing and group interaction, which collectively enable
live online business collaboration, or live eBusiness collaboration. A live
eBusiness collaboration solution must support a broad range of group
interactions in a variety of business contexts through one consistent and
easy-to-use interface. The solution must allow customers, partners and employees
to interact from any location, regardless of whether they are on a corporate
network or dialing-in from home or on the road. Finally, an effective live
eBusiness collaboration solution must have a reliable and scalable management
environment that can grow to support and integrate with e-commerce Web sites,
enterprise application systems and emerging Web technologies.
OUR SOLUTION
We are a leading provider of solutions for live eBusiness collaboration that
enable the development of stronger business relationships, collaborative
commerce and corporate learning. Our solution consists of three elements: Centra
99, a Web-based enterprise-class software application; CentraNow, a Web
collaboration service; and Centra BCN, our online network of partners and users.
Centra 99 is a scalable enterprise application that improves business
performance and flexibility by enabling live collaboration to support internal
and external business processes. CentraNow provides a live collaboration service
for business professionals and their teams through our Web site, WWW.CENTRA.COM.
Centra BCN is a global eBusiness network that enables content and service
providers and users to conduct business-to-business interactions over the Web.
We believe our live eBusiness collaboration solution provides the following
benefits:
COMPREHENSIVE AND ACCESSIBLE. We offer a comprehensive live collaboration
solution, including voice communication over the Internet, or voice-over-IP,
application sharing, real-time data exchange and shared workspaces. Our
graphical user interface is easy to use. Our solution is scalable and
facilitates a broad range of business interactions, including one-to-one,
one-to-many, and many-to-many collaborations. With the capabilities to perform
well under low-bandwidth constraints and to reach participants through corporate
firewalls and proxy servers, our solution enables access by remote users with
28.8 Kbps modem connections and by external customers and partners.
STRENGTHENED CUSTOMER AND PARTNER RELATIONSHIPS. As a result of our
solution's highly interactive capabilities and the ease with which people can
convene online using our solution, companies can develop stronger business
relationships and loyalty through frequent personal interaction and information
sharing. These capabilities also provide companies with the ability to
strengthen existing and develop new customer relationships in order to increase
revenues and customer loyalty.
LEVERAGED INTELLECTUAL CAPITAL. Within most companies, a limited number of
people possess a disproportionate amount of the organization's collective
"knowledge" or intellectual capital. Our solution enables these companies to
utilize these important individuals more efficiently and effectively. With our
solution, experts are no longer limited to interacting in a particular
geographic area or constrained by the need to travel. Companies gain
opportunities for wider, more frequent and more
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cost-effective delivery of knowledge in support of business processes such as
sales, services, marketing, product development and training.
ENHANCED DISTRIBUTION AND MARKETABILITY OF CONTENT AND SERVICES. Our
solution offers content and service providers a versatile distribution system
for the interactive marketing and delivery of revenue-generating content and
services. For example, content providers and companies offering knowledge-based
services can use our solution to efficiently access potential customers
worldwide. Centra BCN partners can leverage the live eBusiness collaboration
capabilities of our solution for the marketing and support of their content and
service offerings.
ENHANCED PRODUCTIVITY AND SIGNIFICANT COST REDUCTIONS. Our solution enables
companies to increase the productivity of their employees while dramatically
reducing travel, facilities and telecommunications costs. By providing a
comprehensive collaboration solution, we enable companies to communicate with
their constituents without the financial and personnel costs associated with
business travel or video or audio conferencing.
OUR STRATEGY
Our goal is to be the leading provider of products and services for live
eBusiness collaboration. Key elements of our strategy to achieve this goal
include:
LEVERAGE NETWORK EFFECT OF WEB-BASED COLLABORATION. We believe that the
dynamics of live eBusiness collaboration will fuel user adoption of our
solution. As our solution is deployed by more organizations, online
collaboration users will invite increasing numbers of customers, partners and
other external users to participate through CentraNow, which will, over time,
increase awareness of the value of Centra 99's live collaboration capabilities.
We intend to leverage the network effect of Web-based collaboration to expand
our base of users and increase the value of our products and services.
INCREASE ADOPTION OF OUR SOLUTION BY OUR CUSTOMER BASE. We believe that our
existing customers will be a significant source of revenues as they implement
our solution across their organizations. We have licensed our products to over
150 customers, many of whom initially implemented our products within specific
departments or for identified business processes, such as sales, services,
marketing and training. As customers continue to use our live eBusiness
collaboration solution, we believe they will seek to implement our products and
use our services across additional departments and business processes throughout
the extended enterprise. In addition, as live eBusiness collaboration becomes
increasingly critical to our customers' business processes, we expect that they
will seek to extend the reach of our solution to their customers and partners
using CentraNow and Centra BCN.
CONTINUE TO EXPAND THE COMMUNITY OF CENTRA BCN PARTNERS. We intend to
facilitate the adoption of Centra BCN by strengthening our strategic
relationships with leading Web destinations, as well as providers of eBusiness
applications and professional consulting and training services. Our network
partners Ariba and TimeDance leverage the collaborative capabilities of
CentraNow to enhance their service offerings. We are working with our partners
to increase the content and services available to network users and to expand
our customer base. As we add new partners to Centra BCN, we believe the value of
the network will increase for all users.
EXTEND TECHNOLOGY LEADERSHIP. We believe that our technology enables us to
offer the most complete and cost-effective solution for live eBusiness
collaboration. Our voice-over-IP conferencing technology and open and scalable
systems architecture were developed to meet companies' demands for an adaptable
and interoperable live collaboration solution with broad reach. We have invested
over four years in the development of the collaborative technologies that
provide the foundation for Centra 99 and CentraNow. We intend to continue to
devote significant resources to the development of new
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and innovative products and services for live eBusiness collaboration. We plan
to extend our technological leadership with new features and capabilities based
on our proven systems architecture.
INCREASE STRATEGIC PARTNER RELATIONSHIPS. We are seeking to leverage
strategic relationships with other companies to take advantage of the market
opportunity for live eBusiness collaboration. We have developed strategic
relationships with companies such as DA Consulting Group, Deloitte Consulting
and PricewaterhouseCoopers in order to increase market awareness of our products
and services, create alternative distribution channels and validate the benefits
of live eBusiness collaboration. We intend to enter into marketing relationships
with additional companies in the Web application and professional services
markets.
EXPAND INTERNATIONAL OPERATIONS. We believe that international customers
represent a significant opportunity for our products and services. We have
established European sales operations based in the United Kingdom and have
engaged a master distributor in Japan. We intend to continue to increase our
global presence by expanding our worldwide field sales and services organization
and by entering into relationships with leading distributors.
PRODUCTS AND SERVICES
Our live eBusiness collaboration products and services enable Web-based
interaction with customers, partners and employees, in a variety of business
contexts. Unlike other ways people may collaborate, our solution enables groups
of people to assemble, communicate, interact, share content and work together in
real-time over intranets, extranets and the Internet. Our solution integrates
voice conferencing, synchronized multimedia and a user interface optimized for
interpersonal interaction delivered through a Web browser. We incorporate a
broad range of content by providing interfaces to enterprise application
systems, information repositories and common file formats like Microsoft
PowerPoint. In addition, we operate a network that supports online
business-to-business collaboration.
Our solution consists of three elements: Centra 99, a Web-based
enterprise-class software application; CentraNow, a Web collaboration service;
and Centra BCN, our online network of partners and users. Our products and
services create a mutually reinforcing dynamic, designed to accelerate usage of
our products and services by individual users and content and service providers
seeking to collaborate. This dynamic actively enables and encourages our users
to expose other potential users to the value of our solution.
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[Description of diagram
Three screens, labeled "CentraNow," "Centra Symposium" and "Centra
Conference," appear across top of diagram. Each of the three screens is
connected to a "cloud" shape, labeled "The Internet," appearing below the
screens. The cloud is connected to eight icons: (1) three icons, all labeled
"Centra BCN Partner Channels," and an additional icon labeled "CentraNow
Service" rest on a circle labeled "Centra Business Collaboration Network" and
(2) three icons, all labeled "Centra Collaboration Servers," and an additional
icon labeled "Centra Management Service" rest on a circle labeled "Centra 99."
The two circles rest on a square labeled "Toolkits & Open API's," which has the
subheadings "e-Commerce," "Knowledge Management" and "Enterprise Applications."
The square rests on two rectangles. One rectangle is labeled "Microsoft
Platform," which has the subheadings "Windows OS," "SQL Server" and "Microsoft
Exchange." The other rectangle is labeled "Internet Standards," which has the
subheadings "JAVA," "XML," "HTTP/HTML" and "LDAP Directory Services."]
Our product and service offerings are powered by a flexible software system
that supports live eBusiness collaboration with a common network infrastructure
and a scalable distributed management system. The system is built upon and
leverages Internet standards and widely used platform technologies from
Microsoft.
CENTRA 99
Centra 99 is a Web-based enterprise application designed to enable live
eBusiness collaboration over intranets, extranets or the Internet. Centra 99 can
be scaled to support and manage the business interactions of large numbers of
users. Companies can integrate Centra 99 with other core business systems such
as e-commerce, customer relationship management, enterprise resource planning,
and knowledge and learning management systems.
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Key capabilities of Centra 99 include:
USER INTERFACE. Centra 99 supports three application-specific user
interfaces that are intuitive and consistent. These include Centra Conference,
which is designed for one-to-one selling and large-scale Web presentations;
Centra Symposium, which is appropriate for highly interactive events such as
hands-on classes, workshops, coaching and teamwork; and CentraNow, which is
designed for spontaneous meetings and can be easily accessed through Centra 99.
STRUCTURE. Centra 99 uses our proprietary software, Choreography, to apply
structure and control to live eBusiness collaboration and group interaction.
This capability provides a more effective means of orchestrating interaction
between people and content than is typically possible in traditional live
business collaboration.
UNIFIED MANAGEMENT SYSTEM. Centra 99 provides a unified management system
that enables companies to centrally manage multiple collaboration servers, large
numbers of users, system content, and multiple live and recorded business
collaborations.
MAXIMUM REACH. Centra 99 has been designed to enable users to participate
in live events without requiring any change to their computer hardware or
network. Centra 99 enables access by users ranging from mobile professionals
using laptop PCs connected via low-speed 28.8 Kbps modems to corporate users
behind secure network firewalls and proxy servers.
VOICE-OVER-IP. Centra 99 supports voice communication over the Internet as
an integral part of the collaborative experience. The synchronization of voice
and content into one unified communication protocol enhances the quality of the
user experience and enables users to participate in Centra-supported events over
a single network connection. Finally, because voice-over-IP uses the Internet,
users avoid supplemental telephone and conference call charges.
EVENT RECORDING AND PLAYBACK. Centra Symposium events can be recorded in
full fidelity, including audio, application sharing and user interactions, for
later playback. This feature enables customers to capture knowledge and publish
recorded events for future playback and reuse.
MICROSOFT PLATFORM INTEGRATION. We offer a version of Centra 99 that
integrates with Microsoft Backoffice. This solution enables organizations to
leverage their investments in Microsoft Office, Microsoft SQL Server database
technology and the Microsoft Exchange messaging platform. This integration
offers users enhanced functionality for live eBusiness collaboration and has
increased the attractiveness of Centra 99 to organizations that have
standardized on Microsoft technology.
FLEXIBLE, SCALABLE, EXTENSIBLE AND OPEN SYSTEMS ARCHITECTURE. Centra 99 is
designed to permit the addition of distributed collaboration servers for
increased capacity. This architecture provides customers with a high degree of
flexibility to increase system capacity and optimize network traffic across
distributed organizations. Centra 99 also supports open, published application
programming interfaces, or APIs, and Internet standards for integration with
other enterprise systems and eBusiness systems.
CENTRANOW WEB SERVICE
Leveraging Centra 99 technology, CentraNow extends the benefits of live
eBusiness collaboration to individual business professionals. In order to
promote user traffic and familiarity with the benefits of live eBusiness
collaboration, CentraNow offers registered users a free collaboration service
for up to five participants. We intend to extend CentraNow with priced services
offerings and expanded functionality in 2000.
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Key capabilities of CentraNow include:
SELF-SERVICE MODEL. CentraNow is an easy-to-use Web service that enables
individuals to schedule a meeting, invite participants by e-mail, and lead a
productive collaborative session without technical assistance or pre-installed
software. Live technical support is available, if needed, to aid new users.
CONTENT-RICH COLLABORATIVE EXPERIENCE. Participants in CentraNow sessions
can share Microsoft PowerPoint presentations and live applications with other
participants. Participants can collaboratively mark-up and discuss content, as
well as respond electronically to questions and surveys.
VOICE-OVER-IP. Voice communication among all participants over the Internet
is a standard feature of CentraNow and enhances the live collaboration
experience.
CENTRA BUSINESS COLLABORATION NETWORK
The Centra Business Collaboration Network, or Centra BCN, is a Web-based
service for content and service providers, including Centra 99 users. The online
network enables content aggregation and distribution and live event hosting.
Centra BCN enables content and service providers to add live collaboration and
business interaction to their offerings, while increasing the value of our
solution for other businesses and business professionals by providing compelling
collaborative content and events.
Network users will be able to collaborate with other people regarding
content provided by our network partners. Each network partner will have a
channel on the network dedicated to their collaborative content and events. As
more content is aggregated on Centra BCN, we expect to attract more users. A
larger user base will create a global pool of qualified customers for both our
partners and network users. Finally, by exposing large business communities to
the value of live eBusiness collaboration through the network, we will increase
awareness and promote the attractiveness of Centra 99 and CentraNow.
PROFESSIONAL SERVICES
We offer comprehensive customer assistance programs, including support
services, education and consulting. Our services organization consisted of 16
employees as of September 30, 1999.
CONSULTING. We offer a wide range of professional consulting services to
customers to facilitate the efficient and cost-effective use of our products and
services. Our consulting group is responsible for the deployment and
implementation of our products. Services include installation, deployment and
implementation, development support and education.
EDUCATION. We provide education programs to assist presenters, content
developers, event managers, systems administrators, help-desk support
professionals, implementation specialists and other professionals in the use of
our products and services. We offer a comprehensive series of online classes
using Centra 99 to provide knowledge and skills to successfully deploy, use and
maintain our products and services. These courses focus on the technical aspects
of our products, as well as business issues and processes related to live
eBusiness collaboration.
SUPPORT. Our standard maintenance agreement gives customers access to new
software releases and related technical support. Our support team helps resolve
technical inquiries and is available over the Web and by telephone, e-mail and
fax. This group is also responsible for maintaining technical information on our
products.
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PRICING
Centra 99 is sold as a Web-based enterprise software solution on a rental or
purchase basis. Revenues are derived from server software licenses, user
licenses, software maintenance and support. A variety of licensing models are
used to support the business needs of different types of customers. These
licensing models include named-user licenses, concurrent-user licenses,
time-limited licenses and revenue-sharing. In addition, we offer our customers
hosting services to outsource the administration of their live eBusiness
collaboration operations. Hosting customers pay a set-up fee and monthly
services fees in addition to license fees for the purchased software. The
CentraNow Web service is currently a free service for registered users. In 2000,
we intend to introduce priced services. We typically provide our professional
services on a time-and-materials basis. Prices for Centra 99 start at $25,000
and increase based upon both the number of system users and the level of use.
TECHNOLOGY
Our live collaboration technology supports a wide range of business
collaboration events and is designed to deliver high performance and
scalability. The Centra 99 collaboration server software can be deployed on a
single Microsoft Windows NT server and is designed to operate without any
special hardware or network technologies. The system was designed to scale, as
customer usage requires, by adding additional collaboration servers.
We use a broad range of technologies to meet end-user requirements, such as
supporting business contexts ranging from one-on-one meetings to large seminars
and presentations, end-user reach across the enterprise and the Internet, and
easy client deployability. These technologies include Java, C++, JavaScript,
Visual Basic, HTML and XML languages, widely utilized network protocols, leading
directory services such as Lightweight Directory Access Protocol or LDAP, and
Microsoft Internet Explorer and Netscape Navigator Web browsers. The use of Java
as the primary development language has enabled our development of thin,
browser-based user interfaces that are available on demand without prior
download or installation.
Our collaboration technology supports network connections as low as 28.8
Kbps and supports user access through corporate network firewalls and Web proxy
servers. The technology was designed to provide high reliability and performance
over low-bandwidth private and public networks. Because all data streams are
combined into a single network connection, our sophisticated connection manager,
known as Adaptive Connectivity, can choose the most reliable method of
connecting a user to a live collaborative event.
A core feature of our technology is voice-over-IP, which provides reliable
and high-quality delivery of audio among all participants. Our voice-over-IP
technology has a unique set of features, including compression, visual feedback
to both speakers and listeners, silence elimination, and timely synchronization
with multimedia content and shared application data.
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CUSTOMERS
We have targeted and will continue to target Global 2000 companies and other
large organizations in a broad range of industries. The following is a partial
list of our customers:
ENTERPRISE SOFTWARE
Ariba
The Baan Company
Calico Commerce
i2 Technologies
Manugistics
Open Text
Oracle
The Vantive Corporation
Wall Data
COMPUTERS
Compaq
Data General
Exabyte
Hitachi Data Systems
Sequent
NETWORKING/COMMUNICATIONS
Ascend Communications
Juniper Networks
NEC America
Nortel Networks
Novell
TELECOMMUNICATIONS
Allegiance Telecom
Ameritech Mobile
Communications
AT&T
Bell Canada
MCI WorldCom
Mitel
PSInet
USInternetworking
ENTERTAINMENT AND INFORMATION
Excite@Home
Viacom
BROKERAGE AND BANKING
Advanta Mortgage
Advest
American Fidelity Group
INSURANCE
Applied Systems
CCC Information Services
Consumer Insurance Services of
America
Independent Insurance
Agents of America
Nationwide Mutual Insurance
The Standard Insurance
CONSUMER GOODS
Federated Department Stores
Kraft Foods
Sony
PHARMACEUTICAL AND HEALTHCARE
Dupont Pharma Medical
Imaging
Merck
Schering Plough
Shared Medical Systems
INTERNET LEARNING
Global Knowledge Network
Health Learning Systems
Kaplan Educational Centers
Ziff-Davis Education
CONSULTING AND SERVICES
Automatic Data Processing
(ADP)
Advanced Manufacturing
Research
DA Consulting Group
Deloitte Consulting
First Consulting Group
Mastech
PricewaterhouseCoopers
Science Applications
International Corporation
(SAIC)
MANUFACTURING
Armstrong World Industries
Clarke American
Marshall Industries
O.C. Tanner
Office Furniture USA
GOVERNMENT
Canadian Department of
Agriculture
United States Army
HIGHER EDUCATION
Bryant College
James Madison University
North Carolina A&T
Stanford University
University of Tennessee
Bay Networks, which was subsequently acquired by Nortel Networks, accounted
for 11% of our total revenues in 1998.
CUSTOMER CASE STUDIES
i2 TECHNOLOGIES
i2 Technologies is a leading provider of intelligent planning and scheduling
software for global supply chain management, with customers worldwide.
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In 1998, i2 undertook an initiative to increase the frequency and
effectiveness of communication between its remote offices and project teams, as
well as to provide a vehicle for improved communication with customers. i2
required a technology solution that would keep field personnel up to speed on
new projects and marketing initiatives, allow i2 to demonstrate products
remotely and give i2 the ability to provide customer training in an effective,
timely and cost-effective way using the Internet. This solution needed to be
able to reach both internal and external audiences.
In 1999, i2 deployed Centra 99. Centra 99's application-sharing capabilities
enabled i2 to host product roll-outs at headquarters and simultaneously
demonstrate the new features of a product. Centra 99 allowed i2 employees,
customers and partners to participate in a wide range of events, including
one-to-one and team sales coaching, product introductions, virtual sales calls
and online sales meetings. Centra 99 also allowed i2 to leverage industry
experts for virtual events and cost-efficient lead generation activities. i2
plans to use Centra 99 to augment its traditional classroom training for
customers and channel partners with enterprise application support and
certification, customer and partner education, and update training.
WALL DATA
Wall Data provides software products that give companies access to
business-critical information systems from any client across intranets,
extranets and the Internet. Before 1998, Wall Data used traditional methods to
provide its channel partners with the detailed information they needed to
support Wall Data's products. These methods were not, however, cost-effective
for either Wall Data or its channel partners. Wall Data incurred significant
expense in sending its channel support team around the world, while its partners
suffered lost revenues because their sales personnel were attending physical
meetings and training events.
In 1998 Wall Data selected Centra 99 to increase its channel effectiveness
by extending the benefits of live, expert-led sales force knowledge transfer to
Wall Data's channel partners around the world. Using Centra 99, Wall Data's
product and sales personnel can quickly and efficiently provide channel sales
personnel with critical and up-to-date product information. Centra 99 enables
Wall Data's experts to demonstrate product features and pass control of the
application from participant to participant, or set-up individual online
application sessions, allowing participants to get hands-on experience with new
products.
As Wall Data has introduced new products, Centra 99's application-sharing
features have become increasingly important in helping Wall Data reduce its
time-to-market. Centra 99 has enabled Wall Data to strengthen its relationships
with its channel partners by supporting the delivery of information and hands-on
training more quickly, which improves the ability of the channel partners to
sell Wall Data's software products.
CLARKE AMERICAN
Clarke American is a large specialty printer of financial institution checks
in the United States. In 1997, Clarke American began to deploy SAP enterprise
resource planning software. While it initially provided two weeks of product
training at its corporate headquarters for existing employees, Clarke American
needed a solution for training subsequently hired employees. With more than 20
remote manufacturing facilities, Clarke American could not cost-effectively send
an SAP expert on-site each time a new employee was hired or new software was
deployed.
With Centra 99, Clarke American's SAP experts are able to remain at
corporate headquarters and to use the corporate intranet and the Internet to
deliver live, hands-on SAP training to employees across the country. Centra 99
allowed Clarke American to increase the productivity of its SAP experts,
eliminate the costs of on-site training sessions, reduce the time spent by
employees in training sessions, and shorten the implementation process.
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During its roll-out of SAP, Clarke American discovered that it could also
use Centra 99 to meet the ongoing support requirements of its employees.
Consequently, Clarke American uses Centra 99 to support a series of weekly
online sessions aimed at developing employee skills.
UNIVERSITY OF TENNESSEE
The University of Tennessee offers a program that allows physicians from
across the United States to earn executive MBA degrees over the Internet. While
business expertise is increasingly important in healthcare, many physicians are
unable to interrupt their clinical practices to undertake a business education
program. The University's College of Business Administration has developed a
12-month Physician Executive MBA program that combines innovative delivery tools
with a flexible schedule.
In 1997, the University selected Centra 99 as the collaborative solution to
provide the virtual classroom that supports the entire Physician Executive MBA
program. The University chose Centra 99 because it provided an opportunity to
leverage the Internet for new sources of revenue by extending curriculum to new
audiences, regardless of location.
By leveraging the capabilities of Centra 99, the University has been able to
make the Physician Executive MBA program accessible to a broader group of
physicians. Physicians need to be physically present on campus only for four
one-week sessions during the year. The remainder of the classroom training is
provided in forty three-hour online sessions, which physicians can access from
personal computers at home, at the office or on the road. The University
graduated its first class from the program in 1999.
SALES AND MARKETING
We sell Centra 99 through a direct sales force and through relationships
with distributors and other strategic partners. As of September 30, 1999, our
direct sales force consisted of 24 sales and pre-sales consulting professionals
located in ten domestic locations and an office in the United Kingdom. Our
direct sales force focuses on selling Centra 99 to Global 2000 companies and
other large organizations. We utilize sales teams consisting of both sales and
technical professionals who work directly with potential customers, or with our
partners, to provide proposals, evaluation events and presentations designed to
meet the specific needs of each customer.
We also sell Centra 99 indirectly through a relationship with a distributor.
We have contracted with Macnica to serve as our master distributor in Japan. We
intend to increase our direct sales force, both domestically and abroad, and to
authorize additional distributors and resellers in selected international
markets.
We expect to market our CentraNow Web service and the Centra Business
Collaboration Network primarily by establishing affiliate relationships with
established Web destinations and content and service providers. After we
introduce priced CentraNow services in 2000, a sales team will market and sell
these services to registered CentraNow users through Web-based marketing and
telesales. We expect that our telesales team also will work with our direct
sales force and our partners to convert subscribers into Centra 99 customers.
We focus our marketing efforts on creating awareness of our solution among
business executives considering enterprise-level live eBusiness collaboration
solutions as well as individual users suitable for the CentraNow Web service. We
conduct a variety of marketing programs worldwide to educate our target market.
We have engaged in marketing activities such as online seminars, direct
marketing, Web marketing, trade shows, press and industry analyst relations, and
users conferences. The marketing organization works closely with our customers,
direct sales organization and partners to capture, organize and prioritize
customer feedback to help guide our product development organization.
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We have entered into a number of strategic relationships with established
systems integrators, training companies and software companies to integrate our
products and services into their offerings. These relationships validate the
benefits of our live eBusiness collaboration solution and assist us with sales
lead generation. We have entered into a relationship with PricewaterhouseCoopers
that enables them to incorporate Centra 99 into their application deployment
methodology. In concert with us, PricewaterhouseCoopers will use Centra 99 to
deliver live interactive training, support, implementation and consulting
services to their customers that are deploying enterprise applications such as
Oracle, Peoplesoft, SAP and Siebel. Other strategic partners include DA
Consulting Group and Deloitte Consulting. These relationships provide additional
marketing resources, awareness and account access to increase our reach into the
marketplace. We intend to enhance and extend these strategic relationships in
the future.
PRODUCT DEVELOPMENT
In July 1997, we began commercial shipment of the initial version of our
software product. We have subsequently enhanced the product through several
releases. The CentraNow Web service and Centra BCN began operation in
October 1999, and we will continue to enhance these services.
We continue to devote a substantial portion of our resources to developing
new products and services, and enhancing our existing products and services. Our
product development expenses were $1.6 million in 1996, $3.0 million in 1997,
$3.1 million in 1998 and $3.1 million during the nine months ended
September 30, 1999. As of September 30, 1999, our product development
organization consisted of 35 employees. We believe a technically skilled
development organization is critical to our success. We must attract and retain
highly qualified employees to further our product development efforts.
COMPETITION
The market for live eBusiness collaboration solutions is immature, intensely
competitive, rapidly evolving and subject to rapid technological change. We
expect that the intensity of our competition will increase in the future.
Increased competition is likely to result in price reductions, reduced gross
margins and loss of market share, any one of which could seriously harm our
business. Competitors vary in size and in the scope and breadth of the products
and services offered. We encounter competition with respect to different aspects
of our collaboration solution from a variety of software and services vendors
including Interwise, LearnLinc, the Lotus division of IBM, Placeware and WebEx.
Major enterprise software vendors may choose to extend their applications with
collaboration features, which might make it more difficult for us to sell our
products to these vendors' customers. In addition, bigger companies with more
resources than we have could enter our market and either reduce our sales or
require us to lower our prices, or both.
Some of our competitors have longer operating histories, significantly
greater financial, technical, marketing and other resources than we do. They
have significantly greater name recognition and a larger installed base of
customers. In addition, many of our competitors have well-established
relationships with our current and potential customers. In the past, we have
lost potential customers to competitors for various reasons, including lower
prices and other incentives not matched by us. 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 to address customer needs. Accordingly, it is possible that new
competitors or alliances among competitors may emerge and rapidly acquire
significant market share.
We believe that the principal competitive factors affecting our market
include a significant base of reference customers, the breadth and depth of the
offered solution, distribution breadth, product quality and reliability,
customer and professional services quality, core technology, product features
and price. Although we believe that our solution competes favorably with respect
to these factors, our
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market is relatively new and is developing rapidly. We may not be able to
maintain our competitive position against current and potential competitors,
especially those with significantly greater financial, marketing, service,
technical and other resources.
INTELLECTUAL PROPERTY RIGHTS
We depend on our ability to develop and maintain the proprietary aspects of
our technology. To protect our proprietary technology, we rely primarily on a
combination of contractual provisions, confidentiality procedures, trade
secrets, and patent, copyright and trademark laws.
We license rather than sell Centra 99 and require our customers to enter
into license agreements, which impose restrictions on their ability to utilize
the software. In addition, we seek to avoid disclosure of our trade secrets
through a number of means, including but not limited to requiring those persons
with access to our proprietary information to execute confidentiality agreements
with us and restricting access to our source code. We seek to protect our
software, documentation and other written materials under trade secret and
copyright laws, which afford only limited protection. We cannot be sure that any
of our proprietary rights with respect to CentraNow or Centra BCN will be viable
or of value in the future since the validity, enforceability and type of
protection of proprietary rights in Internet-related industries are uncertain
and still evolving.
We presently have three U.S. patent applications pending. It is possible
that no patent will be issued from our patent applications or that the patents
that we have applied for, if issued, or any other patents we might obtain in the
future, may be successfully challenged. It is also possible that we may not
develop proprietary products or technologies that are patentable, that any
patent issued to us may not provide us with any competitive advantages, or that
the patents of others will materially adversely affect our business, operating
results and financial condition.
We rely on technology that we license from third parties, including software
that is integrated with our proprietary software and used in Centra 99 to
perform key functions. If we are unable to continue to license any of this
software on commercially reasonable terms, we could face delays in releases of
our software until equivalent technology can be identified, licensed or
developed, and integrated into our current product. These delays could have a
material adverse effect on our business, operating results and financial
condition.
Centra is a registered trademark in the United States. We also have filed
applications to register the Centra trademark in several foreign countries. In
addition, we have filed applications to register CentraNow and Adaptive
Connectivity as trademarks in the United States.
Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy aspects of our products or to obtain or use information that
we regard as proprietary. Policing unauthorized use of our products is
difficult, and while we are unable to determine the extent to which piracy of
our software products exists, software piracy can be expected to be a persistent
problem. In addition, the laws of some foreign countries do not protect our
proprietary rights to as great an extent as do the laws of the United States.
Our means of protecting our proprietary rights may not be adequate and our
competitors may independently develop similar technology, duplicate our products
or design around patents issued to us.
There has been a substantial amount of litigation in the software and
Internet industries regarding intellectual property rights. It is possible that
in the future third parties may claim that we or our current or potential future
products infringe their intellectual property. We expect that software product
developers and providers of Internet-related solutions will increasingly be
subject to infringement claims as the number of products and competitors in our
industry grows and the functionality of products in different industries
increasingly overlaps. Furthermore, former employers of our current and future
employees may assert that our employees have improperly disclosed confidential
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or proprietary information to us. Any such claims, with or without merit, could
be time-consuming to defend, divert management's attention and resources, result
in costly litigation, cause product shipment delays or require us to enter into
royalty or licensing agreements which may not be available on terms acceptable
to us or at all. In addition, parties making these claims may be able to obtain
an injunction, which could prevent us from selling our products in the United
States or abroad. A successful infringement claim against us and our failure or
inability to license the infringed rights or develop or license technology with
comparable functionality could have a material adverse effect on our business,
operating results and financial condition.
EMPLOYEES
As of September 30, 1999, we had a total of 104 employees, including 35 in
product development, 34 in sales and marketing, 16 in customer support,
professional services and training and 19 in administration and finance. Of
these employees, 100 were located in the United States and 4 were located
outside the United States. None of our employees is represented by a collective
bargaining agreement, nor have we experienced any work stoppage. We consider our
relations with our employees to be good.
FACILITIES
Our headquarters occupy approximately 23,000 square feet in Lexington,
Massachusetts, under a lease that expires on August 31, 2001. We have a right to
extend the lease until August 31, 2003. These current facilities are expected to
meet our needs through March 31, 2000, at which time we intend to expand our
facilities by entering into one or more additional leases at our current
location or lease space at another location. In addition, we lease sales and
service offices in the metropolitan areas of Atlanta, Chicago, London,
Philadelphia, San Mateo and Washington, D.C. Each of these offices generally is
leased under an agreement with a remaining term of 12 months or less.
LEGAL PROCEEDINGS
We are not currently subject to any material legal proceedings.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The following table sets forth information with respect to our executive
officers, directors, director--nominees and key employees as of October 25,
1999:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- ---------------------------------------------------
<S> <C> <C>
EXECUTIVE OFFICERS, DIRECTORS AND
DIRECTOR--NOMINEE
Leon Navickas........................... 43 Chief Executive Officer and Chairman
Anthony J. Mark......................... 52 President and Chief Operating Officer
Stephen A. Johnson...................... 44 Chief Financial Officer, Treasurer and Secretary
Joseph M. Gruttadauria.................. 40 Vice President, Professional Services
Steven N. Lesser........................ 43 Vice President, Worldwide Sales
Richard D'Amore(1)...................... 46 Director
Jonathan Flint(1)....................... 48 Director
David Barrett(2)........................ 43 Director--Nominee
KEY EMPLOYEES
Michael Hackney......................... 40 Chief Technology Officer
Lisa LeBlanc............................ 34 Vice President, Corporate Marketing
Michael Tupanjanin...................... 39 Vice President, Business Development
Christopher Reed........................ 44 Vice President, Product Marketing
Lawrence Whittle........................ 34 Vice President, European Sales
</TABLE>
- ------------------------
(1) Member of the audit and compensation committees.
(2) To become member of compensation committee upon joining board after
completion of this offering.
LEON NAVICKAS founded Centra and has served as our Chief Executive Officer
and Chairman of the Board since our incorporation in April 1995. He also served
as our President from our incorporation until January 1999. From May 1983 until
April 1995, Mr. Navickas served as General Manager of Research and Development,
Notes Division for Lotus Development Corp.
ANTHONY J. MARK has served as our President and Chief Operating Officer
since January 1999 and as our Chief Operating Officer since October 1997. From
March 1997 until October 1997, Mr. Mark served as our Vice President, Product
Development. From May 1995 until March 1997, he performed consulting services
for a number of private companies. From May 1993 until May 1995, Mr. Mark served
as Vice President and General Manager, Broadcast Products Division for Avid
Technology, Inc., a software development company.
STEPHEN A. JOHNSON has served as our Chief Financial Officer since
November 1998. Since June 1999, Mr. Johnson has served as our Chief Financial
Officer, as well as Treasurer and Secretary. From May 1997 until November 1998,
Mr. Johnson served as our Director of Finance and Administration. From
March 1997 until May 1997, he served as a consultant to Centra. From
October 1991 until March 1997, Mr. Johnson served in a number of positions at
Avid Technology, Inc., including Controller from October 1991 until
August 1995; Finance Manager, Desktop Products Division from August 1995 until
February 1996; and Director of Finance, Worldwide Field Operations from
February 1996 until March 1997.
JOSEPH M. GRUTTADAURIA has served as our Vice President, Professional
Services since March 1997. From March 1996 until March 1997, Mr. Gruttadauria
served as the Vice President of Sales and Services and Chief Information Officer
for OneWave, Inc., a consulting company. From December 1994
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until March 1996, he served as Director, Customer Service for SAP Americas, a
software company. From June 1994 until December 1994 Mr. Gruttadauria served as
Vice President, Services and Manufacturing for the Softswitch Business Unit of
Lotus Development Corp. From December 1989 until June 1994 Mr. Gruttadauria
served as Vice President, Service and Manufacturing for Softswitch, Inc. a
software development company.
STEVEN N. LESSER has served as our Vice President, Worldwide Sales since
January 1999. From July 1997 to August 1998, Mr. Lesser served as Vice
President, North American Sales for Marcam Corporation. From March 1993 until
July 1997, he served as Vice President, North America Sales for MAPICS Business
Group of Marcam Corporation.
RICHARD D'AMORE has served as one of our directors since April 1995. Since
March 1994, Mr. D'Amore has been a General Partner of North Bridge Venture
Partners, L.P., a venture capital investing firm. Mr. D'Amore also serves as a
director of Veeco Instruments, Inc., Silverstream Software, Inc., and Solectron
Corporation.
JONATHAN FLINT has served as one of our directors since April 1995.
Mr. Flint has been a member of Polaris Venture Management Co., LLC, the general
partner of Polaris Venture Partners and Polaris Venture Founders' Fund, entities
since June 1996. Mr. Flint is also a General Partner of Alta V Management
Partners, L.P., the General Partner of Alta V Limited Partnership. Mr. Flint
also serves as a director of Allaire Corporation.
DAVID BARRETT has been nominated to serve as one of our directors upon
completion of this offering. Mr. Barrett has served as a member of our Advisory
Group since March 1998. Since February 1998, Mr. Barrett has served in a number
of roles at Calico Commerce, Inc., an enterprise software development automation
company, including Executive Vice President, Business Operation from
February 1998 to May 1999 and Executive Vice President and Chief Operating
Officer from May 1999 to date. From December 1996 until February 1998,
Mr. Barrett served as Senior Vice President, Worldwide Sales and Customer
Services at Pure Atria/Rational Software Corporation, an enterprise software
development automation company. From March 1996 to December 1996, Mr. Barrett
served as Vice President, Sales, Marketing and Services at Nets, Inc., an
eCommerce company. From July 1994 until March 1996, Mr. Barrett served as Vice
President, Field Sales and Services for Lotus Development Corporation.
MICHAEL HACKNEY has served as our Chief Technology Officer since
February 1998. From September 1996 until February 1998, he served as our
Director of Development. From February 1996 until September 1996, he served as
our Senior Architect. From February 1994 until February 1996, Mr. Hackney was a
member of Ascom Nexion's technology group. From April 1992 until February 1994,
he was also a member of the technology staff at GTE Laboratories.
LISA LEBLANC has served as our Vice President, Corporate Marketing since
October 1999. From August 1996 until October 1999, she served as our Director,
Corporate Marketing. From June 1996 until August 1996, Ms. LeBlanc served as
Director, Marketing North America and Asia Pacific for Avid Technology, Inc., a
software development company. From January 1994 until June 1996, Ms. LeBlanc
served as the North American Field Marketing Manager at Avid Technology, Inc.
MICHAEL TUPANJANIN has served as our Vice President, Business Development
since June 1999. From May 1998 until June 1999, Mr. Tupanjanin served as
Publishing Director, New Ventures for CMP Media, Inc. From January 1996 until
April 1998, he served as Publisher of CMP Media's ChannelWeb.com business unit.
From November 1994 until January 1996, Mr. Tupanjanin served as Director of
National Accounts for CMP Media, Inc.
CHRISTOPHER REED has served as our Vice President, Product Marketing since
March 1998. From April 1997 until March 1998, he served as Principal of
ParaTechnology, Inc., a consulting firm. From August 1996 until April 1997,
Mr. Reed served as an independent marketing consultant. From
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March 1995 until August 1996, he served as Vice President, Marketing for
NetSuite Development, Inc., a software company. From March 1993 until
March 1995, Mr. Reed served as Director, Solutions Marketing for Lotus
Development Corporation.
LAWRENCE WHITTLE has served as our Vice President, European Sales since
March 1999. From May 1997 until February 1999, Mr. Whittle served as Vice
President, European and Middle East Sales for Marcam Corporation, a software
development company. From May 1996 to May 1997 he served as Central European
Regional Sales Manager for Marcam Corporation. From October 1994 until May 1996
he served as European Major Accounts Manager for Marcam Corporation.
BOARD COMPOSITION
Following this offering, the board of directors will be divided into three
staggered classes and each of the directors, other than the initial Class I and
II directors, will serve a three-year term. Immediately after the completion of
this offering:
- Richard D'Amore will be the sole Class I director and will serve until our
annual stockholders' meeting in 2000;
- David Barrett and Jonathan Flint will be the Class II directors and will
serve until our annual stockholders' meeting in 2001; and
- Leon Navickas will be the sole Class III director and will serve until our
annual stockholders' meeting in 2002.
At each annual meeting of stockholders a class of directors will be elected for
a three-year term to succeed the directors of the same class whose terms are
then expiring.
Two of our current directors, Richard D'Amore and Jonathan Flint, originally
were elected as directors pursuant to provisions of an investors' rights
agreement that will terminate upon the completion of this offering.
Each executive officer serves at the discretion of the board of directors
and holds office until his successor is elected and qualified or until his
earlier resignation or removal. There are no family relationships among any of
our directors and executive officers.
BOARD COMMITTEES
The board of directors established an audit committee in October 1999. The
audit committee consists of Richard D'Amore and Jonathan Flint. The audit
committee reviews our internal accounting procedures, evaluates our audit and
control functions, and reviews the results and scope of the audit and other
services provided by our independent public accountants.
The board of directors elected a new compensation committee in
October 1999. Immediately after this offering, the compensation committee will
consist of Richard D'Amore, Jonathan Flint and David Barrett. The compensation
committee reviews and recommends to the board of directors the compensation and
benefits of our officers and directors, including administering and granting
options under our stock option plans. The compensation committee also
establishes and reviews general policies relating to the compensation and
benefits of our employees.
The board has not established a standing nominating committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the board of directors or the compensation committee serves as
a member of the board of directors or compensation committee of any entity that
has one or more executive officers serving as a member of our board of directors
or compensation committee.
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<PAGE>
DIRECTOR COMPENSATION
We do not currently compensate directors for their services as members of
the board of directors or any committee of the board. We reimburse directors for
out-of-pocket expenses incurred in attending board and committee meetings.
In October 1999 the board of directors voted to grant to David Barrett, upon
his joining the board immediately after the closing of this offering, options to
purchase 22,500 shares of common stock at a price of $5.00 per share. They will
vest over a 4-year period with 25% vesting at the first anniversary of the grant
date and 6.25% each quarter thereafter.
LIABILITY LIMITATIONS AND INDEMNIFICATION
Our certificate of incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. Delaware law provides that directors
of a corporation will not be personally liable for monetary damages for breach
of their fiduciary duties as directors, except liability for:
- any breach of their duty of loyalty to the corporation or its
stockholders;
- acts of omissions that are not in good faith or that involve intentional
misconduct or a knowing violation of law;
- unlawful payments of dividends or unlawful stock repurchases or
redemptions; or
- any transaction from which the director derived an improper personal
benefit.
The limitations do not apply to liabilities arising under the federal securities
laws and do not affect the availability of equitable remedies, including
injunctive relief or rescission.
Our certificate of incorporation and by-laws provide that we will indemnify
our directors and officers, and may indemnify other employees and agents, to the
maximum extent permitted by law. We believe that indemnification under our
by-laws covers at least negligence and gross negligence on the part of
indemnified parties. Our by-laws also permit us to secure insurance on behalf of
any officer, director, employee or agent for any liability arising out of his or
her actions in their capacity as an officer, director, employee or agent,
regardless of whether the by-laws would permit indemnification. We intend to
obtain an insurance policy that insures our directors and officers against
losses, above a deductible amount, from specified types of claims.
We intend to enter into agreements to indemnify our directors and executive
officers, in addition to the indemnification rights provided in our by-laws.
Under these agreements we will indemnify our directors and executive officers
for judgments, fines, settlement amounts and expenses, including attorneys'
fees, incurred by a director or executive officer in an action or proceeding,
including an action by or in the right of Centra, arising out of the person's
services as a director or executive officer of Centra or any subsidiary of
Centra or any other company or enterprise to which the person provides services
at our request. We believe that these provisions and agreements are desirable to
help us attract and retain qualified persons as directors and executive
officers.
The limited liability and indemnification provisions in our certificate of
incorporation, by-laws and indemnification agreements may discourage
stockholders from bringing a lawsuit against our directors for breach of their
fiduciary duty and may reduce the likelihood of derivative litigation against
our directors and officers, even though a derivative action, if successful,
might otherwise benefit us and our stockholders. A stockholder's investment in
us may be adversely affected to the extent we pay the costs of settlement or
damage awards against our directors and officers under these indemnification
provisions.
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At present, there is no pending litigation or proceeding involving any of
our directors, officers or employees in which indemnification is sought, nor are
we aware of any threatened litigation that may result in claims for
indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers and controlling persons under our
certificate of incorporation or by-laws or the agreements described above, we
have been advised that in the opinion of the SEC this indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.
EXECUTIVE COMPENSATION
COMPENSATION EARNED
The following table sets forth the compensation earned during the year ended
December 31, 1998 by our named executive officers, who consist of our chief
executive officer and our three other executive officers who earned more than
$100,000 in salary and bonus.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL ------------
COMPENSATION SECURITIES
------------ UNDERLYING
NAME AND PRESENT PRINCIPAL POSITION(S) SALARY($) OPTIONS(#)
- -------------------------------------- ------------ ------------
<S> <C> <C>
Leon Navickas .............................................. $150,000 --
Chief Executive Officer
Anthony J. Mark ............................................ 150,000 52,500
President and Chief Operating Officer
Stephen A. Johnson ......................................... 117,000 30,000
Chief Financial Officer, Treasurer and Secretary
Joseph M. Gruttadauria ..................................... 157,000 52,500
Vice President, Professional Services
</TABLE>
OPTION GRANTS
The following table sets forth information regarding stock options granted
to the named executive officers during the year ended December 31, 1998.
OPTION GRANTS IN FISCAL 1998
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK PRICE
SECURITIES TOTAL OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ---------------------
NAME GRANTED(#) FISCAL YEAR SHARE($/SH) DATE 5%($) 10%($)
- ---- ---------- ------------- ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Leon Navickas......................... -- -- -- -- -- --
Anthony J. Mark....................... 52,500 6.2% $0.27 1/08/08 $23,100 $36,800
Stephen A. Johnson.................... 30,000 3.6 0.27 3/31/08 13,200 21,000
Joseph M. Gruttadauria................ 52,500 6.2 0.27 3/31/08 23,100 36,800
</TABLE>
The potential realizable values are based on the assumption that our common
stock appreciates at the annual rate shown, compounded annually, from the date
of grant until the expiration of the
49
<PAGE>
ten-year term. These numbers are calculated based on SEC requirements and do not
reflect projections or estimates of future stock price growth. Actual gains, if
any, on stock option exercises will depend on the future performance of the
common stock.
The percentage of total options is based on an aggregate of 840,450 options
granted by us during the year ended December 31, 1998 to our employees and
directors, including the named executive officers. Options were granted with an
exercise price equal to the fair market value of our common stock, as determined
in good faith by our board of directors. All of the options were granted for a
term of 10 years, subject to earlier termination in the event of a termination
of employment. The exercise price for all options may be paid in cash, shares of
common stock, or a combination of cash and shares. Under the terms of our 1995
stock option plan, the board of directors retains discretion, subject to
limitations set forth in the plan, to modify the terms of outstanding options.
OPTION EXERCISES; OPTION AND RESTRICTED STOCK HOLDINGS
The following table sets forth information regarding exercises of stock
options during the year ended December 31, 1998 and exercisable and
unexercisable options held as of December 31, 1998 by each of the named
executive officers.
AGGREGATED OPTION EXERCISES IN FISCAL 1998
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)
ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Leon Navickas.................... -- -- -- -- -- --
Anthony J. Mark.................. 52,500 -- -- -- -- --
Stephen A. Johnson............... 30,000 -- 22,500 37,500 $2,200 $3,800
Joseph M. Gruttadauria........... 52,500 -- -- -- -- --
</TABLE>
All of these options were granted under our 1995 stock option plan. They
vested over a 4-year period with 25% vesting at the first anniversary of the
grant date and 6.25% each quarter thereafter.
The value of unexercised in-the-money options is based on a price of $0.27
per share, the fair market value of our stock on December 31, 1998 as determined
by our board of directors, minus the per share exercise price, multiplied by the
number of shares underlying the option.
We agreed that each of the named executive officers granted options in 1998
could exercise those options immediately. We entered into similar agreements in
prior years. The shares received upon exercise are subject to repurchase by us
at the original option exercise price, subject to vesting at the same rates as
provided in the original options. The following table sets forth information
regarding this vested and unvested "restricted" common stock held as of
December 31, 1998 by each of the named executive officers. The value of the
restricted stock is based on a price of $0.27 per share, the fair
50
<PAGE>
market value of our stock on December 31, 1998 as determined by our board of
directors, minus the aggregate exercise price paid to acquire the restricted
stock.
<TABLE>
<CAPTION>
SHARES OF VALUE OF IN-THE-MONEY
RESTRICTED STOCK RESTRICTED STOCK
AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)
--------------------- ---------------------
NAME VESTED UNVESTED VESTED UNVESTED
- ---- -------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Leon Navickas....................................... -- -- -- --
Anthony J. Mark..................................... 108,281 191,719 $10,800 $13,900
Stephen A. Johnson.................................. -- 30,000 -- --
Joseph M. Gruttadauria.............................. 98,438 179,062 9,800 12,700
</TABLE>
INCENTIVE STOCK PLANS
1995 STOCK OPTION PLAN
In 1995, the board of directors adopted and our stockholders approved the
1995 stock option plan. As of October 25, 1999, options to purchase a total of
1,929,000 shares of common stock were outstanding under the 1995 plan. These
options had a weighted average exercise price of $0.83 per share. In connection
with the adoption of the 1999 stock incentive plan described below, the board
terminated further issuances of options under the 1995 plan.
The 1995 plan authorizes the grant of options to purchase common stock
intended to qualify as incentive stock options, as defined in Section 422 of the
Internal Revenue Code, and the grant of options that do not so qualify. The
exercise price of incentive options granted under the 1995 plan must be at least
equal to the fair market value of the common stock on the date of grant. The
exercise price of incentive options granted to an optionee who owns stock
possessing more than 10% of the voting power of our outstanding capital stock
must be at least equal to 110% of the fair market value of the common stock on
the date of grant, and the optionee must exercise his or her option within five
years from the date of the grant of such option.
The 1995 plan provides that, upon a merger or consolidation, our board may
provide that:
- some or all outstanding options must be assumed or substituted for with
similar options of the corporation surviving any such merger or
consolidation;
- any unexercised options shall terminate immediately prior to the
consummation of the transaction unless exercised by the optionee within a
specified period of time;
- holders of options receive a cash payment in the event of a merger under
terms where holders of our common stock receive a cash payment for each
share surrendered in the merger; or
- provide that all or any outstanding options shall become immediately
exercisable in full.
The 1995 plan is administered by the compensation committee of the board of
directors.
1999 STOCK INCENTIVE PLAN
In October 1999, the board of directors adopted the 1999 stock incentive
plan. We have reserved a total of 3,500,000 shares of common stock for issuance
under the 1999 plan. As of October 25, 1999, no options had been granted under
the 1999 plan. The 1999 plan will be submitted for stockholder approval in
November 1999.
The 1999 plan authorizes the grant of incentive options and nonqualified
options. The 1999 plan also provides for awards of stock appreciation rights,
performance shares, restricted stock and other stock-based awards.
51
<PAGE>
Incentive options may be granted under the 1999 plan to our key employees
and our affiliates within the meaning of the Internal Revenue Code, including
our officers and directors as well as officers and directors of our affiliates
who are also employees. The exercise price of incentive options granted under
the 1999 plan must be at least equal to the fair market value of our common
stock on the date of grant. The exercise price of incentive options granted to
an optionee who owns stock possessing more than 10% of the voting power of our
outstanding capital stock must be at least equal to 110% of the fair market
value of the common stock on the date of grant, and such optionee must exercise
his or her option within five years from the date of the grant of such option.
Under the terms of the 1999 plan, we may grant nonqualified options to our
officers and other employees, our directors, and other individuals providing
services to us. There are no limits on the exercise price of nonqualified
options granted under the 1999 plan.
The 1999 plan provides that, upon a change of control, all outstanding plan
options and other awards may be:
- exchanged for similar options or awards of the corporation surviving the
change of control;
- made immediately exercisable in full; or
- terminated as of the effective date of such change of control, provided
that the holders have the right to exercise the options or awards to the
extent then vested.
For these purposes, a "change of control" means the occurrence of any of the
following:
- any person becomes a beneficial owner, directly or indirectly of 50% or
more of the combined voting power of our outstanding shares;
- any merger or consolidation of Centra with another company, other than a
merger or consolidation which results in our voting shares outstanding
immediately prior to the merger or consolidation, representing more than
65% of the combined voting power of the voting shares of the surviving
entity; or
- the liquidation, sale or disposition of all or substantially all of our
assets.
The 1999 plan is administered by the compensation committee of the board of
directors. The compensation committee selects the individuals to whom options
will be granted and determines the option exercise price and other terms of each
award, subject to the provisions of the 1999 plan.
1999 DIRECTOR OPTION PLAN
In October 1999, the board of directors adopted the 1999 director option
plan. The director plan, adopted in October 1999, provides for the grant of
stock options to those of our directors who are not full-time employees of
Centra or our subsidiary. Only non-statutory options may be granted under the
director plan. The maximum number of shares of Common Stock as to which options
may be granted under the Plan is 200,000. As of October 25, 1999, no options had
been granted under the director plan. The 1999 plan will be submitted for
stockholder approval in November 1999.
The director plan is administered by the board of directors. The option
exercise price for each option granted under the director plan is the fair
market value of the common stock as of the date of grant. Payment of the option
exercise price is to be made in cash for the full exercise price of the options.
Options are not assignable or transferrable except by will or the laws of
descent and distribution. They terminate on the earlier of ten years after the
date of grant or sixty days after the optionee ceases to serve as a director,
except in the event of death or disability.
52
<PAGE>
1999 EMPLOYEE STOCK PURCHASE PLAN
In October 1999, the board of directors adopted the 1999 employee stock
purchase plan. We have reserved 1,500,000 shares of common stock for issuance
under the stock purchase plan. As of December 31 each year, we will increase the
number of shares we reserve for issuance under the stock purchase plan
automatically by 2% of the total number of shares of our common stock then
outstanding or, if less, 300,000 shares. The 1999 plan will be submitted for
stockholder approval in November 1999.
Under the terms of the stock purchase plan, all of our employees who have
completed three months of employment and whose customary employment is more than
20 hours per week and more than five months in the calendar year, are eligible
to participate in the stock purchase plan. Employees who own stock and hold
outstanding options to purchase stock representing five percent or more of the
total combined voting power or value of all classes of our stock are not
eligible to participate in the stock purchase plan.
The right to purchase common stock under the stock purchase plan is made
available through a series of offerings. On the first day of an offering period,
we will grant to each eligible employee who has elected in writing to
participate in the stock purchase plan an option to purchase shares of common
stock. The employee is required to authorize an amount, between 1% and 10% of
the employee's compensation, to be deducted from the employee's pay during the
offering period. On the last day of the offering period, the employee will be
deemed to have exercised the option, at the option exercise price, to the extent
of accumulated payroll deductions. Under the terms of the stock purchase plan,
the option exercise price is an amount equal to 85% of the closing market price
of our common stock on either the first or last day of the offering period,
whichever is lower. In the event of a change in control of Centra, the stock
purchase plan will terminate and shares will be purchased with the payroll
deductions accumulated to date by participating employees.
No employee may be granted an option that would permit the employee's rights
to purchase common stock to accrue at a rate in excess of $25,000 of the fair
market value of the common stock, determined as of the date the option is
granted, in any calendar year.
The stock purchase plan is administered by the compensation committee of the
board of directors.
401(k) PLAN
Effective August 1996, we established a 401(k) defined contribution
retirement plan covering all employees who are at least 21 years of age. The
retirement plan provides for voluntary employee contributions in amounts
determined by the employees, subject to a maximum limit allowed by Internal
Revenue Service guidelines. For 1999, this limit is $10,000. We may contribute
these amounts to the accounts of participants in the retirement plan as
determined by the board of directors, subject to any applicable legal
requirements. To date, we have not made any contribution to the retirement plan,
and we do not anticipate making any contribution to the retirement plan in the
foreseeable future.
SEVERANCE AGREEMENTS
We have entered into severance agreements with Leon Navickas, our Chief
Executive Officer; Anthony J. Mark, our President and Chief Operating Officer;
Stephen A. Johnson, our Chief Financial Officer, Treasurer and Secretary; Steven
N. Lesser, our Vice President, Worldwide Sales; and Joseph M. Gruttadauria, our
Vice President, Professional Services. Under these agreements, if the executive
officer is terminated without cause, he will be entitled to continue to receive
base salary and benefits
53
<PAGE>
for a period ending on the earlier of (a) 181 days from the date of termination
and (b) the date on which he begins new employment. For these purposes, "cause"
means:
- an act of personal dishonesty committed in connection with
responsibilities as an employee and intended to result in substantial
personal enrichment;
- a felony conviction;
- a willful act that constitutes gross misconduct and that is injurious to
Centra; or
- continued, intentional violations of employment obligations after written
notice from Centra.
None of our executive officers has an employment agreement with us. Our
executive officers may resign and we may terminate their employment at any time,
subject to the provisions of their severance agreements.
CHANGE OF CONTROL ARRANGEMENTS
We have entered into change of control agreements with each of Leon
Navickas, our Chief Executive Officer; Anthony J. Mark, our President and Chief
Operating Officer; Stephen A. Johnson, our Chief Financial Officer, Treasurer
and Secretary; Steven N. Lesser, our Vice President, Worldwide Sales; and Joseph
M. Gruttadauria, our Vice President, Professional Services. Each agreement
provides that upon a change of control, 50% of the executive's unvested options
will vest and become immediately exercisable and 50% of our right to repurchase
the executive's unvested options will terminate. A "change of control" means:
- any merger or consolidation which results in the voting shares outstanding
immediately prior to the merger or consolidation, representing immediately
after the merger or consolidation, less than 50% of the voting power of
the surviving entity;
- a sale of all or substantially all of our assets; or
- the sale of our shares in a single transaction or a series of related
transactions, representing at least 80% of the voting power of our voting
shares.
These change of control provisions apply to previous grants of restricted stock
and options and to any future grants of restricted stock and options. The change
of control provisions shall not apply to a proposed merger or consolidation if
(1) our independent accountants determine that enforcement of the change of
control provision would preclude the proposed merger or consolidation as a
pooling of interests and (2) we intended to enter into the proposed merger or
consolidation but for the preclusion of polling of interest accounting
treatment.
The compensation committee of the board of directors, as administrator of
the 1995 stock option plan and the 1999 stock incentive plan, can provide for
accelerated vesting of the shares of common stock subject to outstanding options
held by any of our executive officers or directors in connection with specified
changes of control of Centra. The accelerated vesting may be conditioned on the
termination of the individual's employment following the change of control.
54
<PAGE>
TRANSACTIONS WITH RELATED PARTIES
SALES OF PREFERRED STOCK
In May and June 1996, we sold 1,416,490 shares of series B convertible
preferred stock at a price of $2.25 per share, for gross proceeds of $3,187,000.
- We sold 549,777 of the shares to Alta V Limited Partnership for a total
price of $1,237,000. Jonathan Flint, one of our directors, is affiliated
with Alta V Limited Partnership.
- We sold 333,334 of the shares to North Bridge Venture Partners, L.P. for a
total price of $750,000. Richard D'Amore, one of our directors, is
affiliated with North Bridge Venture Partners, L.P.
In March 1997, we sold 1,670,000 shares of series C convertible preferred
stock at a price of $2.50 per share, for gross proceeds of $4,175,000.
- We sold 316,672 of the shares to Alta V Limited Partnership for a total
price of $792,000. Jonathan Flint, one of our directors, is affiliated
with Alta V Limited Partnership.
- We sold 200,000 of the shares to Commonwealth Capital Ventures, L.P. for a
total purchase price of $500,000. Commonwealth Capital Ventures, L.P. is a
5% stockholder of Centra.
- We sold 280,000 of the shares to North Bridge Venture Partners, L.P. for a
total price of $700,000. Richard D'Amore, one of our directors, is
affiliated with North Bridge Venture Partners, L.P.
- We sold 40,000 shares to Leon Navickas, our Chief Executive Officer and
Chairman, for a total price of $100,000.
- We sold 20,000 of the shares to TM Partners for a total of $50,000.
Anthony J. Mark, our President and Chief Operating Officer, is affiliated
with TM Partners.
In December 1997, we sold 2,250,000 shares of series D convertible preferred
stock at a price of $4.00 per share, for gross proceeds of $9,000,000.
- We sold 503,459 of the shares to Alta V Limited Partnership for a total
price of $2,014,000. Jonathan Flint, one of our directors, is affiliated
with Alta V Limited Partnership.
- We sold 250,000 of the shares to Commonwealth Capital Ventures, L.P. for a
total purchase price of $1,000,000. Commonwealth Capital Ventures, L.P. is
a 5% stockholder of Centra.
- We sold 707,662 of the shares to Polaris Venture Partners, L.P. for a
total price of $2,831,000, and 42,338 of the shares to Polaris Venture
Partners Founders' Fund, L.P. for a total price of $169,000. Jonathan
Flint, one of our directors, is affiliated with Polaris Venture Partners,
L.P. and Polaris Venture Partners Founders' Fund, L.P.
- We sold 400,000 of the shares to North Bridge Venture Partners, L.P. for a
total price of $1,600,000. Richard D'Amore, one of our directors, is
affiliated with North Bridge Venture Partners, L.P.
- We sold 325,000 shares to Scripps Ventures, LLC for a total purchase price
of $1,300,000. Scripps Ventures, LLC is a 5% stockholder of Centra.
- We sold 12,500 shares to TM Partners for a total purchase price of
$50,000. Anthony J. Mark, our President and Chief Operating Officer, is
affiliated with TM Partners.
In April 1999, we sold 2,695,000 shares of series E convertible preferred
stock at a price of $5.00 per share, for gross proceeds of $13,475,000.
55
<PAGE>
- We sold 158,336 of the shares to Alta V Limited Partnership for a total
price of $792,000. Jonathan Flint, one of our directors, is affiliated
with Alta V Limited Partnership.
- We sold 100,000 shares to Commonwealth Capital Ventures, LLC for a total
purchase price of $500,000. Commonwealth Capital Ventures, L.P. is a 5%
stockholder of Centra.
- We sold 84,920 of the shares to Polaris Venture Partners, L.P. for a total
price of $425,000, and 5,080 of the shares to Polaris Venture Partners
Founders' Fund, L.P. for a total price of $25,000. Jonathan Flint, one of
our directors, is affiliated with Polaris Venture Partners, L.P. and
Polaris Venture Partners Founders' Fund, L.P.
- We sold 200,000 of the shares North Bridge Venture Partners, L.P. for a
total price of $1,000,000. Richard D'Amore, one of our directors, is
affiliated with North Bridge Venture Partners, L.P.
- We sold 70,000 shares to Scripps Ventures, LLC for a total purchase price
of $350,000. Scripps Ventures, LLC is a 5% stockholder of Centra.
- We sold 65,000 shares to SL Partners for a total purchase price of
$325,000. Steven N. Lesser, our Vice President, Sales, is affiliated with
SL Partners.
- We sold 10,000 shares to TM Partners for a total purchase price of
$50,000. Anthony J. Mark, our President and Chief Operating Officer, is
affiliated with TM Partners.
REGISTRATION RIGHTS
The holders of 13,746,735 shares of common stock are entitled to rights to
register their shares under the Securities Act. These rights are provided under
the terms of an agreement between us and the holders of registrable securities,
who are former holders of our preferred stock. These holders include:
- Leon Navickas, our Chief Executive Officer and Chairman, who has
registration rights covering 210,000 shares of common stock;
- venture capital firms affiliated with Richard D'Amore, one of our
directors, which have registration rights covering 2,570,001 shares of
common stock; and
- venture capital firms affiliated with Jonathan Flint, one of our
directors, which have registration rights covering 4,294,566 shares of
common stock.
The registration rights:
- are held by all persons and entities that participated in our preferred
stock financings;
- allow holders to require us to register their shares under the Securities
Act; and
- allow holders to include their shares in registration statements filed by
us.
For a more detailed description of the registration rights, see "Description
of Capital Stock--Registration Rights."
INDEMNIFICATION AGREEMENTS
We intend to enter into indemnification agreements with our executive
officers and directors. Under these agreements, we will agree:
- to indemnify, to the fullest extent allowed by Delaware law, the executive
officers and directors against certain liabilities related to their
service or status as officers or directors; and
- in any proceeding in which they could be indemnified, to advance to the
executive officers and directors the expenses they incur in those
proceedings.
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<PAGE>
We also intend to execute similar indemnification agreements with our future
directors, including our current director--nominees, and executive officers. For
a more detailed description of the indemnification agreements, see
"Management--Liability Limitations and Indemnification."
SEVERANCE AGREEMENTS
We have entered into severance agreements with Leon Navickas, our Chief
Executive Officer; Anthony J. Mark, our President and Chief Operating Officer;
Stephen A. Johnson, our Chief Financial Officer, Treasurer and Secretary; Steven
N. Lesser, our Vice President, Worldwide Sales; and Joseph M. Gruttadauria, our
Vice President, Professional Services. Under these agreements, if the executive
officer is terminated without cause, he will be entitled to continue to receive
base salary and benefits for a period ending on the earlier of (a) 181 days from
the date of termination and (b) the date on which he begins new employment. For
a more detailed description of the severance agreements, see
"Management--Severance Agreements."
CHANGE OF CONTROL AGREEMENTS
We have entered into change of control agreements with each of Leon
Navickas, our Chief Executive Officer; Anthony J. Mark, our President and Chief
Operating Officer; Stephen A. Johnson, our Chief Financial Officer, Treasurer
and Secretary; Steven N. Lesser, our Vice President, Worldwide Sales; and Joseph
M. Gruttadauria, our Vice President, Professional Services. Each agreement
provides that upon a change of control, 50% of the executive's unvested options
will vest and become immediately exercisable and 50% of our right to repurchase
the executive's unvested options will terminate. For a more detailed description
of the severance agreements, see "Management--Change of Control Arrangements."
PAYMENT TO PREFERRED STOCKHOLDERS UPON COMPLETION OF THIS OFFERING
Upon the closing of this offering, we will pay $6,480,000 to holders of
series A and series B convertible preferred stock according to the terms of our
certificate of incorporation.
- We will pay $2,598,000 to Alta V Limited Partnership. Jonathan Flint, one
of our directors, is affiliated with Alta V Limited Partnership.
- We will pay $1,875,000 to North Bridge Venture Partners, L.P. Richard
D'Amore, one of our directors, is affiliated with North Bridge Venture
Partners, L.P.
- We will pay $150,000 to Leon Navickas, our Chief Executive Officer and
Chairman.
Please see "Use of Proceeds" for further information.
TERMS OF TRANSACTIONS
We believe that all of the transactions described above were made on terms
no less favorable to us than would have been obtained from unaffiliated third
parties. We have adopted a policy under which all future transactions between us
and any of our directors or executive officers must be on terms no less
favorable to us than would have been obtained from unaffiliated third parties
and must be approved by a majority of the disinterested members of the board of
directors.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information about the beneficial ownership of
our outstanding common stock on October 25, 1999, by:
- each person or entity who is known by us to own beneficially more than
five percent of our common stock;
- each of the named executive officers;
- each of our directors and our director-nominee; and
- all of our executive officers and directors and our director-nominee as a
group.
In accordance with SEC rules, beneficial ownership includes any shares as to
which a person or entity has sole or shared voting power or investment power and
any shares as to which the person or entity has the right to acquire beneficial
ownership within 60 days after September 30, 1999 through the exercise of any
stock option. Except as noted below, we believe that the persons named in the
table have sole voting and investment power with respect to the shares of common
stock set forth opposite their names. Percentage of beneficial ownership is
based on 17,676,837 shares of common stock outstanding as of September 30, 1999,
including shares into which our outstanding preferred stock will convert upon
completion of this offering, and shares of common stock that will be
outstanding after completion of this offering. All shares included below under
"Rights to Acquire" represent shares subject to outstanding stock options. The
address of our executive officers, directors and director-nominee is in care of
Centra Software, Inc., 430 Bedford Street, Lexington, Massachusetts 02420.
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF SHARES SHARES
BENEFICIALLY OWNED BENEFICIALLY OWNED
----------------------------------- --------------------
OUTSTANDING RIGHT TO TOTAL BEFORE AFTER
SHARES ACQUIRE NUMBER OFFERING OFFERING
----------- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C>
Jonathan Flint(1)......................................... 4,294,566 -- 4,294,566 24.3% %
Entities affiliated with Burr, Egan, Deleage & Co.(2)..... 3,066,457 -- 3,066,457 17.3
One Post Office Square
Suite 3800
Boston, MA 02109
North Bridge Venture Partners, L.P. ...................... 2,570,001 -- 2,570,001 14.5
950 Winter Street
Suite 4600
Waltham, MA 02451
Richard D'Amore(3)........................................ 2,570,001 -- 2,570,001 14.5
Leon Navickas............................................. 2,010,000 -- 2,010,000 11.4
Scripps Ventures, LLC..................................... 1,792,500 -- 1,792,500 10.1
200 Madison Avenue
New York, NY 10016
Entities affiliated with The Goldman Sachs Group, 1,500,000 -- 1,500,000 8.5
Inc.(4).................................................
85 Broad Street, Tenth Floor
New York, New York 10004
HarbourVest Partners V--Direct Fund L.P. ................. 1,500,000 -- 1,500,000 8.5
1 Financial Center
Boston, MA 02111
Commonwealth Capital Ventures, L.P. ...................... 1,491,667 -- 1,491,667 8.4
20 William Street
Wellesley, MA 02481
Entities affiliated with Polaris Venture Management Co., 1,260,000 -- 1,260,000 7.1
LLC(5)..................................................
1000 Winter Street
Suite 3350
Waltham, MA 02541
Anthony J. Mark........................................... 600,000 -- 600,000 3.4
Joseph M. Gruttadauria.................................... 315,000 -- 315,000 1.8
Stephen A. Johnson........................................ 75,000 37,500 112,500 * *
David Barrett............................................. 22,500 -- 22,500 * *
All current executive officers and directors and
director-nominee, as a group (eight persons)............ 10,293,110 37,500 10,330,610 58.3
</TABLE>
- ------------------------------
* Less than one percent.
58
<PAGE>
(1) Includes 3,034,566 shares held of record by Alta V Limited Partnership;
71,127 shares held of record by Polaris Venture Partners Founders' Fund,
L.P.; and 1,188,873 shares held of record by Polaris Venture Partners, L.P.
Mr. Flint is a General Partner of Polaris Venture Management, Co., LLC.
Mr. Flint is an affiliate of Alta V Limited Partnership. Mr. Flint disclaims
beneficial ownership of all of the shares held by Alta V Limited
Partnership, except to the extent of his pecuniary interest, if any.
(2) Represents 3,034,566 shares held of record by Alta V Limited Partnership and
31,891 shares held of record by Customs House Partners.
(3) Represents 2,570,001 shares held of record by North Bridge Venture Partners,
L.P. Mr. D'Amore is a General Partner of North Bridge Venture Partners, L.P.
Mr. D'Amore disclaims beneficial ownership of all of these shares, except to
the extent of his pecuniary interest, if any.
(4) Represents 1,350,000 shares held of record by The Goldman Sachs Group, L.P.
and 150,000 shares held of record by Stone Street Fund, 1999, L.P.
(5) Represents 71,127 shares held of record by Polaris Venture Founders' Fund,
L.P. and 1,188,873 shares held of record by Polaris Venture Partners, L.P.
59
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DESCRIPTION OF CAPITAL STOCK
GENERAL
Upon completion of this offering, we will be authorized to issue 100,000,000
shares of common stock, $0.001 par value, and 10,000,000 shares of undesignated
preferred stock, $0.001 par value. The following is a summary description of our
capital stock.
COMMON STOCK
As of September 30, 1999, there were 17,676,837 shares of common stock
outstanding, as adjusted to reflect the conversion of all outstanding preferred
stock upon completion of this offering. The shares were held of record by 55
stockholders.
Holders of common stock are entitled to one vote per share on all matters to
be voted upon by the stockholders. Holders of common stock are entitled to
receive their proportionate share of dividends, if any, declared from time to
time by the board of directors out of funds legally available for that purpose.
See "Dividend Policy." In the event of our liquidation, dissolution or winding
up, holders of common stock are entitled to their proportionate share of all
assets remaining after payment of liabilities, after taking into consideration
the prior distribution rights of any preferred stock then outstanding. Common
stock has no preemptive or conversion rights or other subscription rights. No
redemption or sinking fund provisions apply to the common stock. All outstanding
shares of common stock are fully paid and nonassessable, and the shares of
common stock being offered by us will be fully paid and nonassessable as of the
completion of this offering.
PREFERRED STOCK
Immediately prior to this offering, our certificate of incorporation
provided for five series of preferred stock:
- Series A redeemable convertible participating preferred stock, of which
1,133,000 shares were issued and outstanding;
- Series B redeemable convertible participating preferred stock, of which
1,416,490 shares were issued and outstanding;
- Series C redeemable convertible preferred stock, of which 1,670,000 shares
were issued and outstanding;
- Series D redeemable convertible preferred stock, of which 2,250,000 shares
were issued and outstanding; and
- Series E redeemable convertible preferred stock, of which 2,695,000 shares
were issued and outstanding.
Upon the completion of this offering, each outstanding share of preferred stock
will convert automatically into 1.5 shares of common stock.
Upon the completion of this offering, the board of directors will be
authorized, without stockholder approval, from time to time to issue up to an
aggregate of 10,000,000 shares of preferred stock, $0.001 par value per share,
in one or more series, each of the series to have such rights and preferences,
including voting rights, dividend rights, conversion rights, redemption
privileges and liquidation preferences, as shall be determined by the board of
directors. The rights of the holders of common stock will be affected by, and
may be adversely affected by, the rights of holders of any preferred stock that
may be issued in the future. Issuance of preferred stock, while providing
desirable flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of making it more difficult for others
to acquire, or of discouraging others from attempting to acquire,
60
<PAGE>
a majority of our outstanding voting stock. We have no current plans to issue
any shares of preferred stock.
REGISTRATION RIGHTS
The holders of 13,746,735 shares of common stock are entitled to rights to
register their shares under the Securities Act at any time after the completion
of this offering. These rights are provided under the terms of an agreement
between us and the holders of registrable securities, who are former holders of
our preferred stock. If we register any of our securities either for our own
account or for the account of other security holders, the holders of registrable
securities will be entitled to include their shares of common stock in the
registration, subject to the ability of the underwriters to limit the number of
shares included in the offering. The holders of registrable securities may also
require us to use our best efforts to register all or a portion of their
registrable securities on Form S-3 when use of the form becomes available to us,
provided that the proposed aggregate offering price, based on the then-current
public market price, is at least $500,000. All registration expenses must be
borne by us and all selling expenses relating to registrable securities must be
borne by the holders of the securities being registered.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF DELAWARE LAW AND OUR CHARTER AND BY-LAWS
Provisions of Delaware law and our certificate of incorporation and by-laws
could make it more difficult to acquire us by means of a tender offer, a proxy
contest, open market purchases, removal of incumbent directors and otherwise.
These provisions, summarized below, are expected to discourage types of coercive
takeover practices and inadequate takeover bids and to encourage persons seeking
to acquire control of us to first negotiate with us. We believe that the
benefits of increased protection of our potential ability to negotiate with the
proponent of an unfriendly or unsolicited proposal to acquire or restructure us
outweigh the disadvantages of discouraging takeover or acquisition proposals
because negotiation of these proposals could result in an improvement of their
terms.
We must comply with Section 203 of the Delaware General Corporation Law, an
anti-takeover law. In general, Section 203 prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years following the date the person became an
interested stockholder, unless the business combination or the transaction in
which the person became an interested stockholder is approved in a prescribed
manner. Generally, a "business combination" includes a merger, asset or stock
sale, or other transaction resulting in a financial benefit to an interested
stockholder. An "interested stockholder" includes a person who, together with
affiliates and associates, owns, or did own within three years prior to the
determination of interested stockholder status, 15% or more of the corporation's
voting stock. The existence of this provision generally will have an
anti-takeover effect for transactions not approved in advance by the board of
directors, including discouraging attempts that might result in a premium over
the market price for the shares of common stock held by stockholders.
Upon the closing of this offering, our certificate of incorporation and
by-laws will require that any action required or permitted to be taken by our
stockholders must be effected at a duly called annual or special meeting of the
stockholders and may not be effected by a consent in writing. In addition, upon
the completion of this offering, special meetings of our stockholders may be
called only by the board of directors or some of our officers. Our certificate
of incorporation and by-laws also provide that, effective upon the completion of
this offering, our board of directors will be divided into three classes, with
each class serving staggered three-year terms. These provisions may have the
effect of deterring hostile takeovers or delaying changes in our control or
management.
61
<PAGE>
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is
.
SHARES ELIGIBLE FOR FUTURE SALE
Before this offering, there has been no market for our common stock. We
cannot predict the effect, if any, that sales of shares of common stock to the
public or the availability of shares for sale to the public will have on the
market price of the common stock prevailing form time to time. Nevertheless, if
a significant number of shares of common stock are sold in the public market, or
if people believe that such sales may occur, the prevailing market price of our
common stock could decline and could impair our future ability to raise capital
through the sale of our equity securities.
Upon completion of this offering we will have outstanding shares of
common stock, assuming no exercise of outstanding options after October 25,
1999. Of these shares, the shares sold in this offering will be freely
tradable without restriction under the Securities Act except for any shares
purchased by "affiliates" of Centra as that term is defined in Rule 144 under
the Securities Act.
The remaining shares of common stock were issued and sold by us in
reliance on exemptions from the registration requirements of the Securities Act.
A total of shares eligible for sale under Rule 144 are subject to lock-up
agreements with the underwriters that provide that we and those holders of stock
and options may not dispose of or hedge any common stock or securities
convertible into or exchangeable for shares of common stock. These restrictions
will be in effect for a period of 180 days after the date of this prospectus. At
any time and without notice, BancBoston Robertson Stephens Inc. may, in its sole
discretion, release all or some of the securities from these lock-up agreements.
In addition, holders of stock options could exercise these options and sell some
of the shares issued upon exercise as described below.
<TABLE>
<CAPTION>
NUMBER OF SHARES
RELEVANT DATES ELIGIBLE FOR FUTURE SALE COMMENT
- ----------------------------------- ------------------------ -----------------------------------
<S> <C> <C>
On effective date.................. Shares sold in this offering and
eligible for sale under Rule 144(k)
90 days after effective date....... Additional shares eligible for sale
under Rules 144 and 701
180 days after effective date...... All shares subject to lock-up
released; additional shares
eligible for sale under Rules 144
and 701
More than 181 days after Additional shares becoming eligible
effective date................... for sale under Rule 144 more than
180 days after the effective date
</TABLE>
In addition, as of October 25, 1999, there were outstanding options to
purchase 1,929,000 shares of common stock. A total of of these options are
subject to lock-up agreements.
RULE 144
In general, under Rule 144, an affiliate of Centra, or person (or persons
whose shares are aggregated) who has beneficially owned restricted shares for at
least one year, will be entitled to sell in any three-month period a number of
shares that does not exceed the greater of:
- one percent of the then-outstanding shares of common stock (approximately
shares immediately after this offering), or
62
<PAGE>
- the average weekly trading volume during the four calendar weeks preceding
the date on which notice of the sale is filed with the SEC.
Sales under Rule 144 must also comply with manner of sale provisions and
notice requirements and are subject to the availability of public information
about us.
RULE 144(k)
Under Rule 144(k), a person who is not considered to have been one of our
"affiliates" at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner other than an "affiliate," is
entitled to sell these shares without complying with the manner of sale, notice
filing, volume limitation or notice provisions of Rule 144. Therefore, unless
otherwise restricted, "144(k) shares" may be sold immediately upon the
completion of this offering.
RULE 701
Any of our employees, officers, directors or consultants who purchased
shares pursuant to a written compensatory plan or contract may be entitled to
rely on the resale provision of Rule 701. Rule 701 permits affiliates to sell
their Rule 701 shares under Rule 144 without complying with the holding period
requirements of Rule 144. Rule 701 further provides that non-affiliates may sell
these shares in reliance on Rule 144 without having to comply with the holding
period, public information, volume limitation or notice provisions of Rule 144.
All holders of Rule 701 shares are required to wait until 90 days after the date
of this prospectus before selling those shares. A total of of the
Rule 701 shares are subject to lock-up agreements and will only become eligible
for sale at the earlier of (a) the expiration of the 180-day lock-up agreements
and (b) no sooner than 90 days after the offering upon obtaining the prior
written consent of BancBoston Robertson Stephens Inc.
We are unable to estimate the number of shares that will be sold under
Rule 144, as this will depend on the market price for the common stock, the
personal circumstances of the sellers and other factors. Upon the completion of
this offering, we intend to file a registration statement on Form S-8 under the
Securities Act covering, among other things, shares of common stock covered by
outstanding options under the 1995 stock plan, the 1999 stock incentive plan,
the 1999 director option plan and the 1999 employee stock purchase plan. Based
on the number of shares covered by outstanding options as of October 25, 1999
and currently reserved for issuance under the incentive plans, the registration
statement would cover a total of 7,151,500 shares. The registration statement
will become effective upon filing. Accordingly, shares registered under the
registration statement will be available for sale in the open market
immediately, after complying with Rule 144 volume limitations applicable to
affiliates, and with applicable 180-day lock-up agreements.
REGISTRATION RIGHTS
After the completion of this offering, holders of 13,746,735 shares of
common stock will be entitled to specific rights to register those shares for
sale in the public market. See "Description of Capital Stock--Registration
Rights." Registration of these shares under the Securities Act would result in
the shares becoming freely tradable without restriction under the Securities
Act, except for shares purchased by affiliates, immediately upon the
effectiveness of the registration.
63
<PAGE>
UNDERWRITING
The underwriters named below, acting through their representatives,
BancBoston Robertson Stephens Inc., Hambrecht & Quist LLC and Dain Rauscher
Wessels, a division of Dain Rauscher Incorporated, have severally agreed with
us, subject to the terms and conditions of the underwriting agreement, to
purchase from us the numbers of shares of common stock set forth opposite their
names below. The underwriters are committed to purchase and pay for all of the
shares if any are purchased.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- ----------- ---------
<S> <C>
BancBoston Robertson Stephens Inc...........................
Hambrecht & Quist LLC.......................................
Dain Rauscher Wessels.......................................
---------
Total...................................................
=========
</TABLE>
We have been advised that the underwriters propose to offer the shares of
common stock to the public at the public offering price located on the cover
page of this prospectus and to dealers at that price less a concession of not in
excess of $ per share, of which $ may be reallowed to other dealers. After
the initial public offering, the public offering price, concession and
reallowance to dealers may be reduced by the representatives. No reduction in
this price will change the amount of proceeds to be received by us as indicated
on the cover page of this prospectus.
OVER-ALLOTMENT OPTION. We have granted to the underwriters an option,
exercisable during the 30-day period after the date of this prospectus, to
purchase up to additional shares of common stock at the same price per
share as we will receive for the shares that the underwriters have agreed
to purchase. To the extent that the underwriters exercise this option, each of
the underwriters will have a firm commitment to purchase approximately the same
percentage of additional shares that the number of shares of common stock to be
purchased by it shown in the above table represents as a percentage of the
shares offered by this prospectus. If purchased, the additional shares
will be sold by the underwriters on the same terms as those on which the
shares are being sold. We will be obligated, under this option, to sell shares
to the extent the option is exercised. The underwriters may exercise the option
only to cover over-allotments made in connection with the sale of the
shares of common stock offered by this prospectus.
The following table shows the per share and total underwriting discounts and
commissions to be paid by us to the underwriters. This information is presented
assuming either no exercise or full exercise by the underwriters of their
over-allotment option.
<TABLE>
<CAPTION>
WITHOUT WITH
PER OVER-ALLOTMENT OVER-ALLOTMENT
SHARE OPTION OPTION
-------- -------------- --------------
<S> <C> <C> <C>
Assumed public offering price........... $ $ $
Underwriting discounts and
commissions...........................
Proceeds, before expenses, to us........
</TABLE>
The expenses of the offering payable by us are estimated at $900,000.
BancBoston Robertson Stephens Inc. expects to deliver the shares of common stock
to purchasers on .
64
<PAGE>
INDEMNITY. The underwriting agreement contains covenants of indemnity among
the underwriters and us against certain civil liabilities, including liabilities
under the Securities Act and liabilities arising from breaches of representation
and warranties contained in the underwriting agreement.
FUTURE SALES. Each of our executive officers, directors and other
significant stockholders of record has agreed with the representatives, for a
period of 180 days after the date of this prospectus, not to offer to sell,
contract to sell or otherwise sell, dispose of, loan, pledge or grant any rights
with respect to any shares of common stock, any options or warrants to purchase
any shares of common stock, or any securities convertible into or exchangeable
for shares of common stock owned as of the date of this prospectus or acquired
directly from us by these holders or with respect to which they have or may
acquire the power of disposition, without the prior written consent of
BancBoston Robertson Stephens Inc. However, BancBoston Robertson Stephens Inc.
may, in its sole discretion and at any time without notice, release all or any
portion of the securities subject to lock-up agreements. In addition, we have
agreed that during the 180 days after the date of this prospectus we will not,
without the prior written consent of BancBoston Robertson Stephens Inc.,
(1) consent to the disposition of any shares held by stockholders subject to
lock-up agreements prior to the expiration of the lock-up period or (2) issue,
sell, contract to sell, or otherwise dispose of, any shares of common stock, any
options to purchase any shares of common stock or any securities convertible
into, exercisable for or exchangeable for shares of common stock other than
(a) our sale of shares in this offering, (b) the issuance of common stock upon
the exercise of outstanding options and the issuance of options under existing
stock option and incentive plans, provided such common stock and the common
stock issuable upon the exercise of such options cannot be transferred prior to
the expiration of the lock-up period and (c) the issuance of shares in
connection with certain acquisitions that cannot be sold on the public market
during the lock-up period. Please see "Shares Eligible for Future Sale."
DIRECTED SHARES. We have requested that the underwriters reserve up to five
percent of the shares of common stock for sale at the initial public offering
price to directors, officers, employees and other individuals designated by us.
The underwriters have informed us that they do not intend to confirm sales
to any accounts over which they exercise discretionary authority.
NO PRIOR PUBLIC MARKET. Prior to this offering, there has been no public
market for the common stock. Consequently, the initial public offering price for
the common stock offered by this prospectus will be determined through
negotiations between us and the representatives. Among the factors to be
considered in these negotiations are prevailing market conditions, our financial
information, market valuations of other companies that we and the
representatives believe to be comparable to us, estimates of our business
potential, the present state of our development and other factors deemed
relevant.
STABILIZATION. The representatives have advised us that, under
Regulation M under the Securities Exchange Act, some participants in the
offering may engage in transactions, including stabilizing bids, syndicate
covering transactions or the imposition of penalty bids, that may have the
effect of stabilizing or maintaining the market price of the common stock at a
level above that which might otherwise prevail in the open market. A
"stabilizing bid" is a bid for or the purchase of the common stock on behalf of
the underwriters for the purpose of fixing or maintaining the price of the
common stock. A "syndicate covering transaction" is the bid for or purchase of
the common stock on behalf of the underwriters to reduce a short position
incurred by the underwriters in connection with the offering. A "penalty bid" is
an arrangement permitting the representatives to reclaim the selling concession
otherwise accruing to an underwriter or syndicate member in connection with the
offering if the common stock originally sold by the underwriter or syndicate
member is purchased by the representatives in a syndicate covering transaction
and has therefore not been effectively placed by the underwriter or syndicate
member. The representatives have advised us that these transactions may be
effected on the Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.
65
<PAGE>
LEGAL MATTERS
The validity of the shares offered in this prospectus will be passed upon
for us by Foley, Hoag & Eliot LLP, Boston, Massachusetts. Legal matters will be
passed upon for the underwriters by Hale and Dorr LLP, Boston, Massachusetts.
EXPERTS
The financial statements as of December 31, 1997 and 1998 and for each of
the three years in the period ended December 31, 1998 included in this
prospectus and the registration statement relating to this prospectus have been
audited by Arthur Andersen LLP, as independent public accountants, as indicated
in their report with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in giving said reports.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-1 with the SEC for our
common stock offered hereby. This prospectus does not contain all of the
information set forth in the registration statement. You should refer to the
registration statement and its exhibits for additional information. Whenever we
make reference in this prospectus to any of our contracts, agreements or other
documents, the references are not necessarily complete and you should refer to
the exhibits attached to the registration statement for the copies of the actual
contract, agreement or other document. When we complete this offering, we will
also be required to file annual, quarterly and special reports, proxy statements
and other information with the SEC.
You can read our SEC filings, including the registration statement, over the
Internet at the SEC's Web site at http://www.sec.gov. You may also read and copy
any document we file with the SEC at its public reference facilities at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; Suite
1400, 500 West Madison Street, Chicago, Illinois 60661 and 7 World Trade Center,
Thirteenth Floor, New York, New York 10048. You may also obtain copies of the
documents at prescribed rates by writing to the Public Reference Section of the
SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the public reference facilities.
We intend to send our stockholders annual reports containing audited
consolidated financial statements and quarterly reports containing unaudited
consolidated financial statements for the first three quarters of each fiscal
year.
66
<PAGE>
CENTRA SOFTWARE, INC.
CONSOLIDATED FINANCIAL STATEMENTS
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheets as of December 31, 1997 and 1998
and September 30, 1999 (unaudited) and Pro Forma September
30, 1999 (unaudited)...................................... F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1996,
1997 and 1998, and for the Nine Months Ended September 30,
1998 and 1999 (unaudited)................................. F-4
Consolidated Statements of Redeemable Convertible Preferred
Stock and Stockholders' Equity (Deficit) for the Years
Ended December 31, 1996, 1997 and 1998, and for the Nine
Months Ended September 30, 1999 (unaudited) and Pro Forma
September 30, 1999 (unaudited)............................ F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1997 and 1998 and for the Nine Months
Ended September 30, 1998 and 1999 (unaudited)............. F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Centra Software, Inc.:
We have audited the accompanying consolidated balance sheets of Centra
Software, Inc. (a Delaware corporation) and subsidiary as of December 31, 1997
and 1998, and the related consolidated statements of operations, redeemable
convertible preferred stock and stockholders' equity (deficit) and cash flows
for each of the three years in the period ended December 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Centra Software, Inc. and
subsidiary as of December 31, 1997 and 1998, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1998, in conformity with generally accepted accounting principles.
Arthur Andersen LLP
Boston, Massachusetts
March 2, 1999 (except with respect to
matters discussed in Note 8(b) and 8(e) as to
which the date is October 27, 1999)
F-2
<PAGE>
CENTRA SOFTWARE, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
-------------------------- SEPTEMBER 30, SEPTEMBER 30,
1997 1998 1999 1999
----------- ------------ ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 8,009,000 $ 1,979,000 $ 3,893,000 $ 3,893,000
Short-term investments.................................... 70,000 -- 5,759,000 5,759,000
Accounts receivable, net of reserves of approximately
$50,000, $100,000 and $219,000 at December 31, 1997,
1998 and September 30, 1999, respectively............... 150,000 1,769,000 2,528,000 2,528,000
Prepaid expenses and other current assets................. 77,000 190,000 401,000 401,000
----------- ------------ ------------ ------------
Total current assets.................................. 8,306,000 3,938,000 12,581,000 12,581,000
----------- ------------ ------------ ------------
Property and Equipment, at cost:
Computers and equipment................................... 795,000 1,187,000 1,758,000 1,758,000
Furniture and fixtures.................................... 160,000 204,000 182,000 182,000
Leasehold improvements.................................... 29,000 66,000 72,000 72,000
----------- ------------ ------------ ------------
984,000 1,457,000 2,012,000 2,012,000
Less--Accumulated depreciation and amortization........... 295,000 660,000 1,079,000 1,079,000
----------- ------------ ------------ ------------
689,000 797,000 933,000 933,000
----------- ------------ ------------ ------------
Restricted Cash........................................... 211,000 -- -- --
----------- ------------ ------------ ------------
Other Assets.............................................. 32,000 18,000 106,000 106,000
----------- ------------ ------------ ------------
$ 9,238,000 $ 4,753,000 $ 13,620,000 $ 13,620,000
=========== ============ ============ ============
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Current maturities of term loan........................... $ 130,000 $ 325,000 $ 338,000 $ 338,000
Accounts payable and accrued expenses..................... 871,000 1,347,000 1,364,000 1,364,000
Deferred revenue.......................................... 64,000 725,000 1,331,000 1,331,000
----------- ------------ ------------ ------------
Total current liabilities............................. 1,065,000 2,397,000 3,033,000 3,033,000
----------- ------------ ------------ ------------
Term loan, net of current maturities........................ 158,000 530,000 455,000 455,000
----------- ------------ ------------ ------------
Commitments (Note 6)
Redeemable convertible preferred stock, $0.001 par value--
Authorized--9,164,490 shares; no shares pro forma
Issued and outstanding--6,469,490 shares, 6,469,490
shares, 9,164,490 shares, and no shares as of December
31, 1997 and 1998, September 30, 1999 and pro forma
September 30, 1999, respectively, at carrying value..... 17,992,000 18,498,000 32,353,000 6,480,000
----------- ------------ ------------ ------------
Stockholders' equity (deficit):
Preferred stock (undesignated), $0.001 par value--
Authorized--no shares; actual 10,000,000 shares pro forma
Issued and outstanding--none; actual and pro forma
Common stock, $0.001 par value--
Authorized--25,000,000 shares; actual; 100,000,000 shares
pro forma
Issued--3,534,375 shares, 3,742,689 shares, 4,572,003
shares and 18,318,738 shares at December 31, 1997, 1998,
September 30, 1999 and pro forma September 30, 1999,
respectively............................................ 3,000 3,000 4,000 18,000
Additional paid-in capital.................................. 636,000 693,000 2,709,000 29,345,000
Accumulated deficit......................................... (10,595,000) (17,354,000) (23,325,000) (24,102,000)
Deferred compensation....................................... -- -- (1,561,000) (1,561,000)
Stock subscription receivable............................... (8,000) -- (11,000) (11,000)
Treasury stock (447,089 shares, 455,339 shares 641,901
shares and 641,901 shares of common stock at December 31,
1997, 1998 and September 30, 1999 and pro forma September
30, 1999, respectively, at cost).......................... (13,000) (14,000) (37,000) (37,000)
----------- ------------ ------------ ------------
Total stockholders' equity (deficit).................. (9,977,000) (16,672,000) (22,221,000) 3,652,000
----------- ------------ ------------ ------------
$ 9,238,000 $ 4,753,000 $ 13,620,000 $ 13,620,000
=========== ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
CENTRA SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------- -------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
License..................... $ -- $ 234,000 $ 3,356,000 $ 2,117,000 $ 4,534,000
Service..................... -- 55,000 870,000 599,000 1,048,000
----------- ----------- ----------- ----------- -----------
Total revenues.......... -- 289,000 4,226,000 2,716,000 5,582,000
----------- ----------- ----------- ----------- -----------
Cost of Revenues:
License..................... -- 75,000 185,000 120,000 138,000
Service..................... -- 130,000 919,000 684,000 1,058,000
----------- ----------- ----------- ----------- -----------
Total cost of
revenues.............. -- 205,000 1,104,000 804,000 1,196,000
----------- ----------- ----------- ----------- -----------
Gross profit............ -- 84,000 3,122,000 1,912,000 4,386,000
----------- ----------- ----------- ----------- -----------
Operating Expenses:
Sales and marketing......... 607,000 2,465,000 5,066,000 3,534,000 5,218,000
Product development......... 1,564,000 3,042,000 3,078,000 2,035,000 3,138,000
General and
administrative............ 463,000 983,000 1,442,000 1,064,000 1,544,000
Compensation charge for
issuance of stock
options................... -- -- -- -- 236,000
----------- ----------- ----------- ----------- -----------
Total operating
expenses.............. 2,634,000 6,490,000 9,586,000 6,633,000 10,136,000
----------- ----------- ----------- ----------- -----------
Operating Loss.............. (2,634,000) (6,406,000) (6,464,000) (4,721,000) (5,750,000)
Interest Income............... 74,000 69,000 244,000 214,000 259,000
Interest Expense.............. (9,000) (34,000) (33,000) (21,000) (48,000)
----------- ----------- ----------- ----------- -----------
Net loss.................... (2,569,000) (6,371,000) (6,253,000) (4,528,000) (5,539,000)
Accretion of discount on
preferred stock............. 373,000 506,000 506,000 380,000 380,000
----------- ----------- ----------- ----------- -----------
Net loss attributable to
common stockholders......... $(2,942,000) $(6,877,000) $(6,759,000) $(4,908,000) $(5,919,000)
=========== =========== =========== =========== ===========
Basic and diluted net loss per
common share................ $ (0.75) $ (1.33) $ (1.16) $ (0.86) $ (0.92)
=========== =========== =========== =========== ===========
Pro forma basic and diluted
net loss per common share... $ (0.68) $ (0.45)
=========== ===========
Weighted average common shares
outstanding:
Basic and diluted........... 3,935,000 5,156,000 5,845,000 5,706,000 6,457,000
=========== =========== =========== =========== ===========
Pro forma basic and
diluted................... 11,725,000 14,736,000
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
CENTRA SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (DEFICIT)
FOR EACH OF THE THREE YEARS ENDED DECEMBER 31, 1998
AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
REDEEMABLE CONVERTIBLE STOCKHOLDERS' DEFICIT
PREFERRED STOCK -----------------------------------------------
-------------------------- COMMON STOCK
CARRYING ----------------------------- ADDITIONAL
SHARES VALUE SHARES $0.001 PAR VALUE PAID-IN CAPITAL
---------- ------------- ---------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995........................ 1,133,000 $ 1,105,000 2,248,500 $ 2,000 $ 117,000
Sale of series B redeemable convertible
preferred stock, net of issuance costs of
$14,000....................................... 1,416,490 2,833,000 -- -- 354,000
Accretion of series A and B redeemable
convertible preferred stock discount.......... -- 373,000 -- -- --
Sale of common stock............................ -- -- 481,500 -- 32,000
Repurchase of common stock...................... -- -- -- -- --
Net loss........................................ -- -- -- -- --
---------- ----------- ---------- ------- -----------
BALANCE, DECEMBER 31, 1996........................ 2,549,490 4,311,000 2,730,000 2,000 503,000
Sale of series C redeemable convertible
preferred stock, net of issuance costs of
$27,000....................................... 1,670,000 4,175,000 -- -- --
Sale of series D redeemable convertible
preferred stock, net of issuance costs of
$20,000....................................... 2,250,000 9,000,000 -- -- --
Accretion of series A and B redeemable
convertible preferred stock discount.......... -- 506,000 -- -- --
Sale of common stock............................ -- -- 804,375 1,000 133,000
Repurchase of common stock...................... -- -- -- -- --
Net loss........................................ -- -- -- -- --
---------- ----------- ---------- ------- -----------
BALANCE, DECEMBER 31, 1997........................ 6,469,490 17,992,000 3,534,375 3,000 636,000
Accretion of series A and B redeemable
convertible preferred stock discount.......... -- 506,000 -- -- --
Sale of common stock............................ -- -- 208,314 -- 57,000
Repurchase of common stock...................... -- -- -- -- --
Net loss........................................ -- -- -- -- --
---------- ----------- ---------- ------- -----------
BALANCE, DECEMBER 31, 1998........................ 6,469,490 18,498,000 3,742,689 3,000 693,000
Sales of series E redeemable convertible
preferred stock, net of issuance costs of
$52,000....................................... 2,695,000 13,475,000 -- -- --
Deferred compensation related to grants of
common stock options.......................... -- -- -- -- 1,797,000
Amortization of deferred compensation........... -- -- -- -- --
Accretion of series A and B redeemable
convertible preferred stock discount.......... -- 380,000 -- -- --
Sale of common stock............................ -- -- 829,314 1,000 219,000
Repurchase of common stock...................... -- -- -- -- --
Net loss........................................ -- -- -- -- --
---------- ----------- ---------- ------- -----------
BALANCE, SEPTEMBER 30, 1999 (UNAUDITED)........... 9,164,490 32,353,000 4,572,003 4,000 2,709,000
Accretion of series A and B redeemable
convertible preferred stock discount
(unaudited)................................... -- 777,000 -- -- --
Conversion of redeemable convertible preferred
stock into common stock (unaudited)........... (9,164,490) (26,650,000) 13,746,735 14,000 26,636,000
---------- ----------- ---------- ------- -----------
PRO FORMA BALANCE, SEPTEMBER 30, 1999
(UNAUDITED)....................................... -- $ 6,480,000 18,318,738 $18,000 $29,345,000
========== =========== ========== ======= ===========
<CAPTION>
STOCKHOLDERS' DEFICIT
--------------------------------------------------------------------
STOCK TREASURY STOCK
ACCUMULATED DEFERRED SUBSCRIPTION -------------------
DEFICIT COMPENSATION RECEIVABLE SHARES COST
------------ ------------ ---------------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995........................ $ (715,000) $ -- $ -- 105,000 $ --
Sale of series B redeemable convertible
preferred stock, net of issuance costs of
$14,000....................................... (14,000) -- -- -- --
Accretion of series A and B redeemable
convertible preferred stock discount.......... (373,000) -- -- -- --
Sale of common stock............................ -- -- -- -- --
Repurchase of common stock...................... -- -- -- 290,433 (10,000)
Net loss........................................ (2,569,000) -- -- -- --
------------ ----------- -------- ------- --------
BALANCE, DECEMBER 31, 1996........................ (3,671,000) -- -- 395,433 (10,000)
Sale of series C redeemable convertible
preferred stock, net of issuance costs of
$27,000....................................... (27,000) -- -- -- --
Sale of series D redeemable convertible
preferred stock, net of issuance costs of
$20,000....................................... (20,000) -- -- -- --
Accretion of series A and B redeemable
convertible preferred stock discount.......... (506,000) -- -- -- --
Sale of common stock............................ -- -- (8,000) -- --
Repurchase of common stock...................... -- -- -- 51,656 (3,000)
Net loss........................................ (6,371,000) -- -- -- --
------------ ----------- -------- ------- --------
BALANCE, DECEMBER 31, 1997........................ (10,595,000) -- (8,000) 447,089 (13,000)
Accretion of series A and B redeemable
convertible preferred stock discount.......... (506,000) -- -- -- --
Sale of common stock............................ -- -- 8,000 -- --
Repurchase of common stock...................... -- -- -- 8,250 (1,000)
Net loss........................................ (6,253,000) -- -- -- --
------------ ----------- -------- ------- --------
BALANCE, DECEMBER 31, 1998........................ (17,354,000) -- -- 455,339 (14,000)
Sales of series E redeemable convertible
preferred stock, net of issuance costs of
$52,000....................................... (52,000) -- -- -- --
Deferred compensation related to grants of
common stock options.......................... -- (1,797,000) -- -- --
Amortization of deferred compensation........... -- 236,000 -- -- --
Accretion of series A and B redeemable
convertible preferred stock discount.......... (380,000) -- -- -- --
Sale of common stock............................ -- -- (11,000) -- --
Repurchase of common stock...................... -- -- -- 186,562 (23,000)
Net loss........................................ (5,539,000) -- -- -- --
------------ ----------- -------- ------- --------
BALANCE, SEPTEMBER 30, 1999 (UNAUDITED)........... (23,325,000) (1,561,000) (11,000) 641,901 (37,000)
Accretion of series A and B redeemable
convertible preferred stock discount
(unaudited)................................... (777,000) -- -- -- --
Conversion of redeemable convertible preferred
stock into common stock (unaudited)........... -- -- -- -- --
------------ ----------- -------- ------- --------
PRO FORMA BALANCE, SEPTEMBER 30, 1999
(UNAUDITED)....................................... $(24,102,000) $(1,561,000) $(11,000) 641,901 $(37,000)
============ =========== ======== ======= ========
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY (DEFICIT)
----------------
<S> <C>
BALANCE, DECEMBER 31, 1995........................ $ (596,000)
Sale of series B redeemable convertible
preferred stock, net of issuance costs of
$14,000....................................... 340,000
Accretion of series A and B redeemable
convertible preferred stock discount.......... (373,000)
Sale of common stock............................ 32,000
Repurchase of common stock...................... (10,000)
Net loss........................................ (2,569,000)
------------
BALANCE, DECEMBER 31, 1996........................ (3,176,000)
Sale of series C redeemable convertible
preferred stock, net of issuance costs of
$27,000....................................... (27,000)
Sale of series D redeemable convertible
preferred stock, net of issuance costs of
$20,000....................................... (20,000)
Accretion of series A and B redeemable
convertible preferred stock discount.......... (506,000)
Sale of common stock............................ 126,000
Repurchase of common stock...................... (3,000)
Net loss........................................ (6,371,000)
------------
BALANCE, DECEMBER 31, 1997........................ (9,977,000)
Accretion of series A and B redeemable
convertible preferred stock discount.......... (506,000)
Sale of common stock............................ 65,000
Repurchase of common stock...................... (1,000)
Net loss........................................ (6,253,000)
------------
BALANCE, DECEMBER 31, 1998........................ (16,672,000)
Sales of series E redeemable convertible
preferred stock, net of issuance costs of
$52,000....................................... (52,000)
Deferred compensation related to grants of
common stock options.......................... --
Amortization of deferred compensation........... 236,000
Accretion of series A and B redeemable
convertible preferred stock discount.......... (380,000)
Sale of common stock............................ 209,000
Repurchase of common stock...................... (23,000)
Net loss........................................ (5,539,000)
------------
BALANCE, SEPTEMBER 30, 1999 (UNAUDITED)........... (22,221,000)
Accretion of series A and B redeemable
convertible preferred stock discount
(unaudited)................................... (777,000)
Conversion of redeemable convertible preferred
stock into common stock (unaudited)........... 26,650,000
------------
PRO FORMA BALANCE, SEPTEMBER 30, 1999
(UNAUDITED)....................................... $ 3,652,000
============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
CENTRA SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------- -------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss................................................ $(2,569,000) $(6,371,000) $(6,253,000) $(4,528,000) $(5,539,000)
Adjustments to reconcile net loss to net cash used in
operating activities--
Depreciation and amortization......................... 100,000 227,000 369,000 255,000 421,000
Compensation charge for issuance of stock options..... -- -- -- -- 236,000
Loss on disposal of fixed assets...................... -- 51,000 -- -- --
Changes in current assets and liabilities--
Accounts receivable................................. -- (149,000) (1,619,000) (788,000) (759,000)
Prepaid expenses and other current assets........... (30,000) (46,000) (113,000) (105,000) (211,000)
Accounts payable and accrued expenses............... 167,000 610,000 475,000 (49,000) 16,000
Deferred revenue.................................... -- 64,000 660,000 434,000 606,000
----------- ----------- ----------- ----------- -----------
Net cash used in operating activities............. (2,332,000) (5,614,000) (6,481,000) (4,781,000) (5,230,000)
----------- ----------- ----------- ----------- -----------
Cash Flows from Investing Activities:
Purchase of property and equipment, net................. (315,000) (543,000) (472,000) (362,000) (557,000)
Purchases of short-term investments..................... -- (70,000) -- -- (5,759,000)
Sale of short-term investments.......................... 499,000 -- 70,000 70,000 --
(Increase) decrease in other assets..................... (133,000) 113,000 10,000 9,000 (88,000)
(Increase) decrease in restricted cash.................. -- (161,000) 211,000 211,000 --
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in) investing
activities...................................... 51,000 (661,000) (181,000) (72,000) (6,404,000)
----------- ----------- ----------- ----------- -----------
Cash Flows from Financing Activities:
Proceeds from sale of preferred stock, net.............. 3,173,000 13,128,000 -- -- 13,423,000
Proceeds from sale of common stock...................... 32,000 126,000 65,000 59,000 209,000
Purchase of treasury stock.............................. (10,000) (3,000) (1,000) (1,000) (23,000)
Proceeds from term loan................................. 81,000 159,000 713,000 321,000 209,000
Payments on term loan................................... (47,000) (88,000) (120,000) (89,000) (245,000)
Payments on capital lease obligations................... -- (2,000) (25,000) (21,000) (25,000)
----------- ----------- ----------- ----------- -----------
Net cash provided by financing activities......... 3,229,000 13,320,000 632,000 269,000 13,548,000
----------- ----------- ----------- ----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents...... 948,000 7,045,000 (6,030,000) (4,584,000) 1,914,000
Cash and Cash Equivalents, beginning of period............ 16,000 964,000 8,009,000 8,009,000 1,979,000
----------- ----------- ----------- ----------- -----------
Cash and Cash Equivalents, end of period.................. $ 964,000 $ 8,009,000 $ 1,979,000 $ 3,425,000 $ 3,893,000
=========== =========== =========== =========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest................ $ 9,000 $ 34,000 $ 37,000 $ 23,000 $ 50,000
=========== =========== =========== =========== ===========
Supplemental Disclosure of Noncash Financing Activities:
Accretion of discount on series A and series B
redeemable convertible preferred stock................ $ 373,000 $ 506,000 $ 506,000 $ 380,000 $ 380,000
=========== =========== =========== =========== ===========
Property and equipment acquired under capital lease..... $ -- $ 111,000 $ -- $ -- $ --
=========== =========== =========== =========== ===========
Issuance of common stock and stock subscription
receivable............................................ $ -- $ 8,000 $ -- $ -- $ 11,000
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
CENTRA SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(1) OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Centra Software, Inc. (Centra) was incorporated as a Delaware corporation on
April 4, 1995. From incorporation in April 1995 through June 1997, Centra was in
the development stage, engaged primarily in development of its initial products.
In July 1997, Centra began commercial shipment of its initial product. Centra is
a provider of software and services that support live eBusiness collaboration,
collaborative commerce and corporate learning.
Centra is subject to certain business risks that could affect future
operations and financial performance. These risks include, but are not limited
to, rapid technological changes, significant competition, dependence on key
individuals, quarterly performance fluctuations, ability to enhance existing
products and services and the need to obtain adequate financing to fund these
enhancements and for the development of new products.
The accompanying consolidated financial statements reflect the application
of certain accounting polices, as described in this note and elsewhere in the
notes to consolidated financial statements.
(A) BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Centra and its
wholly-owned subsidiary, Centra Software Europe Limited, which was incorporated
in the United Kingdom on June 25, 1999. All significant intercompany
transactions and balances have been eliminated in consolidation.
(B) INTERIM FINANCIAL INFORMATION
The financial information as of September 30, 1999, and for the nine months
ended September 30, 1998 and 1999 is unaudited but includes all adjustments,
consisting of only normal recurring adjustments, that in the opinion of
management are necessary for a fair presentation of Centra's financial position,
operating result, and cash flows for such periods. Operating results for the
nine month period ended September 30, 1999 are not necessarily indicative of
results to be expected for the full year of 1999 or any future period.
(C) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ materially from those estimates.
(D) REVENUE RECOGNITION
Centra recognizes revenue in accordance with the American Institute of
Certified Public Accountants' (AICPA) Statement of Position 97-2, SOFTWARE
REVENUE RECOGNITION (SOP 97-2), as amended by Statement of Position 98-4,
DEFERRAL OF THE EFFECTIVE DATE OF A PROVISION of SOP 97-2 (SOP 98-4). Centra
derives substantially all of its revenue from the sale of software licenses,
post-contract support (maintenance), and other services. Maintenance includes
telephone technical support, bug fixes and rights to upgrades and enhancements
on a when-and-if available basis. Professional services include training and
basic implementation consulting to meet specific customer needs.
F-7
<PAGE>
CENTRA SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(1) OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue from license fees is recognized when persuasive evidence of an
agreement exists, delivery of the product has occurred, the fee is fixed or
determinable and collectability is probable. Advance payments are recorded as
deferred revenue until the products are shipped, services are delivered or
obligations are met. Centra's products do not require significant customization.
Revenue related to maintenance is recognized on a straight-line basis over
the period that maintenance is provided and revenue allocable to services is
recognized as the services are performed.
In December 1998, the AICPA issued Statement of Position 98-9, MODIFICATION
OF SOP 97-2, SOFTWARE REVENUE RECOGNITION, WITH RESPECT TO CERTAIN TRANSACTIONS
(SOP 98-9). SOP 98-9 requires use of the residual method for recognition of
revenue when vendor-specific objective evidence exists for undelivered elements
but does not exist for delivered elements of a software arrangement. Centra will
be required to comply with the provisions of SOP 98-9 for transactions entered
into beginning January 1, 2000. Centra does not expect that the adoption of SOP
98-9 will have a material effect on the financial position or results of
operations.
(E) CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
Centra considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents. Investments with
maturities greater than three months and less than 12 months are classified as
short-term investments.
Centra accounts for cash equivalents and short-term investments in
accordance with Statement of Financial Accounting Standards (SFAS) No. 115,
ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES. At
December 31, 1997, Centra's cash equivalents and short-term investments
consisted of money market accounts and certificates of deposit, respectively. At
December 31, 1998, Centra's cash equivalents consisted of money market accounts
and highly rated commercial paper. At September 30, 1999, Centra's cash
equivalents and short-term investments consisted of money market accounts and
highly rated corporate bonds, respectively. The average maturity of Centra's
short-term investments is approximately three months at September 30, 1999. All
cash equivalents and short-term investments are classified as held-to-maturity
and are recorded at their amortized cost, which approximates market. To date,
Centra has not recorded any realized gains or losses on the sale of short-term
investments.
(F) DEPRECIATION AND AMORTIZATION
Centra provides for depreciation and amortization of property and equipment
using the straight-line method by charges to operations in amounts to allocate
the cost of assets over their estimated useful lives as follows:
<TABLE>
<CAPTION>
ESTIMATED
ASSET CLASSIFICATION USEFUL LIFE
- -------------------- -------------
<S> <C>
Computers and equipment..................................... 3 years
Furniture and fixtures...................................... 3 years
Leasehold improvements...................................... Life of lease
</TABLE>
F-8
<PAGE>
CENTRA SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(1) OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(G) PRODUCT DEVELOPMENT COSTS
SFAS No. 86, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE TO BE SOLD,
LEASED OR OTHERWISE MARKETED, requires capitalization of certain software
development costs subsequent to the establishment of technological feasibility.
Based upon Centra's product development process, technological feasibility is
established upon completion of a working model. Costs incurred by Centra between
the establishment of technological feasibility and the point at which the
product is ready for general release has not been significant. Accordingly,
Centra has charged all such costs to product development expenses in the
accompanying consolidated statements of operations.
(H) DISCLOSURE OF FAIR VALUE OF FINANCIAL INSTRUMENTS AND CONCENTRATION OF
CREDIT RISK
Financial instruments that potentially expose Centra to concentrations of
credit risk consist mainly of cash and cash equivalents, short-term investments
and accounts receivable. Centra maintains its cash and cash equivalents
principally in domestic financial institutions of high credit standing and its
short-term investments in highly rated corporate bonds. Centra's accounts
receivable are derived primarily from sales of software products and services.
Centra performs credit evaluations of its customers and generally does not
require collateral. Centra does not believe that significant credit risk exists
at December 31, 1997 and 1998 and September 30, 1999. The carrying amounts of
Centra's financial instruments approximate fair market value.
During the year ended December 31, 1998 and nine months ended September 30,
1998, Centra had one customer for each period who accounted for 11% and 13%,
respectively, of revenues. No customer accounted for greater than 10% of
revenues for the year ended December 31, 1997 or the nine months ended
September 30, 1999. Centra had no revenues during the year ended December 31,
1996. Centra had five customers who accounted for 11%, 12%, 12%, 14% and 16% of
accounts receivable, respectively, at December 31, 1997. As of December 31,
1998, Centra had one customer who accounted for 17% of accounts receivable. As
of September 30, 1999, Centra had two customers who accounted for 15% and 10% of
accounts receivables, respectively.
(I) FOREIGN CURRENCY TRANSLATION
The financial statements of Centra's non-US subsidiary are translated in
accordance with SFAS No. 52 FOREIGN CURRENCY TRANSLATION. The functional
currency of Centra's foreign subsidiary is the US dollar, accordingly, all
assets and liabilities of the foreign subsidiary are translated using the
exchange rate at the balance sheet date except for property and equipment and
stockholders' deficit, which are translated at historical rates. Revenues and
expenses are translated at average rates during the period, except for
depreciation and amortization, which are translated at historical rates.
Transaction and translation gains and losses are included in the accompanying
consolidated statement of operations for the nine months ended September 30,
1999 and were not material to the financial statements taken as a whole.
(J) COMPREHENSIVE INCOME (LOSS)
As of January 1, 1998, Centra adopted SFAS No. 130, REPORTING COMPREHENSIVE
INCOME. SFAS No. 130 requires disclosure of all components of comprehensive
income (loss) on an annual and
F-9
<PAGE>
CENTRA SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(1) OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
interim basis. Comprehensive income (loss) is defined as the change in equity of
a business enterprise during a period from transactions and other events and
circumstances from nonowner sources. Centra's comprehensive loss is equal to net
loss for all periods presented.
(K) NET LOSS PER SHARE
Basic and diluted net loss per share are presented in conformity with SFAS
No. 128, EARNING PER SHARE (SFAS No. 128) for all periods presented. Pursuant to
Securities and Exchange Commission Staff Accounting Bulletin No. 98, common
stock and redeemable convertible preferred stock issued or granted for nominal
consideration prior to the anticipated effective date of Centra's initial public
offering must be included in the calculation of basic and diluted net loss per
share as if they had been outstanding for all periods presented. The common
shares to be issued for the series A and series B preferred stock upon
conversion, redemption or liquidation will be for nominal consideration due to
the liquidation premium payable to the holders of series A and series B.
Accordingly, such shares have been included in the calculation of basic and
diluted net loss per share from date of issuance. In accordance with SFAS
No. 128, basic and diluted net loss per share has been computed by dividing the
weighted-average number of shares of common stock outstanding during the period,
less shares subject to repurchase into the net loss attributable to common
stockholders.
(L) PRO FORMA NET LOSS PER SHARE
Pro forma net loss per share has been computed as described above and also
gives effect to the conversion of redeemable convertible preferred stock not
included in the computation of basic and diluted net loss per share that will
automatically convert upon the completion of Centra's proposed initial public
offering (using the if-converted method) from the original date of issuance.
Upon consummation of the proposed initial public offering, all of the redeemable
convertible preferred stock outstanding as of September 30, 1999 will be
converted into an aggregate of 13,746,735 shares of common stock.
F-10
<PAGE>
CENTRA SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(1) OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Historical and pro forma basic and diluted net loss per share are as
follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------- -------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
HISTORICAL:
Net loss attributable to
common stockholders......... $(2,942,000) $(6,877,000) $(6,759,000) $(4,908,000) $(5,919,000)
=========== =========== =========== =========== ===========
Basic and diluted shares:
Weighted-average shares of
common stock outstanding.... 5,485,000 6,684,000 7,028,000 7,001,000 7,478,000
Less: weighted-average shares
subject to repurchase....... (1,550,000) (1,528,000) (1,183,000) (1,295,000) (1,021,000)
Weighted-average shares of
common stock outstanding
used in computing basic and
diluted net loss per
share....................... 3,935,000 5,156,000 5,845,000 5,706,000 6,457,000
----------- ----------- ----------- ----------- -----------
Basic and diluted net loss per
share....................... $ (0.75) $ (1.33) $ (1.16) $ (0.86) $ (0.92)
=========== =========== =========== =========== ===========
PRO FORMA:
Net loss attributable to
common stockholders......... $(6,759,000) $(5,919,000)
Less: Accretion of unamortized
discount on series A and B
preferred stock............. 1,157,000 777,000
----------- -----------
Net loss $(7,916,000) $(6,696,000)
=========== ===========
Weighted-average shares of
common stock outstanding
used in computing basic and
diluted net loss per
share....................... 5,845,000 6,457,000
Adjusted to reflect the
assumed conversion of
convertible preferred stock
from the date of issuance... 5,880,000 8,279,000
----------- -----------
Weighted-average shares of
common stock used in
computing pro forma basic
and diluted net loss per
share 11,725,000 14,736,000
=========== ===========
Pro forma basic and diluted
net loss per share.......... $ (0.68) $ (0.45)
=========== ===========
</TABLE>
F-11
<PAGE>
CENTRA SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(1) OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Options to purchase a total of 319,406, 641,513, 1,092,920, 1,060,670 and
1,695,525 common shares have not been included in the computation of dilutive
EPS above for the years ended December 31, 1996, 1997 and 1998 and for the nine
months ended September 30, 1998 and 1999, respectively. These shares are
considered antidilutive as Centra has recorded a loss for all periods presented.
(M) SEGMENT INFORMATION
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
(SFAS No. 131). As of September 30, 1999, Centra operates solely in one segment,
the development and marketing of software products and related services, and
therefore there is no impact to Centra's financial statements of adopting SFAS
No. 131. Centra's revenue from customers outside of the United States was
approximately $13,000, $585,000, $372,000 and $435,000 in the years ended
December 31, 1997 and 1998, and the nine months ended September 30, 1998 and
1999, respectively.
(N) RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the Accounting Standards Executive Committee issued Statement
of Position 98-1, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED OR
OBTAINED FOR INTERNAL USE (SOP 98-1). SOP 98-1 requires companies to capitalize
certain qualifying computer software costs that are incurred during the
application development stage and amortize them over the software's estimated
useful life. Centra adopted SOP 98-1 effective January 1, 1999. The adoption of
SOP 98-1 did not have a material effect on Centra's consolidated financial
position, results of operations or cash flows.
In April 1998, the AICPA issued SOP 98-5, REPORTING THE COSTS OF START-UP
ACTIVITIES (SOP 98-5). SOP 98-5 is effective beginning on January 1, 1999, and
requires that start-up costs, capitalized prior to January 1, 1999, be written
off and any future start-up costs be expensed as incurred. The adoption of SOP
98-5 did not have a material impact on Centra's financial position, results of
operations, or cash flows.
In June 1998, the FASB issued SFAS No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES (SFAS No. 133). SFAS No. 133 establishes
methods of accounting for derivative financial instruments and hedging
activities related to those instruments as well as other hedging activities.
Centra will be required to adopt SFAS No. 133 for its year ending December 31,
2001. However, because Centra does not currently utilize derivative financial
instruments, Centra does not believe the impact of SFAS No. 133 will be material
to its financial position, results of operations, or cash flows.
(2) INCOME TAXES
Centra provides for federal and state income taxes in accordance with SFAS
No. 109, ACCOUNTING FOR INCOME TAXES. Under the liability method specified by
SFAS No. 109, a deferred tax asset or liability is determined based on the
difference between the financial statement and tax bases of assets and
F-12
<PAGE>
CENTRA SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(2) INCOME TAXES (CONTINUED)
liabilities, as measured by the enacted tax rates. The components of Centra's
net deferred tax assets are approximately as follows at December 31, 1997 and
1998:
<TABLE>
<CAPTION>
1997 1998
----------- -----------
<S> <C> <C>
Net operating loss carryforwards................... $ 2,480,000 $ 5,821,000
Tax credit carryforwards........................... 285,000 406,000
Other temporary differences........................ 1,300,000 465,000
----------- -----------
4,065,000 6,692,000
Valuation allowance................................ (4,065,000) (6,692,000)
----------- -----------
Net deferred tax asset....................... $ -- $ --
=========== ===========
</TABLE>
A valuation allowance has been recorded in the accompanying financial
statements to offset this benefit, because of the uncertainty of realization.
As of December 31, 1998, Centra had federal tax net operating loss
carryforwards available to offset future taxable income, if any, of
approximately $14,617,000. These carryforwards expire through 2018 and are
subject to review and possible adjustment by the Internal Revenue Service.
The U.S. Internal Revenue Code of 1986, as amended (the Code), contains
provisions that may limit the net operating loss and tax credit carryforwards
available to be used in any given year upon the occurrence of certain events,
including changes in the ownership interests of significant stockholders. In the
event of a cumulative change in ownership in excess of 50% over a three-year
period, the amount of the net operating loss carryforwards and tax credit
carryforwards that Centra can utilize in any one year may be limited. In the
event of a change in ownership, as defined, the annual limitation on the use of
the existing net operating loss carryforwards is equal to an amount determined
by multiplying the value of Centra at the time of the ownership change by the
U.S. federal applicable rate of interest, as determined by the U.S. Internal
Revenue Service. Centra has completed several financings since its inception and
has not determined if its net operating losses and tax credit carryforwards have
been limited by these financings.
A reconciliation of the federal statutory rate to Centra's effective tax
rate is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Income tax provision at federal statutory rate.............. (34.0)% (34.0)% (34.0)%
Increase (decrease) in tax resulting from--
State tax provision, net of federal benefit................. (6.0) (6.0) (6.0)
Increase in valuation allowance............................. 40.0 40.0 40.0
----- ----- -----
Effective tax rate.......................................... --% --% --%
===== ===== =====
</TABLE>
(3) REVOLVING LINE OF CREDIT
Centra has a $750,000 revolving line of credit with a bank, which expires on
December 30, 1999. Borrowings under the revolving line of credit bear interest
at the bank's prime rate (8.25% at
F-13
<PAGE>
CENTRA SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(3) REVOLVING LINE OF CREDIT (CONTINUED)
September 30, 1999) plus .50% and are secured by substantially all assets of
Centra. As of December 31, 1997 and 1998 and September 30, 1999, no amounts were
outstanding under the revolving line of credit. In connection with the revolving
line of credit, Centra is required to comply with certain restrictive covenants
which include minimum adjusted quick ratio and minimum tangible net worth. As of
September 30, 1999, Centra was in compliance with these covenants.
(4) TERM LOAN FACILITY AND CAPITAL LEASES
Centra had a fixed asset line of credit/term loan facility, with a bank. On
September 30, 1999, all advances under the original fixed asset line of credit
had converted to a $480,000 term loan. Drawings under the original fixed asset
line of credit were permitted through June 30, 1998, at which time each drawing
under the line was converted to a term loan. In December 1998, Centra amended
the fixed asset line of credit to allow for an additional $600,000 fixed asset
line of credit. Advances under the amended line were permitted through
September 30, 1999. Principal repayments are due monthly for each advance in 36
equal installments upon the conversion. Total borrowings outstanding under the
term loans as of December 31, 1997 and 1998 and September 30, 1999 amounted to
$178,000, $771,000 and $734,000, respectively, and are secured by substantially
all assets of Centra. Outstanding amounts under the term loans bear interest at
8.75% and 9.25% per annum.
In addition to the above fixed asset line of credit/term loan facility,
Centra also has two capital leases. These leases bear interest at rate of 10.5%
per annum and are payable through June 2002. As of December 31, 1997 and 1998
and September 30, 1999 obligations under these capital leases amounted to
$110,000, $84,000 and $59,000, respectively.
Future principal maturities of Centra's long-term obligations as of
December 31, 1998 are as follows:
<TABLE>
<CAPTION>
YEAR
- ----
<S> <C>
1999.............................................. $324,000
2000.............................................. 278,000
2001.............................................. 250,000
2002.............................................. 3,000
--------
$855,000
========
</TABLE>
(5) LETTER OF CREDIT
In January 1997, Centra entered into an irrevocable standby letter of credit
of approximately $211,000, which was payable upon default of Centra's
noncancelable facility lease entered into in January 1997. This letter of credit
was collateralized by cash, which is classified as restricted cash on the
accompanying consolidated balance sheet as of December 31, 1997. This letter of
credit expired on January 12, 1998.
F-14
<PAGE>
CENTRA SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(6) COMMITMENTS
Centra conducts its operations in leased facilities and is obligated to pay
monthly rent through July 31, 2001. As of December 31, 1998, the minimum future
rental payments under the operating lease agreements, which includes two
noncancelable facility subleases entered into during 1997 and 1998, are
approximately as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ------------------------
<S> <C>
1999........................................................ $488,000
2000........................................................ 233,000
2001........................................................ 123,000
--------
$844,000
========
</TABLE>
Rent expense charged to operations was approximately $82,000, $257,000,
$362,000, $319,000 and $397,000, for the years ended December 31, 1996, 1997 and
1998 and for the nine-month periods ended September 30, 1998 and 1999,
respectively.
(7) REDEEMABLE CONVERTIBLE PREFERRED STOCK
Centra has 9,169,490 authorized shares of preferred stock, of which
1,133,000, 1,416,490, 1,670,000, 2,250,000 and 2,695,000 have been designated as
series A redeemable convertible participating preferred stock (series A
preferred stock), series B redeemable convertible participating preferred stock
(series B preferred stock), series C redeemable convertible preferred stock
(series C preferred stock) and series D redeemable convertible preferred stock
(series D preferred stock) and series E redeemable convertible preferred stock
(series E preferred stock), respectively. During 1995, Centra sold 1,133,000
shares of series A preferred stock for $1.00 per share. During 1996, Centra sold
1,416,490 shares of series B preferred stock at $2.25 per share for gross
proceeds of $3,187,000. During 1997, Centra sold 1,670,000 shares of series C
preferred stock for $2.50 per share for gross proceeds of $4,175,000 and
2,250,000 shares of series D preferred stock for $4.00 per share for gross
proceeds of $9,000,000. During 1999, Centra sold 2,695,000 shares of series E
preferred stock for $5.00 per share for gross proceeds of $13,475,000.
Series A and series B preferred stockholders have participation rights that
allow them to receive a cash payment equal to 150% of their original investment
upon redemption, liquidation, and automatic conversion plus the common shares
into which the series A and the series B preferred stock converts. Centra has
attributed $113,000 and $354,000 of value to these participating rights of the
series A and series B preferred stock, respectively, by decreasing the carrying
value of preferred stock and increasing additional paid-in capital in equal
amounts at the date of issuance. Centra is increasing ratably over the
redemption period the carrying value of series A and series B preferred stock by
accreting the discount and the liquidation premium. For the years ended
December 31, 1996, 1997, and 1998 Centra recorded $373,000, $506,000 and
$506,000, respectively of accretion and, for both of the nine month periods
ended September 30, 1998 and 1999, Centra recorded $380,000 of accretion.
F-15
<PAGE>
CENTRA SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(7) REDEEMABLE CONVERTIBLE PREFERRED STOCK (CONTINUED)
The rights, preferences and privileges of the series A, series B, series C,
series D and series E preferred stock are listed as follows:
CONVERSION
The series A, series B, series C, series D and series E preferred stock are
convertible into common stock at the rate of 1 1/2 shares of common stock for
each share of preferred stock, adjusted for certain dilutive events. Conversion
is automatic immediately prior to the closing of an initial public offering of
common stock at a per share price of at least $7.50 for the series A, series B,
series C and series D preferred stock and $10.00 for the series E preferred
stock, and resulting in aggregate proceeds to Centra of at least $10,000,000.
Upon conversion, series A and series B preferred stockholders are also entitled
to receive a liquidation premium as a cash payment equal to 150% of their
original investment ($1,699,500 and $4,780,500, respectively, at September 30,
1999). As of September 30, 1999, all series of redeemable convertible preferred
stock would convert to 13,746,735 shares of common stock. Pro forma
stockholders' equity at September 30, 1999, as adjusted for the conversion of
the redeemable convertible preferred stock is disclosed in the accompanying pro
forma consolidated balance sheet.
DIVIDENDS
The holders of the series A, series B, series C, series D and series E
preferred stock are entitled to receive dividends, if and when declared, at the
same rate as dividends to the common stockholders, based on the number of common
shares into which the series A, series B, series C, series D and series E
preferred stock are convertible.
REDEMPTION
The series A, series B, series C, series D and series E preferred
stockholders have a redemption right that requires Centra to repurchase
outstanding shares of the series A, series B, series C, series D and series E
preferred stock. Upon a majority vote, the series A, series B, series C,
series D and series E preferred stockholders may require the Company to
repurchase shares of the series A, series B, series C, series D and series E
preferred stock, with cash consideration of $1,699,500, $4,780,500, $4,175,000,
$9,000,000 and $13,475,000, respectively, at September 30, 1999. These amounts
are equal to the respective liquidation preferences as of September 30, 1999.
For series A and series B preferred stock, the Company must issue, as additional
consideration, the number of shares of common stock into which the series A and
series B preferred stock would convert. The series A, series B, series C,
series D and series E preferred stock are redeemable, beginning on December 31,
2002 at a rate of 33 1/3% of the shares then outstanding. On December 31, 2003
and 2004, 50% and 100%, respectively, of the series A, series B, series C,
series D and series E preferred stock then outstanding are redeemable.
VOTING
The series A, series B, series C, series D and series E preferred
stockholders are entitled to vote on all matters with the common stockholders as
if they were one class of stock. The series A, series B, series C, series D and
series E preferred stockholders are entitled to the number of votes equal to the
F-16
<PAGE>
CENTRA SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(7) REDEEMABLE CONVERTIBLE PREFERRED STOCK (CONTINUED)
number of shares of common stock into which each share of the series A,
series B, series C, series D and series E preferred stock is then convertible.
MERGERS AND OTHER REORGANIZATIONS
Upon a merger or capital reorganization, as defined, the holders of the
series A, series B, series C, series D and series E preferred stock shall be
entitled to receive upon conversion of the preferred stock the number of shares
of stock to which a holder of common stock would have been entitled in such a
merger or capital reorganization. In addition, the series A and series B
preferred stockholders will receive a liquidation premium as a cash payment
equal to 150% of their original investment amount plus the same consideration
available to the common stockholders.
(8) STOCKHOLDERS' EQUITY (DEFICIT)
(A) AUTHORIZED SHARES
On April 21, 1999, Centra amended its certificate of incorporation to, among
other things, increased its authorized capital stock to 25,000,000 shares of
which 15,835,510 are $0.001 par value common stock and 9,164,490 shares of
$0.001 par value redeemable convertible preferred stock.
(B) RECAPITALIZATION
On October 14, 1999, Centra's Board of Directors approved a 3-for-2 stock
split of its common stock. The stock split was effective on October 27, 1999.
All shares and per share amounts of common stock for all periods have been
retroactively adjusted to reflect the stock split. Upon the closing of Centra's
proposed initial public offering, its certificate of incorporation will be
amended and restated to change its authorized capital stock to 100,000,000
shares of $0.001 par value common stock and 10,000,000 shares of $0.001 par
value preferred stock.
(C) RESERVED SHARES
Centra has reserved the following number of shares of common stock for the
conversion of preferred stock and issuance of stock option and restricted stock:
<TABLE>
<S> <C>
Series A preferred stock.................................... 1,699,500
Series B preferred stock.................................... 2,124,735
Series C preferred stock.................................... 2,505,000
Series D preferred stock.................................... 3,375,000
Series E preferred stock.................................... 4,042,500
Stock options and restricted stock.......................... 4,237,500
----------
17,984,235
==========
</TABLE>
(D) RESTRICTED STOCK AGREEMENTS
Centra has entered into stock repurchase agreements with the stockholders of
all outstanding shares of restricted common stock. The agreements provide that
in the event that the stockholders are
F-17
<PAGE>
CENTRA SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(8) STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
no longer employed by Centra, Centra has the right to repurchase any unvested
shares from the stockholders at the original issuance prices of $0.001 to $0.33
per share. The repurchase option on the 2,056,599 shares of restricted common
stock oustanding at September 30, 1999 lapse as follows: 25% on the one-year
anniversary date from issuance and then 6.25% on each subsequent quarter over
the next three years. As of September 30, 1999, 912,290 shares of common stock
were vested and 1,144,309 shares of common stock are subject to repurchase
rights. During the years ended December 31, 1996, 1997 and 1998, and the nine
months ended September 30, 1999, Centra exercised its rights under the stock
repurchase agreements and repurchased 290,433, 51,656, 8,250 and 186,562 shares,
respectively. These shares were repurchased at original issuance price.
(E) STOCK OPTION AND STOCK PURCHASE PLANS
In 1995, Centra adopted the 1995 Stock Plan (the 1995 Plan), which provides
for the granting of incentive stock options to employees of Centra and
nonqualified stock options to any directors, officers, employees or consultants
of Centra. Options to purchase 3,852,000 shares of common stock may be issued
pursuant to the 1995 Plan, plus an additional 385,500 shares, as defined under
the 1995 Plan. Option and stock pricing is determined by Centra's Board of
Directors and all options to date have been granted at the fair market value
determined by the Board of Directors. Options and stock granted under the 1995
Plan vest as follows: 25% on the one-year anniversary date and then 6.25% on
each subsequent quarter over the next three years, and expire no later than
10 years from the date of grant. Options to purchase 485,376 shares of common
stock were available for grant at September 30, 1999.
Centra allowed for the immediate exercise of certain stock options granted
under the 1995 Plan. The shares received upon exercise are subject to repurchase
by Centra at the original option exercise price, subject to vesting at the same
rates as provided in the original option agreements.
F-18
<PAGE>
CENTRA SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(8) STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
The following is a summary of common stock option and restricted stock
activity under the 1995 Plan:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER OF SHARES EXERCISE PRICE EXERCISE PRICE
---------------- ------------------- ----------------
<S> <C> <C> <C>
Outstanding, December 31, 1995.................... -- $ -- $ --
Granted......................................... 850,125 0.07--0.17 0.10
Exercised....................................... (481,500) 0.07--0.17 0.07
Canceled........................................ (49,219) 0.07--0.17 0.16
---------- ------------------- ------
Outstanding, December 31, 1996.................... 319,406 0.07--0.17 0.15
Granted......................................... 1,305,825 0.17 0.17
Exercised....................................... (804,375) 0.07--0.17 0.17
Canceled........................................ (179,343) 0.07--0.17 0.16
---------- ------------------- ------
Outstanding, December 31, 1997.................... 641,513 0.07--0.17 0.16
Granted......................................... 840,450 0.27 0.27
Exercised....................................... (208,314) 0.17--0.27 0.26
Canceled........................................ (180,729) 0.17--0.27 0.17
---------- ------------------- ------
Outstanding, December 31, 1998.................... 1,092,920 0.07--0.27 0.21
Granted......................................... 1,510,200 0.27--0.67 0.29
Exercised....................................... (829,314) 0.17--0.33 0.27
Canceled........................................ (78,281) 0.17--0.33 0.25
---------- ------------------- ------
Outstanding, September 30, 1999 (unaudited)....... 1,695,525 $ 0.07--0.67 $ 0.26
========== =================== ======
Exercisable common stock options,
September 30, 1999 (unaudited).................. 502,981 $ 0.07--0.33 $ 0.20
========== =================== ======
Exercisable common stock options, December 31,
1998............................................ 291,246 $ 0.07--0.27 $ 0.17
========== =================== ======
Exercisable common stock options, December 31,
1997............................................ 84,092 $ 0.07--0.17 $ 0.16
========== =================== ======
Exercisable common stock options, December 31,
1996............................................ 1,406 $ 0.07 $ 0.07
========== =================== ======
</TABLE>
The range of exercise price for common stock options outstanding and options
exercisable at September 30, 1999, is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ------------------------------------------------------------------ ----------------------------
WEIGHTED
AVERAGE
RANGE OF REMAINING WEIGHTED WEIGHTED
EXERCISE OPTIONS CONTRACTUAL AVERAGE OPTIONS AVERAGE
PRICES OUTSTANDING LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- --------------------- ----------- ----------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$ 0.07 15,000 7.3 years $0.07 12,188 $0.07
0.17 492,750 7.4 years 0.17 313,691 0.17
0.27--0.33 1,148,700 9.1 years 0.28 177,102 0.28
0.67 39,075 9.9 years 0.67 -- 0.67
------------------ --------- --------- ----- ------- -----
$ 0.07--0.67 1,695,525 8.6 years $0.26 502,981 $0.20
================== ========= ========= ===== ======= =====
</TABLE>
F-19
<PAGE>
CENTRA SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(8) STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
In connection with stock options grants to employees and non-employees
during the nine months ended September 30, 1999, Centra recorded deferred
compensation of $1,797,000, which represents the aggregate difference between
the option exercise price and the deemed fair market value of the common stock
determined for financial reporting purposes for grants to employees and the fair
market value of the options for the non-employees. The deferred compensation
will be recognized as an expense over the vesting period of the underlying stock
options. The Company recorded compensation expense of $236,000 in the nine
months ended September 30, 1999, related to these options. On October 14, 1999,
Centra granted to employees options to purchase 255,975 common shares at $5.00
per share and will record additional deferred compensation of $768,000 related
to these grants.
In October 1995, the FASB issued SFAS No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION, which requires the measurement of the fair value of stock options
to be included in the statements of operations or disclosed in the notes to the
financial statements. Centra has determined that it will continue to account for
stock-based compensation for employees and directors under Accounting Principles
Board Opinion No. 25 and elect the disclosure-only alternative under SFAS
No. 123. Centra records the fair market value of stock options granted to
nonemployees in the consolidated statement of operations. The Company has
computed the pro forma disclosures required under SFAS No. 123 for stock options
granted to employees and directors using the Black-Scholes option pricing model.
The assumptions used are as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------- ---------------------------
1996 1997 1998 1998 1999
----------- ------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Risk-free interest
rate................. 6.2%-6.8% 5.7%-6.9% 4.5%-5.7% 4.5%-5.7% 4.7%-6.1%
Expected dividend
yield................ -- -- -- -- --
Expected lives......... 7.5 years 7.5 years 7.5 years 7.5 years 7.5 years
Expected volatility.... 60% 60% 100% 100% 85%
</TABLE>
The expected volatility factor was based on actual volatility factors for
comparable public software companies. The weighted average fair value of grants
during the years ended December 31, 1996, 1997, 1998 and for the nine months
ended September 30, 1998 and 1999 was $0.09, $0.14, $0.27, $0.27 and, $2.58 per
share, respectively.
The pro forma effects of applying SFAS No. 123, if Centra elected to do so,
are as follows for the years ended December 31, 1996, 1997 and 1998 and the nine
months ended September 30, 1998 and 1999:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------- -------------------------
1996 1997 1998 1998 1999
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net loss--
As reported.................. $(2,569,000) $(6,371,000) $(6,253,000) $(4,528,000) $(5,539,000)
Pro forma.................... $(2,572,000) $(6,388,000) $(6,317,000) $(4,577,000) $(5,618,000)
</TABLE>
F-20
<PAGE>
CENTRA SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(8) STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
The Black-Scholes option pricing model was developed for use in estimating
the fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option pricing models require the input of highly
subjective assumptions, including expected stock price volatility. Because
Centra's employee stock options have characteristics significantly different
from those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
1999 STOCK INCENTIVE PLAN
In October 1999, the board of directors adopted the 1999 stock incentive
plan (the 1999 Plan). The 1999 Plan will be submitted for stockholder approval
in November 1999. A total of 3,500,000 shares of common stock have been reserved
for issuance under the 1999 Plan. As of October 25, 1999, no options had been
granted under the 1999 Plan.
The 1999 Plan authorizes the grant of incentive options and nonqualified
options. The 1999 Plan also provides for awards of stock appreciation rights,
performance shares, restricted stock and other stock-based awards.
Incentive options may be granted under the 1999 Plan to key employees and
affiliates within the meaning of the Internal Revenue Code, including officers
and directors as well as officers and directors of affiliates who are also
employees. The exercise price of incentive options granted under the 1999 Plan
must be at least equal to the fair market value of our common stock on the date
of grant. The exercise price of incentive options granted to an optionee who
owns stock possessing more than 10% of the voting power of the outstanding
capital stock must be at least equal to 110% of the fair market value of the
common stock on the date of grant, and such optionee must exercise his or her
option within five years from the date of the grant of such option.
Under the terms of the 1999 Plan, Centra may grant nonqualified options to
officers and other employees, directors, and other individuals providing
services. There are no limits on the exercise price of nonqualified options
granted under the 1999 Plan.
The 1999 Plan is administered by the compensation committee of the board of
directors. The compensation committee selects the individuals to whom options
will be granted and determines the option exercise price and other terms of each
award, subject to the provisions of the 1999 Plan.
1999 DIRECTOR OPTION PLAN
In October 1999, the board of directors adopted the 1999 director option
plan (Director Plan). The Director Plan will be submitted for stockholder
approval in November 1999. The Director Plan, adopted in October 1999, provides
for the grant of stock options to those directors who are not full-time
employees of Centra or its subsidiary. Only non-statutory options may be granted
under the Director Plan. The maximum number of shares of common stock as to
which options may be granted under the Plan is 200,000. As of October 25, 1999,
no options had been granted under the director plan.
F-21
<PAGE>
CENTRA SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(8) STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
The Director Plan is administered by the board of directors. The option
exercise price for each option granted under the Director Plan is the fair
market value of the common stock as of the date of grant. Payment of the option
exercise price is to be made in cash for the full exercise price of the options.
Options are not assignable or transferrable except by will or the laws of
descent and distribution. They terminate on the earlier of ten years after the
date of grant or sixty days after the optionee ceases to serve as a director,
except in the event of death or disability.
1999 EMPLOYEE STOCK PURCHASE PLAN
In October 1999, the board of directors adopted the 1999 employee stock
purchase plan (the Stock Purchase Plan). The Stock Purchase Plan will be
submitted for stockholder approval in November 1999. The Stock Purchase Plan
authorizes the issuance of up to a total of 1,500,000 shares of Centra's common
stock to participating employees. As of December 31 of each year, we will
increase the number of shares we reserve for issuance under the Stock Purchase
Plan automatically by 2% of the total number of shares of our common stock then
outstanding or, if less, 300,000 shares.
Under the terms of the Stock Purchase Plan, all employees who have completed
three months of employment and whose customary employment is more than 20 hours
per week and more than five months in the calendar year, are eligible to
participate in the Stock Purchase Plan. Employees who own stock and hold
outstanding options to purchase stock representing five percent or more of the
total combined voting power or value of all classes of our stock are not
eligible to participate in the Stock Purchase Plan.
The right to purchase common stock under the Stock Purchase Plan is made
available through a series of offerings. On the first day of an offering period,
Centra will grant to each eligible employee who has elected in writing to
participate in the Stock Purchase Plan an option to purchase shares of common
stock. The employee is required to authorize an amount, between 1% and 10% of
the employee's compensation, to be deducted from the employee's pay during the
offering period. On the last day of the offering period, the employee will be
deemed to have exercised the option, at the option exercise price, to the extent
of accumulated payroll deductions. Under the terms of the Stock Purchase Plan,
the option exercise price is an amount equal to 85% of the fair market value of
one share of common stock on either the first or last day of the offering
period, whichever is lower. In the event of a change in control of Centra, the
Stock Purchase Plan will terminate and shares will be purchased with the payroll
deductions accumulated to date by participating employees.
No employee may be granted an option that would permit the employee's rights
to purchase common stock to accrue at a rate in excess of $25,000 of the fair
market value of the common stock, determined as of the date the option is
granted, in any calendar year.
The stock purchase plan is administered by the compensation committee of the
board of directors.
(9) EMPLOYEE BENEFIT PLAN
Centra has adopted an employee benefit plan (the 401(k) Plan) under
Section 401(k) of the Internal Revenue Code. The 401(k) Plan allows employees to
make pretax contributions up to the maximum allowable amount set by the Internal
Revenue Service. Under the 401(k) Plan, Centra may match a portion of the
employee contribution up to a defined maximum and provide profit sharing to
F-22
<PAGE>
CENTRA SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(9) EMPLOYEE BENEFIT PLAN (CONTINUED)
employees at its discretion. Centra made no contributions to the 401(k) Plan for
the years ended December 31, 1996, 1997 and 1998 and the nine months ended
September 30, 1998 and 1999.
F-23
<PAGE>
[Description of inside back cover artwork
The heading ""Consistent, Easy to Use Collaboration Interfaces'' appears
at the top of the page, above the following sentence: ""Centra 99 is an
enterprise-class live eBusiness collaboration system that supports three
application-specific user interfaces.'' The following product descriptions
appear on the left side of the page:
""SYMPOSIUM
Centra Symposium is appropriate
for highly interactive events such as hands-on classes, workshops,
coaching,
and teamwork.''
""CONFERENCE
Centra Conference is designed for one-to-one selling and large-scale
Web presentations.''
""CentraNow
CentraNow is a self-service Web destination that can be accessed through
Centra 99 and is designed for spontaneous meetings.''
A separate illustrative screen shot appears to the right of each of the
product descriptions described above.]
<PAGE>
[LOGO]
UNTIL , 2000 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS THAT BUY, SELL OR TRADE OUR COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS REQUIREMENT IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 27, 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL SECURITIES, AND WE ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES, IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
[LOGO]
SHARES
COMMON STOCK
Centra Software, Inc. is offering shares of its common stock.
This is our initial public offering and no public market currently exists for
our shares. We have applied to have the shares being offered approved for
quotation on the Nasdaq National Market under the symbol "CTRA." We anticipate
that the initial public offering price will be between $ and
$ per share.
------------------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.
------------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----
<S> <C> <C>
Public Offering Price..................................... $ $
Underwriting Discounts and Commissions.................... $ $
Proceeds to Centra........................................ $ $
</TABLE>
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
We have granted the underwriters a 30-day option to purchase up to an
additional shares of common stock to cover over-allotments.
------------------------
ROBERTSON STEPHENS INTERNATIONAL
HAMBRECHT & QUIST
DAIN RAUSCHER WESSELS
A DIVISION OF DAIN RAUSCHER
INCORPORATED
THE DATE OF THIS PROSPECTUS IS , 1999.
<PAGE>
UNDERWRITING
The underwriters named below, acting through their representatives,
BancBoston Robertson
Stephens Inc., Hambrecht & Quist LLC and Dain Rauscher Wessels, a division of
Dain Rauscher Incorporated, have severally agreed with us, subject to the terms
and conditions of the underwriting agreement, to purchase from us the numbers of
shares of common stock set forth opposite their names below. The underwriters
are committed to purchase and pay for all of the shares if any are purchased.
<TABLE>
<CAPTION>
NUMBER
OF SHARES
---------
<S> <C>
U.S. UNDERWRITERS
- ------------------------------------------------------------
BancBoston Robertson Stephens Inc...........................
Hambrecht & Quist LLC.......................................
Dain Rauscher Wessels.......................................
INTERNATIONAL UNDERWRITERS
- ------------------------------------------------------------
BancBoston Robertson Stephens International Limited.........
Hambrecht & Quist LLC.......................................
Dain Rauscher Wessels.......................................
---------
Total.................................................
=========
</TABLE>
We have been advised that the underwriters propose to offer the shares of
common stock to the public at the public offering price located on the cover
page of this prospectus and to dealers at that price less a concession of not in
excess of $ per share, of which $ may be reallowed to other
dealers. After the initial public offering, the public offering price,
concession and reallowance to dealers may be reduced by the representatives. No
reduction in this price will change the amount of proceeds to be received by us
as indicated on the cover page of this prospectus.
OVER-ALLOTMENT OPTION. We have granted to the underwriters an option,
exercisable during the 30-day period after the date of this prospectus, to
purchase up to additional shares of common stock at the same price per
share as we will receive for the shares that the underwriters have
agreed to purchase. To the extent that the underwriters exercise this option,
each of the underwriters will have a firm commitment to purchase approximately
the same percentage of additional shares that the number of shares of common
stock to be purchased by it shown in the above table represents as a percentage
of the shares offered by this prospectus. If purchased, the additional
shares will be sold by the underwriters on the same terms as those on which the
shares are being sold. We will be obligated, under this option, to sell
shares to the extent the option is exercised. The underwriters may exercise the
option only to
62
<PAGE>
cover over-allotments made in connection with the sale of the shares
of common stock offered by this prospectus.
The following table shows the per share and total underwriting discounts and
commissions to be paid by us to the underwriters. This information is presented
assuming either no exercise or full exercise by the underwriters of their
over-allotment option.
<TABLE>
<CAPTION>
WITHOUT WITH
PER OVER-ALLOTMENT OVER-ALLOTMENT
SHARE OPTION OPTION
-------- -------------- --------------
<S> <C> <C> <C>
Assumed public offering price.............................. $ $ $
Underwriting discounts and commissions.....................
Proceeds, before expenses, to us...........................
</TABLE>
The expenses of the offering payable by us are estimated at $900,000.
BancBoston Robertson Stephens Inc. expects to deliver the shares of common stock
to purchasers on .
INDEMNITY. The underwriting agreement contains covenants of indemnity among
the underwriters and us against certain civil liabilities, including liabilities
under the Securities Act and liabilities arising from breaches of representation
and warranties contained in the underwriting agreement.
FUTURE SALES. Each of our executive officers, directors and other
significant stockholders of record has agreed with the representatives, for a
period of 180 days after the date of this prospectus, not to offer to sell,
contract to sell or otherwise sell, dispose of, loan, pledge or grant any rights
with respect to any shares of common stock, any options or warrants to purchase
any shares of common stock, or any securities convertible into or exchangeable
for shares of common stock owned as of the date of this prospectus or acquired
directly from us by these holders or with respect to which they have or may
acquire the power of disposition, without the prior written consent of
BancBoston Robertson Stephens Inc. However,
BancBoston Robertson Stephens Inc. may, in its sole discretion and at any time
without notice, release all or any portion of the securities subject to lock-up
agreements. In addition, we have agreed that during the 180 days after the date
of this prospectus we will not, without the prior written consent of BancBoston
Robertson Stephens Inc., (1) consent to the disposition of any shares held by
stockholders subject to lock-up agreements prior to the expiration of the
lock-up period or (2) issue, sell, contract to sell, or otherwise dispose of,
any shares of common stock, any options to purchase any shares of common stock
or any securities convertible into, exercisable for or exchangeable for shares
of common stock other than (a) our sale of shares in this offering, (b) the
issuance of common stock upon the exercise of outstanding options and the
issuance of options under existing stock option and incentive plans, provided
such common stock and the common stock issuable upon the exercise of such
options cannot be transferred prior to the expiration of the lock-up period and
(c) the issuance of shares in connection with certain acquisitions that cannot
be sold on the public market during the lock-up period. Please see "Shares
Eligible for Future Sale."
DIRECTED SHARES. We have requested that the underwriters reserve up to five
percent of the shares of common stock for sale at the initial public offering
price to directors, officers, employees and other individuals designated by us.
The underwriters have informed us that they do not intend to confirm sales
to any accounts over which they exercise discretionary authority.
NO PRIOR PUBLIC MARKET. Prior to this offering, there has been no public
market for the common stock. Consequently, the initial public offering price for
the common stock offered by this prospectus will be determined through
negotiations between us and the representatives. Among the factors to be
considered in these negotiations are prevailing market conditions, our financial
information, market
63
<PAGE>
valuations of other companies that we and the representatives believe to be
comparable to us, estimates of our business potential, the present state of our
development and other factors deemed relevant.
STABILIZATION. The representatives have advised us that, under
Regulation M under the Securities Exchange Act, some participants in the
offering may engage in transactions, including stabilizing bids, syndicate
covering transactions or the imposition of penalty bids, that may have the
effect of stabilizing or maintaining the market price of the common stock at a
level above that which might otherwise prevail in the open market. A
"stabilizing bid" is a bid for or the purchase of the common stock on behalf of
the underwriters for the purpose of fixing or maintaining the price of the
common stock. A "syndicate covering transaction" is the bid for or purchase of
the common stock on behalf of the underwriters to reduce a short position
incurred by the underwriters in connection with the offering. A "penalty bid" is
an arrangement permitting the representatives to reclaim the selling concession
otherwise accruing to an underwriter or syndicate member in connection with the
offering if the common stock originally sold by the underwriter or syndicate
member is purchased by the representatives in a syndicate covering transaction
and has therefore not been effectively placed by the underwriter or syndicate
member. The representatives have advised us that these transactions may be
effected on the Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.
64
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses payable by us in connection with
the sale of the common stock being registered, other than the underwriting
discounts and commissions. All amounts are estimates except the SEC registration
fee, the NASD filing fee and the Nasdaq National Market listing fee.
<TABLE>
<S> <C>
SEC registration fee........................................ $ 15,985
NASD filing fee............................................. 6,250
Nasdaq National Market listing fee.......................... 95,000
Accounting fees and expenses................................ 175,000
Legal fees and expenses..................................... 400,000
Blue Sky fees and expenses.................................. 10,000
Transfer agent fees......................................... 15,000
Printing and engraving expenses............................. 125,000
Miscellaneous............................................... 57,765
--------
Total................................................... $900,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law empowers a Delaware
corporation to indemnify its present and former directors and officers under
certain conditions. Article Sixth of our certificate of incorporation provides
that we shall indemnify each person who at any time is, or shall have been, one
of our directors or officers and was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he or she is or was one of our directors or officers, or is or was serving
at our request as a director, officer, trustee of, or in similar capacity with,
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement incurred in connection with any such action, suit or proceeding,
to the maximum extent permitted by the Delaware General Corporation Law, as
currently in effect or amended in the future. No amendment to or repeal of the
provisions of Article Sixth of our certificate of incorporation shall deprive a
director or officer of the benefit of those Articles with respect to any act or
failure occurring prior to such amendment or repeal.
Section 102(b)(7) of the Delaware General Corporation Law empowers a
Delaware corporation to adopt a charter provision eliminating or limiting the
personal liability of directors to the corporation or its stockholders for
breach of fiduciary duty as directors, provided that the provision may not
eliminate or limit the liability of directors for:
- any breach of the director's duty of loyalty to the corporation or its
stockholders;
- any acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- any payment of a dividend or approval of a stock purchase that is illegal
under Section 174 of the Delaware General Corporation Law; or
- any transaction from which the director derived an improper personal
benefit.
II-1
<PAGE>
Article Seventh of our certificate of incorporation provides that, to the
maximum extent permitted by the Delaware General Corporation Law, none of our
directors shall be personally liable to us or to any of our stockholders for
monetary damages arising out of that director's breach of fiduciary duty as one
of our directors. No amendment to or repeal of the provisions of Article Seventh
shall apply to or have any effect on the liability or the alleged liability of
any of our directors with respect to any act or failure to act of that director
occurring before the amendment or repeal. A principal effect of Article Seventh
is to limit or eliminate the potential liability of our directors for monetary
damages arising from breaches of their duty of care, unless the breach involves
one of the four exceptions described above.
Section 145 of the Delaware General Corporation Law also empowers a Delaware
corporation to obtain insurance on behalf of its directors and officers against
liabilities incurred by them in those capacities. We intend to procure a
directors' and officers' liability and company reimbursement liability insurance
policy that insures (a) our directors and officers against losses, above a
deductible amount, arising from specified types of claims made against them by
reason of enumerated acts done or attempted by our directors or officers and
(b) us against losses, above a deductible amount, arising from any of the
specified types of claims, but only if we are required or permitted to indemnify
our directors or officers for those losses under statutory or common law or
under provisions of our certificate of incorporation or by-laws.
The preceding discussion gives effect to amendments of our certificate of
incorporation and by-laws that will become effective upon completion of the
offering contemplated by this Registration Statement.
Please also see section 7 of the underwriting agreement relating to the
offering, filed as Exhibit 1.1 to this Registration Statement, for
indemnification arrangements between the underwriters and us.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since October 27, 1996, we have issued and sold unregistered securities as
described below.
COMMON STOCK
We have issued and sold shares of common stock as set forth in the following
table. The notes to the table provide additional information regarding sales
made to executive officers and directors.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF AGGREGATE PURCHASE PRICE
DATE OF SALE SHARES SOLD PURCHASERS PURCHASE PRICE PER SHARE
- ------------ ----------- ---------- -------------- --------------
<S> <C> <C> <C> <C>
April 24, 1997(1)............................ 667,500 3 $111,250 $0.17
May 7, 1997.................................. 24,000 1 4,000 0.17
May 8, 1997.................................. 52,500 1 8,750 0.17
September 16, 1997........................... 45,000 2 7,500 0.17
April 15, 1998(2)............................ 105,000 3 28,000 0.27
July 10, 1998................................ 22,500 1 6,000 0.27
July 24, 1998(3)............................. 52,500 1 14,000 0.27
April 12, 1999(4)............................ 417,000 3 111,200 0.27
April 26, 1999(5)............................ 345,000 2 92,000 0.27
April 30, 1999............................... 30,000 1 8,000 0.27
June 11, 1999................................ 7,500 1 2,500 0.33
</TABLE>
- ------------------------
(1) 225,000 shares were sold to Joseph M. Gruttadauria, our Vice President,
Professional Services, and 247,500 shares were sold to Anthony J. Mark, our
President and Chief Operating Officer.
II-2
<PAGE>
(2) 52,500 shares were sold to Mr. Mark, 30,000 shares were sold to Stephen A.
Johnson, our Chief Financial Officer, Treasurer and Secretary, and 22,500
shares were sold to David Barrett, our Director--Nominee.
(3) All 52,500 shares were sold to Mr. Gruttadauria.
(4) 364,500 shares were sold to Steven N. Lesser, our Vice President, Worldwide
Sales, and 37,500 shares were sold to Mr. Gruttadauria.
(5) 45,000 shares were sold to Mr. Johnson, and 300,000 shares were sold to
Mr. Mark.
CONVERTIBLE PREFERRED STOCK
SERIES B. In May and June 1996, we sold 1,416,490 shares of series B
convertible preferred stock for $3,187,102, or $2.25 per share, as follows:
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES SOLD AGGREGATE PURCHASE PRICE
- ---- --------------------- ------------------------
<S> <C> <C>
Alta V Limited Partnership(1)....................... 549,777 $1,236,998
Customs House Partners.............................. 5,778 13,001
North Bridge Venture Partners, L.P.(2).............. 333,334 750,001
Commonwealth Capital Ventures L.P................... 444,445 1,000,001
Edward Tackas....................................... 15,600 35,100
The Career Group, Ltd............................... 7,111 16,000
Bill Gross's idealab!............................... 44,445 100,001
Rubin Gruber........................................ 16,000 36,000
</TABLE>
- ------------------------
(1) Affiliate of Jonathan Flint, one of our directors.
(2) Affiliate of Richard D'Amore, one of our directors.
SERIES C. In March 1997, we sold 1,670,000 shares of series C convertible
preferred stock for $4,175,000, or $2.50 per share, as follows:
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES SOLD AGGREGATE PURCHASE PRICE
- ---- --------------------- ------------------------
<S> <C> <C>
Alta V Limited Partnership(1)....................... 316,672 $ 791,680
Customs House Partners.............................. 3,328 8,320
North Bridge Venture Partners, L.P.(2).............. 280,000 700,000
Commonwealth Capital Ventures L.P................... 200,000 500,000
Scripps Ventures, LLC............................... 800,000 2,000,000
Leon Navickas(3).................................... 40,000 100,000
TM Partners(4)...................................... 20,000 50,000
Rubin Gruber........................................ 10,000 25,000
</TABLE>
- ------------------------
(1) Affiliate of Jonathan Flint, one of our directors.
(2) Affiliate of Richard D'Amore, one of our directors.
(3) Our Chief Executive Officer and Chairman.
(4) Affiliate of Anthony J. Mark, our President and Chief Operating Officer.
II-3
<PAGE>
SERIES D. In December 1997, we sold 2,250,000 shares of series D
convertible preferred stock for proceeds of $9,000,000, or $4.00 per share, as
follows:
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES SOLD AGGREGATE PURCHASE PRICE
- ---- --------------------- ------------------------
<S> <C> <C>
Alta V Limited Partnership(1)....................... 503,459 $2,013,836
Customs House Partners.............................. 5,291 21,164
North Bridge Venture Partners, L.P.(2).............. 400,000 1,600,000
Commonwealth Capital Ventures L.P................... 250,000 1,000,000
Scripps Ventures, LLC............................... 325,000 1,300,000
Polaris Venture Partners, L.P.(3)................... 707,662 2,830,648
Polaris Venture Partners Founders' Fund, L.P.(3).... 42,338 169,352
TM Partners(4)...................................... 12,500 50,000
Rubin Gruber........................................ 3,750 15,000
</TABLE>
- ------------------------
(1) Affiliate of Jonathan Flint, one of our directors.
(2) Affiliate of Richard D'Amore, one of our directors.
(3) Affiliate of Mr. Flint.
(4) Affiliate of Anthony J. Mark, our President and Chief Operating Officer.
SERIES E. In April 1999, we sold 2,695,000 shares of series E convertible
preferred stock for proceeds of $13,475,000, or $5.00 per share, as follows:
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES SOLD AGGREGATE PURCHASE PRICE
- ---- --------------------- ------------------------
<S> <C> <C>
Alta V Limited Partnership(1)....................... 158,336 $ 791,680
Bridge Street Fund 1999, L.P........................ 24,240 121,200
Customs House Partners.............................. 1,664 8,320
North Bridge Venture Partners, L.P.(2).............. 200,000 1,000,000
Commonwealth Capital Ventures L.P................... 100,000 500,000
Scripps Ventures, LLC............................... 70,000 350,000
Polaris Venture Partners, L.P.(3)................... 84,920 424,600
Polaris Venture Partners Founders' Fund, L.P.(3).... 5,080 25,400
The Goldman Sachs Group, L.P........................ 900,000 4,500,000
HarbourVest Partners V-Direct Fund L.P.............. 1,000,000 5,000,000
TM Partners(4)...................................... 10,000 50,000
SL Partners(5)...................................... 65,000 325,000
Stone Street Fund 1999, L.P......................... 75,760 378,800
</TABLE>
- ------------------------
(1) Affiliate of Jonathan Flint, one of our directors.
(2) Affiliate of Richard D'Amore, one of our directors.
(3) Affiliate of Mr. Flint.
(4) Affiliate of Anthony J. Mark, our President and Chief Operating Officer.
(5) Affiliate of Steven N. Lesser, our Vice President, Worldwide Sales.
II-4
<PAGE>
STOCK OPTIONS
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF EXERCISE PRICE
DATE OF GRANT OPTION SHARES OPTIONEES PER SHARE
- ------------- ------------- --------- --------------
<S> <C> <C> <C>
December 5, 1996......................................... 57,375 7 $0.17
January 28, 1997......................................... 215,100 15 0.17
July 23, 1997............................................ 238,725 17 0.17
September 30, 1997....................................... 63,000 10 0.17
January 1, 1998.......................................... 206,250 16 0.27
March 31, 1998........................................... 309,000 22 0.27
July 9, 1998............................................. 82,950 20 0.27
October 7, 1998.......................................... 62,250 20 0.27
January 12, 1999......................................... 90,375 13 0.27
April 9, 1999............................................ 314,250 42 0.27
June 11, 1999............................................ 267,000 22 0.33
August 5, 1999........................................... 39,075 15 0.67
October 14, 1999......................................... 233,475 67 5.00
</TABLE>
II-5
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL SCHEDULES.
(A) EXHIBITS
<TABLE>
<C> <S>
1.1 Underwriting Agreement
*3.1 Certificate of Incorporation of Centra Software, Inc., as
amended
3.2 Proposed form of Amended and Restated Certificate of
Incorporation of Centra Software, Inc. (to become effective
as of the closing of the offering)
3.3 By-Laws of Centra Software, Inc.
3.4 Proposed form of Amended and Restated By-Laws of Centra
Software, Inc. (to become effective as of the closing of the
Offering)
4.1 Specimen certificate for common stock of Centra Software,
Inc.
*5.1 Opinion of Foley, Hoag & Eliot LLP
10.1 Centra Software, Inc. 1995 Stock Plan, as amended
10.2 Centra Software, Inc. 1999 Stock Incentive Plan
10.3 Centra Software, Inc. 1999 Employee Stock Purchase Plan
*10.4 Centra Software, Inc. 1999 Director Stock Option Plan
10.5 Amendments of Incentive Stock Option and/or Stock
Restriction Agreements ("Change of Control Agreement")
between Centra Software, Inc. and the following:
(a) Joseph Gruttadauria, dated April 25, 1997
(b) Joseph Gruttadauria, dated May 8, 1997
(c) Stephen A. Johnson, dated May 27, 1999
(d) Steven Lesser, dated May 27, 1999
(e) Anthony Mark, dated April 25, 1997
(f) Leon Navickas, dated March 10, 1997
(g) Leon Navickas, dated May 8, 1997
10.6 Severance Agreements between Centra Software, Inc. and the
following:
(a) Joseph Gruttadauria, dated March 24, 1997
(b) Stephen A. Johnson, dated May 27, 1999
(c) Steven Lesser, dated May 27, 1999
(d) Anthony Mark, dated March 10, 1997
(e) Leon Navickas, dated May 8, 1997
*10.7 Indemnity Agreements between Centra Software, Inc. and the
following:
(a) David Barrett (to be executed after closing of the
offering)
(b) Richard D'Amore
(c) Jonathan Flint
(d) Joseph Gruttadauria
(e) Stephen A. Johnson
(f) Steven Lesser
(g) Anthony J. Mark
(h) Leon Navickas
*10.8 Lease dated July 21, 1999 between Centra Software, Inc. and
Trustees of Elandzee Trust, as amended
10.9 Sublease dated May 13, 1997 between Centra Software, Inc.
and Robert Half International, Inc.
</TABLE>
II-6
<PAGE>
<TABLE>
<C> <S>
10.10 Sublease dated December 31, 1996 between Centra Software,
Inc. and C.P. Clare
10.11 Loan and Security Agreement, dated November 5, 1997 between
Centra Software, Inc. and Silicon Valley Bank, as amended
10.12 Fourth Amended and Restated Investors' Rights Agreement,
dated April 21, 1999, by and among Centra Software, Inc.,
Leon Navickas and the persons and entities listed therein,
as amended
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Director-Nominee David Barrett, dated October 25,
1999
*23.3 Consent of Foley, Hoag & Eliot LLP (included in Exhibit 5.1)
24.1 Power of Attorney (contained on page II-8 of this
Registration Statement)
</TABLE>
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* To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULES
Report of Independent Public Accountants on Financial Statement Schedule
Schedule II--Valuation and Qualifying Accounts for the Years Ended
December 31, 1996, 1997 and 1998
All other schedules are omitted because they are not applicable or the
required information is shown in our consolidated financial statements and
related notes.
ITEM 17. UNDERTAKINGS.
We undertake to provide to the underwriters at the closing specified in the
underwriting agreement, certificates in denominations and registered in names as
required by the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers and controlling persons pursuant to
the foregoing provisions, or otherwise, we have been advised that in the opinion
of the SEC that indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against those liabilities (other than our payment of expenses
incurred or paid by one of our directors, officers or controlling persons of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by our directors, officers or controlling persons in connection with
the securities being registered, we will, unless in the opinion of our counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether that indemnification by us is
against public policy as expressed in the Securities Act and we will be governed
by the final adjudication of such issue.
We undertake that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus we filed pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration statement as
of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of those securities at that time shall be
deemed to be the initial BONA FIDE offering thereof.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Centra
Software, Inc. has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the Town of Lexington,
Massachusetts, as of October 27, 1999.
<TABLE>
<S> <C> <C>
CENTRA SOFTWARE, INC.
By: /s/ LEON NAVICKAS
-----------------------------------------
Chief Executive Officer
</TABLE>
POWER OF ATTORNEY
The undersigned officers and directors of Centra Software, Inc. hereby
severally constitute and appoint Leon Navickas, Anthony J. Mark and Stephen A.
Johnson and each of them singly, our true and lawful attorneys-in-fact with full
power to them, to sign for us and in our names in the capacities indicated
below, any and all pre- and post-effective amendments to this Registration
Statement, any subsequent registration statement for the same offering filed
pursuant to Rule 462(b) under the Securities Act of 1933 and any and all pre-
and post-effective amendments thereto, and to file the same, with all exhibits
thereto, and all documents in connection therewith, with the Securities and
Exchange Commission, and generally to do all things in our names and on our
behalf in our capacities as officers and directors to enable Centra
Software, Inc. to comply with the provisions of the Securities Act of 1933 and
all requirements of the Securities and Exchange Commission, hereby ratifying and
confirming our signatures as they may be signed by our said attorneys-in-fact,
or any of them, to said Registration Statement and any and all amendments
thereto or to any subsequent Registration Statements for the same offering filed
pursuant to said Rule 462(b) under the Securities Act of 1933.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the indicated
capacities as of October 27, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ LEON NAVICKAS
------------------------------------------- Chief Executive Officer and Chairman
Leon Navickas (PRINCIPAL EXECUTIVE OFFICER)
/s/ STEPHEN A. JOHNSON Chief Financial Officer, Treasurer and
------------------------------------------- Secretary
Stephen A. Johnson (PRINCIPAL ACCOUNTING AND FINANCIAL OFFICER)
/s/ JONATHAN FLINT
------------------------------------------- Director
Jonathan Flint
/s/ RICHARD D'AMORE
------------------------------------------- Director
Richard D'Amore
</TABLE>
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
1.1 Underwriting Agreement
*3.1 Certificate of Incorporation of Centra Software, Inc., as
amended
3.2 Proposed form of Amended and Restated Certificate of
Incorporation of Centra Software, Inc. (to become effective
as of the closing of the offering)
3.3 By-Laws of Centra Software, Inc.
3.4 Proposed form of Amended and Restated By-Laws of Centra
Software, Inc. (to become effective as of the closing of the
Offering)
4.1 Specimen certificate for common stock of Centra Software,
Inc.
*5.1 Opinion of Foley, Hoag & Eliot LLP
10.1 Centra Software, Inc. 1995 Stock Plan, as amended
10.2 Centra Software, Inc. 1999 Stock Incentive Plan
10.3 Centra Software, Inc. 1999 Employee Stock Purchase Plan
*10.4 Centra Software, Inc. 1999 Director Stock Option Plan
10.5 Amendments of Incentive Stock Option and/or Stock
Restriction Agreements ("Change of Control Agreement")
between Centra Software, Inc. and the following:
(a) Joseph Gruttadauria, dated April 25, 1997
(b) Joseph Gruttadauria, dated May 8, 1997
(c) Stephen A. Johnson, dated May 27, 1999
(d) Steven Lesser, dated May 27, 1999
(e) Anthony Mark, dated April 25, 1997
(f) Leon Navickas, dated March 10, 1997
(g) Leon Navickas, dated May 8, 1997
10.6 Severance Agreements between Centra Software, Inc. and the
following:
(a) Joseph Gruttadauria, dated March 24, 1997
(b) Stephen A. Johnson, dated May 27, 1999
(c) Steven Lesser, dated May 27, 1999
(d) Anthony Mark, dated March 10, 1997
(e) Leon Navickas, dated May 8, 1997
*10.7 Indemnity Agreements between Centra Software, Inc. and the
following:
(a) David Barrett (to be executed after closing of the
offering)
(b) Richard D'Amore
(c) Jonathan Flint
(d) Joseph Gruttadauria
(e) Stephen A. Johnson
(f) Steven Lesser
(g) Anthony J. Mark
(h) Leon Navickas
*10.8 Lease dated July 21, 1999 between Centra Software, Inc. and
Trustees of Elandzee Trust, as amended
10.9 Sublease dated May 13, 1997 between Centra Software, Inc.
and Robert Half International, Inc.
10.10 Sublease dated December 31, 1996 between Centra Software,
Inc. and C.P. Clare
10.11 Loan and Security Agreement, dated November 5, 1997 between
Centra Software, Inc. and Silicon Valley Bank, as amended
</TABLE>
<PAGE>
<TABLE>
<C> <S>
10.12 Fourth Amended and Restated Investors' Rights Agreement,
dated April 21, 1999, by and among Centra Software, Inc.,
Leon Navickas and the persons and entities listed therein,
as amended
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Director-Nominee David Barrett, dated October 25,
1999
*23.3 Consent of Foley, Hoag & Eliot LLP (included in Exhibit 5.1)
24.1 Power of Attorney (contained on page II-8 of this
Registration Statement)
</TABLE>
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* To be filed by amendment.
<PAGE>
Exhibit 1.1
DRAFT OCT. 20, 1999
UNDERWRITING AGREEMENT
, 1999
BancBoston Robertson Stephens Inc.
Hambrecht & Quist LLC
Dain Rauscher Wessels
c/o BancBoston Robertson Stephens Inc.
555 California Street, Suite 2600
San Francisco, CA 94104
Ladies and Gentlemen:
INTRODUCTORY. Centra Software, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to the several underwriters named in
SCHEDULE A (the "Underwriters") an aggregate of [___] shares of its Common
Stock, par value $0.001 per share (the "Common Shares"). In addition, the
Company has granted to the Underwriters an option to purchase up to an
additional [___] Common Shares (the "Option Shares"), as provided in Section 2.
The Firm Shares and, if and to the extent such option is exercised, the Option
Shares are collectively called the "Shares." Immediately prior to the First
Closing Date, as defined below, each holder of the Company's Series A
Convertible Participating Preferred Stock and the Company's Series B Convertible
Participating Preferred Stock is entitled to receive, pursuant to the terms of
the Company's Certificate of Incorporation, a cash payment in the amount set
forth beside such holders' name in SCHEDULE B. All such holders are herein
referred to collectively as the "Stockholders" and all such payments are
referred to as the "Conversion Payments." BancBoston Robertson Stephens Inc.,
Hambrecht & Quist LLC and Dain Rauscher Wessels, a division of Dain Rauscher
Incorporated, have agreed to act as Representatives of the several Underwriters
(in such capacity, the "Representatives") in connection with the offering and
sale of the Common Shares.
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-1 (File No.
333-___), which contains a form of prospectus to be used in connection with the
public offering and sale of the Shares. Such registration statement, as amended,
including the financial statements, exhibits and schedules thereto, in the form
in which it was declared effective by the Commission under the Securities Act of
1933 and the rules and regulations promulgated thereunder (collectively, the
"Securities Act"), including any information deemed to be a part thereof at the
time of effectiveness pursuant to Rule 430A or Rule 434 under the Securities
Act, is called the "Registration Statement." Any registration statement filed by
the Company pursuant to Rule 462(b) under the Securities Act is called the "Rule
462(b) Registration Statement," and from and after the date and time of filing
of the Rule 462(b)
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<PAGE>
Registration Statement the term "Registration Statement" shall include the
Rule 462(b) Registration Statement. Such prospectus, in the form first used
by the Underwriters to confirm sales of the Shares, is called the
"Prospectus;" provided, however, if the Company has, with the consent of
BancBoston Robertson Stephens Inc., elected to rely upon Rule 434 under the
Securities Act, the term "Prospectus" shall mean the Company's prospectus
subject to completion (each, a "preliminary prospectus") dated [___](1) (such
preliminary prospectus is called the "Rule 434 preliminary prospectus"),
together with the applicable term sheet (the "Term Sheet") prepared and filed
by the Company with the Commission under Rules 434 and 424(b) under the
Securities Act and all references in this Agreement to the date of the
Prospectus shall mean the date of the Term Sheet. All references in this
Agreement to the Registration Statement, the Rule 462(b) Registration
Statement, a preliminary prospectus, the Prospectus or the Term Sheet, or any
amendments or supplements to any of the foregoing, shall include any copy
thereof filed with the Commission pursuant to its Electronic Data Gathering,
Analysis and Retrieval System ("EDGAR").
The Company and each of the Stockholders hereby confirm their
respective agreements with the Underwriters as follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
STOCKHOLDERS.
A. The Company and the Stockholders hereby represent, warrant and
covenant to each Underwriter as follows:
(1) COMPLIANCE WITH REGISTRATION REQUIREMENTS. The Registration
Statement and any Rule 462(b) Registration Statement have been declared
effective by the Commission under the Securities Act. The Company has complied
to the Commission's satisfaction with all requests of the Commission for
additional or supplemental information. No stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement is in effect and no proceedings for such purpose have been instituted
or are pending or, to the best knowledge of the Company, are contemplated or
threatened by the Commission.
Each preliminary prospectus and the Prospectus when filed complied in
all material respects with the Securities Act and, if filed by electronic
transmission pursuant to EDGAR (except as may be permitted by Regulation S-T
under the Securities Act), was identical to the copy thereof delivered to the
Underwriters for use in connection with the offer and sale of the Shares. Each
of the Registration Statement, any Rule 462(b) Registration Statement and any
post-effective amendment thereto, at the time it became effective and at all
subsequent times, complied and will comply in all material respects with the
Securities Act and did not and will not contain any untrue statement of a
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(1) Complete with the date of the Company's most recent preliminary prospectus
that was circulated to prospective offerees.
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<PAGE>
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading. The Prospectus,
as amended or supplemented, as of its date and at all subsequent times, did
not and will not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
The representations and warranties set forth in the two immediately preceding
sentences do not apply to statements in or omissions from the Registration
Statement, any Rule 462(b) Registration Statement, or any post-effective
amendment thereto, or the Prospectus, or any amendments or supplements
thereto, made in reliance upon and in conformity with information relating to
any Underwriter furnished to the Company in writing by the Representatives
expressly for use therein. There are no contracts or other documents required
to be described in the Prospectus or to be filed as exhibits to the
Registration Statement which have not been described or filed as required.
(2) OFFERING MATERIALS FURNISHED TO UNDERWRITERS. The Company has
delivered to the Representatives complete conformed copies of the Registration
Statement and of each consent and certificate of experts filed as a part
thereof, conformed copies of the Registration Statement (without exhibits),
preliminary prospectuses and the Prospectus, as amended or supplemented, in such
quantities and at such places as the Representatives has reasonably requested
for each of the Underwriters.
(3) DISTRIBUTION OF OFFERING MATERIAL BY THE COMPANY. The Company has
not distributed and will not distribute, prior to the later of the Second
Closing Date (as defined below) and the completion of the Underwriters'
distribution of the Shares, any offering material in connection with the
offering and sale of the Shares other than a preliminary prospectus, the
Prospectus or the Registration Statement.
(4) THE UNDERWRITING AGREEMENT. This Agreement has been duly
authorized, executed and delivered by, and is a valid and binding agreement of,
the Company, enforceable in accordance with its terms, except as rights to
indemnification hereunder may be limited by applicable law and except as the
enforcement hereof may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting the rights and
remedies of creditors or by general equitable principles.
(5) AUTHORIZATION OF THE SHARES TO BE SOLD BY THE COMPANY. The Shares
to be purchased by the Underwriters from the Company have been duly authorized
for issuance and sale pursuant to this Agreement and, when issued and delivered
by the Company pursuant to this Agreement, will be validly issued, fully paid
and nonassessable.
(6) NO APPLICABLE REGISTRATION OR OTHER SIMILAR RIGHTS. There are no
persons with registration or other similar rights to have any equity or debt
securities registered for sale under the Registration Statement or included in
the offering contemplated by this Agreement, other than the Stockholders with
respect to the Shares included in the Registration Statement, except for such
rights as have been duly waived.
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<PAGE>
(7) NO MATERIAL ADVERSE CHANGE. Subsequent to the respective dates as
of which information is given in the Prospectus: (i) there has been no material
adverse change, or any development that could reasonably be expected to result
in a material adverse change, in the condition, financial or otherwise, or in
the earnings, business, operations or prospects, whether or not arising from
transactions in the ordinary course of business, of the Company and its
subsidiary, considered as one entity (any such change or effect, where the
context so requires, is called a "Material Adverse Change" or a "Material
Adverse Effect"); (ii) the Company and its subsidiary, considered as one entity,
have not incurred any material liability or obligation, indirect, direct or
contingent, not in the ordinary course of business nor entered into any material
transaction or agreement not in the ordinary course of business; and (iii) there
has been no dividend or distribution of any kind declared, paid or made by the
Company or, except for dividends paid to the Company or its subsidiary on any
class of capital stock or repurchase or redemption by the Company or its
subsidiary of any class of capital stock.
(8) INDEPENDENT ACCOUNTANTS. Arthur Andersen LLP, who have expressed
their opinion with respect to the financial statements (which term as used in
this Agreement includes the related notes thereto) and supporting schedules
filed with the Commission as a part of the Registration Statement and included
in the Prospectus, are independent public or certified public accountants as
required by the Securities Act.
(9) PREPARATION OF THE FINANCIAL STATEMENTS. The financial statements
filed with the Commission as a part of the Registration Statement and included
in the Prospectus present fairly the consolidated financial position of the
Company and its subsidiary as of and at the dates indicated and the results of
their operations and cash flows for the periods specified. The supporting
schedules included in the Registration Statement present fairly the information
required to be stated therein. Such financial statements and supporting
schedules have been prepared in conformity with generally accepted accounting
principles as applied in the United States and on a consistent basis throughout
the periods involved, except as may be expressly stated in the related notes
thereto. No other financial statements or supporting schedules are required to
be included in the Registration Statement. The financial data set forth in the
Prospectus under the captions "Prospectus Summary--Summary Consolidated
Financial Data," "Selected Consolidated Financial Data" and "Capitalization"
fairly present the information set forth therein on a basis consistent with that
of the audited financial statements contained in the Registration Statement. The
pro forma consolidated financial statements of the Company and its subsidiary
and the related notes thereto included under the caption "Prospectus
Summary--Summary Consolidated Financial Data" and elsewhere in the Prospectus
and in the Registration Statement present fairly the information contained
therein, have been prepared in accordance with the Commission's rules and
guidelines with respect to pro forma financial statements and have been properly
presented on the bases described therein, and the assumptions used in the
preparation thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions and circumstances referred to
therein. No other pro forma financial information is required to be included in
the Registration Statement pursuant to Regulation S-X.
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<PAGE>
(10) COMPANY'S ACCOUNTING SYSTEM. The Company and its subsidiary
maintain a system of accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with management's
general or specific authorization; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles as applied in the United States and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(11) SUBSIDIARIES OF THE COMPANY. The Company does not own or control,
directly or indirectly, any corporation, association or other entity other than
the subsidiary listed in Exhibit 21 to the Registration Statement.
(12) INCORPORATION AND GOOD STANDING OF THE COMPANY AND ITS SUBSIDIARY.
The Company and its subsidiary have been duly organized and validly exist as
corporations or limited liability companies, as the case may be, in good
standing under the laws of the jurisdiction in which organized with full
corporate power and authority to own properties and conduct business as
described in the prospectus, and duly qualified to do business as foreign
corporations and in good standing under the laws of each jurisdiction which
requires such qualification.
(13) CAPITALIZATION OF THE SUBSIDIARY. All the outstanding shares of
capital stock of the Company's subsidiary have been duly and validly authorized
and issued and are fully paid and nonassessable, and, except as otherwise set
forth in the Prospectus, all outstanding shares of capital stock of the
subsidiary are owned by the Company either directly or through wholly owned
subsidiaries free and clear of any security interests, claims, liens or
encumbrances.
(14) NO PROHIBITION ON THE SUBSIDIARY FROM PAYING DIVIDENDS OR MAKING
OTHER DISTRIBUTIONS. No subsidiary of the Company is currently prohibited,
directly or indirectly, from paying any dividends to the Company, from making
any other distribution on such subsidiary's capital stock, from repaying to the
Company any loans or advances to such subsidiary from the Company or from
transferring any of such subsidiary's property or assets to the Company or any
other subsidiary of the Company, except as described in or contemplated by the
Prospectus.
(15) CAPITALIZATION AND OTHER CAPITAL STOCK MATTERS. The authorized,
issued and outstanding capital stock of the Company is as set forth in the
Prospectus under the caption "Capitalization" (other than for subsequent
issuances, if any, pursuant to employee benefit plans described in the
Prospectus or upon exercise of outstanding options or warrants described in the
Prospectus). The Common Shares (including the Shares) conform in all material
respects to the description thereof contained in the Prospectus. All of the
issued and outstanding Common Shares have been duly authorized and validly
issued, are fully paid and nonassessable and have been issued in compliance with
federal and state securities laws. None of the outstanding Common Shares were
issued in violation of any preemptive rights, rights of first refusal or other
similar rights to subscribe
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<PAGE>
for or purchase securities of the Company. There are no authorized or
outstanding options, warrants, preemptive rights, rights of first refusal or
other rights to purchase, or equity or debt securities convertible into or
exchangeable or exercisable for, any capital stock of the Company or its
subsidiary other than those accurately described in the Prospectus. The
description of the Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted thereunder, set forth in
the Prospectus accurately and fairly presents the information required to be
shown with respect to such plans, arrangements, options and rights.
(16) NASDAQ LISTING. The Shares have been approved for listing on the
Nasdaq National Market, subject only to official notice of issuance.
(17) NO CONSENTS, APPROVALS OR AUTHORIZATIONS REQUIRED. No consent,
approval, authorization, filing with or order of any court or governmental
agency or regulatory body is required in connection with the transactions
contemplated herein, except such as have been obtained or made under the
Securities Act and such as may be required (i) under the blue sky laws of any
jurisdiction in connection with the purchase and distribution of the Shares by
the Underwriters in the manner contemplated here and in the Prospectus, (ii) by
the National Association of Securities Dealers, LLC and (iii) by the federal and
provincial laws of Canada.
(18) NON-CONTRAVENTION OF EXISTING INSTRUMENTS AGREEMENTS. Neither the
issue and sale of the Shares nor the consummation of any other of the
transactions herein contemplated nor the fulfillment of the terms hereof will
conflict with, result in a breach or violation or imposition of any lien, charge
or encumbrance upon any property or assets of the Company or its subsidiary
pursuant to, (i) the charter or by-laws of the Company or its subsidiary, (ii)
the terms of any indenture, contract, lease, mortgage, deed of trust, note
agreement, loan agreement or other agreement, obligation, condition, covenant or
instrument to which the Company or its subsidiary is a party or bound or to
which its or their property is subject or (iii) any statute, law, rule,
regulation, judgment, order or decree applicable to the Company or its
subsidiary of any court, regulatory body, administrative agency, governmental
body, arbitrator or other authority having jurisdiction over the Company or its
subsidiary or any of its or their properties.
(19) NO DEFAULTS OR VIOLATIONS. Neither the Company nor its subsidiary
is in violation or default of (i) any provision of its charter or by-laws, (ii)
the terms of any indenture, contract, lease, mortgage, deed of trust, note
agreement, loan agreement or other agreement, obligation, condition, covenant or
instrument to which it is a party or bound or to which its property is subject
or (iii) any statute, law, rule, regulation, judgment, order or decree of any
court, regulatory body, administrative agency, governmental body, arbitrator or
other authority having jurisdiction over the Company or such subsidiary or any
of its properties, as applicable, except any such violation or default which
would not, singly or in the aggregate, result in a Material Adverse Change
except as otherwise disclosed in the Prospectus.
(20) NO ACTIONS, SUITS OR PROCEEDINGS. No action, suit or proceeding by
or before any court or governmental agency, authority or body or any arbitrator
involving the Company, its
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<PAGE>
subsidiary or their property is pending or, to the best knowledge of the
Company, threatened that (i) could reasonably be expected to have a Material
Adverse Effect on the performance of this Agreement or the of any of the
transactions contemplated hereby or (ii) could reasonably be expected to result
in a Material Adverse Effect.
(21) ALL NECESSARY PERMITS, ETC. The Company and its subsidiary possess
such valid and current certificates, authorizations or permits issued by the
appropriate state, federal or foreign regulatory agencies or bodies necessary to
conduct their respective businesses, and neither the Company nor its subsidiary
has received any notice of proceedings relating to the revocation or
modification of, or non-compliance with, any such certificate, authorization or
permit which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, could result in a Material Adverse Change.
(22) TITLE TO PROPERTIES. The Company and its subsidiary have good and
marketable title to all the properties and assets reflected as owned in the
financial statements referred to in Section 1(A)(i) above, in each case free and
clear of any security interests, mortgages, liens, encumbrances, equities,
claims and other defects, except such as do not materially and adversely affect
the value of such property and do not materially interfere with the use made or
proposed to be made of such property by the Company or its subsidiary. The real
property, improvements, equipment and personal property held under lease by the
Company and its subsidiary are held under valid and enforceable leases, with
such exceptions as are not material and do not materially interfere with the use
made or proposed to be made of such real property, improvements, equipment or
personal property by the Company and its subsidiary.
(23) TAX LAW COMPLIANCE. The Company and its subsidiary have filed all
necessary federal, state and foreign income and franchise tax returns and have
paid all taxes required to be paid, if due and payable, any related or similar
assessment, fine or penalty levied against them. The Company has made adequate
charges, accruals and reserves in the applicable financial statements referred
to in Section 1(A)(i) above in respect of all federal, state and foreign income
and franchise taxes for all periods as to which the tax liability of the Company
and its subsidiary has not been finally determined. The Company is not aware of
any tax deficiency that has been or might be asserted or threatened against the
Company that could result in a Material Adverse Change.
(24) INTELLECTUAL PROPERTY RIGHTS. The Company and its subsidiary owns
or possesses adequate rights to use all patents, patent rights or licenses,
inventions, collaborative research agreements, trade secrets, know-how,
trademarks, service marks, trade names and copyrights which are necessary to
conduct its businesses as described in the Registration Statement and
Prospectus; the expiration of any patents, patent rights, trade secrets,
trademarks, service marks, trade names or copyrights would not result in a
Material Adverse Change that is not otherwise disclosed in the Prospectus; the
Company has not received any notice of, and has no knowledge of, any
infringement of or conflict with asserted rights of the Company by others with
respect to any patent, patent rights, inventions, trade secrets, know-how,
trademarks, service marks, trade names or copyrights; and the Company has not
received any notice of, and has no knowledge of, any infringement of or conflict
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<PAGE>
with asserted rights of others with respect to any patent, patent rights,
inventions, trade secrets, know-how, trademarks, service marks, trade names
or copyrights which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, might have a Material Adverse
Change. There is no claim being made against the Company regarding patents,
patent rights or licenses, inventions, collaborative research, trade secrets,
know-how, trademarks, service marks, trade names or copyrights. The Company
and its subsidiary do not in the conduct of their business as now or proposed
to be conducted as described in the Prospectus infringe or conflict with any
right or patent of any third party, or any discovery, invention, product or
process which is the subject of a patent application filed by any third
party, known to the Company or its subsidiary, which such infringement or
conflict is reasonably likely to result in a Material Adverse Change.
(25) YEAR 2000 PREPAREDNESS. There are no issues related to the
Company's, or its subsidiary's, preparedness for the Year 2000 that (i) are of a
character required to be described or referred to in the Registration Statement
or Prospectus by the Securities Act which have not been accurately described in
the Registration Statement or Prospectus or (ii) might reasonably be expected to
result in any Material Adverse Change or that might materially affect their
properties, assets or rights. All internal computer systems and each Constituent
Component (as defined below) of those systems and all computer-related products
and each Constituent Component (as defined below) of those products of the
Company and its subsidiary fully comply with Year 2000 Qualification
Requirements. "Year 2000 Qualifications Requirements" means that the internal
computer systems and each Constituent Component (as defined below) of those
systems and all computer-related products and each Constituent Component (as
defined below) of those products of the Company and its subsidiary (i) have been
reviewed to confirm that they store, process (including sorting and performing
mathematical operations, calculations and computations), input and output data
containing date and information correctly regardless of whether the date
contains dates and times before, on or after January 1, 2000, (ii) have been
designated to ensure date and time entry recognition and calculations, and date
data interface values that reflect the century, (iii) accurately manage and
manipulate data involving dates and times, including single century formulas and
multi-century formulas, and will not cause an abnormal ending scenario within
the application or generate incorrect values or invalid results involving such
dates, (iv) accurately process any date rollover, and (v) accept and respond to
two-digit year date input in a manner that resolves any ambiguities as to the
century. "Constituent Component" means all software (including operating
systems, programs, packages and utilities), firmware, hardware, networking
components, and peripherals provided as part of the configuration. The Company
has inquired of material vendors as to their preparedness for the Year 2000 and
has disclosed in the Registration Statement or Prospectus any issues that might
reasonably be expected to result in any Material Adverse Change.
(26) NO TRANSFER TAXES OR OTHER FEES. There are no transfer taxes or
other similar fees or charges under Federal law or the laws of any state, or any
political subdivision thereof, required to be paid in connection with the
execution and delivery of this Agreement or the issuance and sale by the Company
of the shares.
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(27) COMPANY NOT AN "INVESTMENT COMPANY." The Company has been advised
of the rules and requirements under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). The Company is not, and after receipt of
payment for the Shares will not be, an "investment company" or an entity
"controlled" by an "investment company" within the meaning of the Investment
Company Act and will conduct its business in a manner so that it will not become
subject to the Investment Company Act.
(28) INSURANCE. The Company and its subsidiary are insured by
recognized, financially sound and reputable institutions with policies in such
amounts and with such deductibles and covering such risks as are generally
deemed adequate and customary for their businesses including, but not limited
to, policies covering real and personal property owned or leased by the Company
and its subsidiary against theft, damage, destruction, acts of vandalism and
earthquakes, general liability and Directors and Officers liability. The Company
has no reason to believe that it or any subsidiary will not be able (i) to renew
its existing insurance coverage as and when such policies expire or (ii) to
obtain comparable coverage from similar institutions as may be necessary or
appropriate to conduct its business as now conducted and at a cost that would
not result in a Material Adverse Change. Neither of the Company nor any
subsidiary has been denied any insurance coverage which it has sought or for
which it has applied.
(29) LABOR MATTERS. To the best of Company's knowledge, no labor
disturbance by the employees of the Company or its subsidiary exists or is
imminent; and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its principal suppliers, value added
resellers, subcontractors, original equipment manufacturers, authorized dealers
or international distributors that might be expected to result in a Material
Adverse Change.
(30) NO PRICE STABILIZATION OR MANIPULATION. The Company has not taken
and will not take, directly or indirectly, any action designed to or that might
be reasonably expected to cause or result in stabilization or manipulation of
the price of the Common Stock to facilitate the sale or resale of the Shares.
(31) LOCK-UP AGREEMENTS. Each officer and director of the company,
Stockholder and [beneficial owner of any outstanding shares of capital of the
Company or any right to acquire shares of capital stock of the Company] has
agreed to sign an agreement substantially in the form attached hereto as EXHIBIT
A (the "Lock-up Agreements"). The Company has provided to counsel for the
Underwriters a complete and accurate list of all securityholders of the Company
and the number and type of securities held by each securityholder. The Company
has provided to counsel for the Underwriters true, accurate and complete copies
of all of the Lock-up Agreements presently in effect or effected hereby. The
Company hereby represents and warrants that it will not release any of its
officers, directors or other stockholders from any Lock-up Agreements currently
existing or hereafter effected without the prior written consent of BancBoston
Robertson Stephens Inc.
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(32) RELATED PARTY TRANSACTIONS. There are no business relationships or
related-party transactions involving the Company or any subsidiary or any other
person required to be described in the Prospectus which have not been described
as required.
Any certificate signed by an officer of the Company and
delivered to the Representatives or to counsel for the Underwriters shall be
deemed to be a representation and warranty by the Company to each Underwriter as
to the matters set forth therein.
(hh) NO UNLAWFUL CONTRIBUTIONS OR OTHER PAYMENTS. Neither the Company
nor its subsidiary nor, to the best of the Company's knowledge, any employee or
agent of the Company or its subsidiary, has made any contribution or other
payment to any official of, or candidate for, any federal, state or foreign
office in violation of any law or of the character required to be disclosed in
the Prospectus.
(ii) ENVIRONMENTAL LAWS. The Company (i) is in compliance with all
rules, laws and regulations relating to the use, treatment, storage and disposal
of toxic substances and protection of health or the environment ("Environmental
Laws") which are applicable to its business, except where the failure to comply
would not result in a Material Adverse Change, (ii) has received no notice from
any governmental authority or third party of an asserted claim under
Environmental Laws, which claim is required to be disclosed in the Registration
Statement and the Prospectus, (iii) will not be required to make future material
capital expenditures to comply with Environmental Laws and (iv) owns, leases or
occupies no property designated as a Superfund site pursuant to the
Comprehensive Response, Compensation, and Liability Act of 1980, as amended (42
U.S.C. Section 9601, ET SEQ.), or otherwise designated as a contaminated site
under applicable state or local law.
(jj) PERIODIC REVIEW OF COSTS OF ENVIRONMENTAL COMPLIANCE. In the
ordinary course of its business, the Company conducts a periodic review of the
effect of Environmental Laws on the business, operations and properties of the
Company and its subsidiary, in the course of which it identifies and evaluates
associated costs and liabilities (including, without limitation, any capital or
operating expenditures required for clean-up, closure of properties or
compliance with Environmental Laws or any permit, license or approval, any
related constraints on operating activities and any potential liabilities to
third parties). On the basis of such review and the amount of its established
reserves, the Company has reasonably concluded that such associated costs and
liabilities would not, individually or in the aggregate, result in a Material
Adverse Change.
(kk) ERISA COMPLIANCE. The Company and its subsidiary and any
"employee benefit plan" (as defined under the Employee Retirement Income
Security Act of 1974, as amended, and the regulations and published
interpretations thereunder (collectively, "ERISA")) established or maintained by
the Company, its subsidiary or their "ERISA Affiliates" (as defined below) are
in compliance in all material respects with ERISA. "ERISA Affiliate" means, with
respect to the Company or its subsidiary, any member of any group of
organizations described in Sections 414(b),(c),(m) or (o) of the Internal
Revenue Code of 1986, as amended, and the regulations and published
interpretations thereunder (the "Code") of which the Company or its subsidiary
is a
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<PAGE>
member. No "reportable event" (as defined under ERISA) has occurred or is
reasonably expected to occur with respect to any "employee benefit plan"
established or maintained by the Company, its subsidiary or any of their ERISA
Affiliates. No "employee benefit plan" established or maintained by the Company,
its subsidiary or any of their ERISA Affiliates, if such "employee benefit plan"
were terminated, would have any "amount of unfounded benefit liabilities" (as
defined under ERISA). Neither the Company, its subsidiary nor any of their ERISA
Affiliates has incurred or reasonably expects to incur any liability under (i)
Title IV of ERISA with respect to termination of, or withdrawal from, any
"employee benefit plan" or (ii) Sections 412, 4971, 4975 or 4980B of the Code.
Each "employee benefit plan" established or maintained by the Company, its
subsidiary or any of their ERISA Affiliates that is intended to be qualified
under Section 401(a) of the Code is so qualified and nothing has occurred,
whether by action or failure to act, which would cause the loss of such
qualification.
B. Each Stockholder represents, warrants and covenants to each
Underwriter as follows:
(a) THE UNDERWRITING AGREEMENT. This Agreement has been duly
authorized, executed and delivered by or on behalf of such Stockholder and is a
valid and binding agreement of such Stockholder, enforceable in accordance with
its terms, except as rights to indemnification hereunder may be limited by
applicable law and except as the enforcement hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights and remedies of creditors or by general
equitable principles.
(b) NO FURTHER CONSENTS, AUTHORIZATION OR APPROVALS. No consent,
approval, authorization or order of any court or governmental agency or body is
required for the consummation by such Stockholder of the transactions
contemplated herein.
(c) NON-CONTRAVENTION. The consummation of any of the transactions
herein contemplated by such Stockholder or the fulfillment of the terms hereof
by such Stockholder will not conflict with, result in a breach or violation of,
or constitute a default under any law or the terms of any indenture or other
agreement or instrument to which such Stockholder is party or bound, any
judgment, order or decree applicable to such Stockholder or any court or
regulatory body, administrative agency, governmental body or arbitrator having
jurisdiction over such Stockholder.
(d) NO REGISTRATION OR OTHER SIMILAR RIGHTS. Such Stockholder does not
have any registration or other similar rights to have any equity or debt
securities registered for sale by the Company under the Registration Statement
or included in the offering contemplated by this Agreement, except for such
rights as are described in the Prospectus under "Shares Eligible for Future
Sale."
(e) NO PREEMPTIVE, CO-SALE OR OTHER RIGHTS. Such Stockholder does not
have, or has waived prior to the date hereof, any preemptive right, co-sale
right or right of first refusal or other similar right to purchase any of the
Shares that are to be sold by the Company pursuant to this
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<PAGE>
Agreement; and such Stockholder does not own any warrants, options or similar
rights to acquire, and does not have any right or arrangement to acquire, any
capital stock, right, warrants, options or other securities from the Company,
other than those described in the Registration Statement and the Prospectus.
(f) NO PRICE STABILIZATION OR MANIPULATION. Such Stockholder has not
taken and will not take, directly or indirectly, any action designed to or that
might be reasonably expected to cause or result in stabilization or manipulation
of the price of the Common Stock to facilitate the sale or resale of the Shares.
(g) DISTRIBUTION OF OFFERING MATERIALS BY THE STOCKHOLDERS. The
Stockholders have not distributed and will not distribute, prior to the later of
the Second Closing Date (as defined below) and the completion of the
Underwriters' distribution of the Shares, any offering material in connection
with the offering and sale of the Shares by such Stockholder other than a
preliminary prospectus, the Prospectus or the Registration Statement.
(h) DISCLOSURE MADE BY SUCH STOCKHOLDER IN THE PROSPECTUS. All
information furnished by or on behalf of such Stockholder in writing expressly
for use in the Registration Statement and Prospectus is, and on the First
Closing Date and the Second Closing Date (as defined below) will be, true,
correct, and complete in all material respects, and does not, and on the First
Closing Date and on the Second Closing Date will not, contain any untrue
statement of a material fact or omit to state any material fact necessary to
make such information not misleading. Such Stockholder confirms as accurate the
number of shares of Company Shares set forth opposite such Stockholder's name in
the Prospectus under the caption "Principal Stockholders" (both prior to and
after giving effect to the sale of the Shares).
SECTION 2. PURCHASE, SALE AND DELIVERY OF THE SHARES.
(1) THE FIRM SHARES. The Company agrees to issue and sell to the
several Underwriters the Firm Shares upon the terms herein set forth. On the
basis of the representations, warranties and agreements herein contained, and
upon the terms but subject to the conditions herein set forth, the Underwriters
agree severally and not jointly, to purchase from the Company the respective
number of Firm Shares set forth opposite their names on SCHEDULE A. The purchase
price per Firm Share to be paid by the several Underwriters to the Company shall
be $[___] per share.
(2) THE FIRST CLOSING DATE. Delivery of the Firm Shares to be purchased
by the Underwriters and payment therefor shall be made by the Company and the
Representatives at 6:00 a.m. San Francisco time, at the offices of Foley, Hoag &
Eliot LLP, One Post Office Square Boston, MA 02109-2170 (or at such other place
as may be agreed upon among the Representatives and the Company), (i) on the
third (3rd) full business day following the first day that Shares are traded,
(ii) if this Agreement is executed and delivered after 1:30 P.M., San Francisco
time, the fourth (4th) full business day following the day that this Agreement
is executed and delivered or (iii) at such other
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time and date not later that seven (7) full business days following the first
day that Shares are traded as the Representatives and the Company may determine
(or at such time and date to which payment and delivery shall have been
postponed pursuant to Section 8 hereof), such time and date of payment and
delivery being herein called the "Closing Date;" provided, however, that if the
Company has not made available to the Representatives copies of the Prospectus
within the time provided in Section 4(l) hereof, the Representatives may, in
their sole discretion, postpone the Closing Date until no later that two (2)
full business days following delivery of copies of the Prospectus to the
Representatives.
(3) THE OPTION SHARES; THE SECOND CLOSING DATE. In addition, on the
basis of the representations, warranties and agreements herein contained, and
upon the terms but subject to the conditions herein set forth, the Company
hereby grants an option to the several Underwriters to purchase, severally and
not jointly, up to an aggregate of [___] Option Shares from the Company at the
purchase price per share to be paid by the Underwriters for the Firm Shares. The
option granted hereunder is for use by the Underwriters solely in covering any
over-allotments in connection with the sale and distribution of the Firm Shares.
The option granted hereunder may be exercised at any time upon notice by the
Representatives to the Company, which notice may be given at any time within 30
days from the date of this Agreement. The time and date of delivery of the
Option Shares, if subsequent to the First Closing Date, is called the "Second
Closing Date" and shall be determined by the Representatives and shall not be
earlier than three nor later than five full business days after delivery of such
notice of exercise. If any Option Shares are to be purchased, (i) each
Underwriter agrees, severally and not jointly, to purchase the number of Option
Shares (subject to such adjustments to eliminate fractional shares as the
Representatives may determine) that bears the same proportion to the total
number of Option Shares to be purchased as the number of Firm Shares set forth
on SCHEDULE A opposite the name of such Underwriter bears to the total number of
Firm Shares and (ii) the Company to sell the number of Option Shares (subject to
such adjustments to eliminate fractional shares as the Representatives may
determine) that bears the same proportion to the total number of Option Shares
to be sold as the number of Option Shares to be sold by the Company as set forth
in the paragraph "Introductory" of this Agreement bears to the total number of
Option Shares. The Representatives may cancel the option at any time prior to
its expiration by giving written notice of such cancellation to the Company.
(4) PUBLIC OFFERING OF THE SHARES. The Representatives hereby advise
the Company that the Underwriters intend to offer for sale to the public, as
described in the Prospectus, their respective portions of the Shares as soon
after this Agreement has been executed and the Registration Statement has been
declared effective as the Representatives, in their sole judgment, have
determined is advisable and practicable.
(5) PAYMENT FOR THE SHARES. Payment for the Shares shall be made at the
First Closing Date (and, if applicable, at the Second Closing Date) by wire
transfer in immediately available-funds to the order of the Company.
It is understood that the Representatives have been
authorized, for their own account and the accounts of the several Underwriters,
to accept delivery of and receipt for, and make
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payment of the purchase price for, the Firm Shares and any Option Shares the
Underwriters have agreed to purchase. BancBoston Robertson Stephens Inc.,
individually and not as the Representative of the Underwriters, may (but shall
not be obligated to) make payment for any Shares to be purchased by any
Underwriter whose funds shall not have been received by the Representatives by
the First Closing Date or the Second Closing Date, as the case may be, for the
account of such Underwriter, but any such payment shall not relieve such
Underwriter from any of its obligations under this Agreement.
(6) DELIVERY OF THE SHARES. The Company shall deliver, or cause to be
delivered, a credit representing the Firm Shares to an account or accounts at
The Depository Trust Company, as designated by the Representatives for the
accounts of the Representatives and the several Underwriters at the First
Closing Date, against the irrevocable release of a wire transfer of immediately
available funds for the amount of the purchase price therefor. The Company shall
also deliver, or cause to be delivered a credit representing the Option Shares
the Underwriters have agreed to purchase at the First Closing Date (or the
Second Closing Date, as the case may be), to an account or accounts at The
Depository Trust Company as designated by the Representatives for the accounts
of the Representatives and the several Underwriters, against the irrevocable
release of a wire transfer of immediately available funds for the amount of the
purchase price therefor. Time shall be of the essence, and delivery at the time
and place specified in this Agreement is a further condition to the obligations
of the Underwriters.
(7) DELIVERY OF PROSPECTUS TO THE UNDERWRITERS. Not later than 12:00
noon on the second business day following the date the Shares are released by
the Underwriters for sale to the public, the Company shall deliver or cause to
be delivered copies of the Prospectus in such quantities and at such place as
the Representatives shall request.
SECTION 3. COVENANTS OF THE COMPANY AND STOCKHOLDERS.
A. The Company further covenants and agrees with each Underwriter as
follows:
(1) REGISTRATION STATEMENT MATTERS. The Company will (i) use its best
efforts to cause a registration statement on Form 8-A (the "Form 8-A
Registration Statement") as required by the Securities Exchange Act of 1934 (the
"Exchange Act") to become effective simultaneously with the Registration
Statement, (ii) use its best efforts to cause the Registration Statement to
become effective or, if the procedure in Rule 430A of the Securities Act is
followed, to prepare and timely file with the Commission under Rule 424(b) under
the Securities Act a Prospectus in a form approved by the Representatives
containing information previously omitted at the time of effectiveness of the
Registration Statement in reliance on Rule 430A of the Securities Act and (iii)
not file any amendment to the Registration Statement or supplement to the
Prospectus of which the Representatives shall not previously have been advised
and furnished with a copy or to which the Representatives shall have reasonably
objected in writing or which is not in compliance with the Securities Act. If
the Company elects to rely on Rule 462(b) under the Securities Act, the Company
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shall file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) under the Securities Act prior to the time
confirmations are sent or given, as specified by Rule 462(b)(2) under the
Securities Act, and shall pay the applicable fees in accordance with Rule 111
under the Securities Act.
(2) SECURITIES ACT COMPLIANCE. The Company will advise the
Representatives promptly (i) when the Registration Statement or any
post-effective amendment thereto shall have become effective, (ii) of receipt of
any comments from the Commission, (iii) of any request of the Commission for
amendment of the Registration Statement or for supplement to the Prospectus or
for any additional information and (iv) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or the use
of the Prospectus or of the institution of any proceedings for that purpose. The
Company will use its best efforts to prevent the issuance of any such stop order
preventing or suspending the use of the Prospectus and to obtain as soon as
possible the lifting thereof, if issued.
(3) BLUE SKY COMPLIANCE. The Company will cooperate with the
Representatives and counsel for the Underwriters in endeavoring to qualify the
Shares for sale under the securities laws of such jurisdictions (both national
and foreign) as the Representatives may reasonably have designated in writing
and will make such applications, file such documents, and furnish such
information as may be reasonably required for that purpose, provided the Company
shall not be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction where it is not now so
qualified or required to file such a consent. The Company will, from time to
time, prepare and file such statements, reports and other documents, as are or
may be required to continue such qualifications in effect for so long a period
as the Representatives may reasonably request for distribution of the Shares.
(4) AMENDMENTS AND SUPPLEMENTS TO THE PROSPECTUS AND OTHER SECURITIES
ACT MATTERS. The Company will comply with the Securities Act and the Exchange
Act, and the rules and regulations of the Commission thereunder, so as to permit
the completion of the distribution of the Shares as contemplated in this
Agreement and the Prospectus. If during the period in which a prospectus is
required by law to be delivered by an Underwriter or dealer, any event shall
occur as a result of which, in the judgment of the Company or in the reasonable
opinion of the Representatives or counsel for the Underwriters, it becomes
necessary to amend or supplement the Prospectus in order to make the statements
therein, in the light of the circumstances existing at the time the Prospectus
is delivered to a purchaser, not misleading, or, if it is necessary at any time
to amend or supplement the Prospectus to comply with any law, the Company
promptly will prepare and file with the Commission, and furnish at its own
expense to the Underwriters and to dealers, an appropriate amendment to the
Registration Statement or supplement to the Prospectus so that the Prospectus as
so amended or supplemented will not, in the light of the circumstances when it
is so delivered, be misleading, or so that the Prospectus will comply with the
law.
(5) COPIES OF ANY AMENDMENTS AND SUPPLEMENTS TO THE PROSPECTUS. The
Company agrees to furnish the Representatives, without charge, during the period
beginning on the date hereof and
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ending on the later of the First Closing Date or such date, as in the opinion of
counsel for the Underwriters, the Prospectus is no longer required by law to be
delivered in connection with sales by an Underwriter or dealer (the "Prospectus
Delivery Period"), as many copies of the Prospectus and any amendments or
supplements as the Representatives may request.
(6) INSURANCE. The Company shall (i) obtain Directors and Officers
liability insurance in the minimum amount of $10 million which shall apply to
the offering contemplated hereby and (ii) shall cause each of the
Representatives to be added as an additional insured to such policy in respect
of the offering contemplated hereby.
(7) NOTICE OF SUBSEQUENT EVENTS. If at any time during the ninety (90)
day period after the Registration Statement becomes effective, any rumor,
publication or event relating to or affecting the Company shall occur as a
result of which in your opinion the market price of the Company Shares has been
or is likely to be materially affected (regardless of whether such rumor,
publication or event necessitates a supplement to or amendment of the
Prospectus), the Company will, after written notice from you advising the
Company to the effect set forth above, forthwith prepare, consult with you
concerning the substance of and disseminate a press release or other public
statement, reasonably satisfactory to you, responding to or commenting on such
rumor, publication or event.
(8) USE OF PROCEEDS. The Company shall apply the net proceeds from the
sale of the Shares sold by it in the manner described under the caption "Use of
Proceeds" in the Prospectus.
(9) TRANSFER AGENT. The Company shall engage and maintain, at its
expense, a registrar and transfer agent for the Company Shares.
(10) EARNINGS STATEMENT. As soon as practicable, the Company will make
generally available to its security holders and to the Representatives an
earnings statement (which need not be audited) covering the twelve-month period
ending [___](2) that satisfies the provisions of Section 11(a) of the Securities
Act.
(11) PERIODIC REPORTING OBLIGATIONS. During the Prospectus Delivery
Period the Company shall file, on a timely basis, with the Commission and the
Nasdaq National Market all reports and documents required to be filed under the
Exchange Act.
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(2) Insert the date of the end of the Company's first quarter ending after one
year following the "effective date of the Registration Statement" (as defined in
Rule 158(c) under the Securities Act).
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(12) AGREEMENT NOT TO OFFER OR SELL ADDITIONAL SECURITIES. The Company
will not, without the prior written consent of BancBoston Robertson Stephens
Inc., for a period of 180 days following the date of the Prospectus, offer, sell
or contract to sell, or otherwise dispose of or enter into any transaction which
is designed to, or could be expected to, result in the disposition (whether by
actual disposition or effective economic disposition due to cash settlement or
otherwise by the Company or any affiliate of the Company or any person in
privity with the Company or any affiliate of the Company) directly or
indirectly, or announce the offering of, any other Common Shares or any
securities convertible into, or exchangeable for, Common Shares; provided,
however, that the Company may (i) issue and sell Common Shares pursuant to any
director or employee stock option plan, stock ownership plan or dividend
reinvestment plan of the Company in effect at the date of the Prospectus and
described in the Prospectus so long as none of those shares may be transferred
on during the period of 180 days from the date that the Registration Statement
is declared effective (the "Lock-Up Period") and the Company shall enter stop
transfer instructions with its transfer agent and registrar against the transfer
of any such Common Shares and (ii) the Company may issue Common Shares issuable
upon the conversion of securities or the exercise of warrants outstanding at the
date of the Prospectus and described in the Prospectus.
(13) FUTURE REPORTS TO THE REPRESENTATIVES. During the period of five
years hereafter the Company will furnish to the Representatives (i) as soon as
practicable after the end of each fiscal year, copies of the Annual Report of
the Company containing the balance sheet of the Company as of the close of such
fiscal year and statements of income, stockholders' equity and cash flows for
the year then ended and the opinion thereon of the Company's independent public
or certified public accountants; (ii) as soon as practicable after the filing
thereof, copies of each proxy statement, Annual Report on Form 10-K, Quarterly
Report on Form 10-Q, Current Report on Form 8-K or other report filed by the
Company with the Commission, the National Association of Securities Dealers, LLC
or any securities exchange; and (iii) as soon as available, copies of any report
or communication of the Company mailed generally to holders of its capital
stock.
B. Each Stockholder further covenants and agrees with each Underwriter
as follows:
NOTIFICATION OF UNTRUE STATEMENTS, ETC. If, at any time prior to the
date on which the distribution of the Common Shares as contemplated herein and
in the Prospectus has been completed, as determined by the Representatives, such
Stockholder has knowledge of the occurrence of any event as a result of which
the Prospectus or the Registration Statement, in each case as then amended or
supplemented, would include an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, such Stockholder
will promptly notify the Company and the Representatives.
SECTION 4. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The
obligations of the several Underwriters to purchase and pay for the Shares as
provided herein on the First Closing Date and, with respect to the Option
Shares, the Second Closing Date, shall be subject to the accuracy of
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the representations and warranties on the part of the Company and the
Stockholders set forth in Sections 1(A) and 1(B) hereof as of the date hereof
and as of the First Closing Date as though then made and, with respect to the
Option Shares, as of the Second Closing Date as though then made, to the timely
performance by the Company and the Stockholders of their respective covenants
and other obligations hereunder, and to each of the following additional
conditions:
(1) COMPLIANCE WITH REGISTRATION REQUIREMENTS, NO STOP ORDER; NO
OBJECTION FROM THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, LLC. The
Registration Statement shall have become effective prior to the execution of
this Agreement, or at such later date as shall be consented to in writing by
you; and no stop order suspending the effectiveness thereof shall have been
issued and no proceedings for that purpose shall have been initiated or, to the
knowledge of the Company, any Stockholder or any Underwriter, threatened by the
Commission, and any request of the Commission for additional information (to be
included in the Registration Statement or Prospectus) shall have been complied
with to the satisfaction of Underwriters' Counsel; and the National Association
of Securities Dealers, LLC shall have raised no objection to the fairness and
reasonableness of the underwriting terms and arrangements.
(2) CORPORATE PROCEEDINGS. All corporate proceedings and other legal
matters in connection with this Agreement, the form of Registration Statement
and the Prospectus, and the registration, authorization, issue, sale and
delivery of the Shares, shall have been reasonably satisfactory to Underwriters'
Counsel, and such counsel shall have been furnished with such papers and
information as they may reasonably have requested to enable them to pass upon
the matters referred to in this Section.
(3) NO MATERIAL ADVERSE CHANGE. Subsequent to the execution and
delivery of this Agreement and prior to the First Closing Date, or the Second
Closing Date, as the case may be, there shall not have been any Material Adverse
Change in the condition (financial or otherwise), earnings, operations, business
or business prospects of the Company and its subsidiary considered as one
enterprise from that set forth in the Registration Statement or Prospectus,
which, in your sole judgment, is material and adverse and that makes it, in your
sole judgment, impracticable or inadvisable to proceed with the public offering
of the Shares as contemplated by the Prospectus.
(4) OPINION OF COUNSEL FOR THE COMPANY. You shall have received on the
First Closing Date, or the Second Closing Date, as the case may be, an opinion
of Foley, Hoag & Eliot LLP counsel for the Company substantially in the form of
EXHIBIT B attached hereto, dated the First Closing Date, or the Second Closing
Date, addressed to the Underwriters and with reproduced copies or signed
counterparts thereof for each of the Underwriters.
Counsel rendering the opinion contained in EXHIBIT B may rely as to
questions of law not involving the laws of the United States, the Commonwealth
of Massachusetts or the State of Delaware upon opinions of local counsel, and as
to questions of fact upon representations or certificates of officers of the
Company, the Stockholders or officers of the Stockholders and of government
officials, in which case their opinion is to state that they are so relying and
that they
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have no knowledge of any material misstatement or inaccuracy in any such
opinion, representation or certificate. Copies of any opinion, representation or
certificate so relied upon shall be delivered to you, as Representatives of the
Underwriters, and to Underwriters' Counsel.
(5) OPINION OF PATENT COUNSEL FOR THE COMPANY. You shall have received
on the First Closing Date, or the Second Closing Date, as the case may be, an
opinion of Wolf, Greenfield & Sacks, P.C., patent counsel for the Company,
substantially in the form of EXHIBIT C attached hereto.
(6) OPINION OF COUNSEL FOR THE UNDERWRITERS. You shall have received on
the First Closing Date or the Second Closing Date, as the case may be, an
opinion of Hale and Dorr LLP, substantially in the form of EXHIBIT D hereto. The
Company shall have furnished to such counsel such documents as they may have
requested for the purpose of enabling them to pass upon such matters.
(7) ACCOUNTANTS' COMFORT LETTER. You shall have received on the First
Closing Date or on the Second Closing Date, as the case may be, a letter from
Arthur Andersen LLP addressed to the Underwriters, dated the First Closing Date
or the Second Closing Date, as the case may be, confirming that they are
independent certified public accountants with respect to the Company within the
meaning of the Act and the applicable published Rules and Regulations and based
upon the procedures described in such letter delivered to you concurrently with
the execution of this Agreement (herein called the "Original Letter"), but
carried out to a date not more than four (4) business days prior to the First
Closing Date or the Second Closing Date, as the case may be, (i) confirming, to
the extent true, that the statements and conclusions set forth in the Original
Letter are accurate as of the First Closing Date or the Second Closing Date, as
the case may be, and (ii) setting forth any revisions and additions to the
statements and conclusions set forth in the Original Letter which are necessary
to reflect any changes in the facts described in the Original Letter since the
date of such letter, or to reflect the availability of more recent financial
statements, data or information. The letter shall not disclose any change in the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiary considered as one enterprise from
that set forth in the Registration Statement or Prospectus, which, in your sole
judgment, is material and adverse and that makes it, in your sole judgment,
impracticable or inadvisable to proceed with the public offering of the Shares
as contemplated by the Prospectus. The Original Letter from Arthur Andersen LLP
shall be addressed to or for the use of the Underwriters in form and substance
satisfactory to the Underwriters and shall (i) represent, to the extent true,
that they are independent certified public accountants with respect to the
Company within the meaning of the Act and the applicable published Rules and
Regulations, (ii) set forth their opinion with respect to their examination of
the consolidated balance sheet of the Company as of December 31, 1997 and 1998
and related consolidated statements of operations, shareholders' equity, and
cash flows for each of the three years in the period ended the twelve (12)
months ended December 31, 1998, (iii) state that Arthur Andersen LLP has
performed the procedures set out in Statement on Auditing Standards No. 71 ("SAS
71") for a review of interim financial information and providing the report of
Arthur Andersen described in SAS 71 on the financial statements for each of the
quarters in the seven-quarter period ended September 30, 1999 (the "Quarterly
Financial
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Statements"), (iv) state that in the course of such review, nothing came to
their attention that leads them to believe that any material modifications need
to be made to any of the Quarterly Financial Statements in order for them to be
in compliance with generally accepted accounting principles consistently applied
across the periods presented, and address other matters agreed upon by Arthur
Andersen LLP and you. In addition, you shall have received from Arthur Andersen
LLP a letter addressed to the Company and made available to you for the use of
the Underwriters stating that their review of the Company's system of internal
accounting controls, to the extent they deemed necessary in establishing the
scope of their examination of the Company's consolidated financial statements as
of December 31, 1998, did not disclose any weaknesses in internal controls that
they considered to be material weaknesses. [To be updated prior to effective
date.]
(8) OFFICERS' CERTIFICATE. You shall have received on the First Closing
Date and the Second Closing Date, as the case may be, a certificate of the
Company, dated the First Closing Date or the Second Closing Date, as the case
may be, signed by the Chief Executive Officer and Chief Financial Officer of the
Company, to the effect that, and you shall be satisfied that:
(i) the representations and warranties of the Company in this Agreement
are true and correct, as if made on and as of the First Closing Date or
the Second Closing Date, as the case may be, and the Company has
complied with all the agreements and satisfied all the conditions on
its part to be performed or satisfied at or prior to the First Closing
Date or the Second Closing Date, as the case may be;
(ii) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or threatened under the Act;
(iii) when the Registration Statement became effective and at all times
subsequent thereto up to the delivery of such certificate, the
Registration Statement and the Prospectus, any amendments or
supplements thereto, contained all material information required to be
included therein by the Securities Act and the applicable rules and
regulations of the Commission thereunder, and in all material respects
conformed to the requirements of the Securities Act and the applicable
rules and regulations of the Commission thereunder, the Registration
Statement and the Prospectus, and any amendments or supplements
thereto, did not and does not include any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading;
and, since the effective date of the Registration Statement, there has
occurred no event required to be set forth in an amended or
supplemented Prospectus which has not been so set forth; and
(iv) subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not been
(a) any material adverse change in the condition (financial or
otherwise), earnings, operations, business or business prospects of the
Company and its subsidiary considered as one enterprise, (b) any
transaction that is material
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to the Company and its subsidiary considered as one enterprise, except
transactions entered into in the ordinary course of business, (c) any
obligation, direct or contingent, that is material to the Company and
its subsidiary considered as one enterprise, incurred by the Company or
its subsidiary, except obligations incurred in the ordinary course of
business, (d) any change in the capital stock or outstanding
indebtedness of the Company or its subsidiary that is material to the
Company and its subsidiary considered as one enterprise, (e) any
dividend or distribution of any kind declared, paid or made on the
capital stock of the Company or its subsidiary, or (f) any loss or
damage (whether or not insured) to the property of the Company or its
subsidiary which has been sustained or will have been sustained which
has a material adverse effect on the condition (financial or
otherwise), earnings, operations, business or business prospects of the
Company and its subsidiary considered as one enterprise.
(9) LOCK-UP AGREEMENT FROM CERTAIN STOCKHOLDERS OF THE COMPANY. The
Company shall have obtained and delivered to you an agreement substantially in
the form of EXHIBIT A attached hereto from each officer and director of the
Company, Shareholder and beneficial owner of one or more percent of the
outstanding issued share capital of the Company.
(10) OPINION OF COUNSEL FOR THE STOCKHOLDERS. You shall have received
on the First Closing Date and the Second Closing Date, as the case may be, the
following opinion of Foley, Hoag & Eliot LLP counsel for the Stockholders
substantially in the form of EXHIBIT E attached hereto, dated as of such Closing
Date, addressed to the Underwriters and with reproduced copies or signed
counterparts thereof for each of the Underwriters.
In rendering such opinion, such counsel may rely as to questions of law
not involving the laws of the United States, Commonwealth of Massachusetts or
State of Delaware upon opinions of local counsel and as to questions of fact
upon representations or certificates of the Stockholders or officers of the
Stockholders, and of governmental officials, in which case their opinion is to
state that they are so relying and that they have no knowledge of any material
misstatement or inaccuracy of any material misstatement or inaccuracy in any
such opinion, representation or certificate so relied upon shall be delivered to
you, as Representatives of the Underwriters, and to Underwriters' Counsel.
(11) STOCK EXCHANGE LISTING. The Shares shall have been approved for
listing on the Nasdaq National Market, subject only to official notice of
issuance.
(12) COMPLIANCE WITH PROSPECTUS DELIVERY REQUIREMENTS. The Company
shall have complied with the provisions of Sections 2(g) and 3(e) hereof with
respect to the furnishing of Prospectuses.
(13) ADDITIONAL DOCUMENTS. On or before each of the First Closing Date
and the Second Closing Date, as the case may be, the Representatives and counsel
for the Underwriters shall have received such information, documents and
opinions as they may reasonably require for the purposes
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of enabling them to pass upon the issuance and sale of the Shares as
contemplated herein, or in order to evidence the accuracy of any of the
representations and warranties, or the satisfaction of any of the conditions or
agreements, herein contained.
If any condition specified in this Section 4 is not satisfied when and
as required to be satisfied, this Agreement may be terminated by the
Representatives by notice to the Company at any time on or prior to the First
Closing Date and, with respect to the Option Shares, at any time prior to the
Second Closing Date, which termination shall be without liability on the part of
any party to any other party, except that Section 5 (Payment of Expenses),
Section 6 (Reimbursement of Underwriters' Expenses), Section 7 (Indemnification
and Contribution) and Section 10 (Representations and Indemnities to Survive
Delivery) shall at all times be effective and shall survive such termination.
SECTION 5. PAYMENT OF EXPENSES. The Company agrees to pay all costs,
fees and expenses incurred in connection with the performance of its obligations
hereunder and in connection with the transactions contemplated hereby, including
without limitation (i) all expenses incident to the issuance and delivery of the
Common Shares (including all printing and engraving costs), (ii) all fees and
expenses of the registrar and transfer agent of the Common Stock, (iii) all
necessary issue, transfer and other stamp taxes in connection with the issuance
and sale of the Shares to the Underwriters, (iv) all fees and expenses of the
Company's counsel, independent public or certified public accountants and other
advisors, (v) all costs and expenses incurred in connection with the
preparation, printing, filing, shipping and distribution of the Registration
Statement (including financial statements, exhibits, schedules, consents and
certificates of experts), each preliminary prospectus and the Prospectus, and
all amendments and supplements thereto, and this Agreement, (vi) all filing
fees, attorneys' fees and expenses incurred by the Company or the Underwriters
in connection with qualifying or registering (or obtaining exemptions from the
qualification or registration of) all or any part of the Shares for offer and
sale under the state securities or blue sky laws or the provincial securities
laws of Canada or any other country, and, if requested by the Representatives,
preparing and printing a "Blue Sky Survey," an "International Blue Sky Survey"
or other memorandum, and any supplements thereto, advising the Underwriters of
such qualifications, registrations and exemptions, (vii) the filing fees
incident to, and the reasonable fees and expenses of counsel for the
Underwriters in connection with, the National Association of Securities Dealers,
LLC review and approval of the Underwriters' participation in the offering and
distribution of the Common Shares, (viii) the fees and expenses associated with
listing the Common Stock on the Nasdaq National Market, (ix) all costs and
expenses incident to the preparation and undertaking of "road show" preparations
to be made to prospective investors, and (x) all other fees, costs and expenses
referred to in Item 13 and Item 14 of Part II of the Registration Statement.
Except as provided in this Section 5, Section 6, and Section 7 hereof, the
Underwriters shall pay their own expenses, including the fees and disbursements
of their counsel.
The Stockholders further agree with each Underwriter to pay
(directly or by reimbursement) all fees and expenses incident to the performance
of their obligations under this
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Agreement which are not otherwise specifically provided for herein, including
but not limited to fees and expenses of counsel and other advisors for such
Stockholders.
This Section 5 shall not affect or modify any separate, valid
agreement relating to the allocation of payment of expenses between the Company,
on the one hand, and the Stockholders, on the other hand.
SECTION 6. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If this Agreement
is terminated by the Representatives pursuant to Section 4, Section 7, Section
8, Section 9, or if the sale to the Underwriters of the Shares on the First
Closing Date is not consummated because of any refusal, inability or failure on
the part of the Company or the Stockholders to perform any agreement herein or
to comply with any provision hereof, the Company agrees to reimburse the
Representatives and the other Underwriters (or such Underwriters as have
terminated this Agreement with respect to themselves), severally, upon demand
for all out-of-pocket expenses that shall have been reasonably incurred by the
Representatives and the Underwriters in connection with the proposed purchase
and the offering and sale of the Shares, including but not limited to fees and
disbursements of counsel, printing expenses, travel expenses, postage, facsimile
and telephone charges.
SECTION 7. INDEMNIFICATION AND CONTRIBUTION.
(1) INDEMNIFICATION OF THE UNDERWRITERS. The Company and each
Stockholder, jointly and severally, agree to indemnify and hold harmless each
Underwriter, its officers and employees, and each person, if any, who controls
any Underwriter within the meaning of the Securities Act and the Exchange Act
against any loss, claim, damage, liability or expense, as incurred, to which
such Underwriter or such controlling person may become subject, under the
Securities Act, the Exchange Act or other federal or state statutory law or
regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Company, which consent shall not be unreasonably withheld), insofar as such
loss, claim, damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based (i) upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, or any amendment thereto, including any information deemed to be a
part thereof pursuant to Rule 430A or Rule 434 under the Securities Act, or the
omission or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading; or (ii) upon
any untrue statement or alleged untrue statement of a material fact contained in
any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; or (iii) in whole or
in part upon any inaccuracy in the representations and warranties of the Company
or Stockholders contained herein; or (iv) in whole or in part upon any failure
of the Company or the Stockholders to perform their respective obligations
hereunder or under law; or (v) any act or failure to act or any alleged act or
failure to act by any Underwriter in connection with, or relating in any
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manner to, the Shares or the offering contemplated hereby, and which is included
as part of or referred to in any loss, claim, damage, liability or action
arising out of or based upon any matter covered by clause (i), (ii), (iii) or
(iv) above, provided that the Company and the Stockholders shall not be liable
under this clause (v) to the extent that a court of competent jurisdiction shall
have determined by a final judgment that such loss, claim, damage, liability or
action resulted directly from any such acts or failures to act undertaken or
omitted to be taken by such Underwriter through its bad faith or willful
misconduct; and to reimburse each Underwriter and each such controlling person
for any and all expenses (including the fees and disbursements of counsel chosen
by BancBoston Robertson Stephens Inc.) as such expenses are reasonably incurred
by such Underwriter or such controlling person in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action; provided, however, that the foregoing indemnity
agreement shall not apply to any loss, claim, damage, liability or expense to
the extent, but only to the extent, arising out of or based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with written information furnished to the
Company and the Stockholders by the Representatives expressly for use in the
Registration Statement, any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto); and provided, further, that with respect to
any preliminary prospectus, the foregoing indemnity agreement shall not inure to
the benefit of any Underwriter from whom the person asserting any loss, claim,
damage, liability or expense purchased Shares, or any person controlling such
Underwriter, if copies of the Prospectus were timely delivered to the
Underwriter pursuant to Section 2 and a copy of the Prospectus (as then amended
or supplemented if the Company shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of such Underwriter
to such person, if required by law so to have been delivered, at or prior to the
written confirmation of the sale of the Shares to such person, and if the
Prospectus (as so amended or supplemented) would have cured the defect giving
rise to such loss, claim, damage, liability or expense. The indemnity agreement
set forth in this Section 7(a) shall be in addition to any liabilities that the
Company and the Stockholders may otherwise have.
(2) INDEMNIFICATION OF THE COMPANY, ITS DIRECTORS AND OFFICERS. Each
Underwriter agrees, severally and not jointly, to indemnify and hold harmless
the Company, each of its directors, each of its officers who signed the
Registration Statement, the Stockholders and each person, if any, who controls
the Company or any Stockholder within the meaning of the Securities Act or the
Exchange Act, against any loss, claim, damage, liability or expense, as
incurred, to which the Company, or any such director, officer, Stockholder or
controlling person may become subject, under the Securities Act, the Exchange
Act, or other federal or state statutory law or regulation, or at common law or
otherwise (including in settlement of any litigation, if such settlement is
effected with the written consent of such Underwriter), insofar as such loss,
claim, damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based upon any untrue or alleged untrue
statement of a material fact contained in the Registration Statement, any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or arises out of or is based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged
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omission was made in the Registration Statement, any preliminary prospectus, the
Prospectus (or any amendment or supplement thereto), in reliance upon and in
conformity with written information furnished to the Company and the
Stockholders by the Representatives expressly for use therein; and to reimburse
the Company, or any such director, officer, Stockholder or controlling person
for any legal and other expense reasonably incurred by the Company, or any such
director, officer, Stockholder or controlling person in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action. The indemnity agreement set forth in this
Section 7(b) shall be in addition to any liabilities that each Underwriter may
otherwise have.
(3) INFORMATION PROVIDED BY THE UNDERWRITERS. The Company and each of
the Stockholders, hereby acknowledges that the only information that the
Underwriters have furnished to the Company and the Stockholders expressly for
use in the Registration Statement, any preliminary prospectus or the Prospectus
(or any amendment or supplement thereto) are the statements set forth in the
table in the first paragraph and the second paragraph under the caption
"Underwriting" in the Prospectus; and the Underwriters confirm that such
statements are correct.
(4) NOTIFICATIONS AND OTHER INDEMNIFICATION PROCEDURES. Promptly after
receipt by an indemnified party under this Section 7 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 7, notify
the indemnifying party in writing of the commencement thereof, but the omission
so to notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party for contribution or otherwise than under
the indemnity agreement contained in this Section 7 or to the extent it is not
prejudiced as a proximate result of such failure. In case any such action is
brought against any indemnified party and such indemnified party seeks or
intends to seek indemnity from an indemnifying party, the indemnifying party
will be entitled to participate in, and, to the extent that it shall elect,
jointly with all other indemnifying parties similarly notified, by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party; provided, however, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that a conflict may arise between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action or that there
may be legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of such indemnifying
party's election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to such
indemnified party under this Section 7 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the next preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the
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expenses of more than one separate counsel (together with local counsel),
approved by the indemnifying party (BancBoston Robertson Stephens Inc. in the
case of Section 7(b) and Section 8), representing the indemnified parties who
are parties to such action), (ii) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the indemnified party
within a reasonable time after notice of commencement of the action, or (iii)
the indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party, in each of which
cases the fees and expenses of counsel shall be at the expense of the
indemnifying party.
(5) SETTLEMENTS. The indemnifying party under this Section 7 shall not
be liable for any settlement of any proceeding effected without its written
consent, which consent shall not be unreasonably withheld, but if settled with
such consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party against any loss, claim, damage,
liability or expense by reason of such settlement or judgment. Notwithstanding
the foregoing sentence, if at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel as contemplated by Section 7(d) hereof, the indemnifying party agrees
that it shall be liable for any settlement of any proceeding effected without
its written consent if (i) such settlement is entered into more than 30 days
after receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement, compromise or consent to the entry of judgment in any pending or
threatened action, suit or proceeding in respect of which any indemnified party
is or could have been a party and indemnity was or could have been sought
hereunder by such indemnified party, unless such settlement, compromise or
consent includes (i) an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such action, suit or
proceeding and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
(6) CONTRIBUTION. If the indemnification provided for in this Section 7
is unavailable to or insufficient to hold harmless an indemnified party under
Section 7(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) then each
indemnifying party shall contribute to the aggregate amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriters
on the other from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law then each indemnifying party shall contribute to such amount paid or payable
by such indemnified party in such proportion as is appropriate to reflect not
only such relative benefits but also the relative fault of the Company on the
one hand and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, (or
actions or proceedings in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriter on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses)
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received by the Company bears to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the table
on the cover page of the Prospectus. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or the
Underwriters on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 7(f) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 7(f). The amount paid
or payable by an indemnified party as a result of the losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to above in
this Section 7(f) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
subsection (f), (i) no Underwriter shall be required to contribute any amount in
excess of the underwriting discounts and commissions applicable to the Shares
purchased by such Underwriter and (ii) no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations in this Section 7(f)
to contribute are several in proportion to their respective underwriting
obligations and not joint.
(7) TIMING OF ANY PAYMENTS OF INDEMNIFICATION. Any losses, claims,
damages, liabilities or expenses for which an indemnified party is entitled to
indemnification or contribution under this Section 7 shall be paid by the
indemnifying party to the indemnified party as such losses, claims, damages,
liabilities or expenses are incurred, but in all cases, no later than thirty
(30) days of invoice to the indemnifying party.
(8) SURVIVAL. The indemnity and contribution agreements contained in
this Section 7 and the representation and warranties of the Company set forth in
this Agreement shall remain operative and in full force and effect, regardless
of (i) any investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the Company, its directors or officers or any
persons controlling the Company, (ii) acceptance of any Shares and payment
therefor hereunder, and (iii) any termination of this Agreement. A successor to
any Underwriter, or to the Company, its directors or officers, or any person
controlling the Company, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 7.
(i) LIMITATION OF STOCKHOLDER LIABILITY. The aggregate liability of
each Stockholder under the representations, warranties, covenants and agreement
contained in this Agreement and under the indemnity and contribution agreements
contained in the provisions of this Section 7 shall be limited to an aggregate
amount equal to the sum of the Conversion Payments to be paid to the
Stockholders listed in SCHEDULE B.
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(j) ACKNOWLEDGEMENTS OF PARTIES. The parties to this Agreement hereby
acknowledge that they are sophisticated business persons who were represented by
counsel during the negotiations regarding the provisions hereof including,
without limitation, the provisions of this Section 7, and are fully informed
regarding said provisions. They further acknowledge that the provisions of this
Section 7 fairly allocate the risks in light of the ability of the parties to
investigate the Company and its business in order to assure that adequate
disclosure is made in the Registration Statement and Prospectus as required by
the Securities Act and the Exchange Act.
SECTION 8. DEFAULT OF ONE OR MORE OF THE SEVERAL UNDERWRITERS. If, on
the First Closing Date or the Second Closing Date, as the case may be, any one
or more of the several Underwriters shall fail or refuse to purchase Shares that
it or they have agreed to purchase hereunder on such date, and the aggregate
number of Common Shares which such defaulting Underwriter or Underwriters agreed
but failed or refused to purchase does not exceed 10% of the aggregate number of
the Shares to be purchased on such date, the other Underwriters shall be
obligated, severally, in the proportions that the number of Firm Common Shares
set forth opposite their respective names on SCHEDULE A bears to the aggregate
number of Firm Shares set forth opposite the names of all such non-defaulting
Underwriters, or in such other proportions as may be specified by the
Representatives with the consent of the non-defaulting Underwriters, to purchase
the Shares which such defaulting Underwriter or Underwriters agreed but failed
or refused to purchase on such date. If, on the First Closing Date or the Second
Closing Date, as the case may be, any one or more of the Underwriters shall fail
or refuse to purchase Shares and the aggregate number of Shares with respect to
which such default occurs exceeds 10% of the aggregate number of Shares to be
purchased on such date, and arrangements satisfactory to the Representatives and
the Company for the purchase of such Shares are not made within 48 hours after
such default, this Agreement shall terminate without liability of any party to
any other party except that the provisions of Section 4, and Section 7 shall at
all times be effective and shall survive such termination. In any such case
either the Representatives or the Company shall have the right to postpone the
First Closing Date or the Second Closing Date, as the case may be, but in no
event for longer than seven days in order that the required changes, if any, to
the Registration Statement and the Prospectus or any other documents or
arrangements may be effected.
As used in this Agreement, the term "Underwriter" shall be deemed to
include any person substituted for a defaulting Underwriter under this Section
8. Any action taken under this Section 8 shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
SECTION 9. TERMINATION OF THIS AGREEMENT. Prior to the First Closing
Date, this Agreement may be terminated by the Representatives by notice given to
the Company and the Stockholders if at any time (i) trading or quotation in any
of the Company's securities shall have been suspended or limited by the
Commission or by the Nasdaq Stock Market, or trading in securities generally on
either the Nasdaq Stock Market or the New York Stock Exchange shall have been
suspended or limited, or minimum or maximum prices shall have been generally
established
-28-
<PAGE>
on any of such stock exchanges by the Commission or the National Association of
Securities Dealers, LLC; (ii) a general banking moratorium shall have been
declared by any of federal, New York, Delaware or California authorities; (iii)
there shall have occurred any outbreak or escalation of national or
international hostilities or any crisis or calamity, or any change in the United
States or international financial markets, or any substantial change or
development involving a prospective change in United States' or international
political, financial or economic conditions, as in the judgment of the
Representatives is material and adverse and makes it impracticable or
inadvisable to market the Common Shares in the manner and on the terms described
in the Prospectus or to enforce contracts for the sale of securities; (iv) in
the judgment of the Representatives there shall have occurred any Material
Adverse Change; or (v) the Company shall have sustained a loss by strike, fire,
flood, earthquake, accident or other calamity of such character as in the
judgment of the Representatives may interfere materially with the conduct of the
business and operations of the Company regardless of whether or not such loss
shall have been insured. Any termination pursuant to this Section 9 shall be
without liability on the part of (a) the Company or the Stockholders to any
Underwriter, except that the Company and the Stockholders shall be obligated to
reimburse the expenses of the Representatives and the Underwriters pursuant to
Sections 5 and 6 hereof, (b) any Underwriter to the Company or the Stockholders,
or (c) of any party hereto to any other party except that the provisions of
Section 7 shall at all times be effective and shall survive such termination.
SECTION 10. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, its officers, the Stockholders and of the several
Underwriters set forth in or made pursuant to this Agreement will remain in full
force and effect, regardless of any investigation made by or on behalf of any
Underwriter or the Company or any of its or their partners, officers or
directors or any controlling person, or the Stockholders, as the case may be,
and will survive delivery of and payment for the Shares sold hereunder and any
termination of this Agreement.
SECTION 11. NOTICES. All communications hereunder shall be in writing
and shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
If to the Representatives:
BANCBOSTON ROBERTSON STEPHENS INC.
555 California Street
San Francisco, California 94104
Facsimile: (415) 676-2696
Attention: General Counsel
If to the Company:
CENTRA SOFTWARE, INC.
-29-
<PAGE>
430 Bedford Street
Lexington, Massachusetts 02420
Facsimile: 617-863-7288
Attention: [___]
If to the Stockholders:
At the address of such Stockholder as listed in SCHEDULE B.
Any party hereto may change the address for receipt of communications by giving
written notice to the others.
SECTION 12. SUCCESSORS. This Agreement will inure to the benefit of and
be binding upon the parties hereto, including any substitute Underwriters
pursuant to Section 9 hereof, and to the benefit of the employees, officers and
directors and controlling persons referred to in Section 7, and to their
respective successors and personal representatives, and no other person will
have any right or obligation hereunder. The term "successors" shall not include
any purchaser of the Shares as such from any of the Underwriters merely by
reason of such purchase.
SECTION 13. PARTIAL UNENFORCEABILITY. The invalidity or
unenforceability of any Section, paragraph or provision of this Agreement shall
not affect the validity or enforceability of any other Section, paragraph or
provision hereof. If any Section, paragraph or provision of this Agreement is
for any reason determined to be invalid or unenforceable, there shall be deemed
to be made such minor changes (and only such minor changes) as are necessary to
make it valid and enforceable.
SECTION 14. GOVERNING LAW PROVISIONS.
(1) GOVERNING LAW. This agreement shall be governed by and construed in
accordance with the internal laws of the state of New York applicable to
agreements made and to be performed in such state.
(2) CONSENT TO JURISDICTION. Any legal suit, action or proceeding
arising out of or based upon this Agreement or the transactions contemplated
hereby ("Related Proceedings") may be instituted in the federal courts of the
United States of America located in the City and County of San Francisco or the
courts of the State of California in each case located in the City and County of
San Francisco (collectively, the "Specified Courts"), and each party irrevocably
submits to the exclusive jurisdiction (except for proceedings instituted in
regard to the enforcement of a judgment of any such court (a "Related
Judgment"), as to which such jurisdiction is non-exclusive) of such courts in
any such suit, action or proceeding. Service of any process, summons, notice or
document by mail to
-30-
<PAGE>
such party's address set forth above shall be effective service of process for
any suit, action or other proceeding brought in any such court. The parties
irrevocably and unconditionally waive any objection to the laying of venue of
any suit, action or other proceeding in the Specified Courts and irrevocably and
unconditionally waive and agree not to plead or claim in any such court that any
such suit, action or other proceeding brought in any such court has been brought
in an inconvenient forum. Each party not located in the United States
irrevocably appoints CT Corporation System, which currently maintains a San
Francisco office at 49 Stevenson Street, San Francisco, California 94105, United
States of America, as its agent to receive service of process or other legal
summons for purposes of any such suit, action or proceeding that may be
instituted in any state or federal court in the City and County of San
Francisco.
(3) WAIVER OF IMMUNITY. With respect to any Related Proceeding, each
party irrevocably waives, to the fullest extent permitted by applicable law, all
immunity (whether on the basis of sovereignty or otherwise) from jurisdiction,
service of process, attachment (both before and after judgment) and execution to
which it might otherwise be entitled in the Specified Courts, and with respect
to any Related Judgment, each party waives any such immunity in the Specified
Courts or any other court of competent jurisdiction, and will not raise or claim
or cause to be pleaded any such immunity at or in respect of any such Related
Proceeding or Related Judgment, including, without limitation, any immunity
pursuant to the United States Foreign Sovereign Immunities Act of 1976, as
amended.
SECTION 15. GENERAL PROVISIONS. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may be executed in two
or more counterparts, each one of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement may not be amended or modified unless in writing by all of the
parties hereto, and no condition herein (express or implied) may be waived
unless waived in writing by each party whom the condition is meant to benefit.
The Table of Contents and the Section headings herein are for the convenience of
the parties only and shall not affect the construction or interpretation of this
Agreement.
[The remainder of this page has been intentionally left blank.]
-31-
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company the enclosed copies hereof,
whereupon this instrument, along with all counterparts hereof, shall become a
binding agreement in accordance with its terms.
Very truly yours,
CENTRA SOFTWARE, INC.
-------------------------------------------
By: Authorized Signatory
NORTH BRIDGE VENTURE PARTNERS, L.P.
By: Authorized Signatory
ALTA V LIMITED PARTNERSHIP
By: Authorized Signatory
LEON NAVICKAS
By: Leon Navickas
CHARLES DIGATE
By: Charles Digate
-32-
<PAGE>
CUSTOMS HOUSE PARTNERS
By: Authorized Signatory
COMMONWEALTH CAPITAL VENTURES, L.P.
By: Authorized Signatory
BILL GROSS'S IDEALAB!
By : Authorized Signatory
RUBIN GRUBER
By: Rubin Gruber
EDWARD TAKAS
By: Edward Takas
THE CAREER GROUP, LTD.
By: Authorized Signatory
-33-
<PAGE>
The foregoing Underwriting Agreement is hereby confirmed and accepted
by the Representatives as of the date first above written.
BANCBOSTON ROBERTSON STEPHENS INC.
HAMBRECHT & QUIST LLC
DAIN RAUSCHER WESSELS
On their behalf and on behalf of each of the several underwriters named in
SCHEDULE A hereto.
BY BANCBOSTON ROBERTSON STEPHENS INC.
- -------------------------------------
By: Authorized Signatory
-34-
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Number of Firm Common
Shares To be Purchased
<S> <C>
Underwriters
BANCBOSTON ROBERTSON STEPHENS,
INC. AND BANCBOSTON ROBERTSON
STEPHENS INTERNATIONAL LIMITED............................ [__________]
HAMBRECHT & QUIST LLC..................................... [__________]
DAIN RAUSCHER WESSELS..................................... [__________]
Total.............................................. [__________]
</TABLE>
-35-
<PAGE>
SCHEDULE B
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER OF SHARES OF AMOUNT OF
SERIES A STOCKHOLDER SERIES A PREFERRED STOCK CONVERSION PAYMENT
- -------------------- ------------------------ ------------------
<S> <C> <C>
North Bridge Venture Partners, L.P. 500,000
950 Winter Street
Suite 4600
Waltham, MA 02451
Alta V Limited Partnership 494,800
One Post Office Square
Suite 3800
Boston, MA 02109
Leon Navickas 100,000
56 Juniper Road
Belmont, MA 02478
Charles Digate 33,000
10 Oxford Street
Winchester, MA 01890
(check address - Series A Binder)
Customs House Partners 5,200
One Post Office Square
Suite 3800
Boston, MA 02109
</TABLE>
<TABLE>
<CAPTION>
Name And Address Of Number Of Shares Of Amount Of
Series B Stockholder Series B Preferred Stock Conversion Payment
- -------------------- ------------------------ ------------------
<S> <C> <C>
Alta V Limited Partnership 549,777
One Post Office Square
Suite 3800
Boston, MA 02109
Commonwealth Capital Ventures, L.P. 444,445
20 Willian Street
Wellesley, MA 02481
North Bridge Venture Partners, L.P. 333,334
950 Winter Street
Suite 4600
Waltham, MA 02451
</TABLE>
-36-
<PAGE>
<TABLE>
<CAPTION>
Name And Address Of Number Of Shares Of Amount Of
Series B Stockholder Series B Preferred Stock Conversion Payment
- -------------------- ------------------------ ------------------
<S> <C> <C>
Bill Gross's idealab! 44,445
[ ]
Rubin Gruber 16,000
709 Sudbury Road
Concord, MA 01742
Edward Takas 15,600
[ ]
The Career Group, Ltd. 7,111
One Kendall Square
Cambridge, MA 02139
Customs House Partners 5,778
One Post Office Square
Suite 3800
Boston, MA 02109
</TABLE>
-37-
<PAGE>
EXHIBIT A
LOCK-UP AGREEMENT
BancBoston Robertson Stephens Inc.
As Lead Representative of the Several Underwriters
555 California Street, Suite 2600
San Francisco, California 94104
RE: CENTRA SOFTWARE, INC. (THE "COMPANY")
Ladies & Gentlemen:
The undersigned is an owner of record or beneficially of certain shares
of Common Stock of the Company ("Common Stock") or securities convertible into
or exchangeable or exercisable for Common Stock. The Company proposes to carry
out a public offering of Common Stock (the "Offering") for which you will act as
the representative (the "Representative") of the underwriters. The undersigned
recognizes that the Offering will be of benefit to the undersigned and will
benefit the Company by, among other things, raising additional capital for its
operations. The undersigned acknowledges that you and the other underwriters are
relying on the representations and agreements of the undersigned contained in
this letter in carrying out the Offering and in entering into underwriting
agreements with the Company with respect to the Offering.
In consideration of the foregoing, the undersigned hereby agrees that
the undersigned will not offer to sell, contract to sell, or otherwise sell,
dispose of, loan, pledge or grant any rights with respect to (collectively, a
"Disposition") any shares of Common Stock, any options or warrants to purchase
any shares of Common Stock or any securities convertible into or exchangeable
for shares of Common Stock (collectively, "Securities") now owned or hereafter
acquired directly by such person or with respect to which such person has or
hereafter acquires the power of disposition, otherwise than (i) as a bona fide
gift or gifts, provided the donee or donees thereof agree in writing to be bound
by this restriction, (ii) as a distribution to partners or shareholders of such
person, provided that the distributees thereof agree in writing to be bound by
the terms of the restriction, (iii) with respect to dispositions of Common
Shares acquired on the open market, (iv) with respect to sales or purchases of
Common Stock acquired on the open market, or (v) with the prior written consent
of BancBoston Robertson Stephens Inc., for a period commencing on the date
hereof and continuing to a date 180 days after the Registration Statement is
declared effective by the Securities and Exchange Commission (the "Lock-up
Period"). The foregoing restriction has been expressly agreed to preclude the
holder of the Securities from engaging in any hedging or other transaction which
is designed to or reasonably expected to lead to or result in a Disposition of
Securities during the Lock-up Period, even if such Securities would be disposed
of by someone other than such holder. Such prohibiting hedging or other
transactions would include, without limitation, any short sale (whether or not
against the box) or any purchase, sale or grant of any right (including, without
A-1
<PAGE>
limitation, any put or call option) with respect to any Securities or with
respect to any security (other than a broad-based market basket or index) that
included, relates to or derives any significant part of its value from
Securities. The undersigned also agrees and consents to the entry of stop
transfer instructions with the Company's transfer agent and registrar against
the transfer of shares of Common Stock or Securities held by the undersigned
except in compliance with the foregoing restrictions.
This agreement is irrevocable and will be binding on the undersigned
and the respective successors, heirs, personal representatives, and assigns of
the undersigned. This letter agreement shall terminate and be no further force
and effect upon a decision by BancBoston Robertson Stephens Inc. or the Company
not to proceed with the Offering.
Dated:
-----------------------------
-----------------------------------
[Printed Name of Holder]
By:
--------------------------------
[Signature]
-----------------------------------
Printed Name of Person Signing
(And indicate capacity of person
signing if signing as custodian,
trustee, or on behalf of an entity)
A-2
<PAGE>
EXHIBIT B
MATTERS TO BE COVERED IN THE OPINION OF COMPANY COUNSEL
(i) The Company and each subsidiary has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation;
(ii) The Company and each subsidiary has the corporate power and authority to
own, lease and operate its properties and to conduct its business as described
in the Prospectus;
(iii) The Company and each subsidiary is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction, if any, in
which the ownership or leasing of its properties or the conduct of its business
requires such qualification, except where the failure to be so qualified or be
in good standing would not have a Material Adverse Effect. To such counsel's
knowledge, the Company does not own or control, directly or indirectly, any
corporation, association or other entity other than Centra Software Europe
Limited;
(iv) The authorized, issued and outstanding capital stock of the Company is as
set forth in the Prospectus under the caption "Capitalization" as of the dates
stated therein, the issued and outstanding shares of capital stock of the
Company have been duly and validly issued and are fully paid and nonassessable,
and, to such counsel's knowledge, will not have been issued in violation of or
subject to any preemptive right, co-sale right, registration right, right of
first refusal or other similar right;
(v) All issued and outstanding shares of capital stock of each subsidiary of the
Company have been duly authorized and validly issued and are fully paid and
nonassessable, and, to such counsel's knowledge, have not been issued in
violation of or subject to any preemptive right, co-sale right, registration
right, right of first refusal or other similar right and are owned by the
Company free and clear of any pledge, lien, security interest, encumbrance,
claim or equitable interest;
(vi) The Firm Shares or the Option Shares, as the case may be, to be issued by
the Company pursuant to the terms of this Agreement have been duly authorized
and, upon issuance and delivery against payment therefor in accordance with the
terms hereof, will be duly and validly issued and fully paid and nonassessable,
and will not have been issued in violation of or subject to any preemptive
right, co-sale right, registration right, right of first refusal or other
similar right.
(vii) The Company has the corporate power and authority to enter into this
Agreement and to issue, sell and deliver to the Underwriters the Shares to be
issued and sold by it hereunder;
(viii) This Agreement has been duly authorized by all necessary corporate action
on the part of the Company and has been duly executed and delivered by the
Company and, assuming due authorization, execution and delivery by you, is a
valid and binding agreement of the Company,
B-1
<PAGE>
enforceable in accordance with its terms, except as rights to indemnification
hereunder may be limited by applicable law and except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or affecting creditors' rights generally or by general equitable
principles;
(ix) The Registration Statement has become effective under the Act and, to such
counsel's knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are pending or threatened under the Securities Act;
(x) The 8-A Registration Statement complied as to form in all material respects
with the requirements of the Exchange Act; the 8-A Registration Statement has
become effective under the Exchange Act; and the Firm Shares or the Option
Shares have been validly registered under the Securities Act and the Rules and
Regulations of the Exchange Act and the applicable rules and regulations of the
Commission thereunder;
(xi) The Registration Statement and the Prospectus, and each amendment or
supplement thereto (other than the financial statements (including supporting
schedules) and financial data derived therefrom as to which such counsel need
express no opinion), as of the effective date of the Registration Statement,
complied as to form in all material respects with the requirements of the Act
and the applicable Rules and Regulations;
(xii) The information in the Prospectus under the caption "Description of
Capital Stock," to the extent that it constitutes matters of law or legal
conclusions, has been reviewed by such counsel and is a fair summary of such
matters and conclusions; and the forms of certificates evidencing the Common
Stock and filed as exhibits to the Registration Statement comply with Delaware
law;
(xiii) The description in the Registration Statement and the Prospectus of the
charter and bylaws of the Company and of statutes are accurate and fairly
present the information required to be presented by the Securities Act;
(xiv) To such counsel's knowledge, there are no agreements, contracts, leases or
documents to which the Company is a party of a character required to be
described or referred to in the Registration Statement or Prospectus or to be
filed as an exhibit to the Registration Statement which are not described or
referred to therein or filed as required;
(xv) The performance of this Agreement and the consummation of the transactions
herein contemplated (other than performance of the Company's indemnification
obligations hereunder, concerning which no opinion need be expressed) will not
(a) result in any violation of the Company's charter or bylaws or (b) to such
counsel's knowledge, result in a material breach or violation of any of the
terms and provisions of, or constitute a default under, any bond, debenture,
note or other evidence of indebtedness, or any lease, contract, indenture,
mortgage, deed of trust, loan agreement, joint venture or other agreement or
instrument known to such counsel to which the Company is a
B-2
<PAGE>
party or by which its properties are bound, or any applicable statute, rule or
regulation known to such counsel or, to such counsel's knowledge, any order,
writ or decree of any court, government or governmental agency or body having
jurisdiction over the Company or its subsidiary, or over any of their properties
or operations;
(xvi) No consent, approval, authorization or order of or qualification with any
court, government or governmental agency or body having jurisdiction over the
Company or its subsidiary, or over any of their properties or operations is
necessary in connection with the consummation by the Company of the transactions
herein contemplated, except (i) such as have been obtained under the Securities
Act, (ii) such as may be required under state or other securities or Blue Sky
laws in connection with the purchase and the distribution of the Shares by the
Underwriters, (iii) such as may be required by the National Association of
Securities Dealers, LLC and (iv) such as may be required under the federal or
provincial laws of Canada;
(xvii) To such counsel's knowledge, there are no legal or governmental
proceedings pending or threatened against the Company or its subsidiary of a
character required to be disclosed in the Registration Statement or Prospectus,
other than those described therein;
(xviii) To such counsel's knowledge, neither the Company nor its subsidiary is
presently (a) in material violation of its respective charter or bylaws, or (b)
in material breach of any applicable statute, rule or regulation known to such
counsel or, to such counsel's knowledge, any order, writ or decree of any court
or governmental agency or body having jurisdiction over the Company or its
subsidiary, or over any of their properties or operations; and
(xix) To such counsel's knowledge, except as set forth in the Registration
Statement or Prospectus, no holders of Company Shares or other securities of the
Company have registration rights with respect to securities of the Company and,
except as set forth in the Registration Statement and Prospectus, all holders of
securities of the Company having rights known to such counsel to registration of
such shares of Company Shares or other securities, because of the filing of the
Registration Statement by the Company have, with respect to the offering
contemplated thereby, waived such rights or such rights have expired by reason
of lapse of time following notification of the Company's intent to file the
Registration Statement or have included securities in the Registration Statement
pursuant to the exercise of and in full satisfaction of such rights.
(xx) The Company is not and, after giving effect to the offering and the sale of
the Shares and the application of the proceeds thereof as described in the
Prospectus, will not be, an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended.
(xxi) To such counsel's knowledge, the Company owns or possesses sufficient
trademarks, trade names, patent rights, copyrights, licenses, approvals, trade
secrets and other similar rights (collectively, "Intellectual Property Rights")
reasonably necessary to conduct their business as now conducted; and the
expected expiration of any such Intellectual Property Rights would not result in
a Material Adverse Effect. The Company has not received any notice of
infringement or conflict
B-3
<PAGE>
with asserted Intellectual Property Rights of others, which infringement or
conflict, if the subject of an unfavorable decision, would result in a Material
Adverse Effect. To such counsel's knowledge, the Company's discoveries,
inventions, products, or processes referred to in the Registration Statement or
Prospectus do not infringe or conflict with any right or patent which is the
subject of a patent application known to the Company.
B-4
<PAGE>
EXHIBIT C
MATTERS TO BE COVERED IN THE OPINION OF
PATENT COUNSEL FOR THE COMPANY
Such counsel are familiar with the technology used by the Company in
its business and the manner of its use thereof and have read the Registration
Statement and the Prospectus, including particularly the portions of the
Registration Statement and the Prospectus referring to patents, trade secrets,
trademarks, service marks or other proprietary information or materials and:
(i) The Company is listed in the records of the United States Patent
and Trademark Office as the holder of record of the patents listed on a
schedule to such opinion (the "Patents") and each of the applications
listed on a schedule to such opinion (the "Applications"). To the
knowledge of such counsel, there are no claims of third parties to any
ownership interest or lien with respect to any of the Patents or
Applications. Such counsel is not aware of any material defect in form
in the preparation or filing of the Applications on behalf of the
Company. To the knowledge of such counsel, the Applications are being
pursued by the Company. To the knowledge of such counsel, the Company
owns as its sole property the Patents and pending Applications;
(ii) The Company is listed in the records of the appropriate foreign
offices as the sole holder of record of the foreign patents listed on a
schedule to such opinion (the "Foreign Patents") and each of the
applications listed on a schedule to such opinion (the "Foreign
Applications"). Such counsel knows of no claims of third parties to any
ownership interest or lien with respect to the Foreign Patents or
Foreign Applications. Such counsel is not aware of any material defect
of form in the preparation or filing of the Foreign Applications on
behalf of the Company. To the knowledge of such counsel, the Foreign
Applications are being pursued by the Company. To the knowledge of such
counsel, the Company owns as its sole property the Foreign Patents and
pending Foreign Applications;
(iii) Such counsel knows of no reason why the Patents or Foreign
Patents are not valid as issued. Such counsel has no knowledge of any
reason why any patent to be issued as a result of any Application or
Foreign Application would not be valid or would not afford the Company
useful patent protection with respect thereto;
(iv) As to the statements under the captions "Risk Factors --
Dependence on Patents and Proprietary Rights" and "Business -- Patents
and Proprietary Rights," [ADD OTHER SECTION REFERENCES IF APPROPRIATE]
nothing has come to the attention of such counsel which caused them to
believe that the above-mentioned sections of the Registration
Statement, at the time the Registration Statement became effective and
at all times subsequent thereto up to and on the Closing Date and on
any later date on which Option Stock are to be purchased the
Registration Statement and any amendment or supplement thereto made
available and reviewed by such counsel contained any untrue statement
of a material fact or omitted to
C-1
<PAGE>
state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or at the Closing Date or
any later date on which the Option Stock are to be purchased, as the
case may be, the above-mentioned sections of the Registration
Statement, Prospectus and any amendment or supplement thereto made
available and reviewed by such counsel contained any untrue statement
of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading; and
(v) Such counsel knows of no material action, suit, claim or proceeding
relating to patents, patent rights or licenses, trademarks or trademark
rights, copyrights, collaborative research, licenses or royalty
arrangements or agreements or trade secrets, know-how or proprietary
techniques, including processes and substances, owned by or affecting
the business or operations of the Company which are pending or
threatened against the Company or any of its officers or directors.
C-2
<PAGE>
EXHIBIT D
MATTERS TO BE COVERED IN THE OPINION OF UNDERWRITERS' COUNSEL
(i) The Firm Shares and the Option Shares have been duly authorized and, upon
issuance and delivery and payment therefor in accordance with the terms of the
Underwriting Agreement, will be validly issued, fully paid and non-assessable.
(ii) The Registration Statement complied as to form in all material respects
with the requirements of the Act; the Registration Statement has become
effective under the Act and, to such counsel's knowledge, no stop order
proceedings with respect thereto have been instituted or threatened or are
pending under the Act.
(iii) The 8-A Registration Statement complied as to form in all material
respects with the requirements of the Exchange Act; the 8-A Registration
Statement has become effective under the Exchange Act; and the Firm Shares or
the Option Shares have been validly registered under the Securities Act and the
Rules and Regulations of the Exchange Act and the applicable rules and
regulations of the Commission thereunder;
(iv) The Underwriting Agreement has been duly authorized, executed and delivered
by the Company.
(v) The Underwriting Agreement has been duly authorized, executed and delivered
by the Stockholders.
Such counsel shall state that such counsel has reviewed the opinions
addressed to the Representatives from Foley, Hoag & Eliot LLP and Wolf,
Greenfield & Sacks, P.C. each dated the date hereof, and furnished to you in
accordance with the provisions of the Underwriting Agreement. Such opinions
appear on their face to be appropriately responsive to the requirements of the
Underwriting Agreement.
In addition, such counsel shall state that such counsel has
participated in conferences with officials and other representatives of the
Company, the Representatives, Underwriters' Counsel and the independent
certified public accountants of the Company, at which such conferences the
contents of the Registration Statement and Prospectus and related matters were
discussed, and although they have not verified the accuracy or completeness of
the statements contained in the Registration Statement or the Prospectus,
nothing has come to the attention of such counsel which leads them to believe
that, at the time the Registration Statement became effective and at all times
subsequent thereto up to and on the First Closing Date or Second Closing Date,
as the case may be, the Registration Statement, any amendment or supplement
thereto (other than the financial statements including supporting schedules and
other financial and statistical information derived therefrom, as to which such
counsel need express no comment) contained any untrue statement of a material
fact or omitted to state a material fact required to be stated
D-1
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therein or necessary to make the statements therein not misleading, or at the
First Closing Date or the Second Closing Date, as the case may be, the
Registration Statement and the Prospectus (except as aforesaid) contained any
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
D-2
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EXHIBIT E
MATTERS TO BE COVERED IN THE OPINION OF STOCKHOLDER COUNSEL
(i) The Underwriting Agreement has been duly authorized, executed and delivered
by or on behalf of, and is a valid and binding agreement of, such Stockholder,
enforceable in accordance with its terms, except as rights to indemnification
thereunder may be limited by applicable law and except as the enforcement
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally or by
general equitable principles.
(ii) The execution and delivery by such Stockholder of, and the performance by
such Stockholder of its obligations under, the Underwriting Agreement will not
contravene or conflict with, result in a breach of, or constitute a default
under, the charter or by-laws, partnership agreement, trust agreement or other
organization documents, as the case may be, of such Stockholder, or, to the best
of such counsel's knowledge, violate, result in a breach of or constitute a
default under the terms of any other agreement or instrument to which such
Stockholder is a party or by which it is bound, or any judgement, order or
decree applicable to such Stockholder of any court, regulatory body,
administrative agency, governmental body or arbitrator having jurisdiction over
such Stockholder.
(iii) To the best of such counsel's knowledge, no consent, approval,
authorization or other order of, or registration or filing with, any court or
governmental authority or agency, is required for the consummation by such
Stockholder of the transactions contemplated in the Underwriting Agreement,
except as required under the Securities Act, applicable state securities or blue
sky laws, and from the National Association of Securities Dealers, LLC.
E-1
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Exhibit 3.2
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CENTRA SOFTWARE, INC.
Centra Software, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, does hereby
certify as follows:
1. The Corporation filed its original Certificate of Incorporation with
the Secretary of State of the State of Delaware on April 4, 1995. The
Certificate of Incorporation was amended by Certificates of Amendment filed on
April 11, 1995, May 1, 1996, March 4, 1997 December 18, 1997, April 21, 1999 and
October 27, 1999.
2. The following Amended and Restated Certificate of Incorporation has
been duly adopted in accordance with the provisions set forth in Sections 242
and 245 of the General Corporation Law of the State of Delaware:
FIRST: The name of the corporation is Centra Software, Inc. (the
"Corporation").
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, Wilmington, Delaware, County of New
Castle, and the name of its registered agent at such address is Corporation
Trust Company.
THIRD: The nature of the business or purposes to be conducted or promoted
is to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of Delaware.
FOURTH: The total number of shares of all classes of capital stock which
the Corporation shall have authority to issue shall be 110,000,000, consisting
of (i) 100,000,000 shares of common stock, par value $0.001 per share ("Common
Stock"), and (ii) 10,000,000 shares of preferred stock, par value $0.001 per
share ("Preferred Stock").
The following is a statement of the designations and the powers,
privileges and rights, and the qualifications, limitations or restrictions
thereof in respect of each class of capital stock of the Corporation:
A. COMMON STOCK.
1. GENERAL. The voting, dividend and liquidation rights of the holders of
the Common Stock are subject to and qualified by the rights of the holders of
the Preferred Stock of any series as may be designated by the board of directors
upon any issuance of the Preferred Stock of any series.
2. VOTING. The holders of Common Stock will be entitled to one vote per
share on all matters to be voted on by the stockholders of the Corporation.
There shall be no cumulative voting.
3. DIVIDENDS. Dividends may be declared and paid on the Common Stock from
funds lawfully available therefor as and when determined by the board of
directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
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4. LIQUIDATION. Upon the dissolution or liquidation of the Corporation,
whether voluntary or involuntary, holders of Common Stock will be entitled to
receive all assets of the Corporation available for distribution to its
stockholders, subject to any preferential liquidation rights of any then
outstanding Preferred Stock.
B. PREFERRED STOCK.
Preferred Stock may be issued from time to time in one or more series,
each of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
board of directors of the Corporation as hereinafter provided. No share of
Preferred Stock that is redeemed, purchased or acquired by the Corporation may
be reissued except as otherwise provided herein or by law. Different series of
Preferred Stock shall not be construed to constitute different classes of shares
for the purposes of voting by classes unless expressly provided herein, in any
such resolution or resolutions, or by law.
Authority is hereby expressly granted to the board of directors from time
to time to issue the Preferred Stock in one or more series, and in connection
with the creation of any such series, by resolution or resolutions providing for
the issue of the shares thereof, to determine and fix such voting powers, full
or limited, or no voting powers, and such designations, preferences and relative
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, including without limitation thereof, dividend rights,
conversion rights, redemption privileges and liquidation preferences, as shall
be stated and expressed in such resolutions, all to the full extent now or
hereafter permitted by the General Corporation Law of Delaware. Without limiting
the generality of the foregoing, the resolutions providing for issuance of any
series of Preferred Stock may provide that such series shall be superior or rank
equally or be junior to the Preferred Stock of any other series to the extent
permitted by law. Except as otherwise provided by law or by this Certificate of
Incorporation, no vote of the holders of the Preferred Stock or Common Stock
shall be a prerequisite to the issuance of any shares of any series of the
Preferred Stock authorized by and complying with the conditions of the
Certificate of Incorporation, the right to have such vote being expressly waived
by all present and future holders of the capital stock of the Corporation.
FIFTH: In furtherance of and not in limitation of powers conferred by
statute, it is further provided that:
(a) The business and affairs of the Corporation shall be managed by
or under the direction of a board of directors.
(b) Elections of directors need not be by written ballot unless, and
only to the extent, otherwise provided in the By-Laws.
(c) The board of directors is expressly authorized to adopt, alter,
amend or repeal the By-Laws of the Corporation.
(d) Subject to any applicable requirements of law, the books of the
Corporation may be kept outside the State of Delaware at such locations as may
be designated by the board of directors or in the ByLaws of the Corporation.
(e) The board of directors may from time to time determine whether,
to what extent, at what times and places and under what conditions and
regulations the accounts, books and records of the Corporation, or any of them,
shall be open to the inspection of the stockholders, and no stockholder shall
have
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any right to inspect any account, book or document of the Corporation except as
and to the extent expressly provided by law or expressly authorized by
resolution of the board of directors.
(f) Except as provided to the contrary in the provisions
establishing a class of stock, the number of authorized shares of such class may
be increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of a majority of the stock of the
Corporation entitled to vote, voting as a single class.
(g) The number of Directors shall be fixed from time to time by or
in the manner provided in the Corporation's By-laws, as amended or restated from
time to time.
(h) Any action required or permitted to be taken by the stockholders
of the Corporation must be effected at a duly called annual or special meeting
of such holders and may not be effected by any consent in writing by such
holders. Special meetings of the stockholders, for any purpose or purposes,
unless otherwise prescribed by law or by this Certificate of Incorporation, may
be called by the Chairman of the board of directors, the Chief Executive Officer
or the President and shall be called by the Chief Executive Officer, President
or Secretary at the request in writing of a majority of the board of directors.
Such request shall state the purpose or purposes of the proposed meeting and
business to be transacted at any special meeting of the stockholders.
(i) In addition to the powers and authority herein or by law
expressly conferred upon them, the directors are hereby empowered to exercise
all such powers and do all such acts and things as may be exercised or done by
the Corporation, subject, nevertheless, to the provisions of the laws of the
State of Delaware, this Certificate of Incorporation and any By-Laws adopted by
the stockholders; provided, however, that no By-Laws hereafter adopted by the
stockholders shall invalidate any prior act of the directors which would have
been valid if such By-Laws had not been adopted.
SIXTH: The following provisions shall apply with respect to the
indemnification of, and advancement of expenses to, certain parties as set forth
below:
A. INDEMNIFICATION.
1. PROCEEDINGS OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION. The
Corporation shall indemnify each person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the Corporation), by reason of the fact that
such person is or was, or has agreed to become, a director or officer of the
Corporation, or is or was serving or has agreed to serve, at the request of the
Corporation, as a director, officer or trustee of, or in a similar capacity
with, another corporation (including any partially or wholly owned subsidiary of
the Corporation), partnership, joint venture, trust or other enterprise
(including any employee benefit plan) (each of such persons being referred to as
an "Indemnitee"), or by reason of any action alleged to have been taken or
omitted in such capacity, against all expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by the Indemnitee or on the Indemnitee's behalf in connection with such action,
suit or proceeding and any appeal therefrom, if (A) the Indemnitee acted in good
faith and in a manner the Indemnitee reasonably believed to be in, or not
opposed to, the best interests of the Corporation and (B) with respect to any
criminal action or proceeding, the Indemnitee had no reasonable cause to believe
the Indemnitee's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of NOLO
CONTENDERE or its equivalent, shall not, of itself, create a presumption that
the Indemnitee did not act in good faith, did not act in a manner that the
Indemnitee reasonably believed to be in, or not opposed to, the best interests
of the Corporation or, with respect to any criminal action or proceeding, did
not
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have reasonable cause to believe that the Indemnitee's conduct was unlawful.
Notwithstanding anything to the contrary in this Article SIXTH, except as set
forth in Section C.2. of this Article SIXTH, the Corporation shall not indemnify
an Indemnitee seeking indemnification in connection with a proceeding (or part
thereof) initiated by the Indemnitee unless the initiation thereof was approved
by the board of directors of the Corporation.
2. PROCEEDINGS BY OR IN THE RIGHT OF THE CORPORATION. The Corporation
shall indemnify any Indemnitee who was or is a party or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of the Corporation to procure a judgment in the Corporation's favor by
reason of the fact that the Indemnitee is or was, or has agreed to become, a
director or officer of the Corporation, or is or was serving as a director,
officer or trustee of, or in a similar capacity with, another corporation
(including any partially or wholly owned subsidiary of the Corporation),
partnership, joint venture, trust or other enterprise (including any employee
benefit plan), or by reason of any action alleged to have been taken or omitted
in such capacity, against all expenses (including attorneys' fees) and amounts
paid in settlement actually and reasonably incurred by the Indemnitee or on the
Indemnitee's behalf in connection with such action, suit or proceeding and any
appeal therefrom, if the Indemnitee acted in good faith and in a manner the
Indemnitee reasonably believed to be in, or not opposed to, the best interests
of the Corporation, except that no indemnification shall be made in respect of
any claim, issue or matter as to which the Indemnitee shall have been adjudged
to be liable to the Corporation unless and only to the extent that the Court of
Chancery of Delaware shall determine upon application that, despite the
adjudication of such liability but in view of all the circumstances of the case,
the Indemnitee is fairly and reasonably entitled to indemnity for such expenses
(including attorneys' fees) that the Court of Chancery of the State of Delaware
shall deem proper.
3. EXPENSES OF SUCCESSFUL INDEMNITEE. Notwithstanding any other provision
of this Article SIXTH, to the extent that an Indemnitee has been successful, on
the merits or otherwise (including a disposition without prejudice), in defense
of any action, suit or proceeding referred to in Section A.1. or 2. of this
Article SIXTH, or in defense of any claim, issue or matter therein, or on appeal
from any such action, suit or proceeding, the Indemnitee shall be indemnified
against all expenses (including attorneys' fees) actually and reasonably
incurred by the Indemnitee or on the Indemnitee's behalf in connection
therewith. Without limiting the foregoing, if any action, suit or proceeding is
disposed of, on the merits or otherwise (including a disposition without
prejudice), without (A) the disposition being adverse to the Indemnitee, (B) an
adjudication that the Indemnitee was liable to the Corporation, (C) a plea of
guilty or NOLO CONTENDERE by the Indemnitee, (D) an adjudication that the
Indemnitee did not act in good faith and in a manner the Indemnitee reasonably
believed to be in, or not opposed to, the best interests of the Corporation, and
(E) with respect to any criminal proceeding, an adjudication that the Indemnitee
had reasonable cause to believe the Indemnitee's conduct was unlawful, the
Indemnitee shall be considered for the purposes hereof to have been wholly
successful with respect thereto.
4. PARTIAL INDEMNIFICATION. If any Indemnitee is entitled under any
provision of this Section A. to indemnification by the Corporation for a
portion, but not all, of the expenses (including attorneys' fees), judgments,
fines or amounts paid in settlement actually and reasonably incurred by the
Indemnitee or on the Indemnitee's behalf, the Corporation shall indemnify the
Indemnitee for the portion of such expenses (including attorneys' fees),
judgments, fines or amounts paid in settlement to which the Indemnitee is
entitled.
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B. ADVANCEMENT OF EXPENSES.
Subject to Section C.2. of this Article SIXTH, in the event that the
Corporation does not assume a defense pursuant to Section C.1. of this Article
SIXTH of any action, suit, proceeding or investigation of which the Corporation
receives notice under this Article SIXTH, any expenses (including attorneys'
fees) incurred by an Indemnitee in defending a civil or criminal action, suit,
proceeding or investigation or any appeal therefrom shall be paid by the
Corporation in advance of the final disposition of such matter; PROVIDED,
HOWEVER, that the payment of such expenses incurred by an Indemnitee in advance
of the final disposition of such matter shall be made only upon receipt of an
undertaking by or on behalf of the Indemnitee to repay all amounts so advanced
in the event that it shall ultimately be determined that the Indemnitee is not
entitled to be indemnified by the Corporation as authorized in this Article
SIXTH. Any such undertaking by an Indemnitee shall be accepted without reference
to the financial ability of the Indemnitee to make such repayment.
C. PROCEDURES.
1. NOTIFICATION AND DEFENSE OF CLAIM. As a condition precedent to any
Indemnitee's right to be indemnified, the Indemnitee must promptly notify the
Corporation in writing of any action, suit, proceeding or investigation
involving the Indemnitee for which indemnity will or may be sought. With respect
to any action, suit, proceeding or investigation of which the Corporation is so
notified, the Corporation will be entitled to participate therein at its own
expense and/or to assume the defense thereof at its own expense, with legal
counsel reasonably acceptable to the Indemnitee; PROVIDED that the Corporation
shall not be entitled, without the consent of the Indemnitee, to assume the
defense of any claim brought by or in the right of the Corporation or as to
which counsel for the Indemnitee shall have reasonably concluded that there may
be a conflict of interest or position on any significant issue between the
Corporation and the Indemnitee in the conduct of the defense of such claim.
After notice from the Corporation to the Indemnitee of its election so to assume
such defense, the Corporation shall not be liable to the Indemnitee for any
legal or other expenses subsequently incurred by the Indemnitee in connection
with such claim, other than as provided in this Section C.1. The Indemnitee
shall have the right to employ the Indemnitee's own counsel in connection with
such claim, but the fees and expenses of such counsel incurred after notice from
the Corporation of its assumption of the defense thereof shall be at the expense
of the Indemnitee unless (A) the employment of counsel by the Indemnitee has
been authorized by the Corporation, (B) counsel to the Indemnitee has reasonably
concluded that there may be a conflict of interest or position on any
significant issue between the Corporation and the Indemnitee in the conduct of
the defense of such action or (C) the Corporation has not in fact employed
counsel to assume the defense of such action, in each of which cases the fees
and expenses of counsel for the Indemnitee shall be at the expense of the
Corporation except as otherwise expressly provided by this Article SIXTH.
2. REQUESTS AND PAYMENT. In order to obtain indemnification or advancement
of expenses pursuant to this Article SIXTH, an Indemnitee shall submit to the
Corporation a written request therefor, which request shall include
documentation and information as is reasonably available to the Indemnitee and
is reasonably necessary to determine whether and to what extent the Indemnitee
is entitled to indemnification or advancement of expenses. Any such
indemnification or advancement of expenses shall be made promptly, and in any
event within sixty days after receipt by the Corporation of the written request
of the Indemnitee, unless with respect to requests under Section A.1., A.2. or
B. of this Article SIXTH, the Corporation determines, by clear and convincing
evidence, within such sixty-day period, that any Indemnitee did not meet the
applicable standard of conduct set forth in Section A.1. or A.2. of this Article
SIXTH. Such determination shall be made in each instance by (A) a majority vote
of the directors of the Corporation consisting of persons who are not at that
time parties to the action, suit or proceeding in question ("disinterested
directors"), even though less than a quorum, (B) a majority vote of a quorum of
the outstanding shares of capital stock of all
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classes entitled to vote for directors, which quorum shall consist of
stockholders who are not at that time parties to the action, suit, proceeding or
investigation in question, (C) independent legal counsel (who may be regular
legal counsel to the Corporation), or (D) a court of competent jurisdiction.
3. REMEDIES. The right of an Indemnitee to indemnification or advancement
of expenses pursuant to this Article SIXTH shall be enforceable by the
Indemnitee in any court of competent jurisdiction if the Corporation denies, in
whole or in part, a request of an Indemnitee in accordance with the preceding
Paragraph 2. or if no disposition thereof is made within the sixty-day period
referred to in the preceding Paragraph 2. Unless otherwise provided by law, the
burden of proving that an Indemnitee is not entitled to indemnification or
advancement of expenses pursuant to this Article SIXTH shall be on the
Corporation. Neither the failure of the Corporation to have made a determination
prior to the commencement of such action that indemnification is proper in the
circumstances because the Indemnitee has met any applicable standard of conduct,
nor an actual determination by the Corporation pursuant to the preceding
Paragraph 2. that the Indemnitee has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
Indemnitee has not met the applicable standard of conduct. The Indemnitee's
expenses (including attorneys' fees) incurred in connection with successfully
establishing the Indemnitee's right to indemnification, in whole or in part, in
any such proceeding shall also be indemnified by the Corporation.
D. RIGHTS NOT EXCLUSIVE.
The right of an Indemnitee to indemnification and advancement of expenses
pursuant to this Article SIXTH shall not be deemed exclusive of any other rights
to which the Indemnitee may be entitled under any law (common or statutory),
agreement, vote of stockholders or disinterested directors, or otherwise, both
as to action in the Indemnitee's official capacity and as to action in any other
capacity while holding office for the Corporation, and shall continue as to an
Indemnitee who has ceased to serve in the capacity with respect to which the
Indemnitee's right to indemnification or advancement of expenses accrued, and
shall inure to the benefit of the estate, heirs, executors and administrators of
the Indemnitee. Nothing contained in this Article SIXTH shall be deemed to
prohibit, and the Corporation is specifically authorized to enter into,
agreements with officers and directors providing indemnification rights and
procedures supplemental to those set forth in this Article SIXTH. The
Corporation may, to the extent authorized from time to time by its board of
directors, grant indemnification rights to other employees or agents of the
Corporation or other persons serving the Corporation and such rights may be
equivalent to, or greater or less than, those set forth in this Article SIXTH.
In addition, the Corporation may purchase and maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation (including any partially or wholly owned
subsidiary of the Corporation), partnership, joint venture, trust or other
enterprise (including any employee benefit plan) against any expense, liability
or loss incurred by such a person in any such capacity, or arising out of such
person's status as such, whether or not the Corporation would have the power to
indemnify such person against such expense, liability or loss under the General
Corporation Law of the State of Delaware.
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E. SUBSEQUENT EVENTS.
1. AMENDMENTS OF ARTICLE OR LAW. No amendment, termination or repeal of
this Article SIXTH or of any relevant provisions of the General Corporation Law
of the State of Delaware or any other applicable law shall affect or diminish in
any way the rights of any Indemnitee to indemnification under the provisions
of this Article SIXTH with respect to any action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or facts
occurring prior to the effective date of such amendment, termination or repeal.
If the General Corporation Law of the State of Delaware is amended after
adoption of this Article SIXTH to expand further the indemnification permitted
to any Indemnitee, then the Corporation shall indemnify the Indemnitee to the
fullest extent permitted by the General Corporation Law of the State of
Delaware, as so amended, without the need for any further action with respect to
this Article SIXTH.
2. MERGER OR CONSOLIDATION. If the Corporation is merged into or
consolidated with another corporation and the Corporation is not the surviving
corporation, the surviving corporation shall assume the obligations of the
Corporation under this Article SIXTH with respect to any action, suit,
proceeding or investigation arising out of or relating to any actions,
transactions or factors occurring prior to the date of such merger or
consolidation.
F. INVALIDATION.
If any or all of the provisions of this Article SIXTH shall be invalidated
on any ground by any court of competent jurisdiction, then the Corporation shall
nevertheless indemnify each Indemnitee as to any expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement in connection with any
action, suit, proceeding or investigation, whether civil, criminal or
administrative, including an action by or in the right of the Corporation, to
the fullest extent permitted by any applicable provision of this Article SIXTH
that shall not have been invalidated and to the fullest extent permitted by the
General Corporation Law of the State of Delaware or any other applicable law.
G. DEFINITIONS.
Unless defined elsewhere in this Amended and Restated Certificate of
Incorporation, any term used in this Article SIXTH and defined in Section 145(h)
or (i) of the General Corporation Law of the State of Delaware shall have the
meaning ascribed to such term in such Section.
SEVENTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of Section 291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of Section 279 of Title 8 of the Delaware Code
order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be, to
be summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
the Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.
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EIGHTH: No director of the Corporation shall be personally liable to the
Corporation or to any of its stockholders for monetary damages arising out of
such director's breach of fiduciary duty as a director of the Corporation,
except to the extent that the elimination or limitation of such liability is not
permitted by the General Corporation Law of the State of Delaware, as the same
exists or may hereafter be amended. No amendment to or repeal of this ARTICLE
EIGHTH shall apply to or have any effect on the liability or alleged liability
of any director of the Corporation for or with respect to any acts or omissions
of the director occurring prior to such amendment or repeal.
NINTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation in the
manner now or hereafter prescribed by statute and this Certificate of
Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation. Notwithstanding the foregoing, any other provision
of law, this Certificate of Incorporation or the By-Laws, and notwithstanding
the fact that a lesser percentage may be specified by law, the affirmative vote
of the holders of at least two-thirds of the shares of capital stock of the
Corporation issued and outstanding and entitled to vote shall be required to
amend or repeal, or to adopt any provision inconsistent with, Article FIFTH or
Article NINTH of this Certificate of Incorporation.
IN WITNESS WHEREOF, Centra Software, Inc. has caused this Amended and
Restated Certificate of Incorporation to be executed on its behalf by Leon
Navickas, its Chief Executive Officer, this _____ day of __________.
CENTRA SOFTWARE, INC.
By:
--------------------------------
Chief Executive Officer
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Exhibit 3.3
BY-LAWS
OF
CENTRA SOFTWARE, INC.
Section 1. CERTIFICATE OF INCORPORATION AND BY-LAWS
1.1 These by-laws are subject to the certificate of incorporation of
the corporation. In these by-laws, references to the certificate of
incorporation and by-laws mean the provisions of the certificate of
incorporation and the by-laws as are from time to time in effect.
Section 2. OFFICES
2.1 REGISTERED OFFICE. The registered office shall be in the City of
Wilmington, County of New Castle, State of Delaware.
2.2 OTHER OFFICES. The corporation may also have offices at such other
places both within and without the State of Delaware as the board of directors
may from time to time determine or the business of the corporation may require.
Section 3. STOCKHOLDERS
3.1 LOCATION OF MEETINGS. All meetings of the stockholders shall be
held at such place either within or without the State of Delaware as shall be
designated from time to time by the board of directors. Any adjourned session of
any meeting shall be held at the place designated in the vote of adjournment.
3.2 ANNUAL MEETING. The annual meeting of stockholders shall be held at
10:00 a.m. on the second Tuesday in February in each year, unless that day be a
legal holiday at the place where the meeting is to be held, in which case the
meeting shall be held at the same hour on the next succeeding day not a legal
holiday, or at such other date and time as shall be designated from time to time
by the board of directors, at which they shall elect a board of directors and
transact such other business as may be required by law or these by-laws or as
may properly come before the meeting.
3.3 SPECIAL MEETING IN PLACE OF ANNUAL MEETING. If the election for
directors shall not be held on the day designated by these by-laws, the
directors shall cause the election to be held as soon thereafter as convenient,
and to that end, if the annual meeting is omitted on the day herein provided
therefor or if the election of directors shall not be held thereat, a special
meeting of the stockholders may be held in place of such omitted meeting or
election, and any business transacted or election held at such special meeting
shall have the same effect as if transacted or held at the annual meeting, and
in such case all references in these by-laws to the annual meeting of the
stockholders, or to the annual election of directors, shall be deemed to
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refer to or include such special meeting. Any such special meeting shall be
called and the purposes thereof shall be specified in the call, as provided in
Section 3.4.
3.4 NOTICE OF ANNUAL MEETING. Written notice of the annual meeting
stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten nor more than
sixty days before the date of the meeting. Such notice may specify the business
to be transacted and actions to be taken at such meeting. No action shall be
taken at such meeting unless such notice is given, or unless waiver of such
notice is given by the holders of outstanding stock having not less than the
minimum number of votes necessary to take such action at a meeting at which all
shares entitled to vote thereon were voted. Prompt notice of all action taken in
connection with such waiver of notice shall be given to all stockholders not
present or represented at such meeting.
3.5 OTHER SPECIAL MEETINGS. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by law or by the
certificate of incorporation, may be called by the president and shall be called
by the president or secretary at the request in writing of a majority of the
board of directors, or at the request in writing of the holders of at least ten
percent of all capital stock of the corporation issued and outstanding and
entitled to vote at such meeting. Such request shall state the purpose or
purposes of the proposed meeting and business to be transacted at any special
meeting of the stockholders.
3.6 NOTICE OF SPECIAL MEETING. Written notice of a special meeting
stating the place, date and hour of the meeting and the purpose or purposes for
which the meeting is called, shall be given not less than ten nor more than
sixty days before the date of the meeting, to each stockholder entitled to vote
at such meeting. No action shall be taken at such meeting unless such notice is
given, or unless waiver of such notice is given by the holders of outstanding
stock having not less than the minimum number of votes necessary to take such
action at a meeting at which all shares entitled to vote thereon were voted.
Prompt notice of all action taken in connection with such waiver of notice shall
be given to all stockholders not present or represented at such meeting.
3.7 STOCKHOLDER LIST. The officer who has charge of the stock ledger of
the corporation shall prepare and make, at least ten days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
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3.8 QUORUM OF STOCKHOLDERS. The holders of a majority of the stock
issued and outstanding and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
stockholders for the transaction of business except as otherwise required by
law, or by the certificate of incorporation or by these by-laws. Except as
otherwise provided by law, no stockholder present at a meeting may withhold his
shares from the quorum count by declaring his shares absent from the meeting.
3.9 ADJOURNMENT. Any meeting of stockholders may be adjourned from time
to time to any other time and to any other place at which a meeting of
stockholders may be held under these by-laws, which time and place shall be
announced at the meeting, by a majority of votes cast upon the question, whether
or not a quorum is present. At such adjourned meeting at which a quorum shall be
present or represented any business may be transacted which might have been
transacted at the original meeting. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
3.10 PROXY REPRESENTATION. Every stockholder may authorize another
person or persons to act for him by proxy in all matters in which a stockholder
is entitled to participate, whether by waiving notice of any meeting, objecting
to or voting or participating at a meeting, or expressing consent or dissent
without a meeting. Every proxy must be signed by the stockholder or by his
attorney-in-fact. No proxy shall be voted or acted upon after three years from
its date unless such proxy provides for a longer period. Except as provided by
law, a revocable proxy shall be deemed revoked if the stockholder is present at
the meeting for which the proxy was given. A duly executed proxy shall be
irrevocable if it states that it is irrevocable and, if, and only as long as, it
is coupled with an interest sufficient in law to support an irrevocable power. A
proxy may be made irrevocable regardless of whether the interest with which it
is coupled is an interest in the stock itself or an interest in the corporation
generally. The authorization of a proxy may but need not be limited to specified
action, provided, however, that if a proxy limits its authorization to a meeting
or meetings of stockholders, unless otherwise specifically provided such proxy
shall entitle the holder thereof to vote at any adjourned session but shall not
be valid after the final adjournment thereof.
3.11 INSPECTORS. The directors or the person presiding at the meeting
may, but need not, appoint one or more inspectors of election and any substitute
inspectors to act at the meeting or any adjournment thereof. Each inspector,
before entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability. The inspectors, if any,
shall determine the number of shares of stock outstanding and the voting power
of each, the shares of stock represented at the meeting, the existence of a
quorum and the validity and effect of proxies, and shall receive votes, ballots
or consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the result, and do such acts as are proper to conduct the
election or vote
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with fairness to all stockholders. On request of the person presiding at the
meeting, the inspectors shall make a report in writing of any challenge,
question or matter determined by them and execute a certificate of any fact
found by them.
3.12 ACTION BY VOTE. When a quorum is present at any meeting, whether
the same be an original or an adjourned session, a plurality of the votes
properly cast for election to any office shall elect to such office and a
majority of the votes properly cast upon any question other than an election to
an office shall decide the question, except when a larger vote is required by
law, by the certificate of incorporation or by these by-laws. No ballot shall be
required for any election unless requested by a stockholder present or
represented at the meeting and entitled to vote in the election.
3.13 ACTION WITHOUT MEETINGS. Unless otherwise provided in the
certificate of incorporation, any action required to be taken at any annual or
special meeting of stockholders of the corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
Section 4. DIRECTORS
4.1 NUMBER. The number of directors which shall constitute the whole
board shall not be less than three nor more than eight, except that whenever
there shall be only one stockholder or prior to issuance of any stock, the
number of directors which shall constitute the whole board shall be not less
than one. The first board shall consist of one director. Thereafter, within the
foregoing limits, the stockholders at the annual meeting shall determine the
number of directors, and within such limits, the number of directors may be
increased or decreased at any time or from time to time by the stockholders or
by the directors by vote of a majority of directors then in office, except that
any such decrease by vote of the directors shall only be made to eliminate
vacancies existing by reason of the death, resignation or removal of one or more
directors. The directors shall be elected at the annual meeting of the
stockholders, except as provided in Section 4.4 of these by-laws. Directors need
not be stockholders.
4.2 TENURE. Except as otherwise provided by law, by the certificate of
incorporation or by these by-laws, each director shall hold office until the
next annual meeting and until his successor is elected and qualified, or until
he sooner dies, resigns, is removed or becomes disqualified.
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4.3 POWERS. The business of the corporation shall be managed by or
under the direction of the board of directors which shall have and may exercise
all the powers of the corporation and do all such lawful acts and things as are
not by law, the certificate of incorporation or these by-laws directed or
required to be exercised or done by the stockholders.
4.4 VACANCIES. Vacancies and any newly created directorships resulting
from any increase in the number of directors may be filled by vote of the
stockholders at a meeting called for the purpose, or by a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. When one or more directors shall resign from the board, effective at a
future date, a majority of the directors then in office, including those who
have resigned, shall have power to fill such vacancy or vacancies, the vote or
action by writing thereon to take effect when such resignation or resignations
shall become effective. The directors shall have and may exercise all their
powers notwithstanding the existence of one or more vacancies in their number,
subject to any requirements of law or of the certificate of incorporation or of
these by-laws as to the number of directors required for a quorum or for any
vote or other actions.
4.5 COMMITTEES. The board of directors may, by vote of a majority of
the whole board, (a) designate, change the membership of or terminate the
existence of any committee or committees, each committee to consist of one or
more of the directors; (b) designate one or more directors as alternate members
of any such committee who may replace any absent or disqualified member at any
meeting of the committee; and (c) determine the extent to which each such
committee shall have and may exercise the powers and authority of the board of
directors in the management of the business and affairs of the corporation,
including the power to authorize the seal of the corporation to be affixed to
all papers which require it and the power and authority to declare dividends or
to authorize the issuance of stock; excepting, however, such powers which by
law, by the certificate of incorporation or by these by-laws they are prohibited
from so delegating. In the absence or disqualification of any member of such
committee and his alternate, if any, the member or members thereof present at
any meeting and not disqualified from voting, whether or not constituting a
quorum, may unanimously appoint another member of the board of directors to act
at the meeting in the place of any such absent or disqualified member. Except as
the board of directors may otherwise determine, any committee may make rules for
the conduct of its business, but unless otherwise provided by the board or such
rules, its business shall be conducted as nearly as may be in the same manner as
is provided by these by-laws for the conduct of business by the board of
directors. Each committee shall keep regular minutes of its meetings and report
the same to the board of directors upon request.
4.6 REGULAR MEETING. Regular meetings of the board of directors may be
held without call or notice at such place within or without the State of
Delaware and at such times as the board may from time to time determine,
provided that notice of the first regular meeting following any such
determination shall be given to absent directors. A regular meeting of the
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directors may be held without call or notice immediately after and at the same
place as the annual meeting of the stockholders.
4.7 SPECIAL MEETINGS. Special meetings of the board of directors may be
held at any time and at any place within or without the State of Delaware
designated in the notice of the meeting, when called by the president, or by
one-third or more in number of the directors, reasonable notice thereof being
given to each director by the secretary or by the president or by any one of the
directors calling the meeting.
4.8 NOTICE. It shall be reasonable and sufficient notice to a director
to send notice by mail at least forty-eight hours or by telegram at least
twenty-four hours before the meeting, addressed to him at his usual or last
known business or residence address or to give notice to him in person or by
telephone at least twenty-four hours before the meeting. Notice of a meeting
need not be given to any director if a written waiver of notice, executed by him
before or after the meeting, is filed with the records of the meeting, or to any
director who attends the meeting without protesting prior thereto or at its
commencement the lack of notice to him. Neither notice of a meeting nor a waiver
of a notice need specify the purposes of the meeting.
4.9 QUORUM. Except as may be otherwise provided by law, by the
certificate of incorporation or by these by-laws, at any meeting of the
directors a majority of the directors then in office shall constitute a quorum;
a quorum shall not in any case be less than one-third of the total number of
directors constituting the whole board. Any meeting may be adjourned from time
to time by a majority of the votes cast upon the question, whether or not a
quorum is present, and the meeting may be held as adjourned without further
notice.
4.10 ACTION BY VOTE. Except as may be otherwise provided by law, by the
certificate of incorporation or by these by-laws, when a quorum is present at
any meeting the vote of a majority of the directors present shall be the act of
the board of directors.
4.11 ACTION WITHOUT A MEETING. Unless otherwise restricted by the
certificate of incorporation or these by-laws, any action required or permitted
to be taken at any meeting of the board of directors or of any committee thereof
may be taken without a meeting if all the members of the board or of such
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the records of the meetings of the board or of such
committee. Such consent shall be treated for all purposes as the act of the
board or of such committee, as the case may be.
4.12 PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE. Unless
otherwise restricted by the certificate of incorporation or these by-laws,
members of the board of directors or of any committee thereof may participate in
a meeting of such board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Such participation shall constitute presence in
person at such meeting.
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4.13 COMPENSATION. Unless otherwise restricted by the certificate of
incorporation or these by-laws, the board of directors shall have the authority
to fix from time to time the compensation of directors. The directors may be
paid their expenses, if any, of attendance at each meeting of the board of
directors and the performance of their responsibilities as directors and may be
paid a fixed sum for attendance at each meeting of the board of directors and/or
a stated salary as director. No such payment shall preclude any director from
serving the corporation or its parent or subsidiary corporations in any other
capacity and receiving compensation therefor. The board of directors may also
allow compensation for members of special or standing committees for service on
such committees.
4.14 INTERESTED DIRECTORS AND OFFICERS.
(a) No contract or transaction between the corporation and one
or more of its directors or officers, or between the corporation and any other
corporation, partnership, association, or other organization in which one or
more of the corporation's directors or officers are directors or officers, or
have a financial interest, shall be void or voidable solely for this reason, or
solely because the director or officer is present at or participates in the
meeting of the board or committee thereof which authorizes the contract or
transaction, or solely because his or their votes are counted for such purpose,
if:
(1) The material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the board of
directors or the committee, and the board or committee in good faith authorizes
the contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or
(2) The material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the corporation
as of the time it is authorized, approved or ratified, by the board of
directors, a committee thereof, or the stockholders.
(b) Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the board of directors or
of a committee which authorizes the contract or transaction.
4.15 RESIGNATION OR REMOVAL OF DIRECTORS. Unless otherwise restricted
by the certificate of incorporation or by law, any director or the entire board
of directors may be removed, with or without cause, by the holders of a majority
of the stock issued and outstanding and entitled to vote at an election of
directors. Any director may resign at any time by delivering his resignation in
writing to the president or the secretary or to a meeting of the
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board of directors. Such resignation shall be effective upon receipt unless
specified to be effective at some other time; and without in either case the
necessity of its being accepted unless the resignation shall so state. No
director resigning and (except where a right to receive compensation shall be
expressly provided in a duly authorized written agreement with the corporation)
no director removed shall have any right to receive compensation as such
director for any period following his resignation or removal, or any right to
damages on account of such removal, whether his compensation be by the month or
by the year or otherwise; unless in the case of a resignation, the directors, or
in the case of removal, the body acting on the removal, shall in their or its
discretion provide for compensation.
Section 5. NOTICES
5.1 FORM OF NOTICE. Whenever, under the provisions of law, or of the
certificate of incorporation or of these by-laws, notice is required to be given
to any director or stockholder, such notice may be given by mail, addressed to
such director or stockholder, at his address as it appears on the records of the
corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Unless written notice by mail is required by law, written notice may also be
given by telegram, cable, telecopy, commercial delivery service, telex or
similar means, addressed to such director or stockholder at his address as it
appears on the records of the corporation, in which case such notice shall be
deemed to be given when delivered into the control of the persons charged with
effecting such transmission, the transmission charge to be paid by the
corporation or the person sending such notice and not by the addressee. Oral
notice or other in-hand delivery (in person or by telephone) shall be deemed
given at the time it is actually given.
5.2 WAIVER OF NOTICE. Whenever notice is required to be given under the
provisions of law, the certificate of incorporation or these by-laws, a written
waiver thereof, signed by the person entitled to notice, whether before or after
the time stated therein, shall be deemed equivalent to notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any meeting of the stockholders, directors or members of a
committee of the directors need be specified in any written waiver of notice.
Section 6. OFFICERS AND AGENTS
6.1 ENUMERATION; QUALIFICATION. The officers of the corporation shall
be a president, a treasurer, a secretary and such other officers, if any, as the
board of directors from time to time may in its discretion elect or appoint
including without limitation one or more vice presidents. Any officer may be,
but none need be, a director or stockholder. Any two or more offices may be held
by the same person. Any officer may be required by the
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board of directors to secure the faithful performance of his duties to the
corporation by giving bond in such amount and with sureties or otherwise as the
board of directors may determine.
6.2 POWERS. Subject to law, to the certificate of incorporation and to
the other provisions of these by-laws, each officer shall have, in addition to
the duties and powers herein set forth, such duties and powers as are commonly
incident to his office and such additional duties and powers as the board of
directors may from time to time designate.
6.3 ELECTION. The board of directors at its first meeting after each
annual meeting of stockholders shall choose a president, a secretary and a
treasurer. Other officers may be appointed by the board of directors at such
meeting, at any other meeting or by written consent. At any time or from time to
time, the directors may delegate to any officer their power to elect or appoint
any other officer or any agents.
6.4 TENURE. Each officer shall hold office until the first meeting of
the board of directors following the next annual meeting of the stockholders and
until his successor is elected and qualified unless a shorter period shall have
been specified in terms of his election or appointment, or in each case until he
sooner dies, resigns, is removed or becomes disqualified. Each agent of the
corporation shall retain his authority at the pleasure of the directors, or the
officer by whom he was appointed or by the officer who then holds agent
appointive power.
6.5 PRESIDENT AND VICE PRESIDENTS. The president shall be the chief
executive officer and shall have direct and active charge of all business
operations of the corporation and shall have general supervision of the entire
business of the corporation, subject to the control of the board of directors.
He shall preside at all meetings of the stockholders and of the board of
directors at which he is present, except as otherwise voted by the board of
directors.
The president or treasurer shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
board of directors to some other officer or agent of the corporation.
Any vice presidents shall have such duties and powers as shall be
designated from time to time by the board of directors or by the president.
6.6 TREASURER AND ASSISTANT TREASURERS. The treasurer shall be the
chief financial officer of the corporation and shall be in charge of its funds
and valuable papers, and shall have such other duties and powers as may be
assigned to him from time to time by the board of directors or by the president.
Any assistant treasurers shall have such duties and powers as shall be
designated from time to time by the board of directors, the president or the
treasurer.
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6.7 SECRETARY AND ASSISTANT SECRETARIES. The secretary shall record all
proceedings of the stockholders, of the board of directors and of committees of
the board of directors in a book or series of books to be kept therefor and
shall file therein all writings of, or related to, action by stockholder or
director consent. In the absence of the secretary from any meeting, an assistant
secretary, or if there is none or he is absent, a temporary secretary chosen at
the meeting, shall record the proceedings thereof. Unless a transfer agent has
been appointed, the secretary shall keep or cause to be kept the stock and
transfer records of the corporation, which shall contain the names and record
addresses of all stockholders and the number of shares registered in the name of
each stockholder. The secretary shall have such other duties and powers as may
from time to time be designated by the board of directors or the president.
Any assistant secretaries shall have such duties and powers as shall be
designated from time to time by the board of directors, the president or the
secretary.
6.8 RESIGNATION AND REMOVAL. Any officer may resign at any time by
delivering his resignation in writing to the president or the secretary or to a
meeting of the board of directors. Such resignation shall be effective upon
receipt unless specified to be effective at some other time, and without in any
case the necessity of its being accepted unless the resignation shall so state.
The board of directors may at any time remove any officer either with or without
cause. The board of directors may at any time terminate or modify the authority
of any agent. No officer resigning and (except where a right to receive
compensation shall be expressly provided in a duly authorized written agreement
with the corporation) no officer removed shall have any right to any
compensation as such officer for any period following his resignation or
removal, or any right to damages on account of such removal, whether his
compensation be by the month or by the year or otherwise; unless in the case of
a resignation, the directors, or in the case of removal, the body acting on the
removal, shall in their or its discretion provide for compensation.
6.9 VACANCIES. If the office of the president or the treasurer or the
secretary becomes vacant, the directors may elect a successor by vote of a
majority of the directors then in office. If the office of any other officer
becomes vacant, any person or body empowered to elect or appoint that office may
choose a successor. Each such successor shall hold office for the unexpired term
of his predecessor, and in the case of the president, the treasurer and the
secretary until his successor is chosen and qualified, or in each case until he
sooner dies, resigns, is removed or becomes disqualified.
Section 7. CAPITAL STOCK
7.1 STOCK CERTIFICATES. Each stockholder shall be entitled to a
certificate stating the number and the class and the designation of the series,
if any, of the shares held by him, in such form as shall, in conformity to law,
the certificate of incorporation and the by-laws, be prescribed from time to
time by the board of directors. Such certificate shall be signed by the
president or a vice-president and (i) the treasurer or an assistant treasurer or
(ii) the secretary
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or an assistant secretary. Any of or all the signatures on the certificate may
be a facsimile. In case an officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed on such certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the corporation with the same effect as if he
were such officer, transfer agent, or registrar at the time of its issue.
7.2 LOST CERTIFICATES. The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 8. TRANSFER OF SHARES OF STOCK
8.1 TRANSFER ON BOOKS. Subject to any restrictions with respect to the
transfer of shares of stock, shares of stock may be transferred on the books of
the corporation by the surrender to the corporation or its transfer agent of the
certificate therefor properly endorsed or accompanied by a written assignment
and power of attorney properly executed, with necessary transfer stamps affixed,
and with such proof of the authenticity of signature as the board of directors
or the transfer agent of the corporation may reasonably require. Except as may
be otherwise required by law, by the certificate of incorporation or by these
by-laws, the corporation shall be entitled to treat the record holder of stock
as shown on its books as the owner of such stock for all purposes, including the
payment of dividends and the right to receive notice and to vote or to give any
consent with respect thereto and to be held liable for such calls and
assessments, if any, as may lawfully be made thereon, regardless of any
transfer, pledge or other disposition of such stock until the shares have been
properly transferred on the books of the corporation.
It shall be the duty of each stockholder to notify the corporation of
his post office address.
Section 9. GENERAL PROVISIONS
9.1 RECORD DATE. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
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other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty days nor less than ten days before the date
of such meeting, nor more than sixty days prior to any other action to which
such record date relates. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the board of directors may fix a new
record date for the adjourned meeting. If no record date is fixed,
(a) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held;
(b) The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the board of directors is necessary, shall be the day on which the
first written consent is expressed; and
(c) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating to such purpose.
9.2 DIVIDENDS. Dividends upon the capital stock of the corporation may
be declared by the board of directors at any regular or special meeting or by
written consent, pursuant to law. Dividends may be paid in cash, in property, or
in shares of the capital stock, subject to the provisions of the certificate of
incorporation.
9.3 PAYMENT OF DIVIDENDS. Before payment of any dividend, there may be
set aside out of any funds of the corporation available for dividends such sum
or sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purpose as the directors shall think conducive to the interest of
the corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
9.4 CHECKS. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the board of directors may from time to time designate.
9.5 FISCAL YEAR. The fiscal year of the corporation shall begin on the
first of January in each year and shall end on the last day of December next
following, unless otherwise determined by the board of directors.
9.6 SEAL. The board of directors may, by resolution, adopt a corporate
seal. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its
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organization and the word "Delaware." The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise. The
seal may be altered from time to time by the board of directors.
Section 10. INDEMNIFICATION
10.1 It being the intent of the corporation to provide maximum
protection available under the law to its officers and directors, the
corporation shall indemnify its officers and directors to the full extent the
corporation is permitted or required to do so by the General Corporation Law of
Delaware.
Section 11. AMENDMENTS
11.1 These by-laws may be altered, amended or repealed or new by-laws
may be adopted by the stockholders or by the board of directors when such power
is conferred upon the board of directors by the certificate of incorporation, at
any regular meeting of the stockholders or of the board of directors or at any
special meeting of the stockholders or of the board of directors. If the power
to adopt, amend or repeal by-laws is conferred upon the board of directors by
the certificate of incorporation, it shall not divest or limit the power of the
stockholders to adopt, amend or repeal by-laws.
* * *
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Exhibit 3.4
AMENDED AND RESTATED BY-LAWS
OF CENTRA SOFTWARE, INC.
SECTION 1. CERTIFICATE OF INCORPORATION AND BY-LAWS
1.1 These By-laws are subject to the Certificate of Incorporation of
Centra Software, Inc. (the "Corporation"). In these By-laws, references to the
Certificate of Incorporation mean the provisions of the Certificate of
Incorporation of the Corporation as are from time to time in effect.
SECTION 2. OFFICES
2.1 REGISTERED OFFICE. The registered office shall be in the City of
Wilmington, County of New Castle, State of Delaware.
2.2 OTHER OFFICES. The Corporation may also have offices at such other
places both within and without the State of Delaware as the board of directors
may from time to time determine or the business of the Corporation may require.
SECTION 3. STOCKHOLDERS
3.1 LOCATION OF MEETINGS. All meetings of the stockholders shall be held
at such place either within or without the State of Delaware as shall be
designated from time to time by the board of directors. Any adjourned session of
any meeting shall be held at the place designated in the vote of adjournment.
3.2 ANNUAL MEETING. The annual meeting of stockholders shall be held at
such date, time and place as shall be designated from time to time by the board
of directors (the "Specified Date"), at which they shall elect a board of
directors and transact such other business as may be required by law or these
By-laws or as may properly come before the meeting.
3.3 SPECIAL MEETING IN PLACE OF ANNUAL MEETING. If the annual meeting
shall not be held in accordance with the provisions of Section 3.2, the
directors shall cause the meeting to be held as soon thereafter as convenient.
If no annual meeting is held in accordance with the provisions of Section 3.2, a
special meeting of the stockholders may be held in place of such omitted
meeting, and any business transacted or election held at such special meeting
shall have the same effect as if transacted or held at the annual meeting, and
in such case all references in these By-laws to the annual meeting of the
stockholders, or to the annual election of directors, shall be deemed to refer
to or include such special meeting. Any such special meeting shall be called and
the purposes thereof shall be specified in the call, as provided in Section 3.4.
3.4 NOTICE OF ANNUAL MEETING. Written notice of the annual meeting stating
the place, date and hour of the meeting shall be given to each stockholder
entitled to vote at such meeting not less than ten nor more than sixty days
before the date of the meeting. Such notice may specify the business to be
transacted and actions to be taken at such meeting. No action shall be taken at
such meeting unless such notice is given, or unless waiver of such notice is
given by the holders of outstanding stock having not less than the minimum
number of votes necessary to take such action at a meeting at which all shares
entitled to vote thereon were voted. Prompt notice of all action taken in
connection with such waiver of notice shall be given to all stockholders not
present or represented at such meeting.
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3.5 OTHER SPECIAL MEETINGS. Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by law or by the Certificate of
Incorporation, may be called by chairman of the board or the president and shall
be called by the president or the secretary at the request in writing of a
majority of the board of directors. Such request shall state the purpose or
purposes of the proposed meeting and business to be transacted at any special
meeting of the stockholders.
3.6 NOTICE OF SPECIAL MEETING. Written notice of a special meeting stating
the place, date and hour of the meeting and the purpose or purposes for which
the meeting is called, shall be given not less than ten nor more than sixty days
before the date of the meeting, to each stockholder entitled to vote at such
meeting. No action shall be taken at such meeting unless such notice is given,
or unless waiver of such notice is given by the holders of outstanding stock
having not less than the minimum number of votes necessary to take such action
at a meeting at which all shares entitled to vote thereon were voted. Prompt
notice of all action taken in connection with such waiver of notice shall be
given to all stockholders not present or represented at such meeting.
3.7 NOTICE OF STOCKHOLDER BUSINESS AT A MEETING OF THE STOCKHOLDERS.
Unless otherwise prescribed by law or by the Certificate of Incorporation,
the following provisions of this Section 3.7 shall apply to the conduct of
business at any meeting of the stockholders. (As used in this Section 3.7, the
term annual meeting shall include a special meeting in lieu of an annual
meeting.)
(a) At any meeting of the stockholders, only such business shall be
conducted as shall have been brought before the meeting (i) pursuant to the
Corporation's notice of meeting, (ii) by or at the direction of the board of
directors or (iii) by any stockholder of the Corporation who is a stockholder of
record at the time of giving of the notice provided for in paragraph (b) of this
Section 3.7, who shall be entitled to vote at such meeting and who complies with
the notice procedures set forth in paragraph (b) of this Section 3.7.
(b) For business to be properly brought before any meeting of the
stockholders by a stockholder pursuant to clause (iii) of paragraph (a) of this
Section 3.7, the stockholder must have given timely notice thereof in writing to
the secretary of the Corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation (i) in the case of an annual meeting, not less than sixty days nor
more than ninety days prior to the Specified Date, regardless of any
postponements, deferrals or adjournments of that meeting to a later date;
provided, however, that if the annual meeting of stockholders or a special
meeting in lieu thereof is to be held on a date prior to the Specified Date, and
if less than seventy days' notice or prior public disclosure of the date of such
annual or special meeting is given or made, notice by the stockholder to be
timely must be so delivered or received not later than the close of business on
the tenth day following the earlier of the date on which notice of the date of
such annual or special meeting was mailed or the day on which public disclosure
was made of the date of such annual or special meeting; and (ii) in the case of
a special meeting (other than a special meeting in lieu of an annual meeting),
not later than the tenth (10th) day following the earlier of the day on which
notice of the date of the scheduled meeting was mailed or the day on which
public disclosure was made of the date of the scheduled meeting. A stockholder's
notice to the secretary shall set forth as to each matter the stockholder
proposes to bring before the meeting (i) a brief description of the business
desired to be brought before the meeting and the reasons for conducting such
business at the meeting, (ii) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business, the name and
address of the beneficial owner, if any, on whose behalf the proposal is made,
and the name and address of any other stockholders or beneficial owners known by
such stockholder to be supporting such proposal, (iii) the class and number of
shares of the Corporation which are owned beneficially and of record by such
stockholder of record, by the beneficial owner, if any, on whose behalf the
proposal is made and by any other stockholders or beneficial owners known by
such stockholder to be supporting such proposal, and (iv) any material interest
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of such stockholder of record and/or of the beneficial owner, if any, on whose
behalf the proposal is made, in such proposed business and any material interest
of any other stockholders or beneficial owners known by such stockholder to be
supporting such proposal in such proposed business, to the extent known by such
stockholder.
(c) Notwithstanding anything in these by-laws to the contrary, no business
shall be conducted at a meeting except in accordance with the procedures set
forth in this Section 3.7. The person presiding at the meeting shall, if the
facts warrant, determine that business was not properly brought before the
meeting and in accordance with the procedures prescribed by these by-laws, and
if he should so determine, he shall so declare at the meeting and any such
business not properly brought before the meeting shall not be transacted.
Notwithstanding the foregoing provisions of this Section 3.7, a stockholder
shall also comply with all applicable requirements of the Securities Exchange
Act of 1934, as amended (or any successor provision), and the rules and
regulations thereunder with respect to the matters set forth in this Section
3.7.
(d) This provision shall not prevent the consideration and approval or
disapproval at the meeting of reports of officers, directors and committees of
the board of directors, but, in connection with such reports, no new business
shall be acted upon at such meeting unless properly brought before the meeting
as herein provided.
3.8 STOCKHOLDER LIST. The officer who has charge of the stock ledger of
the Corporation shall prepare and make, at least ten days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
3.9 QUORUM OF STOCKHOLDERS. The holders of a majority of the stock issued
and outstanding and entitled to vote thereat, present in person or represented
by proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise required by law, or by the
Certificate of Incorporation or by these By-laws. Except as otherwise provided
by law, no stockholder present at a meeting may withhold his shares from the
quorum count by declaring his shares absent from the meeting.
3.10 ADJOURNMENT. Any meeting of stockholders may be adjourned from time
to time to any other time and to any other place at which a meeting of
stockholders may be held under these By-laws, which time and place shall be
announced at the meeting, by a majority of votes cast upon the question, whether
or not a quorum is present. At such adjourned meeting at which a quorum shall be
present or represented any business may be transacted which might have been
transacted at the original meeting. If the adjournment is for more than thirty
days, or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
3.11 PROXY REPRESENTATION. Every stockholder may authorize another person
or persons to act for him by proxy in all matters in which a stockholder is
entitled to participate, whether by waiving notice of any meeting, objecting to
or voting or participating at a meeting, or expressing consent or dissent
without a meeting. Every proxy must be signed by the stockholder or by his
attorney-in-fact. No proxy shall by voted or acted upon after three years from
its date unless such proxy provides for a longer period. Except as provided by
law, a revocable proxy shall be deemed revoked if the stockholder is present at
the meeting for which the proxy was given. A duly executed proxy shall be
irrevocable if it states that it is irrevocable and,
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if, and only as long as, it is coupled with an interest sufficient in law to
support an irrevocable power. A proxy may be made irrevocable regardless of
whether the interest with which it is coupled is an interest in the stock itself
or an interest in the Corporation generally. The authorization of a proxy may
but need not be limited to specified action, provided, however, that if a proxy
limits its authorization to a meeting or meetings of stockholders, unless
otherwise specifically provided such proxy shall entitle the holder thereof to
vote at any adjourned session but shall not be valid after the final adjournment
thereof.
3.12 INSPECTORS. If required to do so by Section 231 of the Delaware
General Corporation Law or other applicable law or regulation, the directors or
the person presiding at the meeting shall appoint one or more inspectors of
election and any substitute inspectors to act at the meeting or any adjournment
thereof. If not so required, the directors or the person presiding at the
meeting may, but need not, appoint such inspectors and substitute inspectors. In
either event, the inspectors and substitute inspectors shall have such duties
and responsibilities as are required by applicable law or regulation and such
other duties and responsibilities not inconsistent therewith as the directors or
the person presiding at the meeting shall deem appropriate.
3.13 ACTION BY VOTE. When a quorum is present at any meeting, whether the
same be an original or an adjourned session, a plurality of the votes properly
cast for election to any office shall elect to such office and a majority of the
votes properly cast upon any question other than an election to an office shall
decide the question, except when a larger vote is required by law, by the
Certificate of Incorporation or by these By-laws. No ballot shall be required
for any election unless requested by a stockholder present or represented at the
meeting and entitled to vote in the election.
3.14 NO ACTION BY CONSENT. Any action required or permitted to be taken by
the stockholders of the Corporation must be effected at a duly constituted
annual or special meeting of such holders and may not be effected by any consent
in writing by such stockholders.
SECTION 4. DIRECTORS
4.1 NUMBER, ELECTION AND QUALIFICATION. The number of directors which
shall constitute the whole board of directors shall be determined by resolution
of the board of directors, but in no event shall be less than three. The number
of directors may be decreased at any time and from time to time by a majority of
the directors then in office, but only to eliminate vacancies existing by reason
of the death, resignation, removal or expiration of the term of one or more
directors. The directors shall be elected at the annual meeting of stockholders
by such stockholders as have the right to vote on such election. Directors need
not be stockholders of the Corporation.
4.2 CLASSES OF DIRECTORS. The board of directors shall be and is divided
into three classes: Class I, Class II and Class III. No one class shall have
more than one director more than any other class. If a fraction is contained in
the quotient arrived at by dividing the designated number of directors by three,
then, if such fraction is one-third, the extra director shall be a member of
Class III, and if such fraction is two-thirds, one of the extra directors shall
be a member of Class II and one of the extra directors shall be a member of
Class III, unless otherwise provided from time to time by resolution adopted by
the board of directors.
4.3 TERMS OF OFFICE. Each director shall serve for a term ending on the
date of the third annual meeting following the annual meeting at which such
director was elected; provided, that each initial director in Class I shall
serve for a term ending on the date of the annual meeting of stockholders in
2000; each initial director in Class II shall serve for a term ending on the
date of the annual meeting of stockholders in 2001; and each initial director in
Class III shall serve for a term ending on the date of the annual meeting of
stockholders in 2002; and provided further, that the term of each director shall
be subject to the election and qualification of his successor and to his earlier
death, resignation or removal.
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4.4 ALLOCATION OF DIRECTORS AMONG CLASSES IN THE EVENT OF INCREASES OR
DECREASES IN THE NUMBER OF DIRECTORS. In the event of any increase or decrease
in the authorized number of directors, (i) each director then serving as such
shall nevertheless continue as a director of the class of which he or she is a
member and (ii) the newly created or eliminated directorships resulting from
such increase or decrease shall be apportioned by the board of directors among
the three classes of directors so as to ensure that no one class has more than
one director more than any other class. To the extent possible, consistent with
the foregoing rule, any newly created directorships shall be added to those
classes whose terms of office are to expire at the latest dates following such
allocation, and any newly eliminated directorships shall be subtracted from
those classes whose terms of offices are to expire at the earliest dates
following such allocation, unless otherwise provided from time to time by
resolution adopted by the board of directors.
4.5 POWERS. The business of the Corporation shall be managed by or under
the direction of the board of directors which shall have and may exercise all
the powers of the Corporation and do all such lawful acts and things as are not
by law, the Certificate of Incorporation or these By-laws directed or required
to be exercised or done by the stockholders.
4.6 VACANCIES. Except as otherwise provided by law or by the Certificate
of Incorporation, vacancies and any newly created directorships resulting from
any increase in the number of directors shall be filled only by a majority of
the directors then in office, although less than a quorum, or by a sole
remaining director. When one or more directors shall resign from the board,
effective at a future date, a majority of the directors then in office,
including those who have resigned, shall have power to fill such vacancy or
vacancies, the vote or action by writing thereon to take effect when such
resignation or resignations shall become effective. The directors shall have and
may exercise all their powers notwithstanding the existence of one or more
vacancies in their number, subject to any requirements of law or of the
Certificate of Incorporation or of these By-laws as to the number of directors
required for a quorum or for any vote or other actions.
4.7 NOMINATION OF DIRECTORS.
The following provisions of this Section 4.7 shall apply to the nomination
of persons for election to the board of directors.
(a) Nominations of persons for election to the board of directors of the
Corporation may be made (i) by or at the direction of the board of directors or
(ii) by any stockholder of the Corporation who is a stockholder of record at the
time of giving of notice provided for in paragraph (b) of this Section 4.7, who
shall be entitled to vote for the election of directors at the meeting and who
complies with the notice procedures set forth in paragraph (b) of this Section
4.7.
(b) Nominations by stockholders shall be made pursuant to timely notice in
writing to the secretary of the Corporation. To be timely, a stockholder's
notice shall be delivered to or mailed and received at the principal executive
offices of the Corporation, not less than sixty days nor more than ninety days
prior to the Specified Date, regardless of any postponements, deferrals or
adjournments of that meeting to a later date; provided, however, that if the
annual meeting of stockholders or a special meeting in lieu thereof is to be
held on a date prior to the Specified Date, and if less than seventy days'
notice or prior public disclosure of the date of such annual or special meeting
is given or made, notice by the stockholder to be timely must be so delivered or
received not later than the close of business on the tenth day following the
earlier of the day on which notice of the date of such annual or special meeting
was mailed or the day on which public disclosure was made of the date of such
annual or special meeting. Such stockholder's notice shall set forth (x) as to
each person whom the stockholder proposes to nominate for election or reelection
as a Director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of
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directors, or is otherwise required, pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended, or pursuant to any other then
existing statute, rule or regulation applicable thereto (including such person's
written consent to being named in the proxy statement as a nominee and to
serving as a Director if elected); (y) as to the stockholder giving the notice
(1) the name and address, as they appear on the Corporation's books, of such
stockholder and (2) the class and number of shares of the Corporation which are
beneficially owned by such stockholder and also which are owned of record by
such stockholder; and (Z) as to the beneficial owner, if any, on whose behalf
the nomination is made, (1) the name and address of such person and (2) the
class and number of shares of the Corporation which are beneficially owned by
such person. The Corporation may require any proposed nominee to furnish such
other information as may reasonably be required by the Corporation to determine
the eligibility of such proposed nominee as a Director. At the request of the
board of directors, any person nominated by the board of directors for election
as a Director shall furnish to the secretary of the Corporation that information
required to be set forth in a stockholder's notice of nomination which pertains
to the nominee.
(c) No person shall be eligible to serve as a Director of the Corporation
unless nominated in accordance with the procedures set forth in this Section
4.7. The person presiding at the meeting shall, if the facts warrant, determine
that a nomination was not made in accordance with the procedures prescribed by
these by-laws, and if he should so determine, he shall so declare to the meeting
and the defective nomination shall be disregarded. Notwithstanding the foregoing
provisions of this Section 4.7, a stockholder shall also comply with all
applicable requirements of the Securities Exchange Act of 1934, as amended (or
any successor provision), and the rules and regulations thereunder with respect
to the matters set forth in this by-law.
4.8 COMMITTEES. The board of directors may, by vote of a majority of the
whole board, (a) designate, change the membership of or terminate the existence
of any committee or committees, each committee to consist of one or more of the
directors; (b) designate one or more directors as alternate members of any such
committee who may replace any absent or disqualified member at any meeting of
the committee; and (c) determine the extent to which each such committee shall
have and may exercise the powers and authority of the board of directors in the
management of the business and affairs of the Corporation, including the power
to authorize the seal of the Corporation to be affixed to all papers which
require it and the power and authority to declare dividends or to authorize the
issuance of stock; excepting, however, such powers which by law, by the
Certificate of Incorporation or by these By-laws they are prohibited from so
delegating. In the absence or disqualification of any member of such committee
and his alternate, if any, the member or members thereof present at any meeting
and not disqualified from voting, whether or not constituting a quorum, may
unanimously appoint another member of the board of directors to act at the
meeting in the place of any such absent or disqualified member. Except as the
board of directors may otherwise determine, any committee may make rules for the
conduct of its business, but unless otherwise provided by the board or such
rules, its business shall be conducted as nearly as may be in the same manner as
is provided by these By-laws for the conduct of business by the board of
directors. Each committee shall keep regular minutes of its meetings and report
the same to the board of directors upon request.
4.9 REGULAR MEETING. Regular meetings of the board of directors may be
held without call or notice at such place within or without the State of
Delaware and at such times as the board may from time to time determine,
provided that notice of the first regular meeting following any such
determination shall be given to absent directors. A regular meeting of the
directors may be held without call or notice immediately after and at the same
place as the annual meeting of the stockholders.
4.10 SPECIAL MEETINGS. Special meetings of the board of directors may be
held at any time and at any place within or without the State of Delaware
designated in the notice of the meeting, when called by the chairman of the
board or president, or by one-third or more in number of the directors,
reasonable notice
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thereof being given to each director by the secretary or by the chairman of the
board or president or by any one of the directors calling the meeting.
4.11 NOTICE. It shall be reasonable and sufficient notice to a director to
send notice by mail at least forty-eight hours or by telegram or telecopy at
least twenty-four hours before the meeting, addressed to him at his usual or
last known business or residence address or to give notice to him in person or
by telephone at least twenty-four hours before the meeting. Notice of a meeting
need not be given to any director if a written waiver of notice, executed by him
before or after the meeting, is filed with the records of the meeting, or to any
director who attends the meeting without protesting prior thereto or at its
commencement the lack of notice to him. Neither notice of a meeting nor a waiver
of a notice need specify the purposes of the meeting.
4.12 QUORUM. Except as may be otherwise provided by law, by the
Certificate of Incorporation or by these By-laws, at any meeting of the
directors a majority of the directors then in office shall constitute a quorum;
a quorum shall not in any case be less than one-third of the total number of
directors constituting the whole board. Any meeting may be adjourned from time
to time by a majority of the votes cast upon the question, whether or not a
quorum is present, and the meeting may be held as adjourned without further
notice.
4.13 ACTION BY VOTE. Except as may be otherwise provided by law, by the
Certificate of Incorporation or by these By-laws, when a quorum is present at
any meeting the vote of a majority of the directors present shall be the act of
the board of directors.
4.14 ACTION WITHOUT A MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these By-laws, any action required or permitted
to be taken at any meeting of the board of directors or of any committee thereof
may be taken without a meeting if all the members of the board or of such
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the records of the meetings of the board or of such
committee. Such consent shall be treated for all purposes as the act of the
board or of such committee, as the case may be.
4.15 PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE. Unless otherwise
restricted by the Certificate of Incorporation or these By-laws, members of the
board of directors or of any committee thereof may participate in a meeting of
such board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Such participation shall constitute presence in
person at such meeting.
4.16 Compensation. Unless otherwise restricted by the Certificate of
Incorporation or these By-laws, the board of directors shall have the authority
to fix from time to time the compensation of directors. The directors may be
paid their expenses, if any, of attendance at each meeting of the board of
directors and the performance of their responsibilities as directors and may be
paid a fixed sum for attendance at each meeting of the board of directors and/or
a stated salary as director. No such payment shall preclude any director from
serving the Corporation or its parent or subsidiary corporations in any other
capacity and receiving compensation therefor. The board of directors may also
allow compensation for members of special or standing committees for service on
such committees.
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4.17 INTERESTED DIRECTORS AND OFFICERS.
(a) No contract or transaction between the Corporation and one or more of
its directors or officers, or between the Corporation and any other corporation,
partnership, association, or other organization in which one or more of the
Corporation's directors or officers are directors or officers, or have a
financial interest, shall be void or voidable solely for this reason, or solely
because the director or officer is present at or participates in the meeting of
the board or committee thereof which authorizes the contract or transaction, or
solely because his or their votes are counted for such purpose, if:
(1) the material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the board of directors
or the committee, and the board or committee in good faith authorizes the
contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or
(2) the material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or
(3) the contract or transaction is fair as to the Corporation as of
the time it is authorized, approved or ratified, by the board of directors, a
committee thereof, or the stockholders.
(b) Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the board of directors or of a committee
which authorizes the contract or transaction.
4.18 RESIGNATION OR REMOVAL OF DIRECTORS. Unless otherwise restricted by
the Certificate of Incorporation or by law, any director or the entire board of
directors may be removed for cause by the holders of at least two-thirds of the
stock issued and outstanding and entitled to vote at an election of directors.
Any director may resign at any time by delivering his resignation in writing to
the president or the secretary or to a meeting of the board of directors. Such
resignation shall be effective upon receipt unless specified to be effective at
some other time; and without in either case the necessity of its being accepted
unless the resignation shall so state. No director resigning and (except where a
right to receive compensation shall be expressly provided in a duly authorized
written agreement with the Corporation) no director removed shall have any right
to receive compensation as such director for any period following his
resignation or removal, or any right to damages on account of such removal,
whether his compensation be by the month or by the year or otherwise; unless in
the case of a resignation, the directors, or in the case of removal, the body
acting on the removal, shall in their or its discretion provide for
compensation.
SECTION 5. NOTICES
5.1 FORM OF NOTICE. Whenever, under the provisions of law, or of the
Certificate of Incorporation or of these By-laws, notice is required to be given
to any director or stockholder, such notice may be given by mail, addressed to
such director or stockholder, at his address as it appears on the records of the
Corporation, with postage thereon prepaid, and such notice shall be deemed to be
given at the time when the same shall be deposited in the United States mail.
Unless written notice by mail is required by law, written notice may also be
given by telegram, cable, telecopy, commercial delivery service, telex or
similar means, addressed to such director or stockholder at his address as it
appears on the records of the Corporation, in which case such notice shall be
deemed to be given when delivered into the control of the persons charged with
effecting such transmission, the transmission charge to be paid by the
Corporation or the person sending such notice and not by the addressee. Oral
notice or other in-hand delivery (in person or by telephone) shall be deemed
given at the time it is actually given.
8
<PAGE>
5.2 WAIVER OF NOTICE. Whenever notice is required to be given under the
provisions of law, the Certificate of Incorporation or these By-laws, a written
waiver thereof, signed by the person entitled to notice, whether before or after
the time stated therein, shall be deemed equivalent to notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any meeting of the stockholders, directors or members of a
committee of the directors need be specified in any written waiver of notice.
SECTION 6. OFFICERS AND AGENTS
6.1 ENUMERATION; QUALIFICATION. The officers of the Corporation shall be a
chief executive officer, president, chief financial officer, a treasurer, a
secretary and such other officers, if any, as the board of directors from time
to time may in its discretion elect or appoint including without limitation a
chairman of the board and one or more vice presidents. Any officer may be, but
none need be, a director or stockholder. Any two or more offices may be held by
the same person. Any officer may be required by the board of directors to secure
the faithful performance of his duties to the Corporation by giving bond in such
amount and with sureties or otherwise as the board of directors may determine.
6.2 POWERS. Subject to law, to the Certificate of Incorporation and to the
other provisions of these Bylaws, each officer shall have, in addition to the
duties and powers herein set forth, such duties and powers as are commonly
incident to his office and such additional duties and powers as the board of
directors may from time to time designate.
6.3 ELECTION. The board of directors at its first meeting after each
annual meeting of stockholders shall choose a president, a secretary and a
treasurer. Other officers may be appointed by the board of directors at such
meeting, at any other meeting or by written consent. At any time or from time to
time, the directors may delegate to any officer their power to elect or appoint
any other officer or any agents.
6.4 TENURE. Each officer shall hold office until the first meeting of the
board of directors following the next annual meeting of the stockholders and
until his successor is elected and qualified unless a shorter period shall have
been specified in terms of his election or appointment, or in each case until he
sooner dies, resigns, is removed or becomes disqualified. Each agent of the
Corporation shall retain his authority at the pleasure of the directors, or the
officer by whom he was appointed or by the officer who then holds agent
appointive power.
6.5 PRESIDENT AND VICE PRESIDENT. The president shall be the chief
executive officer and shall have direct and active charge of all business
operations of the Corporation and shall have general supervision of the entire
business of the Corporation, subject to the control of the board of directors.
He shall preside at all meetings of the stockholders and of the board of
directors at which he is present, except as otherwise voted by the board of
directors.
The president or treasurer shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the Corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
board of directors to some other officer or agent of the Corporation.
Any vice presidents shall have such duties and powers as shall be
designated from time to time by the board of directors or by the president.
9
<PAGE>
6.6 TREASURER AND ASSISTANT TREASURERS. The treasurer shall be in charge
of the Corporation's funds and valuable papers, and shall have such other duties
and powers as may be assigned to him from time to time by the board of directors
or by the president.
Any assistant treasurers shall have such duties and powers as shall be
designated from time to time by the board of directors, the president or the
treasurer.
6.7 SECRETARY AND ASSISTANT SECRETARIES. The secretary shall record all
proceedings of the stockholders, of the board of directors and of committees of
the board of directors in a book or series of books to be kept therefor and
shall file therein all writings of, or related to, action by stockholder or
director consent. In the absence of the secretary from any meeting, an assistant
secretary, or if there is none or he is absent, a temporary secretary chosen at
the meeting, shall record the proceedings thereof. Unless a transfer agent has
been appointed, the secretary shall keep or cause to be kept the stock and
transfer records of the Corporation, which shall contain the names and record
addresses of all stockholders and the number of shares registered in the name of
each stockholder. The secretary shall have such other duties and powers as may
from time to time be designated by the board of directors or the president.
Any assistant secretaries shall have such duties and powers as shall be
designated from time to time by the board of directors, the president or the
secretary.
6.8 RESIGNATION AND REMOVAL. Any officer may resign at any time by
delivering his resignation in writing to the president or the secretary or to a
meeting of the board of directors. Such resignation shall be effective upon
receipt unless specified to be effective at some other time, and without in any
case the necessity of its being accepted unless the resignation shall so state.
The board of directors may at any time remove any officer either with or without
cause. The board of directors may at any time terminate or modify the authority
of any agent. No officer resigning and (except where a right to receive
compensation shall be expressly provided in a duly authorized written agreement
with the Corporation) no officer removed shall have any right to any
compensation as such officer for any period following his resignation or
removal, or any right to damages on account of such removal, whether his
compensation be by the month or by the year or otherwise; unless in the case of
a resignation, the directors, or in the case of removal, the body acting on the
removal, shall in their or its discretion provide for compensation.
6.9 VACANCIES. If the office of the president or the treasurer or the
secretary becomes vacant, the directors may elect a successor by vote of a
majority of the directors then in office. If the office of any other officer
becomes vacant, any person or body empowered to elect or appoint that office may
choose a successor. Each such successor shall hold office for the unexpired term
of his predecessor, and in the case of the president, the treasurer and the
secretary until his successor is chosen and qualified, or in each case until he
sooner dies, resigns, is removed or becomes disqualified.
SECTION 7. CAPITAL STOCK
7.1 STOCK CERTIFICATES. Each stockholder shall be entitled to a
certificate stating the number and the class and the designation of the series,
if any, of the shares held by him, in such form as shall, in conformity to law,
the Certificate of Incorporation and these By-laws, be prescribed from time to
time by the board of directors. Such certificate shall be signed by the
president or a vice-president and (i) the treasurer or an assistant treasurer or
(ii) the secretary or an assistant secretary. Any of or all the signatures on
the certificate may be a facsimile. In case an officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed on such
certificate shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent, or registrar at the time
of its issue.
10
<PAGE>
7.2 LOST CERTIFICATES. The board of directors may direct a new certificate
or certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the board of directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the Corporation a bond in such sum as it may direct as indemnity
against any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
SECTION 8. TRANSFER OF SHARES OF STOCK
8.1 TRANSFER ON BOOKS. Subject to any restrictions with respect to the
transfer of shares of stock, shares of stock may be transferred on the books of
the Corporation by the surrender to the Corporation or its transfer agent of the
certificate therefor properly endorsed or accompanied by a written assignment
and power of attorney properly executed, with necessary transfer stamps affixed,
and with such proof of the authenticity of signature as the board of directors
or the transfer agent of the Corporation may reasonably require. Except as may
be otherwise required by law, by the Certificate of Incorporation or by these
By-laws, the Corporation shall be entitled to treat the record holder of stock
as shown on its books as the owner of such stock for all purposes, including the
payment of dividends and the right to receive notice and to vote or to give any
consent with respect thereto and to be held liable for such calls and
assessments, if any, as may lawfully be made thereon, regardless of any
transfer, pledge or other disposition of such stock until the shares have been
properly transferred on the books of the Corporation.
SECTION 9. GENERAL PROVISIONS
9.1 RECORD DATE. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be more than sixty days nor less than ten days before the date
of such meeting, nor more than sixty days prior to any other action to which
such record date relates. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the board of directors may fix a new
record date for the adjourned meeting. If no record date is fixed,
(a) the record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held;
(b) the record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no prior action
by the board of directors is necessary, shall be the day on which the first
written consent is expressed; and
(c) the record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the board of directors
adopts the resolution relating to such purpose.
11
<PAGE>
9.2 DIVIDENDS. Dividends upon the capital stock of the Corporation may be
declared by the board of directors at any regular or special meeting or by
written consent, pursuant to law. Dividends may be paid in cash, in property, or
in shares of the capital stock, subject to the provisions of the Certificate of
Incorporation.
9.3 PAYMENT OF DIVIDENDS. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the directors shall think conducive to the interest of
the Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
9.4 CHECKS. All checks or demands for money and notes of the Corporation
shall be signed by such officer or officers or such other person or persons as
the board of directors may from time to time designate.
9.5 FISCAL YEAR. The fiscal year of the Corporation shall begin on the
first of January in each year and shall end on the last day of December next
following, unless otherwise determined by the board of directors.
9.6 SEAL. The board of directors may, by resolution, adopt a corporate
seal. The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the word "Delaware." The seal may
be used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
The seal may be altered from time to time by the board of directors.
SECTION 10. AMENDMENTS
10.1 BY THE BOARD OF DIRECTORS. These By-laws may be altered, amended or
repealed or new by-laws may be adopted by the affirmative vote of a majority of
the directors present at any regular or special meeting of the board of
directors at which a quorum is present.
10.2 BY THE STOCKHOLDERS. Except as otherwise provided in Section 10.3,
these By-laws may be altered, amended or repealed or new by-laws may be adopted
by the affirmative vote of the holders of a majority of the shares of the
capital stock of the Corporation issued and outstanding and entitled to vote at
any regular or special meeting of stockholders, provided notice of such
alteration, amendment, repeal or adoption of new by-laws shall have been stated
in the notice of such regular or special meeting.
10.3 CERTAIN PROVISIONS. Notwithstanding any other provision of law, the
Certificate of Incorporation or these By-laws, and notwithstanding the fact that
a lesser percentage may be specified by law, the affirmative vote of the holders
of at least two-thirds of the shares of capital stock of the Corporation issued
and outstanding and entitled to vote shall be required to amend or repeal, or to
adopt any provision inconsistent with, Section 3.5, Section 3.7, Section 3.14,
Section 4 and Section 10 of these By-laws.
12
<PAGE>
Exhibit 4.1
INCORPORATED UNDER THE LAWS OF
THE STATE OF DELAWARE
CENTRA SOFTWARE, INC.
THIS CERTIFICATE IS TRANSFERABLE COMMON STOCK
IN BOSTON, MA OR NEW YORK, NY $0.001 PAR VALUE
SEE REVERSE FOR
CERTAIN DEFINITIONS
THIS CERTIFIES THAT CUSIP
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARE OF COMMON STOCK $0.001 PAR VALUE, OF
CENTRA SOFTWARE, INC. transferable on the books of the Corporation in person
or by attorney upon surrender of this certificate properly endorsed. This
certificate and the shares represented hereby are subject to the laws of the
State of Delaware and to the Certificate of Incorporation and the By-laws of
the Corporation as from time to time amended.
This Certificate is not valid until countersigned and registered by the
Transfer Agent and Registrar.
IN WITNESS WHEREOF, CENTRA SOFTWARE, INC. has caused its facsimile
corporate seal and the facsimile signatures of its duly authorized officers
to be hereunto affixed.
IN WITNESS WHEREOF, CENTRA SOFTWARE, INC. has caused its facsimile
corporate seal and the facsimile signatures of its duly authorized officers
to be hereunto affixed.
Dated:
Stephen A. Johnson CENTRA SOFTWARE, INC. Leon Novickos
CORPORATE
TREASURER AND CHIEF SEAL PRESIDENT AND
FINANCIAL OFFICER 1995 CHIEF EXECUTIVE OFFICER
DELAWARE
COUNTERSIGNED AND REGISTERED
BY
TRANSFER AGENT
AND REGISTRAR
AUTHORIZED SIGNATURE
CENTRA SOFTWARE, INC.
The Corporation will furnish without charge to each stockholder who so
requests the powers, designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -as tenants in common UNIF GIFT MIN ACT- ____________
TEN ENT -as tenants by the entireties (Cust)
JT TEN -as joint tenants with right of under Unif
survivorship and not as tenants Act_______
in common
CON PROP -as community property
Additional abbreviations may also be used though not in the above list.
For value received __________________________ hereby sell, assign and transfer
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------- Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
- ----------------------------------------------------------------------- Attorney
to transfer the said stock on the books of the within-named Corporation with
full power or substitution in the premises.
Dated,
-------------------------------------------
-----------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY PARTICULAR
WITHOUT ALTERATION OR ENLARGEMENT OR ANY
CHANGE WHATEVER.
Signature(s) Guaranteed:
------------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS
AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
<PAGE>
Exhibit 10.1
CENTRA SOFTWARE, INC.
1995 STOCK PLAN
1. PURPOSE.
The purpose of this plan (the "Plan") is to secure for Centra Software,
Inc. (the "Company") and its shareholders the benefits arising from capital
stock ownership by employees, officers and directors of, and consultants or
advisors to, the Company and its parent and subsidiary corporations who are
expected to contribute to the Company's future growth and success. Except where
the context otherwise requires, the term "Company" shall include the parent and
all present and future subsidiaries of the Company as defined in Sections 424(e)
and 424(f) of the Internal Revenue Code of 1986, as amended or replaced from
time to time (the "Code"). Those provisions of the Plan which make express
reference to Section 422 shall apply only to Incentive Stock Options (as that
term is defined in the Plan).
2. TYPES OF AWARDS AND ADMINISTRATION.
(a) OPTIONS. Options granted pursuant to the Plan ("Options") shall be
authorized by action of the Board of Directors of the Company and may be either
incentive stock options ("Incentive Stock Options") meeting the requirements of
Section 422 of the Code or non-statutory Options which are not intended to meet
the requirements of Section 422 of the Code. All Options when granted are
intended to be non-statutory Options, unless the applicable Option Agreement (as
defined below) explicitly states that the Option is intended to be an Incentive
Stock Option. If an Option is intended to be an Incentive Stock Option, and if
for any reason such Option (or any portion thereof) shall not qualify as an
Incentive Stock Option, then, to the extent of such nonqualification, such
Option (or portion thereof) shall be regarded as a non-statutory Option
appropriately granted under the Plan provided that such Option (or portion
thereof) otherwise meets the Plan's requirements relating to non-statutory
Options.
(b) INCENTIVE STOCK. Shares of the Company's Common Stock ("Common
Stock") issued pursuant to the Plan ("Incentive Stock") shall be authorized by
the Board of Directors and may be free from restrictions or may be subject to
such conditions and restrictions as the Board may determine. The vesting of
Incentive Stock may be conditioned upon the completion of a specified period of
employment with the Company and/or such other conditions or events as the Board
may determine, and any unvested Incentive Stock may be made subject to
forfeiture upon termination of employment or the occurrence of other events.
(c) ADMINISTRATION. The Plan shall be administered by the Board of
Directors of the Company, whose construction and interpretation of the terms and
provisions of the Plan shall be final and conclusive. The Board of Directors may
in its sole discretion issue Incentive Stock and grant options to purchase
shares of Common Stock, and issue shares upon exercise of such Options as
provided in the Plan. The Board shall have authority, subject to the express
provisions of the Plan, to construe the respective Incentive Stock Agreements
(as defined below),
<PAGE>
Option Agreements and the Plan, to prescribe, amend and rescind rules and
regulations relating to the Plan, to determine the terms and provisions of the
respective Incentive Stock Agreements and Option Agreements, and to make all
other determinations in the judgment of the Board of Directors necessary or
desirable for the administration of the Plan. The Board of Directors may correct
any defect or supply any omission or reconcile any inconsistency in the Plan or
in any Incentive Stock Agreement or Option Agreement in the manner and to the
extent it shall deem expedient to carry the Plan into effect and it shall be the
sole and final judge of such expediency. No director or person acting pursuant
to authority delegated by the Board of Directors shall be liable for any action
or determination under the Plan made in good faith. The Board of Directors may,
to the full extent permitted by or consistent with applicable laws or
regulations (including, without limitation, applicable state law, delegate any
or all of its powers under the Plan to a committee (the "Committee") appointed
by the Board of Directors, and if the Committee is so appointed all references
to the Board of Directors in the Plan shall mean and relate to such Committee.
3. ELIGIBILITY.
Options may be granted, and Incentive Stock may be issued, to persons
who are, at the time of such grant or issuance, employees, officers or directors
of, or consultants or advisors to, the Company; PROVIDED, that the class of
persons to whom Incentive Stock Options may be granted shall be limited to
employees of the Company.
4. STOCK SUBJECT TO PLAN.
Subject to adjustment as provided in Section 14 below, the maximum
number of shares of Common Stock of the Company which may be issued under the
Plan is 2,568,000(1) shares. If an Option shall expire or terminate for any
reason without having been exercised in full, the unpurchased shares subject
to such Option shall again be available for subsequent Option grants under
the Plan. If shares of Incentive Stock shall be forfeited to, or otherwise
repurchased by, the Company pursuant to an Incentive Stock Agreement, such
purchased shares subject to such Option shall again be available for
subsequent Option grants under the Plan. If shares issued upon exercise of an
Option are tendered to the Company in payment of the exercise price of an
Option, such tendered shares shall again be available for subsequent Option
grants under the Plan.
5. FORMS OF INCENTIVE STOCK AGREEMENTS AND OPTION AGREEMENTS.
(a) OPTION AGREEMENT. As a condition to the grant of an Option, each
recipient of an Option shall execute an option agreement ("Option Agreement") in
such form not inconsistent with the Plan as may be approved by the Board of
Directors. Such Option Agreements may differ among recipients.
(1) This number reflects the number of shares pre-split, as of October 21,
1999.
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<PAGE>
(b) INCENTIVE STOCK AGREEMENT. As a condition to the issuance of
Incentive Stock, each recipient thereof shall execute an incentive stock
agreement ("Incentive Stock Agreement") in such form not inconsistent with the
Plan as may be approved by the Board of Directors. Such Incentive Stock
Agreements may differ among recipients and need not be entitled "Incentive Stock
Agreements".
(c) "STAND-OFF" AGREEMENT. Unless the Board of Directors specifies
otherwise, each Incentive Stock Agreement and Option Agreement shall provide
that upon the request of the Company or the managing Underwriter(s), the holder
of any Option or the purchaser of any Incentive Stock shall, in connection with
an initial public offering of the Company's common stock, agree in writing that
for a period of time (not to exceed 180 days) from the effective date of the
Security Exchange Commission registration statement for such offering, the
holder or purchaser will not sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any shares of the Company's
common stock owned or controlled by him.
6. PURCHASE PRICE.
(a) GENERAL. The purchase price per share of Incentive Stock and per
share of stock deliverable upon the exercise of an Option shall be determined by
the Board of Directors, PROVIDED, HOWEVER, that in the case of an Incentive
Stock Option, the exercise price shall not be less than 100% of the fair market
value of such stock, as determined by the Board of Directors, at the time of
grant of such Option, or less than 110% of such fair market value in the case of
Options described in Section 11(b).
(b) PAYMENT OF PURCHASE PRICE. Option Agreements may provide for the
payment of the exercise price by delivery of cash or a check to the order of the
Company in an amount equal to the exercise price of such Options, or, to the
extent provided in the applicable Option Agreement, (i) by delivery to the
Company of shares of Common Stock of the Company already owned by the optionee
for a period of six months having a fair market value equal in amount to the
exercise price of the Options being exercised, (ii) by any other means
(including, without limitation, by delivery of a promissory note of the optionee
payable on such terms as are specified by the Board of Directors) which the
Board of Directors determines are consistent with the purpose of the Plan and
with applicable laws and regulations, or (iii) by any combination of such
methods of payment. The fair market value of any shares of the Company's Common
Stock or other non-cash consideration which may be delivered upon exercise of an
Option shall be determined by the Board of Directors. Incentive Stock Agreements
may provide for the payment of any purchase price in any manner approved by the
Board of Directors at the time of authorizing the issuance thereof.
7. OPTION PERIOD.
Each Option and all rights thereunder shall expire on such date as
shall be set forth in the applicable Option Agreement, PROVIDED that, in any
event, in the case of an Incentive Stock
-3-
<PAGE>
Option, such date shall not be later than 10 years after the date on which the
Option is granted (or five years in the case of Options described in Section
11(b)), and, in the case of non-statutory Options, not later than 10 years after
the date on which the Option is granted, and, in either case, shall be subject
to earlier termination as provided in the Plan.
8. EXERCISE OF OPTIONS.
Each Option shall be exercisable either in full or in installments at
such time or times and during such period as shall be set forth in the agreement
evidencing such Option, subject to the provisions of the Plan.
9. NONTRANSFERABILITY OF OPTIONS.
No Option or share of Incentive Stock shall be assignable or
transferable by the person to whom it is granted, either voluntarily or by
operation of law, except by will or the laws of descent and distribution. During
the life an optionee, an Option held by him or her shall be exercisable only by
the optionee. Notwithstanding the foregoing, non-statutory Options and shares of
Incentive Stock may be transferred pursuant to a qualified domestic relations
order (as defined in SEC Rule 16b-3).
10. EFFECT OF TERMINATION.
No Incentive Stock Option may be exercised unless, at the time of such
exercise, the optionee is, and has continuously since the date of grant of his
or her Incentive Stock Option, been employed by the Company except that unless
the Option Agreement or instrument expressly provides otherwise:
(a) the Incentive Stock Option may be exercised within the
period of three months after the date the optionee ceases to be an employee of
the Company (or within such lesser period as may be specified in the applicable
Option Agreement);
(b) if the optionee dies while in the employ of the Company,
the Incentive Stock Option may be exercised in full by the person to whom it is
transferred by will or the laws of descent and distribution within the period of
one year after the date of death (or within such lesser period as may be
specified in the applicable Option Agreement); and
(c) if the optionee becomes disabled (within the meaning of
Section 22(e)(3) of the Code or any successor provision thereto) while in the
employ of the Company, the Incentive Stock Option may be exercised in full
within the period of one year after the date the optionee ceases to be such an
employee because of.such disability (or within such lesser period as may be
specified in the applicable Option Agreement); PROVIDED, HOWEVER, that in no
event may any Incentive Stock Option be exercised after the expiration date of
the Incentive Stock Option. For all purposes of the Plan and any Incentive Stock
Option granted hereunder,
-4-
<PAGE>
"employment" shall be defined in accordance with the provisions of Section
1.421-7(h) of the Income Tax Regulations (or any successor regulations).
A non-statutory Option granted to an employee shall be subject to the
foregoing provisions of this Section 10 as if it were an Incentive Stock Option,
but a non-statutory Option may also be exercised so long as the optionee
maintains a relationship with the Company as a director, consultant, or adviser,
unless the Option Agreement provides otherwise.
11. INCENTIVE STOCK OPTIONS.
Options which are intended to be Incentive Stock Options shall be
subject to the following additional terms and conditions:
(a) EXPRESS DESIGNATION. All Incentive Stock Options shall, at the time
of grant, be specifically designated as such in the Option Agreement covering
such Incentive Stock Options.
(b) 10% SHAREHOLDER. If any employee to whom an Incentive Stock Option
is to be granted is, at the time of the grant of such Option, the owner of stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company (after taking into account the attribution of stock
ownership rules of Section 424(d) of the Code), then the following special
provisions shall be applicable to the Incentive Stock Option granted to such
individual:
(i) The purchase price per share of the Common Stock subject
to such Incentive Stock Option shall not be less than 110% of the fair
market value of one share of Common Stock at the time of grant; and
(ii) the option exercise period shall not exceed five years
from the date of grant.
(c) DOLLAR LIMITATION. For so long as the Code shall so provide,
Options granted to any employee under the Plan (and any other incentive stock
option plans of the Company) which are intended to constitute Incentive Stock
Options shall not constitute Incentive Stock Options to the extent that such
Options, in the aggregate, become exercisable for the first time in any one
calendar year for shares of Common Stock with an aggregate fair market value
(determined as of the respective date or dates of grant) of more than $100,000.
12. ADDITIONAL PROVISIONS.
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(a) ADDITIONAL PROVISIONS. The Board of Directors may, in its sole
discretion, include additional provisions in Incentive Stock Agreements and
Option Agreements, including without limitation restrictions on transfer, rights
of the Company to repurchase shares of Incentive Stock or shares of Common Stock
acquired upon exercise of Options, commitments to pay cash bonuses, to make,
arrange for or guaranty loans or to transfer other property to optionees upon
exercise of Options, or such other provisions as shall be determined by the
Board of Directors; PROVIDED THAT such additional provisions shall not be
inconsistent with any other term or condition of the Plan and such additional
provisions shall not be such as to cause any Incentive Stock Option to fail to
qualify as an Incentive Stock Option within the meaning of Section 422 of the
Code.
(b) ACCELERATION, EXTENSION, ETC. The Board of Directors may, in its
sole discretion, (i) accelerate the date or dates on which all or any particular
Option or Options may be exercised or (ii) extend the dates during which all, or
any particular, Option or Options may be exercised; PROVIDED, HOWEVER, that no
such extension shall be permitted if it would cause the Plan to fail to comply
with Section 422 of the Code.
13. RIGHTS AS A SHAREHOLDER.
The holder of an Option shall have no rights as a shareholder with
respect to any shares covered by the Option (including, without limitation, any
rights to receive dividends or non-cash distributions with respect to such
shares) until the date of issue of a stock certificate to him or her for such
shares. No adjustment shall be made for dividends or other rights for which the
record date is prior to the date such stock certificate is issued.
14. ADJUSTMENT PROVISIONS FOR RECAPITALIZATIONS AND RELATED TRANSACTIONS.
(a) GENERAL. If, through or as a result of any merger, consolidation,
sale of all or substantially all of the assets of the Company, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar transaction, (i) the outstanding shares of Common Stock
are increased, decreased or exchanged for a different number or kind of shares
or other securities of the Company, or (ii) additional shares or new or
different shares or other securities of the Company or other non-cash assets are
distributed with respect to such shares of Common Stock or other securities, an
appropriate and proportionate adjustment may be made in (x) the maximum number
and kind of shares reserved for issuance under the Plan, (y) the number and kind
of shares or other securities subject to any then outstanding Options, and (z)
the price for each share subject to any then outstanding Options, without
changing the aggregate purchase price as to which such Options remain
exercisable. Notwithstanding the foregoing, no adjustment shall be made pursuant
to this Section 14 if such adjustment would cause the Plan to fail to comply
with Section 422 of the Code.
(b) BOARD AUTHORITY TO MAKE ADJUSTMENTS. Any adjustments under this
Section 14 will be made by the Board of Directors, whose determination as to
what adjustments, if any, will
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be made and the extent thereof will be final, binding and conclusive. No
fractional shares will be issued under the Plan on account of any such
adjustments.
15. MERGER, CONSOLIDATION, ASSET SALE, LIQUIDATION, ETC.
(a) GENERAL. In the event of a consolidation or merger or sale of all
or substantially all of the assets of the Company in which outstanding shares of
Common Stock are exchanged for securities, cash or other property of any other
corporation or business entity or in the event of a liquidation of the Company,
the Board of Directors of the Company, or the board of directors of any
corporation assuming the obligations of the Company, may, in its discretion,
take any one or more of the following actions, as to some or all outstanding
Options (and need not take the same action as to each such Option: (i) provide
that such Options shall be assumed, or equivalent Options shall be substituted,
by the acquiring or succeeding corporation (or an affiliate thereof), PROVIDED
that any such Options substituted for Incentive Stock Options shall meet the
requirements of Section 424(a) of the Code, (ii) upon written notice to the
optionees, provide that all unexercised Options will terminate immediately prior
to the consummation of such transaction unless exercised by the optionee within
a specified period following the date of such notice, (iii) in the event of a
merger under the terms of which holders of the Common Stock of the Company will
receive upon consummation thereof a cash payment for each share surrendered in
the merger (the "Merger Price"), make or provide for a cash payment to the
optionees equal to the difference between (A) the Merger Price times the number
of shares of Common Stock subject to such outstanding Options (to the extent
then exercisable at prices not in excess of the Merger Price) and (B) the
aggregate exercise price of all such outstanding Options in exchange for the
termination of such Options, and (iv) provide that all or any outstanding
Options shall become exercisable in full immediately prior to such event.
(b) SUBSTITUTE OPTIONS. The Company may grant Options in substitution
for Options held by employees of another corporation who become employees of the
Company, or a subsidiary of the Company, as the result of a merger or
consolidation of the employing corporation with the Company or a subsidiary of
the Company, or as a result of the acquisition by the Company, or one of its
subsidiaries, of property or stock of the employing corporation. The Company may
direct that substitute Options be granted on such terms and conditions as the
Board of Directors considers appropriate in the circumstances.
(c) INCENTIVE STOCK. In the event of a business combination or other
transaction of the type detailed in subparagraph (a) of this Section 15, any
securities, cash or other property received in exchange for shares of Incentive
Stock shall continue to be governed by the provisions of any Incentive Stock
Agreement pursuant to which they were issued, including any provision regarding
vesting, and such securities, cash, or other property may be held in escrow on
such terms as the Board of Directors may direct, to insure compliance with the
terms of any such Incentive Stock Agreement.
16. NO SPECIAL EMPLOYMENT RIGHTS.
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Nothing contained in the Plan or in any Option or Incentive Stock
Agreement shall confer upon any optionee any right with respect to the
continuation of his or her employment by the Company or interfere in any way
with the right of the Company at any time to terminate such employment or to
increase or decrease the compensation of the optionee.
17. OTHER EMPLOYEE BENEFITS.
The amount of any compensation deemed to be received by an employee as
a result of the issuance of shares of Incentive Stock or the grant or exercise
of an Option or the sale of shares received upon such Award or exercise will not
constitute compensation with respect to which any other employee benefits of
such employee are determined, including, without limitation, benefits under any
bonus, pension, profit-sharing, life insurance or salary continuation plan,
except as otherwise specifically determined by the Board of Directors.
18. AMENDMENT OF THE PLAN.
(a) The Board of Directors may at any time, and from time to time,
modify or amend the Plan in any respect, except that if at any time the approval
of the shareholders of the Company is required under Section 422 of the Code or
any successor provision with respect to Incentive Stock Options, the Board of
Directors may not effect such modification or amendment without such approval.
(b) The termination or any modification or amendment of the Plan shall
not, without the consent of an optionee, affect his or her rights under an
Option previously granted to him or her. With the consent of the recipient of
Incentive Stock or optionee affected, the Board of Directors may amend
outstanding Incentive Stock Agreements or Option Agreements in a manner not
inconsistent with the Plan. The Board of Directors shall have the right to amend
or modify the terms and provisions of the Plan and of any outstanding Incentive
Stock Options to the extent necessary to qualify any or all such Options for
such favorable federal income tax treatment (including deferral of taxation upon
exercise) as may be afforded incentive stock options under Section 422 of the
Code.
19. WITHHOLDING.
The Company shall have the right to deduct from payments of any kind
otherwise due to the optionee any federal, state or local taxes of any kind
required by law to be withheld with respect to issuance of any shares of
Incentive Stock or shares issued upon exercise of Options. Subject to the prior
approval of the Company, which may be withheld by the Company in its sole
discretion, the obligor may elect to satisfy such obligations, in whole or in
part, (i) by causing the Company to withhold shares of Common Stock otherwise
issuable or (ii) by delivering to the Company shares of Common Stock already
owned by the obligor. The shares so delivered or withheld shall have a fair
market value equal to such withholding obligation. The fair market
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value of the shares used to satisfy such withholding obligation shall be
determined by the Company as of the date that the amount of tax to be withheld
is to be determined. A person who has made an election pursuant to this Section
19(a) may only satisfy his or her withholding obligation with shares of Common
Stock which are not subject to any repurchase, forfeiture, unfulfilled vesting
or other similar requirements.
20. EFFECTIVE DATE AND DURATION OF THE PLAN.
(a) EFFECTIVE DATE. The Plan shall become effective when adopted by the
Board of Directors, but no Incentive Stock Option shall become exercisable
unless and until the Plan shall have been approved by the Company's
shareholders. If such shareholder approval is not obtained within twelve months
after the date of the Board's adoption of the Plan, no Options previously
granted under the Plan shall be deemed to be Incentive Stock Options and no
Incentive Stock Options shall be granted thereafter. Amendments to the Plan not
requiring shareholder approval shall become effective when adopted by the Board
of Directors; amendments requiring shareholder approval (as provided in Section
18) shall become effective when adopted by the Board of Directors, but no
Incentive Stock Option granted after the date of such amendment shall become
exercisable (to the extent that such amendment to the Plan was required to
enable the Company to grant such Incentive Stock Option to a particular
optionee) unless and until such amendment shall have been approved by the
Company's shareholders. If such shareholder approval is not obtained within
twelve months of the Board's adoption of such amendment, any Incentive Stock
Options granted on or after the date of such amendment shall terminate to the
extent that such amendment to the Plan was required to enable the Company to
grant such Option to a particular optionee. Subject to this limitation, Options
may be granted under the Plan at any time after the effective date and before
the date fixed for termination of the Plan.
(b) TERMINATION. Unless sooner terminated in accordance with Section 15
or by the Board of Directors the Plan shall terminate upon the close of business
on the day next preceding the tenth anniversary of the date of its adoption by
the Board of Directors.
21. PROVISION FOR FOREIGN PARTICIPANTS.
The Board of Directors may, without amending the Plan, modify the terms
of Option or Incentive Stock Agreements to differ from those specified in the
Plan with respect to participants who are foreign nationals or employed outside
the United States to recognize differences in laws, rules, regulations or
customs of such foreign jurisdictions with respect to tax, securities, currency,
employee benefit or other matters.
* * *
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Exhibit 10.2
CENTRA SOFTWARE, INC.
1999 STOCK INCENTIVE PLAN
SECTION 1. GENERAL PURPOSE OF THE PLAN; DEFINITIONS
The name of the plan is the Centra Software, Inc. 1999 Stock Incentive
Plan (the "Plan"). The purpose of the Plan is to encourage and enable officers,
directors and employees of Centra Software, Inc. (the "Company") and its
Subsidiaries and other persons to acquire a proprietary interest in the Company.
It is anticipated that providing such persons with a direct stake in the
Company's welfare will assure a closer identification of their interests with
those of the Company and its stockholders, thereby stimulating their efforts on
the Company's behalf and strengthening their desire to remain with the Company.
The following terms shall be defined as set forth below:
"Award" or "Awards", except where referring to a particular category of
grant under the Plan, shall include Incentive Stock Options, Non-Statutory Stock
Options, Restricted Stock Awards, Unrestricted Stock Awards, Performance Share
Awards and Stock Appreciation Rights.
"Board" means the Board of Directors of the Company.
"Cause" means (i) any material breach by the participant of any agreement
to which the participant and the Company are both parties, and (ii) any act or
omission justifying termination of the participant's employment for cause, as
determined by the Committee.
"Change of Control" shall have the meaning set forth in Section 15.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.
"Conditioned Stock Award" means an Award granted pursuant to Section 6.
"Committee" shall have the meaning set forth in Section 2.
"Disability" means disability as set forth in Section 22(e)(3) of the
Code.
"Effective Date" means the date on which the Plan is approved by
stockholders as set forth in Section 17.
"Eligible Person" shall have the meaning set forth in Section 4.
"Fair Market Value" on any given date means the closing price per share of
the Stock on such date as reported by a nationally recognized stock exchange,
or, if the Stock is not listed on such an exchange, as reported by the Nasdaq
National Market, or, if the Stock is not quoted on the Nasdaq National Market,
the fair market value of the Stock as determined by the Committee.
"Incentive Stock Option" means any Stock Option designated and qualified
as an "incentive stock option" as defined in Section 422 of the Code.
"Non-Statutory Stock Option" means any Stock Option that is not an
Incentive Stock Option.
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"Normal Retirement" means retirement from active employment with the
Company and its Subsidiaries in accordance with the retirement policies of the
Company and its Subsidiaries then in effect.
"Outside Director" means any director who (i) is not an employee of the
Company or of any "affiliated group," as such term is defined in Section 1504(a)
of the Code, which includes the Company (an "Affiliate"), (ii) is not a former
employee of the Company or any Affiliate who is receiving compensation for prior
services (other than benefits under a tax-qualified retirement plan) during the
Company's or any Affiliate's taxable year, (iii) has not been an officer of the
Company or any Affiliate and (iv) does not receive remuneration from the Company
or any Affiliate, either directly or indirectly, in any capacity other than as a
director. "Outside Director" shall be determined in accordance with Section
162(m) of the Code and the Treasury regulations issued thereunder.
"Option" or "Stock Option" means any option to purchase shares of Stock
granted pursuant to Section 5.
"Performance Share Award" means an Award granted pursuant to Section 8.
"Stock" means the Common Stock, $.001 par value per share, of the Company,
subject to adjustments pursuant to Section 3.
"Stock Appreciation Right" means an Award granted pursuant to Section 9.
"Subsidiary" means a subsidiary as defined in Section 424 of the Code.
"Unrestricted Stock Award" means an award granted pursuant to Section 7.
SECTION 2. ADMINISTRATION OF PLAN; COMMITTEE AUTHORITY TO SELECT PARTICIPANTS
AND DETERMINE AWARDS
(a) COMMITTEE. The Plan shall be administered by a committee of the Board
(the "Committee") consisting of not less than two (2) Outside Directors, but the
authority and validity of any act taken or not taken by the Committee shall not
be affected if any person administering the Plan is not an "Outside Director."
Except as specifically reserved to the Board under the terms of the Plan, the
Committee shall have full and final authority to operate, manage and administer
the Plan on behalf of the Company. Action by the Committee shall require the
affirmative vote of a majority of all members thereof.
(b) POWERS OF COMMITTEE. The Committee shall have the power and authority
to grant and modify Awards consistent with the terms of the Plan, including the
power and authority:
(i) to select the persons to whom Awards may from time to time be
granted;
(ii) to determine the time or times of grant, and the extent, if
any, of Incentive Stock Options, Non-Statutory Stock Options, Restricted
Stock, Unrestricted Stock, Performance Shares and Stock Appreciation
Rights, or any combination of the foregoing, granted to any one or more
participants;
(iii) to determine the number of shares to be covered by any Award;
(iv) to determine and modify the terms and conditions, including
restrictions, not inconsistent with the terms of the Plan, of any Award,
which terms and conditions may differ among individual Awards and
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participants, and to approve the form of written instruments evidencing
the Awards; provided, however, that no such action shall adversely affect
rights under any outstanding Award without the participant's consent;
(v) to accelerate the exercisability or vesting of all or any
portion of any Award;
(vi) subject to the provisions of Section 5(a)(ii), to extend the
period in which any outstanding Stock Option or Stock Appreciation Right
may be exercised;
(vii) to determine whether, to what extent, and under what
circumstances Stock and other amounts payable with respect to an Award
shall be deferred either automatically or at the election of the
participant and whether and to what extent the Company shall pay or credit
amounts equal to interest (at rates determined by the Committee) or
dividends or deemed dividends on such deferrals; and
(viii) to adopt, alter and repeal such rules, guidelines and
practices for administration of the Plan and for its own acts and
proceedings as it shall deem advisable; to interpret the terms and
provisions of the Plan and any Award (including related written
instruments); to make all determinations it deems advisable for the
administration of the Plan; to decide all disputes arising in connection
with the Plan; and to otherwise supervise the administration of the Plan.
All decisions and interpretations of the Committee shall be binding on all
persons, including the Company and Plan participants.
SECTION 3. SHARES ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION
(a) SHARES ISSUABLE. The maximum number of shares of Stock with respect to
which Awards (including Stock Appreciation Rights) may be granted under the Plan
shall be three million five hundred thousand (3,500,000). For purposes of this
limitation, the shares of Stock underlying any Awards which are forfeited,
cancelled, reacquired by the Company or otherwise terminated (other than by
exercise) shall be added back to the shares of Stock with respect to which
Awards may be granted under the Plan so long as the participants to whom such
Awards had been previously granted received no benefits of ownership of the
underlying shares of Stock to which the Awards related. Subject to such overall
limitation, any type or types of Award may be granted with respect to shares,
including Incentive Stock Options. Shares issued under the Plan may be
authorized but unissued shares or shares reacquired by the Company.
(b) LIMITATION ON AWARDS. In no event may any Plan participant be granted
Awards (including Stock Appreciation Rights) with respect to more than 500,000
shares of Stock in any calendar year. The number of shares of Stock relating to
an Award granted to a Plan participant in a calendar year that is subsequently
forfeited, cancelled or otherwise terminated shall continue to count toward the
foregoing limitation in such calendar year. In addition, if the exercise price
of an Award is subsequently reduced, the transaction shall be deemed a
cancellation of the original Award and the grant of a new one so that both
transactions shall count toward the maximum shares issuable in the calendar year
of each respective transaction.
(c) STOCK DIVIDENDS, MERGERS, ETC. In the event that after approval of the
Plan by the stockholders of the Company in accordance with Section 17, the
Company effects a stock dividend, stock split or similar change in
capitalization affecting the Stock, the Committee shall make appropriate
adjustments in (i) the number and kind of shares of stock or securities with
respect to which Awards may thereafter be granted (including without limitation
the limitations set forth in Sections 3(a) and (b) above), (ii) the number and
kind of shares remaining subject to outstanding Awards, and (iii) the option or
purchase price in respect of such shares. In the event of any merger,
consolidation, dissolution or liquidation of the Company, the Committee in its
sole discretion may, as to any outstanding Awards, make such substitution or
adjustment in the aggregate number
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of shares reserved for issuance under the Plan and in the number and purchase
price (if any) of shares subject to such Awards as it may determine and as may
be permitted by the terms of such transaction, or accelerate, amend or terminate
such Awards upon such terms and conditions as it shall provide (which, in the
case of the termination of the vested portion of any Award, shall require
payment or other consideration which the Committee deems equitable in the
circumstances), subject, however, to the provisions of Section 15.
(d) SUBSTITUTE AWARDS. The Committee may grant Awards under the Plan in
substitution for stock and stock based awards held by employees of another
corporation who concurrently become employees of the Company or a Subsidiary as
the result of a merger or consolidation of the employing corporation with the
Company or a Subsidiary or the acquisition by the Company or a Subsidiary of
property or stock of the employing corporation. The Committee may direct that
the substitute awards be granted on such terms and conditions as the Committee
considers appropriate in the circumstances. Shares which may be delivered under
such substitute awards may be in addition to the maximum number of shares
provided for in Section 3(a).
SECTION 4. ELIGIBILITY
Awards may be granted to officers, directors and employees of the Company
or its Subsidiaries ("Eligible Persons").
SECTION 5. STOCK OPTIONS
The Committee may grant to Eligible Persons options to purchase stock.
Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.
Stock Options granted under the Plan may be either Incentive Stock Options
or Non-Statutory Stock Options. Unless otherwise so designated, an Option shall
be a Non-Statutory Stock Option. To the extent that any option does not qualify
as an Incentive Stock Option, it shall constitute a Non-Statutory Stock Option.
No Incentive Stock Option shall be granted under the Plan after the tenth
anniversary of the earlier of (i) the date of adoption of the Plan by the Board
or (ii) the date on which the Plan is approved by the stockholders as set forth
in Section 17.
The Committee in its discretion may determine the effective date of Stock
Options, provided, however, that grants of Incentive Stock Options shall be made
only to persons who are, on the effective date of the grant, employees of the
Company or any Subsidiary. Stock Options granted pursuant to this Section 5(a)
shall be subject to the following terms and conditions and the terms and
conditions of Section 13 and shall contain such additional terms and conditions,
not inconsistent with the terms of the Plan, as the Committee shall deem
desirable:
(a) EXERCISE PRICE. The exercise price per share for the Stock
covered by a Stock Option granted pursuant to this Section 5(a) shall be
determined by the Committee at the time of grant but shall be, in the case
of Incentive Stock Options, not less than 100% of Fair Market Value on the
date of grant. If an employee owns or is deemed to own (by reason of the
attribution rules applicable under Section 424(d) of the Code) more than
10% of the combined voting power of all classes of stock of the Company or
any Subsidiary or parent corporation and an Incentive Stock Option is
granted to such employee, the option price shall be not less than 110% of
Fair Market Value on the grant date.
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(b) OPTION TERM. The term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than 10
years after the date the option is granted. If an employee owns or is
deemed to own (by reason of the attribution rules of Section 424(d) of the
Code) more than 10% of the combined voting power of all classes of stock
of the Company or any Subsidiary or parent corporation and an Incentive
Stock Option is granted to such employee, the term of such option shall be
no more than 5 years from the date of grant.
(c) EXERCISABILITY; RIGHTS OF A STOCKHOLDER. Stock Options shall
become vested and exercisable at such time or times, whether or not in
installments, as shall be determined by the Committee at or after the
grant date. The Committee may at any time accelerate the exercisability of
all or any portion of any Stock Option. An optionee shall have the rights
of a stockholder only as to shares acquired upon the exercise of a Stock
Option and not as to unexercised Stock Options.
(d) METHOD OF EXERCISE. Stock Options may be exercised in whole or
in part, by delivering written notice of exercise to the Company,
specifying the number of shares to be purchased. Payment of the purchase
price may be made by one or more of the following methods:
(i) in cash, by certified or bank check or other instrument
acceptable to the Committee;
(ii) in the form of shares of Stock that are not then subject
to restrictions, if permitted by the Committee, in its discretion.
Such surrendered shares shall be valued at Fair Market Value on the
exercise date;
(iii) by the optionee delivering to the Company a properly
executed exercise notice together with irrevocable instructions to a
broker to promptly deliver to the Company cash or a check payable
and acceptable to the Company to pay the purchase price; provided
that in the event the optionee chooses to pay the purchase price as
so provided, the optionee and the broker shall comply with such
procedures and enter into such agreements of indemnity and other
agreements as the Committee shall prescribe as a condition of such
payment procedure. The Company need not act upon such exercise
notice until the Company receives full payment of the exercise
price; or
(iv) by any other means (including, without limitation, by
delivery of a promissory note of the optionee payable on such terms
as are specified by the Committee) which the Committee determines
are consistent with the purpose of the Plan and with applicable laws
and regulations.
The delivery of certificates representing shares of Stock to be purchased
pursuant to the exercise of a Stock Option will be contingent upon receipt
from the Optionee (or a purchaser acting in his stead in accordance with
the provisions of the Stock Option) by the Company of the full purchase
price for such shares and the fulfillment of any other requirements
contained in the Stock Option or imposed by applicable law.
(e) NON-TRANSFERABILITY OF OPTIONS. Except as the Committee may
provide with respect to a Non-Statutory Stock Option, no Stock Option
shall be transferable other than by will or by the laws of descent and
distribution and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee.
(f) ANNUAL LIMIT ON INCENTIVE STOCK OPTIONS. To the extent required
for "incentive stock option" treatment under Section 422 of the Code, the
aggregate Fair Market Value (determined as of the time of grant) of the
Stock with respect to which incentive stock options granted under this
Plan and any other plan of the Company or its Subsidiaries become
exercisable for the first time by an optionee during any calendar year
shall not exceed $100,000.
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(g) FORM OF SETTLEMENT. Shares of Stock issued upon exercise of a
Stock Option shall be free of all restrictions under the Plan, except as
otherwise provided in this Plan.
SECTION 6. RESTRICTED STOCK AWARDS
(a) NATURE OF RESTRICTED STOCK AWARD. The Committee in its discretion may
grant Restricted Stock Awards to any Eligible Person, entitling the recipient to
acquire, for a purchase price determined by the Committee, shares of Stock
subject to such restrictions and conditions as the Committee may determine at
the time of grant ("Restricted Stock"), including continued employment and/or
achievement of pre-established performance goals and objectives.
(b) ACCEPTANCE OF AWARD. A participant who is granted a Restricted Stock
Award shall have no rights with respect to such Award unless the participant
shall have accepted the Award within 60 days (or such shorter date as the
Committee may specify) following the award date by making payment to the Company
of the specified purchase price of the shares covered by the Award and by
executing and delivering to the Company a written instrument that sets forth the
terms and conditions applicable to the Restricted Stock in such form as the
Committee shall determine.
(c) RIGHTS AS A STOCKHOLDER. Upon complying with Section 6(b) above, a
participant shall have all the rights of a stockholder with respect to the
Restricted Stock, including voting and dividend rights, subject to
non-transferability restrictions and Company repurchase or forfeiture rights
described in this Section 6 and subject to such other conditions contained in
the written instrument evidencing the Restricted Award. Unless the Committee
shall otherwise determine, certificates evidencing shares of Restricted Stock
shall remain in the possession of the Company until such shares are vested as
provided in Section 6(e) below.
(d) RESTRICTIONS. Shares of Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided herein. In the event of termination of employment by the
Company and its Subsidiaries for any reason (including death, Disability, Normal
Retirement and for Cause), the Company shall have the right, at the discretion
of the Committee, to repurchase shares of Restricted Stock with respect to which
conditions have not lapsed at their purchase price, or to require forfeiture of
such shares to the Company if acquired at no cost, from the participant or the
participant's legal representative. The Company must exercise such right of
repurchase or forfeiture within 90 days following such termination of employment
(unless otherwise specified in the written instrument evidencing the Restricted
Stock Award).
(e) VESTING OF RESTRICTED STOCK. The Committee at the time of grant shall
specify the date or dates and/or the attainment of pre-established performance
goals, objectives and other conditions on which the non-transferability of the
Restricted Stock and the Company's right of repurchase or forfeiture shall
lapse. Subsequent to such date or dates and/or the attainment of such
pre-established performance goals, objectives and other conditions, the shares
on which all restrictions have lapsed shall no longer be Restricted Stock and
shall be deemed "vested." The Committee at any time may accelerate such date or
dates and otherwise waive or, subject to Section 13, amend any conditions of the
Award.
(f) WAIVER, DEFERRAL AND REINVESTMENT OF DIVIDENDS. The written instrument
evidencing the Restricted Stock Award may require or permit the immediate
payment, waiver, deferral or investment of dividends paid on the Restricted
Stock.
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SECTION 7. UNRESTRICTED STOCK AWARDS
(a) GRANT OR SALE OF UNRESTRICTED STOCK. The Committee in its discretion
may grant or sell to any Eligible Person shares of Stock free of any
restrictions under the Plan ("Unrestricted Stock") at a purchase price
determined by the Committee. Shares of Unrestricted Stock may be granted or sold
as described in the preceding sentence in respect of past services or other
valid consideration.
(b) RESTRICTIONS ON TRANSFERS. The right to receive unrestricted Stock may
not be sold, assigned, transferred, pledged or otherwise encumbered, other than
by will or the laws of descent and distribution.
SECTION 8. PERFORMANCE SHARE AWARDS
NATURE OF PERFORMANCE SHARES. A Performance Share Award is an award
entitling the recipient to acquire shares of Stock upon the attainment of
specified performance goals. The Committee may make Performance Share Awards
independent of or in connection with the granting of any other Award under the
Plan. Performance Share Awards may be granted under the Plan to any Eligible
Person. The Committee in its discretion shall determine whether and to whom
Performance Share Awards shall be made, the performance goals applicable under
each such Award, the periods during which performance is to be measured, and all
other limitations and conditions applicable to the awarded Performance Shares.
SECTION 9. STOCK APPRECIATION RIGHTS
The Committee in its discretion may grant Stock Appreciation Rights to any
Eligible Person (i) alone or (ii) simultaneously with the grant of a Stock
Option and in conjunction therewith or in the alternative thereto. A Stock
Appreciation Right shall entitle the participant upon exercise thereof to
receive from the Company, upon written request to the Company at its principal
offices (the "Request"), a number of shares of Stock (with or without
restrictions as to substantial risk of forfeiture and transferability, as
determined by the Committee in its sole discretion), an amount of cash, or any
combination of Stock and cash, as specified in the Request (but subject to the
approval of the Committee in its sole discretion, at any time up to and
including the time of payment, as to the making of any cash payment), having an
aggregate Fair Market Value equal to the product of (i) the excess of Fair
Market Value, on the date of such Request, over the exercise price per share of
Stock specified in such Stock Appreciation Right or its related Option,
multiplied by (ii) the number of shares of Stock for which such Stock
Appreciation Right shall be exercised. Notwithstanding the foregoing, the
Committee may specify at the time of grant of any Stock Appreciation Right that
such Stock Appreciation Right may be exercisable solely for cash and not for
Stock.
SECTION 10. TERMINATION OF STOCK OPTIONS AND STOCK APPRECIATION RIGHTS
(a) INCENTIVE STOCK OPTIONS:
(i) TERMINATION BY DEATH. If any participant's employment by the
Company and its Subsidiaries terminates by reason of death, any Incentive
Stock Option owned by such participant may thereafter be exercised to the
extent exercisable at the date of death, by the legal representative or
legatee of the participant, for a period of two years (or such longer
period as the Committee shall specify at any time) from the date of death,
or until the expiration of the stated term of the Incentive Stock Option,
if earlier.
7
<PAGE>
(ii) TERMINATION BY REASON OF DISABILITY OR NORMAL RETIREMENT.
(A) Any Incentive Stock Option held by a participant whose
employment by the Company and its Subsidiaries has terminated by reason of
Disability may thereafter be exercised, to the extent it was exercisable
at the time of such termination, for a period of one year (or such longer
period as the Committee shall specify at any time) from the date of such
termination of employment, or until the expiration of the stated term of
the Option, if earlier.
(B) Any Incentive Stock Option held by a participant whose
employment by the Company and its Subsidiaries has terminated by
reason of Normal Retirement may thereafter be exercised, to the
extent it was exercisable at the time of such termination, for a
period of 90 days (or such longer period as the Committee shall
specify at any time) from the date of such termination of
employment, or until the expiration of the stated term of the
Option, if earlier.
(C) The Committee shall have sole authority and discretion to
determine whether a participant's employment has been terminated by
reason of Disability or Normal Retirement.
(D) Except as otherwise provided by the Committee at the time
of grant, the death of a participant during a period provided in
this Section 10(b) for the exercise of an Incentive Stock Option
shall extend such period for two years from the date of death,
subject to termination on the expiration of the stated term of the
Option, if earlier.
(iii) TERMINATION FOR CAUSE. If any participant's employment by the
Company and its Subsidiaries has been terminated for Cause, any Incentive
Stock Option held by such participant shall immediately terminate and be
of no further force and effect; provided, however, that the Committee may,
in its sole discretion, provide that such Option can be exercised for a
period of up to 30 days from the date of termination of employment, or
until the expiration of the stated term of the Option, if earlier.
(iv) OTHER TERMINATION. Unless otherwise determined by the
Committee, if a participant's employment by the Company and its
Subsidiaries terminates for any reason other than death, Disability,
Normal Retirement or for Cause, any Incentive Stock Option held by such
participant may thereafter be exercised, to the extent it was exercisable
on the date of termination of employment, for 90 days (or such longer
period as the Committee shall specify at any time) from the date of
termination of employment, or until the expiration of the stated term of
the Option, if earlier.
(b) NON-STATUTORY STOCK OPTIONS AND STOCK APPRECIATION RIGHTS. Any
Non-Statutory Stock Option or Stock Appreciation Right granted under the Plan
shall contain such terms and conditions with respect to its termination as the
Committee, in its discretion, may from time to time determine.
SECTION 11. TAX WITHHOLDING
(a) PAYMENT BY PARTICIPANT. Each participant shall, no later than the date
as of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the participant for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding the payment of, any Federal, state or
local taxes of any kind required by law to be withheld with respect to such
income. The Company and its Subsidiaries shall, to the extent permitted by law,
have the right to deduct any such taxes from any payment of any kind otherwise
due to the participant.
(b) PAYMENT IN SHARES. A Participant may elect, with the consent of the
Committee, to have such tax withholding obligation satisfied, in whole or in
part, by (i) authorizing the Company to withhold from shares
8
<PAGE>
of Stock to be issued pursuant to an Award a number of shares with an aggregate
Fair Market Value (as of the date the withholding is effected) that would
satisfy the withholding amount due with respect to such Award, or (ii)
transferring to the Company shares of Stock owned by the participant with an
aggregate Fair Market Value (as of the date the withholding is effected) that
would satisfy the withholding amount due.
SECTION 12. TRANSFER, LEAVE OF ABSENCE, ETC.
For purposes of the Plan, the following events shall not be deemed a
termination of employment:
(a) a transfer to the employment of the Company from a Subsidiary or from
the Company to a Subsidiary, or from one Subsidiary to another; and
(b) an approved leave of absence for military service or sickness, or for
any other purpose approved by the Company, if the employee's right to
re-employment is guaranteed either by a statute or by contract or under the
policy pursuant to which the leave of absence was granted or if the Committee
otherwise so provides in writing.
SECTION 13. AMENDMENTS AND TERMINATION
The Board may at any time amend or discontinue the Plan and the Committee
may at any time amend or cancel any outstanding Award (or provide substitute
Awards at the same or reduced exercise or purchase price or with no exercise or
purchase price, but such price, if any, must satisfy the requirements which
would apply to the substitute or amended Award if it were then initially granted
under this Plan) for the purpose of satisfying changes in law or for any other
lawful purpose, but no such action shall adversely affect rights under any
outstanding Award without the holder's consent. However, no such amendment,
unless approved by the stockholders of the Company, shall be effective if it
would cause the Plan to fail to satisfy the incentive stock option requirements
of the Code
SECTION 14. STATUS OF PLAN
With respect to the portion of any Award which has not been exercised and
any payments in cash, Stock or other consideration not received by a
participant, a participant shall have no rights greater than those of a general
creditor of the Company unless the Committee shall otherwise expressly determine
in connection with any Award or Awards. In its sole discretion, the Committee
may authorize the creation of trusts or other arrangements to meet the Company's
obligations to deliver Stock or make payments with respect to Awards hereunder,
provided that the existence of such trusts or other arrangements is consistent
with the provision of the foregoing sentence.
SECTION 15. CHANGE OF CONTROL PROVISIONS
(a) Upon the occurrence of a Change of Control as defined in this
Section 15:
(i) subject to the provisions of clause (iii) below, after the
effective date of such Change of Control, each holder of an outstanding
Stock Option, Restricted Stock Award, Performance Share Award or Stock
Appreciation Right shall be entitled, upon exercise of such Award, to
receive, in lieu of shares of Stock (or consideration based upon the Fair
Market Value of Stock), shares of such stock or other securities, cash or
property (or consideration based upon shares of such stock or other
securities, cash or property) as the holders of shares of Stock received
in connection with the Change of Control;
9
<PAGE>
(ii) the Committee may accelerate the time for exercise of, and
waive all conditions and restrictions on, each unexercised and unexpired
Stock Option, Restricted Stock Award, Performance Share Award and Stock
Appreciation Right, effective upon a date prior or subsequent to the
effective date of such Change of Control, specified by the Committee; or
(iii) each outstanding Stock Option, Restricted Stock Award,
Performance Share Award and Stock Appreciation Right may be cancelled by
the Committee as of the effective date of any such Change of Control
provided that (x) notice of such cancellation shall be given to each
holder of such an Award and (y) each holder of such an Award shall have
the right to exercise such Award to the extent that the same is then
exercisable or, in full, if the Committee shall have accelerated the time
for exercise of all such unexercised and unexpired Awards, during the
30-day period preceding the effective date of such Change of Control.
(b) "Change of Control" shall mean the occurrence of any one of the
following events:
(i) any "person" becomes a "beneficial owner" (as such terms are
defined in Rule 13d-3 promulgated under the Securities and Exchange Act of
1934, as amended) (other than the Company, any trustee or other fiduciary
holding securities under an employee benefit plan of the Company, or any
corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of stock
of the Company), directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's
then outstanding securities; or
(ii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation or other entity,
other than a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 65% of the combined
voting power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation; or
(iii) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets.
SECTION 16. GENERAL PROVISIONS
(a) NO DISTRIBUTION; COMPLIANCE WITH LEGAL REQUIREMENTS. The Committee may
require each person acquiring shares pursuant to an Award to represent to and
agree with the Company in writing that such person is acquiring the shares
without a view to distribution thereof.
No shares of Stock shall be issued pursuant to an Award until all
applicable securities laws and other legal and stock exchange requirements have
been satisfied. The Committee may require the placing of such stop orders and
restrictive legends on certificates for Stock and Awards as it deems
appropriate.
(b) DELIVERY OF STOCK CERTIFICATES. Delivery of stock certificates to
participants under this Plan shall be deemed effected for all purposes when the
Company or a stock transfer agent of the Company shall have delivered such
certificates in the United States mail, addressed to the participant, at the
participant's last known address on file with the Company.
(c) OTHER COMPENSATION ARRANGEMENTS; NO EMPLOYMENT RIGHTS. Nothing
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, subject to stockholder approval if
such approval is required; and such arrangements may be either generally
10
<PAGE>
applicable or applicable only in specific cases. The adoption of the Plan or any
Award under the Plan does not confer upon any employee any right to continued
employment with the Company or any Subsidiary.
SECTION 17. EFFECTIVE DATE OF PLAN
The Plan shall become effective upon approval by the holders of a majority
of the shares of capital stock of the Company present or represented and
entitled to vote at a meeting of stockholders.
SECTION 18. GOVERNING LAW
This Plan shall be governed by, and construed and enforced in accordance
with, the substantive laws of the State of Delaware without regard to its
principles of conflicts of laws.
* * *
11
<PAGE>
Exhibit 10.3
CENTRA SOFTWARE, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
SECTION 1. PURPOSE
The Centra Software, Inc. 1999 Employee Stock Purchase Plan (the "Plan")
is intended to provide a method whereby employees of Centra Software, Inc. (the
"Company") will have an opportunity to acquire an ownership interest (or
increase an existing ownership interest) in the Company through the purchase of
shares of the Common Stock of the Company. It is the intention of the Company
that the Plan qualify as an "employee stock purchase plan" under Section 423 of
the Internal Revenue Code of 1986, as amended (the "Code"). The provisions of
the Plan shall, accordingly, be construed so as to extend and limit
participation in a manner consistent with the requirements of that section of
the Code.
SECTION 2. DEFINITIONS
"Compensation" means, for the purpose of any Offering pursuant to this
Plan, base pay in effect as of the Offering Commencement Date (as hereinafter
defined). Compensation shall not include any deferred compensation other than
contributions by an individual through a salary reduction agreement to a cash or
deferred plan pursuant to Section 401(k) of the Code or to a cafeteria plan
pursuant to Section 125 of the Code.
"Board" means the Board of Directors of the Company.
"Committee" means the Compensation Committee of the Board.
"Common Stock" means the common stock, $.001 par value per share, of the
Company.
"Company" shall also include any Parent or Subsidiary of Centra Software,
Inc. designated by the Board, unless the context otherwise requires.
"Employee" means any person who is customarily employed at least 20 hours
per week and more than five months in a calendar year by the Company.
"Parent" shall mean any present or future corporation which is or would
constitute a "parent corporation" as that term is defined in Section 424 of the
Code.
"Subsidiary" shall mean any present or future corporation which is or
would constitute a "subsidiary corporation" as that term is defined in Section
424 of the Code.
SECTION 3. ELIGIBILITY
(a) Participation in the Plan is completely voluntary. Participation in
any one or more of the offerings under the Plan shall neither limit, nor
require, participation in any other offering.
(b) Each employee shall be eligible to participate in the Plan on the
first Offering Commencement Date, as hereafter defined, following the completion
of three full calendar months of continuous service with the Company.
Notwithstanding the foregoing, no employee shall be granted an option under the
Plan:
<PAGE>
(i) if, immediately after the grant, such employee would own stock,
and/or hold outstanding options to purchase stock, possessing 5% or more
of the total combined voting power or value of all
classes of stock of the Company or any Parent or Subsidiary; for purposes
of this Paragraph the rules of Section 424(d) of the Code shall apply in
determining stock ownership of any employee; or
(ii) which permits his rights to purchase stock under all Section
423 employee stock purchase plans of the Company and any Parent or
Subsidiary to exceed $25,000 of the fair market value of the stock
(determined at the time such option is granted) for each calendar year in
which such option is outstanding; for purposes of this Paragraph, the
rules of Section 423(b)(8) of the Code shall apply.
SECTION 4. OFFERING DATES
The right to purchase stock hereunder shall be made available by a series
of offerings of such duration as the Committee determines (the "Offering" or
"Offerings") to employees eligible in accordance with Paragraph 3 hereof. The
Committee will, in its discretion, determine the applicable date of commencement
("Offering Commencement Date") and termination date ("Offering Termination
Date") for each Offering. Participation in any one or more of the Offerings
under the Plan shall neither limit, nor require, participation in any other
Offering.
SECTION 5. PARTICIPATION
Any eligible employee may become a participant by completing a payroll
deduction authorization form provided by the Company and filing it with the
office of the Company's Treasurer 20 days prior to an applicable Offering
Commencement Date, as determined by the Committee pursuant to Paragraph 4. A
participant who obtains shares of Common Stock in one Offering will be deemed to
have elected to participate in each subsequent Offering, provided such
participant is eligible to participate during each such subsequent Offering and
provided that such participant has not specifically elected not to participate
in such subsequent Offering. Such participant will also be deemed to have
authorized the same payroll deductions under Paragraph 6 hereof for each such
subsequent Offering as in the immediately preceding Offering; provided however,
that, during the enrollment period prior to each new Offering, the participant
may elect to change such participant's payroll deductions by submitting a new
payroll deduction authorization form.
SECTION 6. PAYROLL DEDUCTIONS
(a) At the time a participant files his authorization for a payroll
deduction, he shall elect to have deductions made from his pay on each payday
during any Offering in which he is a participant at a specified percentage of
his Compensation as determined on the applicable Offering Commencement Date;
said percentage shall be in increments of one percent up to a maximum percentage
of ten percent.
(b) Payroll deductions for a participant shall commence on the applicable
Offering Commencement Date when his authorization for a payroll deduction
becomes effective and subject to the last sentence of Paragraph 5 shall end on
the Offering Termination Date of the Offering to which such authorization is
applicable unless sooner terminated by the participant as provided in Paragraph
10.
(c) All payroll deductions made for a participant shall be credited to his
account under the Plan. A participant may not make any separate cash payment
into such account.
(d) A participant may withdraw from the Plan at any time during the
applicable Offering period.
SECTION 7. GRANTING OF OPTION
2
<PAGE>
(a) Except as provided in clause (ii) of Paragraph 3(b), on the Offering
Commencement Date of each Offering, a participating employee shall be deemed to
have been granted an option to purchase a maximum number of shares of the Common
Stock equal to two times an amount determined as follows: 85% of the market
value per share of the Common Stock on the applicable Offering Commencement Date
shall be divided into an amount equal to the percentage of the employee's
Compensation which he has elected to have withheld (but no more than 10%)
multiplied by the employee's Compensation over the Offering period. Such market
value per share of the Common Stock shall be determined as provided in clause
(i) of Paragraph 7(b).
(b) The option price of the Common Stock purchased with payroll deductions
made during each such Offering for a participant therein shall be the lower of:
(i) 85% of the closing price per share on the Offering Commencement
Date as reported by a nationally recognized stock exchange, or, if the
Common Stock is not listed on such an exchange, as reported by the Nasdaq
National Market System or, if the Common Stock is not listed on the Nasdaq
National Market System, 85% of the mean of the bid and asked prices per
share on the Offering Commencement Date or, if the Common Stock is not
traded over-the-counter, 85% of the fair market value on the Offering
Commencement Date as determined by the Committee; and
(ii) 85% of the closing price per share on the Offering Termination
Date as reported by a nationally recognized stock exchange, or, if the
Common Stock is not listed on such an exchange, as reported by the Nasdaq
National Market System or, if the Common Stock is not listed on the Nasdaq
National Market System, 85% of the mean of the bid and asked prices per
share on the Offering Termination Date or, if the Common Stock is not
traded over-the-counter, 85% of the fair market value on the Offering
Termination Date as determined by the Committee.
SECTION 8. EXERCISE OF OPTION
(a) Unless a participant gives written notice to the Treasurer of the
Company as hereinafter provided, his option for the purchase of Common Stock
with payroll deductions made during any Offering will be deemed to have been
exercised automatically on the Offering Termination Date applicable to such
Offering for the purchase of the number of full shares of Common Stock which the
accumulated payroll deductions in his account at that time will purchase at the
applicable option price (but not in excess of the number of shares for which
options have been granted the employee pursuant to Paragraph 7(a)), and any
excess in his account at that time, other than amounts representing fractional
shares, will be returned to him.
(b) Fractional shares will not be issued under the Plan and any
accumulated payroll deductions which would have been used to purchase fractional
shares shall be automatically carried forward to the next Offering unless the
participant elects, by written notice to the Treasurer of the Company, to have
the excess cash returned to him.
SECTION 9. DELIVERY
The Company will deliver to each participant (as promptly as possible
after the appropriate Offering Termination Date), a certificate representing the
Common Stock purchased upon exercise of his option.
3
<PAGE>
SECTION 10. WITHDRAWAL AND TERMINATION
(a) Prior to the Offering Termination Date for an Offering, any
participant may withdraw the payroll deductions credited to his account under
the Plan for such Offering by giving written notice to the Treasurer of the
Company. All of the participant's payroll deductions credited to such account
will be paid to him promptly after receipt of notice of withdrawal, without
interest, and no future payroll deductions will be made from his pay during such
Offering. The Company will treat any attempt to borrow by a participant on the
security of accumulated payroll deductions as an election to withdraw such
deductions.
(b) A participant's election not to participate in, or withdrawal from,
any Offering will not have any effect upon his eligibility to participate in any
succeeding Offering or in any similar plan which may hereafter be adopted by the
Company.
(c) Upon termination of the participant's employment for any reason,
including retirement but excluding death, the payroll deductions credited to his
account will be returned to him, or, in the case of his death, to the person or
persons entitled thereto under Paragraph 14.
(d) Upon termination of the participant's employment because of death, his
beneficiary (as defined in Paragraph 14) shall have the right to elect, by
written notice given to the Company's Treasurer prior to the expiration of a
period of 90 days commencing with the date of the death of the participant,
either:
(i) to withdraw all of the payroll deductions credited to the
participant's account under the Plan; or
(ii) to exercise the participant's option for the purchase of stock
on the Offering Termination Date next following the date of the
participant's death for the purchase of the number of full shares which
the accumulated payroll deductions in the participant's account at the
date of the participant's death will purchase at the applicable option
price (subject to the limitation contained in Paragraph 7(a)), and any
excess in such account will be returned to said beneficiary. In the event
that no such written notice of election shall be duly received by the
office of the Company's Treasurer, the beneficiary shall automatically be
deemed to have elected to withdraw the payroll deductions credited to the
participant's account at the date of the participant's death and the same
will be paid promptly to said beneficiary.
SECTION 11. INTEREST
No interest will be paid or allowed on any money paid into the Plan or
credited to the account of any participating employee.
SECTION 12. STOCK
(a) The maximum number of shares of Common Stock available for issuance
and purchase by employees under the Plan, subject to adjustment upon changes in
capitalization of the Company as provided in Paragraph 17, shall be 1,500,000
shares of Common Stock, plus an annual increase to be added on the last day of
the Company's fiscal year equal to the lesser of (i) 300,000 shares of Common
Stock and (ii) 2% of the number of outstanding shares of Common Stock on such
date, as set forth on the records of the transfer agent and registrar for the
Common Stock. If the total number of shares for which options are exercised on
any Offering Termination Date in accordance with Paragraph 8 exceeds the maximum
number of shares for the applicable Offering, the Company shall make a pro rata
allocation of the shares available for delivery and distribution in an equitable
manner, and the balances of payroll deductions credited to the account of each
participant under the Plan shall be returned to the participant.
4
<PAGE>
(b) The participant will have no interest in stock covered by his option
until such option has been exercised.
SECTION 13. ADMINISTRATION
The Plan shall be administered by the Committee. The interpretation and
construction of any provision of the Plan and adoption of rules and regulations
for administering the Plan shall be made by the Committee. Determinations made
by the Committee with respect to any matter or provision contained in the Plan
shall be final, conclusive and binding upon the Company and upon all
participants, their heirs or legal representatives. Any rule or regulation
adopted by the Committee shall remain in full force and effect unless and until
altered, amended, or repealed by the Committee.
SECTION 14. DESIGNATION OF BENEFICIARY
A participant shall file with the Treasurer of the Company a written
designation of a beneficiary who is to receive any Common Stock and/or cash
under the Plan. Such designation of beneficiary may be changed by the
participant at any time by written notice. Upon the death of a participant and
upon receipt by the Company of proof of the identity and existence at the
participant's death of a beneficiary validly designated by him under the Plan,
the Company shall deliver such Common Stock and/or cash to such beneficiary. In
the event of the death of a participant and in the absence of a beneficiary
validly designated under the Plan who is living at the time of such
participant's death, the Company shall deliver such Common Stock and/or cash to
the executor or administrator of the estate of the participant. No beneficiary
shall prior to the death of the participant by whom he has been designated,
acquire any interest in the Common Stock and/or cash credited to the participant
under the Plan.
SECTION 15. TRANSFERABILITY
Neither payroll deductions credited to a participant's account nor any
rights with regard to the exercise of an option or to receive Common Stock under
the Plan may be assigned, transferred, pledged, or otherwise disposed of in any
way by the participant other than by will or the laws of descent and
distribution. Any such attempted assignment, transfer, pledge, or other
disposition shall be without effect, except that the Company may treat such act
as an election to withdraw funds in accordance with Paragraph 10.
SECTION 16. USE OF FUNDS
All payroll deductions received or held by the Company under this Plan may
be used by the Company for any corporate purpose, and the Company shall not be
obligated to segregate such payroll deductions.
SECTION 17. EFFECT OF CHANGES OF COMMON STOCK
If the Company shall subdivide or reclassify the Common Stock which has
been or may be subject to options under this Plan, or shall declare thereon any
dividend payable in shares of such Common Stock, or shall take any other action
of a similar nature affecting such Common Stock, then the number and class of
shares of Common Stock which may thereafter be subject to options under the Plan
(in the aggregate and to any participant) shall be adjusted accordingly and in
the case of each option outstanding at the time of any such action, the number
and class of shares which may thereafter be purchased pursuant to such option
and the option price per share shall be adjusted to such extent as may be
determined by the Committee, with the approval of independent public accountants
and counsel, to be necessary to preserve the rights of the holder of such
option.
SECTION 18. AMENDMENT OR TERMINATION
5
<PAGE>
The Board may at any time terminate or amend the Plan. No such termination
shall affect options previously granted, nor may an amendment make any change in
any option theretofore granted which would adversely affect the rights of any
participant holding options under the Plan without the consent of such
participant.
SECTION 19. NOTICES
All notices or other communications by a participant to the Company under
or in connection with the Plan shall be deemed to have been duly given when
received by the Treasurer of the Company.
SECTION 20. MERGER OR CONSOLIDATION
In the event of a proposed sale of all or substantially all of the assets
of the Company, or the merger of the Company with or into another corporation,
each outstanding option shall be assumed or an equivalent option substituted by
the successor corporation or a Parent or Subsidiary of the successor
corporation. In the event that the successor corporation refuses to assume or
substitute for the option, the Offering then in progress shall be shortened by
setting a new Offering Termination Date (the "New Offering Termination Date").
The New Offering Termination Date shall be before the date of the Company's
proposed sale or merger. The Board shall notify each participant in writing, at
least ten business days prior to the New Offering Termination Date, that the
Offering Termination Date for the participant's option has been changed to the
New Offering Termination Date and that the participant's option shall be
exercised automatically on the New Offering Termination Date, unless prior to
such date the participant has withdrawn from the Offering as provided in Section
10 hereof.
SECTION 21. APPROVAL OF STOCKHOLDERS
The Plan is subject to the approval of the stockholders of the Company at
their next annual meeting or at any special meeting of the stockholders for
which one of the purposes shall be to act upon the Plan.
SECTION 22. GOVERNMENTAL AND OTHER REGULATIONS
The Plan, and the grant and exercise of the rights to purchase shares
hereunder, and the Company's obligation to sell and deliver shares upon the
exercise of rights to purchase shares, shall be subject to all applicable
federal, state and foreign laws, rules and regulations, and to such approvals by
any regulatory or governmental agency as may, in the opinion of counsel for the
Company, be required. The Plan shall be governed by, and construed and enforced
in accordance with, the provisions of Sections 421, 423 and 424 of the Code and
the substantive laws of the State of Delaware. In the event of any inconsistency
between such provisions of the Code and any such laws, such provisions of the
Code shall govern to the extent necessary to preserve favorable federal income
tax treatment afforded employee stock purchase plans under Section 423 of the
Code.
* * *
6
<PAGE>
Exhibit 10.5(a)
Centra Software, Inc.
430 Bedford Street
Lexington, Massachusetts 02173
April 25, 1997
To: Joseph Gruttadauria
Re: AMENDMENT OF INCENTIVE STOCK OPTION AND/OR STOCK RESTRICTION AGREEMENT
Dear Joe:
The purpose of this letter is to set forth our agreement regarding the
following agreement and/or stock option(s) between Centra Software, Inc. ("the
Company") and you in effect on the date hereof, as follows:
1. IDENTIFICATION OF AGREEMENT AND/OR OPTION(S). This agreement amends
the following (delete inapplicable provisions and complete applicable
provisions):
- Stock restriction agreement between the Company and you dated
April 24, 1997 (the "Stock Restriction Agreement").
- The following stock options (the "Option(s)") granted by the
Company to you pursuant to the Company's 1995 Stock Plan:
None.
<TABLE>
<CAPTION>
MAXIMUM NUMBER OF SHARES FOR
DATE OF GRANT WHICH OPTION IS EXERCISABLE
<S> <C>
</TABLE>
2. DEFINITION OF "CHANGE OF CONTROL". As used in this agreement "Change
of Control" shall mean any (i) merger or consolidation which results in the
voting securities of the Company outstanding immediately prior thereto
representing immediately thereafter (either by remaining outstanding or by being
converted into voting securities of the surviving or acquiring entity) less than
50% of the combined voting power of the voting securities of the Company or such
surviving or acquiring entity outstanding immediately after such merger or
consolidation, (ii) sale of all or substantially all the assets of the Company
or (iii) sale of shares of capital stock of the Company, in a single transaction
or series of related transactions, representing at least 80% of the voting power
of the voting securities of the Company.
3. ACCELERATION OF VESTING. Upon the occurrence of a Change of Control,
notwithstanding any contrary or inconsistent provision of the Stock Restriction
Agreement and/or the Option(s), fifty percent (50%) of the unvested portion of
each of the Option(s) shall become
<PAGE>
fully-exercisable and fifty percent (50%) of the option of the Company to
repurchase the unvested stock of the Company pursuant to the Stock Restriction
Agreement shall terminate.
The Stock Restriction Agreement and/or the Option(s) shall
otherwise remain unaffected by a Change of Control.
4. POOLING. If it is determined in good faith by the Company's
independent public accountants, or those of any other business organization with
which the Company proposes to effect a business combination that would effect a
Change of Control, that the enforcement of the provisions of this agreement
would preclude accounting for the proposed business combination as a pooling of
interests, and the Company intends to enter into such proposed business
combination but for preclusion of such accounting treatment, then this agreement
shall be null and void.
5. FUTURE OPTION GRANTS, ETC. The provisions of ss.ss.2-4 hereof shall
also apply to any stock options granted to, or restricted stock purchased by,
you after the date hereof unless otherwise expressly stipulated in writing by
the Company at the time of grant or purchase.
CENTRA SOFTWARE, INC.
By: /S/ LEON NAVICKAS
--------------------------------------------
duly authorized by the Board of Directors
Accepted and agreed to:
/S/ JOSEPH GRUTTADAURIA
- -----------------------
Joseph Gruttadauria
-2-
<PAGE>
Exhibit 10.5(b)
CENTRA SOFTWARE, INC.
430 BEDFORD STREET
LEXINGTON, MASSACHUSETTS 02173
May 8, 1997
To: Joseph Gruttadauria
Re: AMENDMENT OF INCENTIVE STOCK OPTION AND/OR STOCK RESTRICTION AGREEMENT
Dear Joe:
The purpose of this letter is to set forth our agreement regarding the
following agreement and/or stock option(s) between Centra Software, Inc. ("the
Company") and you in effect on the date hereof, as follows:
1. IDENTIFICATION OF AGREEMENT AND/OR OPTION(S). This agreement amends
the stock restriction agreement between the Company and you dated April 24,1997
(the "Stock Restriction Agreement").
2. DEFINITION OF "CHANGE OF CONTROL". As used in this agreement "Change
of Control" shall mean any (i) merger or consolidation which results in the
voting securities of the Company outstanding immediately prior thereto
representing immediately thereafter (either by remaining outstanding or by being
converted into voting securities of the surviving or acquiring entity) less than
50% of the combined voting power of the voting securities of the Company or such
surviving or acquiring entity outstanding immediately after such merger or
consolidation, (ii) sale of all or substantially all the assets of the Company
or (iii) sale of shares of capital stock of the Company, in a single transaction
or series of related transactions, representing at least 80% of the voting power
of the voting securities of the Company.
3. ACCELERATION OF VESTING. Upon the occurrence of a Change of Control,
notwithstanding any contrary or inconsistent provision of the Stock Restriction
Agreement and/or the Option(s), fifty percent (50%) of the unvested portion of
each of the Option(s) shall become fully-exercisable and fifty percent (50%) of
the option of the Company to repurchase the unvested stock of the Company
pursuant to the Stock Restriction Agreement shall terminate.
The Stock Restriction Agreement and/or the Option(s) shall
otherwise remain unaffected by a Change of Control.
4. POOLING. If it is determined in good faith by the Company's
independent public accountants, or those of any other business organization with
which the Company proposes to effect a business combination that would effect a
Change of Control, that the enforcement of the
<PAGE>
Mr. Joseph Gruttadauria
May 8, 1997
Page Two.
provisions of this agreement would preclude accounting for the proposed business
combination as a pooling of interests, and the Company intends to enter into
such proposed business combination but for preclusion of such accounting
treatment, then this agreement shall be null and void.
CENTRA SOFTWARE, INC.
By: /S/ LEON NAVICKAS
-------------------------------------------
duly authorized by the Board of Directors
Accepted and agreed to:
/S/ JOSEPH GRUTTADAURIA
- -------------------------
Joseph Gruttadauria
-2-
<PAGE>
Exhibit 10.5(c)
Centra Software, Inc.
430 Bedford Street
Lexington, Massachusetts 02173
May 27, 1999
To: Stephen A. Johnson
5 Naumkeag Road
Danvers, MA 01923
Re: AMENDMENT OF INCENTIVE STOCK OPTION AND/OR STOCK RESTRICTION AGREEMENT
Dear Steve:
The purpose of this letter is to set forth our agreement regarding the
following agreement and/or stock option(s) between Centra Software, Inc. ("the
Company") and you in effect on the date hereof, as follows:
1. IDENTIFICATION OF AGREEMENT AND/OR OPTION(S). This agreement amends
the following (delete inapplicable provisions and complete applicable
provisions):
- Stock restriction agreement between the Company and you dated
April 15, 1998 and April 26, 1999 (the "Stock Restriction
Agreement").
- The following stock options (the "Option(s)") granted by the
Company to you pursuant to the Company's 1995 Stock Plan:
<TABLE>
<CAPTION>
MAXIMUM NUMBER OF SHARES FOR
DATE OF GRANT WHICH OPTION IS EXERCISABLE
<S> <C>
May 1, 1997 40,000
</TABLE>
2. DEFINITION OF "CHANGE OF CONTROL". As used in this agreement "Change
of Control" shall mean any (i) merger or consolidation which results in the
voting securities of the Company outstanding immediately prior thereto
representing immediately thereafter (either by remaining outstanding or by being
converted into voting securities of the surviving or acquiring entity) less than
50% of the combined voting power of the voting securities of the Company or such
surviving or acquiring entity outstanding immediately after such merger or
consolidation, (ii) sale of all or substantially all the assets of the Company
or (iii) sale of shares of capital stock of the Company, in a single transaction
or series of related transactions, representing at least 80% of the voting power
of the voting securities of the Company.
<PAGE>
3. ACCELERATION OF VESTING. Upon the occurrence of a Change of Control,
notwithstanding any contrary or inconsistent provision of the Stock Restriction
Agreement and/or the Option(s), fifty percent (50%) of the unvested portion of
each of the Option(s) shall become fully-exercisable and fifty percent (50%) of
the option of the Company to repurchase the unvested stock of the Company
pursuant to the Stock Restriction Agreement shall terminate.
The Stock Restriction Agreement and/or the Option(s) shall
otherwise remain unaffected by a Change of Control.
4. POOLING. If it is determined in good faith by the Company's
independent public accountants, or those of any other business organization with
which the Company proposes to effect a business combination that would effect a
Change of Control, that the enforcement of the provisions of this agreement
would preclude accounting for the proposed business combination as a pooling of
interests, and the Company intends to enter into such proposed business
combination but for preclusion of such accounting treatment, then this agreement
shall be null and void.
5. FUTURE OPTION GRANTS, ETC. The provisions of Sections 2-4 hereof
shall also apply to any stock options granted to, or restricted stock purchased
by, you after the date hereof unless otherwise expressly stipulated in writing
by the Company at the time of grant or purchase.
CENTRA SOFTWARE, INC.
By: /s/ LEON NAVICKAS
------------------------------------------
duly authorized by the Board of Directors
Accepted and agreed to:
/s/ STEPHEN A. JOHNSON
- ----------------------------
Stephen A. Johnson
-2-
<PAGE>
Exhibit 10.5(d)
Centra Software, Inc.
430 Bedford Street
Lexington, Massachusetts 02173
May 27, 1999
To: Steven Lesser
Re: AMENDMENT OF INCENTIVE STOCK OPTION AND/OR STOCK RESTRICTION AGREEMENT
Dear Steve:
The purpose of this letter is to set forth our agreement regarding the
following agreement and/or stock option(s) between Centra Software, Inc. ("the
Company") and you in effect on the date hereof, as follows:
1. IDENTIFICATION OF AGREEMENT AND/OR OPTION(S). This agreement amends
the following (delete inapplicable provisions and complete applicable
provisions):
- Stock restriction agreement between the Company and you dated
April 12, 1999 (the "Stock Restriction Agreement").
- The following stock options (the "Option(s)") granted by the
Company to you pursuant to the Company's 1995 Stock Plan:
None.
<TABLE>
<CAPTION>
MAXIMUM NUMBER OF SHARES FOR
DATE OF GRANT WHICH OPTION IS EXERCISABLE
<S> <C>
</TABLE>
2. DEFINITION OF "CHANGE OF CONTROL". As used in this agreement "Change
of Control" shall mean any (i) merger or consolidation which results in the
voting securities of the Company outstanding immediately prior thereto
representing immediately thereafter (either by remaining outstanding or by being
converted into voting securities of the surviving or acquiring entity) less than
50% of the combined voting power of the voting securities of the Company or such
surviving or acquiring entity outstanding immediately after such merger or
consolidation, (ii) sale of all or substantially all the assets of the Company
or (iii) sale of shares of capital stock of the Company, in a single transaction
or series of related transactions, representing at least 80% of the voting power
of the voting securities of the Company.
3. ACCELERATION OF VESTING. Upon the occurrence of a Change of Control,
notwithstanding any contrary or inconsistent provision of the Stock Restriction
Agreement and/or the Option(s), fifty percent (50%) of the unvested portion of
each of the Option(s) shall become
<PAGE>
fully-exercisable and fifty percent (50%) of the option of the Company to
repurchase the unvested stock of the Company pursuant to the Stock Restriction
Agreement shall terminate.
The Stock Restriction Agreement and/or the Option(s) shall
otherwise remain unaffected by a Change of Control.
4. POOLING. If it is determined in good faith by the Company's
independent public accountants, or those of any other business organization with
which the Company proposes to effect a business combination that would effect a
Change of Control, that the enforcement of the provisions of this agreement
would preclude accounting for the proposed business combination as a pooling of
interests, and the Company intends to enter into such proposed business
combination but for preclusion of such accounting treatment, then this agreement
shall be null and void.
5. FUTURE OPTION GRANTS, ETC. The provisions of Sections 2-4 hereof
shall also apply to any stock options granted to, or restricted stock purchased
by, you after the date hereof unless otherwise expressly stipulated in writing
by the Company at the time of grant or purchase.
CENTRA SOFTWARE, INC.
By: /s/ LEON NAVICKAS
------------------------------------------
duly authorized by the Board of Directors
Accepted and agreed to:
/s/ STEVEN LESSER
- --------------------------
Steven Lesser
-2-
<PAGE>
Exhibit 10.5(e)
Centra Software, Inc.
430 Bedford Street
Lexington, Massachusetts 02173
April 25, 1997
To: Anthony Mark
Re: AMENDMENT OF INCENTIVE STOCK OPTION AND/OR STOCK RESTRICTION AGREEMENT
Dear Anthony:
The purpose of this letter is to set forth our agreement regarding the
following agreement and/or stock option(s) between Centra Software, Inc. ("the
Company") and you in effect on the date hereof, as follows:
1. IDENTIFICATION OF AGREEMENT AND/OR OPTION(S). This agreement amends
the following (delete inapplicable provisions and complete applicable
provisions):
- Stock restriction agreement between the Company and you dated
April 24, 1997 (the "Stock Restriction Agreement").
- The following stock options (the "Option(s)") granted by the
Company to you pursuant to the Company's 1995 Stock Plan:
None.
<TABLE>
<CAPTION>
MAXIMUM NUMBER OF SHARES FOR
DATE OF GRANT WHICH OPTION IS EXERCISABLE
<S> <C>
</TABLE>
2. DEFINITION OF "CHANGE OF CONTROL". As used in this agreement "Change
of Control" shall mean any (i) merger or consolidation which results in the
voting securities of the Company outstanding immediately prior thereto
representing immediately thereafter (either by remaining outstanding or by being
converted into voting securities of the surviving or acquiring entity) less than
50% of the combined voting power of the voting securities of the Company or such
surviving or acquiring entity outstanding immediately after such merger or
consolidation, (ii) sale of all or substantially all the assets of the Company
or (iii) sale of shares of capital stock of the Company, in a single transaction
or series of related transactions, representing at least 80% of the voting power
of the voting securities of the Company.
3. ACCELERATION OF VESTING. Upon the occurrence of a Change of Control,
notwithstanding any contrary or inconsistent provision of the Stock Restriction
Agreement and/or the Option(s), fifty percent (50%) of the unvested portion of
each of the Option(s) shall become
<PAGE>
fully-exercisable and fifty percent (50%) of the option of the Company to
repurchase the unvested stock of the Company pursuant to the Stock Restriction
Agreement shall terminate.
The Stock Restriction Agreement and/or the Option(s) shall
otherwise remain unaffected by a Change of Control.
4. POOLING. If it is determined in good faith by the Company's
independent public accountants, or those of any other business organization with
which the Company proposes to effect a business combination that would effect a
Change of Control, that the enforcement of the provisions of this agreement
would preclude accounting for the proposed business combination as a pooling of
interests, and the Company intends to enter into such proposed business
combination but for preclusion of such accounting treatment, then this agreement
shall be null and void.
5. FUTURE OPTION GRANTS, ETC. The provisions of Sections 2-4 hereof
shall also apply to any stock options granted to, or restricted stock purchased
by, you after the date hereof unless otherwise expressly stipulated in writing
by the Company at the time of grant or purchase.
CENTRA SOFTWARE, INC.
By: /s/ LEON NAVICKAS
------------------------------------------
duly authorized by the Board of Directors
Accepted and agreed to:
/s/ ANTHONY MARK
- ----------------------------
Anthony Mark
-2-
<PAGE>
Exhibit 10.5(f)
Centra Software, Inc.
430 Bedford Street
Lexington, Massachusetts 02173
March 10, 1997
To: Leon Navickas
Re: AMENDMENT OF INCENTIVE STOCK OPTION AND/OR STOCK RESTRICTION AGREEMENT
Dear Steve:
The purpose of this letter is to set forth our agreement regarding the
following agreement and/or stock option(s) between Centra Software, Inc. ("the
Company") and you in effect on the date hereof, as follows:
1. IDENTIFICATION OF AGREEMENT AND/OR OPTION(S). This agreement amends
the following (delete inapplicable provisions and complete applicable
provisions):
- Stock restriction agreement between the Company and you dated
April 11, 1995 (the "Stock Restriction Agreement").
- The following stock options (the "Option(s)") granted by the
Company to you pursuant to the Company's 1995 Stock Plan:
None.
<TABLE>
<CAPTION>
MAXIMUM NUMBER OF SHARES FOR
DATE OF GRANT WHICH OPTION IS EXERCISABLE
<S> <C>
</TABLE>
2. DEFINITION OF "CHANGE OF CONTROL". As used in this agreement "Change
of Control" shall mean any (i) merger or consolidation which results in the
voting securities of the Company outstanding immediately prior thereto
representing immediately thereafter (either by remaining outstanding or by being
converted into voting securities of the surviving or acquiring entity) less than
50% of the combined voting power of the voting securities of the Company or such
surviving or acquiring entity outstanding immediately after such merger or
consolidation, (ii) sale of all or substantially all the assets of the Company
or (iii) sale of shares of capital stock of the Company, in a single transaction
or series of related transactions, representing at least 80% of the voting power
of the voting securities of the Company.
3. ACCELERATION OF VESTING. Upon the occurrence of a Change of Control,
notwithstanding any contrary or inconsistent provision of the Stock Restriction
Agreement and/or the Option(s), fifty percent (50%) of the unvested portion of
each of the Option(s) shall become
<PAGE>
fully-exercisable and fifty percent (50%) of the option of the Company to
repurchase the unvested stock of the Company pursuant to the Stock Restriction
Agreement shall terminate.
The Stock Restriction Agreement and/or the Option(s) shall
otherwise remain unaffected by a Change of Control.
4. POOLING. If it is determined in good faith by the Company's
independent public accountants, or those of any other business organization with
which the Company proposes to effect a business combination that would effect a
Change of Control, that the enforcement of the provisions of this agreement
would preclude accounting for the proposed business combination as a pooling of
interests, and the Company intends to enter into such proposed business
combination but for preclusion of such accounting treatment, then this agreement
shall be null and void.
5. FUTURE OPTION GRANTS, ETC. The provisions of Sections 2-4 hereof
shall also apply to any stock options granted to, or restricted stock purchased
by, you after the date hereof unless otherwise expressly stipulated in writing
by the Company at the time of grant or purchase.
CENTRA SOFTWARE, INC.
By: /s/ ILLEGIBLE
------------------------------------------
duly authorized by the Board of Directors
Accepted and agreed to:
/s/ LEON NAVICKAS
- ----------------------------
Leon Navickas
-2-
<PAGE>
Exhibit 10.5(g)
CENTRA SOFTWARE, INC.
430 BEDFORD STREET
LEXINGTON, MASSACHUSETTS 02173
May 8, 1997
To: Leon Navickas
Re: AMENDMENT OF INCENTIVE STOCK OPTION AND/OR STOCK RESTRICTION AGREEMENT
Dear Leon:
The purpose of this letter is to set forth our agreement regarding the
following agreement and/or stock option(s) between Centra Software, Inc. ("the
Company") and you in effect on the date hereof, as follows:
1. IDENTIFICATION OF AGREEMENT AND/OR OPTION(S). This agreement amends
the stock restriction agreement between the Company and you dated April 11, 1995
(the "Stock Restriction Agreement").
2. DEFINITION OF "CHANGE OF CONTROL". As used in this agreement "Change
of Control" shall mean any (i) merger or consolidation which results in the
voting securities of the Company outstanding immediately prior thereto
representing immediately thereafter (either by remaining outstanding or by being
converted into voting securities of the surviving or acquiring entity) less than
50% of the combined voting power of the voting securities of the Company or such
surviving or acquiring entity outstanding immediately after such merger or
consolidation, (ii) sale of all or substantially all the assets of the Company
or (iii) sale of shares of capital stock of the Company, in a single transaction
or series of related transactions, representing at least 80% of the voting power
of the voting securities of the Company.
3. ACCELERATION OF VESTING. Upon the occurrence of a Change of Control,
notwithstanding any contrary or inconsistent provision of the Stock Restriction
Agreement and/or the Option(s), fifty percent (50%) of the unvested portion of
each of the Option(s) shall become fully-exercisable and fifty percent (50%) of
the option of the Company to repurchase the unvested stock of the Company
pursuant to the Stock Restriction Agreement shall terminate.
The Stock Restriction Agreement and/or the Option(s) shall
otherwise remain unaffected by a Change of Control.
4. POOLING. If it is determined in good faith by the Company's
independent public accountants, or those of any other business organization with
which the Company proposes to effect a business combination that would effect a
Change of Control, that the enforcement of the
<PAGE>
Mr. Leon Navickas
May 8, 1997
Page Two.
provisions of this agreement would preclude accounting for the proposed business
combination as a pooling of interests, and the Company intends to enter into
such proposed business combination but for preclusion of such accounting
treatment, then this agreement shall be null and void.
CENTRA SOFTWARE, INC.
By:/s/ ILLEGIBLE
-------------------------------------------
duly authorized by the Board of Directors
Accepted and agreed to:
/s/ LEON NAVICKAS
- --------------------------
Leon Navickas
-2-
<PAGE>
Exhibit 10.6(a)
Centra Software, Inc.
430 Bedford Street
Lexington, Massachusetts 02173
March 24, 1997
To: Joseph Gruttadauria
Re: SEVERANCE COMPENSATION
Dear Joe:
The purpose of this letter is to set forth our agreement regarding
certain arrangements in the event of termination of your employment with Centra
Software, Inc. ("the Company"), as follows:
1. DEFINITION. As used in this agreement "Cause" shall mean (i) any act
of personal dishonesty committed by you in connection with your responsibilities
as an employee and intended to result in your substantial personal enrichment,
(ii) your conviction for a felony, (iii) a willful act by you which constitutes
gross misconduct and which is injurious to the Company, or (iv) continued,
intentional violations by you of your obligations as an employee of the Company
after the Company has delivered to you a written demand for performance which
describes the basis for the Company's belief that you have not substantially
performed such obligations.
2. SEVERANCE COMPENSATION. Following termination of your employment at
any time without your consent, other than for Cause, the Company will continue
to pay you your base compensation in effect on the date of such termination
until the earlier of (a) the 181st day after the date of such termination or (b)
the occurrence of either of the following events:
- Your commencement of substantial employment with, or
performance of substantial consulting services as an
independent contractor for, a business enterprise or other
organization other than the Company. You agree to inform the
Company promptly in writing if you commence such employment or
consulting.
- Your material breach of any written agreement between the
Company and you or any written policy of the Company by which
you are bound if such breach causes or is likely to cause
material harm to the Company.
3. CONTINUATION OF BENEFITS. Upon termination of your employment that
entitles you to severance compensation under Section 2 the Company shall take
such measures as are permissible under its medical, life, and disability
insurance plans to continue coverage for you (and your family, if applicable) on
the same terms as you have been covered immediately prior to your termination.
If
<PAGE>
March 24, 1997
Page Two.
it is not permissible to continue any such coverage under such plans, the
Company will pay you, as additional severance compensation, such amount, net of
state and federal income taxes payable by you with respect thereto, as will be
sufficient for you to obtain such insurance coverage on an individual basis
assuming that you (and each member of your family who is to be covered) are a
"standard risk" for insurance purposes. Your rights under this Section 3 shall
continue only for so long as you are entitled to severance compensation under
Section 2.
* * *
Sincerely,
CENTRA SOFTWARE, INC.
By: /s/ Leon Navickas
-------------------------------------------
duly authorized by the Board of Directors
Accepted and agreed to:
/s/ Joseph Gruttadauria
- -------------------------
Joseph Gruttadauria
-2-
<PAGE>
Exhibit 10.6(b)
Centra Software, Inc.
430 Bedford Street
Lexington, Massachusetts 02173
May 27, 1999
To: Stephen A. Johnson
Re: SEVERANCE COMPENSATION
Dear Steve:
The purpose of this letter is to set forth our agreement regarding
certain arrangements in the event of termination of your employment with Centra
Software, Inc. ("the Company"), as follows:
1. DEFINITION. As used in this agreement "Cause" shall mean (i) any act
of personal dishonesty committed by you in connection with your responsibilities
as an employee and intended to result in your substantial personal enrichment,
(ii) your conviction for a felony, (iii) a willful act by you which constitutes
gross misconduct and which is injurious to the Company, or (iv) continued,
intentional violations by you of your obligations as an employee of the Company
after the Company has delivered to you a written demand for performance which
describes the basis for the Company's belief that you have not substantially
performed such obligations.
2. SEVERANCE COMPENSATION. Following termination of your employment at
any time without your consent, other than for Cause, the Company will continue
to pay you your base compensation in effect on the date of such termination
until the earlier of (a) the 181st day after the date of such termination or (b)
the occurrence of either of the following events:
- Your commencement of substantial employment with, or
performance of substantial consulting services as an
independent contractor for, a business enterprise or other
organization other than the Company. You agree to inform the
Company promptly in writing if you commence such employment or
consulting.
- Your material breach of any written agreement between the
Company and you or any written policy of the Company by which
you are bound if such breach causes or is likely to cause
material harm to the Company.
3. CONTINUATION OF BENEFITS. Upon termination of your employment that
entitles you to severance compensation under Section 2 the Company shall take
such measures as are permissible under its medical, life, and disability
insurance plans to continue coverage for you (and your family, if
<PAGE>
May 27, 1999
Page Two.
applicable) on the same terms as you have been covered immediately prior to your
termination. If it is not permissible to continue any such coverage under such
plans, the Company will pay you, as additional severance compensation, such
amount, net of state and federal income taxes payable by you with respect
thereto, as will be sufficient for you to obtain such insurance coverage on an
individual basis assuming that you (and each member of your family who is to be
covered) are a "standard risk" for insurance purposes. Your rights under this
Section 3 shall continue only for so long as you are entitled to severance
compensation under Section 2.
* * *
Sincerely,
CENTRA SOFTWARE, INC.
By: /s/ LEON NAVICKAS
-------------------------------------------
duly authorized by the Board of Directors
Accepted and agreed to:
/s/ STEPHEN A. JOHNSON
- -----------------------
Stephen A. Johnson
<PAGE>
Exhibit 10.6(c)
Centra Software, Inc.
430 Bedford Street
Lexington, Massachusetts 02173
May 27, 1999
To: Steven Lesser
Re: SEVERANCE COMPENSATION
Dear Steve:
The purpose of this letter is to set forth our agreement regarding
certain arrangements in the event of termination of your employment with Centra
Software, Inc. ("the Company"), as follows:
1. DEFINITION. As used in this agreement "Cause" shall mean (i) any act
of personal dishonesty committed by you in connection with your responsibilities
as an employee and intended to result in your substantial personal enrichment,
(ii) your conviction for a felony, (iii) a willful act by you which constitutes
gross misconduct and which is injurious to the Company, or (iv) continued,
intentional violations by you of your obligations as an employee of the Company
after the Company has delivered to you a written demand for performance which
describes the basis for the Company's belief that you have not substantially
performed such obligations.
2. SEVERANCE COMPENSATION. Following termination of your employment at
any time without your consent, other than for Cause, the Company will continue
to pay you your base compensation in effect on the date of such termination
until the earlier of (a) the 181st day after the date of such termination or (b)
the occurrence of either of the following events:
- Your commencement of substantial employment with, or
performance of substantial consulting services as an
independent contractor for, a business enterprise or other
organization other than the Company. You agree to inform the
Company promptly in writing if you commence such employment or
consulting.
- Your material breach of any written agreement between the
Company and you or any written policy of the Company by which
you are bound if such breach causes or is likely to cause
material harm to the Company.
3. CONTINUATION OF BENEFITS. Upon termination of your employment that
entitles you to severance compensation under Section 2 the Company shall take
such measures as are permissible under its medical, life, and disability
insurance plans to continue coverage for you (and your family, if applicable) on
the same terms as you have been covered immediately prior to your termination.
If
<PAGE>
May 27, 1999
Page Two.
it is not permissible to continue any such coverage under such plans, the
Company will pay you, as additional severance compensation, such amount, net of
state and federal income taxes payable by you with respect thereto, as will be
sufficient for you to obtain such insurance coverage on an individual basis
assuming that you (and each member of your family who is to be covered) are a
"standard risk" for insurance purposes. Your rights under this Section 3 shall
continue only for so long as you are entitled to severance compensation under
Section 2.
* * *
Sincerely,
CENTRA SOFTWARE, INC.
By: /S/ LEON NAVICKAS
------------------------------------------
duly authorized by the Board of Directors
Accepted and agreed to:
/S/ STEVEN LESSER
- -------------------
Steven Lesser
-2-
<PAGE>
Exhibit 10.6(d)
Centra Software, Inc.
430 Bedford Street
Lexington, Massachusetts 02173
March 10, 1997
To: Anthony Mark
Re: SEVERANCE COMPENSATION
Dear Anthony:
The purpose of this letter is to set forth our agreement regarding
certain arrangements in the event of termination of your employment with Centra
Software, Inc. ("the Company"), as follows:
1. DEFINITION. As used in this agreement "Cause" shall mean (i) any act
of personal dishonesty committed by you in connection with your responsibilities
as an employee and intended to result in your substantial personal enrichment,
(ii) your conviction for a felony, (iii) a willful act by you which constitutes
gross misconduct and which is injurious to the Company, or (iv) continued,
intentional violations by you of your obligations as an employee of the Company
after the Company has delivered to you a written demand for performance which
describes the basis for the Company's belief that you have not substantially
performed such obligations.
2. SEVERANCE COMPENSATION. Following termination of your employment at
any time without your consent, other than for Cause, the Company will continue
to pay you your base compensation in effect on the date of such termination
until the earlier of (a) the 181st day after the date of such termination or (b)
the occurrence of either of the following events:
- Your commencement of substantial employment with, or
performance of substantial consulting services as an
independent contractor for, a business enterprise or other
organization other than the Company. You agree to inform the
Company promptly in writing if you commence such employment or
consulting.
- Your material breach of any written agreement between the
Company and you or any written policy of the Company by which
you are bound if such breach causes or is likely to cause
material harm to the Company.
3. CONTINUATION OF BENEFITS. Upon termination of your employment that
entitles you to severance compensation under Section 2 the Company shall take
such measures as are permissible under its medical, life, and disability
insurance plans to continue coverage for you (and your family, if applicable) on
the same terms as you have been covered immediately prior to your termination.
If
<PAGE>
March 10, 1997
Page Two.
it is not permissible to continue any such coverage under such plans, the
Company will pay you, as additional severance compensation, such amount, net of
state and federal income taxes payable by you with respect thereto, as will be
sufficient for you to obtain such insurance coverage on an individual basis
assuming that you (and each member of your family who is to be covered) are a
"standard risk" for insurance purposes. Your rights under this Section 3 shall
continue only for so long as you are entitled to severance compensation under
Section 2.
* * *
Sincerely,
CENTRA SOFTWARE, INC.
By: /s/ Leon Navickas
--------------------------------------------
duly authorized by the Board of Directors
Accepted and agreed to:
/s/ Anthony J. Mark
- -----------------------
Anthony Mark
-2-
<PAGE>
Exhibit 10.6(e)
Centra Software, Inc.
430 Bedford Street
Lexington, Massachusetts 02173
May 8, 1997
To: Leon Navickas
Re: SEVERANCE COMPENSATION
Dear Leon:
The purpose of this letter is to set forth our agreement regarding
certain arrangements in the event of termination of your employment with Centra
Software, Inc. ("the Company"), as follows:
1. DEFINITION. As used in this agreement "Cause" shall mean (i) any act
of personal dishonesty committed by you in connection with your responsibilities
as an employee and intended to result in your substantial personal enrichment,
(ii) your conviction for a felony, (iii) a willful act by you which constitutes
gross misconduct and which is injurious to the Company, or (iv) continued,
intentional violations by you of your obligations as an employee of the Company
after the Company has delivered to you a written demand for performance which
describes the basis for the Company's belief that you have not substantially
performed such obligations.
2. SEVERANCE COMPENSATION. Following termination of your employment at
any time without your consent, other than for Cause, the Company will continue
to pay you your base compensation in effect on the date of such termination
until the earlier of (a) the 181st day after the date of such termination or (b)
the occurrence of either of the following events:
- Your commencement of substantial employment with, or
performance of substantial consulting services as an
independent contractor for, a business enterprise or other
organization other than the Company. You agree to inform the
Company promptly in writing if you commence such employment or
consulting.
- Your material breach of any written agreement between the
Company and you or any written policy of the Company by which
you are bound if such breach causes or is likely to cause
material harm to the Company.
3. CONTINUATION OF BENEFITS. Upon termination of your employment that
entitles you to severance compensation under Section 2 the Company shall take
such measures as are permissible under its medical, life, and disability
insurance plans to continue coverage for you (and your family, if
<PAGE>
May 8, 1997
Page Two.
applicable) on the same terms as you have been covered immediately prior to your
termination. If it is not permissible to continue any such coverage under such
plans, the Company will pay you, as additional severance compensation, such
amount, net of state and federal income taxes payable by you with respect
thereto, as will be sufficient for you to obtain such insurance coverage on an
individual basis assuming that you (and each member of your family who is to be
covered) are a "standard risk" for insurance purposes. Your rights under this
Section 3 shall continue only for so long as you are entitled to severance
compensation under Section 2.
* * *
Sincerely,
CENTRA SOFTWARE, INC.
By: /s/ ILLEGIBLE
-----------------------------------------
duly authorized by the Board of Directors
Accepted and agreed to:
/s/ Leon Navickas
- -------------------
Leon Navickas
Dated May __, 1997
-2-
<PAGE>
EXHIBIT 10.9
SUBLEASE
THIS SUBLEASE ("Sublease") is made this 13th day of May, by and between
ROBERT HALF INTERNATIONAL INC., a Delaware Corporation ("Sublessor") and CENTRA
SOFTWARE ("Sublessee").
RECITALS
Pursuant to Lease dated June 23, 1983, as amended by First Amendment to Lease
dated November 7,1989, Second Amendment to Lease dated April 1, 1991, Third
Amendment to Lease dated March 29, 1993 and Fourth Amendment to Lease dated
January 9, 1994 as so amended (the "Original Lease").
Sublessor desires to sublease to Sublessee the entire Premises, as shown on
Exhibit "A", attached hereto and made a part hereof, containing approximately
3,009 sq. ft., in the building located at 430 Bedford Street, Suite 335,
Lexington, Massachusetts on the terms, covenants and conditions hereinafter
provided ("Subleased Promises").
NOW, THEREFORE, in consideration of the Premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Sublessor and Sublessee covenant and agree as follows:
1. PREMISES
Sublessor subleases to Sublessee and Sublessee hereby hires and subleases from
Sublessor, the Subleased Premises which the parties acknowledge and agree
contain approximately 3,009 rentable square fee for all purposes under the
Sublease.
2. TERM
The term ("Term") of this Sublease shall be for a period of two (2) years and
nine (9) months and shall commence on June 1, 1997 ("Commencement Date") and
shall expire March 1, 2000 ("Expiration Date"), unless renewed or sooner
terminated by reason or pursuant to any provisions set forth herein or in the
Original Lease. Sublessor grants Sublessee access to the Subleased Premises
prior to The Commencement Date in order to install Sublessee's telephone
equipment, furniture, office equipment and other personal property in the
Subleased Premises. Such early access to the Subleased Premises shall be upon
all the terms and conditions contained in the Original Lease and this Sublease,
except that Sublessee shall not be obligated to pay any Sublease Rent or
additional rent during said period prior to the Commencement Date.
. RENT
Sublessee: agrees to pay to Sublessor for the use and occupancy of the Subleased
Premises the, base monthly rent of $6,119.02 per month for the twelve (12) month
period beginning on January 1, 1998, and $7,156.28 per month for the fourteen
(14) month period beginning on
Page 1 of 6
<PAGE>
January 1, 1999. The base monthly rent is payable in advance commencing on June
1, 1997, ("Rent Commencement Date"). The base monthly rent is payable the first
of the month and in advance directly to the Robert Half International Inc. with
offices at 5720 Stoneridge Drive, Suite 3, Pleasanton, CA 94588-2700.
4. LETTER OF CREDIT
Sublessee shall provide to Sublessor a Letter of Credit upon execution of this
Sublease. The Letter or Credit shall be in the sum of $6,000. The Letter of
Credit will self-renew every three (3) months until the Expiration Date.
5. ADDITIONAL RENT
During the entire Term, Sublessee shall pay Sublessor, as additional rent for
the Subleased Premises, the monthly amounts that Sublessor would be obligated to
pay under Section 2.6 of the; Original Lease with respect to "Landlord's
Operating Expenses, in equal monthly installments, in advance on the first day
of the first month with a base year of 1996. In addition, Sublessee shall pay
Sublessor the amounts Sublessor is obligated to pay for electricity service to
the Subleased Premises for Sublessee's lighting and office equipment, in
accordance with the provisions of Section 2.8 of the Original Lease. Sublessor
agrees to provide Sublessee with such reasonable documentation as may be
requested by Sublessee to substantiate the amounts paid by Sublessee pursuant to
this paragraph.
6. USE
Sublessee shall use and occupy the Subleased Promises, for the purposes
permitted under, and in a manner consistent with, the provisions of the Original
Lease.
7. CONDITION OF SUBLEASED PREMISES
Sublessee acknowledges that Sublessee is hiring the Subleased Premises in "as
is" condition. Rent for any partial mouth shall be paid by Sublessee to
Sublessor at the rate provided in paragraph 3 on a pro rata basis, and, if the
Commencement Date is a day other than the first day of a calendar month, the
first payment which Sublessee shall make to Sublessor shall be a payment equal
to a proportionate pad of such base monthly rent for the partial month from the
Commencement Date to the first day of the succeeding calendar month.
8. SUBORDINATION
Sublessor and Sublessee agree that this Sublease is, and shall be, subject and
subordinate to all of the terms, covenants and conditions of the Original Lease,
and to the matters to which the Original Lease shall be subordinate.
Page 2 of 6
<PAGE>
9. INCORPORATION OF PRIME LEASE TERMS
The terms, covenants and conditions contain the Original Lease are hereby
incorporated herein and shall, as between Sublessor and Sublessee, constitute
the terms, covenants and conditions of this Sublease, except to the extent set
forth and/or modified in this Sublease. Notwithstanding the foregoing and expect
for the monetary obligations of the Sublessee under this Sublease, Sublessee
shall have no obligation with respect to monetary obligations of Sublessor to
Landlord under the Original Lease, or indemnification, hold harmless or
insurance obligations of the Sublessor under the Original Lease or obligations
of the Sublessor concerning its initial fit-up or subsequent alterations to the
Subleased Premises or to remove the same at the end of the term or expiration of
the Original Lease. As between the parties hereto, Sublessor agrees to observe
and perform the terms, covenants and conditions on its part to be kept, observed
and performed hereunder as well as those applicable terms, covenants and
conditions to be observed and performed by Sublessor as Tenant under the
Original Lease with respect to the Subleased Premises. The remedies of the
parties, as Sublessor and Sublessee hereunder, shall be the same as the
respective remedies of the Landlord and the Tenant under the Prime Lease with
respect to the Subleased Premises.
10. INDEMNIFICATION
Sublessee shall indemnify, defend and hold harmless Sublessor from and against
all claims, losses, costs, expenses (including reasonable attorney's fees),
damages and liability, which Sublessor may pay or incur by reason of (i) any
breach or default by Sublessee under this Sublease, (ii) any work done in or to
the Subleased Premises by Sublessee or its servants, employees or contractors,
or (iii) any negligence or other fault on the part of Sublessee or its servants,
employees, agents, or contractors.
11. LIABILITY INSURANCE
At all times during the Term, Sublessee shall, at its own cost and expense,
provide and keep in force for the benefit of Sublessee and Sublessor,
comprehensive general liability insurance against claims for bodily injury,
death or property damage occurring in the Subleased Premises, with limits as
specified in the Original Lease. The insurance to be provided and kept in force
hereunder by Sublessee shall include Sublessee, as insured and Sublessor and
Landlord, as additional insured. Said policy shall be obtained by Sublessee and
certificates thereof delivered to Sublessor promptly after the signing of this
Sublease. Said policy shall be for a period of not less than one year and shall
contain a provision whereby the same cannot be materially changed or canceled
unless Sublessor is given at least thirty (30) days' written notice of such
material change or cancellation. Sublessee shall obtain and pay for renewals of
such insurance from time to time at least thirty (30) days before the expiration
thereof, and Sublessee shall promptly deliver certificates thereof to Sublessor.
Page 3 of 6
<PAGE>
12. ASSIGNMENTS AND SUBLETTING
Sublessee shall not assign, mortgage, pledge or encumber this Sublease, or
underlet all or any part of the Subleased Premises, without the prior written
consent of Landlord and Sublessor in each instance and otherwise in accordance
with the provisions of Section 5.6 of the Original Lease.
13. ALTERATIONS
Sublessee shall not perform any additions, alterations and improvements to the
Subleased Premises, or any part thereof, without the prior written consent of
Landlord and Sublessor and otherwise in full compliance with all of the
applicable terms, covenants and conditions of the Original Lease.
14. APPROVALS
In any instance where the approval or consent of Sublessor is required, such
consent or approval shall not be unreasonably withheld or delayed.
15. NOTICES
Any notice, demand, bill, invoice, statement or communication with either party
may desire to be required to give to the other in connection with this Sublease
shall be in writing and shall be deemed to have been sufficiently given if sent
by (i) Certified or Registered Mail, Return Receipt Requested, or (ii) a
nationally recognized overnight courier, such as Airborne Express, Federal
Express or United Parcel, to such other party at its address set forth at the
head of this Sublease. Each such bill, invoice, statement notice or
communication shall be deemed to have been delivered on the date when the
original of same is received.
16. SERVICES
Sublessee shall be entitled to receive all of the services pertaining to the
Subleased Premises which Sublessor is entitled to receive under the Original
Law. Sublessee recognizes that such services are to be supplied by Landlord and
not by Sublessor. In the event that Landlord shall fail to supply such services
or shall refuse to comply with any of the provisions of the Original Lease
insofar as they affect Sublessee's occupancy of the Subleased Premises,
Sublessor shall, at the written request of Sublessee, request Landlord to so
comply and if Landlord shall fail or refuse to do so then, to the extent
permitted by the terms of the Original Lease, Sublessee shall have the right to
exercise, in its own name and in the name of Sublessor, all of the rights to
enforce performance on the part of Landlord as are available to Sublessor,
provided that the same shall be without cost, expense or liability to Sublessor.
Page 4 of 6
<PAGE>
17. LANDLORD'S APPROVALS
This Sublease is subject to the approval of Landlord and shall have no effect
until Landlord shall have given its written consent to this Sublease and
Sublessor shall use its best efforts to obtain such consent. If Landlord shall
refuse to consent to this Sublease, Sublessor shall not be obligated to take any
legal action to obtain such consent, and this Sublease shall be deemed null and
void and of no effect.
18. BROKERAGE
Sublessee and Sublessor warrant and represent to each other that they have not
dealt with any real estate broker in connection with this Sublease.
19. TERMINATION OF PRIME LEASE
If for any reason whatsoever the term of the Prime Lease shall be terminated
prior to the expiration date of this Sublease, this Sublease shall thereupon be
terminated and Sublessor shall not be liable to Sublessee by reason thereof,
unless said termination shall have been effected because of a default on the
part of Sublessor as Tenant under the Prime Lease which was not the result of a
default by Sublessee.
20. CAPTIONS
The captions in this Sublease are used for convenience and reference only and
are not to be taken as part of this Sublease or to be used in determining the
intent of the patties or otherwise interpreting this Sublease.
21. SUCCESSOR AND ASSIGNS
This Sublease shall be binding upon and inure to the benefit of Sublessor and
Sublessee and their respective successor and assigns, subject however, to the
provisions of Paragraph hereof.
22. MISCELLANEOUS
(a) Sublessor represents that the copy of the Prime Lease attached hereto is a
true, full and complete copy of the Prime Lease. (b) Sublessor represents that:
(i) Sublessor has not received a notice of termination of the Prime Lease; and
(ii) Sublessor shall not enter into any agreement that will terminate modify or
amend the Prime Lease so as to increase or materially affect the obligations of
Sublessee pursuant to this Sublease, or adversely affect Sublessee's right to
use and occupy the Subleased Premises or any other rights of Sublessee pursuant
to this Sublease.
Page 5 of 6
<PAGE>
23. SECURITY DEPOSIT
Sublessee agrees to pay Sublessor a security deposit in the amount of $5,892.63
equal to one month's rent upon execution of this Sublease. Sublessor agrees to
return the security deposit upon expiration of the term, provided Sublessee has
faithfully performed all of the terms, covenants and conditions of this
Sublease.
IN WITNESS WHEREOF, this Sublease has been executed as of the day and year
first above written.
SUBLESSOR: ROBERT HALF INTERNATIONAL INC.
By /s/ ROBERT E. DACK
--------------------------------------
Its Vice President
SUBLESSEE: CENTRA SOFTWARE
By /s/ STEPHEN A. JOHNSON
--------------------------------------
Its Director of Finance
Page 6 of 6
<PAGE>
EXHIBIT 10.10
SUBLEASE
AGREEMENT OF SUBLEASE made as of this 31st day of December, 1996
between C.P. Clare (referred to as Sublandlord) and Centra Software, Inc.,
(referred to as Subtenant).
WITNESSETH
WHEREAS, by a lease dated the December 1, 1994, Sublandlord leased
approximately 6,561 rentable square feet, and a First Amendment to the Lease
dated July 18, 1995 leasing expansion premises of 2,423 rentable square feet
known in total as the "premises" located on the second floor of the building
known as 430 Bedford Street, Lexington, Massachusetts, for an initial term
terminating on July 31, 2001, a copy of which, is marked Exhibit "A" and made a
part hereof ("Basic Lease"), and,
WHEREAS, the Sublandlord has agreed with Subtenant to sublease to
Subtenant the premises identified below. Subtenant has agreed with the
Sublandlord to sublease said premises on the terms and conditions stated herein.
NOW THEREFORE, in consideration of the promises and the mutual
agreements set forth below, the parties hereto agree as follows:
(1) Sublandlord leases to the Subtenant and the Subtenant leases from the
Sublandlord, the above mentioned premises known and designated as approximately
8,984 rentable square feet of office space identified in the floorplan set forth
on Exhibit "B" attached hereto being the entirety of the premises on Exhibit
"B", along with our Sublandlord's appurtenant rights and right to use 30 parking
spaces as provided in the basic lease for a term of approximately fifty-four
(54) months commencing on January 15, 1997 and terminating on July 31, 2001
("the Subterm").
(2) This sublease is contingent upon the right of the Sublandlord to occupy the
premises under the provisions of the Basic Lease, and upon the termination of
the Basic Lease, either at the end of the term thereof or earlier, this sublease
shall also terminate. Rent due from the Subtenant to the Sublandlord shall be
paid through the termination date of this sublease.
(3) The Subtenant shall pay to the Sublandlord as rental for said subleased
premises, a monthly rental of $17,593.66, payable in advance on January 15, 1997
and on the first day of each succeeding month during the Subterm. Subtenant
shall pay the pro rata share of increases in operating expenses over the
calendar 1996 base year and the pro rata share of increases in real estate taxes
over the fiscal 1996 base year. Rent for any partial month at the beginning or
end of each Subterm shall be prorated based upon the number of days in each
month.
(4) The Subtenant herein promises and agrees that this sublease is subject to
the Basic Lease and agrees to abide by and comply with all terms, agreements and
conditions in the Basic Lease except as otherwise provided herein. Nothing
herein shall be deemed to constitute a release of Sublandlord from its
observance and performance as named under the Basic Lease. Notwithstanding the
preceding sentence, effective as of the first day of the Subterm, Subtenant
<PAGE>
shall, and does hereby, assume all the obligations of Sublandlord under the
Basic Lease (excepting the monetary obligations as herein provided or as
provided under the Basic Lease (including without limitation, Sections 2.5
through 2.8, 5.1, 7.1 and 8.21 of the Basic Lease and Sections 3 and 4 of the
First Amendment to Lease) and any indemnification or hold harmless or insurance
obligations of the Sublandlord under the Basic Lease), and hereby hold harmless,
and defend Sublandlord from such assumed obligations.
(5) Subject to the termination provisions contained herein, and in the Basic
Lease, the Sublandlord covenants that it shall do nothing to disturb the
Subtenant's quiet enjoyment of this sublease if Subtenant shall observe and
perform the covenants and provisions of this sublease and the Basic Lease as
herein provided. Subtenant shall be entitled to all rights and benefits of the
Sublandlord under the Basic Lease with respect to the premises that are the
subject of this sublease.
(6) The Subtenant promises and agrees to comply with and abide by such
reasonable rules and regulations as may be prescribed from time to time during
the term of this sublease by the Landlord and or the Sublandlord.
(7) If the Subtenant ( 1) defaults in the payment of rent, and such default
continues for ten (10) days after notice of such default or, (2) if Subtenant
defaults in compliance with non-monetary obligations of Subtenant hereunder and
such default continues for thirty (30) days (or such additional time as may be
reasonably necessary if the default is of a nature that cannot be reasonably
cured within such 30 day period provided that Subtenant shall have commenced
cure of such default within such 30 day period and is diligently prosecuting the
same) after written notice from Sublandlord to Subtenant concerning such
default; or (3) if the leasehold interest of the Subtenant be levied upon
execution or be attached by process of law; then in any such event the
Sublandlord may, at its election, terminate the sublease and Subtenant's right
to possession of the premises. Regardless of whether Sublandlord proceeds under
the provisions of this paragraph, nothing herein shall be considered so as to
relieve the Subtenant of any obligation to pay the balance of the rent owing on
this sublease.
(8) Subtenant shall not, without the prior written consent of the Sublandlord
and of the Landlord, assign this sublease or further sublet the subleased
premises or any portion thereof. No assignment or subletting shall affect the
continuing primary liability of Subtenant under this Sublease.
(9) The Subtenant shall carry comprehensive public liability, auto, and workers
compensation insurance in such carrier, AM Best rated A- or above, in limits and
form, an amount equal to that required in the Basic Lease. At the commencement
of the term of this sublease, Subtenant shall present to the Sublandlord a
certificate of insurance naming Sublandlord as "additionally insured" on such
policies. Policies should contain waiver of subrogation in favor of Sublandlord.
Fifteen (15) days before each anniversary date of the policy, the Subtenant
shall furnish Sublandlord with a paid receipt as evidence of the premium payment
for the next full year of the
-2-
<PAGE>
policy. The Subtenant shall hold harmless the Sublandlord from any bodily injury
or property damage claims.
(10) The Subtenant shall indemnify and save the Sublandlord harmless from any
and all claims or demands whatsoever for injury or damage to person or persons
or the personal property of any person by accident or casualty, Act of God or
otherwise occurring on the herein sublet premises or resulting from Subtenant's
use thereof.
(11) Sublandlord shall not be liable to the Subtenant, or to any other person or
persons, for or on account of any injury or damage occasioned in or about the
premises to persons or property of any nature or sort whatsoever except as may
arise from the gross negligence by or on the part of the Sublandlord, or persons
acting through or under Sublandlord.
(12) Any and all notices provided herein shall be sent by registered or
certified mail or, in the case of delivery to the Subtenant by hand, delivery to
Subtenant or any employee or agent of Subtenant at the sublet premises. If
notice is given by the Subtenant to the Sublandlord, it shall be addressed to:
Mr. Robert Palladino
Corporate Treasurer
C.P. Clare Corporation
78 Cherry Hill Drive
Beverly, MA 01915
If notice is given by the Sublandlord to the Subtenant, it shall be addressed
to:
Mr. Chuck Jones
Centra Software
10 Fawcett Street
Cambridge, MA 02138
(13) The Sublandlord warrants and represents that it has no knowledge of any
default by itself or by the Landlord under the Basic Lease; that to its
knowledge the Basic Lease is in full force and effect and that the leasehold
interest of the Sublandlord under the Basic Lease is not encumbered; and that
the Sublandlord has done nothing to defeat or impair this Sublease agreement.
Sublandlord covenants and agrees that during the Subterm it will not terminate,
nor cause a termination of the Basic Lease, nor will it amend or modify the
Basic Lease to the detriment of Subtenant's rights under this Sublease. The
Sublandlord further covenants that it will pay all rents to the landlord as they
come due under the Basic Lease and that the Subtenant, upon performance of its
obligations hereunder and subject to the provisions hereof, shall for the term
hereof with respect to the premises succeed to all rights of Sublandlord under
the Basic Lease and will have quiet possession and enjoyment of the premises.
Landlord agrees that Subtenant shall not be responsible for any act or omission
by Sublandlord. Landlord and
-3-
<PAGE>
Sublandlord agree that Subtenant shall have the right, but not the obligation,
to cure any monetary default of Sublandlord under the Basic Lease. and in such
event that the Subtenant cures such a default Landlord shall not disturb
Subtenant's leasehold interest and Subtenant shall have recourse against
Sublandlord for said amounts, plus expenses (including reasonable attorneys
fees) and costs of collection.
(14) This sublease shall not be valid or in force unless and until the Landlord
consents to the sublease.
(15) Subtenant shall abide by all laws, regulations, ordinances, and rules
covering its occupancy and use of the premises during the term.
(16) In the event that the Subtenant wishes to make any alterations to the
premises those alterations will not be made with out the prior written approval
of both the Sublandlord and the Landlord. Subtenant shall be responsible for
payment for said alterations and also for returning the space to its original
condition if requested to do so by the Landlord.
(17) Subtenant shall take occupancy of the space in "as is" condition.
Notwithstanding anything to the contrary contained herein or in the Basic Lease,
upon the expiration of the Subterm, Subtenant shall surrender the premises to
Sublandlord in broom clean condition and in as good condition as delivered to
Subtenant at the commencement of the Subterm, normal wear and tear, damage by
fire or other casualty, and taking by eminent domain excepted.
(18) Subtenant shall have the right to use the furniture in place at 430 Bedford
Street as described and under the lease attached in Exhibit "C". The rental rate
for said furniture shall be $2,750 per month, payable in advance, the rental
payments beginning the first day in the 13th month of the lease and continuing
through the end of the Subterm. Rent for any partial month at the beginning or
end of Subterm shall be prorated based upon the number of days in such month.
(19) The parties hereto warrants they have had no dealings with any brokers or
agents in connection with this Sublease other than Leggat McCall/Grubb & Ellis
and covenant to defend with counsel approved by the opposing parties, hold
harmless and indemnify the opposing party from and against any and all cost,
expense or liability for any compensation, commissions and charges claimed by
any broker or agent with respect to such parties dealings in connection with
this Sublease or the negotiation thereof, other than Leggat McCall/Grubb &
Ellis. Sublandlord shall be responsible for the commission due Leggat
McCall/Grubb & Ellis as a result of this transaction.
(20) Subtenant will provide "standby" letter of credit reasonably acceptable to
the Sublandlord in the amount of annual premises and equipment rentals,
automatic renewals annually.
-4-
<PAGE>
(21) Subtenant agrees to abide by Exhibit "D", Subordination, Nondisturbance and
Attornment Agreement dated 8/12/96, attached.
(22) Notwithstanding anything to the contrary in this Sublease, Subtenant agrees
that Sublandlord and its employees and representatives shall have access during
regular business hours to the T-1 telephone line and its related equipment and
accessories which it installed in the premises and the property of ATT for the
purpose of establishing a connection to the new premises of Sublandlord. Such
access rights shall continue until April 15, 1997 or such time as the new
connection to the premises of Sublandlord is so established.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals
this 31st day of December, 1996.
Sublandlord: Subtenant:
C.P. Clare Corporation Centra Software, Inc.
BY: /s/ ILLEGIBLE BY: /s/ LEON NAVICKAS
----------------------------- -----------------------------
Elandzee Trust, hereby consents to the terms and provisions of this sublease.
Landlord:
Elandzee Trust:
BY:
-----------------------------
-5-
<PAGE>
Exhibit 10.11
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT (the "Agreement") is entered into as
of November 5, 1997, by and between SILICON VALLEY BANK, a California-chartered
bank, with its principal place of business at 3003 Tasman Drive, Santa Clara,
California 95054 and with a loan production office located at Wellesley Office
Park, 40 William Street, Suite 350, Wellesley, Massachusetts 02181, doing
business under the name "Silicon Valley East" ("Bank") and CENTRA SOFTWARE,
INC., a Delaware corporation with its principal place of business at 430 Bedford
Street, Lexington, Massachusetts 02173 ("Borrower").
RECITALS
Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.
AGREEMENT
The parties agree as follows:
1 . DEFINITIONS AND CONSTRUCTION
1.1 DEFINITIONS. As used in this Agreement, the following terms shall
have the following definitions:
"Accounts" means all presently existing and hereafter arising accounts,
contract rights, and all other forms of obligations owing to Borrower arising
out of the sale or lease of goods (including, without limitation, the licensing
of software and other technology) or the rendering of services by Borrower,
whether or not earned by performance, and any and all credit insurance,
guaranties, and other security therefor, as well as all merchandise returned to
or reclaimed by Borrower and Borrower's Books relating to any of the foregoing.
"Advance" or "Advances" means a loan advance under the Committed
Revolving Line.
"Affiliate" means, with respect to any Person, any Person that owns or
controls directly or indirectly such Person, any Person that controls or is
controlled by or is under common control with such Person, and each of such
Person's senior executive officers, directors, partners and, for any Person that
is a limited liability company, such Persons, managers and members.
"Bank Expenses" means all reasonable costs or expenses (including
reasonable attorneys' fees and expenses) incurred in connection with the
preparation, negotiation, administration, and enforcement of the Loan Documents;
and Bank's reasonable attorneys' fees and expenses incurred in amending,
enforcing or defending the Loan Documents, (including fees and expenses of
appeal or review, or those incurred in any Insolvency Proceeding) whether or not
suit is brought.
"Borrower's Books" means all of Borrower's books and records including,
without limitation: ledgers; records concerning Borrower's assets or
liabilities, the Collateral, business operations or
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financial condition; and all computer programs, or tape files, and the
equipment, containing such information.
"Borrowing Base" means (x) prior to the Bridge Maturity Date, an amount
equal to the Committed Revolving Line and, (y) as of, and subsequent to the
Bridge Maturity Date, an amount equal to Seventy Five percent (75%) of Eligible
Accounts, as determined by Bank with reference to the most recent Borrowing Base
Certificate delivered by Borrower.
"Bridge Maturity Date" means the earlier of (i) the date of the closing
of a Capitalization Event, or (ii) February 28, 1998.
"Business Day" means any day that is not a Saturday, Sunday, or other
day on which banks in the State of California are authorized or required to
close.
"Capitalization Event" shall mean the issuance by the Borrower of
equity resulting in the receipt by the Borrower of at least Three Million Five
Hundred Thousand Dollars ($3,500,000.00).
"Closing Date" means the date of this Agreement.
"Code" means the Massachusetts Uniform Commercial Code.
"Collateral" means the property described on EXHIBIT A attached hereto.
"Committed Revolving Line" means a credit extension of up to One
Million Two Hundred and Fifty Thousand Dollars ($1,250,000.00).
"Committed Equipment Line" means a credit extension of up to Five
Hundred Thousand Dollars ($500,000.00).
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to (i)
any indebtedness, lease, dividend, letter of credit or other obligation of
another, including, without limitation, any such obligation directly or
indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by
that Person, or in respect of which that Person is otherwise directly or
indirectly liable; (ii) any obligations with respect to undrawn letters of
credit issued for the account of that Person; and (iii) all obligations arising
under any interest rate, currency or commodity swap agreement, interest rate cap
agreement, interest rate collar agreement, or other agreement or arrangement
designated to protect a Person against fluctuation in interest rates, currency
exchange rates or commodity prices; provided, however, that the term "Contingent
Obligation" shall not include endorsements for collection or deposit in the
ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determined amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by such Person in good faith; provided, however, that such
amount shall not in any event exceed the maximum amount of the obligations under
the guarantee or other support arrangement.
"Credit Extension" means each Advance, Equipment Advance, or any other
extension of credit by Bank for the benefit of Borrower hereunder.
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"Current Liabilities" means, as of any applicable date, all amounts
that should, in accordance with GAAP, be included as current liabilities on the
consolidated balance sheet of Borrower and its Subsidiaries, as at such date,
plus, to the extent not already included therein, all outstanding Credit
Extensions made under this Agreement, including all Indebtedness that is payable
upon demand or within one year from the date of determination thereof unless
such Indebtedness is renewable or extendable at the option of Borrower or any
Subsidiary to a date more than one year from the date of determination, but
excluding Subordinated Debt.
"Eligible Accounts" means those Accounts that arise in the ordinary
course of Borrower's business that comply with all of Borrower's representations
and warranties to Bank set forth in Section 5.4. Unless otherwise agreed to by
Bank in writing, Eligible Accounts shall not include the following:
(a) Accounts that the account debtor has failed to pay within
ninety (90) days of invoice date;
(b) Accounts with respect to an account debtor, fifty percent
(50%) of whose Accounts the account debtor has failed to pay within
ninety (90) days of invoice date;
(c) Accounts with respect to an account debtor, including
Affiliates, whose total obligations to Borrower exceed twenty-five
percent (25%) of all Accounts to the extent such obligations exceed the
aforementioned percentage, except as approved in writing by Bank;
(d) Accounts with respect to which the account debtor does not
have its principal place of business in the United States;
(e) Accounts with respect to which the account debtor is a
federal, state, or local governmental entity or any department, agency,
or instrumentality thereof;
(f) Accounts with respect to which Borrower is liable to the
account, but only to the extent of any amounts owing to the account
debtor (sometimes referred to as "contra" accounts, e.g. accounts
payable, customer deposits, credit accounts etc.);
(g) Accounts generated by demonstration or promotional
equipment, or with respect to which goods are placed on consignment,
guaranteed sale, sale or return, sale on approval, bill and hold, or
other terms by reason of which the payment by the account debtor may be
conditional;
(h) Accounts with respect to which the account debtor is an
Affiliate, officer, employee, or agent of Borrower;
(i) Accounts with respect to which the account debtor disputes
liability or makes any claim with respect thereto as to which Bank
believes, in its sole discretion, that there may be a basis for dispute
(but only to the extent of the amount subject to such dispute or
claim), or is subject to any Insolvency Proceeding, or becomes
insolvent, or goes out of business; and
(j) Accounts the collection of which Bank reasonably
determines to be doubtful.
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"Equipment" means all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"Equipment Advance" has the meaning set forth in Section 2.1.2.
"Equipment Availability End Date" has the meaning set forth in
Section 2.1.2.
"Equipment Maturity Date" is defined in Section 2.1.2..
"ERISA" means the Employment Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
"Fleet Debt" has the meaning set forth in Section 2.1.2.
"GAAP" means generally accepted accounting principles as in effect in
the United States from time to time.
"Indebtedness" means (a) all indebtedness for borrowed money or the
deferred purchase price of property or services, including without limitation
reimbursement and other obligations with respect to surety bonds and letters of
credit, (b) all obligations evidenced by notes, bonds, debentures or similar
instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.
"Insolvency Proceeding" means any proceeding commenced by or against
any person or entity under any provision of the United States Bankruptcy Code,
as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.
"Inventory" means all present and future inventory in which Borrower
has any interest, including merchandise, raw materials, parts, supplies, packing
and shipping materials, work in process and finished products intended for sale
or lease or to be furnished under a contract of service, of every kind and
description now or at any time hereafter owned by or in the custody or
possession, actual or constructive, of Borrower, including such inventory as is
temporarily out of its custody or possession or in transit and including any
returns upon any accounts or other proceeds, including insurance proceeds,
resulting from the sale or disposition of any of the foregoing and any documents
of title representing any of the above.
"Investment" means any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Lien" means any mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance.
Loan Documents" means, collectively, this Agreement, any note or notes
executed by Borrower and relating to this Agreement, and any other present or
future agreement entered into between Borrower and/or for the benefit of Bank in
connection with this Agreement, all as amended, extended or restated from time
to time.
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"Material Adverse Effect" means a material adverse effect on (i) the
business operations or condition (financial or otherwise) of Borrower and its
Subsidiaries taken as a whole or (ii) the ability of Borrower to repay the
Obligations or otherwise perform its obligations under the Loan Documents.
"Maturity Date" means the later of (x) the Equipment Maturity Date, (y)
the Revolving Maturity Date, or the (z) the Bridge Maturity Date.
"Negotiable Collateral" means all of Borrower's present and future
letters of credit of which it is a beneficiary, notes, drafts, instruments,
securities, documents of title, and chattel paper.
"Obligations" means all debt, principal, interest, Bank Expenses and
other amounts owed to Bank by Borrower pursuant to this Agreement or any other
agreement, whether absolute or contingent, due or to become due, now existing or
hereafter arising, including any interest that accrues after the commencement of
an Insolvency Proceeding and including any debt, liability, or obligation owing
from Borrower to others that Bank may have obtained by assignment or otherwise.
"Payment Date" means the first calendar day of each month commencing on
the first such date after the Closing Date and ending on the Maturity Date;
provided however, with respect to Advances under the Committed Revolving Line,
the "Payment Date" means the first calendar day of each month commencing after
the Bridge Maturity Date and ending on the Maturity Date;
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising under
this Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and disclosed in
the Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary
course of business; and
(e) Indebtedness secured by Permitted Liens.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in the
Schedule; and
(b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any
agency or any State thereof maturing within one (1) year from the date
of acquisition thereof, (ii) commercial paper maturing no more than one
(1) year from the date of creation thereof and currently having the
highest rating obtainable from either Standard & Poor's Corporation or
Moody's Investors Service, Inc., and (iii) certificates of deposit
maturing no more than one (1) year from the date of investment therein
issued by Bank.
"Permitted Liens" means the following:
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(a) Any Liens existing on the Closing Date and disclosed in
the Schedule or arising under this Agreement or the other Loan
Documents;
(b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good
faith by appropriate proceedings and as to which adequate reserves are
maintained on Borrower's Books in accordance with GAAP, PROVIDED the
same have no priority over any of Bank's security interests;
(c) Liens (i) upon or in any Equipment acquired or held by
Borrower or any of its Subsidiaries to secure the purchase price of
such Equipment or indebtedness incurred solely for the purpose of
financing the acquisition of such Equipment, or (ii) existing on such
equipment at the time of its acquisition, PROVIDED that the Lien is
confined solely to the property so acquired and improvements thereon,
and the proceeds of such equipment;
(d) Liens incurred in connection with the extension, renewal
or refinancing of the indebtedness secured by Liens of the type
described in clauses (a) through (c) above, PROVIDED that any
extension, renewal or replacement Lien shall be limited to the property
encumbered by the existing Lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase.
"Person" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.
"Prime Rate" means the variable rate of interest, per annum, most
recently announced by Bank, as its "prime rate," whether or not such announced
rate is the lowest rate available from Bank.
"Quick Assets" means, as of any applicable date, the consolidated cash,
cash equivalents, accounts receivable and investments with maturities of fewer
than 90 days of Borrower determined in accordance with GAAP.
"Responsible Officer" means each of the Chief Executive Officer, the
President, the Chief Financial Officer and the Controller of Borrower.
"Revolving Maturity Date" means the Bridge Maturity Date, provided,
however, that if Bank has completed an audit of Borrower's Accounts, and such
audit is satisfactory to Bank in its sole and absolute discretion, the Revolving
Maturity Date shall mean one day prior to the date which is one year from the
Closing Date if the Capitalization Event occurs prior to the Bridge Maturity
Date.
"Schedule" means the schedule of exceptions attached hereto, if any.
"Subordinated Debt" means any debt incurred by Borrower that is
subordinated to the debt owing by Borrower to Bank on terms acceptable to Bank
(and identified as being such by Borrower and Bank).
"Subsidiary" means with respect to any Person, corporation,
partnership, company association, joint venture, or any other business entity of
which more than fifty percent (50%) of the voting stock or other equity
interests is owned or controlled, directly or indirectly, by such Person or one
or more Affiliates of such Person.
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1.2 ACCOUNTING AND OTHER TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP and all calculations
and determinations made hereunder shall be made in accordance with GAAP. When
used herein, the term "financial statements" shall include the notes and
schedules thereto. The terms "including"/ "includes" shall always be read as
meaning "including (or includes) without limitation", when used herein or in any
other Loan Document.
2. LOAN AND TERMS OF PAYMENT
2.1 CREDIT EXTENSIONS. Borrower promises to pay to the order of Bank,
in lawful money of the United States of America, the aggregate unpaid principal
amount of all Credit Extensions made by Bank to Borrower hereunder in accordance
with the terms hereof. Borrower shall also pay interest on the unpaid principal
amount of such Advances at rates in accordance with the terms hereof.
2.1.1 (a) Subject to and upon the terms and conditions of this
Agreement, Bank agrees to make Advances to Borrower in an aggregate outstanding
amount not to exceed the Committed Revolving Line or the Borrowing Base,
whichever is less. Subject to the terms and conditions of this Agreement,
amounts borrowed pursuant to this Section 2.1 may be repaid and reborrowed at
any time during the term of this Agreement.
(b) Whenever Borrower desires an Advance, Borrower will notify
Bank by facsimile transmission or telephone no later than 3:00 p.m. Pacific
time, on the Business Day that the Advance is to be made. Each such notification
shall be promptly confirmed by a Payment/Advance Form in substantially the form
of EXHIBIT B hereto. Bank is authorized to make Advances under this Agreement,
based upon instructions received from a Responsible Officer or a designee of a
Responsible Officer, or without instructions if in Bank's discretion such
Advances are necessary to meet Obligations which have become due and remain
unpaid. Bank shall be entitled to rely on any telephonic notice given by a
person who Bank reasonably believes to be a Responsible Officer or a designee
thereof, and Borrower shall indemnify and hold Bank harmless for any damages or
loss suffered by Bank as a result of such reliance. Bank will credit the amount
of Advances made under this Section 2.1 to Borrower's deposit account.
(c) The Committed Revolving Line shall terminate on the
Revolving Maturity Date, at which time all Advances under this Section 2.1 and
other amounts due under this Agreement (except as otherwise expressly specified
herein) shall be immediately due and payable.
2.1.2 EQUIPMENT ADVANCES.
(a) Subject to and upon the terms and conditions of this
Agreement, at any time from the date hereof through six (6) months from the
Closing Date (the "Equipment Availability End Date"), Bank agrees to make
advances (each an "Equipment Advance" and collectively, the "Equipment
Advances") to Borrower in an aggregate outstanding amount not to exceed the
Committed Equipment Line. The first such Advance shall be to pay in full the
existing indebtedness to Fleet Bank (the "Fleet Debt"). To evidence Equipment
Advances, Borrower shall deliver to Bank, at the time of each Equipment Advance
request, an invoice for the equipment to be purchased. Except for the Fleet
Debt, the Equipment Advances shall be used only to purchase new Equipment and
shall not exceed One Hundred Percent (100%) of the invoice amount of such
equipment approved from time to time by Bank, including taxes, shipping,
training, sales tax, and installation expense. Software may only constitute up
to Twenty Five percent (25%) of aggregate Equipment Advances, exclusive of the
Fleet Debt.
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(b) Interest shall accrue from the date of each Equipment
Advance at a per annum rate equal to One percentage point (1.0%) above the Prime
Rate and shall be payable monthly for each month through the month in which the
Equipment Availability End Date falls. The principal amount of the Fleet Debt
shall be repaid, beginning on the fist Payment Date following the Closing Date,
in twenty-two (22) installments, each of which, except for the last, shall be
equal to $8,862.07. The final payment shall be equal to the remaining balance of
the Fleet Debt. All other Equipment Advances that are outstanding on the
Equipment Availability End Date will be payable in thirty six (36) equal monthly
installments of principal, plus all accrued interest, beginning on the Payment
Date of the month following the Equipment Availability End Date and ending on
the thirty sixth (36) Payment Date following the Equipment Availability End
Date. Equipment Advances, once repaid, may not be reborrowed.
(c) When Borrower desires to obtain an Equipment Advance,
Borrower shall notify Bank (which notice shall be irrevocable) by facsimile
transmission to be received no later than 3:00 p.m. Pacific time one (1)
Business Day before the day on which the Equipment Advance is to be made. Such
notice shall be substantially in the form of Exhibit B. The notice shall be
signed by a Responsible Officer or its designee and include a copy of the
invoice for the Equipment to be financed.
2.2 OVERADVANCES. If, at any time or for any reason, the amount of
Obligations owed by Borrower to Bank pursuant to Section 2.1.1 of this Agreement
is greater than the lesser of (i) the Committed Revolving Line or (ii) the
Borrowing Base, Borrower shall immediately pay to Bank, in cash, the amount of
such excess.
2.3 INTEREST RATES, PAYMENTS, AND CALCULATIONS.
(a) INTEREST RATE. Except as set forth in Section 2.3(b), any
Advances shall bear interest, on the average daily balance thereof, at a per
annum rate equal to Three Quarters of One percentage point (0.75%) above the
Prime Rate; provided however, subsequent to the Capitalization Event, any
Advances shall bear interest, on the average daily balance thereof, at a per
annum rate equal to One half of One percentage point (0.50%) above the Prime
Rate.
(b) DEFAULT RATE. All Obligations shall bear interest, from
and after the occurrence of an Event of Default, at a rate equal to five (5)
percentage points above the interest rate applicable immediately prior to the
occurrence of the Event of Default.
(c) PAYMENTS. Interest hereunder shall be due and payable on
each Payment Date. Borrower hereby authorizes Bank to debit any accounts with
Bank, including, without limitation, Account Number 3300076253 for payments of
principal and interest due on the Obligations and any other amounts owing by
Borrower to Bank. Bank will notify Borrower of all debits which Bank has made
against Borrower's accounts. Any such debits against Borrower's accounts in no
way shall be deemed a set-off. Any interest not paid when due shall be
compounded by becoming a part of the Obligations, and such interest shall
thereafter accrue interest at the rate then applicable hereunder.
(d) COMPUTATION. In the event the Prime Rate is changed from
time to time hereafter, the applicable rate of interest hereunder shall be
increased or decreased effective as of 12:01 a.m. on the day the Prime Rate is
changed, by an amount equal to such change in the Prime Rate. All interest
chargeable under the Loan Documents shall be computed on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed.
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2.4 CREDITING PAYMENTS. Prior to the occurrence of an Event of Default,
Bank shall credit a wire transfer of funds, check or other item of payment to
such deposit account or Obligation as Borrower specifies. After the occurrence
of an Event of Default, the receipt by Bank of any wire transfer of funds,
check, or other item of payment, whether directed to Borrower's deposit account
with Bank or to the Obligations or otherwise, shall be immediately applied to
conditionally reduce Obligations, but shall not be considered a payment in
respect of the Obligations unless such payment is of immediately available
federal funds or unless and until such check or other item of payment is honored
when presented for payment. Notwithstanding anything to the contrary contained
herein, any wire transfer or payment received by Bank after 12:00 noon Pacific
time shall be deemed to have been received by Bank as of the opening of business
on the immediately following Business Day. Whenever any payment to Bank under
the Loan Documents would otherwise be due (except by reason of acceleration) on
a date that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension.
2.5 FEES. Borrower shall pay to Bank the following:
(a) FACILITY FEE. As compensation for the Bank's maintenance
of sufficient funds available for such purpose, the Bank shall have
earned a Committed Revolving Line Facility Fee (so referred to herein),
which fee shall be paid in advance, in an amount equal to One Half of
One percent (0.50%) of the Committed Revolving Line. The Borrower shall
not be entitled to any credit, rebate or repayment of any Committed
Revolving Line Facility Fee previously earned by the Bank pursuant to
this Section notwithstanding any termination of the within Agreement,
or suspension or termination of the Bank's obligation to make loans and
advances hereunder;
(b) FINANCIAL EXAMINATION AND APPRAISAL FEES. Bank's customary
fees and out-of-pocket expenses for Bank's audits of Borrower's
Accounts, and for each appraisal of Collateral and financial analysis
and examination of Borrower performed from time to time by Bank or its
agents;
(c) BANK EXPENSES. Upon demand from Bank, including, without
limitation, upon the date hereof, all Bank Expenses incurred through
the date hereof, including reasonable attorneys' fees and expenses,
and, after the date hereof, all Bank Expenses, including reasonable
attorneys' fees and expenses, as and when they become due.
2.6 ADDITIONAL COSTS. In case any law, regulation, treaty or official
directive or the interpretation or application thereof by any court or any
governmental authority charged with the administration thereof or the compliance
with any guideline or request of any central bank or other governmental
authority (whether or not having the force of law):
(a) subjects Bank to any tax with respect to payments of
principal or interest or any other amounts payable hereunder by
Borrower or otherwise with respect to the transactions contemplated
hereby (except for taxes on the overall net income of Bank imposed by
the United States of America or any political subdivision thereof);
(b) imposes, modifies or deems applicable any deposit
insurance, reserve, special deposit or similar requirement against
assets held by, or deposits in or for the account of, or loans by,
Bank; or
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(c) imposes upon Bank any other condition with respect to its
performance under this Agreement,
and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
any loans, Bank shall notify Borrower thereof. Borrower agrees to pay to Bank
the amount of such increase in cost, reduction in income or additional expense
as and when such cost, reduction or expense is incurred or determined, upon
presentation by Bank of a statement of the amount and setting forth Bank's
calculation thereof, all in reasonable detail, which statement shall be deemed
true and correct absent manifest error.
2.7 TERM. Except as otherwise set forth herein, this Agreement shall
become effective on the Closing Date and, subject to Section 12.7, shall
continue in full force and effect for a term ending on the Maturity Date.
Notwithstanding the foregoing, Bank shall have the right to terminate its
obligation to make Credit Extensions under this Agreement immediately and
without notice upon the occurrence and during the continuance of an Event of
Default. Notwithstanding termination of this Agreement, Bank's lien on the
Collateral shall remain in effect for so long as any Obligations are
outstanding.
3. CONDITIONS OF LOANS
3.1 CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION. The obligation of
Bank to make the initial Credit Extension is subject to the condition precedent
that Bank shall have received, in form and substance satisfactory to Bank, the
following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with respect to
articles, bylaws, incumbency and resolutions authorizing the execution
and delivery of this Agreement;
(c) a negative pledge agreement covering intellectual
property;
(d) an opinion of Borrower's counsel;
(e) financing statements (Forms UCC-1);
(f) insurance certificate;
(g) payment of the fees and Bank Expenses then due specified
in Section 2.5 hereof;
(h) Certificate of Foreign Qualification (if applicable); and
(i) such other documents, and completion of such other
matters, as Bank may reasonably deem necessary or appropriate.
3.2 CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS. The obligation of
Bank to make each Credit Extension, including the initial Credit Extension, is
further subject to the following conditions:
(a) timely receipt by Bank of the Payment/Advance Form as
provided in Section 2.1; and
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(b) the representations and warranties contained in Section 5
shall be true and correct in all material respects on and as of the
date of such Payment/Advance Form and on the effective date of each
Credit Extension requested by Borrower as though made at and as of each
such date, and no Event of Default shall have occurred and be
continuing, or would result from such Credit Extension. The making of
each Credit Extension requested by Borrower shall be deemed to be a
representation and warranty by Borrower on the date of such Credit
Extension as to the accuracy of the facts referred to in this Section
3.2(b).
4. CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST. Borrower grants and pledges to Bank a
continuing security interest in all presently existing and hereafter acquired or
arising Collateral in order to secure prompt payment of any and all Obligations
and in order to secure prompt performance by Borrower of each of its covenants
and duties under the Loan Documents. Except as set forth in the Schedule, such
security interest will constitute a valid, first priority security interest in
the presently existing Collateral, and will constitute a valid, first priority
security interest in Collateral acquired after the date hereof, upon the filing
of the Uniform Commercial Code financing statements in the appropriate
governmental offices. Borrower acknowledges that Bank may place a "hold" on any
Deposit Account pledged as Collateral to secure the Obligations. Notwithstanding
termination of this Agreement, Bank's Lien on the Collateral shall remain in
effect for so long as any Obligations are outstanding.
4.2 DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED. Borrower shall from
time to time execute and deliver to Bank, at the request of Bank, all Negotiable
Collateral, all financing statements and other documents that Bank may
reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
4.3 RIGHT TO INSPECT. Bank (through any of its officers, employees, or
agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower's usual business hours, to inspect Borrower's Books and to make
copies thereof and to check, test, and appraise the Collateral in order to
verify Borrower's financial condition or the amount, condition of, or any other
matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
5.1 DUE ORGANIZATION AND QUALIFICATION. Borrower and each Subsidiary is
a corporation duly existing and in good standing under the laws of its state of
incorporation and qualified and licensed to do business in, and is in good
standing in, any state in which failure to be so qualified and licensed would
have a Material Adverse Effect.
5.2 DUE AUTHORIZATION; NO CONFLICT. The execution, delivery, and
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and will not conflict with, and will not constitute a breach of, any
provision contained in Borrower's Certificate of Incorporation or Bylaws, nor
will such execution, delivery and performance constitute an event of default
under any material agreement to which Borrower is a party or by which Borrower
is bound Borrower is not in default under
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any agreement to which it is a party or by which it is bound, which default
could have a Material Adverse Effect.
5.3 NO PRIOR ENCUMBRANCES. Borrower has good and indefeasible title to
the Collateral, free and clear of Liens, except for Permitted Liens.
5.4 BONA FIDE ELIGIBLE ACCOUNTS. The Eligible Accounts are bona fide
existing obligations. The service or property giving rise to such Eligible
Accounts has been performed or delivered to the account debtor or to the account
debtor's agent for immediate shipment to and unconditional acceptance by the
account debtor. Borrower has not received notice of actual or imminent
Insolvency Proceeding of any account debtor whose accounts are included in any
Borrowing Base Certificate as an Eligible Account.
5.5 MERCHANTABLE INVENTORY. All Inventory is in all material respects
of good and marketable quality, free from all material defects.
5.6 NAME; LOCATION OF CHIEF EXECUTIVE OFFICE. Except as disclosed in
the Schedule, Borrower has not done business and will not without at least
thirty (30) days prior written notice to Bank do business under any name other
than that specified on the signature page hereof. The chief executive office of
Borrower is located at the address indicated in Section 10 hereof.
5.7 LITIGATION. Except as set forth in the Schedule, there are no
actions or proceedings pending, or, to Borrower's knowledge, threatened by or
against Borrower or any Subsidiary before any court or administrative agency in
which an adverse decision could have a Material Adverse Effect or a material
adverse effect on Borrower's interest or Bank's security interest in the
Collateral.
5.8 NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS. All
consolidated financial statements related to Borrower and any Subsidiary that
have been delivered by Borrower to Bank fairly present in all material respects
Borrower's consolidated financial condition as of the date thereof and
Borrower's consolidated results of operations for the period then ended. There
has not been a material adverse change in the consolidated financial condition
of Borrower since the date of the most recent of such financial statements
submitted to Bank on or about the Closing Date.
5.9 SOLVENCY. Borrower is able to pay its debts (including trade debts)
as they mature.
5.10 REGULATORY COMPLIANCE. Borrower and each Subsidiary has met the
minimum funding requirements of ERISA with respect to any employee benefit plans
subject to ERISA. No event has occurred resulting from Borrower's failure to
comply with ERISA that is reasonably likely to result in Borrower's incurring
any liability that could have a Material Adverse Effect. Borrower is not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940. Borrower is not engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulations G, T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied with all the provisions of the Federal
Fair Labor Standards Act. Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, violation of which could have a Material
Adverse Effect.
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5.11 ENVIRONMENTAL CONDITION. None of Borrower's or any Subsidiary's
properties or assets has ever been used by Borrower or any Subsidiary or, to the
best of Borrower's knowledge, by previous owners or operators, in the disposal
of, or to produce, store, handle, treat, release, or transport, any hazardous
waste or hazardous substance other than in accordance with applicable law; to
the best of Borrower's knowledge, none of Borrower's properties or assets has
ever been designated or identified in any manner pursuant to any environmental
protection statute as a hazardous waste or hazardous substance disposal site, or
a candidate for closure pursuant to any environmental protection statute; no
lien arising under any environmental protection statute has attached to any
revenues or to any real or personal property owned by Borrower or any
Subsidiary; and neither Borrower nor any Subsidiary has received a summons,
citation, notice, or directive from the Environmental Protection Agency or any
other federal, state or other governmental agency concerning any action or
omission by Borrower or any Subsidiary resulting in the release, or other
disposition of hazardous waste or hazardous substances into the environment.
5.12 TAXES. Borrower and each Subsidiary has filed or caused to be
filed all tax returns required to be filed on a timely basis, and has paid, or
has made adequate provision for the payment of, all taxes reflected therein.
5.13 SUBSIDIARIES Borrower does not own any stock, partnership interest
or other equity securities of any Person, except for Permitted Investments.
5.14 GOVERNMENT CONSENTS. Borrower and each Subsidiary has obtained all
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of Borrower's business as currently conducted.
5.15 FULL DISCLOSURE. No representation, warranty or other statement
made by Borrower in any certificate or written statement furnished to Bank
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained in such certificates or
statements not misleading.
6. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
a Credit Extension hereunder, Borrower shall do all of the following:
6.1 GOOD STANDING. Borrower shall maintain its and each of its
Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could have a Material Adverse Effect. Borrower shall
maintain, and shall cause each of its Subsidiaries to maintain, to the extent
consistent with prudent management of Borrower's business, in force all
licenses, approvals and agreements, the loss of which could have a Material
Adverse Effect.
6.2 GOVERNMENT COMPLIANCE. Borrower shall meet, and shall cause each
Subsidiary to meet, the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA. Borrower shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could
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have a Material Adverse Effect or a material adverse effect on the Collateral or
the priority of Bank's Lien on the Collateral.
6.3 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES. Borrower shall deliver
to Bank: (a) as soon as available, but in any event within twenty five (25) days
after the end of each month, a company prepared consolidated balance sheet and
income statement covering Borrower's consolidated operations during such period,
in a form and certified by an officer of Borrower reasonably acceptable to Bank;
(b) as soon as available, but in any event within ninety (90) days after the end
of Borrower's fiscal year, audited consolidated financial statements of Borrower
prepared in accordance with GAAP, consistently applied, together with an
unqualified opinion on such financial statements of an independent certified
public accounting firm reasonably acceptable to Bank; (c) promptly upon receipt
of notice thereof, a report of any legal actions pending or threatened against
Borrower or any Subsidiary that could result in damages or costs to Borrower or
any Subsidiary of One Hundred Thousand Dollars ($100,000) or more; and (d) such
budgets, sales projections, operating plans or other financial information as
Bank may reasonably request from time to time.
Within twenty five (25) days after the last day of each month,
beginning with the first month after the Bridge Maturity Date, Borrower shall
deliver to Bank a Borrowing Base Certificate signed by a Responsible Officer in
substantially the form of EXHIBIT C hereto, together with aged listings of
accounts receivable.
Within twenty five (25) days after the last day of each month,
beginning with the first month after the Bridge Maturity Date, Borrower shall
deliver to Bank a Compliance Certificate signed by a Responsible Officer in
substantially the form of EXHIBIT D hereto.
Bank shall have a right from time to time hereafter to audit Borrower's
Accounts at Borrower's expense, provided that such audits will be conducted no
more often than every twelve (12) months unless an Event of Default has occurred
and is continuing.
6.4 INVENTORY; RETURNS. Borrower shall keep all Inventory in good and
marketable condition, free from all material defects. Returns and allowances, if
any, as between Borrower and its account debtors shall be on the same basis and
in accordance with the usual customary practices of Borrower, as they exist at
the time of the execution and delivery of this Agreement. Borrower shall
promptly notify Bank of all returns and recoveries and of all disputes and
claims, where the return, recovery, dispute or claim involves more than Fifty
Thousand Dollars ($50,000).
6.5 TAXES. Borrower shall make, and shall cause each Subsidiary to
make, due and timely payment or deposit of all material federal, state, and
local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Bank, on demand, appropriate certificates attesting to
the payment or deposit thereof; and Borrower will make, and will cause each
Subsidiary to make, timely payment or deposit of all material tax payments and
withholding taxes required of it by applicable laws, including, but not limited
to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local,
state, and federal income taxes, and will, upon request, furnish Bank with proof
satisfactory to Bank indicating that Borrower or a Subsidiary has made such
payments or deposits; provided that Borrower or a Subsidiary need not make any
such payment if (i) the amount or validity of such payment is contested in good
faith by appropriate proceedings , (ii) Borrower or a Subsidiary, as the case
may be, has established proper reserves (to the extent required by GAAP), and
(iii) no lien other than a Permitted Lien results.
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6.6 INSURANCE.
(a) Borrower, at its expense, shall keep the Collateral
insured against loss or damage by fire, theft, explosion, sprinklers, and all
other hazards and risks, and in such amounts, as ordinarily insured against by
other owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain insurance
relating to Borrower's ownership and use of the Collateral in amounts and of a
type that are customary to businesses similar to Borrower's.
(b) All such policies of insurance shall be in such form, with
such companies, and in such amounts as are reasonably satisfactory to Bank. All
such policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee thereof and all liability insurance policies shall show the Bank as an
additional insured, and shall specify that the insurer must give at least twenty
(20) days notice to Bank before canceling its policy for any reason. At Bank's
request, Borrower shall deliver to Bank certified copies of such policies of
insurance and evidence of the payments of all premiums therefor. All proceeds
payable under any such policy shall, at the option of Bank, be payable to Bank
to be applied on account of the Obligations.
6.7 PRINCIPAL DEPOSITORY. Borrower shall maintain its principal
depository and operating accounts with Bank.
6.8 QUICK RATIO. As of and subsequent to the Bridge Maturity Date,
Borrower shall maintain, as of the last day of each calendar month, a ratio of
Quick Assets to Current Liabilities of at least 2.0 to 1.0. The Quick Ratio
shall be calculated net of deferred revenue.
6.9 PROFITABILITY. Borrower shall not incur a net loss in excess of
(a) Two Million Dollars ($2,000,000.00) for the first quarter
of calendar year ending 1998; and
(b) One Million Five Hundred Thousand Dollars ($1,500,000.00)
for the second quarter of calendar year ending 1998.
6.10 CAPITALIZATION EVENT. Borrower shall provide the Bank with
evidence, such evidence being satisfactory to the Bank, that Borrower has
completed the Capitalization Event on or before February 28, 1998.
6.11 FURTHER ASSURANCES. At any time and from time to time Borrower
shall execute and deliver such further instruments and take such further action
as may reasonably be requested by Bank to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as any Credit Extension
hereunder shall be available and until payment in full of the outstanding
Obligations or for so long as Bank may have any commitment to make any Advances,
Borrower will not do any of the following:
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7.1 DISPOSITIONS. Convey, sell, lease, transfer or otherwise dispose of
(collectively, a "Transfer"), or permit any of its Subsidiaries to Transfer, all
or any part of its business or property, other than Transfers: (i) of inventory
in the ordinary course of business, (ii) of non-exclusive licenses and similar
arrangements for the use of the property of Borrower or its Subsidiaries in the
ordinary course of business; (iii) that constitute payment of normal and usual
operating expenses in the ordinary course of business; or (iv) of worn-out or
obsolete Equipment.
7.2 CHANGES IN BUSINESS, OWNERSHIP, OR MANAGEMENT, BUSINESS LOCATIONS.
Engage in any business, or permit any of its Subsidiaries to engage in any
business, other than the businesses currently engaged in by Borrower and any
business substantially similar or related thereto (or incidental thereto), or
suffer a material change in Borrower's ownership (with the exception of the
initial Capitalization Event) or change in any three (3) of the following
officers from the officers holding such position as of the date hereof:
President, Chief Executive Officer, Chief Financial Officer, Vice President
Development, Vice President Sales & Marketing, and Vice President Operations.
Borrower will not, without at least thirty (30) days prior written notification
to Bank, relocate its chief executive office or add any new offices or business
locations.
7.3 MERGERS OR ACQUISITIONS. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person.
7.4 INDEBTEDNESS. Create, incur, assume or be or remain liable with
respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.
7.5 ENCUMBRANCES. Create, incur, assume or suffer to exist any Lien
with respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens.
7.6 DISTRIBUTIONS. Pay any dividends or make any other distribution or
payment on account of or in redemption, retirement or purchase of any capital
stock.
7.7 INVESTMENTS. Directly or indirectly acquire or own, or make any
Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments.
7.8 TRANSACTIONS WITH AFFILIATES. Directly or indirectly enter into or
permit to exist any material transaction with any Affiliate of Borrower except
for transactions that are in the ordinary course of Borrower's business, upon
fair and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm's length transaction with a nonaffiliated Person.
7.9 SUBORDINATED DEBT. Make any payment in respect of any Subordinated
Debt, or permit any of its Subsidiaries to make any such payment, except in
compliance with the terms of such Subordinated Debt, or amend any provision
contained in any documentation relating to the Subordinated Debt without Bank's
prior written consent.
7.10 INVENTORY. Store the Inventory with a bailee, warehouseman, or
similar party unless Bank has received a pledge of any warehouse receipt
covering such Inventory. Except for Inventory sold in the ordinary course of
business and except for such other locations as Bank may approve in writing,
Borrower shall keep the Inventory only at the location set forth in Section 10
hereof and such other
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locations of which Borrower gives Bank prior written notice and as to which
Borrower signs and files a financing statement where needed to perfect Bank's
security interest.
7.11 COMPLIANCE. Become an "investment company" or a company controlled
by an "investment company," within the meaning of the Investment Company Act of
1940, or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Advance for such purpose; fail
to meet the minimum funding requirements of ERISA; permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the
Federal Fair Labor Standards Act or violate any other law or regulation, which
violation could have a Material Adverse Effect or a material adverse effect on
the Collateral or the priority of Bank's Lien on the Collateral; or permit any
of its Subsidiaries to do any of the foregoing.
8. EVENTS OF DEFAULT
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:
8.1 PAYMENT DEFAULT. If Borrower fails to pay, when due, any of the
Obligations;
8.2 COVENANT DEFAULT.
(a) If Borrower fails to perform any obligation under Sections
6.3, 6.6, 6.7, 6.8, 6.9, or 6.10 or violates any of the covenants contained in
Article 7 of this Agreement, or
(b) If Borrower fails or neglects to perform, keep, or observe
any other material term, provision, condition, covenant, or agreement contained
in this Agreement, in any of the Loan Documents, and as to any default under
such other term, provision, condition, covenant or agreement that can be cured,
has failed to cure such default within ten (10) days after the occurrence
thereof; provided, however, that if the default cannot by its nature be cured
within the ten (10) day period or cannot after diligent attempts by Borrower be
cured within such ten (10) day period, and such default is likely to be cured
within a reasonable time, then Borrower shall have an additional reasonable
period (which shall not in any case exceed thirty (30) days) to attempt to cure
such default, and within such reasonable time period the failure to have cured
such default shall not be deemed an Event of Default (provided that no Advances
will be required to be made during such cure period);
8.3 MATERIAL ADVERSE CHANGE. If there (i) occurs a material adverse
change in the business, operations, or condition (financial or otherwise) of the
Borrower, or (ii) is a material impairment of the prospect of repayment of any
portion of the Obligations or (iii) is a material impairment of the value or
priority of Bank's security interests in the Collateral, which is not covered by
adequate insurance;
8.4 ATTACHMENT. If any material portion of Borrower's assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within ten (10) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of
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Borrower's assets by the United States Government, or any department, agency, or
instrumentality thereof, or by any state, county, municipal, or governmental
agency, and the same is not paid within ten (10) days after Borrower receives
notice thereof, provided that none of the foregoing shall constitute an Event of
Default where such action or event is stayed or an adequate bond has been posted
pending a good faith contest by Borrower (provided that no Credit Extensions
will be required to be made during such cure period);
8.5 INSOLVENCY. If Borrower becomes insolvent, or if an Insolvency
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within 30 days (provided that no
Advances will be made prior to the dismissal of such Insolvency Proceeding);
8.6 OTHER AGREEMENTS. If there is a default in any agreement to which
Borrower is a party with a third party or parties resulting in a right by such
third party or parties, whether or not exercised, to accelerate the maturity of
any Indebtedness in an amount in excess of One Hundred Thousand Dollars
($100,000) or that could have a Material Adverse Effect;
8.7 SUBORDINATED DEBT. If Borrower makes any payment on account of
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;
8.8 JUDGMENTS. If a judgment or judgments for the payment of money in
an amount, individually or in the aggregate, of at least Fifty Thousand Dollars
($50,000) shall be rendered against Borrower and shall remain unsatisfied and
unstayed for a period of ten (10) days (provided that no Credit Extensions will
be made prior to the satisfaction or stay of such judgment); or
8.9 MISREPRESENTATIONS. If any material misrepresentation or material
misstatement exists now or hereafter in any warranty or representation set forth
herein or in any certificate or writing delivered to Bank by Borrower or any
Person acting on Borrower's behalf pursuant to this Agreement or to induce Bank
to enter into this Agreement or any other Loan Document.
9. BANK'S RIGHTS AND REMEDIES
9.1 RIGHTS AND REMEDIES. Upon the occurrence and during the continuance
of an Event of Default, Bank may, at its election, without notice of its
election and without demand, do any one or more of the following, all of which
are authorized by Borrower:
Declare all Obligations, whether evidenced by this Agreement, by any of the
other Loan Documents, or otherwise, immediately due and payable (provided that
upon the occurrence of an Event of Default described in Section 8.5 all
Obligations shall become immediately due and payable without any action by
Bank);
(a) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement or under any other agreement
between Borrower and Bank;
(b) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank
reasonably considers advisable;
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(c) Without notice to or demand upon Borrower, make such
payments and do such acts as Bank considers necessary or reasonable to
protect its security interest in the Collateral. Borrower agrees to
assemble the Collateral if Bank so requires, and to make the Collateral
available to Bank as Bank may designate. Borrower authorizes Bank to
enter the premises where the Collateral is located, to take and
maintain possession of the Collateral, or any part of it, and to pay,
purchase, contest, or compromise any encumbrance, charge, or lien which
in Bank's determination appears to be prior or superior to its security
interest and to pay all expenses incurred in connection therewith. With
respect to any of Borrower's premises, Borrower hereby grants Bank a
license to enter such premises and to occupy the same, without charge;
(d) Without notice to Borrower set off and apply to the
Obligations any and all (i) balances and deposits of Borrower held by
Bank, or (ii) indebtedness at any time owing to or for the credit or
the account of Borrower held by Bank;
(e) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided
for herein) the Collateral. Bank is hereby granted a non-exclusive,
royalty-free license or other right, solely pursuant to the provisions
of this Section 9.1, to use, without charge, Borrower's labels,
patents, copyrights, mask works, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising
matter, or any property of a similar nature, as it pertains to the
Collateral, in completing production of, advertising for sale, and
selling any Collateral and, in connection with Bank's exercise of its
rights under this Section 9.1, Borrower's rights under all licenses and
all franchise agreements shall inure to Bank's benefit;
(f) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on
terms, in such manner and at such places (including Borrower's
premises) as Bank determines is commercially reasonable, and apply the
proceeds thereof to the Obligations in whatever manner or order it
deems appropriate;
(g) Bank may credit bid and purchase at any public sale, or at
any private sale as permitted by law; and
(h) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.
9.2 POWER OF ATTORNEY. Effective only upon the occurrence and during
the continuance of an Event of Default, Borrower hereby irrevocably appoints
Bank (and any of Bank's designated officers, or employees) as Borrower's true
and lawful attorney to: (a) send requests for verification of Accounts or notify
account debtors of Bank's security interest in the Accounts; (b) endorse
Borrower's name on any checks or other forms of payment or security that may
come into Bank's possession; (c) sign Borrower's name on any invoice or bill of
lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) make, settle, and adjust all claims under and decisions with
respect to Borrower's policies of insurance; and (e) settle and adjust disputes
and claims respecting the accounts directly with account debtors, for amounts
and upon terms which Bank determines to be reasonable; provided Bank may
exercise such power of attorney to sign the name of Borrower on any of the
documents described in Section 4.2 regardless of whether an Event of Default has
occurred. The appointment of Bank as Borrower's attorney in fact, and each and
every one of Bank's rights and powers, being coupled with an interest, is
irrevocable until all of the
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Obligations have been fully repaid and performed and Bank's obligation to
provide advances hereunder is terminated.
9.3 ACCOUNTS COLLECTION. Upon the occurrence and during the continuance
of an Event of Default, Bank may notify any Person owing funds to Borrower of
Bank's security interest in such funds and verify the amount of such Account.
Borrower shall collect all amounts owing to Borrower for Bank, receive in trust
all payments as Bank's trustee, and if requested or required by Bank,
immediately deliver such payments to Bank in their original form as received
from the account debtor, with proper endorsements for deposit.
9.4 BANK EXPENSES. If Borrower fails to pay any amounts or furnish any
required proof of payment due to third persons or entities, as required under
the terms of this Agreement, then Bank may do any or all of the following: (a)
make payment of the same or any part thereof; (b) set up such reserves under the
Committed Revolving Line as Bank deems necessary to protect Bank from the
exposure created by such failure; or (c) obtain and maintain insurance policies
of the type discussed in Section 6.6 of this Agreement, and take any action with
respect to such policies as Bank deems prudent. Any amounts so paid or deposited
by Bank shall constitute Bank Expenses, shall be immediately due and payable,
and shall bear interest at the then applicable rate hereinabove provided, and
shall be secured by the Collateral. Any payments made by Bank shall not
constitute an agreement by Bank to make similar payments in the future or a
waiver by Bank of any Event of Default under this Agreement.
9.5 BANK'S LIABILITY FOR COLLATERAL. So long as Bank complies with
reasonable banking practices, Bank shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. Bank shall
not bear any risk of loss, damage, or destruction to the Collateral.
9.6 REMEDIES CUMULATIVE. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not expressly set forth herein as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election, or acquiescence by it. No waiver by Bank
shall be effective unless made in a written document signed on behalf of Bank
and then shall be effective only in the specific instance and for the specific
purpose for which it was given.
9.7 DEMAND; PROTEST. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be liable.
10. NOTICES
Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, by certified
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mail, postage prepaid, return receipt requested, or by telefacsimile to Borrower
or to Bank, as the case may be, at its addresses set forth below:
If to Borrower Centra Software, Inc.
430 Bedford Street
Lexington, Massachusetts 02173
Attn: Steve Johnson
FAX: (781) 863-2788
If to Bank Silicon Valley Bank
40 William Street
Wellesley, Massachusetts 02181
Attn: Mr. Andrew H. Tsao, Vice President
FAX: (781) 431-9906
with a copy to: Riemer & Braunstein
Three Center Plaza
Boston, Massachusetts 02108
Attn: David A. Ephraim, Esquire
FAX: (617) 723-6831
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
11. CHOICE OF LAW AND VENUE; JURY WAIVER
The laws of the Commonwealth of Massachusetts shall apply to this
Agreement. BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS IN ANY ACTION, SUIT,
OR PROCEEDING OF ANY KIND, AGAINST IT WHICH ARISES OUT OF OR BY REASON OF THIS
AGREEMENT; PROVIDED, HOWEVER, THAT IF FOR ANY REASON BANK CANNOT AVAIL ITSELF OF
THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS, BORROWER ACCEPTS JURISDICTION
OF THE COURTS AND VENUE IN SANTA CLARA COUNTY, CALIFORNIA.
BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE
LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER
CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH
PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
-21-
<PAGE>
12. GENERAL PROVISIONS
12.1 SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
benefit of the respective successors and permitted assigns of each of the
parties; PROVIDED, HOWEVER, that neither this Agreement nor any rights hereunder
may be assigned by Borrower without Bank's prior written consent, which consent
may be granted or withheld in Bank's sole discretion. Bank shall have the right
without the consent of or notice to Borrower to sell, transfer, negotiate, or
grant participation in all or any part of, or any interest in, Bank's
obligations, rights and benefits hereunder.
12.2 INDEMNIFICATION. Borrower shall , indemnify, defend, protect and
hold harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by the Loan Documents;
and (b) all losses or Bank Expenses in any way suffered, incurred, or paid by
Bank as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under the Loan Documents, or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
12.3 TIME OF ESSENCE. Time is of the essence for the performance of all
obligations set forth in this Agreement.
12.4 SEVERABILITY OF PROVISIONS. Each provision of this Agreement shall
be severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
12.5 AMENDMENTS IN WRITING, INTEGRATION. This Agreement cannot be
amended or terminated except by a writing signed by Borrower and Bank. All prior
agreements, understandings, representations, warranties, and negotiations
between the parties hereto with respect to the subject matter of this Agreement,
if any, are merged into this Agreement and the Loan Documents.
12.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
12.7 SURVIVAL. All covenants, representations and warranties made in
this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrower to indemnify Bank
with respect to the expenses, damages, losses, costs and liabilities described
in Section 12.2 shall survive until all applicable statute of limitations
periods with respect to actions that may be brought against Bank have run.
12.8 CONFIDENTIALITY. In handling any confidential information Bank
shall exercise the same degree of care that it exercises with respect to its own
proprietary information of the same types to maintain the confidentiality of any
non-public information thereby received or received pursuant to this Agreement
except that disclosure of such information may be made (i) to the subsidiaries
or affiliates of Bank in connection with their present or prospective business
relations with Borrower, (ii) to prospective transferees or purchasers of any
interest in the Loans, provided that they have entered into a comparable
confidentiality agreement in favor of Borrower and have delivered a copy to
Borrower, (iii) as required by law, regulations, rule or order, subpoena,
judicial order or similar order, (iv) as may be required in connection with the
examination, audit or similar investigation of Bank, and (v) as Bank may deem
-22-
<PAGE>
appropriate in connection with the exercise of any remedies hereunder.
Confidential information hereunder shall not include information that either:
(a) is in the public domain or in the knowledge or possession of Bank when
disclosed to Bank, or becomes part of the public domain after disclosure to
Bank through no fault of Bank; or (b) is disclosed to Bank by a third party,
provided Bank does not have actual knowledge that such third parry is
prohibited from disclosing such information.
12.9 COUNTERSIGNATURE. This Agreement shall become effective only when
it shall have been executed by Borrower and Bank (provided, however, in no event
shall this Agreement become effective until signed by an officer of Bank in
California).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
CENTRA SOFTWARE, INC.
By: /s/ STEPHEN A. JOHNSON
-------------------------------
Title: Director of Finance
----------------------------
SILICON VALLEY BANK, d/b/a
SILICON VALLEY EAST
By: /s/ ANDREW TSAW
------------------------------
Name: ANDREW TSAN
----------------------------
Title: Vice President
---------------------------
-23-
<PAGE>
SILICON VALLEY BANK
By: /s/ MICHELLE GIANNINI
------------------------------
Name: MICHELLE GIANNINI
----------------------------
Title: Asst. Vice President
---------------------------
(Signed in Santa Clara County,
California)
-24-
<PAGE>
EXHIBIT A
The Collateral shall consist of all right, title and interest of Borrower in and
to the following:
(a) All goods and equipment now owned or hereafter acquired,
including, without limitation, all machinery, fixtures, vehicles
(including motor vehicles and trailers), and any interest in any of the
foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions, and improvements to any of the foregoing,
wherever located;
(b) All inventory, now owned or hereafter acquired, including,
without limitation, all merchandise, raw materials, parts, supplies,
packing and shipping materials, work in process and finished products
including such inventory as is temporarily out of Borrower's custody or
possession or in transit and including any returns upon any accounts or
other proceeds, including insurance proceeds, resulting from the sale
or disposition of any of the foregoing and any documents of title
representing any of the above, and Borrower's Books relating to any of
the foregoing;
(c) All contract rights and general intangibles now owned or
hereafter acquired, including, without limitation, goodwill, leases,
license agreements, franchise agreements, blueprints, drawings,
purchase orders, customer lists, route lists, claims, literature,
reports, catalogs, income tax refunds, payments of insurance and rights
to payment of any kind;
(d) All now existing and hereafter arising accounts, contract
rights, royalties, license rights and all other forms of obligations
owing to Borrower arising out of the sale or lease of goods, the
licensing of technology or the rendering of services by Borrower,
whether or not earned by performance, and any and all credit insurance,
guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by Borrower and Borrower's Books relating to
any of the foregoing;
(e) All documents, cash, deposit accounts, securities, letters
of credit, certificates of deposit, instruments and chattel paper now
owned or hereafter acquired and Borrower's Books relating to the
foregoing; and
(f) Any and all claims, rights and interests in any of the
above and all substitutions for, additions and accessions to and
proceeds thereof.
Notwithstanding the foregoing, the Collateral shall not be deemed to include any
copyright rights, copyright applications, copyright registrations and like
protections in each work of authorship and derivative work thereof, whether
published or unpublished, now owned or hereafter acquired; any patents,
trademarks, servicemarks and applications therefor; any trade secret rights,
including any rights to unpatented inventions, know-how, operating manuals,
license rights and agreements and confidential information, now owned or
hereafter acquired; or any claims for damages by way of any past, present and
future infringement of any of the foregoing.
<PAGE>
EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE:
---------------
FAX#: (408) TIME:
-------------- ----------
FROM: CENTRA SOFTWARE, INC.
--------------------------------------------------------------------------
BORROWER'S NAME
FROM:
--------------------------------------------------------------------------
AUTHORIZED SIGNER'S NAME
- --------------------------------------------------------------------------------
AUTHORIZED SIGNATURE
PHONE:
--------------------------------------------------------------------------
FROM ACCOUNT # TO ACCOUNT#
---------------------- -----------------------
<TABLE>
<CAPTION>
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
<S> <C>
PRINCIPAL INCREASE (ADVANCE $
PRINCIPAL PAYMENT (ONLY) $
INTEREST PAYMENT (ONLY) $
PRINCIPAL AND INTEREST (PAYMENT) $
OTHER INSTRUCTIONS:
</TABLE>
All representations and warranties of Borrower stated in the Loan and
Security Agreement are true, correct and complete in all material respects as of
the date of the telephone request for and Advance confirmed by this Advance
Request; provided, however, that those representations and warranties expressly
referring to another date shall be true, correct and complete in all material
respects as of such date.
<PAGE>
BANK USE ONLY:
TELEPHONE REQUEST:
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
- ---------------------------
Authorized Requester
-------------------------------
Authorized Signature (Bank)
Phone #
------------------------
<PAGE>
EXHIBIT C
BORROWING BASE CERTIFICATE
<TABLE>
<S> <C> <C>
Borrower: Centra Software, Inc. Bank: Silicon Valley Bank
Commitment Amount: $1,250,000.00
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of ______ $
----------------
2. Additions (please explain on reverse) $
-----------------
3. TOTAL ACCOUNTS RECEIVABLE $
----------------
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $
-----------------
5. Balance of 50% over 90 day accounts $
----------------
6. Concentration Limits $
-----------------
7. Foreign Accounts $
-----------------
8. Governmental Accounts $
-----------------
9. Contra Accounts $
-----------------
10. Promotion or Demo Accounts $
----------------
11. Intercompany/Employee Accounts $
-----------------
12. Other (please explain on reverse) $
-----------------
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $
----------------
14. Eligible Accounts (#3 minus #13) $
-----------------
15. LOAN VALUE OF ACCOUNTS (75% of #14) $
----------------
BALANCES
16. Maximum Loan Amount $
-----------------
17. Total Funds Available [Lesser of #16 or #15] $
----------------
18. Present balance owing on Line of Credit $
-----------------
19. Outstanding under Sublimits, if any $
-----------------
20. RESERVE POSITION (#17 minus #18 and #19) $
-----------------
</TABLE>
THE UNDERSIGNED REPRESENTS AND WARRANTS THAT THE FOREGOING IS TRUE, COMPLETE AND
CORRECT, AND THAT THE INFORMATION REFLECTED IN THIS BORROWING BASE CERTIFICATE
COMPLIES WITH THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THE LOAN AND
SECURITY AGREEMENT BETWEEN THE UNDERSIGNED AND SILICON VALLEY BANK.
COMMENTS:
BANK USE ONLY
Received By:__________________
Date:________________
Reviewed By:_________________
Compliance Status: Yes/No
- -------------------------
By:
----------------------
Authorized Signer
<PAGE>
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: CENTRA SOFTWARE, INC.
The undersigned authorized officer of Centra Software, Inc. hereby
certifies that in accordance with the terms and conditions of the Loan and
Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower is
in complete compliance for the period ending ___________ with all required
covenants except as noted below and (ii) all representations and warranties of
Borrower stated in the Agreement are true and correct in all material respects
as of the date hereof. Attached herewith are the required documents supporting
the above certification. The Officer further certifies that these are prepared
in accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes. The Officer expressly acknowledges that h no
borrowings may be requested by the Borrower at any time or date of determination
that Borrower is not in compliance with any of the terms of the Agreement, and
that such compliance is determined not just at the date this certificate is
delivered.
Please indicate compliance status by circling Yes/No under "Complies"
column.
<TABLE>
<S> <C> <C> <C>
REPORTING COVENANT REQUIRED COMPLIES
Monthly financial statements and CC Monthly within 25 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
BBC and A/R Monthly within 25 days Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
Maintain on a Monthly Basis:
Minimum Quick Ratio 2.0:1.0 ____:1.0 Yes No
Profitability:
(a) $2,000,000.00 - 1st quarter 1998; and _______ Yes No
(b) $1,500,000.00 - 2nd quarter 1998. _______ Yes No
Minimum Equity (raised by 2/28/98) $3,500,000.00 _______ Yes No
</TABLE>
COMMENTS REGARDING EXCEPTIONS:
Sincerely, BANK USE ONLY
Received By:__________________
_____________________ Date:____________ Date:________________
SIGNATURE Reviewed By:_________________
Compliance Status: Yes/No
_____________________
TITLE
<PAGE>
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of June 1, 1998 and
effective as of May 5, 1998, by and between Centra Software, Inc. ("Borrower")
whose address is 430 Bedford Street, Lexington, MA 02173 and Silicon Valley
Bank, a California-chartered bank ("Bank"), with its principal place of business
at 3003 Tasman Drive, Santa Clara, CA 95054 and with a loan production office
located at Wellesley Office Park, 40 William Street, Suite 350, Wellesley, MA
02181, doing business under the name "Silicon Valley East".
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may be
owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among other
documents, a Loan and Security Agreement, dated November 5, 1997, as may be
amended from time to time, (the "Loan Agreement'). The Loan Agreement provided
for, among other things, a Committed Equipment Line in the original principal
amount of Five Hundred Thousand Dollars ($500,000) (the "Equipment Facility").
Defined terms used but not otherwise defined herein shall have the same meanings
as in the Loan Agreement.
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Indebtedness."
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is
secured by the Collateral as described in the Loan Agreement. Furthermore,
Borrower has agreed not to sell, transfer, assign, mortgage, pledge, lease,
grant a security interest in, or encumber any of its intellectual property as
further described in that certain Negative Pledge Agreement, dated November 5,
1997, by and between Borrower and Bank.
Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Indebtedness shall be
referred to as the "Security Documents". Hereinafter, the Security Documents,
together with all other documents evidencing or securing the Indebtedness shall
be referred to as the "Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
A. MODIFICATION(S) TO LOAN AGREEMENT.
1. The first sentence in item "(a)" under Section 2.1.2
entitled "Equipment Advances" is hereby amended to
read as:
Subject to and upon the terms and conditions of this
Agreement, at any time from the date hereof through
November 5, 1998 (the "Equipment Availability End
Date"), Bank agrees to make advances (each an
"Equipment Advance" and collectively, the "Equipment
Advances") to Borrower in an aggregate outstanding
amount not to exceed the Committed Equipment Line.
2. The second and fourth paragraphs under Section 6.3
entitled "Financial Statements, Reports,
Certificates" are hereby deleted.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.
1
<PAGE>
5. NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it has
no defenses against the obligations to pay any amounts under the Indebtedness.
6. CONTINUING VALIDITY. Borrower understands and agrees that in modifying
the existing Indebtedness, Bank is relying upon Borrower's representations,
warranties, and agreements, as set forth in the Existing Loan Documents.
Except as expressly modified pursuant to this Loan Modification Agreement,
the terms of the Existing Loan Documents remain unchanged and in full force
and effect. Bank's agreement to modifications to the existing Indebtedness
pursuant to this Loan Modification Agreement in no way shall obligate Bank to
make any future modifications to the Indebtedness. Nothing in this Loan
Modification Agreement shall constitute a satisfaction of the Indebtedness.
It is the intention of Bank and Borrower to retain as liable parties all
makers and endorsers of Existing Loan Documents, unless the party is
expressly released by Bank in writing. No maker, endorser, or guarantor will
be released by virtue of this Loan Modification Agreement. The terms of this
Paragraph apply not only to this Loan Modification Agreement, but also to
all subsequent loan modification agreements.
7. JURISDICTION/VENUE. Borrower accepts for itself and in connection with
its properties, unconditionally, the non-exclusive jurisdiction of any state
of federal court of competent jurisdiction in the Commonwealth of
Massachusetts in any action, suit, or proceeding of any kind against it which
arises out of or by reason of this Loan Modification Agreement provided,
however, that if for any reason Bank cannot avail itself of the courts of
the Commonwealth of Massachusetts, then venue shall lie in Santa Clara
County, California.
8. COUNTERSIGNATURE. This Loan Modification Agreement shall become
effective only when it shall have been executed by Borrower and Bank
(provided, however, in no event shall this Loan Modification Agreement become
effective until signed by an officer of Bank in California).
This Loan Modification Agreement is executed as of the date first
written above.
BORROWER: BANK:
CENTRA SOFTWARE, INC. SILICON VALLEY BANK, doing
business as SILICON VALLEY EAST
By: /s/ Stephen A. Johnson By: /s/Andrew Tsho
---------------------------------- ---------------------------------
Name: STEPHEN A. JOHNSON Name: ANDREW TSHO
-------------------------------- -------------------------------
Title: DIRECTOR OF FINANCE AND ADMIN. Title: VICE PRESIDENT
------------------------------- ------------------------------
SILICON VALLEY BANK
By: /s/Michelle D. Giannini
---------------------------------
Name: MICHELLE D. GIANNINI
-------------------------------
Title: ASST. VICE PRESIDENT
------------------------------
(Signed at Santa Clara County, CA)
2
<PAGE>
FIRST LOAN MODIFICATION AGREEMENT
This First Loan Modification Agreement is entered into as of December
30, 1998, by and between CENTRA SOFTWARE, INC., a Delaware corporation with its
principal place of business at 430 Bedford Street, Lexington, Massachusetts
02173 ("Borrower") and SILICON VALLEY BANK a California-chartered bank ("Bank"),
with its principal place of business at 3003 Tasman Drive, Santa Clara, CA 95054
and with a loan production office located at Wellesley Office Park, 40 William
Street Suite 350, Wellesley, MA 02481, doing business under the name "Silicon
Valley East".
1. DESCRIPTION OF EXISTING INDEBTEDNESS. Among other indebtedness which may be
owing by Borrower to Bank, Borrower is indebted to Bank pursuant to a loan
arrangement dated as of November 5, 1997, evidenced by, among other documents, a
certain Loan and Security Agreement dated as of November 5, 1997 (the "Loan
Agreement"). The Loan Agreement established: (ii) a working capital line of
credit in favor of the Borrower in the maximum principal amount of One Million
Two Hundred Fifty Thousand Dollars ($1,250,000.00) (the "Committed Revolving
Line"), and (ii) an equipment line of credit in favor of the Borrower in the
maximum principal amount of Five Hundred Thousand Dollars ($500,000.00) (the
"1997 Equipment Line"). Capitalized terms used but not otherwise defined herein
shall have the same meaning as in the Loan Agreement
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Indebtedness".
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is
secured by the Collateral as described in the Loan Agreement (together with any
other collateral security granted to Bank, the "Security Documents").
Hereinafter, the Security Documents, together with all other documents
evidencing or securing the Indebtedness shall be referred to as the "Existing
Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
A. MODIFICATIONS TO LOAN AGREEMENT.
1. The Loan Agreement shall be amended by deleting the
following definition appearing in Section 1.1
thereof:
""Borrowing Base" means (x) prior to the
Bridge Maturity Date, an amount equal to the
Committed Revolving Line and (y) as of, and
subsequent to the Bridge Maturity Date, an
amount equal to Seventy Five percent (75%)
of Eligible Accounts, as determined by Bank
with reference to the most recent Borrowing
Base Certificate delivered by Borrower."
and inserting in lieu thereof the following:
""Borrowing Base" means an amount equal to
Seventy Five percent (75%) of Eligible
Accounts, as determined by Bank with
reference to the most recent Borrowing Base
Certificate delivered by Borrower."
<PAGE>
2. The Loan Agreement shall be amended by deleting the
following definition appearing in Section 1.1
thereof:
""Committed Revolving Line" means a credit
extension of up to One Million Two Hundred
and Fifty Thousand Dollars ($1,250,000.00)."
and inserting in lieu thereof the following:
""Committed Revolving Line" means a credit
extension of up to Seven Hundred Fifty
Thousand Dollars ($750,000.00)."
3. The Loan Agreement shall be amended by deleting the
following text appearing as paragraph (c) in the
definition of "Eligible Accounts" in Section 1.1
thereof:
"(c) Accounts with respect to an account
debtor, including Affiliates, whose total
obligations to Borrower exceed twenty-five
percent (25%) of all Accounts to the extent
such obligations exceed the aforementioned
percentage, except as approved in writing by
Bank;"
and inserting in lieu thereof the following:
"(c) Accounts with respect to an account
debtor, including Affiliates, whose total
obligations to Borrower exceed thirty
percent (30.0%) of all Accounts to the
extent such obligations exceed the
aforementioned percentage, except as
approved in writing by Bank;"
4. The Loan Agreement shall be amended by deleting the
following definition appearing in Section 1.1
thereof:
""Equipment Advance" has the meaning set
forth in Section 2.1.2."
and inserting in lieu thereof the following:
""Equipment Advance" or "Equipment Advances"
shall mean any advance made hereunder
pursuant to Section 2.1.2 or Section 2.1.3."
5. All references to "Committed Equipment Line" in the
Loan Agreement shall mean and refer to the "1997
Committed Equipment Line".
6. The Loan Agreement shall be amended by inserting the
following definitions immediately after the
definition of "Negotiable Collateral" appearing in
Section 1.1 thereof:
""1999 Committed Equipment Line" means a
credit extension of up to Six Hundred
Thousand Dollars ($600,000.00).
"1999 Equipment Availability End Date" has
the meaning set forth in Section 2.1.3.
-2-
<PAGE>
"1999 Equipment Maturity Date" means
September 30, 2002."
7. The Loan Agreement shall be amended by deleting the
following definition appearing in Section 1.1
thereof:
""Maturity Date" means the later of (x) the
Equipment Maturity Date, (y) the Revolving
Maturity Date, or (z) the Bridge Maturity
Date."
and inserting in lieu thereof the following:
""Maturity Date" means the later of (x) the
Equipment Maturity Date, (y) the 1999
Equipment Maturity Date, or (z) the
Revolving Maturity Date."
8. The Loan Agreement shall be amended by deleting the
following text appearing as paragraph (a) in the
definition of "Permitted Indebtedness" appearing in
Section 1.1 thereof:
"(a) Indebtedness of Borrower in favor of
Bank arising under this Agreement or any
other Loan Document;"
and inserting in lieu thereof the following:
"(a) Indebtedness of Borrower in favor of
Bank arising under this Agreement or any
other Loan Document and any indebtedness of
Borrower in favor of Bank pertaining to the
leasing of equipment."
9. The Loan Agreement shall be amended by deleting the
following definition appearing in Section 1.1
thereof:
""Revolving Maturity Date" means the Bridge
Maturity Date, provided, however, that if
Bank has completed an audit of Borrower's
Accounts, and such audit is satisfactory to
Bank in its sole and absolute discretion,
the Revolving Maturity Date shall mean one
day prior to the date which is one year from
the Closing Date if the Capitalization Event
occurs prior to the Bridge Maturity Date."
and inserting in lieu thereof the following:
""Revolving Maturity Date" means December
30,1999."
10. The Loan Agreement shall be amended by inserting the
following definitions immediately after the
definition of "Subsidiary" appearing in Section 1.1
thereof:
""Tangible Net Worth" means as of any
applicable date, the consolidated total
assets of Borrower and its Subsidiaries
MINUS, without duplication, (i) the sum of
any amounts attributable to (a) goodwill,
(b) intangible items such as unamortized
debt discount and expense, patents, trade
and service marks and names, copyrights and
research and development
-3-
<PAGE>
expenses except prepaid expenses, and (c)
all reserves not already deducted from
assets, AND (ii) Total Liabilities.
"Total Liabilities" means as of any
applicable date, any date as of which the
amount thereof shall be determined, all
obligations that should, in accordance with
GAAP be classified as liabilities on the
consolidated balance sheet of Borrower,
including in any event all Indebtedness, but
specifically excluding Subordinated Debt."
11. The Loan Agreement shall be amended by deleting the
following definition appearing in Section 1.1
thereof:
""Bridge Maturity Date" means the earlier of
(i) the date of the closing of a
Capitalization Event, or (ii) February 28,
1998."
12. Section 2.1.2 of the Loan Agreement shall be retitled
as "1997 Equipment Advances".
13. The Loan Agreement shall be amended by inserting
after Section 2.1.2 thereof the following new section
entitled "l999 Equipment Advances":
"2.1.3 1999 EQUIPMENT ADVANCES.
(a) Subject to and upon the terms and conditions of
this Agreement at any time through September 30, 1999
(the "1999 Equipment Availability End Date"), Bank
agrees to make Equipment Advances (each an "Equipment
Advance" and collectively, the "Equipment Advances")
to Borrower under this Section 2.1.3 in an aggregate
outstanding amount not to exceed the 1999 Committed
Equipment Line. To evidence the Equipment Advances,
Borrower shall deliver to Bank, at the time of each
Equipment Advance request an Invoice for the
equipment to be purchased. Each invoice submitted at
the time of each Equipment Advance request may not be
more than ninety (90) days past the invoice date in
order to be eligible for an Equipment Advance. The
Equipment Advances shall be used only to purchase
Equipment and shall not exceed One Hundred Percent
(100%) of the invoice amount of such equipment
approved from time to time by Bank, excluding taxes,
shipping, warranty charges, freight discounts and
installation expense. Software may only constitute up
to twenty-five percent (25%) of aggregate Equipment
Advances.
(b) Notwithstanding the foregoing, Equipment Advances
supported by invoices dated on or after October 1,
1997 through June 30, 1998 shall be permitted but
shall be limited to, in the aggregate, Two Hundred
Fifty Thousand Dollars ($250,000.00). All such
invoices dated on or after October 1, 1997 through
June 30, 1998 must be submitted to the Bank on or
before December 30, 1998 in order to be eligible for
an Equipment Advance hereunder. Any Equipment
Advances supported by invoices dated on or after
October 1, 1997 through June 30, 1998 shall be
payable in thirty-six (36) equal monthly installments
of principal, plus all accrued interest beginning on
the Payment
-4-
<PAGE>
Date of each month commencing In January 1999 and
ending on December 30, 2001.
(c) Notwithstanding the foregoing, Equipment Advances
supported by invoices dated on or after July 1, 1998
through September 30, 1998 shall be permitted and
shall be subject to and upon the terms and conditions
of this Agreement. All such invoices dated on or
after July 1, 1998 through September 30, 1998 must be
submitted to the Bank on or before December 30, 1998
in order to be eligible for an Equipment Advance
hereunder. Any Equipment Advances supported by
invoices dated on or after July 1, 1998 through
September 30, 1998 shall be payable in thirty-six
(36) equal monthly installments of principal, plus
all accrued interest, beginning on the Payment Date
of each month commencing in January 1999 and ending
on December 30, 2001.
(d) Interest shall accrue from the date of each
Equipment Advance made pursuant to this Section 2.1.3
at a per annum rate equal to the aggregate of the
Prime Rate, PLUS One percent (1.0%), and shall be
payable monthly on the Payment Date of each month
through the month in which the 1999 Equipment
Availability End Date falls. Amounts currently
amortizing under Section 2.1.2 above shall continue
to be repaid as provided in Section 2.1.2 above, and
shall be treated as existing Equipment Advances under
the 1997 Committed Equipment Line. Except as provided
in paragraphs (b) and (c) of this Section 2.1.3, any
Equipment Advances made pursuant to this Section
2.1.3 that are outstanding on the 1999 Equipment
Availability End Date will be payable in thirty-six
(36) equal monthly installments of principal, plus
all accrued interests beginning on the Payment Date
of each month following the 1999 Equipment
Availability End Date and ending on the 1999
Equipment Maturity Date. Equipment Advances, once
repaid, may not be reborrowed.
(e) When Borrower desires to obtain an Equipment
Advance, Borrower shall notify Bank (which notice
shall be irrevocable) by facsimile transmission to be
received no later than 3:00 p.m. Eastern time one (1)
Business Day before the day on which the Equipment
Advance is to be made. Such notice shall be
substantially in the form of Exhibit B. The notice
shall be signed by a Responsible Officer or its
designee and include a copy of the invoice for the
Equipment to be financed."
14. The Loan Agreement shall be amended by deleting the
following text appearing as paragraph (a) of Section
2.3 entitled "Interest Rates, Payments, and
Calculations":
"(a) INTEREST RATE. Except as set forth in
Section 2.3(b), any Advances shall bear
interest on the average daily balance
thereof, at a per annum rate equal to Three
Quarters of One percentage point (0.75%)
above the Prime Rate; provided however,
subsequent to the Capitalization Event, any
Advances shall bear interest on the average
daily balance thereof, at a per annum rate
equal to One half of One percentage point
(0.50%) above the Prime Rate."
-5-
<PAGE>
and inserting in lieu thereof the following:
"(a) INTEREST RATE. Except as set forth in
Section 2.3(b), any Advances shall bear
interest, on the average daily balance
thereof, at a per annum rate equal to the
aggregate of the Prime Rate, PLUS One Half
of One percentage point (0.50%)."
15. The Loan Agreement shall be amended by deleting the
following text appearing as section (a) in the first
paragraph of Section 6.3 entitled "Financial
Statements, Reports, Certificates":
"(a) as soon as available. but in any event
within twenty five (25) days after the end
of each month, a company prepared
consolidated balance sheet and income
statement covering Borrower's consolidated
operations during such period, in a form and
certified by an officer of Borrower
reasonably acceptable to Bank;"
and inserting in lieu thereof the following:
"(a) as soon as available, but in any event
within twenty (20) days after the end of
each month through the month ending March
31, 1999, and within twenty-five (25) days
after the end of each month thereafter, a
company prepared consolidated balance sheet
and income statement covering Borrower's
consolidated operations during such period,
in a form and certified by an officer of
Borrower reasonably acceptable to Bank;"
16. The Loan Agreement shall be amended by deleting the
following text appearing as the second paragraph of
Section 6.3 entitled "Financial Statements, Reports,
Certificates":
"Within twenty-five (25) days after the last
day of each month, beginning with the first
month after the Bridge Maturity Date,
Borrower shall deliver to Bank a Borrowing
Base Certificate signed by a Responsible
Officer in substantially the form of EXHIBIT
C hereto, together with aged listings of
accounts receivable."
and inserting in lieu thereof the following:
"Borrower shall deliver to Bank within
twenty (20) days after the last day of each
month through the month ending March 31,
1999, and within twenty-five (25) days after
the end of each month thereafter, but only
with respect to months which either (i)
Obligations are outstanding, or (ii) Credit
Extensions were made, a Borrowing Base
Certificate signed by a Responsible Officer
in substantially the form of EXHIBIT C
hereto, together with aged listings of
accounts receivable."
-6-
<PAGE>
17. The Loan Agreement shall be amended by deleting the
following text appearing as the fourth paragraph of
Section 6.3 entitled "Financial Statements, Reports,
Certificates":
"Bank shall have a right from time to time
hereafter to audit Borrower's Accounts at
Borrower's expense, provided that such
audits will be conducted no more often than
every twelve (12) months unless an Event of
Default has occurred and is continuing."
and inserting in lieu thereof the following:
"Bank shall have a right from time to time
hereafter to audit Borrower's Accounts at
Borrower's expense, provided that such
audits will be conducted no more often than
every twelve (12) months unless an Event of
Default has occurred and is continuing. An
audit of the Borrower's Accounts pursuant to
this Section 6.3 shall be completed and
satisfactory to Bank in its sole and
absolute discretion on or before March 31,
1999."
18. The Loan Agreement shall be amended by deleting the
following text appearing as Sections 6.8, 6.9 and
6.10 thereof:
"6.8 QUICK RATIO. As of and subsequent to
the Bridge Maturity Date, Borrower shall
maintain, as of the last day of each
calendar month, a ratio of Quick Assets to
Current Liabilities of at least 2.0 to 1.0.
The Quick Ratio shall be calculated net of
deferred revenue.
6.9 PROFITABILITY. Borrower shag not incur a
net loss in excess of: (a) Two Million
Dollars ($2,000,000.00) for the first
quarter of calendar year ending 1998; and
(b) One Million Five Hundred Thousand
Dollars ($1,500,000.00) for the second
quarter of calendar year ending 1998.
6.10 CAPITALIZATION EVENT. Borrower shall
provide the Bank with evidence, such
evidence being satisfactory to the Bank,
that Borrower has completed the
Capitalization Event on or before February
28, 1998."
and inserting in lieu thereof the following:
"6.8 ADJUSTED QUICK RATIO. Borrower shall
maintain, as of the last day of each
calendar month, a ratio of Quick Assets to
Current Liabilities of at least: (i) 1.50 to
1.0 as of last day of the month ending
November 30, 1998, (ii) 1.25 to 1.0 as of
last day of each month thereafter through
the month ending February 28, 1999, and
(iii) 1.50 to 1.0 as of the last day of each
month thereafter. The Quick Ratio shall be
calculated net of deferred revenue.
6.9 TANGIBLE NET WORTH. Borrower shall
maintain, as of the last day of each
quarter, a Tangible Net Worth of not less
than the aggregate of (i) One Million Five
Hundred Thousand Dollars ($1,500,000.00),
PLUS
-7-
<PAGE>
(ii) thirty percent (30.0%) of the amount of
funds received by Borrower from any new
equity issued by Borrower."
19. The Loan Agreement shall be amended by inserting
after paragraph (b) in Section 8.2 entitled "Covenant
Default" the following new paragraph:
"(c) If the audit of Borrower's Accounts to
be completed on or before March 31, 1999
pursuant to Section 6.3 hereof is not
satisfactory to Bank in its sole and
absolute discretion."
20. The Borrower hereby ratifies, confirms and reaffirms,
all and singular, the terms and conditions of a
certain Negative Pledge Agreement dated as of
November 5, 1997 between Borrower and Bank, and
acknowledges, confirms and agrees that said Negative
Pledge Agreement shall remain in full force and
effect.
21. The Borrowing Base Certificate appearing as EXHIBIT C
to the Loan Agreement is hereby replaced with the
Compliance Certificate attached as EXHIBIT A hereto.
22. The Compliance Certificate appearing as EXHIBIT D to
the Loan Agreement is hereby replaced with the
Compliance Certificate attached as EXHIBIT B hereto.
4. FEE. Borrower shall pay to Bank a modification fee equal to Three Thousand
Seven Hundred Fifty Dollars ($3,750.00), which fee shall be due on the date
hereof and shall be deemed fully earned as of the date hereof.
5. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.
6. RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and
reaffirms all terms and conditions of all security or other collateral granted
to the Bank, and confirms that the indebtedness secured thereby includes,
without limitation, the Indebtedness.
7. NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it is not
aware of any defenses against the obligations to pay any amounts under the
Indebtedness.
8. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
existing Indebtedness, Bank is relying upon Borrower's representations,
warranties, and agreements, as set forth in the Existing Loan Documents. Except
as expressly modified pursuant to this Loan Modification Agreement, the terms of
the Existing Loan Documents remain unchanged and in full force and effect.
Bank's agreement to modifications to the existing Indebtedness pursuant to this
Loan Modification Agreement in no way shall obligate Bank to make any future
modifications to the Indebtedness. Nothing in this Loan Modification Agreement
shall constitute a satisfaction of the Indebtedness. It is the intention of Bank
and Borrower to retain as liable parties all makers of Existing Loan Documents,
unless the party is expressly released by Bank in writing. No maker will be
released by virtue of this Loan Modification Agreement.
9. JURISDICTION/VENUE. Borrower accepts for itself and in connection with its
properties, unconditionally, the non-exclusive jurisdiction of any state or
federal court of competent jurisdiction in the Commonwealth of Massachusetts in
any action, suit or proceeding of any kind against it which arises
-8-
<PAGE>
out of or by reason of this Loan Modification Agreement provided, however, that
if for any reason Bank cannot avail itself of the courts of the Commonwealth of
Massachusetts, then venue shall lie in Santa Clara County, California.
10. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
only when it shall have been executed by Borrower and Bank (provided, however,
in no event shall this Loan Modification Agreement become effective until signed
by an officer of Bank in California).
This Loan Modification Agreement is executed as a sealed Instrument
under the laws of the Commonwealth of Massachusetts as of the date first written
above.
BORROWER: BANK:
CENTRA SOFTWARE, INC. SILICON VALLEY BANK, doing business as
SILICON VALLEY EAST
By: /s/ Stephen A. Johnson By: /s/ Dave C. Edmunds
---------------------------- -------------------------------
Name: Stephen A. Johnson Name: Dave C. Edmunds
-------------------------- -----------------------------
Title: CFO Title: SVP
------------------------- ----------------------------
SILICON VALLEY BANK
By: /s/ HEIDI [IILEGIBLE]
-------------------------------
Name: Heidi [Illegible]
-----------------------------
Title: Loan Officer
----------------------------
(signed in Santa Clara County,
California)
-9-
<PAGE>
EXHIBIT A
BORROWING BASE CERTIFICATE
<TABLE>
<S> <C> <C>
Borrower: CENTRA SOFTWARE, INC Bank: Silicon Valley Bank
Commitment Amount: $750,000.00
ACCOUNTS RECEIVABLE
1) Accounts Receivable Book Value as of _________ $
-----------------
2) Additions (please explain on reverse) $
-----------------
3) TOTAL ACCOUNTS RECEIVABLE $
-----------------
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4) Amounts over 90 days due $
-----------------
5) Balance of 50% over 90 day accounts $
-----------------
6) Concentration Limits $
-----------------
7) Foreign Accounts $
-----------------
8) Governmental Accounts $
-----------------
9) Contra Accounts $
-----------------
10) Promotion or Demo Accounts $
-----------------
11) Intercompany/Employee Accounts $
-----------------
12) Other (please explain on reverse) $
-----------------
13) TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $
-----------------
14) Eligible Accounts (#3 minus #13) $
-----------------
15) LOAN VALUE OF ACCOUNTS (75% of #14) $
-----------------
BALANCES
16) Maximum Loan Amount $
-----------------
17) Total Funds Available [Lesser of #16 or #15] $
-----------------
18) Present balance owing on Line of Credit $
-----------------
19) RESERVE POSITION (#17 minus #18) $
-----------------
</TABLE>
THE UNDESIGNED REPRESENTS AND WARRANTS THAT THE FOREGOING IS TRUE, COMPLETE AND
CORRECT, AND THAT THE INFORMATION REFLECTED IN THIS BORROWING BASE CERTIFICATE
COMPLIES WITH THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THE LOAN AND
SECURITY AGREEMENT BETWEEN THE UNDERSIGNED AND SILICON VALLEY BANK.
COMMENTS: BANK USE ONLY
Received
By:____________________________
- -------------------------- Date:__________________________
Reviewed
By:____________________________
Compliance Status: Yes / No
By:
----------------------
Authorized Signer
EXHIBIT B
COMPLIANCE CERTIFICATE
-10-
<PAGE>
TO: SILICON VALLEY BANK
FROM: CENTRA SOFTWARE, INC.
The undersigned authorized officer of CENTRA SOFTWARE, INC. hereby
certifies that in accordance with the terms and conditions of the Loan and
Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower is
in complete compliance for the period ending _________ with all required
covenants except as noted below and (ii) all representations and warranties of
Borrower stated in the Agreement are true and correct in all material respects
as of the date hereof. Attached herewith are the required documents supporting
the above certification. The Officer further certifies that these are prepared
in accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes. The Officer expressly acknowledges that no
borrowings may be requested by the Borrower at any time or date of determination
that Borrower is not in compliance with any of the terms of the Agreement, and
that such compliance is determined not just at the date this certificate is
delivered.
Please indicate compliance status by circling Yes/No under
"Complies" column.
<TABLE>
<S> <C> <C> <C>
REPORTING COVENANT REQUIRED COMPLIES
Monthly financial statements Monthly within 20 days thru 3/31/99; Yes No
within 25 days thereafter
Monthly CC Monthly within 25 days Yes No
Monthly BBC & A/R Agings Monthly within 20 days thru 3/31/99; Yes No
within 25 days thereafter (when borrowing)
Annual (CPA Audited) FYE within 90 days Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
Maintain:
Minimum Adjusted Quick Ratio (monthly) 1.50:1.0 for month end _____:1.0 Yes No
11/30/98; 1.25:1.0 thru
2/28/99; and 1.5:1.0 thereafter
Minimum Tangible Net Worth (quarterly) $1,500,000, plus 30% $_______ Yes No
of new equity
</TABLE>
BANK USE ONLY
Received
By:________________________________
Date:______________________________
Reviewed
By:________________________________
Compliance Status: Yes / No
Comments Regarding Exceptions
Sincerely,
Date:
- ---------------------------------- ------------------
SIGNATURE
- ---------------------------------
TITLE
-11-
<PAGE>
SECOND LOAN MODIFICATION AGREEMENT
This Second Loan Modification Agreement is entered into as of April 12,
1999, by and between CENTRA SOFTWARE, INC., a Delaware corporation with its
principal place of business at 430 Bedford Street, Lexington, Massachusetts
02173 ("Borrower") and SILICON VALLEY BANK, a California-chartered bank
("Bank"), with its principal place of business at 3003 Tasman Drive, Santa
Clara, CA 95054 and with a loan production office located at Wellesley Office
Park, 40 William Street, Suite 350, Wellesley, MA 02481, doing business under
the name "Silicon Valley East".
1. DESCRIPTION OF EXISTING INDEBTEDNESS. Among other indebtedness which may be
owing by Borrower to Bank, Borrower is indebted to Bank pursuant to a loan
arrangement dated as of November 5, 1997, evidenced by, among other documents, a
certain Loan and Security Agreement dated as of November 5, 1997, as affected
and amended by a First Loan Modification Agreement dated December 30, 1998 (as
so amended, the "Loan Agreement"). The Loan Agreement established: (i) a working
capital line of credit in favor of the Borrower in the maximum principal amounts
of Seven Hundred Fifty Thousand Dollars ($750,000.00) (the "Committed Revolving
Line"), and (ii) two equipment lines of credit in favor of the Borrower in the
maximum principal amount of Five Hundred Thousand Dollars ($500,000.00) and Six
Hundred Thousand Dollars ($600,000.00), respectively (the "Equipment Lines").
Capitalized terms used but not otherwise defined herein shall have the same
meaning as in the Loan Agreement.
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Indebtedness".
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is
secured by the Collateral as described in the Loan Agreement (together with any
other collateral security granted to Bank, the "Security Documents").
Hereinafter, the Security Documents, together with all other documents
evidencing or securing the Indebtedness shall be referred to as the "Existing
Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
A. MODIFICATION(S) TO LOAN AGREEMENT.
1. The Loan Agreement shall be amended by the insertion
of the following definitions in alphabetical order in
Section 1.1 thereof:
""Bridge Maturity Date" means the earlier of (i) the
date of the closing of a Capitalization Event, or
(ii) May 27, 1999."
""Committed Bridge Line" means a credit extension of
up to One Million Five Hundred Thousand Dollars
($1,500,000.00)."
<PAGE>
2. The Loan Agreement shall be amended by deleting the
following definition appearing in Section 1.1
thereof:
""Capitalization Event" shall mean the
issuance by the Borrower of equity resulting
in the receipt by the Borrower of at least
Three Million Five Hundred Thousand Dollars
($3,500,000.00)."
and inserting in lieu thereof the following:
""Capitalization Event" shall mean the
issuance by the Borrower of equity resulting
in the receipt by the Borrower of at least
Four Million Dollars ($4,000,000.00)."
3. The Loan Agreement shall be amended by deleting the
following definition appearing in Section 1.1
thereof:
""Credit Extension" means each Advance,
Equipment Advance, or any other extension of
credit by Bank for the benefit of Borrower
hereunder."
and inserting in lieu thereof the following:
""Credit Extension" means each Advance,
Equipment Advance, Bridge Advance, or any
other extension of credit by Bank for the
benefit of Borrower hereunder."
4. The Loan Agreement shall be amended by deleting the
following definition appearing in Section 1.1
thereof:
""Maturity Date" means the later of (x) the
Equipment Maturity Date, (y) the 1999
Equipment Maturity Date, or (z) the
Revolving Maturity Date."
and inserting in lieu thereof the following:
""Maturity Date" means the later of (w) the
Equipment Maturity Date, (x) the 1999
Equipment Maturity Date, (y) the Revolving
Maturity Date, or (z) the Bridge Maturity
Date."
5. The Loan Agreement shall be amended by inserting
after Section 2.1.3 thereof the following new section
entitled "1999 Bridge Line":
-2-
<PAGE>
"2.1.4 1999 BRIDGE LINE
(a) Subject to and upon the terms and conditions of
this Agreement, Bank agrees to make Bridge Advances
(each a "Bridge Advance" and collectively, the Bridge
Advances") to Borrower in an aggregate outstanding
amount not to exceed the Committed Bridge Line.
Bridge Advances, once repaid, may not be reborrowed.
(b) Whenever Borrower desires a Bridge Advance under
the 1999 Bridge Line, Borrower will notify Bank by
facsimile transmission or telephone no later than
3:00 p.m. Eastern time, on the Business Day that the
Bridge Advance is to be made. Each such notification
shall be promptly confirmed by a Payment/Advance Form
in substantially the form of EXHIBIT B hereto. Bank
is authorized to make Bridge Advances under this
Agreement, based upon instructions received from a
Responsible Officer or a designee of a Responsible
Officer. Bank shall be entitled to rely on any
telephonic notice given by a person who Bank
reasonably believes to be a Responsible Officer or a
designee thereof, and Borrower shall indemnify and
hold Bank harmless for any damages or loss suffered
by Bank as a result of such reliance. Bank will
credit the amount of Bridge Advances made under this
Section 2.1 to Borrower's deposit account.
(c) The Committed Bridge Line shall terminate on the
Bridge Maturity Date, at which time all Bridge
Advances under this Section 2.1.4 all interest
accrued thereon and all fees and expenses incurred by
the Bank in connection with the Committed Bridge Line
(the "Committed Bridge Line Obligations") shall be
immediately due and payable.
(d) Interest shall accrue from the date of each
Bridge Advance made pursuant to this Section 2.1.4 at
a per annum rate equal to the aggregate of the Prime
Rate, PLUS two percent (2.0%), and shall be payable
monthly on the Payment Date of each month.
6. The Loan Agreement shall be amended by deleting the following
text appearing as the second paragraph of Section 6.3 entitled
"Financial Statements, Reports, Certificates":
"Borrower shall deliver to Bank, within twenty (20)
days after the last day of each month through the
month ending March 31, 1999, and within twenty-five
(25) days after the end of each month thereafter, but
only with respect to months which either (i)
Obligations are outstanding, or (ii) Credit
Extensions were made, a Borrowing Base Certificate
signed by a Responsible Officer in substantially the
form of EXHIBIT C hereto, together
-3-
<PAGE>
with aged listings of accounts.""
and inserting in lieu thereof the following:
"Borrower shall deliver to Bank, within twenty (20)
days after the last day of each month through the
month ending March 31, 1999, and within twenty-five
(25) days after the end of each month thereafter, but
only with respect to months which either (i)
Obligations are outstanding, or (ii) Credit
Extensions were made, a Borrowing Base Certificate
signed by a Responsible Officer in substantially the
form of EXHIBIT C hereto, together with aged listings
of accounts, PROVIDED HOWEVER, that the Borrower
shall not be obligated to deliver the foregoing prior
to the Bridge Maturity Date."
7. The Loan Agreement shall be amended by deleting the following
text appearing as the third paragraph of Section 6.3 entitled
"Financial Statements, Reports, Certificates":
"Within twenty five (25) days after the last day of
each month, beginning with the first month after the
Bridge Maturity Date, Borrower shall deliver to Bank
a Compliance Certificate signed by a Responsible
Officer in substantially the form of EXHIBIT D
hereto."
and inserting in lieu thereof the following:
"Within twenty five (25) days after the last day of
each month, beginning with the first month after the
Bridge Maturity Date, Borrower shall deliver to Bank
a Compliance Certificate signed by a Responsible
Officer in substantially the form of EXHIBIT D hereto
PROVIDED HOWEVER, that the Borrower shall not be
obligated to deliver the foregoing prior to the
Bridge Maturity Date."
8. The Loan Agreement shall be amended by deleting the following
text appearing as Sections 6.8 and 6.9 thereof:
"6.8 ADJUSTED QUICK RATIO. Borrower shall maintain,
as of the last day of each calendar month, a ratio of
Quick Assets to Current Liabilities of at least: (i)
1.50 to 1.0 as of last day of the month ending
November 30, 1998, (ii) 1.25 to 1.0 as of last day of
each month thereafter through the month ending
February 28, 1999, and (iii) 1.50 to 1.0 as of the
last day of each month thereafter. The Quick Ratio
shall be calculated net of deferred revenue.
-4-
<PAGE>
6.9 TANGIBLE NET WORTH. Borrower shall maintain, as
of the last day of each quarter, a Tangible Net Worth
of not less than the aggregate of (i) One Million
Five Hundred Thousand Dollars ($1,500,000.00), PLUS
(ii) thirty percent (30.0%) of the amount of funds
received by Borrower from any new equity issued by
Borrower."
and inserting in lieu thereof the following:
"6.8 ADJUSTED QUICK RATIO. Borrower shall maintain,
as of the last day of each calendar month commencing
with the first calendar month following the Bridge
Maturity Date, a ratio of Quick Assets to Current
Liabilities of at least: 1.50 to 1.0. The Quick Ratio
shall be calculated net of deferred revenue.
6.9 TANGIBLE NET WORTH. Borrower shall maintain, as
of the last day of each quarter commencing with the
first calendar quarter following the Bridge Maturity
Date, a Tangible Net Worth of not less than the
aggregate of (i) One Million Three Hundred Thousand
Dollars ($1,300,000.00), PLUS (ii) forty percent
(40.0%) of the amount of funds received by Borrower
from any new equity issued by Borrower."
9. The Loan Agreement shall be amended by inserting the following
text appearing as a new Section 6.10 thereof:
"6.10 CAPITALIZATION EVENT. Borrower shall provide
the Bank with evidence, such evidence being
satisfactory to the Bank, that Borrower has completed
the Capitalization Event on or before May 27, 1999."
10. The Borrower hereby ratifies, confirms and reaffirms, all and
singular, the terms and conditions of a certain Negative
Pledge Agreement dated as of November 5, 1997 between Borrower
and Bank, and acknowledges, confirms and agrees that said
Negative Pledge Agreement shall remain in full force and
effect.
4. FEE. Borrower shall pay to Bank a modification fee equal to Ten Thousand
Dollars ($10,000.00) to access the first $500,000.00 of the 1999 Bridge Line
established pursuant to this Loan Modification Agreement, which fee shall be due
on the date hereof and shall be deemed fully earned as of the date hereof. The
Borrower shall also reimburse Bank for all legal fees and expenses incurred in
connection with this amendment to the Loan Documents. In addition, the Borrower
shall pay additional fees equal to (i) Seven Thousand Five Hundred ($7,500.00)
Dollars in the event aggregate Bridge Advances under the Committed Bridge Line
at anytime exceed $500,000.00, and (ii) Eight Thousand Seven Hundred Fifty
($8,750.00) Dollars in the event Bridge Advances under the Committed Bridge Line
at anytime exceed $1,000,000.00. All fees hereunder shall be deemed fully earned
as of the date hereof.
-5-
<PAGE>
5. WARRANTS. The Borrower has on this date agreed to issue certain warrants to
the Bank. The issuance of such warrants shall not constitute a waiver of any
defaults now existing or hereafter arising or a consent by the Bank to any
extension of the Bridge Maturity Date.
6. INTELLECTUAL PROPERTY COLLATERAL. The Borrower has on this date granted to
the Bank a security interest in the Borrower's Intellectual Property Collateral
(as such term is defined in the Intellectual Property Security Agreement of even
date by and between the Bank and the Borrower). Notwithstanding anything to the
contrary contained in this Loan Modification Agreement or any of the Existing
Loan Documents, the Bank acknowledges and agrees that the Bank's lien upon the
Intellectual Property Collateral shall be terminated upon (i) repayment in full
of all Bridge Advances and all accrued interest and fees thereon, and (ii)
termination of the 1999 Bridge Line such that the Bank has no further obligation
to make Bridge Advances thereunder.
7. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever
necessary to reflect the changes described above.
8. RATIFICATION OF LOAN DOCUMENTS. Borrower hereby ratifies, confirms, and
reaffirms all terms and conditions of all security or other collateral granted
to the Bank, and confirms that the indebtedness secured thereby includes,
without limitation, the Indebtedness.
9. NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it is not
aware of any defenses against the obligations to pay any amounts under the
Indebtedness.
10. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
existing Indebtedness, Bank is relying upon Borrower's representations,
warranties, and agreements, as set forth in the Existing Loan Documents. Except
as expressly modified pursuant to this Loan Modification Agreement, the terms of
the Existing Loan Documents remain unchanged and in full force and effect.
Bank's agreement to modifications to the existing Indebtedness pursuant to this
Loan Modification Agreement in no way shall obligate Bank to make any future
modifications to the Indebtedness. Nothing in this Loan Modification Agreement
shall constitute a satisfaction of the Indebtedness. It is the intention of Bank
and Borrower to retain as liable parties all makers of Existing Loan Documents,
unless the party is expressly released by Bank in writing. No maker will be
released by virtue of this Loan Modification Agreement.
11. JURISDICTION/VENUE. Borrower accepts for itself and in connection with its
properties, unconditionally, the non-exclusive jurisdiction of any state or
federal court of competent jurisdiction in the Commonwealth of Massachusetts in
any action, suit, or proceeding of any kind against it which arises out of or by
reason of this Loan Modification Agreement; provided, however, that if for any
reason Bank cannot avail itself of the courts of the Commonwealth of
Massachusetts, then venue shall lie in Santa Clara County, California.
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<PAGE>
12. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
only when it shall have been executed by Borrower and Bank (provided, however,
in no event shall this Loan Modification Agreement become effective until signed
by an officer of Bank in California).
This Loan Modification Agreement is executed as a sealed instrument
under the laws of the Commonwealth of Massachusetts as of the date first written
above.
BORROWER: BANK:
CENTRA SOFTWARE, INC. SILICON VALLEY BANK, DOING BUSINESS AS
SILICON VALLEY EAST
By: /s/ STEPHEN A. JOHNSON By: /s/ DAVE C. EDMUNDS
------------------------- -----------------------------
Name: STEPHEN A. JOHNSON Name: DAVE C. EDMUNDS
----------------------- ---------------------------
Title: CFO Title: SVP
---------------------- --------------------------
SILICON VALLEY BANK
By: /s/ HEIDI [ILLEGIBLE]
-----------------------------
Name: Heidi [Illegible]
---------------------------
Title: Loan Officer
--------------------------
(signed in Santa Clara County,
California)
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<PAGE>
Exhibit 10.12
FOURTH AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
This Fourth Amended and Restated Investors' Rights Agreement is made
this 21st day of April, 1999, by and among Centra Software, Inc., a Delaware
corporation (the "Company"), the persons and entities listed on Exhibit A hereto
(each, a "Purchaser" and collectively, the "Purchasers"), and Leon Navickas (the
"Founder"). The Purchasers and the Founder are sometimes referred to in this
Agreement collectively as the "Stockholders."
RECITALS:
WHEREAS, the Founder owns 1,200,000 shares (the "Founder's Shares") of
the Common Stock, $.01 par value per share (the "Common Stock"), of the Company;
WHEREAS, certain of the Stockholders hold shares of Series A
Convertible Participating Preferred Stock, $.001 par value (the "Series A
Preferred Stock"), of the Company;
WHEREAS, certain of the Stockholders hold shares of Series B
Convertible Participating Preferred Stock, $.001 par value (the "Series B
Preferred Stock"), of the Company;
WHEREAS, certain of the Stockholders hold shares of Series C
Convertible Preferred Stock, $.001 par value (the "Series C Preferred Stock"),
of the Company;
WHEREAS, certain of the Stockholders hold shares of Series D
Convertible Preferred Stock, $.001 par value (the "Series D Preferred Stock"),
of the Company;
WHEREAS, certain of the Purchasers are purchasing, concurrently
herewith, certain shares of Series E Convertible Preferred Stock, $.001 par
value (the "Series E Preferred Stock," and, together with the Series A Preferred
Stock, the Series B Preferred Stock, the Series C Preferred Stock, and the
Series D Preferred Stock, the "Preferred Stock"), of the Company pursuant to the
Series E Convertible Preferred Stock Purchase Agreement of even date herewith
(the "Purchase Agreement");
WHEREAS, the Company and the Stockholders wish to provide for (i) their
continuing representation on the Board of Directors of the Company, (ii) certain
arrangements with respect to the registration of shares of capital stock of the
Company under the Securities Act of 1933, and (iii) a right of first refusal
with respect to the sale of any shares of capital stock by the Company;
<PAGE>
WHEREAS, the Company, certain of the Purchasers and the Founder entered
into a Third Amended and Restated Investors' Rights Agreement dated as of
December 19, 1997 (the "Third Amended Investors' Rights Agreement");
WHEREAS, certain of the Purchasers have waived any right they may have
to purchase Series E Preferred Stock;
WHEREAS, the Company and the parties to the Third Amended Investors'
Rights Agreement wish to amend and restate the Third Amended Investors' Rights
Agreement in its entirety to make certain changes to the parties and the terms
thereof; and
WHEREAS, the Purchasers who or which have executed this Agreement are
the holders of at least 66.7% of the voting power of the Voting Shares,
Registrable Shares or Eligible Shares as each is defined in the Third Amended
Investors' Rights Agreement.
In consideration of the mutual covenants contained herein and the
consummation of the sale and purchase of shares of capital stock of the Company
pursuant to the Purchase Agreement, and for other valuable consideration,
receipt of which is hereby acknowledged, the parties hereto agree to amend and
restate the Third Amended Investors' Rights Agreement as follows:
ARTICLE I. VOTING RIGHTS
1. VOTING OF SHARES.
(a) In any and all elections of directors of the Company
(whether at a meeting or by written consent in lieu of a meeting), each
Stockholder shall vote or cause to be voted all Voting Shares (as defined in
Section 2 below) owned by him or it, or over which he or it has voting control,
and otherwise use his or its respective best efforts, so as to fix the number of
directors of the Company at eight (8) and to elect (i) the Chief Executive
Officer of the Company, (ii) two (2) members designated by the Purchasers who or
which are holders of Series A Preferred Stock (the "Series A Holders") (by
action of the holders of a majority of the shares of Series A Preferred Stock
held by such Series A Holders), (iii) one (1) member designated by Commonwealth
Capital Ventures L.P. ("Commonwealth"), (iv) one (1) member designated by
Scripps Ventures, LLC ("Scripps"), (v) one (1) member designated by Polaris
Venture Partners ("Polaris"), and (vi) two (2) members mutually agreed upon by
the Purchasers and the Founder (by action of the holders of a majority of the
Shares held by the Purchasers and the Founder). As of the date hereof, there is
one vacancy on the Board of Directors. The directors currently designated by the
Series A Holders are Richard D'Amore and Jonathan Flint. The director currently
designated by Commonwealth is Michael Fitzgerald. The director currently
designated by Scripps is Douglas R. Stern. The director
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currently designated by Polaris is Jonathan Flint, it being understood that
Jonathan Flint will serve both as a designee of the Series A Holders and as the
designee of Polaris. The directors currently mutually agreed upon by the
Purchasers and the Founder are Fred Lucconi and Charles Digate. The Chief
Executive Officer of the Company is Leon Navickas. Additionally, HarbourVest
Partners V-Direct Fund L.P. and The Goldman Sachs Group, L.P. shall each have
the right to appoint a representative (each, an "Observer") to attend all Board
meetings; provided, however, that each Observer shall agree, in writing, to hold
in confidence and trust all information so provided; and provided further, that
the Board shall have the right to withhold any information from or to exclude an
Observer from any meeting or portion thereof if in the good faith judgment of
the Board such actions are necessary to maintain an attorney client privilege.
(b) The Company shall provide the Stockholders with 30 days'
prior written notice of any intended mailing of a notice to stockholders for a
meeting at which directors are to be elected. The Series A Holders,
Commonwealth, Scripps, Polaris, the Purchasers and the Founder shall give
written notice to all other parties to this Agreement, no later than 20 days
prior to such mailing, of the persons designated by them as nominees for
election as directors. The Company agrees to nominate and recommend for election
as directors only the individuals designated, or to be designated, pursuant to
Section 1(a). If the Series A Holders, Commonwealth, Scripps, Polaris, the
Purchasers or the Founder shall fail to give notice to the Company as provided
above, it shall be deemed that their respective designees then serving as
directors shall be their designees for reelection.
(c) The Founder shall not vote to remove any director
designated by the Series A Holders, Commonwealth, Scripps or Polaris, except for
bad faith, willful misconduct or the consistent failure by any such director to
attend meetings of the Company's Board of Directors.
2. VOTING SHARES. "Voting Shares" shall mean and include any and all
shares of Common Stock, Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock
and/or any other shares of capital stock of the Company, by whatever name
called, which carry voting rights (including voting rights which arise by reason
of default) now owned or subsequently acquired by a Stockholder, however
acquired, including, without limitation, by stock split or stock dividend.
3. NO REVOCATION. The voting agreements contained herein are coupled
with an interest and may not be revoked, except by written consent of all of the
Stockholders.
4. INDEMNIFICATION. In the event that any director elected (i) pursuant
to Section 1 of this Article I or (ii) pursuant to Article 4(B) Section 3(b) of
the Company's Certificate of Incorporation shall be made or threatened to be
made a party to any action, suit or proceeding with respect to which he may be
entitled to indemnification by the Company pursuant to its
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<PAGE>
Certificate of Incorporation or By-Laws, or otherwise, he shall be entitled to
be represented in such action, suit or proceeding by counsel of his choice and
the reasonable expenses of such representation shall be reimbursed by the
Company to the extent provided in or authorized by said Certificate of
Incorporation or By-laws. In the event of an action, suit or proceeding against
more than one director in which there are no actual or potential differing
interests among more than one director, such directors shall use reasonable
efforts to choose one counsel to represent all such directors. Each of the
Stockholders agrees not to take any action to amend any provisions of the
Certificate of Incorporation or the By-Laws of the Company which would reduce or
limit the indemnification of directors, as presently in effect, unless such
amendment would have only prospective effect, without the prior written consent
of all of the Stockholders.
5. RESTRICTIVE LEGEND. All certificates representing Voting Shares
owned or hereafter acquired by the Stockholders or any transferee of the
Stockholders bound by this Agreement shall have affixed thereto a legend
substantially in the following form:
"The shares of stock represented by this certificate
are subject to certain voting agreements as set forth
in an Investors' Rights Agreement by and among the
registered owner of this certificate, the Company and
certain other stockholders of the Company, a copy of
which is available for inspection at the offices of
the Secretary of the Company."
6. TRANSFERS OF VOTING RIGHTS. Any transferee to whom Voting Shares are
transferred by a Stockholder, whether voluntarily or by operation of law, shall
be bound by the voting obligations imposed upon the transferor under this
Agreement, and shall be entitled to the rights granted to the transferor under
this Agreement, to the same extent as if such transferee were a Stockholder
hereunder.
ARTICLE II. REGISTRATION RIGHTS
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
"COMMISSION" means the Securities and Exchange Commission, or
any other Federal agency at the time administering the Securities Act.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, or any similar Federal statute, and the rules and regulations of the
Commission issued under such Act, as they each may, from time to time, be in
effect.
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<PAGE>
"REGISTRATION STATEMENT" means a registration statement filed
by the Company with the Commission for a public offering and sale of Common
Stock (other than a registration statement on Form S-8 or Form S-4, or their
successors, or any other form for a similar limited purpose, or any registration
statement covering only securities proposed to be issued in exchange for
securities or assets of another corporation).
"REGISTRATION EXPENSES" means the expenses described in
Section 5 of this Article II.
"REGISTRABLE SHARES" means (i) the shares of Common Stock
issued or issuable upon conversion of the Shares, (ii) any shares of Common
Stock, and any shares of Common Stock issued or issuable upon the conversion or
exercise of any other securities, acquired by the Purchasers pursuant to Article
III of this Agreement (or any predecessor agreement) and (iii) any other shares
of Common Stock issued in respect of such shares (because of stock splits, stock
dividends, reclassifications, recapitalizations, or similar events); PROVIDED,
HOWEVER, that shares of Common Stock which are Registrable Shares shall cease to
be Registrable Shares (i) upon any sale pursuant to a Registration Statement or
Rule 144 under the Securities Act or (ii) upon any sale in any manner to a
person or entity which, by virtue of Article IV, Section 2 of this Agreement, is
not entitled to the rights provided by this Agreement. Wherever reference is
made in this Article II to a request or consent of holders of a certain
percentage of Registrable Shares, the determination of such percentage shall
include shares of Common Stock issuable upon conversion of the Shares even if
such conversion has not yet been effected.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
or any similar Federal statute, and the rules and regulations of the Commission
issued under such Act, as they each may, from time to time, be in effect.
"SHARES" shall have the meaning specified, and include all
such Shares referred to, in Subsection 1.2 of the Purchase Agreement, Subsection
1.2 of the Series D Convertible Preferred Stock Purchase Agreement dated
December 19, 1997, Subsection 1.2 of the Series C Convertible Preferred Stock
Purchase Agreement dated March 6, 1997, Subsection 1.2 of the Series B
Convertible Participating Preferred Stock Purchase Agreement dated May 1, 1996,
and Subsection 1.2 of the Series A Convertible Participating Preferred Stock
Purchase Agreement dated April 11, 1995 by and among the Company, the Founder
and certain of the Purchasers.
"STOCKHOLDERS" means the Purchasers and Founder, any persons
or entities to whom the rights granted under this Article II are transferred by
any Purchasers or the Founder, and their successors or assigns pursuant to
Article IV, Section 2 of this Agreement.
2. REQUIRED REGISTRATIONS.
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<PAGE>
(a) At any time after the earlier of April 21, 2002 or the
closing of the Company's first underwritten public offering of shares of Common
Stock pursuant to a Registration Statement, a Stockholder or Stockholders
holding in the aggregate at least a majority of the Registrable Shares may
request, in writing, that the Company effect the registration on Form S-1 or
Form S-2 (or any successor form) of Registrable Shares owned by such Stockholder
or Stockholders having an aggregate offering price of at least $10,000,000
(based on the then current market price or fair value). If the holders
initiating the registration intend to distribute the Registrable Shares by means
of an underwriting, they shall so advise the Company in their request. In the
event such registration is underwritten, the right of other Stockholders to
participate shall be conditioned on such Stockholders' participation in such
underwriting. Upon receipt of any such request, the Company shall promptly give
written notice of such proposed registration to all Stockholders. Such
Stockholders shall have the right, by giving written notice to the Company
within 30 days after the Company provides its notice, to elect to have included
in such registration such of their Registrable Shares as such Stockholders may
request in such notice of election; provided that if the underwriter (if any)
managing the offering determines that, because of market factors, all of the
Registrable Shares requested to be registered by all Stockholders may not be
included in the offering, then all Stockholders who have requested registration
shall participate in the registration pro rata based upon the number of
Registrable Shares which they have requested to be so registered. Thereupon, the
Company shall, as expeditiously as possible, use its best efforts to effect the
registration on Form S-1 or Form S-2 (or any successor form) of all Registrable
Shares which the Company has been requested to so register.
(b) At any time after the Company becomes eligible to file a
Registration Statement on Form S-3 (or any successor form relating to secondary
offerings), a Stockholder or Stockholders may request the Company, in writing,
to effect the registration on Form S-3 (or such successor form), of Registrable
Shares having an aggregate offering price of at least $500,000 (based on the
then current public market price). Upon receipt of any such request, the Company
shall promptly give written notice of such proposed registration to all
Stockholders. Such Stockholders shall have the right, by giving written notice
to the Company within 30 days after the Company provides its notice, to elect to
have included in such registration such of their Registrable Shares as such
Stockholders may request in such notice of election; provided that if the
underwriter (if any) managing the offering determines that, because of market
factors, all of the Registrable Shares requested to be registered by all
Stockholders may not be included in the offering, then all Stockholders who have
requested registration shall participate in the registration pro rata based upon
the number of Registrable Shares which they have requested to be so registered.
Thereupon, the Company shall, as expeditiously as possible, use its best efforts
to effect the registration on Form S-3 (or such successor form) of all
Registrable Shares which the Company has been requested to so register.
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<PAGE>
(c) The Company shall not be required to effect more than two
registrations pursuant to paragraph (a) above; PROVIDED, HOWEVER, that such
obligation shall be deemed satisfied only when a registration statement covering
the applicable Registrable Shares shall have (i) become effective and, if such
method of disposition is a firm commitment underwritten public offering, all
such Registrable Shares have been sold pursuant thereto or (ii) been withdrawn
at the request of the Stockholders requesting such registration (other than as a
result of information concerning the business or financial condition of the
Company which is made known to the Stockholders after the date on which such
registration was requested). There shall be no limit on the number of
registrations which may be requested and obtained pursuant to paragraph (b)
above. In addition, the Company shall not be required to effect any registration
(other than on Form S-3 or any successor form relating to secondary offerings)
within six months after the effective date of any other Registration Statement
on Form S-1 of the Company, in which, subject to Section 3(b) of this Article
II, the holders of Registrable Shares shall have been entitled to join pursuant
to Section 3 of this Article II.
(d) If at the time of any request to register Registrable
Shares pursuant to this Section 2, the Company is engaged or has fixed plans to
engage within 30 days of the time of the request in a registered public offering
as to which the Stockholders may include Registrable Shares pursuant to Section
3 of this Article II or is engaged in any other activity which, in the good
faith determination of the Company's Board of Directors, would be adversely
affected by the requested registration to the material detriment of the Company,
then the Company may at its option direct that such request be delayed for a
period not in excess of six months from the effective date of such offering or
the date of commencement of such other material activity, as the case may be,
such right to delay a request to be exercised by the Company not more than once
in any two-year period.
(e) If at any time when a registration statement on Form S-3
is in effect a material event occurs which the Company's Board of Directors
determines, in good faith, should not be immediately disclosed, the Company
shall so inform each Stockholder which has included Registrable Shares in such
registration statement. Each such Stockholder shall suspend the making of offers
or sales under such registration statement until such material event is
disclosed. The Company shall disclose such material event as soon as is
practicable thereafter in the good faith judgment of its Board of Directors.
3. INCIDENTAL REGISTRATION.
(a) Whenever the Company proposes to file a Registration
Statement (other than pursuant to Section 2 of this Article II) at any time and
from time to time, it will, prior to such filing, give written notice to all
Stockholders of its intention to do so and, upon the written request of a
Stockholder or Stockholders given within 20 days after the Company provides such
notice (which request shall state the intended method of disposition of such
Registrable Shares), the Company shall use its best efforts to cause all
Registrable Shares
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<PAGE>
which the Company has been requested by such Stockholder or Stockholders to
register to be registered under the Securities Act to the extent necessary to
permit their sale or other disposition in accordance with the intended methods
of distribution specified in the request of such Stockholder or Stockholders;
provided that the Company shall have the right to postpone or withdraw any
registration effected pursuant to this Section 3 without obligation to any
Stockholder.
(b) In connection with any registration under this Section 3
involving an underwriting, the Company shall not be required to include any
Registrable Shares in such registration unless the holders thereof accept the
terms of the underwriting as agreed upon between the Company and the
underwriters selected by it (provided that such terms must be consistent with
this Agreement and such terms shall not provide for indemnification or
contribution obligations on the part of sellers of Registrable Shares greater
than the obligations imposed pursuant to Section 6(b) hereof). If in the opinion
of the managing underwriter it is appropriate because of marketing factors to
limit the number of Registrable Shares to be included in the offering, then the
Company shall be required to include in the registration only that number of
Registrable Shares, if any, that the managing underwriter believes should be
included therein; provided that (i) except in the case of the first Registration
Statement filed by the Company, in no event shall the number of Registrable
Shares included in the offering be reduced below 35% of the total number of
shares of Common Stock (giving effect to the conversion into Common Stock of all
securities convertible thereinto) included in the offering, and (ii) no persons
or entities other than the Company, the Stockholders and persons or entities
holding registration rights granted in accordance with Section 10 of this
Article II shall be permitted to include securities in the offering. If the
number of Registrable Shares to be included in the offering in accordance with
the foregoing is less than the total number of shares which the holders of
Registrable Shares have requested to be included, then the holders of
Registrable Shares who have requested registration and other holders of
securities entitled to include them in such registration shall participate in
the registration pro rata based upon their total ownership of shares of Common
Stock (giving effect to the conversion into Common Stock of all securities
convertible thereinto). If any holder would thus be entitled to include more
securities than such holder requested to be registered, the excess shall be
allocated among other requesting holders pro rata in the manner described in the
preceding sentence.
4. REGISTRATION PROCEDURES. If and whenever the Company is required by
the provisions of Article II of this Agreement to use its best efforts to effect
the registration of any of the Registrable Shares under the Securities Act, the
Company shall:
(a) file with the Commission a Registration Statement with
respect to such Registrable Shares and use its best efforts to cause that
Registration Statement to become and remain effective;
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<PAGE>
(b) as expeditiously as possible prepare and file with the
Commission any amendments and supplements to the Registration Statement and the
prospectus included in the Registration Statement as may be necessary to keep
the Registration Statement effective, in the case of a firm commitment
underwritten public offering, until each underwriter has completed the
distribution of all securities purchased by it and, in the case of any other
offering, until the earlier of the sale of all Registrable Shares covered
thereby or 120 days after the effective date thereof;
(c) as expeditiously as possible furnish to each selling
Stockholder such reasonable numbers of copies of the prospectus, including a
preliminary prospectus, in conformity with the requirements of the Securities
Act, and such other documents as the selling Stockholder may reasonably request
in order to facilitate the public sale or other disposition of the Registrable
Shares owned by the selling Stockholder; and
(d) as expeditiously as possible use its best efforts to
register or qualify the Registrable Shares covered by the Registration Statement
under the securities or Blue Sky laws of such states as the selling Stockholders
shall reasonably request, and do any and all other acts and things that may be
necessary or desirable to enable the selling Stockholders to consummate the
public sale or other disposition in such states of the Registrable Shares owned
by the selling Stockholder; PROVIDED, HOWEVER, that the Company shall not be
required in connection with this paragraph (d) to qualify as a foreign
corporation or execute a general consent to service of process in any
jurisdiction.
If the Company has delivered preliminary or final prospectuses to the
selling Stockholders and after having done so the prospectus is amended to
comply with the requirements of the Securities Act, the Company shall promptly
notify the selling Stockholders and, if requested, the selling Stockholders
shall immediately cease making offers of Registrable Shares and return all
prospectuses to the Company. The Company shall promptly provide the selling
Stockholders with revised prospectuses and, following receipt of the revised
prospectuses, the selling Stockholders shall be free to resume making offers of
the Registrable Shares.
5. ALLOCATION OF EXPENSES. The Company will pay all Registration
Expenses of all registrations under this Agreement; PROVIDED, HOWEVER, that if a
registration under Section 2 of this Article II is withdrawn at the request of
the Stockholders requesting such registration (other than as a result of
information concerning the business or financial condition of the Company which
is made known to the Stockholders after the date on which such registration was
requested) and if the requesting Stockholders elect not to have such
registration counted as a registration requested under Section 2 of this Article
II, the requesting Stockholders shall pay the Registration Expenses of such
registration pro rata in accordance with the number of their Registrable Shares
included in such registration. For purposes of this Section 5, the term
"Registration Expenses" shall mean all expenses incurred by the Company in
complying with
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this Agreement, including, without limitation, all registration and filing fees,
exchange listing fees, printing expenses, fees and expenses of counsel for the
Company and the reasonable fees and expenses of one counsel selected by the
selling Stockholders to represent the selling Stockholders, state Blue Sky fees
and expenses, and the expense of any special audits incident to or required by
any such registration, but excluding underwriting discounts, selling commissions
and the fees and expenses of selling Stockholders' own counsel (other than the
counsel selected to represent all selling Stockholders).
6. INDEMNIFICATION AND CONTRIBUTION.
(a) In the event of any registration of any of the Registrable
Shares under the Securities Act pursuant to this Agreement, the Company will
indemnify and hold harmless each seller of such Registrable Shares, each holder
of Registrable Securities, each underwriter of such Registrable Shares, each of
their respective officers, directors and partners and each other person, if any,
who controls such seller, holder or underwriter within the meaning of the
Securities Act or the Exchange Act against any losses, claims, damages or
liabilities, joint or several, to which such seller, holder, underwriter or
controlling person may become subject under the Securities Act, the Exchange
Act, state securities or Blue Sky laws or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in any Registration Statement under which such Registrable Shares
were registered under the Securities Act, any preliminary prospectus or final
prospectus contained in the Registration Statement, or any amendment or
supplement to such Registration Statement, or arise out of or are based upon the
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; and the
Company will reimburse such seller, underwriter and each such controlling person
for any legal or any other expenses reasonably incurred by such seller,
underwriter or controlling person in connection with investigating or defending
any such loss, claim, damage, liability or action; PROVIDED, HOWEVER, that the
Company will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon any untrue statement
or omission made in such Registration Statement, preliminary prospectus or final
prospectus, or any such amendment or supplement, in reliance upon and in
conformity with information furnished to the Company, in writing, by or on
behalf of such seller, underwriter or controlling person specifically for use in
the preparation thereof.
(b) In the event of any registration of any of the Registrable
Shares under the Securities Act pursuant to this Agreement, each seller of
Registrable Shares, severally and not jointly, will indemnify and hold harmless
the Company, each holder of Registrable Securities, each underwriter (if any),
each of their respective officers, directors and partners, and each person, if
any, who controls the Company or any such holder of Registrable Securities or
underwriter, within the meaning of the Securities Act or the Exchange Act,
against any losses, claims, damages or liabilities, joint or several, to which
the Company, such
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directors, officers and partners, such holder of Registrable Securities, such
underwriter or such controlling person may become subject under the Securities
Act, Exchange Act, state securities or Blue Sky laws or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of a material fact contained in any Registration Statement under which such
Registrable Shares were registered under the Securities Act, any preliminary
prospectus or final prospectus contained in the Registration Statement, or any
amendment or supplement to the Registration Statement, or arise out of or are
based upon any omission or alleged omission to state a material fact required to
be stated therein or necessary to make the statements therein not misleading, if
the statement or omission was made in reliance upon and in conformity with
information relating to such seller furnished in writing to the Company by or on
behalf of such seller specifically for use in connection with the preparation of
such Registration Statement, prospectus, amendment or supplement; PROVIDED,
HOWEVER, that the obligations of such Stockholders hereunder shall be limited to
an amount equal to the proceeds to each Stockholder of Registrable Shares sold
in connection with such registration.
(c) Each party entitled to indemnification under this Section
6 (the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; PROVIDED, that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld); and, PROVIDED, FURTHER, that the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of its
obligations under this Section 6. The Indemnified Party may participate in such
defense at such party's expense; PROVIDED, HOWEVER, that the Indemnifying Party
shall pay such expense if representation of such Indemnified Party by the
counsel retained by the Indemnifying Party would be inappropriate due to actual
or potential differing interests between the Indemnified Party and any other
party represented by such counsel in such proceeding. No Indemnifying Party, in
the defense of any such claim or litigation shall, except with the prior written
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement (i) which includes an admission of fault on behalf of the
Indemnified Party, or (ii) which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party of a
release from all future liability in respect of such claim or litigation.
(d) In order to provide for just and equitable contribution to
joint liability under the Securities Act in any case in which either (i) any
holder of Registrable Shares exercising rights under this Agreement, or any
controlling person of any such holder, makes a claim for indemnification
pursuant to this Section 6 but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced
11
<PAGE>
in such case notwithstanding the fact that this Section 6 provides for
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of any such selling Stockholder or any such controlling
person in circumstances for which indemnification is provided under this Section
6; then, in each such case, the Company and such Stockholder will contribute to
the aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportions so that such holder
is responsible for the portion represented by the percentage that the public
offering price of its Registrable Shares offered by the Registration Statement
bears to the public offering price of all securities offered by such
Registration Statement, and the Company is responsible for the remaining
portion; PROVIDED, HOWEVER, that, in any such case, (A) no such holder will be
required to contribute any amount in excess of the proceeds to it of all
Registrable Shares sold by it pursuant to such Registration Statement, and (B)
no person or entity guilty of fraudulent misrepresentation, within the meaning
of Section 11(f) of the Securities Act, shall be entitled to contribution from
any person or entity who is not guilty of such fraudulent misrepresentation.
7. INDEMNIFICATION WITH RESPECT TO UNDERWRITTEN OFFERING. In the event
that Registrable Shares are sold pursuant to a Registration Statement in an
underwritten offering pursuant to Section 2 of this Article II, the Company
agrees to enter into an underwriting agreement containing customary
representations and warranties with respect to the business and operations of an
issuer of the securities being registered and customary covenants and agreements
to be performed by such issuer, including without limitation customary
provisions with respect to indemnification by the Company of the underwriters of
such offering.
8. INFORMATION BY HOLDER. Each Stockholder including Registrable Shares
in any registration shall furnish to the Company such information regarding such
Stockholder and the distribution proposed by such Stockholder as the Company may
reasonably request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Agreement.
9. "STAND-OFF" AGREEMENT. Each Stockholder, if requested by the Company
and the managing underwriter (the "Underwriter") of an offering by the Company
of Common Stock or other securities of the Company pursuant to a Registration
Statement, shall agree not to sell publicly or otherwise transfer or dispose of
any Registrable Shares or other securities of the Company held by such
Stockholder for a specified period of time (not to exceed 180 days) following
the effective date of such Registration Statement; PROVIDED, that:
(a) such agreement shall only apply to the first Registration
Statement covering Common Stock to be sold on its behalf to the public in an
underwritten offering;
(b) all Stockholders, all other stockholders of the Company
holding in excess of 1% of the outstanding Common Stock, (including shares of
Common Stock issuable
12
<PAGE>
upon the conversion of Shares, or other convertible securities, or upon the
exercise of options, warrants or rights) and all officers and directors of the
Company enter into similar agreements; and
(c) The Underwriter agrees not to release any party from any
such lock-up agreement or similar agreement (a "Lock-Up Release") without (i)
providing all Stockholders who are party thereto at least seven days prior
written notice of the effective date of the Lockup Release and (ii)
simultaneously releasing all Stockholders who are party thereto to the same
extent from any such lock-up letter or similar agreement.
Notwithstanding anything herein to the contrary, this
Agreement shall not restrict Goldman, Sachs & Co. and its affiliates from
engaging in any brokerage, investment advisory, financial advisory, anti-raid
advisory, merger advisory, financing, asset management, trading, market making,
arbitrage and other similar activity conducted in the ordinary course of its, or
its affiliates' business.
10. LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. The Company shall
not, without the prior written consent of Stockholders holding at least 66.7% of
the Registrable Shares, enter into any agreement (other than this Agreement)
with any holder or prospective holder of any securities of the Company which
would allow such holder or prospective holder (a) to include securities of the
Company in any Registration Statement, unless under the terms of such agreement,
such holder or prospective holder may include such securities in any such
registration only on terms substantially similar to the terms on which holders
of Registrable Shares may include shares in such registration, or (b) to make a
demand registration which could result in such registration statement being
declared effective prior to April 21, 2002. Notwithstanding anything to the
contrary herein, any right given by the Company to any holder or prospective
holder of the Company's securities in connection with the registration of
securities shall be conditioned such that it shall be subordinate to the rights
of the Stockholders provided in this Agreement unless Stockholders holding at
least 66.7% of the Registrable Shares consent in writing to such arrangements
and, provided that, such arrangement will not result in materially detrimental
treatment of one or more series of Preferred Stock owned by a Purchaser on the
one hand and the other series of Preferred Stock on the other hand.
11. RULE 144 REQUIREMENTS. After the earliest of (i) the closing of the
sale of securities of the Company pursuant to a Registration Statement, (ii) the
registration by the Company of a class of securities under Section 12 of the
Exchange Act, or (iii) the issuance by the Company of an offering circular
pursuant to Regulation A under the Securities Act, the Company agrees to:
(a) comply with the requirements of Rule 144(c) under the
Securities Act with respect to current public information about the Company;
13
<PAGE>
(b) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements); and
(c) furnish to any holder of Registrable Shares upon request
(i) a written statement by the Company as to its compliance with the
requirements of said Rule 144(c), and the reporting requirements of the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements), (ii) a copy of the most recent annual or quarterly
report of the Company, and (iii) such other reports and documents of the Company
as such holder may reasonably request to avail itself of any similar rule or
regulation of the Commission allowing it to sell any such securities without
registration.
12. MERGERS, ETC. The Company shall not, directly or indirectly, enter
into any merger, consolidation or reorganization in which the Company shall not
be the surviving corporation unless the proposed surviving corporation shall,
prior to such merger, consolidation or reorganization, agree in writing to
assume the obligations of the Company under this Agreement, and for that purpose
references hereunder to "Registrable Shares" shall be deemed to be references to
the securities which the Stockholders would be entitled to receive in exchange
for Registrable Shares under any such merger, consolidation or reorganization;
PROVIDED, HOWEVER, that the provisions of this Section 12 shall not apply in the
event of any merger, consolidation or reorganization in which the Company is not
the surviving corporation if all Stockholders are entitled to receive in
exchange for their Registrable Shares consideration consisting solely of (i)
cash, (ii) securities of the acquiring corporation which may be immediately sold
to the public without registration under the Securities Act, or (iii) securities
of the acquiring corporation which the acquiring corporation has agreed to
register within 90 days of completion of the transaction for resale to the
public pursuant to the Securities Act.
ARTICLE III. RIGHT OF FIRST REFUSAL REGARDING NEW ISSUANCES
1. RIGHT OF FIRST REFUSAL.
(a) The Company shall not issue, sell or exchange, agree to
issue, sell or exchange, or reserve or set aside for issuance, sale or exchange,
(i) any shares of Common Stock, (ii) any other equity securities of the Company,
including, without limitation, shares of Preferred Stock, (iii) any option,
warrant or other right to subscribe for, purchase or otherwise acquire any
equity securities of the Company, or (iv) any debt securities convertible into
capital stock of the Company (collectively, the "Offered Securities"), unless in
each such case the Company shall have first complied with this Article III. The
Company shall deliver to each Stockholder a written notice of any proposed or
intended issuance, sale or exchange of Offered Securities (the "Offer"), which
Offer shall (i) identify and describe the Offered Securities, (ii) describe
generally the price and other material terms upon which they are to be
14
<PAGE>
issued, sold or exchanged, and the number or amount of the Offered Securities to
be issued, sold or exchanged, (iii) identify the persons or entities to which or
with which the Offered Securities are to be offered, issued, sold or exchanged
and (iv) offer to issue and sell to or exchange with such Stockholder (A) such
portion of the Offered Securities as the aggregate number of Eligible Shares
then held by such Stockholder bears to the total number of Eligible Shares then
held by all Stockholders (the "Basic Amount"), and (B) any additional portion of
the Offered Securities as such Stockholder shall indicate it will purchase or
acquire should the other Stockholders subscribe for less than their Basic
Amounts (the "Undersubscription Amount"). Each Stockholder shall have the right,
for a period of 15 days following delivery of the Offer, to purchase or acquire,
at a price and upon the other terms specified in the Offer, the number or amount
of Offered Securities described above. The Offer by its term shall remain open
and irrevocable for such 15-day period.
(b) "Eligible Shares" shall mean and include all shares of
capital stock of the Company held by the Stockholders, whether now owned or
hereafter acquired, other than shares acquired by an employee Stockholder due to
his status as an employee of the Company (including but not limited to the
Founder's Shares or any shares issued pursuant to any employee stock option,
purchase or similar plan). For purposes of calculating a Stockholder's ownership
of Eligible Shares, all shares of convertible Preferred Stock of the Company
shall be deemed to have been converted into shares of Common Stock.
(c) To accept an Offer, in whole or in part, a Stockholder
must deliver a written notice to the Company prior to the end of the 15-day
period of the Offer, setting forth the portion of the Stockholder's Basic Amount
that such Stockholder elects to purchase and, if such Stockholder shall elect to
purchase all of its Basic Amount, the Undersubscription Amount (if any) that
such Stockholder elects to purchase (the "Notice of Acceptance"). If the Basic
Amounts subscribed for by all Stockholders are less than the total Offered
Securities, then each Stockholder who has set forth Undersubscription Amounts in
its Notice of Acceptance shall be entitled to purchase, in addition to the Basic
Amounts subscribed for, all Undersubscription Amounts it has subscribed for;
PROVIDED, HOWEVER, that should the Undersubscription Amounts subscribed for
exceed the difference between the Offered Securities and the Basic Amounts
subscribed for (the "Available Undersubscription Amount"), each Stockholder who
has subscribed for any Undersubscription Amount shall be entitled to purchase
only that portion of the Available Undersubscription Amount as the
Undersubscription Amount subscribed for by such Stockholder bears to the total
Undersubscription Amounts subscribed for by all Stockholders, subject to
rounding by the Board of Directors to the extent it reasonably deems necessary.
(d) In the event that Notices of Acceptance are not given by
the Stockholders in respect of all the Offered Securities, the Company shall
have 90 days from the expiration of the period set forth in Section 1(a) above
to issue, sell or exchange all or any part of such Offered Securities as to
which a Notice of Acceptance has not been given by the
15
<PAGE>
Stockholders (the "Refused Securities"), but only to the offerees or purchasers
described in the Offer and only upon terms and conditions (including, without
limitation, unit prices and interest rates) which are not more favorable, in the
aggregate, to the acquiring person or persons or less favorable to the Company
than those set forth in the Offer.
(e) In the event the Company shall propose to sell less than
all the Refused Securities (any such sale to be in the manner and on the terms
specified in Section 1(d) above), then each Stockholder may, at its sole option
and in its sole discretion, reduce the number or amount of the Offered
Securities specified in its Notice of Acceptance to an amount that shall be not
less than the number or amount of the Offered Securities that the Stockholder
elected to purchase pursuant to Section 1(c) above multiplied by a fraction, (i)
the numerator of which shall be the number or amount of Offered Securities the
Company actually proposes to issue, sell or exchange (including Offered
Securities to be issued or sold to Stockholders pursuant to Section 1(c) above
prior to such reduction) and (ii) the denominator of which shall be the amount
of all Offered Securities. In the event that any Stockholder so elects to reduce
the number or amount of Offered Securities specified in its Notice of
Acceptance, the Company may not issue, sell or exchange more than the reduced
number or amount of the Offered Securities unless and until such securities have
again been offered to the Stockholders in accordance with Section 1(a) above.
(f) Upon the closing of the issuance, sale or exchange of all
or less than all the Refused Securities, the Stockholders shall acquire from the
Company, and the Company shall issue to the Stockholders, the number or amount
of Offered Securities specified in the Notices of Acceptance, as reduced
pursuant to Section 1(e) above if the Stockholders have so elected, upon the
terms and conditions specified in the Offer. The purchase by the Stockholders of
any Offered Securities is subject in all cases to the preparation, execution and
delivery by the Company and the Stockholders of a purchase agreement relating to
such Offered Securities reasonably satisfactory in form and substance to the
Stockholders and their respective counsel.
(g) Any Offered Securities not acquired by the Stockholders or
other persons in accordance with Section 1(d) above may not be issued, sold or
exchanged until they are again offered to the Stockholders under the procedures
specified in this Article.
2. EXCLUDED ISSUANCES.
The rights of the Stockholders under this Article III shall
not apply to:
(a) Common Stock issued as a stock dividend to holders of
Common Stock or upon any subdivision or combination of shares of Common Stock,
16
<PAGE>
(b) the issuance of any shares of Common Stock upon conversion
of outstanding shares of convertible Preferred Stock,
(c) up to 1,526,745 shares of Common Stock, or options
exercisable therefor, including options outstanding on the date of this
Agreement (such number to be proportionately adjusted in the event of any stock
splits, stock dividends, recapitalizations or similar events occurring on or
after the date of this Agreement) issuable to officers, directors, consultants
and employees of the Company and any subsidiary pursuant to the Company's 1995
Stock Plan,
(d) up to 257,000 shares of Common Stock, or options
exercisable therefor, including options outstanding on the date of this
Agreement (such number to be proportionately adjusted in the event of any stock
splits, stock dividends, recapitalizations or similar events occurring on or
after the date of this Agreement) issuable to officers, directors, consultants
and employees of the Company and any subsidiary pursuant to the Company's 1995
Stock Plan, provided that for each such share the Corporation has repurchased a
share issued prior to April 11, 1995 to an employee or former employee of the
Corporation,
(e) securities issued solely in consideration for the
acquisition (whether by merger or otherwise) by the Company or any of its
subsidiaries of all or substantially all of the stock or assets of any other
entity, or
(f) shares of Common Stock sold by the Company in an
underwritten public offering pursuant to an effective registration statement
under the Securities Act.
IV. GENERAL
1. TERMINATION.
(i) Article I of this Agreement shall terminate in its
entirety on the earliest of (a) the tenth anniversary of the date of this
Agreement, or (b) the closing of the Company's initial public offering of shares
of Common Stock (a "Qualified Public Offering") pursuant to an effective
registration statement under the Securities Act resulting in at least
$10,000,000 of gross proceeds to the Company at a minimum price of $7.50 per
share (subject to appropriate adjustment for stock splits, stock dividends,
recapitalizations and other similar events). All of the Company's obligations to
register Registrable Shares under Article II of this Agreement shall terminate
on the tenth anniversary of this Agreement. Article III of this Agreement shall
terminate in its entirety upon the earliest of (a) the closing of a Qualified
Public Offering or (b) the date that (i) less than 165,000 shares of Series A
Preferred Stock, less than 195,000 shares of Series B Preferred Stock, less than
200,000 shares of Series C Preferred Stock, less than 500,000 shares of Series D
Preferred Stock and less than 500,000 shares of Series E
17
<PAGE>
Preferred Stock remain outstanding (subject to appropriate adjustment for stock
splits, stock dividends, recapitalization or other similar events).
2. TRANSFER OF RIGHTS. This Agreement, and the rights and obligations
of each Stockholder hereunder, may be assigned by such Stockholder to any person
or entity to which Shares are transferred by such Stockholder, and such
transferee shall be deemed a "Stockholder" for purposes of this Agreement;
provided that the transferee provides written notice of such assignment to the
Company. Notwithstanding the foregoing sentence, the rights and obligations of
each Stockholder under Article II of this Agreement may only be assigned by such
Stockholder to any person or entity (i) to which at least 55,000 Shares are
transferred by such Stockholder or (ii) which is a partner, stockholder or
affiliate of such Stockholder, and such transferee shall be deemed a
"Stockholder" for purposes of this Agreement. For purposes of the foregoing
sentence, the shares of Series E Preferred Stock held by any holder shall be
aggregated with the shares of Series E Preferred Stock held by each partner,
stockholder or other affiliate of such holder. No Stockholder may assign any of
its rights or obligations hereunder to any person or entity which is determined
by the Board of Directors to be a "competitor" of the Company.
3. SEVERABILITY. The provisions of this Agreement are severable, so
that the invalidity or unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of any other term or provision of this
Agreement, which shall remain in full force and effect.
4. SPECIFIC PERFORMANCE. In addition to any and all other remedies that
may be available at law in the event of any breach of this Agreement, each
Purchaser shall be entitled to specific performance of the agreements and
obligations of the Company and the Stockholders hereunder and to such other
injunctive or other equitable relief as may be granted by a court of competent
jurisdiction.
5. GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the Commonwealth of Massachusetts.
6. NOTICES. All notices, requests, consents, and other communications
under this Agreement shall be in writing and shall be delivered by hand or
mailed by first class certified or registered mail, return receipt requested,
postage prepaid:
If to the Company, at 430 Bedford Street, Lexington, Massachusetts
02173, Attention: President, or at such other address or addresses as may have
been furnished in writing by the Company to the Purchasers, with a copy to
Foley, Hoag & Eliot LLP, One Post Office Square, Boston, MA 02109, Attn: Robert
L. Birnbaum, Esq.
18
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If to a Purchaser, at his or its address set forth on Exhibit A to this
Agreement, or at such other address or addresses as may have been furnished to
the Company in writing by such Purchaser; or
If to the Founder, at his address set forth beneath his signature to
this Agreement, or at such other address or addresses as may have been furnished
to the Company in writing by such Founder.
Notices provided in accordance with this Section 6 shall be deemed
delivered upon personal delivery or two business days after deposit in the mail.
7. COMPLETE AGREEMENT; AMENDMENTS. This Agreement constitutes the full
and complete agreement of the parties hereto with respect to the subject matter
hereof. Any amendment, modification or termination of any provision of this
Agreement shall be valid as to all parties if, but only if, it is in writing and
is signed by the Company and the holders of at least 66.7% of the voting power
of the Voting Shares, Registrable Shares or Eligible Shares, as the case may be,
then held by all Stockholders; PROVIDED, that Article II may be amended with the
consent of the holders of less than all Registrable Shares only in a manner
which affects all Registrable Shares in the same fashion (it being specifically
understood and agreed that the last paragraph of Section 9 of Article II may
only be amended with the consent of The Goldman Sachs Group, L.P. or any
successor thereto) and PROVIDED, FURTHER, that Article I, Section 1 may be
amended as to the member of the Board appointed by the Founder along with the
Purchasers only with prior written consent of the Founder and holders of at
least 66.7% of the Shares of the Purchasers.
Notwithstanding the foregoing, in the event that a vote with respect to the
foregoing sentence regarding an amendment of Articles I, III or IV would result
in materially detrimental treatment of one or more series of Preferred Stock
owned by a Purchaser on the one hand and the other series of Preferred Stock on
the other hand, the consent of the holders of not less than 51% of the
outstanding Shares of each so detrimentally treated Series of Preferred Stock,
voting separately as an individual class, shall be required to approve such
matters.
8. WAIVERS. No waivers of or exceptions to any term, condition or
provision of this Agreement, in any one or more instances, shall be deemed to
be, or construed as, a further or continuing waiver of any such term, condition
or provision.
9. PRONOUNS. Whenever the content may require, any pronouns used in
this Agreement shall include the corresponding masculine, feminine or neuter
forms, and the singular form of nouns and pronouns shall include the plural, and
vice versa.
10. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall constitute one Agreement binding on all the
parties hereto.
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11. CAPTIONS. Captions of sections have been added only for convenience
and shall not be deemed to be a part of this Agreement.
12. TERMINATION OF THIRD AMENDED AGREEMENT. The terms and provisions of
the Third Amended Investors' Rights Agreement are hereby terminated and shall
have no further force or effect.
[Remainder of page intentionally left blank]
20
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the day and year first above written.
COMPANY:
CENTRA SOFTWARE, INC.
By: /s/ LEON NAVICKAS
-------------------------------------
President and Chief Executive Officer
FOUNDER:
/s/ LEON NAVICKAS
-------------------------------------
Leon Navickas
PURCHASERS:
ALTA V LIMITED PARTNERSHIP
By: Alta V Management Partners, L.P.
By /s/ EILEEN MCCARTHY
-------------------------------------
General Partner
CUSTOMS HOUSE PARTNERS
By:/s/ EILEEN MCCARTHY
-------------------------------------
General Partner
21
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NORTH BRIDGE VENTURE PARTNERS, L.P.
By: North Bridge Venture Management, L.P.,
Its General Partner
By:/s/ ILLEGIBLE
-------------------------------------
General Partner
COMMONWEALTH CAPITAL VENTURES L.P.
By: Commonwealth Venture Partners L.P.,
Its General Partner
By: /s/ MICHAEL FITZGERALD
-------------------------------------
General Partner
----------------------------------------
Charles Digate
----------------------------------------
Edward Takacs
THE CAREER GROUP, LTD.
By:
-------------------------------------
Title:
----------------------------------------
Rubin Gruber
22
<PAGE>
BILL GROSS'S IDEALAB!
By:
-------------------------------------
Title:
TM PARTNERS
By:/s/ ANTHONY MARK
-------------------------------------
Title: Partner
SCRIPPS VENTURES, LLC
By: /s/ ILLEGIBLE
-------------------------------------
Title: Senior Vice President
POLARIS VENTURE PARTNERS, L.P.
By: Polaris Venture Management Co., LLC
Its General Partner
By:/s/ ILLEGIBLE
-------------------------------------
Member
POLARIS VENTURE PARTNERS FOUNDERS'
FUND, L.P.
By: Polaris Venture Management Co., LLC
Its General Partner
By:/s/ ILLEGIBLE
-------------------------------------
Member
23
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THE GOLDMAN SACHS GROUP, L.P.
By: The Goldman Sachs Corporation
Its General Partner
By: /s/ JOSEPH H. GLEBERMAN
-------------------------------------
Name: Joseph H. Gleberman
Title: Executive Vice President
STONE STREET FUND 1999, L.P.
By: Stone Street 1999 Corp.
Its General Partner
By: /s/ EVE M. GERRIETS
-------------------------------------
Name: Eve M. Gerriets
Title: Vice President
BRIDGE STREET FUND 1999 L.P.
By: Stone Street 1999 Corp.
Its General Partner
By:/s/ EVE M. GERRIETS
-------------------------------------
Name: Eve M. Gerriets
Title: Vice President
HARBOURVEST PARTNERS V-DIRECT FUND L.P.
By: HVP V-Direct Associates L.L.C.
Its General Partner
By: HarbourVest Partners, LLC
Its Managing Member
By: /s/ ILLEGIBLE
-------------------------------------
SL PARTNERS
By: /s/ STEVEN LESSER
-------------------------------------
Title: Partner
24
<PAGE>
EXHIBIT A
PURCHASERS
ALTA V LIMITED PARTNERSHIP
c/o Burr, Egan, Deleage & Co.
One Post Office Square, Suite 3800
Boston, Massachusetts 02109
CUSTOMS HOUSE PARTNERS
c/o Burr, Egan, Deleage & Co.
One Post Office Square
Suite 3800
Boston, Massachusetts 02109
NORTH BRIDGE VENTURE PARTNERS, L.P.
404 Wyman Street, Suite 365
Waltham, MA 02154
COMMONWEALTH CAPITAL VENTURES L.P.
20 William Street
Wellesley, MA 02181
Charles Digate
15 Oxford Street
Winchester, Massachusetts 01890
Edward Takacs
55 Bedford Road
Lincoln, Massachusetts 01773
THE CAREER GROUP, LTD.
One Kendall Square
Cambridge, Massachusetts 02139
Rubin Gruber
709 Sudbury Road
Concord, Massachusetts 01742
25
<PAGE>
BILL GROSS'S IDEALAB!
351 South Greenwood Avenue
Pasadena, California 91107
TM PARTNERS
c/o Anthony Mark
168 Middleton Road
Boxford, Massachusetts 01921
SCRIPPS VENTURES, LLC
Attention: Benjamin Burdett
200 Madison Avenue
New York, New York 10016
with copy to
Baker & Hostetler LLP
3200 National City Center
1900 East Ninth Street
Cleveland, OH 44114
Attn: Gerardo C. Orlando, Esq.
POLARIS VENTURE PARTNERS, L.P.
c/o Polaris Venture Management Co., LLC
1000 Winter Street, Suite 3350
Waltham, Massachusetts 02154
POLARIS VENTURE PARTNERS FOUNDERS' FUND, L.P.
c/o Polaris Venture Management Co., LLC
1000 Winter Street, Suite 3350
Waltham, Massachusetts 02154
THE GOLDMAN SACHS GROUP, L.P.
85 Broad Street, 19th Floor
New York, New York 10004
Attn: Randy Blumenthal
STONE STREET FUND 1999, L.P.
c/o The Goldman Sachs Group, L.P.
85 Broad Street, 19th Floor
New York, New York 10004
Attn: Randy Blumenthal
26
<PAGE>
BRIDGE STREET FUND 1999 L.P.
c/o The Goldman Sachs Group, L.P.
85 Broad Street, 19th Floor
New York, New York 10004
Attn: Randy Blumenthal
HARBOURVEST PARTNERS V-DIRECT FUND L.P.
One Financial Center
44th Floor
Boston, MA 02111
attn: Ofer Nemirovsky
SL Partners
47 Claypit Hill Road
Wayland, MA 01778
FOUNDER
Leon Navickas
430 Bedford Street
Lexington, Massachusetts 02173
27
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Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of
this registration statement.
Arthur Andersen LLP
Boston, Massachusetts
October 27, 1999
<PAGE>
Exhibit 23.2
CONSENT OF DIRECTOR -- NOMINEE
The undersigned, pursuant to Rule 438 under the Securities Act, consents
to the use of his name in the Registration Statement on Form S-1 of Centra
Software, Inc. as a person who is a Director-Nominee of Centra Software, Inc.
/s/ David Barrett
---------------------
David Barrett
Date: October 25, 1999
