<PAGE>
As filed with the Securities and Exchange Commission on March 3, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PLACEWARE, INC.
(Exact Name of Registrant as Specified in its Charter)
---------------
Delaware 7371 77-0442561
(State or Other (Primary Standard Industrial (I.R.S. Employer
Jurisdiction of Classification Code Number) Identification No.)
Incorporation or
Organization)
295 North Bernardo Avenue
Mountain View, California 94043
(650) 526-6100
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
---------------
Barry James Folsom
Chief Executive Officer
PlaceWare, Inc.
295 North Bernardo Avenue
Mountain View, California 94043
(650) 526-6100
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
---------------
Copies to:
Mark P. Tanoury, Esq. Gregory C. Smith, Esq.
James F. Fulton, Jr., Esq. Thomas J. Ivey, Esq.
David Y. Oh, Esq. Sanjiv Singh, Esq.
COOLEY GODWARD LLP SKADDEN, ARPS, SLATE, MEAGHER & FLOM
3000 Sand Hill Road LLP
Building 3, Suite 230 525 University Ave.
Menlo Park, California 94025-7166 Suite 220
(650) 843-5000 Palo Alto, California 94301
(650) 470-4500
---------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement is declared 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 to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
number for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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Title of Each Class of Amount to be Amount of
Securities to be Registered Registered (1) Registration Fee
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<S> <C> <C>
Common Stock, par value $.0001 per share........... $75,000,000 $19,800
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</TABLE>
(1) Estimated solely for the purpose of computing the amount of the
registration fee, in accordance with Rule 457(o) promulgated under the
Securities Act of 1933.
---------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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. The prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MARCH 3, 2000.
Shares
[LOGO]
PlaceWare, Inc.
Common Stock
--------
Prior to this offering, there has been no public market for our common stock.
The initial public offering price of the common stock is expected to be between
$ and $ per share. We have applied to list our common stock on The
Nasdaq Stock Market's National Market under the symbol "PLCW."
The underwriters have an option to purchase a maximum of additional
shares to cover over-allotments of shares.
Investing in our common stock involves risks. See "Risk Factors" on page 8.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions PlaceWare, Inc.
------------ ------------- ---------------
<S> <C> <C> <C>
Per Share............................ $ $ $
Total................................ $ $ $
</TABLE>
Delivery of the shares of common stock will be made on or about ,
2000.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
Credit Suisse First Boston Robertson Stephens
U.S. Bancorp Piper Jaffray
The date of this prospectus is , 2000.
<PAGE>
Inside Front Cover Graphics Description
[The words "A New Medium for Business-to-Business Communications: Web
Conferencing" appears at the top of the inside cover. A screen shot of the
PlaceWare presenter console appears with a photographic image of business
people working together. The text "Web-based communications E-Service for
interactive meetings and presentations over the Internet" appears to the right
of the photograph of the business people working together. The PlaceWare logo
with the text "Web conferencing" below it appears in the lower right hand
corner. A screened back image of the character from the PlaceWare logo appears
in the background.]
<PAGE>
Inside Gatefold Graphics Description
[The words "From small teams to global markets.....Web conferencing is here''
appears at the top of the inside gatefold. A world map appears in the center of
the gatefold, on which there is an image of a ""building'' with arrows
extending out to all areas on the map that end in animated screen shot images
of PlaceWare with the words ""PlaceWare real-time interaction makes effective
presentations''. The map is surrounded by five round photographs of business
people working together. In the background the words "sales training", "new
product launches", "investor relations", "customer seminars", "press/analyst
briefings", "customer communications", "customer education", "town hall
meetings", "sales meetings", "user groups/market research", "sales training",
"employee meetings", and "channel communications". On the right side of the
gatefold there is a column of black with a photo of business people applauding.
The PlaceWare logo with the text "Web conferencing" below it appears in the
lower right hand corner.]
<PAGE>
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TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
Prospectus Summary....................................................... 4
Risk Factors............................................................. 8
Special Note Regarding Forward-Looking Statements........................ 18
Use of Proceeds.......................................................... 19
Dividend Policy.......................................................... 19
Capitalization........................................................... 20
Dilution................................................................. 21
Selected Consolidated Financial Data..................................... 22
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 24
Business................................................................. 32
</TABLE>
<TABLE>
<CAPTION>
Page
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<S> <C>
Management................................................................. 45
Certain Transactions....................................................... 55
Principal Stockholders..................................................... 58
Description of Capital Stock............................................... 60
Shares Eligible for Future Sale............................................ 62
Underwriting............................................................... 64
Notice to Canadian Residents............................................... 66
Legal Matters.............................................................. 67
Experts.................................................................... 67
Additional Information..................................................... 67
Index to Consolidated Financial Statements................................. F-1
</TABLE>
------------
You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities. The information in this document may only be accurate
on the date of this document.
Dealer Prospectus Delivery Obligation
Until , 2000 (25 days after the commencement of this offering), all
dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This
is in addition to the dealer's obligation to deliver a prospectus when acting
as underwriters and with respect to their unsold allotments or subscriptions.
3
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
You should read this entire prospectus carefully, including the risk factors
beginning on page 8. In this prospectus, we, us and our refer to PlaceWare,
Inc. and not to the underwriters.
PlaceWare
PlaceWare is a leading provider of web conferencing services and products
that enable businesses to conduct real-time, interactive meetings and
presentations over the Internet. Businesses use our web conferencing services
and products as strategic tools to create new business opportunities; share and
exchange information among geographically dispersed organizations; strengthen
relationships with customers, partners, vendors and employees; enhance employee
productivity; and reduce unnecessary travel time and expenses.
At the core of our services is Conference Center 2000, the latest generation
of our technology. It provides a robust, easy-to-use web conferencing platform
that enables presenters to quickly and easily upload standard presentations and
other selected file types and begin presenting in a web conference in a
relatively short period of time. Using only an Internet-enabled personal
computer and a telephone, people can attend these meetings and presentations.
Conference Center 2000 can be used to host meetings and presentations over the
Internet with up to 2,500 participants. Our web conferencing services can be
delivered either as a hosted application service or as an in-house software
application.
Forrester Research has identified web conferencing as the fastest growing
segment of the collaboration services market. In their survey of Fortune 1000
companies, 70% of all respondents indicated they would use web conferencing by
2001. Web conferencing generally uses customers' existing voice and data
infrastructure to facilitate widespread deployment. Additionally, it provides
businesses with the ability to communicate verbally while sharing rich visual
content over low bandwidth connections. We believe web conferencing enables
businesses to increase their reach and cost-effectively communicate mission-
critical knowledge to constituencies within and outside of an organization,
thereby shortening time to market and sales cycles.
Our services and products are designed to be:
. easy-to-use;
. highly scalable;
. simple to purchase and deploy; and
. highly interactive with support for rich visual content.
We began providing web conferencing in June 1997 and as of December 31,
1999, had over 340 customers. Our customers consist of a diverse group of
companies operating in many industries worldwide, ranging from Fortune 100 to
small private companies. Our largest customers in their respective industry
category include Ariba, Inc., Autodesk, Inc., The Charles Schwab Corporation,
Cisco Systems, Inc., The Dun and Bradstreet Corporation and International Data
Corporation. In addition, we provide co-branded web conferencing services
through our communication service providers including Conference Plus, Inc.,
Envoyglobal.com, General Dynamics Corporation, Hewlett-Packard Company, MCI
WorldCom, Inc. and Sprint.
Our objective is to be the leading provider of web conferencing services.
Key elements of our strategy to achieve this objective include:
. promoting web conferencing, in general, and increasing brand
recognition;
. expanding our business development and sales and marketing efforts to
attract new customers;
4
<PAGE>
. increasing our customers' utilization of our existing services and
products;
. extending and expanding our service and product offerings;
. continuing to increase the scalability and reliability of our services
and products;
. leveraging and extending our technology base to more tightly integrate
our technology with third-party services and applications; and
. pursuing strategic acquisitions.
Our address is 295 North Bernardo Avenue, Mountain View, CA 94043. Our
telephone number is (650) 526-6100. Our web site is located at
www.placeware.com. Information contained on our web site does not constitute
part of this prospectus.
5
<PAGE>
The Offering
<TABLE>
<C> <S>
Common stock offered................................ shares
Common stock to be outstanding after this offering.. shares
Use of proceeds..................................... For general corporate
purposes, including
working capital, capital
expenditures, geographic
expansion and additional
sales and marketing
efforts.
Proposed Nasdaq National Market symbol.............. PLCW
</TABLE>
The number of shares of our common stock outstanding after this offering is
based on shares outstanding as of December 31, 1999. This table excludes:
. 1,278,343 shares of common stock underlying outstanding options as of
December 31, 1999 at a weighted average exercise price of $0.94 per
share;
. 315,625 shares of common stock that are issuable upon the exercise of
outstanding warrants at a weighted average exercise price of $3.57 per
share;
. 3,650,000 shares reserved for issuance or future grant under our stock
option plans; and
. 500,000 shares reserved for issuance under our employee stock purchase
plan.
----------------
Except as otherwise indicated, information in this prospectus is based on
the following assumptions:
. the conversion of each outstanding share of our convertible preferred
stock into one share of common stock immediately before completion of
this offering;
. no exercise of the underwriters' over-allotment option; and
. the filing of our amended and restated certificate of incorporation.
PlaceWare, PlaceWare Conference Center 2000, LiveDemo, MyPlaceWare, Web
Conferencing is Here and iVault are our trademarks. Other trademarks or service
marks appearing in this prospectus are trademarks or service marks of the
companies that use them.
6
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Summary Consolidated Financial Information
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1997 1998 1999
------- ------- --------
(in thousands, except
per share data)
<S> <C> <C> <C>
Statement of Operations Data:
Revenues:
Hosting and services............................ $ -- $ 511 $ 2,433
Licensing....................................... 609 1,113 1,962
------- ------- --------
Total revenues................................ 609 1,624 4,395
------- ------- --------
Operating expenses:
Cost of hosting and services.................... -- 3 806
Operations...................................... 188 214 492
Sales and marketing............................. 1,516 2,819 7,824
Research and development........................ 1,490 2,057 2,704
General and administrative...................... 806 1,648 2,559
Stock-based compensation........................ 11 6 1,128
------- ------- --------
Total operating expenses...................... 4,011 6,747 15,513
------- ------- --------
Operating loss.................................... (3,402) (5,123) (11,118)
------- ------- --------
Interest income, net.............................. 130 155 200
------- ------- --------
Net loss.......................................... $(3,272) $(4,968) $(10,918)
======= ======= ========
Basic and diluted net loss per share.............. $ (4.67) $ (4.58) $ (6.41)
======= ======= ========
Shares used in computing basic and diluted net
loss per share................................... 700 1,084 1,704
======= ======= ========
Pro forma basic and diluted net loss per share.... $ (1.10)
========
Shares used in computing pro forma basic and
diluted net loss per share....................... 9,937
========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1999
-------------------------------
Pro forma,
Pro forma As Adjusted
Actual (unaudited) (unaudited)
------- ----------- -----------
(in thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents..................... $14,591 $14,591 $
Working capital............................... 10,152 10,152
Total assets.................................. 21,136 21,136
Notes payable and capital lease obligations,
less current portion......................... 503 503
Stockholders' equity.......................... 12,891 12,891
</TABLE>
The pro forma balance sheet data give effect to the conversion of all
outstanding shares of preferred stock into shares of common stock upon the
consummation of this offering. The pro forma, as adjusted balance sheet data
give effect to the foregoing and to the sale of the shares of common
stock by us in this offering at an assumed initial public offering price of
$ per share, based on the mid-point of the filing range, after deducting the
underwriting discounts and commissions and estimated offering expenses and
application of the net proceeds.
See Note 1 to the consolidated financial statements for a description of the
method that we used to compute the net loss per share amounts.
7
<PAGE>
RISK FACTORS
An investment in our common stock is very risky. You should carefully
consider the risks described below, together with the other information in this
prospectus, before buying shares in this offering. See "Special Note Regarding
Forward-Looking Statements."
Risks Related to our Business
Our limited operating history makes financial forecasting and evaluation of our
business difficult.
We were incorporated in October 1996 and first recorded revenue in 1997. In
July 1998, we shifted the focus of our business model from sales of software
licenses to a hosted services model. Because we have a limited operating
history and have limited financial data available, it is difficult to
accurately evaluate our business or predict future revenues and expenses. We
are subject to the risks, expenses and uncertainties frequently encountered by
companies in new and rapidly evolving technology and Internet-related markets,
and we cannot be certain that our business model and future operating
performance will yield the results that we seek. Because of the emerging nature
of the web conferencing industry, we cannot determine trends that may emerge in
our market or affect our business. The revenue and income potential of the web
conferencing industry, and our business, are unproven.
Our quarterly operating results may fluctuate significantly.
Our quarterly operating results are difficult to predict. Due to any number
of factors, our future quarterly operating results may fluctuate and may not
meet the expectations of investors or securities analysts who may initiate
coverage, which may cause the price of our common stock to decline. Some of the
factors that may contribute to fluctuations in our operating results include
the following:
. the inability to deliver our hosted service;
. the loss of a major customer or communication service provider or the
failure to attract new customers;
. many of our expenses, such as salaries, rent, advertising and hosting
facilities, have fixed minimums;
. lower revenues than expected;
. downward pressure on prices paid by our business customers, as a result
of competition or other factors, which could reduce our quarterly
revenues even if we maintain or increase the number of sales;
. our ability to upgrade, develop, maintain and have available our
services, systems and infrastructure in a timely manner, and the related
costs and expenditures related to such activities; and
. the timing of a significant marketing campaign.
Because our customers do not have long-term obligations to purchase services
from us, our revenues and operating results depend upon the volume and timing
of customer orders and payments. We historically have received payments in
advance for our services and products and have deferred these revenues over a
fixed period of time, generally for a period of one year. If we modify our
billing and payment practices and change the period of time over which we defer
revenues, and if investors or securities analysts who may initiate coverage
fail to understand this modification, such investors or analysts may perceive
this change as additional fluctuations in our operating results which may cause
the price of our stock to decrease.
We have a history of losses, we expect continuing losses and we may never
achieve profitability.
Our operating costs have exceeded our revenue in each quarter since our
inception in October 1996. We incurred cumulative losses of approximately $19.4
million from October 1996 through December 31, 1999. We intend to increase our
expenditures on marketing, administration, product development and technology
development, and such expenditures may further contribute to our net losses.
For instance, we intend to increase our expenditures related to the PlaceWare
brand, believing that brand awareness will be critical to increasing business
customer awareness and acceptance. If we do not increase our revenues as a
result of these expenditures, we may not be able to achieve and maintain
profitability and may be unable to continue our operations.
8
<PAGE>
In addition to increasing our expenditures, we cannot assure you that our
revenues will continue to grow such that we will be able to achieve or maintain
profitability. A significant amount of our revenues come from repeat customers.
Because our customers are under no obligation to continue to renew their
subscription to our services and products, a failure to retain customers or
maintain and expand their order volume and utilization of our services and
products may harm our business. If we are not able to significantly increase
our revenues, we may not achieve or sustain profitability in the future and may
be unable to continue our operations.
If we fail to execute our growth strategy our business will be harmed.
The majority of our web conferencing customers to date have been businesses
in the high technology, financial services and professional services markets.
We intend to expand our service and product offerings and to develop customer
bases in other target markets. We have had limited experience in these extended
markets and may encounter obstacles, such as regulatory issues or changing
technical standards, which we have not anticipated and may negatively affect
our growth strategy. If we are unsuccessful in carrying out any part of our
growth strategy, our business will be harmed.
Our growth strategy may also require us to enter into acquisitions, joint
ventures or other relationships with undetermined third parties. Our failure to
form beneficial relationships, or our failure to secure terms favorable to us,
may cause our business to be harmed. In addition, any such relationship would
be accompanied by the risks commonly encountered in such acquisitions or joint
ventures, including the difficulty of assimilating the operations and personnel
of the other companies, the potential disruption of our ongoing business, the
inability of management to succeed in the incorporation of other companies'
technology into our services and products, any additional expense associated
with such relationships, the difficulty of maintaining uniform standards,
controls, procedures and policies, and the potential impairment of
relationships with employees, customers and existing service providers.
If we are unable to manage our expected growth, our business may be harmed.
Since we began operations, we have significantly increased the size of our
operations and we plan to continue to expand our operations. The growth of our
operations is expensive and places a significant strain on our management and
resources. Our ability to successfully offer additional services and products
and to timely implement our business plan in the rapidly evolving web
conferencing market requires an effective planning and management process. If
we do not effectively manage this growth, we will not be able to operate
efficiently or maintain the quality of our services or products, either of
which may harm our business. To manage our expanded operations effectively, we
will need to continue to improve our operational, financial and managerial
controls, and will need to enhance our reporting systems and procedures. We
will also need to continue to expand, train and manage our work force. If we
are unable to effectively manage these factors in our growth process, our
business may be harmed.
Expansion into international markets may be difficult or unprofitable.
One component of our strategy for growth is to expand into international
markets. We have recently commenced sales operations in the United Kingdom, and
we may continue to open offices in the future in other countries. International
expansion comes with significant risks, which may include the adoption of new
laws or changes to existing international laws, currency fluctuations,
increased costs associated with opening and maintaining new hosting facilities,
political and economic instability, slower or more expensive Internet access,
or differing technology standards, any of which could restrict, harm or
eliminate our ability to do business in international markets.
9
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We may not be successful in the timely development and introduction of new
services and products.
The web conferencing industry is new and rapidly evolving. In order to be
successful, we must be able to recognize new opportunities, and must also be
able to develop new services and products on a timely basis to take advantage
of these opportunities. In addition, such new services or products may not
achieve the broad market penetration, rapid acceptance or price stability
necessary to achieve or maintain profitability.
For example, we have recently focused on, and will continue to devote
significant resources to, the development of Conference Center 2000, the most
recent version of our hosted web conferencing solution. If Conference Center
2000 does not gain widespread market acceptance, or if we fail to implement our
planned enhancements to Conference Center 2000 on a timely basis, such as
increasing the number of supported application file types, including word
processing and spreadsheet documents, we may suffer lost sales and could fail
to achieve anticipated revenues, and our business may be harmed.
We may not be successful in our attempts to keep up with rapid technological
change.
The markets for our services and products are characterized by rapidly
changing technology, changes in customer needs, emerging competition, and
frequent new product and service introductions. Our future success will depend,
in part, on our ability to:
. improve and develop our hardware infrastructure;
. enhance our current services and products;
. advertise and market our services and products;
. influence and respond to emerging market trends;
. influence and respond to emerging and evolving industry standards; and
. develop and execute contingency plans.
Our continued development must be accomplished in a timely and cost-
effective manner. We may not be successful in effectively using new
technologies, developing new services or products or enhancing our existing
services or products on a timely basis or in a manner that achieves market
acceptance. Our pursuit of necessary technological advances may require
substantial time and expense. If we are unable to successfully respond to these
new technological advances, our business may be harmed.
Alteration of our customers' or users' firewall protection policies may harm
our business.
Our services and products are dependent on their ability to penetrate
firewalls. Recent electronic break-ins and hacking activities have caused
companies across various industries to re-evaluate the level of firewall
protection necessary to protect their data and computer operations. If more
companies improve or substantially alter their current firewall protection, we
may lose our current ability to provide web conferencing across most corporate
firewalls, and our business may be harmed.
We rely heavily on the reliability, security and performance of our internally
developed systems and operations, and any difficulties in maintaining these
systems may cause our business to be harmed.
The satisfactory performance, reliability and availability of our
proprietary hardware and software infrastructure is critical to our reputation
and ability to attract and retain customers and maintain adequate customer
service. Any system interruptions that result in the unavailability of services
or products would harm our reputation and our ability to conduct business. Our
software and hardware infrastructure is complex and requires considerable
technical expertise to maintain. Failure to develop and execute carrier-class
policies, procedures and tools to operate our software and hardware
infrastructure could result in intermittent to prolonged outages. Many of the
software systems used to support our services and products were developed
internally. These systems will need to be enhanced over time or replaced with
equivalent commercial products, either of which could entail considerable
effort and expense.
10
<PAGE>
If we fail to maintain adequate data security, our business may be harmed.
While we currently have security measures to prevent unauthorized attendance
and access to particular conferences, we have not deployed any encryption
technologies or similar security measures to protect content, as it is being
transmitted, from being viewed or accessed by unauthorized users. To the extent
such encryption technology and similar security measures are required or
expected by businesses for the transmission of commercially or otherwise
sensitive information, our failure to deploy such technology and implement
safeguards may result in the loss of existing customers, the inability to
attract new customers and possibly subject us to liability for breaches of
security and confidentiality.
We rely heavily on the services of our co-location facility provider and any
interruption of service could harm our business.
Substantially all of our computer and communications hardware infrastructure
is located at the facilities of Exodus Communications in Santa Clara,
California, and as a result, we rely on third-parties to monitor and maintain
our equipment. Our systems and operations are vulnerable to damage or
interruption from fire, flood, power loss, telecommunications failure, computer
viruses, physical or electronic break-ins, earthquakes and similar events.
Because we do not presently have a fully redundant co-location facility or a
formal disaster recovery plan, there can be no assurance that a system failure
would not severely harm our business, financial condition and results of
operations. The occurrence of any of the foregoing risks could harm our
business, financial condition and results of operations.
Our services or products may contain errors which could harm our business.
The technology underlying our services and products is complex and may
contain undetected errors when new services and products are introduced or when
new versions are released. Although we conduct extensive testing of our
services and products during development, we have in the past discovered
errors. If we market services and products that have errors or that do not
function properly, then we may experience negative publicity, loss of or delay
in market acceptance, or claims against us by customers, any of which may harm
our business.
If we are unable to scale our technology infrastructure or develop new software
to meet the demand for our services and products, our business may be harmed.
The number of web conferences we are hosting has grown significantly. We
will need to enhance our software and hardware infrastructure to handle
increased volume in the number of events and the number of customers using our
services and products. Our success will depend on our ability to scale our
technology and operations infrastructure to meet the demand for our services
and products. Adding this new capacity will be expensive, and we may not be
able to do so successfully. If we are unable to expand capacity to keep pace
with our anticipated customers' demands we may lose market share and our
business may be harmed.
We must also continue to innovate and develop new versions of our software
to remain competitive in the market for web conferencing services and products.
Because of the complexity of our services and products, our development efforts
are inherently difficult to manage and keep on schedule. Our failure to manage
and keep those development projects on schedule may harm our business.
If we are unable to adequately protect our intellectual property, our business
may be harmed.
Our ability to successfully compete is substantially dependent upon our
internally developed technology, which we protect through a combination of
copyright, trade secret and trademark law. We currently have no issued patents
and three patent applications pending. We may not be able to adequately protect
our proprietary rights which may harm our business. Unauthorized parties may
attempt to copy or otherwise obtain and use our products or technology.
Policing unauthorized use of our services and products is difficult, and we
cannot be certain that the steps we have taken will prevent misappropriation of
our technology, particularly in foreign countries where the laws may not
protect our proprietary rights as fully as in the United States.
11
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We may be subject to infringement claims which could harm our business.
There is a substantial risk of litigation regarding intellectual property
rights in our industry. A successful infringement claim against us and our
failure or inability to license the infringed or similar technology could harm
our business. We expect that our technologies and products may be increasingly
subject to third-party infringement claims as the number of our competitors
grows. We cannot be certain that third parties will not make a claim of
infringement against us with respect to our technologies and products. Any
claims, with or without merit, could:
. be time-consuming to defend;
. result in costly litigation;
. divert management's attention and resources;
. cause delays in delivering services and products;
. require the payment of monetary damages which may be tripled if the
infringement is found to be willful;
. result in an injunction which would prohibit us from offering one or more
services or products; or
. require us to enter into royalty or licensing agreements which, if
required, may not be available on acceptable terms, if at all.
In July 1999, we were contacted by legal counsel representing Pixion, Inc.,
a web conferencing provider, with allegations that we misappropriated trade
secrets under an August 1997 license and distribution agreement. Pixion
essentially alleged that we failed to destroy any shared confidential
information disclosed pursuant to the agreement, and that their confidential
information was used in the development of our LiveDemo software product.
Pixion also alleged copyright and trademark infringement. After initial
attempts to resolve this issue, Pixion has failed to respond to any of our
requests to move this issue forward, and our last contact with Pixion was in
October 1999. Although we have not received any additional communications from
Pixion, we are prepared to vigorously defend ourselves if and when such claims
are brought to court. If a lawsuit is brought to court, we may be forced to
expend time, money and resources in defending against such lawsuit, and if we
are unsuccessful in our defense, our business may be harmed. Trade secret
misappropriation cases are inherently fact-specific, making it difficult to
predict with any degree of certainty the outcome of a given dispute. This
uncertainty is heightened by the fact that such claims may be tried before a
jury, and that if the jury finds that a defendant acted willfully or in bad
faith, it may award the plaintiff punitive damages that could be substantial,
in addition to injunctive relief, damages and attorneys' fees. It is thus
difficult to quantify the potential extent of our exposure, although it could
be very substantial.
Our business may be harmed if we do not attract and retain additional highly-
skilled personnel.
In order for us to succeed, we must identify, attract, retain and motivate
highly-skilled technical, managerial, sales and marketing personnel. We plan to
significantly expand our operations, and we will need to hire additional
personnel as our business grows. Competition for qualified personnel is
intense, especially in Silicon Valley, and we have experienced difficulties in
hiring highly-skilled technical personnel due to significant competition for
experienced personnel in our market. Failure to attract and retain necessary
personnel could harm our business, financial condition and operating results.
Most of our management team has only recently joined us and has little
experience working together, which could limit the team's effectiveness in
operating our business.
Our management team does not have significant experience working together,
because most members of our management team have been employed by us for a
short period of time. This could prevent or limit our management team's ability
to work together effectively. The failure of our management team to work
together effectively could delay efficient decision-making and execution of
business objectives, that may harm our business, financial condition and
operating results.
12
<PAGE>
Loss of our senior management or key employees could harm our business.
Our future success depends to a significant degree on the skills, experience
and efforts of our senior management and key employees. The loss of services of
any of our senior management or key employees, particularly of our president
and chief excutive officer, Barry James Folsom, could harm our business and
operations. We have not obtained life insurance benefiting us on any of our
senior management or key employees. We have not entered into employment
agreements with our senior management or key employees and their employment is
at-will. If any of our senior management or key employees left or was seriously
injured and unable to work and we were unable to find a qualified replacement,
our business could be harmed.
The termination of service provider relationships could significantly reduce
our future revenues and increase our costs.
We have entered into various agreements with AT&T, Conference Plus, Inc.,
Envoyglobal.com, General Dynamics Corporation, Hewlett-Packard Company, MCI
WorldCom, Inc. and Sprint to become service providers. If these relationships
are terminated or otherwise fail, our revenues may be harmed and we may be
required to devote additional resources to the sales and marketing of our
services and products. We have no long-term contracts with these service
providers and they generally are not obligated to offer our services or
products to their clients or restricted from working with our competitors.
Accordingly, our success will be affected by their willingness to devote
resources and efforts to marketing our services and products.
We license third party technologies and we face risks in doing so.
As part of our web conferencing services and products, we utilize technology
licensed from Xerox PARC which enables companies to hold and participate in web
conferences with others, despite the existence of firewalls that broadly block
the transmission of certain content across organizational boundaries. The loss
of any of this licensed technology may have a materially adverse effect on our
business, financial condition and results of operations. In addition to
maintaining this license, we may also need to license additional technologies
to remain competitive, and may not be able to license these technologies on
commercially reasonable terms or at all. Our inability to obtain any of these
licenses could delay the development of our services and products until
equivalent technology can be identified, licensed and integrated, which may
harm our business. These licenses may also expose us to increased risks,
including risks related to the integration of or inability to integrate new
technology, the diversion of resources from the development of our own
proprietary technology and our inability to generate revenue from new
technology sufficient to offset associated acquisition and maintenance costs.
In addition, we have developed our products to be utilized by Internet
browsers capable of integrating and running applications based on the Java
software programming language. If there are fundamental changes to existing
Internet browsers such that they no longer are compatible with or capable of
running these Java-based applications, we will be forced to modify our services
and products and our business may be harmed. Similarly, if there are
fundamental changes to the Java programming language, we will be forced to
modify our services and products and our business will be harmed.
Risks Related to Our Industry
Competition in the web conferencing services industry is intense and, if we are
unable to compete effectively, the demand for, or the prices of, our services
and products may decline.
The market for web conferencing services is intensely competitive, rapidly
evolving and subject to technological change. We expect competition to increase
significantly in the future as new and existing competitors seek to provide web
conferencing services and products.
We believe the principal factors affecting the competitive environment
include a significant base of referenceable customers, the quality and
performance of the service, including scalability, reliability and
13
<PAGE>
security, product features, customer service, core technology, the quality of
the event services offering, price and the value of a given service. Although
we believe that our services and products currently compete favorably with
respect to these factors, our market is relatively new and is evolving rapidly.
We may not be able to maintain our competitive position against current and
potential competitors.
Our principal competitors include providers of web conferencing services
such as Contigo, INTERVU and WebEx. We may experience additional competition
from companies that provide streaming media services, audio conferencing or
video conferencing services, or other established software or distance learning
companies that decide to enter the web conferencing market. These companies
could possess large, existing customer bases, substantial financial resources
and established distribution channels and could develop, market or resell a
number of web conferencing services. Such potential competitors may also choose
to enter the market for web conferencing services by acquiring one of our
existing competitors or by forming strategic alliances with such competitors.
Either of these occurrences could harm our ability to compete effectively. In
addition, our currently licensed service providers may enter into similar
agreements with our competitors or develop parallel services based on their own
technology. This kind of competition from our service providers may harm our
business in the future.
Many of our potential competitors have longer operating histories, greater
name recognition, larger customer bases, more diversified lines of services and
products and significantly greater resources than we have. These competitors
may be able to undertake more extensive marketing campaigns, adopt more
aggressive pricing policies and deliver superior solutions. In addition, many
of our current or potential competitors have broad distribution channels that
may be used to bundle competing services or products directly to end-users or
purchasers. If such competitors bundle competing services or products for their
customers, the demand for our services and products could substantially
decline. As a result of the above factors, we cannot assure you that we will
compete effectively with the current or future competitors or that competitive
pressures will not harm our business.
Our business may be harmed if businesses fail to accept web conferencing.
The market for web conferencing is new and rapidly evolving and our business
will be harmed if sufficient demand for our services and products does not
develop. Our current and planned services and products are different from the
traditional meeting and presentation methods that many of our customers have
historically used to communicate with customers, partners, vendors and
employees. Demand for our services and products may not materialize for the
following reasons:
. businesses that have already invested substantial resources in other
distance communication solutions may be reluctant to adopt our new
conferencing services and products;
. businesses may choose not to accept web conferencing as a means of
conducting business; and
. the effectiveness of web conferencing may diminish significantly if
alternative technologies or methods for distance communication develop.
If demand for our services and products fails to materialize, our business may
be harmed.
Our business may be harmed if we fail to price our services and products
appropriately.
The price of Internet services and products is subject to rapid and frequent
change. Due to competitive reasons or technical difficulties, we may be forced
to reduce or eliminate prices for certain of our services or products. If this
happens, our business may be harmed.
We rely generally on the equipment and infrastructure of the Internet and of
our customers.
Our services and products are designed to operate over the Internet, as
accessed and maintained by each individual customer. As a result, the
successful use of our product will generally depend on the continued
development and maintenance of the Internet infrastructure, such as reliable
network backbones with the necessary speed, data capacity and security, and
will also depend on customers' own computer equipment,
14
<PAGE>
including a functional operating system, Internet browser software and reliable
connections to the Internet. To the extent that the Internet continues to
experience increased numbers of users, a high frequency of use or increased
bandwidth requirements of users, the Internet infrastructure may not continue
to be able to support the demands placed on it by this continued growth and the
performance or reliability of the Internet may be harmed. Furthermore the
Internet has experienced a variety of outages and other delays as a result of
damage to portions of its infrastructure, and could face similar outages and
delays in the future. These outages and delays could reduce the level of
Internet usage and diminish the perception of the Internet as a viable means of
communication, such that usage of our services and products may decrease and
our business may be harmed.
Government regulation and legal uncertainties of doing business on the Internet
could negatively impact our business.
Laws and regulations that apply to Internet communications are becoming more
prevalent, particularly laws and regulations covering user privacy, security,
pricing, taxation and quality of services and products. These regulations could
affect the cost of communicating on the Internet and negatively affect the
demand for our web conferencing services and products or otherwise harm our
business. This legislation could hinder growth in the use of the Internet
generally and decrease the acceptance of the Internet as a web conferencing or
distance communication solution.
As a provider of Internet communication services and products, we face
potential liability for defamation, negligence, copyright, patent or trademark
infringement and other claims based on the nature and content of the materials
being transmitted by our services or products. Although we currently require
customers to agree not to engage in the transmission of such content before
utilizing our services or products, there can be no guarantee that our
customers will refrain from the transmission of such content, or that we will
not be deemed responsible for the content being transmitted or hosted using our
services, products or infrastructure.
Although we currently are not subject to direct regulation by any
governmental agency, the laws governing the Internet remain largely unsettled,
even in areas where there has been some legislative action. It may take years
to determine whether and how existing laws including those governing
intellectual property, privacy, security and taxation apply to the Internet and
the use of the Internet as a communication medium. Our business could be harmed
with the adoption or modification of laws or regulations relating to the
Internet, or the application of existing laws to the Internet.
The tax treatment of activities on or relating to the Internet is currently
unsettled. A number of proposals have been made at the federal, state and local
levels and by foreign governments that could impose taxes on the online sale of
goods and services and other Internet activities. The Internet Tax Freedom Act
of 1998 has generally imposed a U.S. moratorium through October 2001 on the
imposition of some kinds of consumer-related taxes, other than sales or use
taxes, in connection with Internet access and Internet-related sales. However,
future laws imposing taxes or other regulations on commerce over the Internet
could substantially impair the growth of Internet commerce and, as a result,
decrease our revenues or make it cost-prohibitive to operate our business.
Risks Related to this Offering
Our stock price may be highly volatile and could drop, particularly because our
business depends on the Internet.
Prior to this offering, our common stock has not been sold in a public
market. After this offering, an active trading market in our stock might not
develop. If an active trading market does develop, it may not continue.
Moreover, if an active market develops, the trading price of our common stock
may fluctuate widely as a result of a number of factors, many of which are
outside our control. In addition, the stock market has experienced extreme
price and volume fluctuations that have affected the market prices of many
technology companies, particularly Internet-related companies. Moreover, these
price and volume fluctuations have often been
15
<PAGE>
unrelated or disproportionate to the operating performance of these companies.
These broad market fluctuations could adversely affect the market price of our
common stock.
We have discretion over the use of the proceeds of this offering, and our use
of the proceeds may not produce a favorable return.
We intend to use the net proceeds primarily for general corporate purposes,
including working capital, capital expenditures, geographic expansion and
additional sales and marketing efforts. Accordingly, management will have
significant flexibility in applying the net proceeds of the offering. The
failure of management to apply these funds effectively could significantly harm
our business, financial condition and results of operations. See "Use of
Proceeds."
Future sales of our common stock after the offering could materially affect the
market price of our common stock.
Sales of substantial numbers of shares of our common stock in the public
market after this offering, or the perception that sales could be made, could
cause the market price of our common stock to decline. Based on shares
outstanding as of following this offering, we will have
approximately shares of our common stock outstanding or
shares if the underwriters' over-allotment option is exercised in full.
Approximately shares or % of our outstanding common stock
will be subject to resale restrictions under U.S. securities laws. Holders of
substantially all of these shares have agreed not to sell these shares for at
least 180 days following the date of this prospectus, although Credit Suisse
First Boston Corporation can waive this restriction at any time at its sole
discretion and without notice. When these restrictions on resale end beginning
in , 2000, the market price for our common stock could drop
significantly if holders of these shares sell them or are perceived by the
market as intending to sell them. These sales also may create difficulties for
us if we attempt to raise additional funds by selling equity securities in the
future. See "Shares Available for Future Sale."
We may be unable to obtain the additional capital required to develop and
expand our business.
We may be required to raise additional capital through the issuance of debt
or equity securities. Depending on market conditions, we may choose to raise
additional capital sooner for our working capital requirements. The actual
amount and timing of our future capital requirements will depend upon a number
of factors, including:
. the number of new markets we enter and the timing of entry;
. new service and product deployment schedules and associated costs;
. the rate and price at which customers purchase our services and products;
. the level of marketing required to attract and retain customers in new
and existing markets; and
. opportunities to invest in or acquire complementary businesses.
The value of your investment may be diluted by our future capital raising
transactions. We also may be unsuccessful in raising sufficient capital on
terms that we consider acceptable, if at all, which would impair our ability to
continue to expand our business or respond to competitive developments.
After this offering, our executive officers, directors and principal
stockholders, whose interests may conflict with yours, will control
approximately % of our outstanding common stock.
Following this offering, our executive officers and directors and principal
stockholders together will beneficially own approximately % of the total
voting power of our company. These stockholders, as a group, will be able to
determine the composition of our board of directors, will retain the voting
power to approve all matters requiring stockholder approval and will continue
to have significant influence over the company. This concentration of control
could delay or prevent a change in control of our company or otherwise
16
<PAGE>
discourage a potential acquirer from attempting to obtain control of our
company, which in turn could significantly lower the market price of our common
stock or prevent our stockholders from realizing a premium over the market
prices for their shares of common stock. We also plan to reserve up to 5% of
the shares offered in this offering under a directed share program in which our
executive officers, directors, principal stockholders, employees, business
associates and related persons may be able to purchase shares in this offering
at the initial public offering price. This program may further increase the
amount of stock held by persons whose interests are closely aligned with
management's interests.
We have anti-takeover provisions which may make it difficult for a third party
to acquire us.
Our corporate documents and Delaware law contain provisions that might
enable our management to resist a change in control of our company. These
provisions might discourage, delay or prevent a change in our management. These
provisions could also discourage a proxy contest 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 common stock and could deprive you
of an opportunity to receive a premium for your common stock as part of a sale.
These provisions include:
. authorizing the issuance of "blank check" preferred stock that could be
issued by our board of directors to increase the number of outstanding
shares and thwart a takeover attempt;
. prohibiting cumulative voting in the election of directors, which would
allow less than a majority of stockholders to elect director candidates;
. limiting the ability of stockholders to call special meetings of
stockholders;
. prohibiting stockholder action by written consent, thereby requiring all
stockholder actions to be taken at a meeting of our stockholders;
. establishing advance notice requirements for nominations for election to
the board of directors or for proposing matters that can be acted upon
by stockholders at stockholder meetings; and
. Section 203 of the Delaware General Corporation Law, which could thwart
a takeover attempt. See "Description of Capital Stock--Delaware Anti-
Takeover Law and Certain Charter and Bylaw Provisions."
We have not declared any dividends.
We have never declared or paid cash dividends on our capital stock and do
not anticipate paying any cash dividends in the foreseeable future. See
"Dividend Policy."
Investors will experience immediate dilution.
Investors in common stock in the offering will experience immediate and
substantial dilution in the net tangible book value of their shares. At the
assumed initial public offering price of $ per share, based on the mid-
point of the filing range, dilution to new investors will be $ per share.
Additional dilution will occur upon exercise of outstanding stock options. See
"Dilution."
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<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including the sections entitled Prospectus Summary, Risk
Factors, Management's Discussion and Analysis of Financial Condition and
Results of Operations, and Business, contains forward-looking statements. These
statements relate to future events or our future financial performance and
involve known and unknown risks, uncertainties and other factors that may cause
our or our industry's actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by the forward-
looking statements. These risks and other factors include those listed under
Risk Factors and elsewhere in this prospectus. In some cases, you can identify
forward-looking statements by terminology such as may, will, should, expects,
plans, intends, anticipates, believes, estimates, predicts, potential or
continue, or the negative of these terms or other comparable terminology. These
statements are only predictions. In evaluating these statements, you should
specifically consider various factors, including risks outlined under Risk
Factors.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other
person assumes responsibility for the accuracy and completeness of these
forward-looking statements. We are under no duty to update any of the forward-
looking statements after the date of this prospectus to conform these
statements to actual results, unless required by law.
18
<PAGE>
USE OF PROCEEDS
Our net proceeds from the sale of the shares of common stock we are
offering in this prospectus at an assumed initial public offering price of
$ per share, based on the mid-point of the filing range, are estimated to
be $ , or $ if the underwriters' over-allotment option is exercised in
full and after deducting the underwriting discounts and commissions and
estimated offering expenses.
We intend to use the net proceeds from this offering primarily for general
corporate purposes, including working capital, capital expenditures, geographic
expansion and additional sales and marketing efforts. We also may use a portion
of the net proceeds to acquire complementary businesses, products or
technologies; however, we currently have no commitments or agreements and are
not involved in any negotiations to do so. Pending use of the net proceeds of
this offering, we intend to invest the net proceeds in short-term, interest-
bearing, investment-grade securities.
DIVIDEND POLICY
We have never declared or paid any dividends on our capital stock. We
currently intend to retain all future earnings, if any, for use in the
operation and expansion of our business and do not anticipate declaring or
paying cash dividends for the foreseeable future. Any determination to pay
dividends in the future will be at the discretion of our board of directors and
will depend upon our financial condition, operating results and capital
requirements. Our existing line of credit prohibits the payment of cash
dividends.
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<PAGE>
CAPITALIZATION
The following table sets forth the following information:
. the actual capitalization of PlaceWare as of December 31, 1999;
. the pro forma capitalization of PlaceWare after giving effect to the
automatic conversion, upon completion of this offering, of all
outstanding shares of convertible preferred stock into 11,779,785 shares
of common stock and the filing of our amended and restated certificate of
incorporation; and
. the pro forma as adjusted capitalization to give effect to the sale of
shares of common stock at an assumed initial public offering price
of $ per share in this offering, based on the mid-point of the
filing range, less underwriting discounts and commissions and estimated
offering expenses payable by PlaceWare.
<TABLE>
<CAPTION>
December 31, 1999
---------------------------------
Pro Forma
Pro Forma As Adjusted
Actual (unaudited) (unaudited)
-------- ----------- -----------
(in thousands)
<S> <C> <C> <C>
Notes payable and capital lease obligations,
less current portion........................ $ 503 $ 503 $503
Stockholders' equity:
Convertible preferred stock, $0.0001 par
value; actual--12,305,000 shares
authorized, 11,779,785 shares issued and
outstanding, aggregate liquidation
preference of $30,773; pro forma--
50,000,000 shares authorized, no shares
issued or outstanding; pro forma as
adjusted--50,000,000 shares authorized; no
shares issued or outstanding.............. 1 -- --
Common stock, $0.0001 par value; actual--
20,000,000 shares authorized; 3,728,750
shares issued and outstanding; pro forma--
300,000,000 shares authorized; 15,508,535
shares issued and outstanding; pro forma
as adjusted 300,000,000 authorized;
shares issued and outstanding............. -- 1
Additional paid-in capital................. 36,081 36,081
Treasury stock, at cost; 529,926 shares of
common stock.............................. (15) (15)
Notes receivable from stockholders......... (671) (671)
Deferred stock-based compensation.......... (3,102) (3,102)
Accumulated deficit........................ (19,403) (19,403)
-------- -------- ----
Total stockholders' equity............... 12,891 12,891
-------- -------- ----
Total capitalization................... $ 13,394 $ 13,394 $
======== ======== ====
</TABLE>
The share amounts in this table are based on shares outstanding as of
December 31, 1999. This table excludes:
. 1,278,343 shares of common stock underlying outstanding options as of
December 31, 1999 at a weighted average exercise price of $0.94 per
share;
. 315,625 shares of common stock that are issuable upon the exercise of
outstanding warrants at a weighted average exercise price of $3.57 per
share;
. 3,650,000 shares reserved for issuance or future grant under our stock
option plans; and
. 500,000 shares reserved for issuance under our employee stock purchase
plan.
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<PAGE>
DILUTION
If you invest in our common stock, your interest will be diluted by the
difference between the initial public offering price per share of our common
stock and the pro forma as adjusted net tangible book value per share of common
stock after this offering. The pro forma as adjusted net tangible book value as
of December 31, 1999 was $ or approximately $ per share of common
stock. Pro forma as adjusted net tangible book value per share represents the
amount of our total tangible assets less total liabilities, divided by the
total number of shares of common stock outstanding after the offering, which
will include the conversion of all outstanding shares of convertible preferred
stock into shares of common stock. Dilution in net tangible book value per
share represents the difference between the amount per share paid by purchasers
of shares of our common stock in this offering and the net tangible book value
per share of our common stock immediately following this offering.
After giving effect to our sale of the shares of common stock
offered by this prospectus and after deducting the estimated underwriting
discounts and commissions and estimated offering expenses payable by us, our
pro forma as adjusted net tangible book value as of December 31, 1999 would
have been $ , or approximately $ per share. This represents an
immediate increase in net tangible book value of $ per share to existing
stockholders and an immediate dilution in net tangible book value of $
per share to new investors. The following table illustrates this dilution on a
per share basis:
<TABLE>
<S> <C> <C>
Assumed public offering price per share............................. $
Pro forma as adjusted net tangible book value per share as of
December 31, 1999................................................ $
Increase per share attributable to new investors..................
----
Pro forma as adjusted net tangible book value per share after the
offering...........................................................
----
Dilution in pro forma as adjusted net tangible book value per share
to new investors................................................... $
====
</TABLE>
The following table sets forth, on a pro forma as adjusted basis as of
December 31, 1999, the differences between the number of shares of common stock
purchased from us, the total price and average price per share paid by existing
investors and by the new investors, before deducting the estimated underwriting
discounts and commissions and estimated offering expenses payable by us, at the
assumed initial public offering price of $ per share, based on the mid-
point of the filing range.
<TABLE>
<CAPTION>
Total
Shares Purchased Consideration
----------------- ----------------- Average Price
Number Percentage Amount Percentage Per Share
------ ---------- ------ ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing shareholders......... % $ % $
New investors................. $
---- --- ----- ---
Total......................... 100% $ 100%
==== === ===== ===
</TABLE>
Except as noted above, the foregoing tables and discussion assume no
exercise of any stock options or warrants outstanding at December 31, 1999. As
of December 31, 1999, there were options outstanding to purchase 1,278,343
shares of common stock at a weighted average exercise price of $0.94 per share
and warrants to purchase 315,625 shares of common stock at a weighted average
exercise price of $3.57 per share. To the extent that any of these options and
warrants are exercised, there will be further dilution to investors purchasing
our common stock.
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<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
This section presents our historical financial data. You should read
carefully the consolidated financial statements included in this prospectus,
including the related notes and "Management's Discussion and Analysis of
Financial Condition and Results of Operations." The selected data in this
section is not intended to replace the consolidated financial statements.
We derived the statement of operations data for the years ended December 31,
1997, 1998 and 1999 and the consolidated balance sheet data as of December 31,
1998 and 1999 from the audited consolidated financial statements included
elsewhere in this prospectus, which have been audited by KPMG LLP, independent
auditors. The consolidated balance sheet data as of December 31, 1997 are
derived from audited consolidated financial statements not included elsewhere
in this prospectus. The statement of operations data for the period from
inception to December 31, 1996, and the balance sheet data as of December 31,
1996 are derived from unaudited financial statements not included elsewhere in
this prospectus and include all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the financial results set
forth therein. Historical results are not necessarily indicative of future
results. See notes to the consolidated financial statements for an explanation
of the method used to determine the number of shares used in computing pro
forma basic and diluted loss per share.
<TABLE>
<CAPTION>
From
Inception to
December 31, Year Ended December 31,
1996 --------------------------
(unaudited) 1997 1998 1999
------------- ------- ------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
Hosting and services.............. $ -- $ -- $ 511 $ 2,433
Licensing......................... -- 609 1,113 1,962
------ ------- ------- --------
Total revenues.................. -- 609 1,624 4,395
------ ------- ------- --------
Operating expenses:
Cost of hosting and services...... -- -- 3 806
Operations........................ -- 188 214 492
Sales and marketing............... -- 1,516 2,819 7,824
Research and development.......... 196 1,490 2,057 2,704
General and administrative........ 49 806 1,648 2,559
Stock-based compensation(1)....... -- 11 6 1,128
------ ------- ------- --------
Total operating expenses........ 245 4,011 6,747 15,513
------ ------- ------- --------
Operating loss...................... (245) (3,402) (5,123) (11,118)
====== ======= ======= ========
Other income (expense):
Interest income................... -- 130 172 309
Interest expense.................. -- -- (17) (109)
------ ------- ------- --------
Total other income (expense).... -- 130 155 200
------ ------- ------- --------
Net loss............................ $ (245) $(3,272) $(4,968) $(10,918)
====== ======= ======= ========
Basic and diluted net loss per
share.............................. $(0.49) $ (4.67) $ (4.58) $ (6.41)
====== ======= ======= ========
Shares used in computing basic and
diluted net loss per share......... 496 700 1,084 1,704
====== ======= ======= ========
Pro forma basic and diluted net loss
per share.......................... $ (1.10)
========
Shares used in computing pro forma
basic and diluted net loss per
share.............................. 9,937
========
</TABLE>
- --------
(1) See note 3(c) to the consolidated financial statements for a description of
stock-based compensation and the items of operating expenses to which this
compensation relates.
22
<PAGE>
<TABLE>
<CAPTION>
December 31,
---------------------------------
1996
(unaudited) 1997 1998 1999
----------- ------ ------ -------
(in thousands)
<S> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents................... $1,112 $2,230 $3,155 $14,591
Working capital............................. 968 2,404 2,826 10,152
Total assets................................ 1,165 3,039 4,907 21,136
Notes payable and capital lease obligations,
less current portion....................... -- -- 613 503
Stockholders' equity........................ 1,007 2,708 2,819 12,891
</TABLE>
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
Selected Consolidated Financial Data and our financial statements and the
related notes included elsewhere in the prospectus. Except for historical
information, the discussion in this report contains forward-looking statements
that involve risks and uncertainties. These forward-looking statements include,
among others, those statements including the words, expects, anticipates,
intends, believes and similar language. Our actual results could differ
materially from those discussed herein. Factors that could cause or contribute
to such differences include, but are not limited to the risks discussed in the
section titled Risk Factors in this prospectus. See "Special Note Regarding
Forward-Looking Statements."
Overview
Since our incorporation in October 1996, our primary activities have
consisted of the following:
. developing our services and products to enable businesses to conduct
real-time interactive meetings and presentations over the Internet;
. establishing relationships with major service providers;
. creating and expanding our web conferencing services and products and
Internet infrastructure;
. expanding our direct sales force; and
. assembling an experienced management team.
We have incurred losses since commencing operations and as of December 31,
1999, we had an accumulated deficit of $19.4 million. We have not achieved
profitability on a quarterly or annual basis. We intend to invest significantly
in promoting web conferencing, in general, and increasing our brand
recognition; expanding our business development and sales and marketing
efforts; increasing our customers' utilization of our existing services and
products; extending our services and products; increasing the scalability and
reliability of our operations infrastructure and leveraging and extending our
technology base. As a result, we expect to continue to incur losses for at
least the next two years. We will need to generate significantly higher
revenues to support expected increases in expenses and to achieve and maintain
profitability.
We generate revenues by providing businesses with web conferencing services
and products that can be delivered either as a hosted application service or as
an in-house software application product. In July 1998, we shifted the focus of
our business model from sales of software licenses to a hosted services model.
We offer our customers the ability to purchase our hosted application service
as an annual subscription based on the maximum number of concurrent users
available to a customer and as an event service to meet their web conferencing
demands. The in-house software application is sold as a licensed software
product for our customers wishing to deploy our web conferencing software
inside their company, and for service providers wishing to host their own web
conferencing services.
Revenues generated from hosting and services, which include hosting
services, event services, revenue sharing arrangements and technical support
and maintenance services, accounted for 55% of total revenues for the year
ended December 31, 1999. Revenues from hosting services are recognized ratably
over the hosting period. Revenues from event services are recognized as the
event takes place. Revenues from revenue sharing arrangements are recognized as
earned. Revenues from technical support and maintenance services are recognized
ratably over the term of the support period.
Licensed software product revenues are generated from the sale of time-based
licenses and perpetual licenses and represented 45% of the total revenues for
the year ended December 31, 1999. Time-based revenues are recognized ratably
over the time period. Perpetual license revenues are recognized when the
following criteria are met: persuasive evidence of an arrangement exists;
delivery has occurred; the fee is fixed or determinable; collectibility is
probable; and evidence of the fair value is determinable for all undelivered
components of the arrangement.
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<PAGE>
Our cost of hosting and services consists primarily of computer equipment
depreciation charges, network connectivity, royalties, co-location costs and
costs of third-party service providers, including audio conferencing, streaming
audio and event services providers. Our network connectivity expense, co-
location costs and costs to third-party service providers are variable and
correlate to the use of our services. Our depreciation charges generally
increase as we increase our capacity and build our infrastructure.
Our operations expenses consist primarily of compensation and related costs
for management personnel, technical support employees and consultants who
manage and maintain our service operations.
Our sales expenses consist primarily of compensation and related cost for
sales personnel. We sell our services and products through both our direct
sales organization and our service providers. Our direct sales force is
headquartered in Mountain View, California and supported by sales
representatives based in several cities throughout North America and in our
European sales office in the United Kingdom. Our European sales office is
responsible for all European, Middle Eastern and African sales opportunities.
The direct sales force consists of inside and outside sales representatives and
is primarily responsible for expanding our customer base.
Our marketing expenses consist primarily of the salaries and benefits for
our advertising and promotions, marketing personnel, consulting fees and direct
marketing expenses.
Our research and development expenses consist primarily of salaries and
benefits for research and development personnel, consulting fees, and
development and test-related infrastructure. We expense research and
development costs as they are incurred.
Our general and administrative expenses consist primarily of expenses for
finance, human resources, office operations, administrative and general
management activities, including legal, accounting and other professional fees,
travel expenses and other general corporate expenses.
In connection with the granting of stock options to, and restricted stock
purchases by, our employees through December 31, 1999, we recorded deferred
stock-based compensation totaling approximately $4.0 million. This amount
represents the difference between the exercise or purchase price, as
applicable, and the deemed fair value of our common stock for accounting
purposes on the date these stock options were granted or purchase agreements
were signed. This amount is included as a component of stockholders' equity and
is being amortized on an accelerated basis by charges to operations over the
vesting period of the options consistent with the method described in Financial
Accounting Standards Board Interpretation No. 28. The stock options and
restricted stock purchases generally vest at a rate of 25% upon the first
anniversary of the option grant date or restricted stock purchase date and
2.083% each month thereafter for three years. We expect to record additional
substantial stock-based compensation for stock options granted subsequent to
December 31, 1999. Amortization of the December 31, 1999 balance of deferred
stock-based compensation will result in charges to total operating expense of
$1.9 million in 2000, $0.8 million in 2001, $0.3 million in 2002 and
$0.1 million in 2003.
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<PAGE>
Results of Operations
The following table sets forth certain statement of operations data for the
periods indicated as a percentage of total revenues.
<TABLE>
<CAPTION>
Year Ended
December 31,
------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Statement of Operations Data:
Revenues:
Hosting and services..................................... --% 31% 55%
Licensing................................................ 100 69 45
---- ---- ----
Total revenues......................................... 100 100 100
---- ---- ----
Operating expenses:
Cost of hosting and services............................. -- -- 18
Operations............................................... 31 13 11
Sales and marketing...................................... 249 174 178
Research and development................................. 245 127 62
General and administrative............................... 132 102 58
Stock-based compensation................................. 2 -- 26
---- ---- ----
Total operating expenses............................... 659 415 353
---- ---- ----
Operating loss............................................. (559) (315) (253)
---- ---- ----
Other income (expense):
Interest income.......................................... 21 11 7
Interest expense......................................... -- (1) (2)
---- ---- ----
Total other income (expense)........................... 21 10 5
---- ---- ----
Net loss................................................... (537)% (306)% (248)%
==== ==== ====
</TABLE>
Years ended December 31, 1999 and 1998
Revenues. Revenues increased $2.8 million from $1.6 million in 1998 to $4.4
million in 1999. Of this amount, hosting and services revenues increased $1.9
million in 1999 primarily due to the launch of our new web conferencing hosted
service model in July 1998. The full year availability of the hosted service
model was primarily responsible for the increase in our customer count to
approximately 340 at the end of 1999. Prior to launching the hosted service
model, we sold perpetual software licenses for our web conferencing product,
which included annual support and maintenance.
Cost of hosting and services. Cost of hosting and services increased $0.8
million from a nominal amount in 1998 to $0.8 million in 1999. The increase was
substantially due to the launch of our hosting model in July 1998. The new
model required an increase in equipment purchases, network connectivity and
co-location costs. We expect significant increases in all these expenses as we
continue to build our infrastructure in anticipation of increased demand for
our services. Cost of hosting and services in 1999 included a nominal royalty
expense pursuant to the terms of our technology assignment from Xerox PARC,
which provides for a royalty payment equal to 2% of total revenues, up to a
maximum royalty of $1 million. We expect this royalty expense to increase
substantially in 2000.
Operations. Operations costs increased $0.3 million from $0.2 million in
1998 to $0.5 million in 1999. The increase was primarily due to an increase in
compensation and related costs for management personnel, technical support
employees and consultants who manage and maintain our service operations. We
expect significant increases in operations costs to support increased
utilization by our customers.
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<PAGE>
Sales and marketing. Sales and marketing costs increased $5.0 million from
$2.8 million in 1998 to $7.8 million in 1999. The increase was a result of the
growth in the number of sales and marketing employees, the establishment of our
European sales office as well as an increase in the amount of advertising and
promotional spending. Sales and marketing costs in 1999 also include a one-time
charge associated with a warrant granted in connection with a marketing
arrangement. We expect significant increases in our sales and marketing
expenses as we expand our North American and international sales organizations,
increase advertising and promotional activities, add marketing personnel and
increase marketing programs.
Research and development. Research and development costs increased $0.6
million from $2.1 million in 1998 to $2.7 million. The increase was associated
with increases in hiring additional engineers as well as product expansion and
new product development. We intend to continue to make substantial investments
in research and development and anticipate that these expenses will continue to
increase.
General and administrative. General and administrative costs increased $0.9
million from $1.7 million in 1998 to $2.6 million in 1999. The increase was
associated with the growth in employees, increased consulting services, the
costs associated with the addition of office space, and equipment purchases. We
expect increases in general and administrative expenses as we expand executive
management, finance, human resources and other administrative functions
required to support business and operate as a public company.
Stock-based compensation. During 1999, we recorded approximately $1.1
million of stock-based compensation amortization expense, representing $0.1
million of operations costs, $0.6 million of sales and marketing expenses, $0.1
million of research and development expenses, and $0.3 million of general and
administrative expenses. Amortization of the December 31, 1999 balance of
deferred stock-based compensation will be approximately $1.9 million in 2000,
$0.8 million in 2001, $0.3 million in 2002 and $0.1 million in 2003.
Interest income, net. Interest income, net, remained constant at $0.2
million in 1998 and 1999. While interest income increased as a result of
increased funds from fund raising activities, this increase was fully offset by
higher interest expense from equipment financing activities.
Years ended December 31, 1998 and 1997
Revenues. Revenues increased $1.0 million from $0.6 million in 1997 to $1.6
million in 1998. Revenues for 1997 were primarily generated from our software
product license. The growth in revenues was due to increases in the number of
customers and the launch of our hosted service model. Licensing revenues
accounted for 69% of total revenues for 1998.
Cost of Hosting and Services. Cost of hosting and services were nominal in
both 1997 and 1998 as our primary business was the sale of software product
licenses.
Operations. Operations costs remained constant at $0.2 million in both 1997
and 1998.
Sales and Marketing. Sales and marketing costs increased $1.3 million from
$1.5 million in 1997 to $2.8 million in 1998. The increase was a result of the
growth in the number of sales and marketing employees as well as an increase in
the amount of advertising and promotional spending.
Research and Development. Research and development costs increased $0.6
million from $1.5 million in 1997 to $2.1 million in 1998. The increase was
associated with increases in hiring as well as product expansion and new
product development.
General and Administrative. General and administrative costs increased $0.9
million from $0.8 million in 1997 to $1.7 million in 1998. The increase was
associated with the growth in employees, addition of office space and the costs
associated with equipment purchases.
27
<PAGE>
Stock-based compensation. Stock-based compensation was nominal in both 1997
and 1998.
Interest income, net. Interest income, net, increased $0.1 million from $0.1
million in 1997 to $0.2 million in 1998. The increase was a result of increased
funds from fund raising activity, partially offset by higher interest expense
from equipment financing activities.
Quarterly Operating Results
The following table presents our historical unaudited quarterly results of
operations for our most recent five quarters. This data has been prepared on
the same basis as our annual consolidated financial statements and includes all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the financial results set forth therein. Our results of
operations have fluctuated and are likely to continue to fluctuate
significantly from quarter to quarter. Results of operations for any previous
periods are not necessarily comparable to future periods.
<TABLE>
<CAPTION>
Quarter Ended
------------------------------------------------
Dec. 31, Mar. 31, Jun. 30, Sep. 30, Dec. 31,
1998 1999 1999 1999 1999
-------- -------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
Hosting and services............ $ 222 $ 299 $ 451 $ 609 $ 1,074
Licensing....................... 400 147 368 726 721
------- ------- ------- ------- -------
Total revenues................ 622 446 819 1,335 1,795
------- ------- ------- ------- -------
Operating expenses:
Cost of hosting and services.... 3 11 35 239 521
Operations...................... 6 68 85 126 213
Sales and marketing............. 792 1,263 1,260 1,948 3,353
Research and development........ 526 575 641 732 756
General and administrative...... 434 442 373 574 1,170
Stock-based compensation........ -- 34 84 172 838
------- ------- ------- ------- -------
Total operating expenses....... 1,761 2,393 2,478 3,791 6,851
------- ------- ------- ------- -------
Operating loss.................... (1,139) (1,947) (1,659) (2,456) (5,056)
------- ------- ------- ------- -------
Other income (expense):
Interest income................. 33 31 24 62 192
Interest expense................ (8) (23) (26) (30) (30)
------- ------- ------- ------- -------
Total other income (expense).. 25 8 (2) 32 162
------- ------- ------- ------- -------
Net loss.......................... $(1,114) $(1,939) $(1,661) $(2,424) $(4,894)
======= ======= ======= ======= =======
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Quarter ended
--------------------------------------------
Dec. 31, Mar. 31, Jun. 30, Sep. 30, Dec. 31,
1998 1999 1999 1999 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
As a Percentage of Total Revenues:
Revenues:
Hosting and services............ 36% 67 % 55 % 46 % 60 %
Licensing....................... 64 33 45 54 40
---- ---- ---- ---- ----
Total revenues................ 100 100 100 100 100
---- ---- ---- ---- ----
Operating expenses:
Cost of hosting and
services....................... -- 3 4 18 29
Operations...................... 1 15 11 9 12
Sales and marketing............. 127 283 154 146 187
Research and development........ 85 129 78 55 42
General and administrative...... 70 99 46 43 65
Stock-based compensation........ -- 8 10 13 47
---- ---- ---- ---- ----
Total operating expenses....... 283 537 303 284 382
---- ---- ---- ---- ----
Operating loss.................... (183) (437) (203) (184) (282)
Other income (expense):
Interest income................. 5 7 3 4 11
Interest expense................ (1) (5) (3) (2) (2)
---- ---- ---- ---- ----
Total other income
(expense).................... 4 2 -- 2 9
---- ---- ---- ---- ----
Net loss.......................... (179)% (435)% (203)% (182)% (273)%
==== ==== ==== ==== ====
</TABLE>
Revenues have increased in each consecutive quarter presented, exclusive of
the first quarter of 1999. During that quarter, the effect of our shifting
focus toward a hosting services model had a negative effect on our licensing
revenues. The growth in revenues during the second, third and fourth quarters
of 1999 was primarily due to higher hosting and services revenues as we
substantially increased our sales and marketing activities.
Operating expenses have generally increased in each quarter to support
increased utilization of services and products by our customers. Sales and
marketing expenses in the first quarter of 1999 were higher compared to the
fourth quarter of 1998 and the second quarter of 1999 due to increased direct
marketing and consulting expenses. General and administrative expenses
increased in the third and fourth quarters of 1999, primarily due to
investments in administrative infrastructure to support increased utilization
of our services.
Our quarterly operating results are difficult to predict. Due to any number
of factors, our future quarterly operating results may fluctuate and may not
meet the expectations of investors or securities analysts who may initiate
coverage, which may cause the price of our common stock to decline. Some of the
factors that may contribute to fluctuations in our operating results include
the following:
. the inability to deliver our hosted service;
. the loss of a major customer or communication service provider or the
failure to attract new customers;
. many of our expenses, such as salaries, rent, advertising and hosting
facilities, have fixed minimums;
. lower revenues than expected;
. downward pressure on prices paid by our business customers, as a result
of competition or other factors, which could reduce our quarterly
revenues even if we maintain or increase the number of sales;
. our ability to upgrade, develop, maintain and have available our
services, systems and infrastructure in a timely manner, and the related
costs and expenditures related to such activities; and
. the timing of a significant marketing campaign.
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<PAGE>
Because our customers do not have long-term obligations to purchase services
from us, our revenues and operating results depend upon the volume and timing
of customer orders and payments. We historically have received payments in
advance for our services and products and have deferred these revenues over a
fixed period of time, generally for a period of one year. If we modify our
billing and payment practices and change the period of time over which we defer
revenues, and if investors or securities analysts who may initiate coverage
fail to understand this modification, such investors or analysts may perceive
this change as additional fluctuations in our operating results which may cause
the price of our stock to decrease.
Provisions for Income Taxes
No provision for federal and state income taxes was recorded as we incurred
net operating losses from inception through December 31, 1999. Due to the
uncertainty regarding the ultimate utilization of the net operating loss carry
forwards, we have not recorded any benefit for losses and a valuation allowance
has been recorded for the entire amount of the net deferred tax asset. In
addition, sales of our stock, including shares sold in this offering, may
further restrict our ability to utilize our net operating loss carry forwards.
Liquidity and Capital Resources
Since inception, we have financed our operations primarily from the sale of
our preferred stock and, to a lesser extent, proceeds from bank loans. During
1997 we sold $5.0 million in series B preferred stock. During 1998 we sold an
additional $5.0 million in series B preferred stock. During 1999 we sold an
additional $0.2 million in series B preferred stock. In September 1999, we sold
$18.8 million in series C preferred stock.
Net cash used by operating activities was $3.6 million in 1997, $4.3 million
in 1998 and $4.7 million in 1999. In 1997 and 1998, net cash used was primarily
due to our 1997 net loss of $3.3 million and our 1998 net loss of $5.0 million.
In 1999, net cash used was primarily due to our 1999 net loss of $10.9 million,
partially offset by an increase of $4.5 million in deferred revenues.
Net cash used for investing activities was $0.2 million in 1997, $0.1
million in 1998 and $2.6 million in 1999. The cash used in investing activities
related to purchases of property and equipment.
Net cash from financing activities was $5.0 million in 1997, $5.4 million in
1998 and $18.8 million in 1999. Cash provided by financing activities resulted
primarily from proceeds of preferred stock sales and borrowings under a note
payable.
As of December 31, 1999, we had a bank revolving line of credit of up to
$750,000, bearing interest at the bank's prime rate plus 1% per annum, which
was 9.5% as of December 31, 1999. Borrowings from the line will be
collateralized by substantially all of our assets. In January 2000, we
increased the borrowing capacity of this line up to $2.5 million, with an
extension of the maturity date to January 24, 2001. We currently have not drawn
on this line.
As of December 31, 1999, we had $1.1 million available under an arrangement
with a financing corporation for a lease line of credit. We have financed the
acquisition of property and equipment, primarily computer hardware and software
for our increasing employee base, as well as for our management information
systems, primarily through capital leases. We currently expect capital
expenditures of between $4 million and $6 million in 2000. As of December 31,
1999, we had no material commitments for capital expenditures.
We expect to continue to experience growth in our operating expenses. We
anticipate that operating expenses and planned capital expenditures will
continue to be a material use of our cash resources. In addition, we may
utilize cash resources to fund acquisitions or investments in other businesses
or technologies. We believe that available cash and cash equivalents and the
net proceeds from the sale of the common stock in this offering will be
sufficient to meet our working capital and operating expense requirements for
at least the next 12 months. After that period, we may require additional funds
to support our working capital and operating
30
<PAGE>
expense requirements or for other purposes and may seek to raise these
additional funds through public or private debt or equity financings. There can
be no assurance that this additional financing will be available, or if
available, will be on reasonable terms.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for
Derivative Instruments and Hedging Activities. SFAS No. 133 establishes
accounting and reporting standards for derivative financial instruments and
hedging activities related to those instruments, as well as other hedging
activities. Because we do not currently hold any derivative instruments and do
not engage in hedging activities, we expect that the adoption of SFAS No. 133
will not have a material impact on our consolidated financial position, results
of operations, or cash flows. We will be required to adopt SFAS No. 133 in
fiscal 2001.
Quantitative and Qualitative Disclosure About Market Risk
The primary objective of our investment activities is to preserve principal
while at the same time maximizing the income we receive from our investments
without significantly increasing risk. Some of the securities that we may
invest in may be subject to market risk. This means that a change in prevailing
interest rates may cause the principal amount of the investment to fluctuate.
For example, if we hold a security that was issued with a fixed interest rate
at the then-prevailing rate and the prevailing interest rate later rises, the
principal amount of our investment will probably decline. To minimize this risk
in the future, we intend to maintain our portfolio of cash equivalents and
short-term investments in a variety of securities, including commercial paper,
money market funds and government and non-government debt securities. In
general, money market funds are not subject to market risk because the interest
paid on such funds fluctuates with the prevailing interest rate. As of December
31, 1999, all of our cash and cash equivalents were in money market and
checking funds.
We have operated primarily in the United States, and all sales have been
made in U.S. dollars. Accordingly, we have not had any material exposure to
foreign currency rate fluctuations.
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<PAGE>
BUSINESS
Overview
PlaceWare is a leading provider of web conferencing services and products
that enable businesses to conduct real-time, interactive meetings and
presentations over the Internet. Businesses use our web conferencing services
and products as strategic tools to create new business opportunities; share and
exchange information among geographically dispersed organizations; strengthen
relationships with customers, partners, vendors and employees; enhance employee
productivity; and reduce unnecessary travel time and expenses.
Industry Background
Business-to-Business Communications
Businesses today are operating in an environment that can be characterized
by rapid change and increasingly complex business interactions with customers,
partners, vendors and employees. Advances in technology have created broad
market opportunities, but have also accelerated the pace at which competitors
have entered the market. True global competition has emerged and businesses are
required to bring new services and products to market faster and provide
superior customer support to remain competitive. To successfully compete in
this new environment, businesses must effectively communicate with their
geographically distributed base of customers, partners, vendors and employees.
Companies have historically relied on in-person meetings and traditional
business collaboration technologies, such as audio conferencing and video
conferencing, to communicate. These means of communication, either individually
or in combination, have a number of limitations, including:
Opportunity Cost of In-person Meetings. As customers, partners, vendors and
employees grow increasingly distributed geographically, holding in-person
meetings with these constituencies requires greater travel time and expense.
While actual travel expenses are not insignificant, the time lost to travel may
represent the true opportunity cost to a company. When personnel are travelling
to or from meetings, businesses lose opportunities to engage in the type of
collaborative and real-time interactions with others that are necessary to
build and strengthen customer and partner relationships and improve employee
productivity.
Lack of Visual Content in Audio Conferencing. While audio conferencing
offers broad accessibility and real-time interaction, it supports only voice
communication and lacks support for other critical elements of effective
business collaboration, including rich visual content necessary to better
comprehend information that participants are attempting to convey. In addition,
as content becomes more complicated and the number of people participating on a
conference call increases, it becomes difficult to follow the presenter,
increasing confusion and hindering participant interaction. Finally, real-time
collaboration is difficult since any changes or clarifications discussed
verbally cannot be visually incorporated and reviewed by the group in real-
time.
Limited Availability, Complexity and Expense of Video Conferencing. The lack
of widespread availability, technical limitations, such as minimum bandwidth
requirements, latency and limited resolution of visual content limit the
effectiveness of video conferencing. In addition, video conferencing is costly
and complex to install, implement and maintain, and often requires a dedicated
video conferencing hosting facility and internal technical assistance, further
limiting the number of occasions in which it can be used.
The Emergence of the Internet as a Tool for Business-to-Business Communications
The Internet has emerged as a global medium for communication and commerce.
According to International Data Corporation, or IDC, the number of web users
worldwide is expected to grow from 239 million at the end of 1999 to 602
million by the end of 2003. Since the Internet has become more accessible,
functional and widely used, it has emerged as an effective communications and
collaboration vehicle for businesses of all sizes to create new revenue
opportunities by enhancing their interaction with new and
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<PAGE>
existing customers. IDC estimates that worldwide commerce over the Internet
conducted by businesses is expected to increase from approximately $97 billion
in 1999 to $1.4 trillion in 2003. As such, businesses are increasing resources
devoted to applications that enable businesses to leverage the power and
accessibility of the Internet to communicate more effectively with customers,
partners, vendors and employees.
The Internet possesses a number of unique characteristics that differentiate
it from traditional media. It allows users to communicate or access information
from almost anywhere, use interactive content on a real-time basis and
communicate instantaneously with individuals or groups. Despite the
availability and use of Internet-based communications tools, such as e-mail,
instant messaging and webcasting, these tools have several important
limitations when used for business-to-business communications:
E-Mail. E-mail is widely used as a tool for asynchronous business
communications. However, it is primarily a text-based solution with a limited
ability to facilitate real-time interactive collaboration.
Instant Messaging. Instant messaging is used primarily as a mechanism for
consumer communications. Its ability to enable business communications is
limited, because it is text-only and designed to work effectively only for one-
to-one or one-to-few communications.
Webcasting. Broadcasting of audio and video content over the Internet for
larger group communications through streaming media has become popular in
consumer applications. Its limitations include a lack of two-way interactivity,
limited resolution of visual content, high production costs, difficulty in
traversing corporate firewalls and limited reliability for bandwidth intensive
audio and video streaming.
Trend Towards Outsourced Applications
In addition to facilitating communications, the Internet has created
widespread opportunities for software companies to host applications from a
centrally managed facility. This allows customers to avoid the need to devote
internal resources to install, maintain and continually upgrade applications.
By outsourcing these applications, businesses can more quickly realize the
benefits that they offer. Forrester Research estimates that the market for
application hosting services will increase from $933 million in 1999 to over
$11 billion in 2003.
Market Opportunity
According to IDC, one of the most rapidly growing segments of the
application services market is collaboration services. Collaboration services
combine Internet-based communications with dynamic and interactive content on a
real-time basis. The web-based hosted model is well suited for collaboration
services largely due to the fact that it enables businesses to deploy these
services rapidly without requiring valuable internal resources.
Forrester Research has identified web conferencing as the fastest growing
area of the collaboration services market. In their survey of Fortune 1000
companies, 70% of all respondents indicated they would use web conferencing by
the year 2001. Web conferencing leverages customers existing voice and data
infrastructure, which facilitates widespread deployment. It provides businesses
with the ability to communicate verbally while sharing rich visual content on a
real-time basis over low bandwidth connections. Web conferencing enables
businesses to increase their reach and cost-effectively communicate mission-
critical knowledge to constituencies within and outside the company.
The PlaceWare Solution
We are a leading provider of comprehensive web conferencing services and
products that enable businesses to conduct real-time, interactive meetings and
presentations over the Internet. Our services and products are designed to
overcome some of the limitations of traditional business collaboration
technologies and today's Internet-based communications tools. Some of the ways
in which our customers utilize our services include sales and marketing
activities, such as new product launches, seminars and product demonstrations
and corporate communications, such as investor communications and employee
meetings.
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<PAGE>
We provide our customers with web conferencing services that can be
delivered either as a hosted application service or as an in-house software
application. Customers that choose to host their applications on the web are
not required to install, maintain and upgrade software. Additionally, our
hosted service is designed to reduce customers' administrative burden of
deploying web conferencing.
Strategic Benefits
Extend Communications Reach. Our services enable users to reach people
located at a distance, and to reach more people in total, because of a
reduction in the time required for travel.
Enhance Communications Effectiveness. The visual component and real-time
interactive nature of our services are intended to improve the understanding
and retention of meeting content.
Shorten Sales Cycles and Accelerate Time To Market. Our services enable
customers to communicate more quickly and effectively with both internal and
external parties, and streamline and accelerate sales and other business
processes throughout an entire organization. This can mean shorter sales
cycles, quicker time to market for product development efforts, faster sales
and distribution channel training and more effective customer communication.
Services and Products Benefits
Ease of Use. Our services are designed to be easy to use both by our
customers and their conference participants. Presenters who are accustomed to
using standard presentation software and end-users who are familiar with web
browsers are able to use our services without the need to install additional
software or hardware. Moreover, our services operate effectively without
requiring high-speed access to the Internet.
Highly Scalable and Reliable. Our proprietary hosting infrastructure
technology, iVault, is designed to be highly scalable and reliable and to
enable us to quickly react to the increasing demands of our clients. Our system
is designed to be expanded to enable thousands of concurrent meetings and up to
2,500 users in a single web conference. We have designed our services to enable
content to be presented securely and viewed only by individuals and
organizations that are authorized to have access to it. Our services enable
business users to communicate through most corporate firewalls and participate
in web conferences without requiring any policy changes or physical changes to
the firewalls or proxy servers.
Simple to Purchase and Deploy. Our hosted services rely upon the existing
infrastructure that is generally ubiquitous throughout an organization,
including an Internet-enabled personal computer and a telephone. Users can
subscribe to some of our services, schedule meetings, load content and conduct
meetings within minutes without the assistance of a customer service or
technical support representative.
Real-Time Interactivity with Rich Visual Content. We provide customers with
the ability to conduct web conferences in real-time using rich visual content.
Real-time interactivity includes shared whiteboard with annotations, polling
and the ability to have multiple presenters and moderators answering questions
from conference participants.
The PlaceWare Strategy
Our objective is to be the leading provider of web conferencing services.
Key elements of our strategy to achieve this objective include:
Promote web conferencing and increase our brand recognition. Our goal is to
promote web conferencing, in general, and to establish our services as the most
reliable and well-known web conferencing services for business communications.
We are promoting web conferencing and intend to increase our brand awareness
through the use of our web site, branding campaigns and selected media events.
We have also established relationships with major audio conference service
providers, Internet portals and application service
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providers that offer our services through co-branding arrangements, thereby
enhancing the recognition of our brand and increasing our customer base. We
plan to increase our co-branding relationships and continue to promote our
client success stories through the use of case studies, technical papers and
regular briefings with industry analysts.
Expand our business development and sales and marketing efforts. We have
relationships with a number of major Internet, communications and conferencing
service providers, including Conference Plus, Inc., Envoyglobal.com, General
Dynamics Corporation, Hewlett-Packard Company, MCI WorldCom, Inc. and Sprint.
These service providers offer our services to their customers either as an
independent, value-added service or as a bundled service to their own product
offerings. We intend to continue to expand the scope of our existing
relationships and build additional relationships to leverage their strong
sales, marketing and engineering capabilities as well as their large,
established customer bases. We also intend to broaden our sales and marketing
efforts by increasing the size and geographic reach of our direct sales force
and adding additional sales and marketing personnel to focus on further
penetration of our existing customer base.
Increase our customers' utilization of our existing services. We have over
340 direct customers. In addition, our services are used by the customers of
our service providers. Our web conferencing services are typically used for
medium to large size meetings and presentations, such as sales training, new
product launches and web seminars, and have typically been adopted by one or
more departments within each customer's enterprise. We intend to increase the
utilization of our services by existing customers by promoting the services to
other groups and departments within those existing customers and by
demonstrating the benefits of our services and products for medium and smaller
group meetings.
Extend and expand our service offerings. We intend to leverage our web
conferencing, collaborative computing and technology expertise to develop new
services, applications and features that will enable us to make online meetings
and presentations as effective as in-person meetings. Our recently introduced
Conference Center 2000 contains a number of enhancements designed to make our
services both easier to use and administer. We intend to continue to enhance
our services while maintaining and improving their usability, scalability and
reliability. We plan to make it even easier for customers to subscribe to our
services by introducing self-service tools to enable our customers to pay for
web conferencing services over the Internet.
Continue to increase the scalability and reliability of our web conferencing
services. Our proprietary hosting infrastructure technology is designed to be
expanded to enable thousands of concurrent meetings and up to 2,500 users in a
single web conference. We intend to continue to invest in our hosting
infrastructure and related services to maintain and enhance the usability,
scalability, security and reliability of our services as well as increase the
aggregate number of customers who can attend conferences simultaneously. We
intend to add industry standard encryption support.
Leverage and extend our technology base. Current efforts are underway to
more tightly integrate our technology with third party services and
applications, including streaming audio and video, audio bridges, e-mail and
scheduling and reservation applications. We also plan to integrate Internet
protocol voice and video when they become more reliable for business
communication use.
Pursue Strategic Acquisitions. We intend to pursue acquisitions of
businesses, products, services, technologies, and distribution channels that
are complementary to our existing business to expand our position in the web
conferencing market. Although we have no present commitments or agreements
regarding any acquisitions, we believe that there are many acquisition
candidates that could enhance our position in this market.
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Services, Products and Capabilities
Our web conferencing services enable our customers with an Internet-enabled
personal computer and a telephone to conduct real-time interactive meetings and
presentations with rich visual content over the Internet. Web conferencing
enables effective communication, coordination and collaboration among
customers, partners, vendors and employees in many sales, marketing and other
business contexts. We provide a comprehensive suite of services and products
that offer web conferencing capabilities to companies, individuals, Internet
portals, service providers and resellers. Our suite of services are currently
based on our Conference Center 2000 technology and our proprietary iVault
hosting infrastructure technology.
[CHART APPEARS HERE]
Web conferencing Corporate Service Portal
Services E-Service Provider E-Service MyPlaceWare
E-Service
Technology
Platform Conference Center 2000
Hosting
environment iVault Hosting Infrastructure
Service Offerings
We offer customers and service providers the option to subscribe to an
annual hosted service or to rent our software for their web conferencing
requirements. Our services are delivered to customers in four separate
editions: Corporate E-Service; Service Provider E-Service; Portal E-Service;
and MyPlaceWare.
Corporate E-Service. Our Corporate E-Service enables businesses of all sizes
to use web conferencing as a new medium for business communications. The
Corporate E-Service is a multi-user version of the service. An administrator
can authorize as many users of the system as appropriate. Users are then able
to access the full capabilities of the Corporate E-Service, including meeting
provisioning, scheduling and reports.
Service Provider E-Service. Our Service Provider E-Service enables service
providers, such as audio conference service providers or streaming audio
providers, to bundle web conferencing with their existing services, and offer a
co-branded solution. The Service Provider E-Service offers a software
programming interface that enables service providers to integrate our web
conferencing service with existing proprietary reservations, scheduling and
billing systems. Conference Plus, Inc., Envoyglobal.com, General Dynamics
Corporation, Hewlett-Packard Company, MCI WorldCom, Inc. and Sprint have
licensed our software and deliver a co-branded web conferencing service to
their customers.
Portal E-Service. Our Portal E-Service enables an Internet portal to
incorporate a self-service, web conferencing capability to its existing suite
of services. The Portal E-Service allows for co-branding and also varying
levels of service integration, including billing, user registration and login.
For example, Autodesk is offering a co-branded service to enable their
authorized training centers to deliver training courses over the Internet.
MyPlaceWare. MyPlaceWare is a self-service, web conferencing service that
offers many of the features available through Corporate E-Service. MyPlaceWare
enables registered members to host web conferences with up to five people and
is currently offered free of charge. Over 15,000 people have subscribed to this
service since its launch in October 1999. We intend to enhance MyPlaceWare to
enable members to subscribe to a paid service. This service will enable
customers to host meetings and presentations with more than five people and
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have enhanced features, including the ability to store and retrieve
presentation materials and record actual meetings and presentations for future
viewing.
Service Platform
These service offerings are primarily based on our Conference Center 2000
technology.
Conference Center 2000. Conference Center 2000 was announced in January 2000
and became available to selected users in February 2000 and will become
generally available in March 2000. Conference Center 2000 is the latest
generation of our technology and is offered as a hosted communications e-
service that can be turned on the same day as receipt of an order. It provides
a robust, easy-to-use web conferencing platform where a presenter can quickly
and easily upload any standard presentation or other supported file type on
their computer and begin presenting in a web conference. Individuals authorized
on Conference Center 2000 can use the service to hold meetings and
presentations over the Internet with up to 2,500 participants.
Conference Center 2000 offers two virtual meeting environments that address
different meeting and presentation needs. Web Meeting Places are designed for
small group collaborative meetings and enable some or all of the participants
to collaborate on a real-time basis. Auditorium Places are uniquely designed to
meet the needs of large group presentations and include real-time interactive
features, such as audience feedback indicators and text chat and other features
which enable polling of participants and moderated questions and answers.
Conference Center 2000 features include:
. Real-time Interactive Meetings with Rich Visual Content. Conference
Center 2000 enables presenters to deliver real-time, interactive
presentations with rich visual content over the Internet.
. Scheduling, Invitation and Personal Calendar. Scheduling and invitation
features enable authorized users to quickly and easily schedule web
conferences, and together with the customers' e-mail system, generate
meeting-specific invitations to send to audience members. The invitation
feature integrates with e-mail tools, such as Microsoft Outlook, or
other browser-based, e-mail programs. A personal calendar of meetings
scheduled by the user is the default home page for each user.
. Meeting Provisioning. Users can set up as many meetings as needed to
fulfill their specific requirements. Users can customize each meeting
for the number of attendees, time, date, time zone, type of meeting room
and type of security policy.
. Content Persistence and Security. All presentation material uploaded
into our service remains available until the user chooses to delete it,
enabling them to reuse content for multiple presentations. Web Meeting
Places or Auditorium Places are protected by a variety of user specified
security policies which prevent unauthorized users from viewing content.
. Meeting Reports. Users can obtain detailed meeting reports, including
reports for individual meetings and summary level reports on meetings
scheduled, users, attendance, capacity utilization and future
reservations. These reports can be exported to third party applications,
such as Excel or corporate sales or marketing databases.
. Record and Playback of Meeting Content. The audio and visuals of any
meeting can be recorded for later playback by those who could not attend
or want additional reinforcement. Recordings can have security controls
to permit access to authorized personnel only.
Conference Center 2000 is based on the iVault hosting infrastructure, which
is designed to deliver reliable, highly scalable, fault-tolerant web-based
services.
iVault Hosting Infrastructure. Our hosted servers are physically located at
Exodus Communications in Santa Clara, California. Exodus provides fully
redundant Internet access with an aggregate network capacity of
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over 17 gigabits per second. Additionally, Exodus provides power, climate
control and monitoring services 24 hours per day, seven days per week. We
intend to add a similar facility in Europe within the next 12 months. Our
internal network operations are managed by experienced personnel who provide
operations and database administration support 24 hours per day.
Our proprietary technology leverages our scalable architecture and runs on
Sun Microsystems and Hewlett-Packard, Intel-based servers. These servers are
connected to the Internet through several 100-megabit network connections. Our
production and internal networks are protected by a firewall system. We have
also implemented a secure link between our hosting service and our corporate
office facility that allows direct access to our data center systems, enabling
timely system administration.
Conference Center 3.5. Conference Center 3.5 was until recently our flagship
service and product offering. Conference Center 3.5 is currently available to
our customers seeking to obtain the software for deployment within their
organization, and for service providers wishing to host their own web
conferencing service.
PlaceWare Development Kit. Our PlaceWare Development Kit is an application
developer's kit that enables resellers to build web-based collaborative
applications on top of our technology platform. Two resellers, General Dynamics
and Hewlett-Packard, have developed applications based on this technology,
which they license into targeted market segments. General Dynamics builds
InfoWorkSpace, a collaborative application, licensed to the Department of
Defense. Hewlett-Packard has developed the HP Virtual ClassRoom application
which they offer as a service to the corporate training market.
Event Services and Customer Support
We provide our customers with event management services that can be tailored
to their particular needs. These services include web conferencing services,
presenter training, web-based audience registration, event moderation and
technical support services. We also resell audio conferencing and audio
streaming services from third party service providers.
We offer online classes and on-demand recordings using our services to
provide knowledge and skills to successfully deploy, use and maintain our
services and products. These training classes include material presenters,
moderators, event managers and system administrators.
Our hosted service agreement and annual maintenance agreement provide
customers access to new product enhancements and technical support. We also
offer customer support to resolve technical and user issues by phone and e-
mail.
Customers
We began providing web conferencing in June 1997 and as of December 31,
1999, had over 340 customers. Our customers consist of a diverse group of
companies operating in many industries worldwide, ranging from Fortune 1000 to
small private companies. In addition, we provide co-branded web conferencing
technology and services to our communications service providers. During 1999,
General Dynamics accounted for 27% of our revenues. No other customer accounted
for more than 10% of our revenues in 1999.
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Below is a list of our top customers as of March 1, 2000, based on the
number of authorized concurrent users in each of the categories listed below:
Internet Software and Rational Software DHL Worldwide Express
Services Corporation Dow Jones & Company,
AltaVista Company Remedy Corporation Inc.
Ariba, Inc. SalesLogix Corporation Dun & Bradstreet
AXENT Technologies, Inc. Symantec Corporation Corporation
BEA Systems, Inc. Veritas Software FedEx Corporation
BroadVision, Inc. Corporation Ingram Micro, Inc.
CacheFlow Inc. Network World, Inc.
Excite@Home Network Computer Hardware, Rosenbluth
Hyperion Solutions Corp. Semiconductors and International
Netscape/AOL-America Networking PC Week
Online, Inc. Amdahl Corporation
USWeb/CKS Corporation Cisco Systems, Inc. Manufacturing/Other
Vignette Corporation EMC Corporation Child Health
Web Hire, Inc. Encanto Networks, Inc. Corporation
Hewlett-Packard Company of America
Financial Services International Business Epic Learning, Inc.
American International Machines Corporation General Dynamics
Group, Inc. Motorola, Inc. Corporation
Bank of Montreal Sun Microsystems, Inc. General Electric
Bank One Corporation Unisys Corporation Plastics
The Charles Schwab Xilinx Inc. GTE Corporation
Corporation KnowledgeNet
Dain Rauscher Corporation Professional Services KRM Information
J.P. Morgan & Co. Andersen Consulting Services, Inc.
Incorporated Andersen Worldwide Morrison Knudsen
Morgan Stanley Dean The Boston Consulting Corporation
Witter & Co. Group The Procter & Gamble
Paine Webber Group Inc. Gartner Group, Inc. Company
T Rowe Price Associates, GIGA Information Group, Telcordia
Inc. Inc. Technologies Inc.
TD Waterhouse Group, Inc. Grant Thornton Xerox Corporation
International
Computer Software International Data Service Providers
Autodesk, Inc. Corporation Activate.net
Cadence Design Systems, Lippert/Heilshorn & Corporation
Inc. Associates Conference Plus, Inc.
Eprise Corporation Mainspring Envoyglobal.com
Informix Corporation Communications, Inc. Gemisis
J.D. Edwards & Company Miller Shandwick Geoconference
JetForm Corporation Technologies Hugin Expert
Microsoft Corporation MCI WorldCom, Inc.
Oracle Corporation Business Services Sprint
Parametric Technology ABC Radio
Corporation Corporate Software and
Technology, Inc.
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Selected Customer Profiles
<TABLE>
<CAPTION>
Customer Profile
- -------------------------------------------------------------------------------
<C> <S>
Autodesk Autodesk initially selected our services to deliver real-
time web seminars for marketing its geographic information
system software solutions. Their first web conference
series consisted of 24 real-time online seminars conducted
twice per week. Since September 1999, Autodesk has reached
over 4,500 people around the world, and has had
approximately 500 people in a single web seminar. Most of
these attendees were people who otherwise would not take
the time to attend a seminar in-person.
Autodesk currently uses our services for distribution
channel, partner and customer communications in its
learning and training department. Autodesk selected our
service as its enterprise-wide web conferencing standard in
February 2000. They have also selected our Portal E-Service
as the basis for a co-branded service endorsed by the their
learning and training department for the delivery of
eLearning courses through their authorized training centers
and distribution channel partners.
- -------------------------------------------------------------------------------
International Data IDC, a division of International Data Group, selected our
Corporation (IDC) services in May 1999, as their new medium for delivering
customer research presentations online through web
conferences. IDC used our service to train their lead
analysts in more than 40 countries worldwide as well as
their sales and marketing teams. IDC then launched a
monthly web conference series, where IDC's leading industry
analysts speak to a worldwide audience of as many as 300
people over the Internet.
- -------------------------------------------------------------------------------
GTE GTE uses our services in numerous ways to enhance its
ability to communicate with its customers, investors and
employees. GTE has selected our services to deliver real-
time presentations of financial information to its global
audience of investors and analysts. GTE held its first
investor web conference to describe its $3.27 billion
acquisition of Ameritech's wireless assets last year, and
has used our services in several subsequent analyst
briefings. These real-time, dynamic events attracted a
number of key GTE investors and analysts. GTE currently
uses our services to facilitate communications among
employees within the company.
</TABLE>
Sales and Marketing
We sell our services and products through both a direct sales organization
and our service providers. We target companies looking to enhance their
business-to-business communications effectiveness. Our direct sales force is
headquartered in Mountain View, California, and we have sales representatives
based in several cities throughout North America. We have a European sales
office located in the United Kingdom that is responsible for all European,
Middle East and African sales opportunities. Asian sales opportunities are
handled through our headquarters. The direct sales force consists of inside and
outside sales representatives and is responsible for acquiring new customers.
We intend to increase the size of our domestic and international sales force.
We also sell through our service providers, which include Conference Plus,
Inc., Envoyglobal.com, General Dynamics Corporation, Hewlett-Packard Company,
MCI WorldCom, Inc. and Sprint. These companies maintain direct sales
organizations that sell our services, often bundled with audio conferencing or
other services. We have sales personnel who help our service providers in
selling our services.
Our marketing strategy is to build and promote our brand, to grow awareness
and demand for the web conferencing category and to generate qualified leads
for our sales force. We focus our marketing efforts on sales, marketing and
corporate communications applications inside high technology, financial
services and
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professional services companies. We rely on a range of available marketing
avenues to pursue our objectives and educate our target markets, including
print advertisements, billboards, online seminars, e-mail newsletters, targeted
permission-based e-mail and web banners, targeted direct mail, trade shows,
marketing promotions, press and industry analyst relations programs, our web
site and selected media events. We publish collateral materials to support the
sales process, including a company brochure, feature data sheets, technology
white papers and customer case studies.
As of December 31, 1999, we had 32 sales and marketing professionals,
including sales engineers, account managers and service provider sales
executives.
Research and Development and Operations
We have assembled a team of skilled operations and engineering personnel
with extensive experience in the fields of software development, applications
and user interface design and testing, Internet software, collaborative
computing, network system design and network operations.
Our research and development process is driven by the availability of new
technology, market demand and customer feedback. We have invested significant
time and resources in creating a structured process for undertaking all
development projects. This process involves all functional groups and all
levels in the company. Following an assessment of market demand, our research
and development team develops a full set of comprehensive functional product
specifications based on input from the product management and sales
organizations. We are continuing to invest in the development of the Conference
Center 2000 web conferencing service and our iVault hosting infrastructure.
Our operations team designs, monitors, and supports the iVault hosting
infrastructure. They specify network system design, architect and build the
network operations center, and provide ongoing 24 hours per day, seven days per
week support. The operations team also provides technical support for our
customers.
As of December 31, 1999, we employed 18 people in research and development,
and 9 people in operations.
Technology
Our web conferencing technology was originally developed at Xerox PARC and
was assigned to us in 1996. Our web conferencing technology enables a wide
variety of business collaboration applications. It is designed to deliver
scalable, reliable, real-time interactivity with minimal latency over the
Internet. Our technology is designed to accommodate the transmission of data
and voice over the Internet at connection speeds as low as 28.8Kbps and to
support user access through corporate firewalls and web proxy servers. Our
technology efforts focus on developing the key proprietary components of the
underlying communication and collaboration infrastructure. In addition, we
utilize existing products and services and industry standards when appropriate
to enhance our services .
Real-time Collaboration Technology: PSOM.
Persistent Shared Object Messaging is the set of core proprietary component
technologies our applications are built upon. PSOM is an object-oriented
technology with several unique advantages over other contemporary development
technologies. PSOM was specifically architected for enabling scalable,
reliable, secure, real-time interaction and collaboration over the often
congested Internet.
PSOM offers the following advantages:
Persistence. PSOM objects automatically have persistence, thus the objects
are preserved with no additional programming efforts across different
invocations of the application and across service interruptions. This
capability enables faster development times of real-time collaborative
applications and increases our service reliability by ensuring key information
and content is preserved.
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Shared objects. Every client and the server have a copy of each shared
object, thereby allowing any change to an object to be immediately displayed
and quickly sent to all other copies of the object. Changes made to a shared
object at the same time by different users are quickly exchanged over the
Internet and synchronized at each client. This capability enables the delivery
of real-time interactivity with minimal latency over the Internet.
Messaging. The messaging subsystem automatically adapts to both the type of
firewall connections and speed of the connections. Messages between the
browser-based client and the server are grouped together and immediately sent
over the Internet without waiting for the results from prior sent messages to
be returned. This capability enables the traversal of firewalls, minimizes
bandwidth utilization, optimizes performance based on the speed of each
individual connection, and supports our ability to scale up to 2,500
simultaneous users.
We utilize a number of industry standard technologies including Java, C++,
JavaScript, Visual Basic, and HTML languages, widely used Internet network
protocols, audio and video streaming technologies from Microsoft and
RealNetworks, and Microsoft Internet Explorer and Netscape Navigator browsers.
Use of Java on browsers provides audience members with both universal
accessibility and immediate access because no software needs to be installed on
an Internet-enabled personal computer prior to using the service to attend a
meeting or a presentation.
Scalable, Reliable Infrastructure: iVault.
iVault is the proprietary carrier-class architecture our applications run on
to deliver our services to our hosted customers and service providers. The
architecture divides the applications processing into several functions, with
each function running on a separate set of servers, including one or more
backup units. This architecture enables the service to provide redundancy in
the event of a server failure by diverting to a backup unit and allows us to
incrementally increase service capacity by adding additional servers as the
usage of our service increases.
iVault uses off-the-shelf networking systems including Cisco Systems
routers, switches and local director, Sun Solaris on Sun Microsystems Unix-
bases servers, Windows NT on Hewlett-Packard, Intel-based servers, and content
storage on Network Appliance file servers. This equipment is physically located
at our set of cages at Exodus Communications Internet co-location facility in
Santa Clara, California. Exodus provides our data center redundancy through
multiple Internet connections, fully redundant power on the premises, multiple
backup generators, and around-the-clock systems management with onsite
personnel trained in the areas of networking, Internet, and systems management.
Use of these products and services helps to ensure the best overall service
levels are supplied to our customers and service providers.
Competition
The market for web conferencing services is intensely competitive, rapidly
evolving and subject to technological change. We expect competition to increase
significantly in the future as new and existing competitors seek to provide web
conferencing services and products.
We believe the principal factors affecting the competitive environment
include a significant base of referenceable customers, the quality and
performance of the service, including scalability, reliability and security,
product features, customer service, core technology, the quality of the event
services offering, price and the value of a given service. Although we believe
that our services and products currently compete favorably with respect to
these factors, our market is relatively new and is evolving rapidly. We may not
be able to maintain our competitive position against current and potential
competitors.
Our principal competitors include providers of web conferencing services
such as Contigo, INTERVU and WebEx. We may experience additional competition
from companies that provide streaming media services, audio conferencing or
video conferencing services, or other established software or distance learning
companies that decide to enter the web conferencing market. These companies
could possess large, existing customer bases, substantial financial resources
and established distribution channels and could develop, market or resell a
number
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of web conferencing services. Such potential competitors may also choose to
enter the market for web conferencing services by acquiring one of our existing
competitors or by forming strategic alliances with such competitors. Either of
these occurrences could harm our ability to compete effectively. In addition,
our currently licensed service providers may enter into similar agreements with
our competitors or develop parallel services based on their own technology.
This kind of competition from our service providers may harm our business in
the future.
Many of our potential competitors have longer operating histories, greater
name recognition, larger customer bases, more diversified lines of services and
products and significantly greater resources than we have. These competitors
may be able to undertake more extensive marketing campaigns, adopt more
aggressive pricing policies and deliver superior solutions. In addition, many
of our current or potential competitors have broad distribution channels that
may be used to bundle competing services or products directly to end-users or
purchasers. If such competitors bundle competing services or products for their
customers, the demand for our services and products could substantially
decline. As a result of the above factors, we cannot assure you that we will
compete effectively with the current or future competitors or that competitive
pressures will not harm our business.
Intellectual Property Rights
Our success and ability to compete are substantially dependent upon our
technology and intellectual property. While we rely on copyright, trade secret
and trademark law to protect our technology, we believe that factors such as
the technological and creative skills of our personnel, new product and service
developments, frequent product and service enhancements and reliable product
and service maintenance are more essential to establishing and maintaining an
intellectual property leadership position. We have no patents to date. We have
three patent applications pending. Others may develop services and products
that are similar or superior to ours.
PlaceWare is a registered trademark in the United States. We have applied
for trademark applications on the following terms: PlaceWare Conference Center
2000, Live Demo, MyPlaceWare, Web Conferencing is Here, Real Meetings No Travel
and iVault.
We will continue to assess appropriate occasions for seeking patent and
other intellectual property protections for those aspects of our technology
that we believe constitute innovations providing significant competitive
advantage. The pending and future applications may or may not result in the
issuance of valid patents and trademarks.
We generally enter into confidentiality or non-disclosure agreements with
our employees, consultants and others, and generally control access to and
distribution of our products, documentation and other proprietary information.
Despite our efforts to protect our proprietary rights, unauthorized parties may
attempt to copy or otherwise obtain and use our products, services or
technology. Policing unauthorized use of our proprietary information is
difficult, and the steps we have taken might not prevent misappropriation of
our technology, particularly in foreign countries where the laws may not
protect our proprietary rights as fully as do the laws of the United States.
Substantial litigation regarding intellectual property rights exists in the
technology industry. From time to time, third parties have asserted and may
assert exclusive patent, copyright, trademark and other intellectual property
rights to technologies and related standards that are important to us. We
expect that we may increasingly be subject to infringement claims as the number
of competitors in our industry grows and the functionality of products in
different industries overlap. In addition, our competitors may have filed or
intend to file patent applications covering aspects of their technology that
they may claim our intellectual property infringes. Although we have not been
party to any litigation asserting claims that allege infringement of
intellectual property rights, we cannot assure you that we will not be a party
to litigation in the future. Any third party claims, with or without merit,
could be time-consuming to defend, result in costly litigation, divert
management's attention and resources, cause product shipment delays or require
us to enter into royalty or licensing agreements. Such royalty or licensing
agreements, if required, may not be available on terms acceptable to us, if at
all. A successful claim of product infringement against us could harm our
business. See "Business--Legal Proceeding."
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Employees
As of December 31, 1999, we had 71 employees, including 32 in sales and
marketing, 18 in research and development, nine in operations and 12 in general
and administrative functions. We are not subject to any collective bargaining
agreements and believe that our employee relations are good. Competition for
employees in our industry is intense and our future success depends on our
ability to attract, retain and motivate highly-skilled employees.
Facilities
Our executive offices are located in Mountain View, California, where we
lease approximately 40,000 square feet under the terms of a lease that expires
in August 2002. We believe that these existing facilities are adequate to meet
current foreseeable requirements or that suitable additional or substitute
space will be available on commercially reasonable terms.
Legal Proceedings
In July 1999, we were contacted by legal counsel representing Pixion, Inc.,
a web conferencing provider, with allegations that we misappropriated trade
secrets under an August 1997 license and distribution agreement. Pixion
essentially alleged that we failed to destroy any shared confidential
information disclosed pursuant to the agreement, and that their confidential
information was used in the development of our LiveDemo software product.
Pixion also alleged copyright and trademark infringement. After initial
attempts to resolve this issue, Pixion has failed to respond to any of our
requests to move this issue forward, and our last contact with Pixion was in
October 1999. Although we have not received any additional communications from
Pixion, we are prepared to vigorously defend ourselves if and when such claims
are brought to court. If a lawsuit is brought to court, we may be forced to
expend time, money and resources in defending against such lawsuit, and if we
are unsuccessful in our defense, our business may be harmed. Trade secret
misappropriation cases are inherently fact-specific, making it difficult to
predict with any degree of certainty the outcome of a given dispute. This
uncertainty is heightened by the fact that such claims may be tried before a
jury, and that if the jury finds that a defendant acted willfully or in bad
faith, it may award the plaintiff punitive damages that could be substantial,
in addition to injunctive relief, damages and attorneys' fees. It is thus
difficult to quantify the potential extent of our exposure, although it could
be very substantial.
44
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MANAGEMENT
Executive Officers and Directors
The following table sets forth information with respect to our executive
officers and directors as of February 29, 2000:
<TABLE>
<CAPTION>
Name Age Position(s)
- ---- --- -----------
<S> <C> <C>
Barry James Folsom......... 52 President, Chief Executive Officer and Director
Kevin R. Evans............. 42 Chief Financial Officer and Secretary
Kathy Hearn Bosse.......... 50 Vice President, Operations
Stephen C. Brown........... 43 Vice President, Worldwide Sales
William G. Glazier......... 40 Vice President, Marketing
James A. Hogan............. 42 Vice President, Business Development
Michael R. Jordan.......... 50 Vice President, Engineering
J. Phillip Samper(1)(2).... 65 Chairman of the Board of Directors
Lon H. H. Chow(2).......... 35 Director
Philip T. Gianos........... 50 Director
Domenic J. LaCava(1)....... 59 Director
Richard P. Magnuson(1)..... 44 Director
Rory T. O'Driscoll(2)...... 35 Director
</TABLE>
- ---------------------
(1) Member of Audit Committee
(2) Member of Compensation Committee
Barry James Folsom has served as our president, chief executive officer and
a director since October 1997. From September 1996 to August 1997, Mr. Folsom
served as a consultant and vice president of sales and marketing for Exodus
Communications, an Internet hosting company. From January 1995 to August 1996,
Mr. Folsom served as chief executive officer and president of Vivid Business
Systems, an e-commerce tools company. Prior to that, Mr. Folsom served in
various capacities at Spectrum Holobyte, Radius, Focus Systems, Sun
Microsystems and Digital Equipment Corporation. Mr. Folsom holds a B.S. degree
in electrical engineering and a M.S. degree in computer science from the
Georgia Institute of Technology.
Kevin R. Evans has served as our chief financial officer and secretary since
November 1999. From January 1998 to June 1999, Mr. Evans served as the chief
financial officer of Sequel, Inc., a computer service and support company. From
December 1995 to October 1997, Mr. Evans served as chief financial officer of
Madge Networks, N.V., a networking company. From May 1990 to November 1995, Mr.
Evans served as Vice President of Merisel, Inc., a computer equipment and
software distribution company. Prior to that, Mr. Evans served in various
capacities at Kerr Glass Group, Wells Fargo Bank and ARA Services, Inc. Mr.
Evans holds a dual B.A. degree in economics and management from Sonoma State
University and a M.B.A. degree from San Diego State University.
Kathy Hearn Bosse has served as our vice president of operations since
November 1999. From November 1997 to October 1999, Ms. Bosse served as vice
president of operations at UpShot.com, an Internet-based sales tool provider.
From August 1995 to August 1997, Ms. Bosse worked as a director of channel
marketing with Remedy, an enterprise software company. From October 1993 to
March 1995, Ms. Bosse worked as a director of worldwide sales support with
Network General Corporation, a network equipment company. Prior to that, Ms.
Bosse worked in various capacities at Network Equipment Technologies,
Ungermann-Bass and Tymnet. Ms. Bosse holds a B.S. degree in Mathematics and a
M.A.S. degree in Computer Science from Southern Methodist University.
Stephen C. Brown has served as our vice president of worldwide sales since
June 1999. From August 1998 to May 1999, Mr. Brown served as director of
business development with Tumbleweed Software, an Internet
45
<PAGE>
messaging company. From July 1997 to July 1998, Mr. Brown was a private
investor. From June 1995 to June 1997, Mr. Brown served as vice president of
sales with QRS Corporation, an electronic commerce information services
company. From December 1984 to June 1995, Mr. Brown served in various sales
management capacities with Federal Express, a global transportation and
logistics information company. Mr. Brown holds a B.A. degree in political
science from California State University at Long Beach.
William G. Glazier has served as our vice president of marketing since
January 1999. From June 1997 to October 1998, Mr. Glazier served as vice
president of marketing with Eloquent, Inc., an internet software and services
firm. From April 1995 to June 1997, Mr. Glazier served as a director of the
workstations business with Digital Equipment Corporation, a computer company.
From October 1989 to April 1995, Mr. Glazier served as director of marketing at
Silicon Graphics Inc., a computer company. Prior to that, Mr. Glazier served in
various capacities at Bain and Company. Mr. Glazier holds a B.A. degree in
government and economics from Harvard College and a M.B.A. degree from Stanford
University.
James A. Hogan has served as our vice president of business development
since March 1999. From July 1998 to February 1999, Mr. Hogan served as
president and chief executive officer of Silicon Systems and Technologies, a
systems software company. From October 1996 to July 1998, Mr. Hogan served as
general manager and corporate vice president of worldwide marketing and sales
for Zitel Corporation, a systems software and services company. From November
1995 to October 1996, Mr. Hogan served as a senior director of market
development with NETCOM On-Line Communications Services, Inc., an Internet
access provider. From January 1995 to November 1995, Mr. Hogan served as vice
president of marketing and sales at CyberSource Corporation, an Internet-based
software distribution company. Prior to that, Mr. Hogan served in various
capacities at CompuServe, Inc. and IBM Corporation. Mr. Hogan holds a B.B.A.
degree and a M.B.A. degree from the University of Michigan.
Michael R. Jordan has served as our vice president of engineering since
November 1996. From May 1994 to September 1996, Mr. Jordan served as a director
and as a vice president of console software at 3DO, a software development
company. Prior to that, Mr. Jordan served in various capacities at NCD, Ridge &
Gavilan, Stratus & Tandem and GE/Honeywell. Mr. Jordan holds a B.S.E.E. from
Arizona State University.
J. Phillip Samper has served as the chairman of the board of directors of
PlaceWare since December 1998. Mr. Samper is currently a managing director of
Gabriel Venture Partners, L.L.C., a venture capital firm, and has been a member
of that firm since November 1998. From November 1997 to June 1998, Mr. Samper
served as chief executive officer and president of Avistar Systems Corporation,
a video collaboration company. From 1996 to 1997, Mr. Samper served as
chairman, chief executive officer and president of Quadlux, Inc., a commercial
and residential cooking appliances company. From May 1995 to March 1996, Mr.
Samper served as chairman and chief executive officer of Cray Research, Inc., a
computer products company. From January 1994 to March 1995, Mr. Samper served
as president and chief executive officer of Sun Microsystems Computer
Corporation. Prior to that, Mr. Samper served as managing partner of FRN Group,
a private investment consulting firm. Mr. Samper currently serves on the boards
of iTango Systems, Inc. and SalesHound.com, Inc., each of which is a privately-
held company, and Ingram Micro, Inc., the Interpublic Group of Companies, Inc.
and Sylvan Learning Systems, Inc. Mr Samper holds a B.S. degree from the
University of California, Berkeley, a B.F.T. from the American Graduate School
of International Management and a M.S.M from the Massachusetts Institute of
Technology.
Lon H. H. Chow has served as a director of PlaceWare since April 1999. Mr.
Chow is currently a general partner with Apex Investment Partners, a venture
capital firm, and has been a member of that firm since October 1997. From
September 1993 to October 1997, Mr. Chow was a management consultant with
Mercer Management Consulting (formerly Strategic Planning Associates). Prior to
that, Mr. Chow served in various operating management roles at Pacific Telesis.
Mr. Chow holds a B.A. degree in international relations from the University of
California, Davis and an M.B.A. degree from the Wharton School.
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<PAGE>
Philip T. Gianos has served as a director of PlaceWare since September 1999.
Mr. Gianos is currently a general partner with InterWest Partners, a venture
capital firm, and has been a member of that firm since 1982. Prior to joining
InterWest Partners, Mr. Gianos was with IBM Corporation. Mr. Gianos is a board
member of Xilinx, Ramp Networks, T/R Systems and the Western Association of
Venture Capitalists. Mr. Gianos holds a B.S. degree and an M.S. degree in
electrical engineering from Stanford University and an M.B.A. degree from
Harvard University.
Domenic J. LaCava has served as a director of PlaceWare since November 1998.
Mr. LaCava is currently the president of Eastman Software, Inc., and has been
with that company since November 1999. From November 1997 to October 1999, Mr.
LaCava worked with several emerging growth companies. From January 1997 to
October 1997, Mr. LaCava served as president and chief operating officer of
PictureTel Corporation, a video conferencing company. From December 1993 to
December 1996, Mr. LaCava served as a vice president of PictureTel Corporation.
Prior to that, Mr. LaCava served in various capacities at PowerOpen
Association, Digital Equipment Corporation and IBM. Mr. LaCava currently sits
on the board of Acunet.net, a privately held company. Mr. LaCava holds an
A.S.E.E. degree from the Wentworth Institute of Technology.
Richard P. Magnuson has served as a director of PlaceWare since November
1996. Mr. Magnuson is currently a private venture capital investor in a number
of emerging growth companies, and has been engaged in this activity since
January 1996. From 1982 to December 1996, Mr. Magnuson was a general partner
and associate with Menlo Ventures, a venture capital firm. Mr. Magnuson
currently serves on the boards of AVCOM Technologies, Inc., eSavingsCenter,
Inc., HealthAnswers, Inc. and HotData, Inc., each of which is a privately-held
company, and Rogue Wave Software, Inc. and California Water Service Group. Mr.
Magnuson holds a B.A degree in economics, a J.D. degree and an M.B.A. degree
from Stanford University.
Rory T. O'Driscoll has served as a director of PlaceWare since September
1999. Mr. O'Driscoll is currently a vice president and general partner of
BankAmerica Ventures, a venture capital firm, and has served in this capacity
since September 1993. Mr. O'Driscoll serves on the boards of netGenesis, a
business intelligence software and services provider, and several other
privately held companies. Mr. O'Driscoll holds a B.Sc. degree in economics from
the London School of Economics.
Board Composition
We currently have authorized seven directors. Our certificate of
incorporation provides for a classified board of directors consisting of three
classes of directors, each serving staggered three-year terms. As a result, a
portion of the board of directors will be elected each year. To implement the
classified structure, prior to the consummation of the offering, two of the
nominees will be elected to one-year terms, two will be elected to a two-year
term and three will be elected to three-year terms. Thereafter, directors will
be elected for three-year terms. Lon H. H. Chow and Rory T. O'Driscoll have
been designated Class I directors whose term expires at the 2001 annual meeting
of stockholders. Philip T. Gianos and Richard P. Magnuson have been designated
Class II directors whose term expires at the 2002 annual meeting of
stockholders. Barry James Folsom, Domenic J. LaCava and J. Phillip Samper have
been designated Class III directors whose term expires at the 2003 annual
meeting of stockholders. There are no family relationships among any of our
directors, officers or key employees.
Board Committees
Our Board of Directors has an audit committee and a compensation committee.
Our audit committee reviews, acts on and reports to our Board of Directors
with respect to various auditing and accounting matters, including the
selection of our independent accountants, the scope of our annual audits, fees
to be paid to the independent accountants, the performance of our independent
accountants and our accounting practices. Domenic J. LaCava, Richard P.
Magnuson and J. Phillip Samper are the members of our audit committee.
47
<PAGE>
Our compensation committee establishes salaries, incentives and other forms
of compensation for officers and other employees. This committee also
administers our incentive compensation and benefit plans. Lon H. H. Chow, Rory
T. O'Driscoll and J. Phillip Samper are the members of the compensation
committee. Barry James Folsom, our chief executive officer, will participate in
all discussions and decisions regarding salaries and incentive compensation for
all employees and consultants of PlaceWare, except that he will be excluded
from decisions regarding his own compensation.
Director Compensation
Our directors do not currently receive any cash compensation for services on
the board of directors or any committee of our board, but directors may be
reimbursed for certain expenses in connection with attendance at board of
directors and committee meetings. All directors are eligible to participate in
our 2000 Equity Incentive Plan. Non-employee directors are eligible to
participate in our 2000 Non-Employee Directors' Stock Option Plan.
Compensation Committee Interlocks and Insider Participation
None of the members of our compensation committee is an officer or employee
of PlaceWare. No interlocking relationship exists between our Board of
Directors or compensation committee and the board of directors or compensation
committee of any other company, nor has such an interlocking relationship
existed in the past.
Executive Compensation
The following table sets forth information concerning the compensation
earned that we paid during the year ended December 31, 1999 to our chief
executive officer and the four next most highly compensated executive officers
whose aggregate cash compensation exceeded $100,000 during that fiscal year.
All option grants were made under our 1997 Stock Plan.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
------------
Annual Compensation Securities
--------------------- Other Annual Underlying
Name and Principal Position Salary($) Bonus($) Compensation Options
- --------------------------- ---------- --------- ------------ ------------
<S> <C> <C> <C> <C>
Barry James Folsom
President and Chief Executive Officer.. 175,012 46,579 -- 228,500
Kevin R. Evans(1)
Chief Financial Officer and Secretary.. 30,775 10,000(4) -- 210,000
Stephen C. Brown(2)
Vice President, Worldwide Sales........ 91,809 24,577 $27,397(5) 135,000
William G. Glazier(3)
Vice President, Marketing.............. 143,298 39,383(6) -- 200,000
Michael R. Jordan
Vice President, Engineering............ 139,510 38,722 -- 10,000
</TABLE>
- ---------------------
(1) Mr. Evans joined PlaceWare in November 1999.
(2) Mr. Brown joined PlaceWare in June 1999.
(3) Mr. Glazier joined PlaceWare in January 1999.
(4) Represents amounts paid as a signing bonus.
(5) Represents amounts earned as commissions.
(6) Includes $20,000 paid as a signing bonus.
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<PAGE>
Option Grants in 1999
The following table sets forth summary information regarding the option
grants made to our chief executive officer and each of our four other most
highly paid executive officers during 1999. Options granted to purchase shares
of our common stock under our 1997 Stock Plan are generally immediately
exercisable by the optionee but are subject to a right of repurchase pursuant
to the vesting schedule of each specific grant. In the event that a purchaser
ceases to provide service to PlaceWare and its affiliates, we have the right to
repurchase any of that person's unvested shares of common stock at the original
option exercise price. 25% of each option vests on the one year anniversary of
employment and the remainder vest in a series of equal monthly installments
beginning on the one year anniversary of employment and continuing over the
next three years of service. The exercise price per share is equal to the fair
market value of our common stock on the date of grant as determined by our
board of directors.
The percentage of total options was calculated based on options to purchase
an aggregate of 1,973,883 shares of common stock granted under our 1997 Stock
Plan in 1999. The potential realizable value was calculated based on the ten-
year term of the options and assumed rates of stock appreciation of 5% and 10%,
compounded annually from the date the options were granted to their expiration
date based on the fair market value of the common stock on the date of grant.
These assumed rates of appreciation comply with the rules of the Securities and
Exchange Commission and do not represent our estimate of future stock prices.
Actual gains, if any, on stock option exercises will be dependent on the future
performance of our common stock. See "Compensation Plans" for a description of
the material terms of these options.
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------
% of Total
Number of Options Potential Realizable
Securities Granted to Value at Assumed
Underlying Employees Exercise Annual Rates of Stock
Options In Last Price Expiration Price Appreciation
Name Granted(#) Fiscal Year ($/share) Date for Option Term(1)
---- ---------- ----------- -------- ---------- ----------------------
5% 10%
<S> <C> <C> <C> <C> <C> <C>
Barry James Folsom...... 228,500 11.6% $2.00 12/30/09
Kevin R. Evans.......... 210,000 10.6% $1.00 11/23/09
Stephen C. Brown........ 135,000 6.8% $0.20 6/09/09
William G. Glazier...... 200,000 10.1% $0.20 2/10/09
Michael R. Jordan....... 10,000 *% $0.20 7/14/09
</TABLE>
- ---------------------
* less than 1%
(1) The potential realizable value is calculated by assuming that the initial
public offering price of $ per share, based on the mid-point of the
filing range, appreciates at the indicated rate for the remaining term of
the option and that the option is exercised at the exercise price and sold
on the last day of its term at the appreciated price. The potential
realizable value computation is net of the applicable exercise price, but
does not take into account applicable federal or state income tax
consequences and other expenses of option exercises or sales of appreciated
stock. The values shown do not consider non-transferability or termination
of the options upon termination of such employment with PlaceWare.
49
<PAGE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options at
Shares Fiscal Year End (#) Fiscal Year End ($)
Acquired on Value -------------------------------------------------
Name Exercise (#) Realized ($)(1) Vested Unvested Exercisable Unexercisable
- ---- ------------ --------------- ---------- ------------------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Barry James Folsom...... -- -- -- 228,500 --
Kevin R. Evans(2)....... 210,000 -- -- -- --
Stephen C. Brown(2)..... 135,000 -- -- -- --
William G. Glazier...... -- -- -- 200,000 --
Michael R. Jordan....... 10,000 -- -- -- --
</TABLE>
- --------
(1) Based on the assumed initial public offering price of $ , based on
the mid-point of the filing range, minus the per share offering price,
multiplied by the number of shares issued upon exercise of the option.
(2) Represents shares subject to a right of repurchase in favor of PlaceWare.
Compensation Plans
1997 Stock Plan
In March 1997 the board of directors adopted, and the stockholders approved,
the 1997 stock plan . Our 1997 stock plan was amended in July 1998 and the
stockholders approved the amendment. The incentive stock option plan was again
amended in July 1999 and the stockholders approved this second amendment. The
plan was further amended in December 1999 and the stockholders approved this
third amendment. An aggregate of 4,752,833 shares of common stock currently are
authorized for issuance under the plan. The plan will terminate as of the
effective date of the initial public offering. The termination of the plan will
have no effect on the options that have been granted thereunder.
The plan permits the grant of stock options to employees, non-employee
directors and consultants. Stock options may be either incentive stock options
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended, or nonstatutory stock options. In addition, the plan permits the award
or sale of shares of our common stock.
The plan is administered by our board of directors. Our board of directors
may delegate its authority to administer the plan to a committee of one or more
Board members appointed by our board of directors.
In the event of certain changes in control in our beneficial ownership, all
outstanding stock awards under the 1997 stock plan may be assumed, continued or
substituted for by any surviving entity. If the surviving entity determines not
to assume, continue or substitute for such awards, then for those optionholders
in our service at that time, the vesting of such stock awards will be
accelerated and such stock awards will be terminated upon the change in control
if not previously exercised.
Our board of directors may amend or modify the plan at any time. However, no
amendment or modification shall adversely affect the right and obligations with
respect to options or unvested awards unless the participant consents to the
amendment or modification. In addition, our board of directors shall not,
without the approval of the stockholders, (i) increase the maximum number of
shares issuable under the 1997 Plan (except for permissible adjustments in the
event of certain changes in the company's capitalization) or (ii) materially
change the class of persons who are eligible for the grants of the incentive
stock options.
2000 Equity Incentive Plan
In February 2000, our board of directors adopted our 2000 equity incentive
plan. The 2000 plan will be effective on the effective date of this initial
public offering. The 2000 plan is intended to replace and supersede the 1997
stock plan. A total of 3,000,000 shares of our common stock have been reserved
for issuance under
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<PAGE>
the 2000 plan. When a stock award expires or is terminated before it is
exercised, the shares not acquired pursuant to the stock awards shall again
become available for issuance under the 2000 plan. No optionee may be granted
options covering more than 1,500,000 shares during any calendar year. In no
event may an option be exercised following its expiration date.
The 2000 plan permits the grant of options to employees, directors and
consultants. Options may be either incentive stock options within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended, or
nonstatutory stock options. In addition, the 2000 plan permits the grant of
stock bonuses and rights to purchase restricted stock.
The 2000 plan is administered by our board of directors. The board of
directors may delegate its authority to administer the 2000 plan to a committee
of two or more board members appointed by the board of directors. The
administrator has the authority to select the eligible persons to whom award
grants are to be made, to designate the number of shares to be covered by each
award, to determine whether an option is to be an incentive stock option or
nonstatutory stock option, to establish vesting schedules, to specify the
exercise price of options and the type of consideration to be paid upon
exercise and to specify other terms of awards.
In general, the terms of stock options granted under the 2000 plan may not
exceed 10 years. An optionholder may not transfer a stock option other than by
will or the laws of descent and distribution. The exercise price for an
incentive stock option cannot be less than 100% of the fair market value of the
common stock on the date of grant. The exercise price for a nonstatutory stock
option cannot be less than 85% of the fair market value of the common stock on
the date of grant. In the event the optionholder is a 10% stockholder, then the
exercise price per share shall not be less than 110% of the fair market value
of common stock on the date of grant.
Unless the terms of an optionholder's stock option agreement provide for
earlier termination, in the event an optionholder's service relationship with
us, or any affiliate of ours, ceases due to death, the optionholder's
beneficiary may exercise any vested options up to 18 months after the date such
service relationship ends. In the event an optionholder's service relationship
with us, or any affiliate of ours, ceases due to disability, the optionholder
may exercise any vested option up to 12 months after the cessation of service.
If an optionholder's relationship with us, or any affiliate of ours, ceases for
any reason other than disability or death, the optionholder may (unless the
terms of the stock option agreement provide for earlier termination) exercise
any vested options up to 3 months after cessation of service.
Incentive stock options may be granted only to our employees. The aggregate
fair market value, determined at the time of grant, of shares of our common
stock with respect to which incentive stock options are exercisable for the
first time by an optionholder during any calendar year under all of our stock
plans may not exceed $100,000. No incentive stock option may be granted to any
person who at, the time of the grant, owns or is deemed to own stock possessing
more then 10% of our total combined voting power unless the term of the
incentive stock option award does not exceed five years from the date of grant.
In the event of certain changes in control in our beneficial ownership all
outstanding stock awards under the 2000 plan may be assumed, continued or
substituted for by any surviving entity. If the surviving entity determines not
to assume, continue or substitute for such awards, then for those optionholders
in our service at that time, the vesting of such stock awards will be
accelerated and such stock awards will be terminated upon the change in control
if not previously exercised.
The terms of any stock bonuses or restricted stock purchase awards granted
under the 2000 plan will be determined by the administrator. The administrator
may award stock bonuses in consideration of past services without a purchase
payment. Shares sold or awarded under the 2000 plan may be subject to
repurchase by the company. The purchase price of restricted stock under any
restricted stock purchase agreement will not be less than 85% of the fair
market value of the company's common stock on the date of grant.
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<PAGE>
Our board of directors may amend or modify the 2000 plan at any time.
However, no amendment or modification shall adversely affect the right and
obligations with respect to options or unvested awards unless the participant
consents to the amendment or modification. In addition, the board of directors
shall not, without the approval of the stockholders, (i) increase the maximum
number of shares issuable under the 2000 plan (except for permissible
adjustments in the event of certain changes in the company's capitalization),
materially modify the eligibility requirements for participation or (ii)
materially increase the benefits accruing to participants.
2000 Employee Stock Purchase Plan
In February 2000, the board of directors adopted our 2000 employee stock
purchase plan. A total of 500,000 shares of common stock have been authorized
for issuance under the purchase plan. As of each December 31st, beginning with
December 31, 2001 and continuing through and including December 31, 2008 the
share reserve will increase by the least of the following: (1) 1% of our total
outstanding common stock; (2) 250,000 shares of common stock; or (3) a lesser
amount as determined by our board of directors. The purchase plan is intended
to qualify as an employee stock purchase plan within the meaning of Section 423
of the Internal Revenue Code of 1986, as amended. Under our purchase plan,
eligible employees will be able to purchase common stock at a discount price in
periodic offerings not to exceed twenty-seven months in length. The purchase
plan will commence on the effective date of this initial public offering. The
first offering period is scheduled to commence with our initial public offering
and end on April 30, 2002.
Unless otherwise determined by the board of directors, all employees are
eligible to participate in the purchase plan so long as they are employed by us
(or a subsidiary designated by the board of directors) for at least 20 hours
per week and are customarily employed by us (or a subsidiary designated by the
board of directors) for at least five months per calendar year.
Under the purchase plan, employees who participate in an offering may have
up to 15% of their earnings for the period of that offering withheld. The
amount withheld is used on each purchase date of the offering period to
purchase shares of common stock. The price paid for common stock on the
purchase dates will equal the lower of 85% of the fair market value of the
common stock first day of the offering period or 85% of the fair market value
of the common stock on the purchase date. Employees may end their participation
in the offering at any time during the offering period, and participation ends
automatically on termination of employment.
Upon a change in control of the beneficial ownership of our outstanding
stock or substantially all of our assets, the board of directors has discretion
to provide that each right to purchase common stock will be assumed or an
equivalent right substituted by the successor entity, or the board of directors
may provide for all sums collected by payroll deductions to be applied to
purchase stock immediately prior to the effective date of the change in control
transaction.
Our board of directors has the authority to amend or terminate the purchase
plan; provided, however, that no amendment or termination of the purchase plan
may adversely affect any outstanding rights to purchase common stock.
Amendments will generally be submitted for stockholder approval only to the
extent required by law.
2000 Non-Employee Directors' Stock Option Plan
In February 2000, our board of directors adopted our 2000 non-employee
directors' stock option plan. The non-employee directors' plan will be
effective on the effective date of this initial public offering. A total of
650,000 shares of our common stock have been reserved for issuance under our
non-employee directors' plan. When a stock option expires or is terminated
before its is exercised, the shares not acquired pursuant to the stock option
shall again become available for issuance under the non-employee directors'
plan.
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<PAGE>
Our non-employee directors' plan permits the grant of nonstatutory options
to non-employee directors. Our non-employee directors' plan is administered by
the board of directors, however; the grant of stock options is automatic, as
described below:
. Upon the completion of the initial public offering, each non-employee
director who was a non-employee director as of the date of the initial
public offering or who is first elected or appointed after the date of
the prospectus as a non-employee director will automatically be granted
an option to purchase 30,000 shares of common stock. Such option shall
vest ratably over 36 months. Notwithstanding the foregoing, Messrs.
LaCava and Samper are not eligible for this initial grant.
. On the date of each annual meeting of our stockholders, commencing with
our annual meeting in 2001, each non-employee director will
automatically receive an option to purchase 10,000 shares of our common
stock. Such option will vest ratably over 12 months.
. Upon the completion of the initial public offering each non-employee
director who is then the chairman of the compensation committee or the
audit committee will automatically be granted an option to purchase
3,000 shares of common stock. Any non-employee director who is appointed
or elected chairman of the compensation committee or audit committee
after the completion of the initial public offering, commencing with our
annual meeting in 2001, will automatically be granted an option to
purchase 3,000 shares of common stock on the date of each annual
meeting. Each such option shall vest ratably over 12 months.
In general, the terms of stock options granted under the non-employee
directors' plan may not exceed 10 years. An optionholder may not transfer a
stock option other than by will or the laws of descent and distribution. The
exercise price for nonstatutory stock options will be 100% of the fair market
value of the common stock on the date of grant. Generally, the options vest in
equal monthly installments over a three year period measured from the date of
grant.
Unless the terms of an optionholder's stock option agreement provide for
earlier termination, in the event an optionholder's service relationship with
us, or any affiliate of ours, ceases due to death, the optionholder's
beneficiary may exercise any vested options up to 18 months after the date such
service relationship ends. In the event an optionholder's service relationship
with us, or any affiliate of ours, ceases due to disability, the optionholder
may exercise any vested option up to 12 months after the cessation of service.
If an optionholder's relationship with us, or any affiliate of ours, ceases for
any reason other than disability or death, the optionholder may (unless the
terms of the stock option agreement provide for earlier termination) exercise
any vested options up to 3 months from cessation of service.
In the event a non-employee director, who first became a non-employee
director prior to the initial public offering, is terminated in connection with
certain changes in control in our beneficial ownership, the vesting of 100% of
the unvested options held by such non-employee director shall accelerate. In
the event a non-employee director, who first became a non-employee director on
after the initial public offering, is terminated within 12 months of certain
changes in control in our beneficial ownership, the vesting of 100% of the
unvested options held by such non-employee director shall accelerate.
The board of directors may amend or modify the non-employee directors' plan
at any time. However, no such amendment or modification shall adversely affect
the right and obligations with respect to options unless the participant
consents to such an amendment or modification.
401(k) Plan
We sponsor the PlaceWare, Inc. 401(k) Plan, a defined contribution plan
intended to qualify under Section 401(a) of the Internal Revenue Code of 1986,
as amended. All employees are eligible to participate. Participants may make
pre-tax contributions to the 401(k) plan of up to 25% of their eligible
earnings, subject to a statutorily prescribed annual limit ($10,500 in calendar
year 2000). Under the 401(k) Plan, each employee is fully vested in his or her
deferred salary contributions. Employee contributions are held and invested by
the
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401(k) Plan's trustee. The 401(k) Plan also permits us to make matching
contributions and profit-sharing contributions, subject to established limits.
Each participant's contributions, and the corresponding investment earnings,
are generally not taxable to the participants until withdrawn. Individual
participants may direct the trustee to invest their accounts in authorized
investment alternatives.
Executive Severance Benefit Plan
Currently, Kathy Bosse, Stephen Brown, Kevin Evans, Barry James Folsom,
William Glazier, James Hogan and Michael Jordan are participants in our
executive severance benefit plan . Under the plan, we agreed that in the event
the executive's employment is terminated without cause, we would (i) continue
the base salary of the executive for three (3) months (or such longer period as
we determine, in our sole discretion); and (ii) if the executive elects COBRA
coverage, pay the continued cost for such coverage for a number of months equal
to the number of months of the salary continuation payments under the plan. In
addition, if the executive's employment is terminated without cause or the
executive terminates employment for good reason, in either event within 13
months following a change in control in our beneficial ownership, we would (i)
accelerate 100% of the vesting all of such executive's unvested stock options,
(ii) continue the base salary of the executive for at least three (3) months;
and (iii) if the executive elects COBRA coverage, pay the continued cost for
the such coverage for a number of months equal to the number of months of the
salary continuation payments under the executive severance benefit plan.
Limitations on Liability and Indemnification of Directors and Officers
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 or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. unlawful payments of dividends or unlawful stock repurchases or
redemption; or
. any transaction from which the director derived an improper personal
benefit.
This limitation of liability does not apply to liabilities arising under the
federal securities laws and does not affect the availability of equitable
remedies such as injunctive relief or rescission.
Our certificate of incorporation and bylaws provide that we shall indemnify
our directors and executive officers and may indemnify other officers and
employees and our agents to the fullest extent permitted by law. We believe
that indemnification under our bylaws covers at least negligence and gross
negligence on the part of indemnified parties. Our bylaws also permit us to
secure insurance on behalf of any officer, director, employee or other agent
for any liability arising out of his or her actions in such capacity,
regardless of whether the bylaws would permit indemnification.
We have entered into agreements to indemnify our directors and executive
officers, in addition to indemnification provided for in our bylaws. These
agreements, among other things, provide for indemnification of our directors
and executive officers for expenses, including attorneys' fees, judgments,
fines and settlement amounts incurred by any such person in any action or
proceeding, including any action by or in the right of PlaceWare, arising out
of such person's services as a director or executive officer of ours, any
subsidiary of ours or any other company or enterprise to which the person
provides services at our request. We believe that these provisions and
agreements are necessary to attract and retain qualified persons as directors
and executive officers.
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CERTAIN TRANSACTIONS
Other than compensation agreements and other arrangements, which are
described as required in "Management," and the transactions described below,
since October 1996, there has not been, nor is there currently proposed, any
transaction or series of similar transactions to which we were or will be a
party:
. in which the amount involved exceeded or will exceed $60,000; or
. in which any holder of more than 5% of our common stock on an as-
converted basis, director, executive officer or any member of their
immediate family had or will have a direct or indirect material interest.
Series A Preferred Stock Financing
On November 25, 1996, we issued and sold shares of our series A preferred
stock, which shares are convertible into 1,705,000 shares of our common stock,
to investors at a per share price of approximately $1.00 per common equivalent
share. The price of our series A preferred stock was determined through arms
length negotiations among us and investors not affiliated with us at the time
of this financing. Upon the closing of this offering, each share of series A
preferred stock will automatically convert into one share of common stock. The
investors in the financing included the following principal stockholders,
officers and directors and their related entities:
<TABLE>
<CAPTION>
Equivalent
Common
Stock
Name Purchased
---- ----------
<S> <C>
Xerox Corporation................................................. 455,000
Rekhi Family Trust(1)............................................. 300,000
Magnuson Revocable Trust(2)....................................... 200,000
</TABLE>
- ---------------------
(1) Consists of shares held by Kanwal S. Rekhi, a former director of ours, held
in trust for the benefit of Mr. Rekhi's family and children.
(2) Consists of shares held by Richard P. Magnuson, one of our directors, held
in a revocable trust.
The shares issued to Xerox Corporation were issued in connection with the
execution of a software license and technology assignment agreement.
Series B Preferred Stock Financing
On April 23, 1997, May 22, 1998, June 28, 1998, March 8, 1999 and April 1,
1999, we issued and sold shares of our series B preferred stock, which shares
are convertible into 5,120,000 shares of our common stock, to investors at a
per share price of approximately $2.00 per common equivalent share. The price
of our series B preferred stock was determined through arms length negotiations
among us and investors not affiliated with us at the time of this financing.
Upon the closing of this offering, each share of series B preferred stock will
automatically convert into one share of common stock. The investors in the
financing included the following principal stockholders, officers and directors
and their related entities:
<TABLE>
<CAPTION>
Equivalent
Common
Stock
Name Purchased
---- ----------
<S> <C>
InterWest Partners(1)............................................. 1,587,500
Apex Investment Fund(2)........................................... 1,250,000
Bay Partners SBIC, L.P............................................ 1,000,000
Xerox Corporation................................................. 447,514
Magnuson Revocable Trust.......................................... 85,191
J. Phillip Samper................................................. 50,000
Domenic H. LaCava................................................. 10,000
</TABLE>
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- ---------------------
(1) Includes 1,540,204 shares held by InterWest Partners VI, L.P. and 47,296
shares held by InterWest Investors VI, L.P. Philip T. Gianos, one of our
directors, is a managing director of the general partner of InterWest
Partners VI, L.P. and InterWest Investors VI, L.P.
(2) Includes 1,189,344 shares held by Apex Investment Fund III, L.P. and 60,656
shares held by Apex Strategic Partners L.L.C. Lon H. H. Chow, one of our
directors, serves as a director and was an associate of Apex Investment
Fund III and Apex Strategic Partners L.L.C.
(3) Consists of shares held by Richard P. Magnuson, one of our directors, held
in a revocable trust.
Series C Preferred Stock Financing
On September 17, 1999, we issued and sold shares of our series C preferred
stock, which shares are convertible into 4,954,785 shares of our common stock,
to investors at a per share price of approximately $3.80 per common equivalent
share. The price of our series C preferred stock was determined through arms
length negotiations among us and investors not affiliated with us at the time
of this financing. Upon the closing of this offering, each share of series C
preferred stock will automatically convert into one share of common stock. The
investors in the financing included the following principal stockholders,
officers and directors and their related entities:
<TABLE>
<CAPTION>
Equivalent
Common
Stock
Name Purchased
---- ----------
<S> <C>
BankAmerica Ventures.............................................. 1,447,368
InterWest Partners(1)............................................. 657,894
Gabriel Venture Partners(2)....................................... 394,737
Bay Partners SBIC, L.P............................................ 263,157
Apex Investment Fund(3)........................................... 263,085
Xerox Corporation................................................. 131,578
Magnuson Revocable Trust(4)....................................... 52,631
Barry James Folsom................................................ 13,157
</TABLE>
- ---------------------
(1) Includes 637,894 shares held by InterWest Partners VI, L.P. and 20,000
shares held by InterWest Investors VI, L.P. Philip T. Gianos, one of our
directors, is a managing director of the general partner of InterWest
Partners VI, L.P. and InterWest Investors VI, L.P.
(2) Includes 382,272 shares held by Gabriel Venture Partners, L.P. and 12,465
shares held by Gabriel Legacy Fund, L.P. J. Phillip Samper, our chairman of
the board of directors, is a general partner of Gabriel Venture Partners,
L.P. and Gabriel Legacy Fund, L.P.
(3) Includes 250,387 shares held by Apex Investment Fund III and 12,698 shares
held by Apex Strategic Partners L.L.C. Lon H. H. Chow, one of our
directors, serves as a director and was an associate of Apex Investment
Fund III and Apex Strategic Partners L.L.C.
(4) Consists of shares held by Richard P. Magnuson, one of our directors, held
in a revocable trust.
Investor Rights Agreement
PlaceWare and the preferred stockholders described above have entered into
an agreement, pursuant to which these and other preferred stockholders possess
registration rights with respect to their shares of common stock.
Indemnification Agreements
We have entered into indemnification agreements with our directors and our
executive officers for the indemnification of an advancement of expenses to
these persons to the fullest extent permitted by law. We also intend to enter
into indemnification agreements with our future directors and officers. See
"Management--Limitations on Liability and Indemnification of Directors and
Officers."
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<PAGE>
Employment Contracts and Change of Control Arrangements
At the time of commencement of employment, our employees generally sign
offer letters specifying basic terms and conditions of employment. In general,
our employees are not subject to written employment agreements.
On February 2, 1998, we entered into an employment offer letter with Barry
James Folsom, our president, chief executive officer and a director. The letter
was subsequently amended pursuant to the executive severance benefit plan
described below. Pursuant to such amended offer letter and in addition to any
benefits he is entitled to receive under the executive severance benefit plan,
in the event that Mr. Folsom is terminated without cause prior to February 16,
2001, he will be entitled to receive, as severance, continued payment of his
base salary and health benefits for six months. In the event that Mr. Folsom is
terminated without cause on or after February 16, 2001, he will be entitled to
receive, as severance, continued payment of his base salary and health benefits
for nine months.
On November 5, 1999, we entered into an employment offer letter with Kevin
R. Evans, our chief financial officer and secretary. The letter was
subsequently amended pursuant to the executive severance benefit plan described
below. Pursuant to such amended offer letter and in addition to any benefits he
is entitled to receive under the executive severance benefit plan, in the event
that Mr. Evans is terminated without cause, he shall be entitled to receive, as
severance, continued payment of his base salary for three months and an extra
six months of vesting. Furthermore, in the event that Mr. Evans is
constructively terminated, he shall be entitled to receive, as severance,
continued payment of his base salary and health benefits for six months and an
extra six months of vesting.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of our common stock as of December 31, 1999, by
. each of our directors;
. each of our named executive officers;
. all of our named executive officers and directors as a group; and
. each person known by us to be the beneficial owner of more than 5% of our
outstanding common stock.
Except as otherwise noted, the address of each person listed in the table is
c/o PlaceWare, 295 North Bernardo Avenue, Mountain View, California 94043. The
table includes all shares of common stock issuable within 60 days of December
31, 2000 upon the exercise of options and other rights beneficially owned by
the indicated stockholders on that date. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission and
includes voting and investment power with respect to the shares.
To our knowledge, except under applicable community property laws or as
otherwise indicated, the persons named in the table have sole voting and sole
investment control with respect to all shares beneficially owned.
The applicable percentage of ownership for each stockholder is based on
15,508,535 shares of common stock outstanding as of December 31, 1999, together
with applicable options for that stockholder. Shares of common stock issuable
upon exercise of options and other rights beneficially owned are deemed
outstanding for the purpose of computing the percentage ownership of the person
holding those options and other rights, but are not deemed outstanding for
computing the percentage ownership of any other person.
<TABLE>
<CAPTION>
Percentage
Beneficially
Number of Owned
Shares -----------------
Beneficially Prior to After
Name and Address Owned Offering Offering
- ---------------- ------------ -------- --------
<S> <C> <C> <C>
Directors and named executive officers:
Philip T. Gianos(1)........................... 2,245,394 14.5%
Lon H. H. Chow(2)............................. 1,513,085 9.8
Rory T. O'Driscoll(3)......................... 1,447,368 9.3
J. Phillip Samper(4).......................... 794,737 5.1
Richard P. Magnuson(5)........................ 371,947 2.4
Domenic J. LaCava(6).......................... 60,000 *
Barry James Folsom(7)......................... 834,157 5.3
Kevin R. Evans(8)............................. 210,000 1.4
William G. Glazier(9)......................... 200,000 1.3
Stephen C. Brown(8)........................... 135,000 *
Michael R. Jordan(8).......................... 120,000 *
All executive officers and directors as a
group (11 persons)........................... 7,931,688 49.6
Other 5% stockholders
Bay Partners SBIC, L.P........................ 1,263,157 8.1
10600 North DeAnza Blvd.
Cupertino, CA 95014
Xerox Corporation............................. 1,034,092 6.7
3333 Coyote Hill Road
Palo Alto, CA 94304
</TABLE>
- ---------------------
* Less than 1% of the outstanding shares of common stock.
(1) Consists of 2,178,098 shares held by InterWest Partners VI, L.P. and 67,296
shares held by InterWest Investors VI, L.P. Philip T. Gianos, one of our
directors is a managing director of the general partner of
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<PAGE>
InterWest Partners VI, L.P. and InterWest Partners VI, L.P. and may be
deemed to share voting and investment power with respect to these shares. He
disclaims beneficial ownership of such shares except to the extent of his
pecuniary interest therein.
(2) Consists of 1,439,731 shares held by Apex Investment Fund III and 73,354
shares held by Apex Strategic Partners LLC. Lon H. H. Chow, one of our
directors, serves as a director and was an associate of Apex Investment
Partners III and Apex Strategic Partners and may be deemed to share voting
and investment power with respect to these shares. He disclaims beneficial
ownership of such shares except to the extent of his pecuniary interest
therein.
(3) Represents shares held by BankAmerica Ventures. Rory T. O'Driscoll, one of
our directors, is a general partner of BankAmerica Ventures and may be
deemed to share voting and investment power with respect to these shares.
He disclaims beneficial ownership of such shares except to the extent of
his pecuniary interest therein.
(4) Includes 382,272 shares held by Gabriel Venture Partners, L.P. and 12,465
shares held by Gabriel Legacy Fund, L.P. J. Phillip Samper, our chairman of
the board of directors, is a general partner of Gabriel Venture Partners
L.P. and Gabriel Legacy Fund, L.P., and may be deemed to share voting and
investment power with respect to these shares. He disclaims beneficial
ownership of such shares except to the extent of his pecuniary interest
therein.
(5) Consists of shares held by Richard P. Magnuson, one of our directors, held
in a revocable trust.
(6) Includes 50,000 shares exercisable within 60 days of December 31, 1999.
(7) Includes 228,500 shares exercisable within 60 days of December 31, 1999.
(8) A portion of these shares are subject to a right to repurchase which lapses
over time.
(9) Represents shares exercisable within 60 days of December 31, 1999.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
General
Upon the completion of this offering, we will be authorized to issue
300,000,000 shares of common stock, $0.0001 par value, and 50,000,000 shares of
undesignated preferred stock, $0.0001 par value. The following description of
our capital stock does not purport to be complete and is subject to and
qualified in its entirety by our certificate of incorporation and bylaws, which
are included as exhibits to the registration statement of which this prospectus
forms a part, and by the provisions of applicable Delaware law.
Common Stock
As of December 31, 1999, there were 15,508,535 shares of common stock
outstanding which were held of record by 124 stockholders.
The holders of common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may
be applicable to any outstanding preferred stock, the holders of common stock
are entitled to receive ratably such dividends, if any, as may be declared from
time to time by the Board of Directors out of funds legally available for that
purpose. See "Dividend Policy." In the event we liquidate, dissolve or wind up,
the holders of common stock are entitled to share ratably in all assets
remaining after payment of liabilities, subject to prior distribution rights of
preferred stock, if any, then outstanding. The holders of common stock have no
preemptive or conversion rights or other subscription rights. There are no
redemption or sinking fund provisions applicable to the common stock. All
outstanding shares of common stock are fully paid and nonassessable, and the
shares of common stock to be issued upon the closing of this offering will be
fully paid and nonassessable.
Preferred Stock
Under our certificate of incorporation, the board has the authority, without
further action by stockholders, to issue up to 50,000,000 shares of preferred
stock in one or more series and to fix the rights, preferences, privileges,
qualifications and restrictions granted to or imposed upon such preferred
stock, including dividend rights, conversion rights, voting rights, rights and
terms of redemption, liquidation preference and sinking fund terms, any or all
of which may be greater than the rights of the common stock. The issuance of
preferred stock could adversely affect the voting power of holders of common
stock and reduce the likelihood that such holders will receive dividend
payments and payments upon liquidation. Such issuance could have the effect of
decreasing the market price of the common stock. The issuance of preferred
stock could also have the effect of delaying, deterring or preventing a change
in control. We have no present plans to issue any shares of preferred stock.
Warrants
In September 1997, in connection with a lease agreement, we issued a warrant
to purchase 40,625 shares of series B preferred stock at an exercise price of
$2.00 per share. These warrants are exercisable and will terminate upon the
later of September 30, 2007 or five years following the completion of this
offering or, subject to certain conditions, a change of control.
In November 1999, in connection the execution of a marketing arrangement, we
issued a warrant to purchase 275,000 shares of series C preferred stock at an
exercise price of $3.80 per share. The warrants become exercisable on the
earlier of ten years of the date of issuance of the warrant, upon certain
revenue milestones or upon breach of the agreement.
Registration Rights
As of December 31, 1999, the holders of 11,779,785 shares of our common
stock or their transferees are entitled to rights with respect to the
registration of these shares under the Securities Act. These rights are
provided under the terms of an agreement between us and the holders of these
securities. Subject to limitations in the
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<PAGE>
agreement, if we register any of our common stock either for our own account or
for the account of other security holders, these holders are entitled to
include their shares of common stock in that registration, subject to the
ability of the underwriters to limit the number of shares included in the
offering. We will be responsible for paying all registration expenses, and the
holders selling their shares will be responsible for paying all selling
expenses.
Delaware Anti-Takeover Law and Certain Charter and Bylaw Provisions
Delaware Takeover Statute
PlaceWare is subject to the provisions of Section 203 of the Delaware
General Corporation 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 after the date of the transaction in
which the person became an interested stockholder, unless the business
combination is approved in a prescribed manner. A business combination includes
mergers, asset sale or other transactions resulting in a financial benefit to
the stockholder. An interested stockholder is a person who, together with
affiliates and associates, owns (or within three years, did own) 15% or more of
a corporation's voting stock. The statute could have the effect of delaying,
deferring or preventing a change in control of PlaceWare.
Amended and Restated Certificate of Incorporation and Amended and Restated
Bylaws
Our amended and restated certificate specifies that our board of directors
will be classified into three classes of directors and each of the directors
may be removed from the board only for cause. In addition, the amended and
restated certificate specifies that the authorized number of directors may be
changed only by resolution of the board of directors and does not include a
provision for cumulative voting for directors. Our amended and restated
certificate also provides that any action required or permitted to be taken by
our stockholders must be effected at a duly called annual or special meeting of
stockholders and may not be effected by any consent in writing. In addition,
our amended and restated bylaws provide that special meetings of our
stockholders may be called only by the chairman of the board of directors, the
chief executive officer or the board of directors pursuant to a resolution
adopted by a majority of the total number of authorized directors, or by the
holders of 50% of the outstanding voting stock of PlaceWare. Our amended and
restated certificate may only be amended with the approval of 66 2/3% of our
outstanding voting stock and our amended and restated bylaws may be amended
either by the board or by the approval of 66 2/3% of our outstanding voting
stock. Furthermore, our amended and restated certificate requires the advance
notice of stockholders' nominations for the election of directors and business
brought before a meeting of stockholders. These provisions contained in our
amended and restated certificate and our amended and restated bylaws could
delay or discourage certain types of transactions involving an actual or
potential change in control or our management.
Transfer Agent and Registrar
The transfer agent and registrar for the common stock is ChaseMellon
Shareholder Services L.L.C.
Nasdaq Stock Market National Market Listing
We have applied to list our common stock on The Nasdaq Stock Market's
National Market under the symbol "PLCW."
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Immediately prior to this offering, there was no public market for our
common stock. Future sales of substantial amounts of our common stock in the
public market could adversely affect the market price of our common stock.
Upon completion of this offering, based on shares outstanding as of December
31, 1999, we will have outstanding shares of common stock,
assuming (1) the issuance of shares of common stock in this
offering, (2) no exercise of the underwriters over-allotment option, and (3) no
exercise of options after . All of the shares sold
in this offering will be freely tradable without restriction or further
registration under the Securities Act. However, the sale of any of these share
if purchased by "affiliates" as that term is defined in Rule 144 are subject to
certain limitations and restrictions that are described below.
The remaining shares of common stock held by existing
stockholders were issued and sold by us in reliance on exemptions from the
registration requirements of the Securities Act. These shares are "restricted
shares" as that term is defined in Rule 144 and therefore may not be sold
publicly unless they are registered under the Securities Act or are sold
pursuant to Rule 144 or another exemption from registration. In addition, our
directors and officers as well as substantially all of our stockholders and
optionholders have entered into "lock-up agreements" with the underwriters.
These lock-up agreements provide that, except under limited exceptions, the
stockholder may not offer, sell, contract to sell, pledge or otherwise dispose
of any of our common stock or securities that are convertible into or
exchangeable for, or that represent the right to receive, our common stock for
a period of 180 days after the effective date. Credit Suisse First Boston
Corporation, however, may in its sole discretion, at any time without notice,
release all or any portion of the shares subject to lock-up agreements.
Accordingly, of the remaining shares, shares will
become eligible for sale on the 181st day after the effective
date subject to Rules 144 and 701, assuming an effective date of .
As of December 31, 1999, there were a total of 1,278,343 shares of common
stock subject to outstanding options, of which were vested, and
substantially all of which are subject to lock-up agreements. Immediately after
the completion of the offering, we intend to file registration statements on
Form S-8 under the Securities Act to register all of the shares of common stock
issued or reserved for future issuance under our 2000 equity incentive plan,
our 2000 employee stock purchase plan and our 2000 non-employee directors'
stock option plan. On the date 180 days after the effective date of the
offering, the date that the lock-up agreements expire, a total of
shares of our common stock subject to outstanding options will be vested. After
the effective dates of the registration statements on Form S-8, shares
purchased upon exercise of options granted pursuant to our 2000 equity
incentive plan, our 2000 employee stock purchase plan and our 2000 non-employee
directors' stock option plan generally would be available for resale in the
public market.
Rule 144
In general, under Rule 144 as currently in effect beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year would be entitled to sell, within any three-
month period, a number of shares that does not exceed the greater of:
. 1% of the number of shares of common stock then outstanding, which will
equal approximately shares immediately after this offering;
or
. the average weekly trading volume of the common stock on the Nasdaq Stock
Market's National Market during the four calendar weeks preceding the
filing of a notice on Form 144 with respect to such sale.
Sales under Rule 144 are also subject to certain other requirements regarding
the manner of sale, notice filing and the availability of current public
information about us.
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<PAGE>
Rule 144(k)
Under Rule 144(k), a person who is not deemed 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,
generally including the holding period of any prior owner other than an
affiliate, is entitled to sell such 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
In general, under Rule 701, any of our employees, directors, officers,
consultants or advisors who purchase shares from us in connection with a
compensatory stock or option plan or other written agreement before the
effective date of this offering is entitled to resell such shares 90 days after
the effective date of this offering in reliance on Rule 144, without having to
comply with certain restrictions including the holding period, contained in
Rule 144.
The Securities and Exchange Commission has indicated that Rule 701 will
apply to typical stock options granted by an issuer before it becomes subject
to the reporting requirements of the Securities Exchange Act of 1934, along
with the shares acquired upon exercise of such options (including exercises
after the date of this prospectus). Securities issued in reliance on Rule 701
are restricted securities and, subject to the contractual restrictions
described above, beginning 90 days after the date of this prospectus, may be
sold by persons other than affiliates, as defined in Rule 144, subject only to
the manner of sale provisions of Rule 144. Securities issued in reliance on
Rule 701 may be sold by affiliates under Rule 144 without compliance with its
one-year minimum holding period requirement.
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<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 2000, we have agreed to sell to the underwriters
named below, for whom Credit Suisse First Boston Corporation, FleetBoston
Robertson Stephens Inc. and U.S. Bancorp Piper Jaffray Inc. are acting as
representatives, the following respective numbers of shares of common stock:
<TABLE>
<CAPTION>
Number
Underwriter of Shares
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation.............................
FleetBoston Robertson Stephens Inc. ...............................
U.S. Bancorp Piper Jaffray Inc. ...................................
</TABLE>
<TABLE>
<S> <C>
---
Total..................................................................
===
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.
We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to additional shares at the initial public offering
price less the underwriting discounts and commissions. The option may be
exercised only to cover any over-allotments of common stock.
The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The underwriters
and selling group members may allow a discount of $ per share on sales to
other brokers/dealers. After the initial public offering, the public offering
price and concession and discount to dealers may be changed by the
representatives.
The following table summarizes the compensation and estimated expenses we
will pay.
<TABLE>
<CAPTION>
Per Share Total
----------------------------- -----------------------------
Without With Without With
Over-allotment Over-allotment Over-allotment Over-allotment
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting Discounts
and Commissions Paid by
us..................... $ $ $ $
Expenses Paid by us..... $ $ $ $
</TABLE>
The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.
We have agreed that we will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act of 1933
relating to, any shares of our common stock or securities convertible into or
exchangeable or exercisable for any shares of our common stock, or publicly
disclose the intention to make any such offer, sale, pledge, disposition or
filing, without the prior written consent of Credit Suisse First Boston
Corporation for a period of 180 days after the date of this prospectus.
64
<PAGE>
Our officers, directors, and substantially all of our shareholders have
agreed that they will not offer, sell, contract to sell, pledge or otherwise
dispose of, directly or indirectly, any shares of our common stock or
securities convertible into or exchangeable or exercisable for any shares of
our common stock, enter into a transaction which would have the same effect, or
enter into any swap, hedge or other arrangement that transfers, in whole or in
part, any of the economic consequences of ownership of our common stock,
whether any such aforementioned transaction is to be settled by delivery of our
common stock or such other securities, in cash or otherwise, or publicly
disclose the intention to make any such offer, sale, pledge or disposition, or
to enter any such transaction, swap, hedge or other arrangements, without, in
each case, the prior written consent of Credit Suisse First Boston Corporation
for a period of 180 days after the date of this prospectus.
The underwriters have reserved for sale, at the initial public offering
price up to shares of the common stock for employees, directors and
certain other persons associated with us who have expressed an interest in
purchasing common stock in the offering. The number of shares available for
sale to the general public in the offering will be reduced to the extent such
persons purchase such reserved shares. Any reserved shares not so purchased
will be offered by the underwriters to the general public on the same terms as
the other shares.
We have agreed to indemnify the underwriters against liabilities under the
Securities Act or contribute to payments which the underwriters may be required
to make in that respect.
We have applied to list the shares of common stock on the Nasdaq Stock
Market's National Market.
Before this offering, there has been no public market for the common stock.
The initial public offering price will be determined by negotiation between us
and the underwriters. Among the principal factors to be considered in
determining the public offering price of our common stock will be:
. the information set forth in this prospectus and otherwise available to
the underwriters;
. the history and the prospectus for the industry in which we compete;
. the ability of our management;
. the prospects for future earnings, the present state of our development
and our current financial condition;
. the recent market prices of, and the demand for, publicly traded common
stock of generally comparable companies; and
. the general condition of the securities markets at the time of this
offering.
The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation
M under the Securities Exchange Act of 1934.
. Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.
. Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
. Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed to cover
syndicate short positions.
. Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by the
syndicate member is purchased in a syndicate covering transaction to
cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty
bids may cause the price of the common stock to be higher than it would be in
the absence of these transactions. These transactions may be effected on The
Nasdaq Stock Market's National Market or otherwise and, if commenced, may be
discontinued at any time.
65
<PAGE>
NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common
stock in Canada must be made in accordance with applicable securities laws
which will vary depending on the relevant jurisdiction, and which may require
resales to be made in accordance with available statutory exemptions or
pursuant to a discretionary exemption granted by the applicable Canadian
securities regulatory authority. Purchasers are advised to seek legal advice
prior to any resale of the common stock.
Representations of Purchasers
Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom such
purchase confirmation is received that: (i) such purchaser is entitled under
applicable provincial securities laws to purchase such common stock without the
benefit of a prospectus qualified under such securities laws, (ii) where
required by law, that such purchaser is purchasing as principal and not as
agent, and (iii) such purchaser has reviewed the text above under "Resale
Restrictions."
Rights of Action (Ontario Purchasers)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or recission or rights of action under the civil liability provisions
of the U.S. federal securities laws.
Enforcement of Legal Rights
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be
possible for Canadian purchasers to effect service of process within Canada
upon the issuer of such persons. All or a substantial portion of the assets of
the issuer and such persons may be located outside of Canada and, as a result,
it may not be possible to satisfy a judgement against the issuer or such person
in Canada or to enforce a judgment obtained in Canadian courts against such
issuer or persons outside of Canada.
Notice to British Columbia Residents
A purchaser of common stock to whom the (Securities Act), British Columbia,
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by such purchaser pursuant to this offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from us. Only one such report
must be filed in respect of common stock acquired on the same date and under
the same prospectus exemption.
Taxation and Eligibility for Investment
Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
legislation.
66
<PAGE>
LEGAL MATTERS
The validity of our common stock offered hereby will be passed upon for
PlaceWare by Cooley Godward LLP, Menlo Park, California. Legal matters will be
passed upon for the underwriters by Skadden, Arps, Slate, Meagher & Flom LLP,
Palo Alto, California.
EXPERTS
The consolidated balance sheets of PlaceWare, Inc. and subsidiary as of
December 31, 1998 and 1999, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1999, have been included herein and in the
registration statement in reliance upon the report of KPMG LLP, independent
certified public accountants, and upon the authority of said firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the common stock
offered hereby. This prospectus, which constitutes a part of the registration
statement, does not contain all of the information set forth in the
registration statement and the exhibits filed as a part thereof, certain parts
of which are omitted in accordance with the rules and regulations of the
Securities and Exchange Commission. For further information with respect to us
and the common stock offered hereby, reference is made to the registration
statement and to the exhibits filed as a part thereof. Statements contained in
this prospectus as to the contents of any contract, agreement or other document
referred to are not necessarily complete and are qualified in their entirety by
reference to each such contract, agreement or other document which is filed as
an exhibit to the registration statement. The registration statement, including
the exhibits and schedules thereto, may be inspected without charge at the
principal office of the Securities and Exchange Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, or at the Regional Offices of the
Securities and Exchange Commission at Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center, Suite 1300,
New York, New York 10048. Our SEC filings are also available to the public from
the Securities and Exchange Commission's web site at http://www.sec.gov. In
addition, such material will be available for inspection at the offices of The
Nasdaq Stock Market, Inc., at 1735 K Street, N.W., Washington D.C. 20006.
Copies of such material may be obtained by mail from the Public Reference
Branch of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates.
67
<PAGE>
PLACEWARE, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report............................................... F-2
Consolidated Balance Sheets................................................ F-3
Consolidated Statements of Operations...................................... F-4
Consolidated Statements of Stockholders' Equity............................ F-5
Consolidated Statements of Cash Flows...................................... F-6
Notes to Consolidated Financial Statements................................. F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
PlaceWare, Inc.:
We have audited the accompanying consolidated balance sheets of PlaceWare,
Inc. (the Company) and subsidiary as of December 31, 1998 and 1999, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the years in the three-year period ended December 31, 1999.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of PlaceWare,
Inc. and subsidiary as of December 31, 1998 and 1999, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1999, in conformity with generally accepted accounting
principles.
/s/ KPMG LLP
Mountain View, California
February 25, 2000, except as to
Note 8, which is as of March 2, 2000
F-2
<PAGE>
PLACEWARE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
December 31,
------------------------------
1998 1999 Pro forma
------- -------- -----------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................... $ 3,155 $ 14,591
Accounts receivable, less allowance for
doubtful accounts of $11 and $383 as of
December 31, 1998 and 1999, respectively..... 999 2,964
Prepaid expenses and other current assets..... 147 339
------- --------
Total current assets........................ 4,301 17,894
Property and equipment, net..................... 606 2,908
Other assets.................................... -- 334
------- --------
Total assets................................ $ 4,907 $ 21,136
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................. $ 65 $ 1,283
Accrued employee compensation................. 124 563
Other accrued liabilities..................... 208 239
Current portion of notes payable and capital
lease obligations............................ 201 300
Deferred revenue.............................. 877 5,357
------- --------
Total current liabilities................... 1,475 7,742
Notes payable and capital lease obligations,
less current portion........................... 613 503
------- --------
Total liabilities........................... 2,088 8,245
------- --------
Stockholders' equity:
Convertible preferred stock, $0.0001 par
value; actual--8,000,000 and 12,305,000
shares authorized as of December 31, 1998 and
1999, respectively; 6,750,000 and 11,779,785
shares issued and outstanding as of December
31, 1998 and 1999, respectively; aggregate
liquidation preference of $11,795 and $30,773
as of December 31, 1998 and 1999,
respectively; pro forma--no shares
authorized, issued, or outstanding........... 1 1 $ --
Common stock, $0.0001 par value; actual--
20,000,000 shares authorized; 2,209,951 and
3,728,750 shares issued and outstanding as of
December 31, 1998 and 1999, respectively;
pro forma--300,000,000 shares authorized;
15,508,535 shares issued and outstanding..... -- -- 1
Additional paid-in capital.................... 11,431 36,081 36,081
Treasury stock, at cost; 482,633 and 529,926
shares of common stock as of December 31,
1998 and 1999, respectively.................. (6) (15) (15)
Notes receivable from stockholders............ (110) (671) (671)
Deferred stock-based compensation............. (12) (3,102) (3,102)
Accumulated deficit........................... (8,485) (19,403) (19,403)
------- -------- --------
Total stockholders' equity.................. 2,819 12,891 $ 12,891
========
Commitments and contingencies
------- --------
Total liabilities and stockholders' equity.. $ 4,907 $ 21,136
======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
PLACEWARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Revenues:
Hosting and services............................ $ -- $ 511 $ 2,433
Licensing....................................... 609 1,113 1,962
------- ------- --------
Total revenues................................ 609 1,624 4,395
------- ------- --------
Operating expenses:
Cost of hosting and services.................... -- 3 806
Operations...................................... 188 214 492
Sales and marketing............................. 1,516 2,819 7,824
Research and development........................ 1,490 2,057 2,704
General and administrative...................... 806 1,648 2,559
Stock-based compensation........................ 11 6 1,128
------- ------- --------
Total operating expenses...................... 4,011 6,747 15,513
------- ------- --------
Operating loss................................ (3,402) (5,123) (11,118)
------- ------- --------
Other income (expense):
Interest income................................. 130 172 309
Interest expense................................ -- (17) (109)
------- ------- --------
Total other income (expense).................. 130 155 200
------- ------- --------
Net loss...................................... $(3,272) $(4,968) $(10,918)
======= ======= ========
Basic and diluted net loss per share.............. $ (4.67) $ (4.58) $ (6.41)
======= ======= ========
Shares used in computing basic and diluted net
loss per share................................... 700 1,084 1,704
======= ======= ========
Pro forma basic and diluted net loss per share
(unaudited)...................................... $ (1.10)
========
Shares used in computing pro forma basic and
diluted net loss per share (unaudited)........... 9,937
========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
PLACEWARE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended December 31, 1997, 1998, and 1999
(In thousands, except share data)
<TABLE>
<CAPTION>
Convertible Notes
preferred stock Common stock Additional Treasury stock receivable Deferred
----------------- ----------------- paid-in -------------- from stock-based Accumulated
Shares Amount Shares Amount capital Shares Amount stockholders compensation deficit
---------- ------ --------- ------ ---------- ------- ------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances as of
December 31,
1996............ 1,705,000 $ -- 1,935,000 $ -- $ 1,252 -- $ -- $ -- $ -- $ (245)
Issuance of
Series B
convertible
preferred stock,
net of $34,758
issuance costs.. 2,500,000 -- -- -- 4,965 -- -- -- -- --
Repurchase of
common stock.... -- -- (350,016) -- -- 350,016 (4) -- -- --
Deferred stock
compensation
relating to
stock option
grants.......... -- -- -- -- 23 -- -- -- (23) --
Amortization of
stock-based
compensation.... -- -- -- -- -- -- -- -- 5 --
Non-employee
stock
compensation.... -- -- -- -- 6 -- -- -- -- --
Issuance of
common stock in
connection with
the exercise of
stock options... -- -- 22,000 -- 1 -- -- -- -- --
Net loss........ -- -- -- -- -- -- -- -- -- (3,272)
---------- ---- --------- ---- ------- ------- ---- ----- ------- --------
Balances as of
December 31,
1997............ 4,205,000 -- 1,606,984 -- 6,247 350,016 (4) -- (18) (3,517)
Issuance of
Series B
convertible
preferred stock,
net of $46,459
issuance costs.. 2,545,000 1 -- -- 5,043 -- -- -- -- --
Repurchase of
common stock.... -- -- (132,617) -- -- 132,617 (2) -- -- --
Amortization of
stock-based
compensation.... -- -- -- -- -- -- -- -- 6 --
Issuance of
common stock in
connection with
the exercise of
stock options... -- -- 603,534 -- 114 -- -- (96) -- --
Issuance of
common stock.... -- -- 132,050 -- 27 -- -- (14) -- --
Net loss........ -- -- -- -- -- -- -- -- -- (4,968)
---------- ---- --------- ---- ------- ------- ---- ----- ------- --------
Balances as of
December 31,
1998............ 6,750,000 1 2,209,951 -- 11,431 482,633 (6) (110) (12) (8,485)
Issuance of
Series B
convertible
preferred
stock........... 75,000 -- -- -- 150 -- -- (100) -- --
Issuance of
Series C
convertible
preferred stock,
net of $16,235
issuance costs.. 4,954,785 -- -- -- 18,811 -- -- -- -- --
Repurchase of
common stock.... -- -- (47,293) -- -- 47,293 (9) -- -- --
Deferred stock
compensation
relating to
stock option
grants.......... -- -- -- -- 3,992 -- -- -- (3,992) --
Amortization of
stock-based
compensation.... -- -- -- -- -- -- -- -- 902 --
Non-employee
stock
compensation.... -- -- -- -- 226 -- -- -- -- --
Issuance of
common stock in
connection with
the exercise of
stock options... -- -- 1,566,092 -- 622 -- -- (461) -- --
Warrant granted
in connection
with marketing
arrangement..... -- -- -- -- 849 -- -- -- -- --
Net loss........ -- -- -- -- -- -- -- -- -- (10,918)
---------- ---- --------- ---- ------- ------- ---- ----- ------- --------
Balances as of
December 31,
1999............ 11,779,785 $ 1 3,728,750 $ -- $36,081 529,926 $(15) $(671) $(3,102) $(19,403)
========== ==== ========= ==== ======= ======= ==== ===== ======= ========
<CAPTION>
Total
stockholders'
equity
-------------
<S> <C>
Balances as of
December 31,
1996............ $ 1,007
Issuance of
Series B
convertible
preferred stock,
net of $34,758
issuance costs.. 4,965
Repurchase of
common stock.... (4)
Deferred stock
compensation
relating to
stock option
grants.......... --
Amortization of
stock-based
compensation.... 5
Non-employee
stock
compensation.... 6
Issuance of
common stock in
connection with
the exercise of
stock options... 1
Net loss........ (3,272)
-------------
Balances as of
December 31,
1997............ 2,708
Issuance of
Series B
convertible
preferred stock,
net of $46,459
issuance costs.. 5,044
Repurchase of
common stock.... (2)
Amortization of
stock-based
compensation.... 6
Issuance of
common stock in
connection with
the exercise of
stock options... 18
Issuance of
common stock.... 13
Net loss........ (4,968)
-------------
Balances as of
December 31,
1998............ 2,819
Issuance of
Series B
convertible
preferred
stock........... 50
Issuance of
Series C
convertible
preferred stock,
net of $16,235
issuance costs.. 18,811
Repurchase of
common stock.... (9)
Deferred stock
compensation
relating to
stock option
grants.......... --
Amortization of
stock-based
compensation.... 902
Non-employee
stock
compensation.... 226
Issuance of
common stock in
connection with
the exercise of
stock options... 161
Warrant granted
in connection
with marketing
arrangement..... 849
Net loss........ (10,918)
-------------
Balances as of
December 31,
1999............ $ 12,891
=============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
PLACEWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss......................................... $(3,272) $(4,968) $(10,918)
Adjustments to reconcile net loss to net cash
used for operating activities:
Allowance for doubtful accounts................ -- 11 372
Depreciation and amortization.................. 95 325 567
Revenue resulting from nonmonetary exchange for
computer equipment and software and services.. (154) -- --
Amortization of stock-based compensation....... 5 6 902
Nonemployee stock-based compensation expense... 6 -- 226
Warrant granted in connection with marketing
arrangement................................... -- -- 849
Changes in operating assets and liabilities:
Accounts receivable.......................... (403) (608) (2,337)
Prepaid expenses and other assets............ (86) (46) (526)
Accounts payable............................. (42) (52) 1,218
Accrued employee compensation and other
liabilities................................. 134 198 470
Deferred revenue............................. 79 798 4,480
------- ------- --------
Net cash used for operating activities..... (3,638) (4,336) (4,697)
------- ------- --------
Cash flows used for investing activities--purchases
of property and equipment......................... (207) (97) (2,648)
------- ------- --------
Cash flows from financing activities:
Repayments of capital lease obligations.......... -- (19) (144)
Issuance of convertible preferred stock, net..... 4,961 5,044 18,861
Issuance of common stock......................... 1 31 161
Repurchase of common stock....................... (4) (2) (9)
Borrowings under note payable and line of
credit.......................................... -- 333 625
Repayments of note payable and line of credit.... -- (29) (713)
------- ------- --------
Net cash provided by financing activities.. 4,958 5,358 18,781
------- ------- --------
Net increase in cash and cash equivalents.......... 1,113 925 11,436
Cash and cash equivalents at beginning of year..... 1,117 2,230 3,155
------- ------- --------
Cash and cash equivalents at end of year........... $ 2,230 $ 3,155 $ 14,591
======= ======= ========
Supplemental disclosures of noncash investing and
financing activities:
Equipment acquired under capital leases.......... $ -- $ 529 $ 221
======= ======= ========
Deferred stock-based compensation................ $ 23 $ -- $ 3,992
======= ======= ========
Issuance of common stock in exchange for notes
receivable from stockholders.................... $ -- $ 110 $ 461
======= ======= ========
Issuance of preferred stock in exchange for note
receivable from stockholders.................... $ -- $ -- $ 100
======= ======= ========
Issuance of warrant.............................. $ -- $ -- $ 849
======= ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
PLACEWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1998 and 1999
(1) Organization and Significant Accounting Policies
(a) Description of Business
PlaceWare, Inc. (the Company) was incorporated in Delaware in 1996 to
develop and market web conferencing services and products that enable
businesses to conduct real-time, interactive meetings, and events over the
Internet.
(b) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Placeware, Inc. and its wholly owned subsidiary, PlaceWare Europe, Ltd. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
(c) Revenue Recognition
The Company recognizes revenue in accordance with the provisions of
Statement of Position (SOP) 97-2, Software Revenue Recognition, as amended by
SOP 98-9. SOP 97-2 generally requires revenue earned on software arrangements
involving multiple elements such as software products, upgrades, enhancements,
post-contract customer support, installation, and training to be allocated to
each element based on the relative fair values of the elements. The fair value
of the element must be based on evidence that is specific to the vendor. If a
vendor does not have evidence of the fair value for all elements in a multiple-
element arrangement, all revenue from the arrangement is deferred until such
evidence exists or until all elements are delivered.
Hosting and services revenues represent (a) revenues from post-contract
customer support services which are recognized ratably over the term of the
support period; (b) revenues from hosting arrangements where the Company's
software is resident on a company server, which are recognized ratably over the
hosting period; (c) revenues from event services which are recognized as the
events take place; and (d) revenues from revenue sharing arrangements which are
recognized as earned. The Company records revenues from revenue sharing
arrangements at the gross invoice amount only where the Company acts as
principal to the revenue sharing transaction and the Company bears the credit
risk on the related customer receivable. Licensing revenues represent revenues
recorded relating to perpetual and time-based licenses for software delivered
to customers for in-house applications. Revenues from perpetual software
license agreements are recognized upon shipment of the software when all of the
following criteria have been met: persuasive evidence of an arrangement exists;
delivery has occurred; the fee is fixed or determinable; collectibility is
probable; and evidence is available of the fair value of all undelivered
elements. Time-based licenses are recognized ratably over the license period.
Cost of hosting and services consists primarily of computer equipment
depreciation expense, network connectivity, royalties, co-location costs and
costs of third-party service providers. Operations expenses consist primarily
of compensation and related costs for management personnel, technical support
employees and consultants who manage and maintain the Company's conferencing
solutions infrastructure and support the Company's customer base. Cost of
licensing revenues are not significant.
Deferred revenue includes amounts billed to customers for which revenues
have not been recognized, which generally results from the following: (1)
deferred licensing, maintenance, and support; (2) amounts billed to customers
under hosting arrangements; (3) amounts billed to customers with extended
payment terms which are due within three months; and (4) customer advances
received under revenue sharing arrangements.
F-7
<PAGE>
PLACEWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(d) Initial Public Offering and Unaudited Pro Forma Balance Sheet
Information
In fiscal 2000, the Board of Directors authorized the filing of a
registration statement with the Securities and Exchange Commission (SEC) that
would permit the Company to sell shares of the Company's common stock in
connection with a proposed initial public offering (IPO). Following the closing
of the Company's IPO, the number of authorized shares of preferred stock and
common stock will be 50,000,000 and 300,000,000, respectively. If the offering
is consummated under the terms presently anticipated, all the then outstanding
shares of the Company's convertible preferred stock will automatically convert
into shares of common stock on a one-for-one basis upon the closing of the
proposed IPO. The pro forma balance sheet information reflects the conversion
of all of the convertible preferred stock as if it had occurred on December 31,
1999.
(e) Cash and Cash Equivalents
Cash and cash equivalents consist of cash and investments in a certificate
of deposit and mutual funds with purchased maturities of less than 90 days.
(f) Accounting for Certain Investments in Debt and Equity Securities
The Company classifies its investments in debt and equity securities as
available-for-sale. Available-for-sale securities are carried at fair market
value, which approximates amortized cost. As of December 31, 1998 and 1999, the
Company had no investments in debt or equity instruments.
(g) Financial Instruments and Concentration of Credit Risk
The carrying value of the Company's financial instruments, including cash
and cash equivalents, accounts receivable, accounts payable, accrued employee
compensation, other accrued liabilities and notes payable, approximates fair
market value. Cash and cash equivalents, accounts receivable, accounts payable,
accrued employee compensation and other accrued liabilities approximate fair
market value due to their short-term nature. Notes payable approximate fair
market value as interest rates on these notes approximate those currently
available in the market.
Financial instruments that subject the Company to concentration of credit
risk consist primarily of cash and cash equivalents and trade accounts
receivable. The Company is exposed to credit risk related to cash and cash
equivalents in the event of default by the financial institutions or the
issuers of these investments to the extent of the amounts recorded on the
balance sheet. Credit risk is concentrated in North America. The Company
performs ongoing credit evaluations of its customers' financial condition and,
generally, requires no collateral from its customers. The Company has had
immaterial write-offs of accounts receivable to date. Based on its ongoing
evaluations, the Company believes it has adequately provided for doubtful
accounts as of the date of each balance sheet presented herein.
(h) Property and Equipment
Property and equipment are recorded at cost less accumulated depreciation
and amortization. Depreciation is calculated using the straight-line method
over the estimated useful lives of the respective assets, generally three to
five years. Assets obtained through capital leases are amortized over the
shorter of their estimated useful lives or the lease term, generally three to
five years. Leasehold improvements are amortized over the shorter of the
estimated useful lives of the improvements or the remaining lease term.
(i) Research and Development
Research and development costs are expensed as incurred until technological
feasibility has been established. To date, the Company's software has been
available for general release concurrent with the establishment of
technological feasibility, and, accordingly, no costs have been capitalized.
F-8
<PAGE>
PLACEWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(j) Impairment of Long-Lived Assets
The Company assesses the recoverability of the carrying amount of its long-
lived assets whenever events or changes in circumstances indicate that the
carrying amount of such assets may be impaired. If the estimated future
undiscounted cash flows over the remaining useful life of the long-lived asset
is less than the carrying amount of the asset, an impairment charge would be
recognized in the statement of operations for the excess carrying amount of the
asset over its fair value.
(k) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. A valuation allowance is recorded against deferred tax assets
if it is more likely than not that all or a portion of the deferred tax assets
will not be realized.
(l) Stock-Based Compensation
The Company accounts for stock option grants under Statement of Financial
Accounting Standards (SFAS) No. 123, Accounting For Stock-Based Compensation,
which permits the use of the intrinsic-value method in accordance with
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued
to Employees, and related interpretations. Expense associated with stock-based
compensation is being amortized on an accelerated basis over the vesting period
of the individual award consistent with the method described in Financial
Accounting Standards Board (FASB) Interpretation No. 28.
(m) Comprehensive Loss
The Company did not have any significant components of other comprehensive
loss for the years ended December 31, 1997, 1998, and 1999.
(n) Translation of Foreign Currencies
The Company considers the functional currency of its foreign subsidiary to
be the U.S. dollar. Accordingly, this entity remeasures monetary assets and
liabilities at year-end exchange rates while nonmonetary items are remeasured
at historical rates. Income and expense accounts are remeasured at the average
rates in effect during the year, except for depreciation which is remeasured at
historical rates. Foreign currency transaction gains and losses are recognized
in income in the period of occurrence.
F-9
<PAGE>
PLACEWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(o) Net Loss Per Share
Basic net loss per share is computed using the weighted-average number of
outstanding shares of common stock, excluding shares of restricted stock
subject to repurchase summarized below. Diluted net loss per share is computed
using the weighted-average number of shares of common stock outstanding and,
when dilutive, potential common shares from options and warrants to purchase
common stock using the treasury stock method and from convertible securities
using the if-converted basis. The following potential common shares have been
excluded from the computation of diluted net loss per share for all periods
presented because the effect would have been anti-dilutive, (in thousands):
<TABLE>
<CAPTION>
Year ended
December 31,
------------------
1997 1998 1999
----- ----- ------
<S> <C> <C> <C>
Shares issuable under stock options..................... 456 1,079 1,278
Shares of restricted stock subject to repurchase........ 740 808 1,537
Shares issuable pursuant to warrants to purchase common
and convertible preferred stock........................ -- 41 316
Shares of convertible preferred stock on an "as-if-
converted" basis....................................... 4,205 6,750 11,780
</TABLE>
The weighted-average purchase price of restricted stock was $0.01, $0.11,
and $0.39 for the years ended December 31, 1997, 1998, and 1999, respectively.
The weighted-average exercise price of the warrants was $2.00 and $3.57 for the
years ended December 31, 1998 and 1999, respectively.
Pro forma basic and diluted net loss per share is presented for the year
ended December 31, 1999, to reflect per share data assuming the conversion of
all outstanding shares of convertible preferred stock into common stock on a
one-for-one basis, as if the conversion had taken place at the beginning of
fiscal 1997, or at the date of issuance if later. This data is unaudited.
(p) Recent Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 establishes accounting and
reporting standards for derivative financial instruments and hedging activities
related to those instruments, as well as other hedging activities. Because the
Company does not currently hold any derivative instruments and does not engage
in hedging activities, the Company expects that the adoption of SFAS No. 133
will not have a material impact on its consolidated financial position, results
of operations, or cash flows. The Company will be required to adopt SFAS No.
133, as amended, in fiscal 2001.
(q) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(r) Reclassification
Certain balances in the accompanying 1998 and 1997 consolidated financial
statements have been reclassified in order to conform to the presentation of
the 1999 consolidated financial statements.
F-10
<PAGE>
PLACEWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(2) Property and Equipment
Property and equipment as of December 31, 1998 and 1999, consisted of the
following (in thousands):
<TABLE>
<CAPTION>
1998 1999
------ ------
<S> <C> <C>
Computer equipment and software.............................. $ 890 $2,373
Office furniture and equipment............................... 73 437
Leasehold improvements....................................... 64 1,086
------ ------
1,027 3,896
Accumulated depreciation and amortization.................... (421) (988)
------ ------
$ 606 $2,908
====== ======
</TABLE>
As of December 31, 1998 and 1999, equipment recorded under capital leases
was $529,000 and $750,000, respectively, and accumulated amortization thereon
was $169,000 and $344,000 respectively.
(3) Stockholders' Equity
(a) Convertible Preferred Stock
Convertible preferred stock outstanding as of December 31, 1999, is as
follows:
<TABLE>
<CAPTION>
Shares Issued and Par
designated outstanding value
---------- ----------- ------
<S> <C> <C> <C>
Series:
A............................................. 1,705,000 1,705,000 $ 171
B............................................. 5,200,000 5,120,000 512
C............................................. 5,400,000 4,954,785 495
---------- ---------- ------
12,305,000 11,779,785 $1,178
========== ========== ======
</TABLE>
The rights, preferences, and privileges of the holders of Series A, B, and
C convertible preferred stock are as follows:
. Dividends are noncumulative and payable only upon declaration by the
Company's Board of Directors at a rate of $0.08, $0.16, and $0.30 per
share for Series A, B, and C preferred stock, respectively.
. Holders of Series A, B, and C preferred stock have a liquidation
preference of $1.00, $2.00, and $3.80 per share, respectively, plus any
declared but unpaid dividends over holders of common stock.
. Each share of Series A, B, and C preferred stock is convertible at any
time into one share of common stock subject to certain antidilution
provisions. All shares will convert to common stock automatically on the
date the Company successfully completes an initial public offering.
. Each holder of preferred stock has voting rights equal to the number of
shares of common stock into which such shares could be converted.
(b) Stock Plans
In connection with the 1997 stock option plan (the Plan), the Company is
authorized to issue up to 4,752,833 shares of common stock to directors,
employees, and consultants. The 1997 Plan provides for the issuance of stock
purchase rights, incentive stock options, or nonstatutory stock options.
The stock purchase rights are subject to a restricted stock purchase
agreement whereby the Company has the right to repurchase the stock upon the
voluntary or involuntary termination of the purchaser's employment
F-11
<PAGE>
PLACEWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
with the Company at the original issuance cost. The Company's repurchase right
lapses at a rate determined by the stock plan administrator, but at a minimum
rate of 20% per year. Through December 31, 1999, the Company has issued a net
3,728,750 shares of common stock to founders, employees, and consultants under
restricted stock purchase agreements and through the exercise of employee stock
options. As of December 31, 1999, the Company has repurchased 529,926 shares,
and 1,536,547 shares are subject to repurchase at a weighted-average purchase
price of $0.39 per share. The repurchase rights expire ratably through the year
2003. Certain of these restricted shares were issued for full recourse
promissory notes with interest rates ranging from 5.28% to 6.20%, and terms of
four years.
Under the 1997 Plan, the exercise price for incentive stock options is at
least 100% of the stock's fair market value on the date of grant for employees
owning less than 10% of the voting power of all classes of stock, and at least
110% of the fair market value on the date of grant for employees owning more
than 10% of the voting power of all classes of stock. For nonstatutory stock
options, the exercise price is also at least 110% of the fair market value on
the date of grant for employees owning more than 10% of the voting power of all
classes of stock and no less than 85% for employees owning 10% or less of the
voting power of all classes of stock.
Under the 1997 Plan, options generally expire in 10 years. Vesting periods
are determined by the Company's Board of Directors and generally provide for
shares to vest ratably over a 4-year period, with 25% vesting after one year
from date of grant and monthly thereafter.
(c) Stock-Based Compensation
The Company uses the intrinsic-value method in accounting for its employee
stock-based compensation plans. Accordingly, no compensation cost has been
recognized for any of its stock options granted or restricted stock sold
because the exercise price of each option or purchase price of each share of
restricted stock equaled or exceeded the fair value of the underlying common
stock as of the grant date for each stock option or purchase date of each
restricted stock share, except for stock options granted and restricted stock
sold from January 1, 1999, through December 31, 1999. With respect to the stock
options granted and restricted stock sold from January 1, 1999, to December 31,
1999, the Company recorded deferred stock compensation of $3,992,000 for the
difference at the grant or issuance date between the exercise price of each
stock option granted or purchase price of each restricted share sold and the
fair value of the underlying common stock. This amount is being amortized on an
accelerated basis over the vesting period, generally four to five years,
consistent with the method described in FASB Interpretation No. 28.
Amortization of the December 31, 1999 balance of deferred stock-based
compensation for the years ended 2000, 2001, 2002, and 2003, would approximate
$1,895,000, $783,000, $351,000, and $73,000, respectively. The amortization of
deferred stock compensation, combined with the expense associated with stock
options granted to non-employees, relates to the following items in the
accompanying consolidated statements of operations (in thousands):
<TABLE>
<CAPTION>
Year ended
December 31,
----------------
1997 1998 1999
---- ---- ------
<S> <C> <C> <C>
Operations................................................. $ -- $ -- $ 127
Sales and marketing........................................ -- -- 586
Research and development................................... -- -- 74
General and administrative................................. 11 6 341
---- ---- ------
Total.................................................... $ 11 $ 6 $1,128
==== ==== ======
</TABLE>
F-12
<PAGE>
PLACEWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Had compensation costs been determined in accordance with SFAS No. 123 for
all of the Company's stock-based compensation plans, net loss (in thousands)
and basic and diluted net loss per share would have been as follows:
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Net loss:
As reported................................... $(3,272) $(4,968) $(10,918)
Pro forma..................................... $(3,272) $(4,968) $(10,970)
Basic and diluted net loss per share:
As reported................................... $ (4.67) $ (4.58) $ (6.41)
Pro forma..................................... $ (4.67) $ (4.58) $ (6.43)
</TABLE>
The fair value of each option was estimated on the date of grant using the
minimum value method with the following weighted-average assumptions: no
dividends; risk-free interest rate of 6.0% for the years ended December 31,
1997, 1998, and 1999; and expected life of five years for the years ended
December 31, 1997, 1998, and 1999.
As of December 31, 1999, there were 1,341,241 shares available for grant
under the Plan. A summary of the status of the Company's stock option activity
under the Plan is as follows:
<TABLE>
<CAPTION>
1997 1998 1999
------------------ -------------------- ---------------------
Weighted- Weighted- Weighted-
Number average average average
of price per Number of price per Number of price per
shares share shares share shares share
------- --------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year................ -- $ -- 456,250 $0.15 1,079,094 $0.18
Options granted......... 478,250 0.15 1,308,379 0.20 1,973,883 0.92
Options exercised....... (22,000) 0.11 (603,534) 0.19 (1,566,092) 0.39
Options canceled........ -- 0.00 (82,001) 0.17 (208,542) 0.21
------- --------- ----------
Outstanding at end of
year................... 456,250 0.15 1,079,094 0.18 1,278,343 0.94
======= ========= ==========
Options exercisable at
end of year:
Unrestricted options.. 56,249 127,232 44,476
Restricted options.... 400,001 951,862 1,233,867
------- --------- ----------
456,250 1,079,094 1,278,343
======= ========= ==========
Weighted-average fair
value of options
granted during the year
with exercise prices
equal to fair value at
date of grant.......... $ 0.07 $ 0.10 $ --
======= ========= ==========
Weighted-average fair
value of options
granted during the year
with exercise prices
less than fair value at
date of grant.......... $ -- $ -- $ 2.29
======= ========= ==========
</TABLE>
F-13
<PAGE>
PLACEWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
As of December 31, 1999, the exercise prices and weighted-average remaining
contractual life of outstanding options were as follows:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
---------------------------------- ---------------------
Weighted-
average Weighted- Weighted-
remaining average average
Exercise Number contractual exercise Number exercise
price outstanding life (years) price exercisable price
-------- ----------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$0.10 15,000 7.21 $0.10 15,000 $0.10
0.20 486,000 9.10 0.20 486,000 0.20
0.38 111,343 9.69 0.38 111,343 0.38
1.00 276,000 9.87 1.00 276,000 1.00
2.00 390,000 9.99 2.00 390,000 2.00
--------- ---------
1,278,343 1,278,343
========= =========
</TABLE>
(e) Warrants
During 1999, the Company issued a warrant to purchase 275,000 shares of
Series C convertible preferred stock, in connection with a marketing
arrangement. The warrant is exercisable on the earlier of November 2009, or
upon the achievement of certain milestones. The warrant has an exercise price
of $3.80 and expires in November 2009. The fair value of the warrant is
$849,000, as determined using the Black-Scholes option pricing model with the
following assumptions: no dividends; 70% volatility; risk-free interest rate of
6.61%; and life of 10 years. As of December 31, 1999, the warrant remains
outstanding. The $849,000 warrant value has been included in sales and
marketing expense on the accompanying 1999 consolidated statement of operations
as the executory contract associated with the warrant permits the counterparty
to cease performance at any time without cause.
During 1997, the Company issued a warrant to purchase 40,625 shares of
Series B convertible preferred stock, in connection with a capital lease. The
warrant has an exercise price of $2.00, and expires in September 2007. The fair
value of the warrant, was not significant as determined using the Black-Scholes
option pricing model, with the following assumptions: no dividends; 70%
volatility; risk-free interest rate of 6.12%; and life of 10 years. As of
December 31, 1999, the warrant remains outstanding.
(4) Commitments and Contingencies
(a) Operating and Capital Leases
The Company occupies facilities rented under noncancelable operating leases
expiring in 2002. The Company also leases certain equipment under capital lease
arrangements that expire through 2003.
F-14
<PAGE>
PLACEWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Future minimum lease payments are as follows (in thousands):
<TABLE>
<CAPTION>
Year ending Capital Operating
December 31, leases leases
------------ ------- ---------
<S> <C> <C>
2000...................................................... $253 $1,134
2001...................................................... 255 1,158
2002...................................................... 157 882
2003...................................................... 12 --
---- ------
Total minimum lease payments............................... 677 $3,174
======
Less amount representing interest.......................... 86
----
Present value of minimum lease payments.................... 591
Less current portion....................................... 204
----
Noncurrent portion of capital lease obligations............ $387
====
</TABLE>
Rent expense for the years ended December 31, 1997, 1998, and 1999, was
approximately $190,000, $240,000, and $508,000, respectively.
(b) Royalties
The Company is committed to pay a holder of Series A preferred stock amounts
equaling 2% of net revenues, up to a maximum of $1,000,000 which commenced in
1999. Royalty expense under this arrangement totaled approximately $55,000 in
1999.
(c) Legal proceedings
In July 1999, the Company was contacted by legal counsel representing
another web conferencing provider, with allegations of misappropriated trade
secrets by the Company under an August 1997 License and Distribution Agreement.
After initial attempts to resolve this issue, the counterparty has failed to
respond to any of the Company's requests to move this issue forward, and the
last contact was in October 1999. Although the Company has not received any
additional communications, the Company is prepared to vigorously defend itself
against any claims of trade secret misappropriation, if and when such claims
are brought to court. No reserve has been established for this matter as the
range of a potential settlement is not reasonably estimable.
(5) Income Taxes
The Company's reported income tax expense for the years ended December 31,
1997, 1998, and 1999, differs from the amount obtained by applying the federal
statutory income tax rate of 34% to loss before income taxes primarily due to
operating losses not benefited.
The tax effects of the temporary differences that give rise to significant
portions of the deferred tax assets and liabilities as of December 31, 1998 and
1999, are as follows (in thousands):
<TABLE>
<CAPTION>
1998 1999
------ ------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards........................... $3,339 $6,049
Tax credit carryforwards................................... 487 762
Accrued liabilities not currently deductible for tax
purposes.................................................. 50 384
Fixed assets............................................... 102 191
------ ------
Total gross deferred tax assets.......................... 3,978 7,386
Less valuation allowance..................................... 3,978 7,386
------ ------
Net deferred tax assets.................................. $ -- $ --
====== ======
</TABLE>
F-15
<PAGE>
PLACEWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The net change in the total valuation allowance for the years ended December
31, 1998 and 1999, was a net increase of $2,305,000, and $3,408,000,
respectively.
As of December 31, 1999, the Company has net operating loss carryforwards
for federal and California income tax purposes of approximately $15,821,000 and
$12,043,000, respectively. The federal net operating loss carryforward expires
beginning in 2011 through 2019. The California net operating loss carryforward
expires primarily in 2004.
As of December 31, 1999, the Company has research and development credit
carryovers for federal and California income tax purposes of approximately
$492,000 and $270,000, respectively. The federal research and experimental
credit expires beginning in the year 2019. The California research and
experimental credit can be carried forward indefinitely.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management does not
believe it is more likely than not that the deferred tax assets will be
realized; accordingly, a full valuation allowance has been established and no
deferred tax asset is shown in the accompanying consolidated balance sheets.
Federal and California tax laws impose substantial restrictions on the
utilization of net operating loss carryforwards in the event of an "ownership
change" for tax purposes, as defined in Section 382 of the Internal Revenue
Code. The Company's ability to utilize its net operating loss and tax credit
carryforwards may be subject to restriction pursuant to these provisions.
(6) Notes Payable and Lease Financing
(a) Equipment Finance Arrangements
In January 1998, the Company entered into an arrangement with a financing
corporation for a lease line of credit for up to $850,000 in new equipment (see
Note 4) and for a note payable collateralized by the Company's existing assets
of up to $400,000, bearing interest at 7.5%. The lease line is no longer
available. As of December 31, 1999, $212,000 is outstanding under the note
payable and is due in equal monthly installments through January 2002. As of
December 31, 1999, future principal payments under this note payable are
$96,000, $107,000, and $9,000 for the years ending December 31, 2000, 2001, and
2002, respectively.
On March 16, 1999, the Company entered into an arrangement with another
financing corporation for a lease line of credit for up to $1,200,000 of
equipment. The line is available through September 30, 2000 and is secured by
equipment. As of December 31, 1999, the amount available under the line is
$1,142,000.
(b) Revolving Line of Credit
On March 11, 1999, the Company entered into an arrangement with a bank for a
line of credit up to $750,000. The arrangement consists of a committed
revolving line of credit of an amount not to exceed the lesser of $750,000 or
the borrowing base, as defined by the agreement. Borrowings will be
collateralized by certain assets of the Company. Borrowings against the line of
credit will bear interest at the bank's prime rate plus 1% per annum (9.5% as
of December 31, 1999). The line of credit will expire on January 24, 2001 (see
Note 8a). During 1999 the Company borrowed and repaid $625,000 under this
arrangement. As of December 31, 1999, the amount available under the line of
credit is $750,000.
F-16
<PAGE>
PLACEWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(7) Significant Customer Information and Segment Reporting
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information establishes standards for the manner in which public companies
report information about operating segments in annual and interim financial
statements. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. The method for
determining what information to report is based on the way management organizes
the operating segments within the Company for making operating decisions and
assessing financial performance. The Company's chief operating decision-maker
is considered to be the chief executive officer (CEO). The CEO reviews
financial information presented on a consolidated basis for purposes of making
operating decisions and assessing financial performance. The consolidated
financial information is identical to the information presented in the
accompanying consolidated statements of operations. Therefore, the Company has
determined that it operates in a single operating segment, specifically, the
providing of web-based conferencing solution.
The desegregated information reviewed on a product basis by the CEO is as
follows:
<TABLE>
<CAPTION>
Year ended
December 31,
------------------
1997 1998 1999
---- ------ ------
<S> <C> <C> <C>
Hosting and Services...................................... $ -- $ 511 $2,433
Licensing................................................. 609 1,113 1,962
---- ------ ------
$609 $1,624 $4,395
==== ====== ======
</TABLE>
Significant customer information is as follows:
<TABLE>
<CAPTION>
Percent of
Percent of total accounts
total revenue receivable
---------------- --------------
Year ended
December 31, December 31,
---------------- --------------
1997 1998 1999 1999
---- ---- ---- --------------
<S> <C> <C> <C> <C>
Customer A..................................... 17% 40% 27% 14%
Customer B..................................... 24% 13% 6% 2%
Customer C..................................... 18% -- -- --
Customer D..................................... 15% -- -- --
</TABLE>
In 1999, 6% of the Company's revenue was from two customers that are
shareholders of the Company. As of December 31, 1999, the outstanding accounts
receivable balance related to these customers is not significant. The Company
has no significant foreign operations.
(8) Subsequent Events
(a) Borrowings
In January 2000, the Company modified its $750,000 line of credit
arrangement with a bank (see Note 6). The line of credit maximum borrowing
capacity was increased to $2,500,000 and the maturity date was extended to
January 24, 2001. All other terms remain essentially unchanged. As of February
25, 2000, there was no outstanding balance on this line of credit.
On March 2, 2000, the Company entered into a two-year operating lease
arrangement related to certain switching equipment for future monthly payments
of approximately $19,000.
F-17
<PAGE>
PLACEWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(b) Stock Plans
On February 29, 2000, the Company's Board of Directors approved the 2000
Equity Incentive Plan (2000 Plan). The 2000 Plan is intended to replace and
supercede the 1997 Plan. The Plan will be effective on the effective date of
the proposed initial public offering. The Company has reserved 3,000,000 shares
of common stock for issuance under the 2000 Plan. When a stock award expires or
is terminated before it is exercised, the shares not acquired pursuant to the
stock awards shall again becomes available for issuance under the 2000 Plan.
In general, the terms of stock options under the 2000 Plan may not exceed 10
years. An option holder may not transfer a stock option other than by will or
the laws of descent and distribution. The exercise price for an incentive stock
option cannot be less than 100% of the fair market value of the common stock on
the date of grant. The exercise price for a nonstatutory stock option cannot be
less than 85% of the fair market value of the common stock on the date of
grant. In the event an optionholder is a 10% shareholder, then the exercise
price per share shall not be less than 110% of the fair market value of common
stock on the date of grant.
On February 29, 2000, the Company's Board of Directors approved the
2000 Employee Stock Purchase Plan (the Purchase Plan). A total of 500,000
shares of common stock have been authorized for issuance under the Purchase
Plan. Each year on December 31, beginning on December 31, 2001, the share
reserve will increase by the least of the following: (1) 1% of the total
outstanding common stock of the Company; (2) 250,000 shares of common stock; or
(3) a lesser amount as determined by the Board of Directors. Under the purchase
plan, employees who participate in an offering may have up to 15% of their
earnings for the period of that offering withheld. The amount withheld is used
on each purchase date of the offering period to purchase shares of common
stock. Eligible employees will be able to purchase common stock at a purchase
price equal to the lower of 85% of the fair market value of the common stock at
the first day of the offering period or 85% of the fair market value of the
common stock on the purchase date.
On February 29, 2000, the Company's Board of Directors approved the
2000 Non-Employee Directors' Stock Option Plan (the "Non-Employee Directors'
Plan"). The Non-Employee Directors' Plan will be effective on the effective
date of the proposed initial public offering. A total of 650,000 shares of
common stock of the Company have been reserved for issuance under the Non-
Employee Directors' Plan. When a stock option expires or is terminated before
it is exercised, the shares not acquired pursuant to the stock option shall
again become available for issuance under the Non-Employee Directors' Plan. The
Non-Employee Directors' Plan is administered by the Board of Directors, however
the grant of stock options is automatic. Upon the completion of the IPO, each
non-employee director will automatically be granted an option to purchase
30,000 shares of common stock which will vest ratably over 36 months. At the
time of the annual stockholders' meeting, beginning with the annual
stockholders' meeting in 2001, each non-employee director will automatically be
granted an option to purchase 10,000 shares of common stock which will vest
ratably over 12 months. In addition, upon the completion of the initial public
offering, each non-employee director then serving as chair of either the audit
committee or the compensation committee will automatically be granted an option
to purchase 3,000 shares of common stock. Any non-employee director who is
serving as chair of the audit committee or the compensation committee on the
date of each annual meeting of stockholders, commencing with our annual meeting
in 2001, will automatically be granted an option to purchase 3,000 shares of
common stock. Each such option shall vest ratably over 12 months.
Under the Non-Employee Directors' Plan, the exercise price will be 100% of
the fair market value of the common stock on the date of grant. Generally, the
options will vest over a three year period with a third of the shares subject
to the option vesting 12 months from the date of grant and 1/36th of the shares
subject to the option vesting monthly thereafter.
F-18
<PAGE>
[Describe Text]
<PAGE>
[LOGO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the
sale of the securities being registered. All amounts shown are estimates except
for the SEC registration fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC registration fee............................................. $ 19,800
NASD filing fee.................................................. 8,000
NASDAQ National Market Fees...................................... 95,000
Blue Sky qualification fees and expenses......................... 10,000
Printing and engraving expenses.................................. 200,000
Accountant's fees and expenses................................... 450,000
Legal fees and expenses.......................................... 600,000
Transfer agent and registrar fees................................ 10,000
Miscellaneous.................................................... 107,200
----------
Total.......................................................... $1,500,000
==========
</TABLE>
Item 14. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law permits a corporation to
include in its charter documents, and in agreements between the corporation and
its directors and officers, provisions expanding the scope of indemnification
beyond that specifically provided by the current law.
Article VI of the Registrant's Amended and Restated Certificate of
Incorporation provides for the indemnification of directors to the fullest
extent permissible under Delaware law.
Article XI of the Registrant's Amended and Restated Bylaws provides for the
indemnification of officers, directors and third parties acting on behalf of
the Registrant if such person acted in good faith and in a manner reasonably
believed to be in and not opposed to the best interest of the Registrant, and,
with respect to any criminal action or proceeding, the indemnified party had no
reason to believe his or her conduct was unlawful.
The Registrant has entered into indemnification agreements with its
directors and executive officers, in addition to indemnification provided for
in the Registrant's Bylaws, and intends to enter into indemnification
agreements with any new directors and executive officers in the future.
Item 15. Recent Sales of Unregistered Securities.
(a) Since February 1997, the Registrant has issued and sold (without payment
of any selling commission to any person) the following unregistered securities:
(1) In September and November 1999, the Registrant issued and sold
shares of its Series C Preferred Stock convertible into an aggregate of
4,954,785 shares of common stock to a total of 32 investors for an
aggregate purchase price of $18,828,183.
(2) In April 1997, May and June 1998, and March and April 1999 the
Registrant issued and sold shares of its Series B Preferred Stock
convertible into an aggregate of 5,120,000 shares of common stock to a
total of 37 investors for an aggregate purchase price of $10,240,000.
(3) In February and March 1998, the Registrant issued and sold 112,500
shares of restricted common stock to Barry James Folsom for an aggregate
purchase price of $22,500.
(4) In February 1998, the Registrant issued and sold 11,000 shares of
restricted common stock to Jeffrey Rudy for an aggregate purchase price of
$2,200.
II-1
<PAGE>
(5) In February 1998, the Registrant issued and sold 8,550 shares of
restricted common stock to Stephen Saperstein for an aggregate purchase
price of $1,710.
(6) As of December 31, 1999, 2,191,626 shares of common stock had been
issued upon exercise of options or pursuant to restricted stock purchase
agreements and 1,278,343 shares of common stock were issuable upon exercise
of outstanding options under the Registrant's 1997 Stock Plan.
(b) There were no underwritten offering employed in connection with any of
the transactions set forth in Item 15(a).
The issuances described in Items 15(a)(1), 15(a)(2), (15)(a)(3), 15(a)(4)
and 15(a)(5) were deemed to be exempt from registration under the Securities
Act in reliance upon Section 4(2) thereof as transactions by an issuer not
involving any public offering. The issuances described in Item 15(a)(6) were
deemed to be exempt from registration under the Securities Act in reliance upon
Rule 701 promulgated thereunder in that they were offered and sold either
pursuant to written compensatory benefit plans or pursuant to a written
contract relating to compensation, as provided by Rule 701. In addition, such
issuances were deemed to be exempt from registration under Section (4)(2) of
the Securities Act as transactions by an issuer not involving any public
offering. The recipients of securities in each such transaction represented
their intentions to acquire the securities for investment only and not with a
view to or for sale in connection with any distribution thereof and appropriate
legends were affixed to the securities issued in such transactions. All
recipients had adequate access, through their relationships with the Company,
to information about the Registrant.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description of Document Page No.
------- ----------------------- ----------
<C> <S> <C>
1.1 Form of Underwriting Agreement*
3.1 Restated Certificate of Incorporation of PlaceWare, dated
September 17, 1999
3.2 Form of Amended and Restated Certificate of Incorporation
of the Registrant to be filed promptly after the closing
of the offering
3.3 Bylaws of the Registrant as currently in effect
3.4 Bylaws of the Registrant to be in effect after the
closing of the offering
4.1 Specimen Common Stock Certificate*
4.2 Third Amended and Restated Investor Rights Agreement
5.1 Opinion of Cooley Godward LLP*
10.1 Executive Severance Benefit Plan
10.2 2000 Equity Incentive Plan
10.3 2000 Non Employee Directors' Stock Option Plan*
10.4 2000 Employee Stock Purchase Plan
10.5 Offer letter to Barry James Folsom, as amended*
10.6 Offer letter to Kevin R. Evans, as amended*
10.7 Sublease between Registrant and Proxim, Inc. dated August
23, 1999
10.8 Software License and Technology Agreement between
Registrant and Xerox Corporation dated November 25, 1996
10.9 Master Lease Agreement between Registrant and Comdisco,
Inc. dated September 30, 1997 and related documents
10.10 Loan and Security Agreement between Registrant and
Silicon Valley Bank dated March 11, 1999 and related
documents
10.11 Master Lease Agreement between Registrant and Linc
Capital, Inc. dated May 3, 1999 and related documents
21.1 Subsidiaries of the Registrant
23.1 Consent of KPMG LLP, Independent Auditors
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S> <C>
23.2 Consent of Counsel (see Exhibit 5.1)
24.1 Power of Attorney (see page II-4)
27.1 Financial Data Schedules
</TABLE>
- --------
* To be filed by amendment
(b) Financial Statement Schedules.
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
Item 17. Undertakings.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto, duly
authorized, in the City of Mountain View, California, on March 3, 2000.
PLACEWARE, INC.
/s/ Barry James Folsom
By: _________________________________
Barry James Folsom
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Barry James Folsom and Kevin R. Evans, and each
of them his attorney-in-fact, with the power of substitution, for him in any
and all capacities, to sign any amendment or post-effective amendment to this
Registration Statement on Form S-1 or abbreviated registration statement
(including, without limitation, any additional registration filed pursuant to
Rule 462 under the Securities Act of 1933) with respect hereto and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all
that said attorney-in-fact, or his substitute or substitutes, may do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Barry James Folsom President, Chief Executive March 3, 2000
____________________________________ Officer and Director
Barry James Folsom
/s/ Kevin R. Evans Chief Financial Officer and March 3, 2000
____________________________________ Secretary
Kevin R. Evans
/s/ J. Phillip Samper Chairman of the Board of March 3, 2000
____________________________________ Directors
J. Phillip Samper
/s/ Lon H. H. Chow Director March 3, 2000
____________________________________
Lon H. H. Chow
/s/ Philip T. Gianos Director March 3, 2000
____________________________________
Philip T. Gianos
/s/ Domenic J. LaCava Director March 3, 2000
____________________________________
Domenic J. LaCava
/s/ Richard P. Magnuson Director March 3, 2000
____________________________________
Richard P. Magnuson
/s/ Rory T. O'Driscoll Director March 3, 2000
____________________________________
Rory T. O'Driscoll
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description of Document Page No.
------- ----------------------- ----------
<C> <S> <C>
1.1 Form of Underwriting Agreement*
3.1 Restated Certificate of Incorporation of PlaceWare, dated
September 17, 1999
3.2 Form of Amended and Restated Certificate of Incorporation
of the Registrant to be filed promptly after the closing
of the offering
3.3 Bylaws of the Registrant as currently in effect
3.4 Bylaws of the Registrant to be in effect after the
closing of the offering
4.1 Specimen Common Stock Certificate*
4.2 Third Amended and Restated Investor Rights Agreement
5.1 Opinion of Cooley Godward LLP*
10.1 Executive Severance Benefit Plan
10.2 2000 Equity Incentive Plan
10.3 2000 Non Employee Directors' Stock Option Plan*
10.4 2000 Employee Stock Purchase Plan
10.5 Offer letter to Barry James Folsom, as amended*
10.6 Offer letter to Kevin R. Evans, as amended*
10.7 Sublease between Registrant and Proxim, Inc. dated August
23, 1999
10.8 Software License and Technology Agreement between
Registrant and Xerox Corporation dated November 25, 1996
10.9 Master Lease Agreement between Registrant and Comdisco,
Inc. dated September 30, 1997 and related documents
10.10 Loan and Security Agreement between Registrant and
Silicon Valley Bank dated March 11, 1999 and related
documents
10.11 Master Lease Agreement between Registrant and Linc
Capital, Inc. dated May 3, 1999 and related documents
21.1 Subsidiaries of the Registrant
23.1 Consent of KPMG LLP, Independent Auditors
23.2 Consent of Counsel (see Exhibit 5.1)
24.1 Power of Attorney (see page II-4)
27.1 Financial Data Schedules
</TABLE>
- --------
* To be filed by amendment
<PAGE>
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF PLACEWARE, INC.
a Delaware Corporation
The undersigned, Barry James Folsom and James E. Graber hereby certify
that:
ONE: They are the duly elected and acting President and Secretary,
respectively, of said corporation.
TWO: The name of the corporation is PlaceWare, Inc. and that the
corporation was originally incorporated on October 24, 1996, under the name
Coyote Hill Systems, Inc., pursuant to the Delaware General Corporation Law.
THREE: The Certificate of Incorporation of said corporation shall be
amended and restated to read in full as follows:
ARTICLE I
The name of this corporation is PlaceWare, Inc.
ARTICLE II
The address of the registered office of this corporation in the State
of Delaware is 15 East North Street, in the city of Dover, 19901, County of
Kent. The name of its registered agent at such address is Incorporating
Services, Inc.
ARTICLE III
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 Delaware.
ARTICLE IV
A. Classes of Stock. This corporation is authorized to issue two
----------------
classes of stock to be designated, respectively, "Common Stock" and "Preferred
Stock." The total number of shares that this corporation is authorized to issue
is thirty-two million three hundred five thousand (32,305,000) shares. Twenty
million (20,000,000) shares shall be Common Stock, par value $.0001 per share,
and twelve million three hundred five thousand (12,305,000) shares shall be
Preferred Stock, par value $.0001 per share.
B. Rights, Preferences and Restrictions of Preferred Stock. The
-------------------------------------------------------
Preferred Stock authorized by this Restated Certificate of Incorporation may be
issued from time to time in one or more series. The rights, preferences,
privileges, and restrictions granted to and imposed on the Series A Preferred
Stock, which series shall consist of 1,705,000 shares (the "Series A Preferred
Stock"), the Series B Preferred Stock, which series shall consist of 5,200,000
shares
<PAGE>
(the "Series B Preferred Stock"), and the Series C Preferred Stock, which series
shall consist of 5,400,000 shares (the "Series C Preferred Stock"), are as set
forth below in this Article IV(B).
1. Dividend Provisions. Subject to the rights of series of Preferred
-------------------
Stock that may from time to time come into existence, the holders of shares of
Series A Preferred Stock Series B Preferred Stock and Series C Preferred Stock
shall be entitled to receive dividends, out of any assets legally available
therefor, prior and in preference to any declaration or payment of any dividend
(payable other than in Common Stock or other securities and rights convertible
into or entitling the holder thereof to receive, directly or indirectly,
additional shares of Common Stock of this corporation) on the Common Stock of
this corporation, at the rate of $.08 per share per annum for the Series A
Preferred Stock, $.16 per share per annum for the Series B Preferred Stock and
$.304 per share per annum for the Series C Preferred Stock (such prices per
share to be appropriately adjusted to reflect any subsequent stock dividends,
combinations, splits, recapitalizations and the like with respect to the Series
A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock) or, if
greater (as determined on a per annum basis and an as converted basis for the
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred
Stock), an amount equal to that paid on any other outstanding shares of this
corporation, payable quarterly when, as and if declared by the Board of
Directors. Such dividends shall not be cumulative.
2. Liquidation Preference.
----------------------
(a) In the event of any liquidation, dissolution or winding up of this
corporation, either voluntary or involuntary, subject to the rights of series of
Preferred Stock that may from time to time come into existence, the holders of
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
shall be entitled to receive, prior and in preference to any distribution of any
of the assets of this corporation to the holders of Common Stock by reason of
their ownership thereof, an amount per share equal to (i) $1.00 for each
outstanding share of Series A Preferred Stock (the "Original Series A Issue
Price") (such price per share to be appropriately adjusted to reflect any
subsequent stock dividends, combinations, splits, recapitalizations and the like
with respect to the Series A Preferred Stock) plus any declared but unpaid
dividends on such share, (ii) $2.00 for each outstanding share of Series B
Preferred Stock (the "Original Series B Issue Price") (such price per share to
be appropriately adjusted to reflect any subsequent stock dividends,
combinations, splits, recapitalizations and the like with respect to the Series
B Preferred Stock) plus any declared but unpaid dividends on such share and
(iii) $3.80 for each outstanding share of Series C Preferred Stock (the
"Original Series C Issue Price") (such price per share to be appropriately
adjusted to reflect any subsequent stock dividends, combinations, splits,
recapitalizations and the like with respect to the Series C Preferred Stock)
plus any declared but unpaid dividends on such share. If upon the occurrence of
such event, the assets and funds thus distributed among the holders of the
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
shall be insufficient to permit the payment to such holders of the full
aforesaid preferential amounts, then, subject to the rights of series of
Preferred Stock that may from time to time come into existence, the entire
assets and funds of this corporation legally available for distribution shall be
distributed ratably among the
2
<PAGE>
holders of the Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock in proportion to the preferential amount each such holder is
otherwise entitled to receive.
(b) Upon the completion of the distribution required by subsection
(a) of this Section 2 and any other distribution that may be required with
respect to series of Preferred Stock that may from time to time come into
existence, the remaining assets of this corporation available for distribution
to stockholders shall be distributed among the holders of Series C Preferred
Stock and Common Stock pro rata based on the number of shares of Common Stock
held by each (assuming full conversion of all such Series C Preferred Stock)
until with respect to the holders of Series C Preferred Stock, such holders
shall have received an aggregate of $7.60 per share (as adjusted for any stock
splits, stock dividends, recapitalizations or the like) (including amounts paid
pursuant to subsection (a) of this Section 2); thereafter, subject to the rights
of series of Preferred Stock that may from time to time come into existence, if
assets remain in this corporation, the holders of the Common Stock of this
corporation shall receive all of the remaining assets of this corporation pro
rata based on the number of shares of Common Stock held by each.
(c) (i) For purposes of this Section 2, a liquidation, dissolution
or winding up of this corporation shall be deemed to be occasioned by, or to
include, (A) the acquisition of this corporation by another entity by means of
any transaction or series of related transactions (including, without
limitation, any reorganization, merger or consolidation) that results in the
transfer of fifty percent (50%) or more of the outstanding voting power of this
corporation; or (B) a sale, conveyance or other disposition of all or
substantially all of the assets of this corporation.
(ii) In any of such events, if the consideration received by
this corporation is other than cash, its value will be deemed its fair market
value. Any securities shall be valued as follows:
(A) Securities not subject to investment letter or other
similar restrictions on free marketability covered by (B) below:
(1) If traded on a securities exchange or through the
Nasdaq National Market System, the value shall be deemed to be the average of
the closing prices of the securities on such exchange or system over the thirty
(30) day period ending three (3) days prior to the closing;
(2) If actively traded over-the-counter, the value
shall be deemed to be the average of the closing bid or sale prices (whichever
is applicable) over the thirty (30) day period ending three (3) days prior to
the closing; and
3
<PAGE>
(3) If there is no active public market, the value
shall be the fair market value thereof, as mutually determined by this
corporation and the holders of at least a majority of the voting power of all
then outstanding shares of Preferred Stock.
(B) The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a stockholder's status as an affiliate
or former affiliate) shall be to make an appropriate discount from the market
value determined as above in (A) (1), (2) or (3) to reflect the approximate fair
market value thereof, as mutually determined by this corporation and the holders
of at least a majority of the voting power of all then outstanding shares of
such Preferred Stock.
(iii) In the event the requirements of this subsection 2(c) are
not complied with, this corporation shall forthwith either:
(A) cause such closing to be postponed until such time as
the requirements of this Section 2 have been complied with; or
(B) cancel such transaction, in which event the rights,
preferences and privileges of the holders of the Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock shall revert to and be the
same as such rights, preferences and privileges existing immediately prior to
the date of the first notice referred to in subsection 2(c)(iv) hereof.
(iv) This corporation shall give each holder of record of Series
A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock written
notice of such impending transaction not later than twenty (20) days prior to
the stockholders' meeting called to approve such transaction, or twenty (20)
days prior to the closing of such transaction, whichever is earlier, and shall
also notify such holders in writing of the final approval of such transaction.
The first of such notices shall describe the material terms and conditions of
the impending transaction and the provisions of this Section 2, and this
corporation shall thereafter give such holders prompt notice of any material
changes. The transaction shall in no event take place sooner than twenty (20)
days after this corporation has given the first notice provided for herein or
sooner than ten (10) days after this corporation has given notice of any
material changes provided for herein; provided, however, that such periods may
be shortened upon the written consent of the holders of Preferred Stock that are
entitled to such notice rights or similar notice rights and that represent at
least a majority of the voting power of all then outstanding shares of such
Preferred Stock.
3. Redemption. The Series A Preferred Stock, the Series B Preferred
----------
Stock and Series C Preferred Stock are not redeemable.
4. Conversion. The holders of Preferred Stock shall have conversion
----------
rights as follows (the "Conversion Rights"):
4
<PAGE>
(a) Right to Convert. Each share of Series A Preferred Stock, Series
----------------
B Preferred Stock and Series C Preferred Stock shall be convertible, at the
option of the holder thereof, at any time after the date of issuance of such
share, at the office of this corporation or any transfer agent for such stock,
into such number of fully paid and nonassessable shares of Common Stock as is
determined (i) for the Series A Preferred Stock by dividing the Original Series
A Issue Price by the Series A Conversion Price applicable to such share,
determined as hereafter provided, in effect on the date the certificate is
surrendered for conversion, (ii) for the Series B Preferred Stock by dividing
the Original Series B Issue Price by the Series B Conversion Price applicable to
such share, determined as hereafter provided, in effect on the date the
certificate is surrendered for conversion, and (iii) for the Series C Preferred
Stock by dividing the Original Series C Issue Price by the Series C Conversion
Price applicable to such share, determined as hereafter provided, in effect on
the date the certificate is surrendered for conversion. The initial Conversion
Price per share for shares of Series A Preferred Stock shall be the Original
Series A Issue Price; provided, however, that the Conversion Price for the
Series A Preferred Stock shall be subject to adjustment as set forth in
subsection 4(d). The initial Conversion Price per share of Series B Preferred
Stock shall be the Original Series B issue Price; provided, however, that the
Conversion Price for the Series B Preferred Stock shall be subject to adjustment
as set forth in subsection 4(d). The initial Conversion Price per share of
Series C Preferred Stock shall be the Original Series C issue Price; provided,
however, that the Conversion Price for the Series C Preferred Stock shall be
subject to adjustment as set forth in subsection 4(d).
(b) Automatic Conversion. Each share of Series A Preferred Stock,
--------------------
Series B Preferred Stock and Series C Preferred Stock shall automatically be
converted into such number of fully paid and nonassessable shares of Common
Stock as is determined (i) for the Series A Preferred Stock by dividing the
Original Series A Issue Price by the Conversion Price at the time in effect for
such Series A Preferred Stock, (ii) for the Series B Preferred Stock by dividing
the Original Series B Issue Price by the Conversion Price at the time then in
effect for such Series B Preferred Stock and (iii) for the Series C Preferred
Stock by dividing the Original Series C Issue Price by the Conversion Price at
the time then in effect for such Series C Preferred Stock immediately upon the
earlier of (x) this corporation's sale of its Common Stock in a firm commitment
underwritten public offering pursuant to a registration statement on Form S-1 or
Form SB-2 (or any successor to such forms) under the Securities Act of 1933, as
amended, the public offering price of which was not less than $9.50 per share
(adjusted to reflect subsequent stock dividends, stock splits or
recapitalization) and raising proceeds to the Company of at least $20,000,000 in
the aggregate (net of underwriting discounts and commissions) or (y) as to each
series of Preferred Stock, the date specified by written consent or agreement of
the holders of a majority of the then outstanding shares of Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock, respectively, each
voting as a separate class.
(c) Mechanics of Conversion. Before any holder of Series A Preferred
-----------------------
Stock, Series B Preferred Stock or Series C Preferred Stock shall be entitled to
convert the same into shares of Common Stock, he shall surrender the certificate
or certificates therefor, duly endorsed, at the office of this corporation or of
any transfer agent for the Series A Preferred Stock, Series B Preferred Stock or
Series C Preferred Stock, and shall give written notice to this
5
<PAGE>
corporation at its principal corporate office, of the election to convert the
same and shall state therein the name or names in which the certificate or
certificates for shares of Common Stock are to be issued. This corporation
shall, as soon as practicable thereafter, issue and deliver at such office to
such holder of Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock, or to the nominee or nominees of such holder, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled as aforesaid. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
shares of Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock to be converted, and the person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock as
of such date. If the conversion is in connection with an underwritten offering
of securities registered pursuant to the Securities Act of 1933, as amended, the
conversion may, at the option of any holder tendering Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock for conversion, be
conditioned upon the closing with the underwriters of the sale of securities
pursuant to such offering, in which event the person(s) entitled to receive the
Common Stock upon conversion of the Series A Preferred Stock, Series B Preferred
Stock or Series C Preferred Stock shall not be deemed to have converted such
Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock
until immediately prior to the closing of such sale of securities.
(d) Conversion Price Adjustments of Preferred Stock for Certain
-----------------------------------------------------------
Dilutive Issuances, Splits and Combinations. The Conversion Price of the Series
- -------------------------------------------
A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock shall
be subject to adjustment from time to time as follows:
(i) (A) If after the date upon which any shares of Series C
Preferred Stock were first issued (the "Purchase Date"), this corporation shall
issue any Additional Stock (as defined below) without consideration or for a
consideration per share less than the Conversion Price for the Series A
Preferred Stock, the Series B Preferred Stock or Series C Preferred Stock, as
applicable, in effect immediately prior to the issuance of such Additional
Stock, the Conversion Price for the Series A Preferred Stock, the Series B
Preferred Stock and Series C Preferred Stock, as applicable, in effect
immediately prior to each such issuance of Additional Stock shall forthwith
(except as otherwise provided in this clause (i)) be adjusted to a price
determined by multiplying such Conversion Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such issuance of Additional Stock plus the number of shares of Common
Stock that the aggregate consideration received by this corporation for such
issuance of Additional Stock would purchase at such Conversion Price, and the
denominator of which shall be the number of shares of Common Stock outstanding
(including Common Stock deemed outstanding pursuant to subection 4(d)(i)(E)
below) immediately prior to such issuance of Additional Stock plus the number of
shares of such Additional Stock.
(B) No adjustment of the Conversion Price for the Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock shall be
made in an amount less than one cent per share, provided that any adjustments
that are not required to
6
<PAGE>
made by reason of this sentence shall be carried forward and shall be either
taken into account in any subsequent adjustment made prior to three years from
the date of the event giving rise to the adjustment being carried forward, or
shall be made at the end of three years from the date of the event giving rise
to the adjustment being carried forward. Except to the limited extent provided
for in subsections (E)(3) and (E)(4), no adjustment of the Conversion Price for
the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred
Stock pursuant to this subsection 4(d)(i) shall have the effect of increasing
such Conversion Price above the Conversion Price for such series in effect
immediately prior to such adjustment.
(C) In the case of the issuance of Common Stock for cash,
the consideration shall be deemed to be the amount of cash paid therefor after
deducting any reasonable discounts, commissions or the like, but without
deducting any other expenses allowed, paid or incurred by this corporation for
any underwriting or otherwise in connection with the issuance and sale thereof.
(D) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair value thereof as reasonably determined by
the Board of Directors irrespective of any accounting treatment.
(E) In the case of the issuance (whether before, on or
after the Purchase Date) of options to purchase or rights to subscribe for
Common Stock, securities by their terms convertible into or exchangeable for
Common Stock, or options to purchase or rights to subscribe for such convertible
or exchangeable securities, the following provisions shall apply for all
purposes of this subsection 4(d)(i) and subsection 4(d)(ii):
(1) The aggregate maximum number of shares of Common
Stock deliverable upon exercise (assuming the satisfaction of any conditions to
exercisability, including without limitation, the passage of time, but without
taking into account potential antidilution adjustments) of such options to
purchase or rights to subscribe for Common Stock shall be deemed to have been
issued at the time such options or rights were issued and for a consideration
equal to the consideration (determined in the manner provided in subsections
4(d)(i)(C) and (d)(i)(D)), if any, received by this corporation upon the
issuance of such options or rights plus the minimum exercise price provided in
such options or rights (without taking into account potential antidilution
adjustments) for the Common Stock covered thereby.
(2) The aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange (assuming the satisfaction
of any conditions to convertibility or exchangeability, including, without
limitation, the passage of time, but without taking into account potential
antidilution adjustments) for any such convertible or exchangeable securities or
upon the exercise of options to purchase or rights to subscribe for such
convertible or exchangeable securities and subsequent conversion or exchange
thereof shall be deemed to have been issued at the time such securities were
issued or such options or rights were issued and for a consideration equal to
the consideration, if any, received by this
7
<PAGE>
corporation for any such securities and related options or rights, plus the
minimum additional consideration, if any, to be received by this corporation
(without taking into account potential antidilution adjustments) upon the
conversion or exchange of such securities or the exercise of any related options
or rights (the consideration in each case to be determined in the manner
provided in subsections 4(d)(i)(C) and (d)(i)(D)).
(3) In the event of any change in the number of shares
of Common Stock deliverable or in the consideration payable to this corporation
upon exercise of such options or rights or upon conversion of or in exchange for
such convertible or exchangeable securities, including, but not limited to, a
change resulting from the antidilution provisions thereof, the Conversion Price
of the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred
Stock, to the extent in any way affected by or computed using such options,
rights or securities, shall be recomputed to reflect such change, but no further
adjustment shall be made for the actual issuance of Common Stock or any payment
of such consideration upon the exercise of any such options or rights or the
conversion or exchange of such securities.
(4) Upon the expiration of any such options or rights,
the termination of any such rights to convert or exchange, or the expiration of
any options or rights related to such convertible or exchangeable securities,
the Conversion Price of the Series A Preferred Stock, Series B Preferred Stock
and Series C Preferred Stock, to the extent in any way affected by or computed
using such options, rights or securities, or options or rights related to such
securities, shall be recomputed to reflect the issuance of only the number of
shares of Common Stock (and convertible or exchangeable securities that remain
in effect) actually issued upon the exercise of such options or rights, upon the
conversion or exchange of such securities, or upon the exercise of the options
or rights related to such securities.
(5) The number of shares of Common Stock deemed issued
and the consideration deemed paid therefor pursuant to subsections 4(d)(i)(E)(1)
and (2) shall be appropriately adjusted to reflect any change, termination or
expiration of the type described in either subsection 4(d)(i)(E)(3) or (4).
(ii) "Additional Stock" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to subsection 4(d)(i)(E))
by this corporation after the Purchase Date other than
(A) Common Stock issued pursuant to a transaction
described in subsection 4(d)(iii) hereof;
(B) Shares of Common Stock issuable or issued to
employees consultants, directors or vendors (if in transactions with primarily
non-financing purposes) of this corporation directly or pursuant to a stock
option plan or restricted stock plan approved by the Board of Directors of this
corporation;
8
<PAGE>
(C) Common Stock issued upon conversion of shares of
Preferred Stock;
(D) Warrants issued to banks or equipment lessors for
other than primarily equity financing purposes approved by the Company's Board
of Directors; or
(E) Shares of Common or Preferred Stock issued in
connection with business combinations or corporate partnering agreements
approved by the Board of Directors.
(iii) In the event this corporation should at any time or
from time to time after the Purchase Date fix a record date for the effectuation
of a split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other securities or
rights convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion
Price of the Series A Preferred Stock, the Conversion Price of the Series B
Preferred Stock and the Conversion Price of the Series C Preferred Stock shall
be appropriately decreased so that the number of shares of Common Stock issuable
on conversion of each share of such series shall be increased in proportion to
such increase of the aggregate of shares of Common Stock outstanding and those
issuable with respect to such Common Stock Equivalents.
(iv) If the number of shares of Common Stock outstanding at
any time after the Purchase Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the Conversion Price for the Series A Preferred Stock, the
Conversion Price for the Series B Preferred Stock and the Conversion Price of
the Series C Preferred Stock shall be appropriately increased so that the number
of shares of Common Stock issuable on conversion of each share of such series
shall be decreased in proportion to such decrease in outstanding shares.
(e) Other Distributions. In the event this corporation shall
-------------------
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 4(d)(iii), then,
in each such case for the purpose of this subsection 4(e), the holders of the
Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock
shall be entitled to a proportionate share of any such distribution as though
they were the holders of the number of shares of Common Stock of this
corporation into which their shares of Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock are convertible as of the record
date fixed for the determination of the holders of Common Stock of this
corporation entitled to receive such distribution.
9
<PAGE>
(f) Recapitalizations. If at any time or from time to time there
-----------------
shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 4 or in Section 2) provision shall be made so that the holders of
the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred
Stock shall thereafter be entitled to receive upon conversion of the Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock the number
of shares of stock or other securities or property of the Company or otherwise,
to which a holder of Common Stock deliverable upon conversion would have been
entitled on such recapitalization. In any such case, appropriate adjustment
shall be made in the application of the provisions of this Section 4 with
respect to the rights of the holders of the Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock after the recapitalization to the
end that the provisions of this Section 4 (including adjustment of the
applicable Conversion Price then in effect and the number of shares purchasable
upon conversion of the Series A Preferred Stock, the Series B Preferred Stock
and Series C Preferred Stock) shall be applicable after that event as nearly
equivalent as may be practicable.
(g) No Impairment. Without the consent of the holders of a
-------------
majority of the Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock, voting together as a single class, this corporation will not,
by amendment of its Restated Certificate of Incorporation or through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by this corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 4 and in the
taking of all such action as may be necessary or appropriate in order to protect
the Conversion Rights of the holders of the Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock against impairment.
(h) No Fractional Shares and Certificate as to Adjustments.
------------------------------------------------------
(i) No fractional shares shall be issued upon the
conversion of any share or shares of the Series A Preferred Stock, Series B
Preferred Stock or Series C Preferred Stock, and the number of shares of Common
Stock to be issued shall be rounded to the nearest whole share. Whether or not
fractional shares are issuable upon such conversion shall be determined on the
basis of the total number of shares of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock the holder is at the time
converting into Common Stock and the number of shares of Common Stock issuable
upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment
of the Conversion Price of Series A Preferred Stock, Series B Preferred Stock or
Series C Preferred Stock pursuant to this Section 4, this corporation, at its
expense, shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and prepare and furnish to each holder of Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, as the
case may be, a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
This corporation shall, upon the written request at any time of any holder of
Series A Preferred Stock, Series B Preferred Stock or
10
<PAGE>
Series C Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (A) such adjustment and readjustment, (B) the
Conversion Price for such series of Preferred Stock at the time in effect, and
(C) the number of shares of Common Stock and the amount, if any, of other
property that at the time would be received upon the conversion of a share of
Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock.
(i) Notices of Record Date. In the event of any taking by this
----------------------
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
corporation shall mail to each holder of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock, at least twenty (20) days prior to
the date specified therein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend, distribution or right,
and the amount and character of such dividend, distribution or right.
(j) Reservation of Stock Issuable Upon Conversion. This
---------------------------------------------
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series A Preferred Stock, Series B Preferred
Stock and Series C Preferred Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock; and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the conversion
of all then outstanding shares of the Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock, in addition to such other remedies
as shall be available to the holder of such Preferred Stock, this corporation
will take such corporate action as may, in the opinion of its counsel, be
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purposes, including, without
limitation, engaging in best efforts to obtain the requisite stockholder
approval of any necessary amendment to this certificate.
(k) Notices. Any notice required by the provisions of this
-------
Section 4 to be given to the holders of shares of Series A Preferred Stock,
Series B Preferred Stock or Series C Preferred Stock shall be deemed given upon
personal delivery to the holder notified, five (5) days after having been sent
by certified or registered mail, return receipt requested, postage prepaid, one
(1) day after deposit with a nationally recognized overnight courier, specifying
next day delivery with written verification of receipt, addressed to each holder
of record at his address appearing on the books of this corporation or when sent
by confirmed telex or facsimile if sent during normal business hours of the
recipient, if not, then on the next business day.
5. Voting Rights.
-------------
(a) General Voting Rights. The holder of each share of Preferred
---------------------
Stock shall have the right to one vote for each share of Common Stock into which
such share of
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<PAGE>
Preferred Stock could then be converted, and with respect to such vote, such
holder shall have full voting rights and powers equal to the voting rights and
powers of the holders of Common Stock, and shall be entitled, notwithstanding
any provision hereof, to notice of any stockholders' meeting in accordance with
the bylaws of this Corporation, and shall be entitled to vote, together with
holders of Common Stock, with respect to any question upon which holders of
Common Stock have the right to vote, except as otherwise provided by law.
Fractional votes shall not, however, be permitted and any fractional voting
rights available on an as-converted basis (after aggregating all shares into
which shares of Preferred Stock held by each holder could be converted) shall be
rounded to the nearest whole number (with one-half being rounded upward).
(b) Voting for the Election of Directors. As long as five
------------------------------------
hundred thousand (500,000) or more of the shares of Series A Preferred Stock
originally issued remain outstanding (such number of shares being subject to
proportional adjustment to reflect any subsequent stock dividends, combinations,
splits, recapitalizations and the like with respect to the Preferred Stock), the
holders of such shares of Series A Preferred Stock shall be entitled to elect
one (1) director of this corporation at each annual election of directors. As
long as five hundred thousand (500,000) or more of the shares of Series B
Preferred Stock originally issued remain outstanding (such number of shares
being subject to proportional adjustment to reflect any subsequent stock
dividends, combinations, splits, recapitalizations and the like with respect to
the Preferred Stock), the holders of such shares of Series B Preferred Stock
shall be entitled to elect two (2) directors of this corporation at each annual
election of directors. As long as five hundred thousand (500,000) or more of the
shares of Series C Preferred Stock originally issued remain outstanding (such
number of shares being subject to proportional adjustment to reflect any
subsequent stock dividends, combinations, splits, recapitalizations and the like
with respect to the Preferred Stock), the holders of such shares of Series C
Preferred Stock shall be entitled to elect one (1) director of this corporation
at each annual election of directors. The holders of outstanding Common Stock
shall be entitled to elect one (1) director of this corporation at each annual
election of directors. The holders of Preferred Stock and Common Stock (voting
together as a single class and not as a separate series, and on an as-converted
basis) shall be entitled to elect any remaining directors of this corporation.
In the case of any vacancy (other than a vacancy caused by removal) in
the office of a director occurring among the directors elected by the holders of
a class or series of stock pursuant to this Section 5(b), the remaining
directors so elected by that class or series may by affirmative vote of a
majority thereof (or the remaining director so elected if there be but one, or
if there are no such directors remaining, by the affirmative vote of the holders
of a majority of the shares of that class or series), elect a successor or
successors to hold office for the unexpired term of the director or directors
whose place or places shall be vacant. Any director who shall have been elected
by the holders of a class or series of stock or by any directors so elected as
provided in the immediately preceding sentence hereof may be removed during the
aforesaid term of office, either with or without cause, by, and only by, the
affirmative vote of the holders of the shares of the class or series of stock
entitled to elect such director or directors, given either at a special meeting
of such stockholders duly called for that purpose or pursuant to a written
consent of stockholders, and any vacancy thereby created may be filled by the
holders of that class or series of stock represented at the meeting or pursuant
to unanimous written consent.
12
<PAGE>
6. Protective Provisions.
---------------------
(a) So long as any shares of Preferred Stock are outstanding,
this corporation shall not without first obtaining the approval (by vote or
written consent, as provided by law) of the holders of at least a majority of
the then outstanding shares of Preferred Stock (voting together as one class and
on an as-converted basis):
(i) sell, convey, or otherwise dispose of all or
substantially all of its property or business or merge into or consolidate with
any other corporation (other than a wholly-owned subsidiary corporation) or
effect any transaction or series of related transactions in which more than
fifty percent (50%) of the voting power of this corporation is disposed of;
(ii) alter or change the rights, preferences or privileges
of the shares of any series of Preferred Stock so as to affect adversely the
shares;
(iii) increase or decrease (other than by conversion) the
total number of authorized shares of Preferred Stock;
(iv) authorize or issue, or obligate itself to issue, any
other equity security, including any other security convertible into or
exercisable for any equity security having a preference over, or being on a
parity with, the Preferred Stock with respect to voting, dividends or upon
liquidation;
(v) effect a reclassification or recapitalization of the
outstanding capital stock of the corporation; or
(vi) pay, declare or set aside any sums for the payment of
any dividends, or make any distributions on, any shares of its capital stock, or
redeem or repurchase any of its capital stock; provided, however that this
corporation may repurchase the unvested shares of former service providers to
this corporation at the original issue price of such shares.
(b) So long as any shares of Series C Preferred Stock are
outstanding, this corporation shall not without first obtaining the approval (by
vote or written consent, as provided by law) of the holders of at least two-
thirds of the then outstanding shares of Series C Preferred Stock:
(i) amend its Certificate of Incorporation or Bylaws to
alter or change the rights, preferences or privileges of the Series C Preferred
Stock; or
(ii) increase or decrease the total number of authorized
shares of Series C Preferred Stock.
7. Status of Converted Stock. In the event any shares of
-------------------------
Preferred Stock shall be converted pursuant to Section 4 hereof, the shares so
converted shall be canceled and shall not be issuable by this corporation. The
Restated Certificate of Incorporation of this
13
<PAGE>
corporation shall be appropriately amended to effect the corresponding reduction
in this corporation's authorized capital stock.
C. Common Stock.
------------
1. Dividend Rights. Subject to the prior rights of holders of
---------------
all classes of stock at the time outstanding having prior rights as to
dividends, the holders of the Common Stock shall be entitled to receive, when
and as declared by the Board of Directors, out of any assets of this corporation
legally available therefor, such dividends as may be declared from time to time
by the Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or
------------------
winding up of this corporation, the assets of this corporation shall be
distributed as provided in Section 2 of Division (B) of this Article IV hereof.
3. Redemption. The Common Stock is not redeemable.
----------
4. Voting Rights. The holder of each share of Common Stock
-------------
shall have the right to one vote, and shall be entitled to notice of any
stockholders' meeting in accordance with the bylaws of this corporation, and
shall be entitled to vote upon such matters and in such manner as may be
provided by law.
ARTICLE V
Except as otherwise provided in this Restated Certificate of
Incorporation, in furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, repeal, alter,
amend and rescind any or all of the Bylaws of this corporation.
ARTICLE VI
The number of directors of this corporation shall be fixed from time
to time by a bylaw or amendment thereof duly adopted by the Board of Directors
or by the stockholders.
ARTICLE VII
Elections of directors need not be by written ballot unless the Bylaws
of this corporation shall so provide.
ARTICLE VIII
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of this corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of this corporation.
14
<PAGE>
ARTICLE IX
A director of this corporation shall, to the fullest extent permitted
by the Delaware General Corporation Law as it now exists or as it may hereafter
be amended, not be personally liable to this corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to this
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived any improper personal benefit. If the Delaware
General Corporation Law is amended, after approval by the stockholders of this
Article, to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of this
corporation shall be eliminated or limited to the fullest extent permitted by
the Delaware General Corporation Law as so amended.
Any amendment, repeal or modification of the foregoing provisions of
this Article IX, or the adoption of any provision in an amended or restated
Certificate of Incorporation inconsistent with this Article IX, by the
stockholders of this corporation shall not apply to or adversely affect any
right or protection of a director of this corporation existing at the time of
such amendment, repeal, modification or adoption.
ARTICLE X
To the fullest extent permitted by applicable law, this corporation is
authorized to provide indemnification of (and advancement of expenses to) such
agents of this corporation (and any other persons to which Delaware law permits
this corporation to provide indemnification) through bylaw provisions,
agreements with such agents or other persons, vote of stockholders or
disinterested directors or otherwise, in excess of the indemnification and
advancement otherwise permitted by Section 145 of the Delaware General
Corporation Law, subject only to limits created by applicable Delaware law
(statutory or non-statutory), with respect to actions for breach of duty to this
corporation, its stockholders, and others.
Any amendment, repeal or modification of any of the foregoing
provisions of this Article X shall not adversely affect any right or protection
of a director, officer, agent or other person existing at the time of, or
increase the liability of any director of this corporation with respect to any
acts or omissions of such director, officer or agent occurring prior to such
amendment, repeal or modification.
ARTICLE XI
This corporation reserves the right to amend, alter, change or repeal
any provision contained in this Restated Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, except as otherwise provided in
this Restated Certificate of Incorporation, and all rights conferred upon
stockholders herein are granted subject to this reservation.
* * *
15
<PAGE>
FOUR: That thereafter said amendment and restatement was duly adopted
in accordance with the provisions of Section 242 and Section 245 of the General
Corporation Law.
16
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this certificate on
September __, 1999.
_______________________________________________
Barry James Folsom, President
_______________________________________________
James E. Graber, Secretary
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
PLACEWARE, INC.
Barry James Folsom and Kevin R. Evans hereby certify that:
ONE: The original name of this corporation is Coyote Hill Systems, Inc.
and the date of filing the original Certificate of Incorporation of this
corporation with the Secretary of State of the State of Delaware was October 24,
1996.
TWO: They are the duly elected and acting President and Secretary of
PlaceWare, Inc., a Delaware corporation.
THREE: The Certificate of Incorporation of this corporation is hereby
amended and restated to read as follows:
I.
The name of this corporation is PlaceWare, Inc.
II.
The address of the registered office of the corporation in the State of
Delaware is 15 East North Street, in the city of Dover, County of Kent. The
name of its registered agent at such address is Incorporating Services, Ltd.
III.
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware.
IV.
A. This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the corporation is authorized to issue is three hundred
fifty million (350,000,000) shares. Three hundred million (300,000,000) shares
shall be Common Stock, each having a par value of one-hundredth of one cent
($.0001). Fifty million (50,000,000) shares shall be Preferred Stock, each
having a par value of one-hundredth of one cent ($.0001).
B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, by filing a certificate (a
"Preferred Stock Designation") pursuant to the Delaware General Corporation Law
("DGCL"), to fix or alter from time to time the designation, powers, preferences
and rights of the shares of each such series and the qualifications, limitations
or restrictions of any wholly unissued series of Preferred Stock, and to
1.
<PAGE>
establish from time to time the number of shares constituting any such series or
any of them; and to increase or decrease the number of shares of any series
subsequent to the issuance of shares of that series, but not below the number of
shares of such series then outstanding. In case the number of shares of any
series shall be decreased in accordance with the foregoing sentence, the shares
constituting such decrease shall resume the status that they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
V.
For the management of the business and for the conduct of the affairs of
the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A. Voting Rights
1. The management of the business and the conduct of the affairs of
the corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be fixed
exclusively by one or more resolutions adopted by the Board of Directors.
2. Board of Directors
(a) Subject to the rights of the holders of any series of
Preferred Stock to elect additional directors under specified circumstances,
following the closing of the initial public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the "1993
Act"), covering the offer and sale of Common Stock to the public (the "Initial
Public Offering"), the directors shall be divided into three classes designated
as Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors. At the first annual meeting of stockholders following the closing
of the Initial Public Offering, the term of office of the Class I directors
shall expire and Class I directors shall be elected for a full term of three
years. At the second annual meeting of stockholders following the Initial Public
Offering, the term of office of the Class II directors shall expire and Class II
directors shall be elected for a full term of three years. At the third annual
meeting of stockholders following the Initial Public Offering, the term of
office of the Class III directors shall expire and Class III directors shall be
elected for a full term of three years. At each succeeding annual meeting of
stockholders, directors shall be elected for a full term of three years to
succeed the directors of the class whose terms expire at such annual meeting.
During such time or times that the corporation is subject to Section 2115(b) of
the California General Corporation Law ("CGCL"), this Section A.2.a of this
Article V shall become effective and be applicable only when the corporation is
a "listed" corporation within the meaning of Section 301.5 of the CGCL.
(b) In the event that the corporation is unable to have a
classified board under applicable law, Section 301.5 of the CGCL, Section
A. 2. a. of this Article V shall not
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apply and all directors shall be elected at each annual meeting of stockholders
to hold office until the next annual meeting.
(c) No stockholder entitled to vote at an election for directors
may cumulate votes to which such stockholder is entitled, unless, at the time of
such election, the corporation (i) is subject to Section 2115(b) of the CGCL and
(ii) is not or ceases to be a "listed" corporation under Section 301.5 of the
CGCL. During this time, every stockholder entitled to vote at an election for
directors may cumulate such stockholder's votes and give one candidate a number
of votes equal to the number of directors to be elected multiplied by the number
of votes to which such stockholder's shares are otherwise entitled, or
distribute the stockholder's votes on the same principle among as many
candidates as such stockholder thinks fit. No stockholder, however, shall be
entitled to so cumulate such stockholder's votes unless (i) the names of such
candidate or candidates have been placed in nomination prior to the voting and
(ii) the stockholder has given notice at the meeting, prior to the voting, of
such stockholder's intention to cumulate such stockholder's votes. If any
stockholder has given proper notice to cumulate votes, all stockholders may
cumulate their votes for any candidates who have been properly placed in
nomination. Under cumulative voting, the candidates receiving the highest number
of votes, up to the number of directors to be elected, are elected.
Notwithstanding the foregoing provisions of this section, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
3. Removal of Directors
a. During such time or times that the corporation is subject to
Section 2115(b) of the CGCL, the Board of Directors or any individual director
may be removed from office at any time without cause by the affirmative vote of
the holders of at least a majority of the outstanding shares entitled to vote on
such removal; provided, however, that unless the entire Board is removed, no
individual director may be removed when the votes cast against such director's
removal, or not consenting in writing to such removal, would be sufficient to
elect that director if voted cumulatively at an election which the same total
number of votes were cast (or, if such action is taken by written consent, all
shares entitled to vote were voted) and the entire number of directors
authorized at the time of such director's most recent election were then being
elected.
b. At any time or times that the corporation is not subject to
Section 2115(b) of the CGCL and subject to any limitations imposed by law,
Section A. 3. a. above shall no longer apply and removal shall be as provided in
Section 141(k) of the DGCL.
4. Vacancies
(a) Subject to the rights of the holders of any series of
Preferred Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of
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directors, shall, unless the Board of Directors determines by resolution that
any such vacancies or newly created directorships shall be filled by the
stockholders, except as otherwise provided by law, be filled only by the
affirmative vote of a majority of the directors then in office, even though less
than a quorum of the Board of Directors, and not by the stockholders. Any
director elected in accordance with the preceding sentence shall hold office for
the remainder of the full term of the director for which the vacancy was created
or occurred and until such director's successor shall have been elected and
qualified.
(b) If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in offices as aforesaid, which election shall be governed by Section 211 of the
DGCL.
(c) At any time or times that the corporation is subject to
Section 2115(b) of the CGCL, if, after the filling of any vacancy by the
directors then in office who have been elected by stockholders shall constitute
less than a majority of the directors then in office, then
(i) Any holder or holders of an aggregate of five percent
(5%) or more of the total number of shares at the time outstanding having the
right to vote for those directors may call a special meeting of stockholders; or
(ii) The Superior Court of the proper county shall, upon
application of such stockholder or stockholders, summarily order a special
meeting of stockholders, to be held to elect the entire board, all in accordance
with Section 305(c) of the CGCL. The term of office of any director shall
terminate upon that election of a successor.
B. Bylaws
1. Bylaw Amendments
Subject to paragraph (h) of Section 43 of the Bylaws, the Bylaws
may be altered or amended or new Bylaws adopted by the affirmative vote of at
least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of
the then-outstanding shares of the voting stock of the corporation entitled to
vote. The Board of Directors shall also have the power to adopt, amend, or
repeal Bylaws.
2. The directors of the corporation need not be elected by written
ballot unless the Bylaws so provide.
3. No action shall be taken by the stockholders of the corporation
except at an annual or special meeting of stockholders called in accordance with
the Bylaws or by written consent of stockholders in accordance with the Bylaws
prior to the closing of the Initial Public
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Offering and following the closing of the Initial Public Offering no action
shall be taken by the stockholders by written consent.
4. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the corporation shall be given in the manner provided in the
Bylaws of the corporation.
VI.
A. The liability of the directors for monetary damages shall be
eliminated to the fullest extent under applicable law.
B. This corporation is authorized to provide indemnification of agents
(as defined in Section 317 of the CGCL) for breach of duty to the corporation
and its shareholders through bylaw provisions or through agreements with the
agents, or through shareholder resolutions, or otherwise, in excess of the
indemnification otherwise permitted by Section 317 of the CGCL, subject, at any
time or times the corporation is subject to Section 2115(b) to the limits on
such excess indemnification set forth in Section 204 of the CGCL.
C. Any repeal or modification of this Article VI shall be prospective and
shall not affect the rights under this Article VI in effect at the time of the
alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VII.
A. 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, except as provided in paragraph B. of this
Article VII, and all rights conferred upon the stockholders herein are granted
subject to this reservation.
B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then-outstanding shares of the voting stock, voting together
as a single class, shall be required to alter, amend or repeal Articles V, VI,
and VII.
FOUR: This Restated Certificate of Incorporation has been duly approved by
the Board of Directors of this Corporation.
FIVE: This Restated Certificate of Incorporation has been duly adopted in
accordance with the provisions of Sections 228, 242 and 245 of the General
Corporation Law of the State of Delaware by the Board of Directors and the
stockholders of the Corporation. The total number of outstanding shares entitled
to vote or act by written consent was 1,463,451 shares of Common Stock,
1,705,000 shares of Series A Preferred, 5,120,000 shares of Series B Preferred
and 4,954,785 shares of Series C Preferred. A majority of the outstanding shares
of
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Common Stock, Series A Preferred, Series B Preferred and Series C Preferred
approved this Restated Certificate of Incorporation by written consent in
accordance with Section 228 of the General Corporation Law of the State of
Delaware and written notice of such was given by the Corporation in accordance
with said Section 228.
6.
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In Witness Whereof, PlaceWare, Inc. has caused this Restated Certificate of
Incorporation to be signed by the President and Secretary in Mountain View,
California, this _______ day of _______________ 2000.
PlaceWare, Inc.
By:_________________________________
Barry James Folsom, President
Attest:
By:____________________________
Kevin R. Evans, Secretary
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EXHIBIT 3.3
BYLAWS
OF
PLACEWARE, INC.
(formerly COYOTE HILL SYSTEMS, INC.)
ARTICLE I
OFFICES
Section 1. The registered office shall be in the City of Dover,
County of Kent, State of Delaware.
Section 2. 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.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of
directors shall be held in the City of Palo Alto, State of California, at such
place as may be fixed from time to time by the Board of Directors, or at such
other place either within or without the State of Delaware as shall be
designated from time to time by the Board of Directors and stated in the notice
of the meeting. Meetings of stockholders for any other purpose may be held at
such time and place, within or without the State of Delaware, as shall be stated
in the notice of the meeting or in a duly executed waiver of notice thereof.
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Section 2. Annual meetings of stockholders, commencing with the year
1997, shall be held at such date and time as shall be designated from time to
time by the Board of Directors and stated in the notice of the meeting, at which
they shall elect by a plurality vote a board of directors, and transact such
other business as may properly be brought before the meeting.
Section 3. 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 fewer than ten (10) nor more than sixty (60) days before the
date of the meeting.
Section 4. 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.
Section 5. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute 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 stockholders owning at least ten
percent
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(10%) in amount of the entire capital stock of the corporation issued and
outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting.
Section 6. 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 fewer than ten (10) nor more than sixty (60) days
before the date of the meeting, to each stockholder entitled to vote at such
meeting.
Section 7. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 8. The holders of fifty percent (50%) of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
certificate of incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the stockholders entitled to
vote thereat, present in person or represented by proxy, shall have power to
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present or represented. 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 meeting as originally
notified. 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.
Section 9. When a quorum is present at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide
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any question brought before such meeting, unless the question is one upon which
by express provision of the statutes or of the certificate of incorporation, a
different vote is required, in which case such express provision shall govern
and control the decision of such question.
Section 10. Unless otherwise provided in the certificate of
incorporation each stockholder shall at every meeting of the stockholders be
entitled to one vote in person or by proxy for each share of the capital stock
having voting power held by such stockholder, but no proxy shall be voted on
after three years from its date, unless the proxy provides for a longer period.
Section 11. 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.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole
board shall be determined by resolution of the Board of Directors or by the
stockholders at the annual meeting of the stockholders, except as provided in
Section 2 of this Article, and each director
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elected shall hold office until his successor is duly elected and qualified.
Directors need not be stockholders.
Section 2. Vacancies and newly created directorships resulting from
any increase in the authorized number of directors may be filled by a majority
of the directors then in office, though less than a quorum, or by a sole
remaining director, and the directors so chosen shall hold office until the next
annual election and until their successors are duly elected and shall qualify,
unless sooner displaced. If there are no directors in office, then an election
of directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent of
the total number of the shares at the time outstanding having the right to vote
for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.
Section 3. The business of the corporation shall be managed by or
under the direction of its board of directors which may exercise all such powers
of the corporation and do all such lawful acts and things as are not by statute
or by the certificate of incorporation or by these bylaws directed or required
to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
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Section 5. The first meeting of each newly elected Board of Directors
shall be held at such time and place as shall be fixed by the vote of the
stockholders at the annual meeting and no notice of such meeting shall be
necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present. In the event of the failure of the
stockholders to fix the time or place of such first meeting of the newly elected
Board of Directors, or in the event such meeting is not held at the time and
place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for
special meetings of the Board of Directors, or as shall be specified in a
written waiver signed by all of the directors.
Section 6. Regular meetings of the Board of Directors may be held
without notice at such time and at such place as shall from time to time be
determined by the board.
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Section 7. Special meetings of the board may be called by the
president on two (2) days' notice to each director by mail or forty-eight (48)
hours notice to each director either personally or by telegram; special meetings
shall be called by the president or secretary in like manner and on like notice
on the written request of two directors unless the board consists of only one
director, in which case special meetings shall be called by the president or
secretary in like manner and on like notice on the written request of the sole
director.
Section 8. At all meetings of the board a majority of the directors
shall constitute a quorum for the transaction of business and the act of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 9. Unless otherwise restricted by the certificate of
incorporation of these bylaws, any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee thereof may be taken
without a meeting, if all members of the board or committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the board or committee.
Section 10. Unless otherwise restricted by the certificate of
incorporation or these bylaws, members of the Board of Directors, or any
committee designated by the Board of Directors, may participate in a meeting of
the Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons
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participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The Board of Directors may, by resolution passed by a
majority of the whole board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee.
In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member.
Any such committee, to the extent provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to amending the certificate of incorporation, adopting an
agreement of merger or consolidation, recommending to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the bylaws of the corporation; and,
unless the resolution or the certificate of incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend or to
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authorize the issuance of stock. Such committee or committees shall have such
name or names as may be determined from time to time by resolution adopted by
the Board of Directors.
Section 12. Each committee shall keep regular minutes of its meetings
and report the same to the Board of Directors when required.
COMPENSATION OF DIRECTORS
Section 13. Unless otherwise restricted by the certificate of
incorporation or these bylaws, the Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be paid
a fixed sum for attendance at each meeting of the Board of Directors or a stated
salary as director. No such payment shall preclude any director from serving
the corporation in any other capacity and receiving compensation therefor.
Members of special or standing committees may be allowed like compensation for
attending committee meetings.
REMOVAL OF DIRECTORS
Section 14. Unless otherwise restricted by the certificate of
incorporation or bylaw, any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of shares entitled
to vote at an election of directors.
ARTICLE IV
NOTICES
Section 1. Whenever, under the provisions of the statutes or of the
certificate of incorporation or of these bylaws, notice is required to be given
to any director or stockholder, it shall not be construed to mean personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his address as it appears on the records of the
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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.
Notice to directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under the
provisions of the statutes or of the certificate of incorporation or of these
bylaws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the
Board of Directors and shall be two (2) co-presidents, a treasurer and a
secretary. Each co-president shall have the full power and authority that a
sole president acting alone would have within the Office of the Presidency, and
each co-president, acting either together or separately, shall have full
authority to act on behalf of the Office of the Presidency and the corporation
as "President" of the corporation. The Board of Directors may elect from among
its members a Chairman of the Board and a Vice Chairman of the Board. The Board
of Directors may also choose one or more vice-presidents, assistant secretaries
and assistant treasurers. Any number of offices may be held by the same person,
unless the certificate of incorporation or these bylaws otherwise provide.
Section 2. The Board of Directors at its first meeting after each
annual meeting of stockholders shall choose a president, a treasurer, and a
secretary and may choose vice presidents.
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Section 3. The Board of Directors may appoint such other officers and
agents as it shall deem necessary who shall hold their offices for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the board.
Section 4. The salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
Section 5. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by
the Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
corporation shall be filled by the Board of Directors.
THE CHAIRMAN OF THE BOARD
Section 6. The Chairman of the Board, if any, shall preside at all
meetings of the Board of Directors and of the stockholders at which he shall be
present. He shall have and may exercise such powers as are, from time to time,
assigned to him by the Board and as may be provided by law.
Section 7. In the absence of the Chairman of the Board, the Vice
Chairman of the Board, if any, shall preside at all meetings of the Board of
Directors and of the stockholders at which he shall be present. He shall have
and may exercise such powers as are, from time to time, assigned to him by the
Board and as may be provided by law.
THE PRESIDENT AND VICE-PRESIDENTS
Section 8. The president or co-presidents shall be the chief
executive officer(s) of the corporation; and in the absence of the Chairman and
Vice Chairman of the Board, the president or each of the co-presidents shall
have the authority to preside at all meetings of the
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stockholders and the Board of Directors; he or they shall have general and
active management of the business of the corporation and shall see that all
orders and resolutions of the Board of Directors are carried into effect.
Section 9. The president or each of the co-presidents shall have the
authority, acting either together or separately, to 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.
Section 10. In the absence of the president or both co-presidents or
in the event of their inability or refusal to act, the vice-president, if any,
(or in the event there be more than one vice-president, the vice-presidents in
the order designated by the directors, or in the absence of any designation,
then in the order of their election) shall perform the duties of the president,
and when so acting, shall have all the powers of and be subject to all the
restrictions upon the president. The vice-presidents shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe.
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THE SECRETARY AND ASSISTANT SECRETARY
Section 11. The secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings of
the meetings of the corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
president, under whose supervision he shall be. He shall have custody of the
corporate seal of the corporation and he, or an assistant secretary, shall have
authority to affix the same to any instrument requiring it and when so affixed,
it may be attested by his signature or by the signature of such assistant
secretary. The Board of Directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by his
signature.
Section 12. The assistant secretary, or if there be more than one,
the assistant secretaries in the order determined by the Board of Directors (or
if there be no such determination, then in the order of their election) shall,
in the absence of the secretary or in the event of his inability or refusal to
act, perform the duties and exercise the powers of the secretary and shall
perform such other duties and have such other powers as the board of directors
may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 13. The treasurer shall have the custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name
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and to the credit of the corporation in such depositories as may be designated
by the Board of Directors.
Section 14. He shall disburse the funds of the corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the president and the Board of Directors, at
its regular meetings, or when the Board of Directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 15. If required by the Board of Directors, he shall give the
corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his office and for the restoration to
the corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in his possession or under his control belonging to the corporation.
Section 16. The assistant treasurer, or if there shall be more than
one, the assistant treasurers in the order determined by the Board of Directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the treasurer or in the event of his inability or
refusal to act, perform the duties and exercise the powers of the treasurer and
shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
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ARTICLE VI
CERTIFICATE OF STOCK
Section 1. Every holder of stock in the corporation shall be entitled
to have a certificate, signed by, or in the name of the corporation by, the
chairman or vice-chairman of the Board of Directors, or the president or a vice-
president and the treasurer or an assistant treasurer, or the secretary or an
assistant secretary of the corporation, certifying the number of shares owned by
him in the corporation.
Certificates may be issued for partly paid shares and in such case
upon the face or back of the certificates issued to represent any such partly
paid shares, the total amount of the consideration to be paid therefor, and the
amount paid thereon shall be specified.
If the corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualification, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in section 202 of the General Corporation Law of Delaware, in
lieu of the foregoing requirements, there may be set forth on the face or back
of the certificate which the corporation shall issue to represent such class or
series of stock, a statement that the corporation will furnish without charge to
each stockholder who so requests the powers, 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.
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Section 2. Any of or all the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a 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 date of issue.
LOST CERTIFICATES
Section 3. 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.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall be
the duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
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FIXING RECORD DATE
Section 5. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholder 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 nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. 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.
REGISTERED STOCKHOLDERS
Section 6. The corporation shall be entitled to recognize the
exclusive right of a person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold liable for calls and
assessments a person registered on its books as the owner of shares and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
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ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation,
subject to the provisions of the certificate of incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, 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.
Section 2. 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
purposes 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.
CHECKS
Section 3. 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.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
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SEAL
Section 5. The Board of Directors may adopt a corporate seal having
inscribed thereon the name of the corporation, the year of its organization and
the words "Corporate Seal, Delaware". The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced or otherwise.
INDEMNIFICATION
Section 6. The corporation shall, to the fullest extent authorized
under the laws of the State of Delaware, as those laws may be amended and
supplemented from time to time, indemnify any director made, or threatened to be
made, a party to an action or proceeding, whether criminal, civil,
administrative or investigative, by reason of being a director of the
corporation or a predecessor corporation or, at the corporation's request, a
director or officer of another corporation, provided, however, that the
corporation shall indemnify any such agent in connection with a proceeding
initiated by such agent only if such proceeding was authorized by the Board of
Directors of the corporation. The indemnification provided for in this Section
6 shall: (i) not be deemed exclusive of any other rights to which those
indemnified may be entitled under any bylaw, agreement or vote of stockholders
or disinterested directors or otherwise, both as to action in their official
capacities and as to action in another capacity while holding such office, (ii)
continue as to a person who has ceased to be a director, and (iii) inure to the
benefit of the heirs, executors and administrators of such a person. The
corporation's obligation to provide indemnification under this Section 6 shall
be offset to the extent of any other source of indemnification or any otherwise
applicable insurance coverage under a policy maintained by the corporation or
any other person.
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Expenses incurred by a director of the corporation in defending a
civil or criminal action, suit or proceeding by reason of the fact that he is or
was a director of the corporation (or was serving at the corporation's request
as a director or officer of another corporation) shall be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the corporation as authorized by relevant sections of the
General Corporation Law of Delaware. Notwithstanding the foregoing, the
corporation shall not be required to advance such expenses to an agent who is a
party to an action, suit or proceeding brought by the corporation and approved
by a majority of the Board of Directors of the corporation which alleges willful
misappropriation of corporate assets by such agent, disclosure of confidential
information in violation of such agent's fiduciary or contractual obligations to
the corporation or any other willful and deliberate breach in bad faith of such
agent's duty to the corporation or its stockholders.
The foregoing provisions of this Section 6 shall be deemed to be a
contract between the corporation and each director who serves in such capacity
at any time while this bylaw is in effect, and any repeal or modification
thereof shall not affect any rights or obligations then existing with respect to
any state of facts then or theretofore existing or any action, suit or
proceeding theretofore or thereafter brought based in whole or in part upon any
such state of facts.
The Board of Directors in its discretion shall have power on behalf of
the corporation to indemnify any person, other than a director, made a party to
any action, suit or
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proceeding by reason of the fact that he, his testator or intestate, is or was
an officer or employee of the corporation.
To assure indemnification under this Section 6 of all directors,
officers and employees who are determined by the corporation or otherwise to be
or to have been "fiduciaries" of any employee benefit plan of the corporation
which may exist from time to time, Section 145 of the General Corporation Law of
Delaware shall, for the purposes of this Section 6, be interpreted as follows:
an "other enterprise" shall be deemed to include such an employee benefit plan,
including without limitation, any plan of the corporation which is governed by
the Act of Congress entitled "Employee Retirement Income Security Act of 1974,"
as amended from time to time; the corporation shall be deemed to have requested
a person to serve an employee benefit plan where the performance by such person
of his duties to the corporation also imposes duties on, or otherwise involves
services by, such person to the plan or participants or beneficiaries of the
plan; excise taxes assessed on a person with respect to an employee benefit plan
pursuant to such Act of Congress shall be deemed "fines."
ARTICLE VIII
AMENDMENTS
Section 1. These bylaws may be altered, amended or repealed or new
bylaws 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 notice of such alteration, amendment, repeal or adoption of new
bylaws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal bylaws is
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conferred upon the Board of Directors by the certificate or incorporation it
shall not divest or limit the power of the stockholders to adopt, amend or
repeal bylaws.
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CERTIFICATE OF SECRETARY OF
COYOTE HILL SYSTEMS, INC.
The undersigned, Steven M. Spurlock, hereby certifies that he is the
duly elected and acting Secretary of Coyote Hill Systems, Inc., a Delaware
corporation (the "Corporation"), and that the Bylaws attached hereto constitute
the Bylaws of said Corporation as duly adopted by Action by Written Consent in
Lieu of Organizational Meeting by the Sole Director on October 24, 1996.
IN WITNESS WHEREOF, the undersigned has hereunto subscribed his name
this 24th day of October, 1996.
_______________________________________
Steven M. Spurlock
Secretary
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EXHIBIT 3.4
BYLAWS
OF
PLACEWARE, INC.
(A DELAWARE CORPORATION)
As Amended and Restated on February 29, 2000
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE I OFFICES......................................................................................... 1
Section 1. Registered Office........................................................................... 1
Section 2. Other Offices............................................................................... 1
ARTICLE II CORPORATE SEAL.................................................................................. 1
Section 3. Corporate Seal.............................................................................. 1
ARTICLE III STOCKHOLDERS' MEETINGS.......................................................................... 1
Section 4. Place of Meetings........................................................................... 1
Section 5. Annual Meeting.............................................................................. 2
Section 6. Special Meetings............................................................................ 3
Section 7. Notice of Meetings.......................................................................... 4
Section 8. Quorum...................................................................................... 4
Section 9. Adjournment and Notice of Adjourned Meetings................................................ 4
Section 10. Voting Rights............................................................................... 4
Section 11. Joint Owners of Stock....................................................................... 5
Section 12. List of Stockholders........................................................................ 5
Section 13. Organization................................................................................ 6
ARTICLE IV DIRECTORS....................................................................................... 6
Section 14. Number and Term of Office................................................................... 6
Section 15. Powers...................................................................................... 7
Section 16. Classes Of Directors........................................................................ 7
Section 17. Term of Directors........................................................................... 7
Section 18. Vacancies................................................................................... 8
Section 19. Resignation................................................................................. 8
Section 20. Removal..................................................................................... 8
Section 21. ................................................................................................
(a) Annual Meetings............................................................................. 9
(b) Regular Meetings............................................................................ 9
(c) Special Meetings............................................................................ 9
(d) Telephone Meetings.......................................................................... 9
(e) Notice of Meetings.......................................................................... 9
(f) Waiver of Notice............................................................................ 10
Section 22. Quorum and Voting........................................................................... 10
Section 23. Action Without Meeting...................................................................... 10
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Section 24. Fees and Compensation....................................................................... 10
Section 25. Committees.................................................................................. 10
(a) Executive Committee......................................................................... 10
(b) Other Committees............................................................................ 11
(c) Term........................................................................................ 11
(d) Meetings.................................................................................... 11
Section 26. Organization................................................................................ 11
ARTICLE V OFFICERS........................................................................................ 12
Section 27. Officers Designated......................................................................... 12
Section 28. Tenure and Duties of Officers............................................................... 12
(a) General..................................................................................... 12
(b) Duties of Chairman of the Board of Directors................................................ 12
(c) Duties of President......................................................................... 12
(d) Duties of Vice Presidents................................................................... 12
(e) Duties of Secretary......................................................................... 12
(f) Duties of Chief Financial Officer........................................................... 13
Section 29. Delegation of Authority..................................................................... 13
Section 30. Resignations................................................................................ 13
Section 31. Removal..................................................................................... 13
ARTICLE VI EXECUTION OF CORPORATE INSTRUMENTS AND VOTING
OF SECURITIES OWNED BY THE CORPORATION.......................................................... 13
Section 32. Execution of Corporate Instruments.......................................................... 13
Section 33. Voting of Securities Owned by the Corporation............................................... 14
ARTICLE VII SHARES OF STOCK................................................................................. 14
Section 34. Form and Execution of Certificates.......................................................... 14
Section 35. Lost Certificates........................................................................... 15
Section 36. Transfers................................................................................... 15
Section 37. Fixing Record Dates......................................................................... 15
Section 38. Registered Stockholders..................................................................... 16
ARTICLE VIII OTHER SECURITIES OF THE CORPORATION............................................................. 16
Section 39. Execution of Other Securities............................................................... 16
ARTICLE IX DIVIDENDS....................................................................................... 17
Section 40. Declaration of Dividends.................................................................... 17
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Section 41. Dividend Reserve............................................................................ 17
ARTICLE X FISCAL YEAR..................................................................................... 17
Section 42. Fiscal Year................................................................................. 17
ARTICLE XI INDEMNIFICATION................................................................................. 17
Section 43. Indemnification of Directors, Executive Officers, Other Officers,
Employees and Other Agents.................................................................. 17
(a) Directors and Executive Officers............................................................ 17
(b) Other Officers, Employees and Other Agents.................................................. 18
(c) Expenses.................................................................................... 18
(d) Enforcement................................................................................. 18
(e) Non-Exclusivity of Rights................................................................... 19
(f) Survival of Rights.......................................................................... 19
(g) Insurance................................................................................... 19
(h) Amendments.................................................................................. 19
(i) Saving Clause............................................................................... 19
(j) Certain Definitions......................................................................... 19
ARTICLE XII NOTICES......................................................................................... 20
Section 44. Notices..................................................................................... 20
(a) Notice to Stockholders...................................................................... 20
(b) Notice to Directors......................................................................... 20
(c) Affidavit of Mailing........................................................................ 20
(d) Time Notices Deemed Given................................................................... 21
(e) Methods of Notice........................................................................... 21
(f) Failure to Receive Notice................................................................... 21
(g) Notice to Person with Whom Communication Is Unlawful........................................ 21
(h) Notice to Person with Undeliverable Address................................................. 21
ARTICLE XIII AMENDMENTS...................................................................................... 21
Section 45. Amendments.................................................................................. 21
ARTICLE XIV MISCELLANEOUS................................................................................... 24
Section 46. Annual Report............................................................................... 24
</TABLE>
<PAGE>
BYLAWS
OF
PLACEWARE, INC.
(A DELAWARE CORPORATION)
ARTICLE I
Offices
Section 1. Registered Office. The registered office of the corporation in
the State of Delaware shall be in the City of Dover, County of Kent.
Section 2. Other Offices. The corporation shall also have and maintain an
office or principal place of business at such place as may be fixed by the Board
of Directors, and 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.
ARTICLE II
Corporate Seal
Section 3. Corporate Seal. If the Board of Directors adopts a corporate
seal, such corporate seal shall consist of a die bearing the name of the
corporation and the inscription, "Corporate Seal-Delaware." Said seal may be
used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
ARTICLE III
Stockholders' Meetings
Section 4. Place of Meetings. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the principal office of the corporation required
to be maintained pursuant to Section 2 hereof.
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Section 5. Annual Meeting.
(a) The annual meeting of the stockholders of the corporation, for
the purpose of election of directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors.
(b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be: (A) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, (B) otherwise properly brought before the meeting by
or at the direction of the Board of Directors, or (C) otherwise properly brought
before the meeting by a stockholder. For business to be properly brought before
an annual meeting by a stockholder, 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 not later than the close of
business on the sixtieth (60th) day nor earlier than the close of business on
the ninetieth (90th) day prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that no annual meeting was
held in the previous year or the date of the annual meeting has been changed by
more than thirty (30) days from the date contemplated at the time of the
previous year's proxy statement, notice by the stockholder to be timely must be
so received not earlier than the close of business on the ninetieth (90th) day
prior to such annual meeting and not later than the close of business on the
later of the sixtieth (60th) day prior to such annual meeting or, in the event
public announcement of the date of such annual meeting is first made by the
corporation fewer than seventy (70) days prior to the date of such annual
meeting, the close of business on the tenth (10th) day following the day on
which public announcement of the date of such meeting is first made by the
corporation. A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting: (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and address, as they appear on the corporation's books, of the stockholder
proposing such business, (iii) the class and number of shares of the corporation
which are beneficially owned by the stockholder, (iv) any material interest of
the stockholder in such business and (v) any other information that is required
to be provided by the stockholder pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), in his capacity as
a proponent to a stockholder proposal. Notwithstanding the foregoing, in order
to include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholders' meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
conducted at any annual meeting except in accordance with the procedures set
forth in this paragraph (b). The chairman of the annual meeting shall, if the
facts warrant, determine and declare at the meeting that business was not
properly brought before the meeting and in accordance with the provisions of
this paragraph (b), and, if he should so determine, he shall so declare at the
meeting that any such business not properly brought before the meeting shall not
be transacted.
(c) Only persons who are nominated in accordance with the procedures
set forth in this paragraph (c) shall be eligible for election as directors.
Nominations of persons for election to the Board of Directors of the corporation
may be made at a meeting of stockholders by or at the direction of the Board of
Directors or by any stockholder of the corporation entitled to vote in the
election of directors at the meeting who complies with the notice procedures set
forth in this paragraph (c). Such nominations, other than those made by or at
the direction of the Board of Directors, shall be made pursuant to timely notice
in writing to the Secretary of the corporation in accordance with the provisions
of paragraph (b) of this Section 5. Such stockholder's notice shall set forth
(i) as to each person, if any, whom the stockholder proposes to nominate for
election or re-election as a director: (A) the name, age, business
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address and residence address of such person, (B) the principal occupation or
employment of such person, (C) the class and number of shares of the corporation
which are beneficially owned by such person, (D) a description of all
arrangements or understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nominations are to be made by the stockholder, and (E) any other information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the 1934 Act (including without limitation such
person's written consent to being named in the proxy statement, if any, as a
nominee and to serving as a director if elected); and (ii) as to such
stockholder giving notice, the information required to be provided pursuant to
paragraph (b) of this Section 5. At the request of the Board of Directors, any
person nominated by a stockholder for election as a director shall furnish to
the Secretary of the corporation that information required to be set forth in
the stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible for election as a director of the corporation unless nominated
in accordance with the procedures set forth in this paragraph (c). The chairman
of the meeting shall, if the facts warrant, determine and declare at the meeting
that a nomination was not made in accordance with the procedures prescribed by
these Bylaws, and if he should so determine, he shall so declare at the meeting,
and the defective nomination shall be disregarded.
(d) For purposes of this Section 5, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the 1934 Act.
Section 6. Special Meetings.
(a) Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, or (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board of
Directors for adoption) and shall be held at such place, on such date, and at
such time as the Board of Directors shall fix. At any time or times that the
corporation is subject to Section 2115(b) of the California General Corporation
Law ("CGCL"), stockholders holding fifty percent (50%) or more of the
outstanding shares shall have the right to call a special meeting of
stockholders as set forth in Section 18(c) herein.
(b) If a special meeting is called by any person or persons other
than the Board of Directors, the request shall be in writing, specifying the
general nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the Chairman of the Board of Directors, the Chief Executive
Officer, or the Secretary of the corporation. No business may be transacted at
such special meeting otherwise than specified in such notice. The Board of
Directors shall determine the time and place of such special meeting, which
shall be held not less than thirty-five (35) nor more than one hundred twenty
(120) days after the date of the receipt of the request. Upon determination of
the time and place of the meeting, the officer receiving the request shall cause
notice to be given to the stockholders entitled to vote, in accordance with the
provisions of Section 7 of these Bylaws. If the notice is not given within
twenty (20) days after the receipt of the request, the person or persons
requesting the meeting may set the time and place of the meeting and give the
notice. Nothing contained in this paragraph (b) shall be construed as limiting,
fixing, or affecting the time when a meeting of stockholders called by action of
the Board of Directors may be held.
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Section 7. Notice of Meetings. Except as otherwise provided by law or the
Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
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. Any stockholder so waiving notice of such meeting shall be
bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given.
Section 8. Quorum. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. In the absence of a quorum,
any meeting of stockholders may be adjourned, from time to time, either by the
chairman of the meeting or by vote of the holders of a majority of the shares
represented thereat, but no other business shall be transacted at such meeting.
The stockholders present at a duly called or convened meeting, at which a quorum
is present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by law, the Certificate of Incorporation or these Bylaws, all
action taken by the holders of a majority of the vote cast, including
abstentions, at any meeting at which a quorum is present shall be valid and
binding upon the corporation; provided, however, that, except as set forth in
Section 17 herein, directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. Where a separate vote by a class or classes
or series is required, except where otherwise provided by the statute or by the
Certificate of Incorporation or these Bylaws, a majority of the outstanding
shares of such class or classes or series, present in person or represented by
proxy, shall constitute a quorum entitled to take action with respect to that
vote on that matter and, except where otherwise provided by statute or by the
Certificate of Incorporation or these Bylaws, the affirmative vote of the
majority (plurality, in the case of the election of directors) of the votes
cast, including abstentions, by the holders of shares of such class or classes
or series shall be the act of such class or classes or series.
Section 9. Adjournment and Notice of Adjourned Meetings. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes, excluding abstentions. When a meeting is adjourned to another
time or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting, the corporation may transact any business which might
have been transacted at the original meeting. If the adjournment is for more
than thirty (30) days or if after the adjournment a new record date is fixed for
the adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 10. Voting Rights. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote or execute consents shall have the right to do so either
in person or by an agent or agents authorized by a proxy granted in accordance
with Delaware law. An agent so appointed need not be a stockholder. No
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proxy shall be voted after three (3) years from its date of creation unless the
proxy provides for a longer period.
Section 11. Joint Owners of Stock. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the Delaware General Corporation Law, Section 217(b). If
the instrument filed with the Secretary shows that any such tenancy is held in
unequal interests, a majority or even-split for the purpose of subsection (c)
shall be a majority or even-split in interest.
Section 12. List of Stockholders. The Secretary shall prepare and make, at
least ten (10) days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at said meeting, arranged in alphabetical order,
showing the address of each stockholder and the number of shares registered in
the name of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not specified, at the place where
the meeting is to be held. The list shall be produced and kept at the time and
place of meeting during the whole time thereof and may be inspected by any
stockholder who is present.
Section 13. Organization.
(a) At every meeting of stockholders, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the President,
or, if the President is absent, a chairman of the meeting chosen by a majority
in interest of the stockholders entitled to vote, present in person or by proxy,
shall act as chairman. The Secretary, or, in his absence, an Assistant Secretary
directed to do so by the President, shall act as secretary of the meeting.
(b) The Board of Directors of the corporation shall be entitled to
make such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.
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ARTICLE IV
Directors
Section 14. Number and Term of Office.
The exact number of directors shall be set from time to time (a) by
the approval of the Board of Directors, or (b) by the affirmative vote of a
majority of the shares represented and voting at a duly held meeting at which a
quorum is present (which shares voting affirmatively also constitute at least a
majority of the required quorum) or by the written consent of shareholders
pursuant to Section 13 herein above.
Directors need not be stockholders unless so required by the Certificate of
Incorporation. If for any cause, the directors shall not have been elected at an
annual meeting, they may be elected as soon thereafter as convenient at a
special meeting of the stockholders called for that purpose in the manner
provided in these Bylaws.
Section 15. Powers. The powers of the corporation shall be exercised, its
business conducted and its property controlled by the Board of Directors, except
as may be otherwise provided by statute or by the Certificate of Incorporation.
Section 16. Classes Of Directors. Unless otherwise provided in the
Certificate of Incorporation and subject to the rights of the holders of any
series of Preferred Stock to elect additional directors under specified
circumstances, following the closing of the Initial Public Offering, the
directors shall be divided into three classes designated as Class I, Class II,
and Class III, respectively. Directors shall be assigned to each class in
accordance with a resolution or resolutions adopted by the Board of Directors.
At the first annual meeting of stockholders following the closing of the Initial
Public Offering, the term of office of the Class I directors shall expire and
Class I directors shall be elected for a full term of three years. At the second
annual meeting of stockholders following the Closing of the Initial Public
Offering, the term of office of the Class II directors shall expire and Class II
directors shall be elected for a full term of three years. At the third annual
meeting of stockholders following the closing of the Initial Public Offering,
the term of office of the Class III directors shall expire and Class III
directors shall be elected for a full term of three years. At each succeeding
annual meeting of stockholders, directors shall be elected for a full term of
three years to succeed the directors of the class whose terms expire at such
annual meeting.
Notwithstanding the foregoing provisions of this Article, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
Section 17. Term of Directors.
(a) Subject to the rights of the holders of any series of Preferred
Stock to elect additional directors under specified circumstances, directors
shall be elected at each annual meeting of stockholders for a term of one year.
Each director shall serve until his successor is duly elected and qualified or
until his death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
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(b) No person entitled to vote at an election for directors may
cumulate votes to which such person is entitled, unless, at the time of such
election, the corporation is subject to (S)2115(b) of the CGCL.
(i) During such time or times that the corporation is subject to
(S)2115(b) of the CGCL:
(ii) Every stockholder entitled to vote at an election for
directors may cumulate such stockholder's votes and give one candidate a number
of votes equal to the number of directors to be elected multiplied by the number
of votes to which such stockholder's shares are otherwise entitled, or
distribute the stockholders votes on the same principal among as many candidates
as such stockholder thinks fit. No stockholder, however, shall be entitled to so
cumulate such stockholder's votes unless (a) the names of such candidate or
candidates have been placed in nomination prior to the voting and (b) the
stockholder has given notice at the meeting, prior to the voting, of such
stockholder's intention to cumulate such stockholder's votes. If any stockholder
has given proper notice, all stockholders may cumulate their votes for any
candidates who have been properly placed in nomination. The candidates receiving
the highest number of votes, up to the number of directors to be elected, are
elected.
Section 18. Vacancies.
(a) Unless otherwise provided in the Certificate of Incorporation,
any vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other causes and any newly created directorships
resulting from any increase in the number of directors shall, unless the Board
of Directors determines by resolution that any such vacancies or newly created
directorships shall be filled by stockholders, be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum of the Board of Directors. Any director elected in accordance with the
preceding sentence shall hold office for the remainder of the full term of the
director for which the vacancy was created or occurred and until such director's
successor shall have been elected and qualified. A vacancy in the Board of
Directors shall be deemed to exist under this Bylaw in the case of the death,
removal or resignation of any director.
(b) If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder holding at
least ten percent (10%) of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in offices as
aforesaid, which election shall be governed by Section 211 of the Delaware
General Corporation Law.
(c) At any time or times that the corporation is subject to
(S)2115(b) of the CGCL, if, after the filling of any vacancy by the directors
then in office who have been elected by stockholders shall constitute less than
a majority of the directors then in office, then
(i) any holder or holders of an aggregate of five percent (5%)
or more of the total number of shares at the time outstanding having the right
to vote for those directors may call a special meeting of stockholders; or
(ii) the Superior Court of the proper county shall, upon
application of such stockholder or stockholders, summarily order a special
meeting of the stockholders, to be held to elect the
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entire board, all in accordance with Section 305(c) of the CGCL, the term of
office of any director shall terminate upon that election of a successor (CGCL
(S)305(c)).
Section 19. Resignation. Any director may resign at any time by delivering
his written resignation to the Secretary, such resignation to specify whether it
will be effective at a particular time, upon receipt by the Secretary or at the
pleasure of the Board of Directors. If no such specification is made, it shall
be deemed effective at the pleasure of the Board of Directors. When one or more
directors shall resign from the Board of Directors, effective at a future date,
a majority of the directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote thereon
to take effect when such resignation or resignations shall become effective, and
each Director so chosen shall hold office for the unexpired portion of the term
of the Director whose place shall be vacated and until his successor shall have
been duly elected and qualified.
Section 20. Removal.
(a) Subject to any limitations imposed by applicable law (and
assuming the corporation is not subject to Section 2115 of the CGCL), the Board
of Directors or any director may be removed from office at any time (i) with
cause by the affirmative vote of the holders of a majority of the voting power
of all then-outstanding shares of voting stock of the corporation entitled to
vote at an election of directors or (ii) without cause by the affirmative vote
of the holders of two-thirds of the voting power of all then-outstanding shares
of voting stock of the corporation, entitled to vote at an election of
directors.
(b) During such time or times that the corporation is subject to
Section 2115(b) of the CGCL, the Board of Directors or any individual director
may be removed from office at any time without cause by the affirmative vote of
the holders of at least a majority of the outstanding shares entitled to vote on
such removal; provided, however, that unless the entire Board is removed, no
individual director may be removed when the votes cast against such director's
removal, or not consenting in writing to such removal, would be sufficient to
elect that director if voted cumulatively at an election which the same total
number of votes were cast (or, if such action is taken by written consent, all
shares entitled to vote were voted) and the entire number of directors
authorized at the time of such director's most recent election were then being
elected
Section 21.
(a) Annual Meetings. The annual meeting of the Board of Directors
shall be held immediately before or after the annual meeting of stockholders and
at the place where such meeting is held. No notice of an annual meeting of the
Board of Directors shall be necessary and such meeting shall be held for the
purpose of electing officers and transacting such other business as
(b) Regular Meetings. Except as hereinafter otherwise provided,
regular meetings of the Board of Directors shall be held in the office of the
corporation required to be maintained pursuant to Section 2 hereof. Unless
otherwise restricted by the Certificate of Incorporation, regular meetings of
the Board of Directors may also be held at any place within or without the State
of Delaware which has been designated by resolution of the Board of Directors or
the written consent of all directors.
(c) Special Meetings. Unless otherwise restricted by the Certificate
of Incorporation, special meetings of the Board of Directors may be held at any
time and place within or without the State of Delaware whenever called by the
Chairman of the Board, the President or any two (2) of the directors.
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(d) Telephone Meetings. Any member of the Board of Directors, or of
any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.
(e) Notice of Meetings. Notice of the time and place of all special
meetings of the Board of Directors shall be orally or in writing, by telephone,
including a voice messaging system or other system or technology designed to
record and communicate messages, facsimile, telegraph or telex, or by electronic
mail or other electronic means, during normal business hours, at least twenty-
four (24) hours before the date and time of the meeting, or sent in writing to
each director by first class mail, postage prepaid, at least three (3) days
before the date of the meeting. Notice of any meeting may be waived in writing
at any time before or after the meeting and will be waived by any director by
attendance thereat, except when the director attends the 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.
(f) Waiver of Notice. The transaction of all business at any meeting
of the Board of Directors, or any committee thereof, however called or noticed,
or wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum be present and if, either before or after
the meeting, each of the directors not present shall sign a written waiver of
notice. All such waivers shall be filed with the corporate records or made a
part of the minutes of the meeting.
Section 22. Quorum and Voting.
(a) Unless the Certificate of Incorporation requires a greater number
and except with respect to indemnification questions arising under Section 43
hereof, for which a quorum shall be one-third of the exact number of directors
fixed from time to time, a quorum of the Board of Directors shall consist of a
majority of the exact number of directors fixed from time to time by the Board
of Directors in accordance with the Certificate of Incorporation; provided,
however, at any meeting, whether a quorum be present or otherwise, a majority of
the directors present may adjourn from time to time until the time fixed for the
next regular meeting of the Board of Directors, without notice other than by
announcement at the meeting.
(b) At each meeting of the Board of Directors at which a quorum is
present, all questions and business shall be determined by the affirmative vote
of a majority of the directors present, unless a different vote be required by
law, the Certificate of Incorporation or these Bylaws.
Section 23. Action Without Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
Section 24. Fees and Compensation. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
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Section 25. Committees.
(a) Executive Committee. The Board of Directors may appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and provided
in the resolution of the Board of Directors shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, and may authorize the seal of the corporation to
be affixed to all papers which may require it; but no such committee shall have
the power or authority in reference to (i) approving or adopting, or
recommending to the stockholders, any action or matter expressly required by the
Delaware General Corporation Law to be submitted to stockholders for approval,
or (ii) adopting, amending or repealing any bylaw of the corporation.
(b) Other Committees. The Board of Directors may, from time to time,
appoint such other committees as may be permitted by law. Such other committees
appointed by the Board of Directors shall consist of one (1) or more members of
the Board of Directors and shall have such powers and perform such duties as may
be prescribed by the resolution or resolutions creating such committees, but in
no event shall any such committee have the powers denied to the Executive
Committee in these Bylaws.
(c) Term. Each member of a committee of the Board of Directors shall
serve a term on the committee coexistent with such member's term on the Board of
Directors. The Board of Directors, subject to the provisions of subsections (a)
or (b) of this Bylaw may at any time increase or decrease the number of members
of a committee or terminate the existence of a committee. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation from the committee or from the Board of Directors. The Board of
Directors may at any time for any reason remove any individual committee member
and the Board of Directors may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee, and, in addition, in the absence or disqualification of any
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
(d) Meetings. Unless the Board of Directors shall otherwise provide,
regular meetings of the Executive Committee or any other committee appointed
pursuant to this Section 25 shall be held at such times and places as are
determined by the Board of Directors, or by any such committee, and when notice
thereof has been given to each member of such committee, no further notice of
such regular meetings need be given thereafter. Special meetings of any such
committee may be held at any place which has been determined from time to time
by such committee, and may be called by any director who is a member of such
committee, upon written notice to the members of such committee of the time and
place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat, except when the director
attends such special 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. A majority of the authorized number of
members of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of such committee.
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Section 26. Organization. At every meeting of the directors, the Chairman
of the Board of Directors, or, if a Chairman has not been appointed or is
absent, the President, or if the President is absent, the most senior Vice
President, or, in the absence of any such officer, a chairman of the meeting
chosen by a majority of the directors present, shall preside over the meeting.
The Secretary, or in his absence, an Assistant Secretary directed to do so by
the President, shall act as secretary of the meeting.
ARTICLE V
Officers
Section 27. Officers Designated. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer and the
Controller, all of whom shall be elected at the annual organizational meeting of
the Board of Directors. The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such
other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the officers
of the corporation shall be fixed by or in the manner designated by the Board of
Directors.
Section 28. Tenure and Duties of Officers.
(a) General. All officers shall hold office at the pleasure of the
Board of Directors and until their successors shall have been duly elected and
qualified, unless sooner removed. Any officer elected or appointed by the Board
of Directors may be removed at any time by the Board of Directors. If the office
of any officer becomes vacant for any reason, the vacancy may be filled by the
Board of Directors.
(b) Duties of Chairman of the Board of Directors. The Chairman of the
Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. If there is no President, then the Chairman
of the Board of Directors shall also serve as the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 28.
(c) Duties of President. The President shall preside at all meetings
of the stockholders and at all meetings of the Board of Directors, unless the
Chairman of the Board of Directors has been appointed and is present. Unless
some other officer has been elected Chief Executive Officer of the corporation,
the President shall be the chief executive officer of the corporation and shall,
subject to the control of the Board of Directors, have general supervision,
direction and control of the business and officers of the corporation. The
President shall perform other duties commonly incident to his office and shall
also perform such other duties and have such other powers as the Board of
Directors shall designate from time to time.
(d) Duties of Vice Presidents. The Vice Presidents may assume and
perform the duties of the President in the absence or disability of the
President or whenever the office of President is
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vacant. The Vice Presidents shall perform other duties commonly incident to
their office and shall also perform such other duties and have such other powers
as the Board of Directors or the President shall designate from time to time.
(e) Duties of Secretary. The Secretary shall attend all meetings of
the stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
(f) Duties of Chief Financial Officer. The Chief Financial Officer
shall keep or cause to be kept the books of account of the corporation in a
thorough and proper manner and shall render statements of the financial affairs
of the corporation in such form and as often as required by the Board of
Directors or the President. The Chief Financial Officer, subject to the order of
the Board of Directors, shall have the custody of all funds and securities of
the corporation. The Chief Financial Officer shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time. The President may direct the Treasurer or any Assistant Treasurer,
or the Controller or any Assistant Controller to assume and perform the duties
of the Chief Financial Officer in the absence or disability of the Chief
Financial Officer, and each Treasurer and Assistant Treasurer and each
Controller and Assistant Controller shall perform other duties commonly incident
to his office and shall also perform such other duties and have such other
powers as the Board of Directors or the President shall designate from time to
time.
Section 29. Delegation of Authority. The Board of Directors may from time
to time delegate the powers or duties of any officer to any other officer or
agent, notwithstanding any provision hereof.
Section 30. Resignations. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
Section 31. Removal. Any officer may be removed from office at any time,
either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
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ARTICLE VI
Execution Of Corporate Instruments And Voting
Of Securities Owned By The Corporation
Section 32. Execution of Corporate Instruments. The Board of Directors may,
in its discretion, determine the method and designate the signatory officer or
officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and other
evidences of indebtedness of the corporation, and other corporate instruments or
documents requiring the corporate seal, and certificates of shares of stock of
the corporation, shall be executed, signed or endorsed by the Chairman of the
Board of Directors, or the President or any Vice President, and by the Secretary
or Treasurer or any Assistant Secretary or Assistant Treasurer. All other
instruments and documents requiring the corporate signature, but not requiring
the corporate seal, may be executed as aforesaid or in such other manner as may
be directed by the Board of Directors.
All checks and drafts drawn on banks or other depositaries on funds to the
credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
Section 33. Voting of Securities Owned by the Corporation. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President.
ARTICLE VII
Shares Of Stock
Section 34. Form and Execution of Certificates. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman of the Board of Directors, or the President
or any Vice President and by the Treasurer or Assistant Treasurer or the
Secretary or Assistant Secretary, certifying the number of shares owned by him
in the corporation. Any or all of the signatures on the certificate may be
facsimiles. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued with the same effect as if he were such officer,
transfer agent, or
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registrar at the date of issue. Each certificate shall state upon the face or
back thereof, in full or in summary, all of the powers, designations,
preferences, and rights, and the limitations or restrictions of the shares
authorized to be issued or shall, except as otherwise required by law, set forth
on the face or back a statement that 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. Within a reasonable time after the issuance or
transfer of uncertificated stock, the corporation shall send to the registered
owner thereof a written notice containing the information required to be set
forth or stated on certificates pursuant to this section or otherwise required
by law or with respect to this section a statement that 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. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of certificates representing stock of the same class and series shall be
identical.
Section 35. Lost Certificates. A new certificate or certificates shall 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. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, 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 or to
give the corporation a surety bond in such form and amount 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 36. Transfers.
(a) Transfers of record of shares of stock of the corporation shall
be made only upon its books by the holders thereof, in person or by attorney
duly authorized, and upon the surrender of a properly endorsed certificate or
certificates for a like number of shares.
(b) The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the Delaware General Corporation Law.
Section 37. Fixing Record Dates.
(a) 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, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall not be more than sixty (60) nor less than ten (10) days before the date of
such meeting. If no record date is fixed by the Board of Directors, 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. 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.
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(b) In order that the corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the Board
of Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors, and which date shall not be more than ten (10) days after the date
upon which the resolution fixing the record date is adopted by the Board of
Directors. Any stockholder of record seeking to have the stockholders authorize
or take corporate action by written consent shall, by written notice to the
Secretary, request the Board of Directors to fix a record date. The Board of
Directors shall promptly, but in all events within ten (10) days after the date
on which such a request is received, adopt a resolution fixing the record date.
If no record date has been fixed by the Board of Directors within ten (10) days
of the date on which such a request is received, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is required by
applicable law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
corporation by delivery to its registered office in the State of Delaware, its
principal place of business or an officer or agent of the corporation having
custody of the book in which proceedings of meetings of stockholders are
recorded. Delivery made to the corporation's registered office shall be by hand
or by certified or registered mail, return receipt requested. If no record date
has been fixed by the Board of Directors and prior action by the Board of
Directors is required by law, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting shall be at
the close of business on the day on which the Board of Directors adopts the
resolution taking such prior action.
(c) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders 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
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty (60)
days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
Section 38. Registered Stockholders. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VIII
Other Securities Of The Corporation
Section 39. Execution of Other Securities. All bonds, debentures and other
corporate securities of the corporation, other than stock certificates (covered
in Section 34), may be signed by the Chairman of the Board of Directors, the
President or any Vice President, or such other person as may be authorized by
the Board of Directors, and the corporate seal impressed thereon or a facsimile
of such seal imprinted thereon and attested by the signature of the Secretary or
an Assistant Secretary, or the Chief Financial Officer or Treasurer or an
Assistant Treasurer; provided, however, that where any such bond, debenture or
other corporate security shall be authenticated by the manual signature, or
where permissible facsimile signature, of a trustee under an indenture pursuant
to which such bond, debenture or other
15
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corporate security shall be issued, the signatures of the persons signing and
attesting the corporate seal on such bond, debenture or other corporate security
may be the imprinted facsimile of the signatures of such persons. Interest
coupons appertaining to any such bond, debenture or other corporate security,
authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an
Assistant Treasurer of the corporation or such other person as may be authorized
by the Board of Directors, or bear imprinted thereon the facsimile signature of
such person. In case any officer who shall have signed or attested any bond,
debenture or other corporate security, or whose facsimile signature shall appear
thereon or on any such interest coupon, shall have ceased to be such officer
before the bond, debenture or other corporate security so signed or attested
shall have been delivered, such bond, debenture or other corporate security
nevertheless may be adopted by the corporation and issued and delivered as
though the person who signed the same or whose facsimile signature shall have
been used thereon had not ceased to be such officer of the corporation.
ARTICLE IX
Dividends
Section 40. Declaration of Dividends. Dividends upon the capital stock of
the corporation, subject to the provisions of the Certificate of Incorporation
and applicable law, if any, may be declared by the Board of Directors pursuant
to law at any regular or special meeting. Dividends may be paid in cash, in
property, or in shares of the capital stock, subject to the provisions of the
Certificate of Incorporation and applicable law.
Section 41. Dividend Reserve. 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 Board of Directors from time to time, in its absolute discretion,
thinks is 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 Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
Fiscal Year
Section 42. Fiscal Year. Unless otherwise fixed by resolution of the Board
of Directors, the fiscal year of the corporation shall end on the 31/st/ day of
December in each calendar year.
ARTICLE XI
Indemnification
Section 43. Indemnification of Directors, Executive Officers, Other
Officers, Employees and Other Agents.
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(a) Directors and Executive Officers. The corporation shall indemnify
its directors and executive officers (for the purposes of this Article XI,
"executive officers" shall have the meaning defined in Rule 3b-7 promulgated
under the 1934 Act) to the fullest extent not prohibited by the Delaware General
Corporation Law or any other applicable law; provided, however, that the
corporation may modify the extent of such indemnification by individual
contracts with its directors and executive officers; and, provided, further,
that the corporation shall not be required to indemnify any director or
executive officer in connection with any proceeding (or part thereof) initiated
by such person unless (i) such indemnification is expressly required to be made
by law, (ii) the proceeding was authorized by the Board of Directors of the
corporation, (iii) such indemnification is provided by the corporation, in its
sole discretion, pursuant to the powers vested in the corporation under the
Delaware General Corporation Law or any other applicable law or (iv) such
indemnification is required to be made under subsection (d).
(b) Other Officers, Employees and Other Agents. The corporation shall
have power to indemnify its other officers, employees and other agents as set
forth in the Delaware General Corporation Law or any other applicable law.
(c) Expenses. The corporation shall advance to any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or executive
officer of the corporation, or is or was serving at the request of the
corporation as a director or executive officer of another corporation,
partnership, joint venture, trust or other enterprise, prior to the final
disposition of the proceeding, promptly following request therefor, all expenses
incurred by any director or executive officer in connection with such proceeding
upon receipt of an undertaking by or on behalf of such person to repay said
amounts if it should be determined ultimately that such person is not entitled
to be indemnified under this Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to paragraph
(e) of this Bylaw, no advance shall be made by the corporation to an officer of
the corporation (except by reason of the fact that such officer is or was a
director of the corporation, in which event this paragraph shall not apply) in
any action, suit or proceeding, whether civil, criminal, administrative or
investigative, if a determination is reasonably and promptly made (i) by the
Board of Directors by a majority vote of a quorum consisting of directors who
were not parties to the proceeding, or (ii) if such quorum is not obtainable,
or, even if obtainable, a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, that the facts known to the
decision-making party at the time such determination is made demonstrate clearly
and convincingly that such person acted in bad faith or in a manner that such
person did not believe to be in or not opposed to the best interests of the
corporation.
(d) Enforcement. Without the necessity of entering into an express
contract, all rights to indemnification and advances to directors and executive
officers under this Bylaw shall be deemed to be contractual rights and be
effective to the same extent and as if provided for in a contract between the
corporation and the director or executive officer. Any right to indemnification
or advances granted by this Bylaw to a director or executive officer shall be
enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. In connection with any claim for indemnification, the
corporation shall be entitled to raise as a defense to any such action that the
claimant has not met the standards of conduct that make it permissible under the
Delaware General Corporation Law or any other applicable law for the corporation
to indemnify the claimant for the amount claimed. In connection with any claim
by an executive officer of the corporation (except in any action, suit or
proceeding, whether
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civil, criminal, administrative or investigative, by reason of the fact that
such executive officer is or was a director of the corporation) for advances,
the corporation shall be entitled to raise a defense as to any such action clear
and convincing evidence that such person acted in bad faith or in a manner that
such person did not believe to be in or not opposed to the best interests of the
corporation, or with respect to any criminal action or proceeding that such
person acted without reasonable cause to believe that his conduct was lawful.
Neither the failure of the corporation (including its Board of Directors,
independent legal counsel or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he has met the applicable standard of
conduct set forth in the Delaware General Corporation Law or any other
applicable law, nor an actual determination by the corporation (including its
Board of Directors, independent legal counsel or its stockholders) that the
claimant has not met such applicable standard of conduct, shall be a defense to
the action or create a presumption that claimant has not met the applicable
standard of conduct.
(e) Non-Exclusivity of Rights. The rights conferred on any person by
this Bylaw shall not be exclusive of any other right which such person may have
or hereafter acquire under any applicable statute, provision of the Certificate
of Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its directors,
officers, employees or agents respecting indemnification and advances, to the
fullest extent not prohibited by the Delaware General Corporation Law or any
other applicable law.
(f) Survival of Rights. The rights conferred on any person by this
Bylaw shall continue as to a person who has ceased to be a director, officer,
employee or other agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.
(g) Insurance. To the fullest extent permitted by the Delaware
General Corporation Law, the corporation or any other applicable law, upon
approval by the Board of Directors, may purchase insurance on behalf of any
person required or permitted to be indemnified pursuant to this Bylaw.
(h) Amendments. Any repeal or modification of this Bylaw shall only
be prospective and shall not affect the rights under this Bylaw in effect at the
time of the alleged occurrence of any action or omission to act that is the
cause of any proceeding against any agent of the corporation.
(i) Saving Clause. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and executive officer to
the full extent not prohibited by any applicable portion of this Bylaw that
shall not have been invalidated, or by any other applicable law. If this Section
43 shall be invalid due to the application of the indemnification provisions of
another jurisdiction, then the corporation shall indemnify each director and
executive officer to the full extent under applicable law.
(j) Certain Definitions. For the purposes of this Bylaw, the
following definitions shall apply:
(1) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.
18
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(2) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of any
nature or kind incurred in connection with any proceeding.
(3) The term the "corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this Bylaw with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
(4) References to a "director," "executive officer," "officer,"
"employee," or "agent" of the corporation shall include, without limitation,
situations where such person is serving at the request of the corporation as,
respectively, a director, executive officer, officer, employee, trustee or agent
of another corporation, partnership, joint venture, trust or other enterprise.
(5) References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on
a person with respect to an employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with respect to
an employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Bylaw.
ARTICLE XII
Notices
Section 44. Notices.
(a) Notice to Stockholders. Whenever, under any provisions of
these Bylaws, notice is required to be given to any stockholder, it shall be
given in writing, timely and duly deposited in the United States mail, postage
prepaid, and addressed to his last known post office address as shown by the
stock record of the corporation or its transfer agent.
(b) Notice to Directors. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by facsimile,
telex or telegram, except that such notice other than one which is delivered
personally shall be sent to such address as such director shall have filed in
writing with the Secretary, or, in the absence of such filing, to the last known
post office address of such director.
(c) Affidavit of Mailing. An affidavit of mailing, executed by a
duly authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders,
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or director or directors, to whom any such notice or notices was or were given,
and the time and method of giving the same, shall in the absence of fraud, be
prima facie evidence of the facts therein contained.
(d) Time Notices Deemed Given. All notices given by mail, as above
provided, shall be deemed to have been given as at the time of mailing, and all
notices given by facsimile, telex or telegram shall be deemed to have been given
as of the sending time recorded at time of transmission.
(e) Methods of Notice. It shall not be necessary that the same method
of giving notice be employed in respect of all directors, but one permissible
method may be employed in respect of any one or more, and any other permissible
method or methods may be employed in respect of any other or others.
(f) Failure to Receive Notice. The period or limitation of time
within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such director to receive such
notice.
(g) Notice to Person with Whom Communication Is Unlawful. Whenever
notice is required to be given, under any provision of law or of the Certificate
of Incorporation or Bylaws of the corporation, to any person with whom
communication is unlawful, the giving of such notice to such person shall not be
required and there shall be no duty to apply to any governmental authority or
agency for a license or permit to give such notice to such person. Any action or
meeting which shall be taken or held without notice to any such person with whom
communication is unlawful shall have the same force and effect as if such notice
had been duly given. In the event that the action taken by the corporation is
such as to require the filing of a certificate under any provision of the
Delaware General Corporation Law, the certificate shall state, if such is the
fact and if notice is required, that notice was given to all persons entitled to
receive notice except such persons with whom communication is unlawful.
(h) Notice to Person with Undeliverable Address. Whenever notice is
required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate need not
state that notice was not given to persons to whom notice was not required to be
given pursuant to this paragraph.
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ARTICLE XIII
Amendments
Section 45. Amendments. Subject to paragraph (h) of Section 43 of the
Bylaws, these Bylaws may be altered or amended or repealed and new Bylaws
adopted by the affirmative vote of at least sixty-six and two-thirds percent
(66-2/3%) of the voting power of all of the then outstanding shares of Voting
Stock. The Board of Directors shall also have the power, if such power is
conferred upon the Board of Directors by the Certificate of Incorporation, to
adopt, amend, or repeal Bylaws (including, without limitation, the amendment of
any Bylaw setting forth the number of Directors who shall constitute the whole
Board of Directors).
ARTICLE XIV
Miscellaneous
Section 46. Annual Report.
(a) Subject to the provisions of paragraph (b) of this Bylaw, the
Board of Directors shall cause an annual report to be sent to each stockholder
of the corporation not later than one hundred twenty (120) days after the close
of the corporation's fiscal year. Such report shall include a balance sheet as
of the end of such fiscal year and an income statement and statement of changes
in financial position for such fiscal year, accompanied by any report thereon of
independent accounts or, if there is no such report, the certificate of an
authorized officer of the corporation that such statements were prepared without
audit from the books and records of the corporation. When there are more than
100 stockholders of record of the corporation's shares, as determined by Section
605 of the CGCL, additional information as required by Section 1501(b) of the
CGCL shall also be contained in such report, provided that if the corporation
has a class of securities registered under Section 12 of the 1934 Act, that Act
shall take precedence. Such report shall be sent to stockholders at least
fifteen (15) days prior to the next annual meeting of stockholders after the end
of the fiscal year to which it relates.
(b) If and so long as there are fewer than 100 holders of record of
the corporation's shares, the requirement of sending of an annual report to the
stockholders of the corporation is hereby expressly waived.
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EXHIBIT 4.2
THIRD RESTATED INVESTORS' RIGHTS AGREEMENT
PLACEWARE, INC.
September 17, 1999
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C>
1. Registration Rights........................................................ 1
1.1 Definitions......................................................... 1
1.2 Request for Registration............................................ 2
1.3 Company Registration................................................ 4
1.4 Obligations of the Company.......................................... 4
1.5 Furnish Information................................................. 5
1.6 Expenses of Demand Registration..................................... 5
1.7 Expenses of Company Registration.................................... 6
1.8 Underwriting Requirements........................................... 6
1.9 Delay of Registration............................................... 7
1.10 Indemnification.................................................... 7
1.11 Reports Under Securities Exchange Act of 1934...................... 9
1.12 Form S-3 Registration.............................................. 9
1.13 Assignment of Registration Rights.................................. 10
1.14 Limitations on Subsequent Registration Rights...................... 11
1.15 "Market Stand-Off" Agreement Rights................................ 11
1.16 Termination of Registration Rights................................. 11
2. Covenants of the Company................................................... 12
2.1 Delivery of Financial Statements.................................... 12
2.2 Inspection.......................................................... 12
2.3 Termination of Information and Inspection Covenants................. 13
2.4 Right of First Offer................................................ 13
2.5 Observer Rights..................................................... 14
2.6 Directors' Liability and Indemnification............................ 15
2.7 Proprietary Information and Inventions Agreement.................... 15
2.8 Certain Covenants Relating to SBA Matters........................... 15
2.9 Committees of the Board............................................. 17
2.10 Audit Committee of the Board....................................... 17
3. Miscellaneous.............................................................. 17
3.1 Successors and Assigns.............................................. 17
3.2 Governing Law....................................................... 17
3.3 Counterparts........................................................ 18
3.4 Titles and Subtitles................................................ 18
3.5 Notices............................................................. 18
3.6 Expenses............................................................ 18
3.7 Amendments and Waivers.............................................. 18
3.8 Severability........................................................ 18
3.9 Aggregation of Stock................................................ 18
3.10 Entire Agreement................................................... 19
3.11 Termination of Prior Agreement..................................... 19
</TABLE>
Schedule A Schedule of Investors
Schedule B Schedule of Management Holders
i
<PAGE>
THIRD RESTATED INVESTORS' RIGHTS AGREEMENT
------------------------------------------
THIS THIRD RESTATED INVESTORS' RIGHTS AGREEMENT is made as of
September 17, 1999, by and among PlaceWare, Inc., a Delaware corporation (the
"Company"), the investors listed on Schedule A hereto, each of which is herein
referred to as an "Investor," and the management holders listed on Schedule B
hereto, each of which is herein referred to as a "Management Holder."
RECITALS
--------
WHEREAS, certain of the Investors holding Series A Preferred Stock
(the "Series A Investors"), certain of the Investors holding Series B Preferred
Stock (the "Series B Investors") and the Management Holders possess registration
and other rights granted pursuant to the PlaceWare, Inc. Second Restated
Investors' Rights Agreement by and among the Company, the Series A Investors,
the Series B Investors and Management Holders named therein, dated May 22, 1998
(the "Prior Agreement"), entered into in connection with that certain Second
Series B Preferred Stock Purchase Agreement, dated May 22, 1998, by and among
the Company and the Investors named therein;
WHEREAS, the Prior Agreement may be amended, and any provision therein
waived, with the consent of the Company, the Series A Investors, the Series B
Investors and the Management Holders holding a majority of the "Registrable
Securities" of the Company (as defined in the Prior Agreement);
WHEREAS, certain of the Investors are parties to the PlaceWare, Inc.
Series C Preferred Stock Purchase Agreement (the "Series C Agreement") of even
date herewith by and among the Company and the Investors listed on Schedule A
thereto (the "Series C Investors");
WHEREAS, in order to induce the Company to enter into the Series C
Agreement and to induce the Series C Investors to invest funds in the Company
pursuant to the Series C Agreement, the Series A Investors, the Series B
Investors and Management Holders desire to waive, amend and restate all rights
granted to them under the Prior Agreement, to terminate the Prior Agreement, and
to replace the Prior Agreement in its entirety as set forth herein; and
WHEREAS, the Series C Investors and the Company have agreed, pursuant
to the Series C Agreement, to enter into this Agreement.
NOW, THEREFORE, THE PARTIES HEREBY CONSENT TO THE ISSUANCE OF SERIES B
PREFERRED STOCK PURSUANT TO THE SECOND SERIES B AGREEMENT AND AGREE AS FOLLOWS:
1. Registration Rights. The Company covenants and agrees as follows:
-------------------
1.1 Definitions. For purposes of this Section 1:
-----------
(a) The term "Act" means the Securities Act of 1933, as amended.
<PAGE>
(b) The term "Form S-3" means such form under the Act as in effect on
the date hereof or any registration form under the Act subsequently adopted by
the SEC that permits inclusion or incorporation of substantial information by
reference to other documents filed by the Company with the SEC.
(c) The term "Holder" means any person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance with
Section 1.13 hereof.
(d) The term "1934 Act" shall mean the Securities Exchange Act of
1934, as amended.
(e) The term "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document.
(f) The term "Registrable Securities" means (i) the Common Stock
issuable or issued upon conversion of the Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock, (ii) the shares of Common Stock
issued to the Management Holders; provided, however, that such shares of Common
Stock shall not be deemed Registrable Securities and the aforementioned
individuals shall not be deemed Holders for the purposes of Section 1.2, 1.12
and 3.7 hereof, and (iii) any Common Stock of the Company issued as (or issuable
upon the conversion or exercise of any warrant, right or other security that is
issued as) a dividend or other distribution with respect to, or in exchange for,
or in replacement of the shares referenced in (i) and (ii) above, excluding in
all cases, however, any Registrable Securities sold by a person in a transaction
in which his rights under this Section 1 are not assigned.
(g) The number of shares of "Registrable Securities then outstanding"
shall be determined by the number of shares of Common Stock outstanding that
are, and the number of shares of Common Stock issuable pursuant to then
exercisable or convertible securities that are, Registrable Securities.
(h) The term "SEC" shall mean the Securities and Exchange Commission.
1.2 Request for Registration.
------------------------
(a) If the Company shall receive at any time after the earlier of (i)
January 1, 2001, or (ii) six (6) months after the effective date of the first
registration statement for a public offering of securities of the Company (other
than a registration statement relating either to the sale of securities to
employees of the Company pursuant to a stock option, stock purchase or similar
plan or a SEC Rule 145 transaction), a written request from Holders that the
Company file a registration statement under the Act covering the registration of
at least thirty percent (30%) of the Registrable Securities then outstanding and
having an aggregate offering price, net of underwriting discounts and
commissions, of at least $10,000,000, then the Company shall:
(i) within ten (10) days of the receipt thereof, give written
notice of such request to all Holders; and
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(ii) effect as soon as practicable, and in any event within
sixty (60) days of the receipt of such request, the registration under the Act
of all Registrable Securities that the Holders request to be registered, subject
to the limitations of subsection 1.2(b), within twenty (20) days of the mailing
of such notice by the Company in accordance with Section 3.5.
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to subsection 1.2(a) and the Company
shall include such information in the written notice referred to in subsection
1.2(a). The underwriter will be selected by the Company and shall be reasonably
acceptable to a majority in interest of the Initiating Holders. In such event,
the right of any Holder to include his Registrable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company as provided in subsection 1.4(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting. Notwithstanding any other provision of this
Section 1.2, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities that would otherwise be underwritten pursuant hereto, and
the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder; provided, however,
that the number of shares of Registrable Securities to be included in such
underwriting shall not be reduced unless all other securities are first entirely
excluded from the underwriting.
(c) Notwithstanding the foregoing, if the Company shall furnish to
Holders requesting a registration statement pursuant to this Section 1.2, a
certificate signed by the Chief Executive Officer of the Company stating that in
the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its stockholders for such registration
statement to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer taking action
with respect to such filing for a period of not more than one hundred twenty
(120) days after receipt of the request of the Initiating Holders; provided,
however, that the Company may not utilize this right more than once in any
twelve (12) month period.
(d) In addition, the Company shall not be obligated to effect, or to
take any action to effect, any registration pursuant to this Section 1.2:
(i) After the Company has effected two (2) registrations
pursuant to this Section 1.2 and such registrations have been declared or
ordered effective;
(ii) During the period starting with the date sixty (60) days
prior to the Company's good faith estimate of the date of filing of, and ending
on a date one hundred eighty
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(180) days after the effective date of, a registration subject to Section 1.3
hereof; provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective; or
(iii) If the Initiating Holders propose to dispose of shares of
Registrable Securities that may be immediately registered on Form S-3 pursuant
to a request made pursuant to Section 1.12 below.
1.3 Company Registration. If (but without any obligation to do so)
--------------------
the Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Holders) any of its
stock or other securities under the Act in connection with the public offering
of such securities solely for cash (other than a registration relating solely to
the sale of securities to participants in a Company stock plan, a registration
on any form that does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the
Registrable Securities or a registration in which the only Common Stock being
registered is Common Stock issuable upon conversion of debt securities that are
also being registered), the Company shall, at such time, promptly give each
Holder written notice of such registration. Upon the written request of each
Holder given within twenty (20) days after mailing of such notice by the Company
in accordance with Section 3.5, the Company shall, subject to the provisions of
Section 1.8, cause to be registered under the Act all of the Registrable
Securities that each such Holder has requested to be registered.
1.4 Obligations of the Company. Whenever required under this Section
--------------------------
1 to effect the registration of any Registrable Securities, the Company shall,
as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for a period of up to one hundred twenty (120)
days or, if earlier, until the distribution contemplated in the Registration
Statement has been completed.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or blue sky
laws of such jurisdictions as shall be reasonably requested by the Holders;
provided that the Company shall not be required in
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connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed.
(h) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
1.5 Furnish Information.
-------------------
(a) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Section 1 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company such information regarding itself, the Registrable Securities held
by it, and the intended method of disposition of such securities as shall be
required to effect the registration of such Holder's Registrable Securities.
(b) The Company shall have no obligation with respect to any
registration requested pursuant to Section 1.2 or Section 1.12 if, due to the
operation of subsection 1.5(a), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in subsection 1.2(a) or subsection
1.12(b)(2), whichever is applicable.
1.6 Expenses of Demand Registration. All expenses other than
-------------------------------
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company and the
reasonable fees and disbursements of one counsel for the selling Holders shall
be borne by the Company; provided, however, that the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 1.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered (in which case all participating Holders shall bear such expenses),
unless the Holders of a majority of the Registrable Securities agree to forfeit
their right to one demand
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registration pursuant to Section 1.2; provided further, however, that if at the
time of such withdrawal, the Holders have learned of a material adverse change
in the condition, business, or prospects of the Company from that known to the
Holders at the time of their request and have withdrawn the request with
reasonable promptness following disclosure by the Company of such material
adverse change, then the Holders shall not be required to pay any of such
expenses and shall retain their rights pursuant to Section 1.2.
1.7 Expenses of Company Registration. The Company shall bear and
--------------------------------
pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder (which right may be assigned as provided
in Section 1.13), including (without limitation) all registration, filing, and
qualification fees, printers and accounting fees relating or apportionable
thereto and the fees and disbursements of one counsel for the selling Holders
selected by them, but excluding underwriting discounts and commissions relating
to Registrable Securities.
1.8 Underwriting Requirements. In connection with any offering
-------------------------
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in good faith and in their sole
discretion is compatible with the success of the offering, then the Company
shall be required to include in the offering only that number of such
securities, including Registrable Securities, that the underwriters determine in
good faith and in their sole discretion will not jeopardize the success of the
offering (the securities so included to be apportioned pro rata among the
selling stockholders according to the total amount of securities entitled to be
included therein owned by each selling stockholder or in such other proportions
as shall mutually be agreed to by such selling stockholders) but in no event
shall (i) the amount of securities of the selling Holders included in the
offering be reduced below twenty-five percent (25%) of the total amount of
securities included in such offering, unless such offering is the initial public
offering of the Company's securities, in which case the selling stockholders may
be excluded if the underwriters make the determination described above and no
other stockholder's securities are included or (ii) notwithstanding (i) above,
any shares being sold by a stockholder exercising a demand registration right
similar to that granted in Section 1.2 be excluded from such offering. For
purposes of the preceding parenthetical concerning apportionment, for any
selling stockholder that is a holder of Registrable Securities and that is a
partnership or corporation, the partners, retired partners and stockholders of
such holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall be
deemed to be a single "selling stockholder," and any pro-rata reduction with
respect to such "selling stockholder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "selling stockholder," as defined in this sentence. If any
selling Holder disapproves of the terms of any underwriting under Section 1.3,
such Holder may elect to withdraw any of its securities included in such
underwriting by written notice to the Company and the underwriter, delivered at
least fifteen (15)
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business days prior to the effective date of the registration statement. Any
Registrable Securities excluded or withdrawn from such underwriting shall be
excluded and withdrawn from the registration.
1.9 Delay of Registration. No Holder shall have any right to obtain
---------------------
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.
1.10 Indemnification. In the event any Registrable Securities are
---------------
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the partners, officers and directors of each Holder,
any underwriter (as defined in the Act) for such Holder, and each person, if
any, who controls such Holder or underwriter within the meaning of the Act or
the 1934 Act, against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Act, the 1934 Act or other
federal or state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively, a "Violation"): (i)
any untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the Act, the 1934
Act, any state securities law or any rule or regulation promulgated under the
Act, the 1934 Act or any state securities law; and the Company will pay to each
such Holder, partner, officer, director, underwriter or controlling person, as
incurred, any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the indemnity agreement contained in this
subsection 1.10(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably withheld),
nor shall the Company be liable in any such case for any such loss, claim,
damage, liability or action to the extent that it arises out of or is based upon
a Violation that occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
any such Holder, partner, officer, director, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any partner,
officer, director or controlling person of any such underwriter or other Holder,
against any losses, claims, damages or liabilities (severally, and not jointly)
to which any of the foregoing persons may become subject under the Act, the 1934
Act or other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with such registration;
and each such Holder will pay, as
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<PAGE>
incurred, any legal or other expenses reasonably incurred by any person intended
to be indemnified pursuant to this subsection 1.10(b) in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this subsection
1.10(b) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Holder (which consent shall not be unreasonably withheld); provided that
in no event shall any indemnity under this subsection 1.10(b) exceed the net
proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
1.10 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 1.10, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties that may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.10, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.10.
(d) If the indemnification provided for in this Section 1.10 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. In no event shall any contribution under this subsection
1.10(d) exceed the net proceeds from the offering received by such holder.
(e) The obligations of the Company and Holders under this Section
1.10 shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1, and otherwise.
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<PAGE>
(f) No indemnifying party, in the defense of any such claim or
litigation, shall, except with the consent of each indemnified party, consent to
entry to any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.
1.11 Reports Under Securities Exchange Act of 1934. With a view to
---------------------------------------------
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after the effective date of
the first registration statement filed by the Company for the offering of its
securities to the general public;
(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of SEC Rule 144 (at any time
after ninety (90) days after the effective date of the first registration
statement filed by the Company), the Act and the 1934 Act (at any time after it
has become subject to such reporting requirements), or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3 (at any time
after it so qualifies), (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC that permits the
selling of any such securities without registration or pursuant to such form.
1.12 Form S-3 Registration. In case the Company shall receive from
---------------------
any Holder or Holders holding at least ten percent (10%) of the outstanding
Registrable Securities a written request or requests that the Company effect a
registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder or
Holders, the Company will:
(a) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any
9
<PAGE>
other Holder or Holders joining in such request as are specified in a written
request given within fifteen (15) days after receipt of such written notice from
the Company; provided, however, that the Company shall not be obligated to
effect any such registration, qualification or compliance, pursuant to this
section 1.12: (1) if Form S-3 is not available for such offering by the Holders;
(2) if the Holders, together with the holders of any other securities of the
Company entitled to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) at an aggregate price to the
public (net of any underwriters' discounts or commissions) of less than
$1,000,000; (3) if the Company shall furnish to the Holders a certificate signed
by the President of the Company stating that in the good faith judgment of the
Board of Directors of the Company, it would be seriously detrimental to the
Company and its stockholders for such Form S-3 Registration to be effected at
such time, in which event the Company shall have the right to defer the filing
of the Form S-3 registration statement for a period of not more than one hundred
twenty (120) days after receipt of the request of the Holder or Holders under
this Section 1.12; provided, however, that the Company shall not utilize this
right more than once in any twelve (12) month period; (4) if the Company has,
within the six (6) month period preceding the date of such request, already
effected one (1) registration on Form S-3 for the Holders pursuant to this
Section 1.12; or (5) in any particular jurisdiction in which the Company would
be required to qualify to do business or to execute a general consent to service
of process in effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a registration
statement covering the Registrable Securities and other securities so requested
to be registered as soon as practicable after receipt of the request or requests
of the Holders. All expenses incurred in connection with a registration
requested pursuant to Section 1.12, including (without limitation) all
registration, filing, qualification, printer's and accounting fees and the
reasonable fees and disbursements of counsel for the selling Holder or Holders
and counsel for the Company, but excluding any underwriters' discounts or
commissions associated with Registrable Securities, shall be borne by the
Company. Registrations effected pursuant to this Section 1.12 shall not be
counted as demands for registration or registrations effected pursuant to
Sections 1.2 or 1.3, respectively.
1.13 Assignment of Registration Rights. The rights to cause the
---------------------------------
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities who, after such assignment or transfer, holds at
least 100,000 shares of Registrable Securities (subject to appropriate
adjustment for stock splits, stock dividends, combinations and other
recapitalizations), provided: (a) the Company is, within a reasonable time after
such transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned; (b) such transferee or assignee agrees
in writing to be bound by and subject to the terms and conditions of this
Agreement, including without limitation the provisions of Section 1.14 below;
and (c) such assignment shall be effective only if immediately following such
transfer the further disposition of such securities by the transferee or
assignee is restricted under the Act. For the purposes of determining the number
of shares of Registrable Securities held by a transferee or assignee, the
holdings of transferees and assignees of a partnership, corporation or limited
liability company who are partners, shareholders or members or retired partners,
former shareholders or members of such entity (including spouses and ancestors,
lineal descendants and siblings of such partners,
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shareholders or members or spouses who acquire Registrable Securities by gift,
will or intestate succession) shall be aggregated together and with the entity;
provided that all assignees and transferees who would not qualify individually
for assignment of registration rights shall have a single attorney-in-fact for
the purpose of exercising any rights, receiving notices or taking any action
under this Section 1.
1.14 Limitations on Subsequent Registration Rights. From and after
---------------------------------------------
the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of a majority of the then outstanding shares of Series C
Preferred Stock, enter into any agreement with any holder or prospective holder
of any securities of the Company that would allow such holder or prospective
holder (a) to include such securities in any registration filed under Section
1.3 hereof, unless under the terms of such agreement, such holder or prospective
holder may include such securities in any such registration only to the extent
that the inclusion of such securities will not reduce the amount of the
Registrable Securities of the Holders that are included or (b) to demand
registration of their securities.
1.15 "Market Stand-Off" Agreement Rights. Each Investor hereby agrees
-----------------------------------
that, during the period of duration specified by the Company and an underwriter
of Common Stock or other securities of the Company, following the effective date
of a registration statement of the Company filed under the Act, it shall not, to
the extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any securities of the Company
held by it at any time during such period except Common Stock included in such
registration; provided, however, that:
(a) such agreement shall be applicable only to the first such
registration statement of the Company that covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
(b) all officers and directors and greater than one percent (1%)
stockholders of the Company enter into similar agreements; and
(c) such market stand-off time period shall not exceed one hundred
eighty (180) days.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
1.16 Termination of Registration Rights. No Holder shall be entitled
----------------------------------
to exercise any right provided for in this Section 1 after four (4) years
following the consummation of the sale of securities pursuant to a registration
statement filed by the Company under the Act in connection with the initial firm
commitment underwritten offering of its securities to the general public or, as
to any Holder, such earlier time at which (i) all Registrable Securities held by
such Holder can be sold in any three (3) month period without registration in
compliance with
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Rule 144 of the Act and (ii) such Holder at that time holds less than one
percent (1%) of the Company's outstanding capital stock.
2. Covenants of the Company.
------------------------
2.1 Delivery of Financial Statements. The Company shall deliver to
--------------------------------
each Investor:
(a) as soon as practicable, but in any event within ninety (90) days
after the end of each fiscal year of the Company, an income statement for such
fiscal year, a balance sheet of the Company and statement of stockholder's
equity as of the end of such year, and a statement of cash flows for such year,
such year-end financial reports to be in reasonable detail, prepared in
accordance with generally accepted accounting principles ("GAAP"), and audited
and certified by independent public accountants of nationally recognized
standing selected by the Company;
(b) so long as such Investor holds at least 100,000 shares of
Preferred Stock (either in the form of Preferred Stock or Common Stock issued
upon conversion thereof, and as adjusted for subsequent stock splits,
recombinations or reclassifications), as soon as practicable, but in any event
within thirty (30) days after the end of each of the first three (3) quarters of
each fiscal year of the Company, an unaudited income statement and statement of
cash flows for such fiscal quarter and an unaudited balance sheet and a
statement of stockholder's equity as of the end of such fiscal quarter comparing
results to the annual plan;
(c) so long as such Investor holds at least 100,000 shares of
Preferred Stock (either in the form of Preferred Stock or Common Stock issued
upon conversion thereof, and as adjusted for subsequent stock splits,
recombinations or reclassifications), within thirty (30) days of the end of each
month, an unaudited income statement and statement of cash flows and balance
sheet for and as of the end of such month, in reasonable detail;
(d) so long as such Investor holds at least 100,000 shares of
Preferred Stock (either in the form of Preferred Stock or Common Stock issued
upon conversion thereof, and as adjusted for subsequent stock splits,
recombinations or reclassifications), as soon as practicable, but in any event
thirty (30) days prior to the end of each fiscal year, a budget for the next
fiscal year, prepared on a monthly basis, including balance sheets and
statements of cash flows, for such months, and, as soon as prepared, any other
budgets or revised budgets prepared by the Company; and
(e) with respect to the financial statements called for in
subsections (b) and (c) of this Section 2.1, an instrument executed by the Chief
Financial Officer or President of the Company certifying that such financials
were prepared in accordance with GAAP consistently applied with prior practice
for earlier periods (with the exception of footnotes that may be required by
GAAP) and fairly present the financial condition of the Company and its results
of operation for the period specified, subject to year-end audit adjustment.
2.2 Inspection. The Company shall permit each Investor, at such
----------
Investor's expense, to visit and inspect the Company's properties, to examine
its books of account and records and to discuss the Company's affairs, finances
and accounts with its officers, all at such reasonable times as may be requested
by the Investor; provided, however, that the Company
12
<PAGE>
shall not be obligated pursuant to this Section 2.2 to provide access to any
information that it reasonably considers to be a trade secret or similar
confidential information.
2.3 Termination of Information and Inspection Covenants. The
---------------------------------------------------
covenants set forth in Section 2.1 and Section 2.2 shall terminate as to
Investors and be of no further force or effect when the sale of securities
pursuant to a registration statement filed by the Company under the Act in
connection with the firm commitment underwritten offering of its securities to
the general public is consummated or when the Company first becomes subject to
the periodic reporting requirements of Sections 12(g) or 15(d) of the 1934 Act,
whichever event shall first occur.
2.4 Right of First Offer. Subject to the terms and conditions
--------------------
specified in this paragraph 2.4, the Company hereby grants to each Investor a
right of first offer with respect to future sales by the Company of its Shares
(as hereinafter defined). An Investor shall be entitled to apportion the right
of first offer hereby granted it among itself and its partners and affiliates in
such proportions as it deems appropriate.
Each time the Company proposes to offer any shares of, or securities
convertible into or exercisable for, any shares of any class of its capital
stock ("Shares"), the Company shall first make an offering of such Shares to
each Investor in accordance with the following provisions:
(a) The Company shall deliver a notice by certified mail ("Notice")
to the Investors stating (i) its bona fide intention to offer such Shares, (ii)
the number of such Shares to be offered, and (iii) the price and terms, if any,
upon which it proposes to offer such Shares.
(b) By written notification received by the Company, within twenty
(20) calendar days after giving of the Notice, the Investor may elect to
purchase or obtain, at the price and on the terms specified in the Notice, up to
that portion of such Shares that equals the proportion that the number of shares
of Common Stock issued and held, or issuable upon conversion of the Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock then
held, by such Investor bears to the total number of shares of Common Stock of
the Company then outstanding (assuming full conversion, exercise and exchange of
all convertible, exercisable or exchangeable securities).
(c) If all Shares that Investors are entitled to obtain pursuant to
subsection 2.4(b) are not elected to be obtained as provided in subsection
2.4(b) hereof, the Company may, during the ninety (90) day period following the
expiration of the period provided in subsection 2.4(b) hereof, offer the
remaining unsubscribed portion of such Shares to any person or persons at a
price not less than, and upon terms no more favorable to the offeree than those
specified in the Notice. If the Company does not enter into an agreement for the
sale of the Shares within such period, or if such agreement is not consummated
within sixty (60) days of the execution thereof, the right provided hereunder
shall be deemed to be revived and such Shares shall not be offered unless first
reoffered to the Investors in accordance herewith.
(d) The right of first offer in this paragraph 2.4 shall not be
applicable (i) to the issuance or sale of shares of Common Stock (or options
therefor) to employees or directors of
13
<PAGE>
or consultants to the Company for the primary purpose of soliciting or retaining
their services, as approved by the Board of Directors, (ii) to or after
consummation of a bona fide, firmly underwritten public offering of shares of
Common Stock, registered under the Act pursuant to a registration statement on
Form S-1 or SB-2 (or any similar successor form), at an offering price of at
least $9.50 per share (appropriately adjusted for any stock split, dividend,
combination or other recapitalization) and $20,000,000 in the aggregate, (iii)
to the issuance of securities pursuant to the conversion, exercise or exchange
of convertible, exercisable or exchangeable securities, (iv) to the issuance of
securities in connection with a bona fide business acquisition of or by the
Company, whether by merger, consolidation, sale of assets, sale or exchange of
stock or otherwise, as approved by the Board of Directors, (v) to the issuance
of stock, warrants or other securities or rights to persons or entities with
which the Company has business relationships, provided such issuances are for
other than primarily equity financing purposes, as approved by the Board of
Directors, or (vi) to the issuance of shares of Series C Preferred Stock
pursuant to the Series C Agreement.
(e) The rights provided in this Section 2.4 shall terminate as to all
Investors and be of no further force or effect (i) when the sale of securities
pursuant to a registration statement filed by the Company under the Act in
connection with the firm commitment underwritten offering of its securities to
the general public is consummated, the public offering price of which was not
less than $9.50 per share (adjusted to reflect subsequent stock dividends, stock
splits or recapitalizations), and $20,000,000 in aggregate proceeds to the
Company or (ii) when the Company first becomes subject to the periodic reporting
requirements of Sections 12(g) or 15(d) of the 1934 Act, whichever event shall
first occur.
2.5 Observer Rights. Subject to Section 4 of the Third Restated
---------------
Voting Agreement of even date herewith, as long as Xerox Corporation ("Xerox")
owns not less than 455,000 shares of Series A Preferred Stock or Common Stock
issued or issuable upon conversion thereof (as adjusted for any subsequent stock
dividends, combinations, splits or recapitalizations), the Company shall invite
Xerox to send at Xerox' own expense one (1) representative of Xerox reasonably
acceptable to the Company's Board of Directors to attend, in a nonvoting
observer capacity, each meeting of its Board of Directors; provided, however,
that such representative shall agree to hold in confidence and trust and to act
in a fiduciary manner with respect to all information provided in connection
with such meetings; and, provided further, that the Company reserves the right
to withhold any information and to exclude such representative from any meeting
or portion thereof if the Company believes access to such information or
attendance at such meeting or portion thereof could adversely affect the
attorney-client privilege between the Company and its counsel or would result in
disclosure of highly confidential proprietary information on matters where Xerox
or its representative may be a competitor of the Company. Xerox agrees, and any
representative of Xerox will agree, to hold in confidence and trust and not use
or disclose any confidential information provided to or learned by it in
connection with its rights under this Section 2.5(a), and such obligations will
survive any termination of this Section 2.5(a) or this Agreement. The rights
(but not the obligations) of Xerox under this Section 2.5(a) shall not be
assignable and shall terminate as to Xerox and be of no further force or effect
upon the earlier to occur of:
(i) the date upon which the Company or a parent of the Company
consummates a sale of securities pursuant to a registration statement filed by
the Company under
14
<PAGE>
the Act in connection with the firm commitment underwritten offering of its
securities to the general public or the date upon which the Company first
becomes subject to the periodic reporting requirements of Section 12(g) or 15(d)
of the 1934 Act, whichever event shall first occur; or
(ii) the date upon which the Company consummates (i) a
consolidation or merger of the Company or any affiliated corporation with or
into any other corporation or corporations (other than a consolidation or merger
of this Company with or into a wholly owned subsidiary of this Company), (ii) a
sale of all or substantially all of the assets or business of the Company in one
or more related transactions, (iii) a transaction or series of related
transactions (other than a public offering of the Company's securities) in which
the stockholders of the Company immediately prior to such transaction(s) own, as
a result of such transaction(s), less than a majority of the voting securities
of the successor or surviving corporation, which shall not be the Company in the
event of a consolidation or merger, immediately thereafter, or (iv) a
transaction or series of related transactions (other than a public offering of
the Company's securities) in which the Company issues shares representing more
than 50% of the voting power of the Company immediately after giving effect to
such transaction.
2.6 Directors' Liability and Indemnification. The Company's Restated
----------------------------------------
Certificate of Incorporation and Bylaws shall provide (i) for elimination of the
liability of directors to the maximum extent permitted by law and (ii) for
indemnification of directors for acts on behalf of the Company to the maximum
extent permitted by law. In addition the Company shall use its best efforts to
retain such indemnification provisions.
2.7 Proprietary Information and Inventions Agreement. The Company
------------------------------------------------
shall require all employees and consultants to execute and deliver a Proprietary
Information and Inventions Agreement in the form provided to the Investors.
2.8 Certain Covenants Relating to SBA Matters.
-----------------------------------------
(a) Use of Proceeds. The proceeds from the issuance and sale of the
Series C Stock pursuant to the Series C Agreement (the "Proceeds") shall be used
by the Company for its growth, modernization or expansion. The Company shall
provide each Investor which is a licensed Small Business Investment Company (an
"SBIC Investor") and the Small Business Administration (the "SBA") reasonable
access to the Company's books and records for the purpose of confirming the use
of Proceeds.
(b) Business Activity. For a period of one year following the
initial Closing under the Series C Agreement the Company shall not change the
nature of its business activity if such change would render the Company
ineligible as provided in 13 C.F.R. Section 107.720.
(c) Compliance. So long as any SBIC Investor holds any securities of
the Company, the Company will at all times comply with the non-discrimination
requirements of 13 C.F.R. Parts 112, 113 and 117.
(d) Information for SBIC Investor. Within 45 days after the end of
each fiscal year and at such other times as an SBIC Investor may reasonably
request, the Company shall
15
<PAGE>
deliver to such SBIC Investor a written assessment, in form and substance
satisfactory to such SBIC Investor, of the economic impact of such investment,
and the impact of the financing on the Company's business in terms of profits
and on taxes paid by the Company and its employees. Upon request, the Company
agrees to promptly provide each SBIC Investor with sufficient information to
permit such Investor to comply with their obligations under the Small Business
Investment Act of 1958, as amended, and the regulations promulgated thereunder
and related thereto; provided, however, each SBIC Investor agrees that it will
protect any information which the Company labels as confidential to the extent
permitted by law. Any submission of any financial information under this Section
shall include a certificate of the company's president, chief executive officer,
treasurer or chief financial officer.
(e) For purposes of this Agreement, a "Regulatory Problem" means any
set of facts or circumstances wherein both (i) it has been asserted by any
governmental regulatory agency with jurisdiction over a SBIC Investor that such
SBIC Investor is not entitled to hold, or exercise any significant right with
respect to equity securities of the Company, including the Series C Preferred
Stock or the currently unissued Common Stock of the Company into which the
Series C Preferred Stock is convertible and (ii) such SBIC Investor reasonably
determines that such assertion is meritorious and that the solutions proposed by
such SBIC Investor is necessary to cure such regulatory violation by such SBIC
Investor. If a SBIC Investor determines that it has a Regulatory Problem, it
will so notify the Company and the other Investors as soon as practicable in
writing. After giving such notice, such SBIC Investor will have the right to
transfer its Series C Preferred Stock, and/or the shares of Common Stock
issuable upon conversion of such Series C Preferred Stock, without regard to any
restrictions on transfer set forth in this Agreement, the Series C Agreement or
any other Agreement identified herein or in the Series C Agreement
(collectively, the "Related Agreements") or in the Company's Certificate of
Incorporation or Bylaws, provided that the transferee agrees to become a party
to this Agreement, the Series C Agreement and/or to such relevant Related
Agreements, and acknowledges that such securities will become again, after such
transfer to such transferee, bound by all then relevant provisions relating to
further transfer thereof by transferee, and the Company will take all such
actions as are reasonably requested by such SBIC Investor in order to (i)
effectuate and facilitate any transfer by such SBIC Investor of any securities
of the Company then held by such SBIC Investor to any person designated by such
SBIC Investor, (ii) permit such SBIC Investor (or any of its affiliates) to
exchange all or any portion of any voting security of the Company then held by
such SBIC Investor on a share-for-share basis for shares of a nonvoting security
of the Company as will be created by action of the Board, and, to the extent
required by law, its stockholder, which nonvoting security will be identical in
all respects to the voting security exchanged for it, except that it will be
nonvoting and will be convertible into a voting security on such terms, solely
as required to allow such SBIC Investor to comply with then-applicable
regulatory considerations, as are requested by such SBIC Investor in good faith,
and (iii) amend, and use its reasonable efforts to cause other relevant parties,
including without limitation the Company's stockholders, to take such actions as
are legally required in order to amend this Agreement, the Series C Agreement,
the Related Agreements, the Company's Certificate of Incorporation, the
Company's Bylaws and related agreements and instruments in order to effectuate
and reflect the foregoing. The parties to this Agreement (other than the
Company) will vote all of the Company's voting securities held by them, and will
execute and
16
<PAGE>
deliver all documents and instruments requested by them by the Company, in favor
of and to effect such amendments and actions.
(f) Number of Holders of Voting Securities. So long as any SBIC
Investor holds any securities purchased pursuant to the Purchase Agreement or
issued by the Company with respect thereto, the Company shall notify each SBIC
Investor (i) at least 15 days prior to taking any action after which the number
or record holders of the Company's voting securities would be increased from
fewer than 50 to 50 or more, and (ii) of any other action or occurrence after
which the number of record holders of the Company's voting securities was
increased (or would increase) from fewer than 50 to 50 or more, as soon as
practicable after the Company becomes aware that such other action or occurrence
has occurred or is proposed to occur.
(g) Termination of Obligations. The obligations of the Company under
any provision of this Section 2.8 shall terminate and be of no further force and
effect to the extent that (i) compliance with such provision is not required
under the Small Business Investment Company Act of 1958 as amended, or the rules
and regulations of the SBA thereunder, or (ii) an Investor is no longer a SBIC
Investor.
2.9 Committees of the Board. As long as Apex is entitled to
-----------------------
designate one individual to serve as a member of the Board of Directors of the
Company, such Apex designee shall be a member of the Compensation Committee and
any executive committee of the Board of Directors of the Company. As long as
BankAmerica Ventures is entitled to designate one individual to serve as a
member of the Board of Directors of the Company, such BankAmerica Ventures
designee shall be a member of the Compensation Committee and shall have equal
consideration to be on all committees of the Board of Directors. The
Compensation Committee of the Board of Directors of the Company shall have no
more than four (4) members (the "Compensation Committee Members") and shall have
the power and authority to approve compensation-related matters with respect to
executive officers of the Company and to administer the Company's 1997 Stock
Plan and any other stock or option plan of the Company. Two (2) of the
Compensation Committee Members shall be outside directors.
2.10 Audit Committee of the Board. The Company shall establish an
----------------------------
Audit Committee within six months of the date of this Agreement. Members of the
Audit Committee shall be appointed by the Board of Directors.
3. Miscellaneous.
-------------
3.1 Successors and Assigns. Except as otherwise provided herein, the
----------------------
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Registrable Securities). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
3.2 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of California as applied to agreements among
California residents
17
<PAGE>
entered into and to be performed entirely within California, without reference
to California conflict of laws provisions.
3.3 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.4 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5 Notices. Unless otherwise provided, any notice required or
-------
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other address
as such party may designate by ten (10) days' advance written notice to the
other parties.
3.6 Expenses. If any action at law or in equity is necessary to
--------
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
3.7 Amendments and Waivers. Any term of this Agreement may be
----------------------
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Registrable Securities then outstanding; provided, however,
that (i) in the event such amendment or waiver adversely affects the rights
and/or obligations of the Management Holders under this Agreement in a different
manner than the other Holders, such amendment or waiver shall also require the
written consent of a majority of the Common Stock held by the Management
Holders, (ii) Section 2.5(a) shall not be amended or waived without the prior
written consent of Xerox, (iii) Section 2.5(b) shall not be amended or waived
without the prior written consent of Apex and (iv) Section 2.5(c) shall not be
amended or waived without the prior written consent of Hewlett-Packard. Any
amendment or waiver effected in accordance with this paragraph shall be binding
upon each holder of any Registrable Securities then outstanding, each future
holder of all such Registrable Securities and the Company.
3.8 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
3.9 Aggregation of Stock. All shares of Registrable Securities held
--------------------
or acquired by affiliated entities or persons shall be aggregated together for
the purpose of determining the availability of any rights under this Agreement.
18
<PAGE>
3.10 Entire Agreement. This Agreement (including the Exhibits hereto,
----------------
if any) constitutes the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof.
3.11 Termination of Prior Agreement. Upon the effectiveness of this
------------------------------
Agreement, the Prior Agreement shall terminate and be of no further force and
effect, and shall be superseded and replaced in its entirety by this Agreement.
19
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMPANY:
PLACEWARE, INC.
By:___________________________________________
Barry James Folsom, President and
Chief Executive Officer
Address: 201 Ravendale Drive
Mountain View, CA 94043
Signature Page
Third Restated Investor's Rights Agreement
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
INVESTORS:
______________________________________________
Print Name
By:___________________________________________
Name:_________________________________________
Title:________________________________________
Address:______________________________________________
______________________________________________
______________________________________________
Signature Page
Third Restated Investor's Rights Agreement
<PAGE>
SCHEDULE A
Investors
- ---------
BankAmerica Ventures
950 Tower Lane
Suite 700
Foster City, CA 94404
Attn:
Trans Cosmos USA
555 Twin Dolphin Drive
Suite 150
Redwood Shores, CA 94065
Attn: Yasushi Nishida
Gabriel Venture Partners, L.P.
1325 Howard Ave.
Burlingame, CA 94010
Attn: Rick Bolander
Gabriel Legacy Fund, L.P.
1325 Howard Ave.
Burlingame, CA 94010
Attn: Rick Bolander
Hewlett-Packard Company
3000 Hanover Street
Mailstop 20BQ
Palo Alto, CA 94304
Attn: General Counsel
Apex Investment Fund III, L.P.
Suite 9600
233 South Wacker Drive
Chicago, IL 60606
Apex Strategic Partners, LLC
Suite 9600
233 South Wacker Drive
Chicago, IL 60606
InterWest Partners VI, L.P.
3000 Sand Hill Road
Building 3, Suite 255
Menlo Park, CA 94025
Attn: Flip Gianos
A-1
<PAGE>
InterWest Investors VI, L.P.
3000 Sand Hill Road
Building 3, Suite 255
Menlo Park, CA 94025
Attn: Flip Gianos
Bay Partners SBIC, L.P.
10600 North De Anza Blvd., #100
Cupertino, CA 95015
Xerox Corporation
800 Long Ridge Road
P. O. Box 1600
Stamford, CT 06904
Attn: Charles Gilliam
Larry J. Williams and Margaret T. Williams,
Trustees of the Williams Family Trust
U/D/T dated 7/30/91
12 Snecker Ct.
Menlo Park, CA 94025
Magnuson Revocable Trust Dated 1/14/94
c/o Richard P. & Amy C. Magnuson, Trustees
355 Mariposa Avenue
Los Altos, CA 94022
Rekhi Family Trust Dated 12/15/89
c/o Kanwal S. Rekhi & Ann H. Rekhi, Trustees
16150 Hillvale Avenue
Monte Sereno, CA 95030
Raj-Ann Kaur Rekhi Trust Dated 12/15/89
Benjamin Rekhi Trust Dated 12/15/89
c/o Navindra Jain, Kanwal S. Rekhi & Ann H. Rekhi, Trustees
16150 Hillvale Avenue
Monte Sereno, CA 95030
Rekhi Family Trust, Created on June 17, 1992
c/o Upender Jeet Singh Rekhi & Kulvinder Kaur Rekhi, Trustees
18330 Laurel Drive
Los Gatos, CA 95030
A-2
<PAGE>
J.F. Shea Co., Inc. as nominee 1996-48
c/o Edmund Shea
655 Brea Canyon Drive
Walnut, CA 91789
Henry L. B. Wilder
331 Tripp Road
Woodside, CA 94062
Dougery Ventures, LLC
165 Santa Ana Avenue
San Francisco, CA 94127
Attn: John Dougery
Dougery Revocable Trust UTD 10/15/96
John R. Dougery Revocable Trust UTD 10/15/96
Shelley Dougery Trust
John R. Dougery, Jr. Trust
Kathryn Ann Dougery Trust
Rolapp Trust
165 Santa Ana Avenue
San Francisco, CA 94127
Attn: John Dougery
K. B. Chandrasekhar
c/o Exodus Communications, Inc.
2650 San Tomas Expressway
Santa Clara, CA 95051
Ayer Family Trust Dated 6/30/82
William E. Ayer
c/o William E. Ayer
3000 Sand Hill Road, #4-145
Menlo Park, CA 94402
Goel Family Partnership
98 Ridgeview Drive
Atherton, CA 94027
Donald B. Ayer
6250 Park Road
McLean, VA 22101
William S. Ayer
15829 S.E. 56th Place
Bellevue, WA 98006
A-3
<PAGE>
James F. McGill
201 West 72/nd/ Street, #16A
New York, NY 10023
Eric Emerson Schmidt & Wendy Schmidt,
Trustees or successor trustee, under the
Schmidt family living trust u/a/d 2/19/87
366 Walsh Road
Atherton, CA 94027
Daniel C. Lynch
25660 LaLanne Court
Los Altos Hills, CA 94022
George B. and Mary Lou Shott Trust U/A DTD 10/15/91
990 Green Street, #5
San Francisco, CA 94133
Rajinder K. Chopra
Anjali Chopra
19918 Portal Plaza
Cupertino, CA 95014
Rajdak Investment LLC
151 Bridgton Court
Los Altos, CA 94022
Barry James Folsom
27197 Black Mountain Road
Los Altos Hills, CA 94022
Zeisler/Bailey Family Trust,
Dated 5/14/98
c/o John Zeisler
25975 Alicante Lane
Los Altos Hills, CA 94022
Comdisco, Inc.
c/o Comdisco Ventures Division
3000 Sand Hill Road
Building 1, Suite 155
Menlo Park, CA 94025
A-4
<PAGE>
SCHEDULE B
Management Holders
- ------------------
Richard H. Bruce
1956 Alford Drive
Los Altos, CA 94024-6901
Pavel Curtis
27990 Via Ventana
Los Altos Hills, CA 94022
Michael D. Dixon
1523 Portola Avenue
Palo Alto, CA 94306
Robert T. Krivacic
2302 Gunar Drive
San Jose, CA 95124
David A. Nichols
2555 Dell Avenue
Mountain View, CA 94043
The William W. and Nancy W. Shott
Family Trust Dated May 14, 1993
280 Willowbrook
Portola Valley, CA 94028
Magnuson Revocable Trust Dated 1/14/94
c/o Richard P. & Amy C. Magnuson, Trustees
355 Mariposa Avenue
Los Altos, CA 94022
Rekhi Family Trust Dated 12/15/89
c/o Kanwal S. Rekhi & Ann H. Rekhi, Trustees
16150 Hillvale Avenue
Monte Sereno, CA 95030
B-1
<PAGE>
EXHIBIT 10.1
PLACEWARE, INC.
EXECUTIVE SEVERANCE BENEFIT PLAN
SECTION 1. Introduction
The PlaceWare, Inc. Executive Severance Benefit Plan (the "Plan") is
designed to provide separation pay and benefits to certain eligible executive
employees of the Company whose employment is terminated under the conditions
specified herein. This document constitutes the written instrument under which
the Plan is maintained and supersedes any prior plan or practice of the Company
that provides severance benefits to eligible employees. The Plan was initially
approved by the Board of Directors of the Company effective February ,
2000.
SECTION 2. Definitions
For purposes of this Plan, the following terms shall have the meanings set
forth below:
(a) "Base Salary" means base salary paid to you (including all amounts
elected to be deferred that would otherwise have been paid, under any cash or
deferred arrangement established by the Company), overtime pay, and commissions
but excluding other remuneration paid directly to you including bonuses, profit
sharing, the cost of employee benefits paid for by the Company, education or
tuition reimbursements, imputed income arising under any Company group insurance
or benefit program, traveling expenses, business and moving expense
reimbursements, income received in connection with stock options, contributions
made by the Company under any employee benefit plan, and similar items of
compensation.
(b) "Board" means the Board of Directors of the Company.
(c) "Cause" means any of the following: (i) your theft, dishonesty, or
falsification of any Company documents or records; (ii) your improper use or
disclosure of the Company's confidential or proprietary information; (iii) your
refusal to perform any reasonable assigned duties after written notice from the
Company of, and a reasonable opportunity to cure, such refusal; (iv) any
material breach by you of any employment agreement between you and the Company,
which breach is not cured pursuant to the terms of such agreement; or (v) your
conviction (including any plea of guilty or nolo contendere) of any felony or
any crime involving moral turpitude or dishonesty which impairs your ability to
perform your duties with the Company. The Board shall have the right to
reasonably determine whether you have engaged in conduct constituting "Cause"
for purposes of this Agreement.
(d) "Change in Control" means (i) the consummation of a merger or
consolidation of the Company with or into another entity or any other corporate
reorganization, if more than fifty (50%) of the combined voting power of the
continuing or surviving entity's securities outstanding immediately after such
merger, consolidation or other reorganization is owned by persons who were not
stockholders of the Company immediately prior to such merger, consolidation or
other reorganization; or (ii) the sale, transfer or other disposition of all or
substantially all of the Company's assets. A transaction shall not constitute a
Change in Control
1.
<PAGE>
if its sole purpose is to change the state of the Company's incorporation or to
create a holding company that will be owned in substantially the same
proportions by the persons who held the Company's securities immediately before
such transaction.
(e) "Company" means PlaceWare, Inc., or following a Change in Control, the
surviving entity resulting from such transaction.
(f) "Involuntary Termination Without Cause" means your dismissal or
discharge by the Company (or, if applicable, by any successor entity) for any
reason or no reason other than for Cause. The termination of your employment
will not be deemed to be an "Involuntary Termination Without Cause" if your
termination occurs as a result of your death or disability.
(g) "Voluntary Termination for Good Reason" means that you voluntarily
terminate your employment with the Company after any of the following are
undertaken by the Company:
(i) without your express written consent, the assignment to you
of any duties, or any limitation of your responsibilities, substantially
inconsistent with your positions, duties, responsibilities and status with the
Company immediately prior to the date of the Change in Control; provided,
however, that a mere change in your title or reporting relationships shall not
constitute Good Reason;
(ii) without your express written consent, the relocation of the
principal place of your employment to a location that is more than twenty-five
(25) miles from your principal place of employment immediately prior to the date
of the Change in Control, or the imposition of travel requirements substantially
more demanding of you than such travel requirements existing immediately prior
to the date of the Change in Control; or
(iii) any failure by the Company to pay, or any material reduction
by the Company of, your base salary in effect immediately prior to the date of
the Change in Control (unless reductions comparable in amount and duration are
concurrently made for all other employees of the Company with comparable
responsibilities, organizational level and title).
SECTION 3. Eligibility And Participation
Employees of the Company listed on the attached Schedule I ("Eligible
Employees") shall receive the following benefits under the following conditions:
(a) In the event your employment with the Company terminates due to (i) an
Involuntary Termination Without Cause that occurs within thirteen (13) months
following the effective date of a Change in Control or (ii) a Voluntary
Termination for Good Reason that occurs within thirteen (13) months following
the effective date of a Change in Control, you will receive the benefits
described in Sections 4(a), 4(b) and 4(c).
(b) In the event your employment with the Company terminates due to an
Involuntary Termination Without Cause that is not in connection with a Change in
Control, you will receive the benefits described in Sections 4(a) and 4(b).
2.
<PAGE>
(c) The Board may determine that you are eligible for any portion of or
all of the benefits set forth in Section 4 of the Plan for reasons other than
those specified in Sections 3(a) or 3(b) above and such decision by the Board
shall in no way obligate the Company to provide such benefits to any other
Eligible Employee, even if similarly situated.
SECTION 4. Benefits
(a) Salary Continuation. The Company shall continue your Base Salary for
three months (3) months following your termination of employment as described in
section 3(a) or 3(b). Any salary continuation payments shall be paid to you in
regular installments on the normal payroll dates of the Company or over a
shorter period, as determined by the Company. Any such amount that you receive
shall be subject to all required tax withholding.
(b) Continuation of Health Benefits. Provided that you elect continued
coverage under federal COBRA law as applicable, the Company shall pay, on your
behalf, the portion of premiums of your group health insurance, including
coverage for your eligible dependents, that the Company paid prior to your
termination of employment; provided, however, that the Company will pay such
premiums for your eligible dependents only for coverage for which those
dependents were enrolled immediately prior to your termination of employment.
You will continue to be required to pay that portion of the premium of your
health coverage, including coverage for your eligible dependents, that you were
required to pay as an active employee immediately prior to your termination of
employment. The number of months of such premium payments shall equal the number
of months of your salary continuation payments, but in no event shall such
premium payments be made for a period exceeding twelve (12) months or be made
following the effective date of your coverage by a health plan of a subsequent
employer. For the balance of the period that you are entitled to coverage under
federal COBRA law, you shall be entitled to maintain coverage for yourself and
your eligible dependents at your own expense.
(c) Vesting of Stock Options. The Company, immediately prior to your
termination of employment, shall accelerate one hundred percent (100%) of the
vesting, measured from the effective date of termination of employment, of all
of your unvested stock options to purchase stock of the Company or any successor
thereto. In addition, if applicable, the Company's (or any successor
corporation's) right to repurchase unvested stock purchased by you pursuant to
an early exercise stock purchase agreement shall lapse in full immediately prior
to your termination of employment.
(d) Additional Benefits. In addition to the benefits provided in the
foregoing Sections 4(a), 4(b) and 4(c), the Board may, in its sole discretion,
provide additional benefits to Eligible Employees chosen by the Company, in its
sole discretion, and the provision of any such additional benefits to an
Eligible Employee shall in no way obligate the Company to provide such
additional benefits to any other Eligible Employee, even if similarly situated.
(e) Parachute Payments. If any payment or benefit you would receive
pursuant to a Change in Control from the Company or otherwise ("Payment") would
(i) constitute a "parachute payment" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code"), and (ii) but for this
sentence, be subject to the excise tax imposed by
3.
<PAGE>
Section 4999 of the Code (the "Excise Tax"), then such Payment shall be reduced
to the Reduced Amount. The "Reduced Amount" shall be either (x) the largest
portion of the Payment that would result in no portion of the Payment being
subject to the Excise Tax or (y) the largest portion, up to and including the
total, of the Payment, whichever amount, after taking into account all
applicable federal, state and local employment taxes, income taxes, and the
Excise Tax (all computed at the highest applicable marginal rate), results in
your receipt, on an after-tax basis, of the greater amount of the Payment
notwithstanding that all or some portion of the Payment may be subject to the
Excise Tax. If a reduction in payments or benefits constituting "parachute
payments" is necessary so that the Payment equals the Reduced Amount, reduction
shall occur in the following order unless you elect in writing a different order
(provided, however, that such election shall be subject to Company approval if
made on or after the date on which the event that triggers the Payment occurs):
reduction of cash payments; cancellation of accelerated vesting of stock awards;
reduction of employee benefits. In the event that acceleration of vesting of
stock award compensation is to be reduced, such acceleration of vesting shall be
cancelled in the reverse order of the date of grant of your stock awards unless
you elect in writing a different order for cancellation.
The accounting firm engaged by the Company for general audit purposes as of
the day prior to the effective date of the Change in Control shall perform the
foregoing calculations. If the accounting firm so engaged by the Company is
serving as accountant or auditor for the individual, entity or group effecting
the Change in Control, the Company shall appoint a nationally recognized
accounting firm to make the determinations required hereunder. The Company
shall bear all expenses with respect to the determinations by such accounting
firm required to be made hereunder.
The accounting firm engaged to make the determinations hereunder shall
provide its calculations, together with detailed supporting documentation, to
the Company and you within fifteen (15) calendar days after the date on which
your right to a Payment is triggered (if requested at that time by the Company
or you) or such other time as requested by the Company or you. If the
accounting firm determines that no Excise Tax is payable with respect to a
Payment, either before or after the application of the Reduced Amount, it shall
furnish the Company and you with an opinion reasonably acceptable to you that no
Excise Tax will be imposed with respect to such Payment. Any good faith
determinations of the accounting firm made hereunder shall be final, binding and
conclusive upon the Company and you.
SECTION 5. Limitations and Conditions on Benefits
(a) Release. To receive benefits under this Plan, you must execute a
release of claims in favor of the Company, in the form attached to this Plan as
Exhibit A, Exhibit B or Exhibit C, as appropriate, and such release must become
effective in accordance with its terms.
(b) Termination of Benefits. Benefits under this Plan shall terminate
immediately if you, at any time, violate any proprietary information or
confidentiality obligation to the Company.
(c) Certain Reductions. Notwithstanding any other provision of the Plan
to the contrary, any benefits payable to you under this Plan shall be reduced by
any severance benefits
4.
<PAGE>
payable by the Company or an affiliate of the Company to you under any other
policy, plan, program or arrangement, including, without limitation, a contract
between you and any entity (other than any letter addressed from the Company to
you which sets forth your eligibility under the Plan), under which you are
covered. Furthermore, to the extent that any federal, state or local laws,
including, without limitation, so-called "plant closing" laws, require the
Company to give advance notice or make a payment of any kind to you because of
your involuntary termination due to a layoff, reduction in force, plant or
facility closing, sale of business, change of control, or any other similar
event or reason, the benefits payable under this Plan shall either be reduced or
eliminated.
(d) Non-Duplication of Benefits. You are eligible to receive benefits
under this Plan one (1) time.
SECTION 6. Administration and Operation of the Plan
The Company is the "Plan Sponsor" and the "Plan Administrator" of the Plan,
as such terms are defined in the Employee Retirement Income Security Act of 1974
("ERISA"). The Company, in its capacity as Plan Administrator of the Plan, is
the named fiduciary that has the authority to control and manage the operation
and administration of the Plan. The Company has the sole discretion to make such
rules, regulations, and interpretations of the Plan and to make such
computations and shall take such other action to administer the Plan as it may
deem appropriate in its sole discretion. Such rules, regulations,
interpretations, computations, and other actions shall be conclusive and binding
upon all persons. The Company may engage the services of such persons or
organizations to render advice or perform services with respect to its
responsibilities under the Plan as it shall determine to be necessary or
appropriate. Such persons or organizations may include (without limitation)
actuaries, attorneys, accountants and consultants.
Any person or group of persons may serve in more than one fiduciary
capacity with respect to the Plan. The responsibilities of the Company under
the Plan shall be carried out on its behalf by its directors, officers,
employees and agents, acting on behalf or in the name of the Company in their
capacity as directors, officers, employees and agents and not as individual
fiduciaries. The Company may delegate any of its fiduciary responsibilities
under the Plan to another person or persons pursuant to a written instrument
that specifies the fiduciary responsibilities so delegated to each such person.
SECTION 7. Claims, Inquiries and Appeals
(a) Applications for Benefits and Inquiries. Applications for benefits
should be in writing, signed and submitted to: Plan Administrator, Executive
Severance Benefit Plan, PlaceWare, Inc., 295 North Bernardo Drive, Mountain
View, California 94043-5205.
(b) Denial of Claims. If any application for benefits is denied in whole
or in part, the Plan Administrator must notify you, in writing, of the denial of
the application, and of your right to review the denial. The written notice of
denial will be set forth in a manner designed to be understood, and will include
specific reasons for the denial, specific references to the Plan provision upon
which the denial is based, a description of any information or material that the
5.
<PAGE>
Plan Administrator needs to complete the review and an explanation of the Plan's
review procedure.
This written notice will be given to you within ninety (90) days after the
Plan Administrator receives the application, unless special circumstances
require an extension of time, in which case, the Plan Administrator has up to an
additional ninety (90) days for processing the application. If an extension of
time for processing is required, written notice of the extension will be
furnished to you before the end of the initial 90-day period.
This notice of extension will describe the special circumstances
necessitating the additional time and the date by which the Plan Administrator
is to render its decision on the application. If written notice of denial of
the application for benefits is not furnished within the specified time, the
application shall be deemed to be denied. You will then be permitted to appeal
the denial in accordance with the review procedure described below.
(c) Request for Review. You (or your authorized representative) may appeal
a denied benefit claim by submitting a written request for a review to: Review
Panel, Executive Severance Benefit Plan, PlaceWare, Inc., 295 North Bernardo
Drive, Mountain View, California 94043-5205. The Review Panel shall be comprised
of two (2) or more persons to be appointed by the Company. Your appeal must be
submitted within sixty (60) days after the application is denied (or deemed
denied). The Review Panel will give you (or your representative) an opportunity
to review pertinent documents in preparing a request for a review.
A request for review must set forth all of the grounds on which it is
based, all facts in support of the request and any other matters that you or
your representative feel are pertinent. The Review Panel may require you or
your representative to submit additional facts, documents or other material as
it may find necessary or appropriate in making its review.
(d) Decision on Review. The Review Panel will act on each request for
review within sixty (60) days after receipt of the request, unless special
circumstances require an extension of time (not to exceed an additional sixty
(60) days) for processing the request for a review. If an extension for review
is required, written notice of the extension will be furnished within the
initial 60-day period. The Review Panel will give written notice of its decision
to the applicant. In the event that the Review Panel confirms the denial of the
application for benefits in whole or in part, the notice will outline the
specific Plan provisions upon which the decision is based. If written notice of
the Review Panel's decision is not given within the time prescribed above, the
application will be deemed denied on review.
(e) Rules and Procedures. The Plan Administrator and/or the Review Panel
may establish rules and procedures, consistent with the Plan and with ERISA, as
necessary and appropriate in carrying out their responsibilities in reviewing
benefit claims. If you wish to submit additional information in connection with
an appeal from the denial (or deemed denial) of benefits, you may be required to
do so at your own expense.
(f) Exhaustion of Remedies. No legal action for benefits under the Plan
may be brought until (i) a written application for benefits has been submitted
in accordance with the procedures described above, (ii) the person claiming
benefits has been notified by the Plan
6.
<PAGE>
Administrator that the application is denied (or the application is deemed
denied due to the Plan Administrator's failure to act on it within the time
prescribed), (iii) a written request for a review of the application has been
submitted in accordance with the appeal procedure described above and (iv) the
person appealing the denial has been notified in writing that the Review Panel
has denied the appeal (or the appeal is deemed to be denied due to the Review
Panel's failure to take any action on the claim within the time prescribed).
SECTION 8. Basis of Payments To and From the Plan
All benefits under the Plan shall be paid by the Company. The Plan shall be
unfunded and benefits hereunder shall be paid only from the general assets of
the Company.
SECTION 9. Amendment and Termination
The Company reserves the right to amend or terminate this Plan at any time;
provided, however, that this Plan may not be amended or terminated following the
effective date of a Change in Control, and no amendment or termination of the
Plan shall adversely affect any benefits to which you have become entitled prior
to such amendment or termination.
SECTION 10. Non-Alienation of Benefits
No Plan benefit may be anticipated, alienated, sold, transferred, assigned,
pledged, encumbered or charged, and any attempt to do so will be void.
SECTION 11. Successors and Assigns
This Plan shall be binding upon any surviving entity resulting from a
Change in Control and upon any other person who is a successor by merger,
acquisition, consolidation or otherwise to the business formerly carried on by
the Company without regard to whether or not such person actively adopts or
formally continues the Plan. Eligible Employees, to the extent they are
otherwise eligible for benefits under the Plan, are intended third party
beneficiaries of this provision.
SECTION 12. Legal Construction
This Plan shall be interpreted in accordance with ERISA and, to the extent
not preempted by ERISA, with the laws of the State of California. This Plan
constitutes both a plan document and a summary plan description for purposes of
ERISA.
SECTION 13. Other Plan Information
Plan Identification Number: 510
Employer Identification Number: 77-044-2561
Ending of the Plan's Fiscal Year: December 31
7.
<PAGE>
<TABLE>
<S> <C>
Agent for the Service of Legal Process: PlaceWare, Inc., 295 North Bernardo Drive,
Mountain View, CA 94043-5205
</TABLE>
SECTION 14. Statement of ERISA Rights
As a participant in this Plan (which is a welfare benefit plan sponsored by
the Company) you are entitled to certain rights and protections under ERISA,
including the right to:
(a) Examine, without charge, at the Plan Administrator's office and at
other specified locations, such as work sites, all Plan documents and copies of
all documents filed by the Plan with the U.S. Department of Labor, such as
detailed annual reports;
(b) Obtain copies of all Plan documents and Plan information upon written
request to the Plan Administrator. The Plan Administrator may make a reasonable
charge for the copies; and
(c) Receive a summary of the Plan's annual financial report, in the case
of a plan which is required to file an annual financial report with the
Department of Labor. (Generally, all pension plans and welfare plans with 100 or
more participants must file these annual reports.)
In addition to creating rights for Plan participants, ERISA imposes duties
upon the people responsible for the operation of the employee benefit plan. The
people who operate the Plan, called "fiduciaries" of the Plan, have a duty to do
so prudently and in the interest of you and other Plan participants and
beneficiaries.
No one, including your employer or any other person, may fire you or
otherwise discriminate against you in any way to prevent you from obtaining a
Plan benefit or exercising your rights under ERISA. If your claim for a Plan
benefit is denied in whole or in part, you must receive a written explanation of
the reason for the denial. You have the right to have the Plan review and
reconsider your claim.
Under ERISA, there are steps you can take to enforce the above rights. For
instance, if you request materials from the Plan and do not receive them within
30 days, you may file suit in a federal court. In such a case, the court may
require the Plan Administrator to provide the materials and pay you up to $110 a
day until you receive the materials, unless the materials were not sent because
of reasons beyond the control of the Plan Administrator. If you have a claim
for benefits that is denied or ignored, in whole or in part, you may file suit
in a state or federal court. If it should happen that the Plan fiduciaries
misuse the Plan's money, or if you are discriminated against for asserting your
rights, you may seek assistance from the U.S. Department of Labor, or you may
file suit in a federal court. The court will decide who should pay court costs
and legal fees. If you are successful, the court may order the person you have
sued to pay these costs and fees. If you lose, the court may order you to pay
these costs and fees, for example, if it finds your claim is frivolous.
If you have any questions about this statement or about your rights under
ERISA, you should contact the nearest office of the Pension and Welfare Benefits
Administration, U.S. Department of Labor, listed in your telephone directory, or
the Division of Technical Assistance
8.
<PAGE>
and Inquiries, Pension and Welfare Benefit Administration, U.S. Department of
Labor, 200 Constitution Avenue N.W., Washington, D.C. 20210.
Exhibit A: Release (For Persons 40 Years of Age or Older-Group Termination)
Exhibit B: Release (For Persons 40 Years of Age or Older-Individual
Termination)
Exhibit C: Release (For Persons Under 40 Years of Age)
9.
<PAGE>
Exhibit A
RELEASE (For Persons 40 Years of Age or Older-Group Termination)
I understand and agree completely to the terms set forth in the PlaceWare,
Inc. Executive Systems Severance Benefit Plan (the "Plan").
In consideration of benefits I will receive under the Plan, I hereby
release, acquit and forever discharge the Company, its parents and subsidiaries,
and their respective officers, directors, agents, servants, employees,
shareholders, successors, assigns and affiliates, of and from any and all
claims, liabilities, demands, causes of action, costs, expenses, attorneys'
fees, damages, indemnities and obligations of every kind and nature, in law,
equity, or otherwise, known and unknown, suspected and unsuspected, disclosed
and undisclosed (other than any claim for indemnification I may have as a result
of any third party action against me based on my employment with the Company),
arising out of or in any way related to agreements, events, acts or conduct at
any time prior to and including the date I execute this Agreement, including but
not limited to: all such claims and demands directly or indirectly arising out
of or in any way connected with my employment with the Company or the
termination of that employment, including but not limited to, claims of
intentional and negligent infliction of emotional distress, any and all tort
claims for personal injury, claims or demands related to salary, bonuses,
commissions, stock, stock options, or any other ownership interests in the
Company, vacation pay, fringe benefits, expense reimbursements, severance pay,
or any other form of compensation; claims pursuant to any federal, state or
local law or cause of action including, but not limited to, the federal Civil
Rights Act of 1964, as amended; the federal Age Discrimination in Employment Act
of 1967, as amended ("ADEA"); the federal Americans with Disabilities Act of
1990; the California Fair Employment and Housing Act, as amended; tort law;
contract law; wrongful discharge; discrimination; fraud; defamation; emotional
distress; and breach of the implied covenant of good faith and fair dealing.
I acknowledge that I am knowingly and voluntarily waiving and releasing any
rights I may have under ADEA. I also acknowledge that the consideration given
for the waiver and release in the preceding paragraph hereof is in addition to
anything of value to which I was already entitled. I further acknowledge that I
have been advised by this writing, as required by the ADEA, that: (a) my waiver
and release do not apply to any rights or claims that may arise after I execute
this Agreement; (b) I have the right to consult with an attorney prior to
executing this Agreement; (c) I have forty-five (45) days from the date I
receive this Agreement and the information specified in (f) below to consider
this Agreement (although I voluntarily may choose to execute this Agreement
earlier); (d) I have seven (7) days following the execution of this Agreement to
revoke the Agreement; and (e) this Agreement shall not be effective until the
later of (i) the date upon which the revocation period has expired, which shall
be the eighth (8th) day after I execute this Agreement, and (ii) the date I
return this Agreement, fully executed, to the Company; and (f) I have received
with this Agreement a detailed list of the job titles and ages of all employees
who were terminated in this group termination and the ages of all employees of
the Company and its affiliates in the same job classification or organizational
unit who were not terminated.
1.
<PAGE>
by him must have materially affected his settlement with the debtor." I hereby
expressly waive and relinquish all rights and benefits under that section and
any law of any jurisdiction of similar effect with respect to my release of any
claims I may have against the Company, its affiliates, and the entities and
persons specified above.
Employee
Name:______________________ Date:___________________________
2.
<PAGE>
Exhibit B
RELEASE (For Persons 40 Years of Age or Older-Individual Termination)
I understand and agree completely to the terms set forth in the PlaceWare,
Inc. Executive Severance Benefit Plan (the "Plan").
In consideration of benefits I will receive under the Plan, I hereby
release, acquit and forever discharge the Company, its parents and subsidiaries,
and their respective officers, directors, agents, servants, employees,
shareholders, successors, assigns and affiliates, of and from any and all
claims, liabilities, demands, causes of action, costs, expenses, attorneys'
fees, damages, indemnities and obligations of every kind and nature, in law,
equity, or otherwise, known and unknown, suspected and unsuspected, disclosed
and undisclosed (other than any claim for indemnification I may have as a result
of any third party action against me based on my employment with the Company),
arising out of or in any way related to agreements, events, acts or conduct at
any time prior to and including the date I execute this Agreement, including but
not limited to: all such claims and demands directly or indirectly arising out
of or in any way connected with my employment with the Company or the
termination of that employment, including but not limited to, claims of
intentional and negligent infliction of emotional distress, any and all tort
claims for personal injury, claims or demands related to salary, bonuses,
commissions, stock, stock options, or any other ownership interests in the
Company, vacation pay, fringe benefits, expense reimbursements, severance pay,
or any other form of compensation; claims pursuant to any federal, state or
local law or cause of action including, but not limited to, the federal Civil
Rights Act of 1964, as amended; the federal Age Discrimination in Employment Act
of 1967, as amended ("ADEA"); the federal Americans with Disabilities Act of
1990; the California Fair Employment and Housing Act, as amended; tort law;
contract law; wrongful discharge; discrimination; fraud; defamation; emotional
distress; and breach of the implied covenant of good faith and fair dealing.
I acknowledge that I am knowingly and voluntarily waiving and releasing any
rights I may have under the ADEA, as amended. I also acknowledge that the
consideration given for the waiver and release in the preceding paragraph hereof
is in addition to anything of value to which I was already entitled. I further
acknowledge that I have been advised by this writing, as required by the ADEA,
that: (a) my waiver and release do not apply to any rights or claims that may
arise after the execution date of this Release Agreement; (b) I have been
advised hereby that I have the right to consult with an attorney prior to
executing this Agreement; (c) I have twenty-one (21) days to consider this
Agreement (although I may choose to voluntarily execute this Agreement earlier);
(d) I have seven (7) days following the execution of this Agreement by the
parties to revoke the Agreement; and (e) this Agreement will not be effective
until the date upon which the revocation period has expired, which will be the
eighth day after this Agreement is executed by me, provided that the Company has
also executed this Agreement by that date ("Effective Date").
I acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: "A general release does not
extend to claims which the creditor does not know or suspect to exist in his
favor at the time of executing the release, which if known
1.
<PAGE>
by him must have materially affected his settlement with the debtor." I hereby
expressly waive and relinquish all rights and benefits under that section and
any law of any jurisdiction of similar effect with respect to my release of any
claims I may have against the Company, its affiliates, and the entities and
persons specified above.
Employee
Name: _______________________________ Date:___________________________
2.
<PAGE>
Exhibit C
RELEASE (For Persons Under 40 Years of Age)
I understand and agree completely to the terms set forth in the PlaceWare,
Inc. Executive Severance Benefit Plan (the "Plan").
In consideration of benefits I will receive under the Plan, I hereby
release, acquit and forever discharge the Company, its parents and subsidiaries,
and their respective officers, directors, agents, servants, employees,
shareholders, successors, assigns and affiliates, of and from any and all
claims, liabilities, demands, causes of action, costs, expenses, attorneys'
fees, damages, indemnities and obligations of every kind and nature, in law,
equity, or otherwise, known and unknown, suspected and unsuspected, disclosed
and undisclosed (other than any claim for indemnification I may have as a result
of any third party action against me based on my employment with the Company),
arising out of or in any way related to agreements, events, acts or conduct at
any time prior to and including the date I execute this Agreement, including but
not limited to: all such claims and demands directly or indirectly arising out
of or in any way connected with my employment with the Company or the
termination of that employment, including but not limited to, claims of
intentional and negligent infliction of emotional distress, any and all tort
claims for personal injury, claims or demands related to salary, bonuses,
commissions, stock, stock options, or any other ownership interests in the
Company, vacation pay, fringe benefits, expense reimbursements, severance pay,
or any other form of compensation; claims pursuant to any federal, state or
local law or cause of action including, but not limited to, the federal Civil
Rights Act of 1964, the federal Americans with Disabilities Act of 1990; the
California Fair Employment and Housing Act, as amended; tort law; contract law;
wrongful discharge; discrimination; fraud; defamation; emotional distress; and
breach of the implied covenant of good faith and fair dealing.
I acknowledge that to become effective, I must sign and return this
Agreement to the Company so that it is received not later than fourteen (14)
days following the date of my employment termination. I acknowledge that I have
read and understand Section 1542 of the California Civil Code which reads as
follows: "A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the
debtor." I hereby expressly waive and relinquish all rights and benefits under
that section and any law of any jurisdiction of similar effect with respect to
my release of any claims I may have against the Company, its affiliates, and the
entities and persons specified above.
Employee
Name: ____________________________ Date:__________________________________
3.
<PAGE>
Schedule I
4.
<PAGE>
EXHIBIT 10.2
PlaceWare, Inc.
2000 EQUITY INCENTIVE PLAN
Effective Date: Date of Initial Public Offering
Approved By Stockholders _______________, ______
Termination Date: February __, 2010
1. Purposes.
(a) Eligible Stock Award Recipients. The persons eligible to receive Stock
Awards are the Employees, Directors and Consultants of the Company and its
Affiliates.
(b) Available Stock Awards. The purpose of the Plan is to provide a means
by which eligible recipients of Stock Awards may be given an opportunity to
benefit from increases in value of the Common Stock through the granting of the
following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) stock bonuses and (iv) rights to acquire restricted stock.
(c) General Purpose. The Company, by means of the Plan, seeks to retain the
services of the group of persons eligible to receive Stock Awards, to secure and
retain the services of new members of this group and to provide incentives for
such persons to exert maximum efforts for the success of the Company and its
Affiliates.
2. Definitions.
(a) "Affiliate" means any parent corporation or subsidiary corporation of
the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a committee of one or more members of the Board
appointed by the Board in accordance with subsection 3(c).
(e) "Common Stock" means the common stock of the Company.
(f) "Company" means PlaceWare, Inc., a Delaware corporation.
(g) "Consultant" means any person, including an advisor, (i) engaged by the
Company or an Affiliate to render consulting or advisory services and who is
compensated for such services or (ii) who is a member of the Board of Directors
of an Affiliate. However, the term "Consultant" shall not include either
Directors who are not compensated by the Company
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for their services as Directors or Directors who are merely paid a director's
fee by the Company for their services as Directors.
(h) "Continuous Service" means that the Participant's service with the Company
or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's service. For example, a change in status without interruption
from an Employee of the Company to a Consultant of an Affiliate or a Director
will not constitute an interruption of Continuous Service. The Board or the
chief executive officer of the Company, in that party's sole discretion, may
determine whether Continuous Service shall be considered interrupted in the case
of any leave of absence approved by that party, including sick leave, military
leave or any other personal leave.
(i) "Covered Employee" means the chief executive officer and the four (4)
other highest compensated officers of the Company for whom total compensation is
required to be reported to stockholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.
(j) "Director" means a member of the Board of Directors of the Company.
(k) "Disability" means the permanent and total disability of a person within
the meaning of Section 22(e)(3) of the Code.
(l) "Employee" means any person employed by the Company or an Affiliate. Mere
service as a Director or payment of a director's fee by the Company or an
Affiliate shall not be sufficient to constitute "employment" by the Company or
an Affiliate.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(n) "Fair Market Value" means, as of any date, the value of the Common Stock
determined as follows:
(i) If the Common Stock is listed on any established stock exchange or
traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair
Market Value of a share of Common Stock shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or market (or the exchange or market with the greatest volume of
trading in the Common Stock) on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable.
(ii) In the absence of such markets for the Common Stock, the Fair Market
Value shall be determined in good faith by the Board.
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(o) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(p) "Non-Employee Director" means a Director who either (i) is not a current
Employee or Officer of the Company or its parent or a subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
a subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
("Regulation S-K")), does not possess an interest in any other transaction as to
which disclosure would be required under Item 404(a) of Regulation S-K and is
not engaged in a business relationship as to which disclosure would be required
under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a "non-
employee director" for purposes of Rule 16b-3.
(q) "Nonstatutory Stock Option" means an Option not intended to qualify as an
Incentive Stock Option.
(r) "Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(s) "Option" means an Incentive Stock Option or a Nonstatutory Stock Option
granted pursuant to the Plan.
(t) "Option Agreement" means a written agreement between the Company and an
Optionholder evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
(u) "Optionholder" means a person to whom an Option is granted pursuant to the
Plan or, if applicable, such other person who holds an outstanding Option.
(v) "Outside Director" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
Treasury Regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(w) "Participant" means a person to whom a Stock Award is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding Stock
Award.
(x) "Plan" means this PlaceWare, Inc. 2000 Equity Incentive Plan.
(y) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or any
successor to Rule 16b-3, as in effect from time to time.
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(z) "Securities Act" means the Securities Act of 1933, as amended.
(aa) "Stock Award" means any right granted under the Plan, including an
Option, a stock bonus and a right to acquire restricted stock.
(bb) "Stock Award Agreement" means a written agreement between the Company
and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
(cc) "Ten Percent Stockholder" means a person who owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or of any of its Affiliates.
3. Administration.
(a) Administration by Board. The Board shall administer the Plan unless
and until the Board delegates administration to a Committee, as provided in
subsection 3(c).
(b) Powers of Board. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; what type or combination of types of Stock Award shall be
granted; the provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be permitted to
receive Common Stock pursuant to a Stock Award; and the number of shares of
Common Stock with respect to which a Stock Award shall be granted to each such
person.
(ii) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(iii) To amend the Plan or a Stock Award as provided in Section 12.
(iv) To terminate or suspend the Plan as provided in Section 13.
(v) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) Delegation to Committee.
(i) General. The Board may delegate administration of the Plan to a
Committee or Committees of one (1) or more members of the Board, and the term
"Committee" shall apply to any person or persons to whom such authority has been
delegated. If
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administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, including the power to delegate to a subcommittee any of the
administrative powers the Committee is authorized to exercise (and references in
this Plan to the Board shall thereafter be to the Committee or subcommittee),
subject, however, to such resolutions, not inconsistent with the provisions of
the Plan, as may be adopted from time to time by the Board. The Board may
abolish the Committee at any time and revest in the Board the administration of
the Plan.
(ii) Committee Composition when Common Stock is Publicly Traded. At
such time as the Common Stock is publicly traded, in the discretion of the
Board, a Committee may consist solely of two or more Outside Directors, in
accordance with Section 162(m) of the Code, and/or solely of two or more Non-
Employee Directors, in accordance with Rule 16b-3. Within the scope of such
authority, the Board or the Committee may (1) delegate to a committee of one or
more members of the Board who are not Outside Directors the authority to grant
Stock Awards to eligible persons who are either (a) not then Covered Employees
and are not expected to be Covered Employees at the time of recognition of
income resulting from such Stock Award or (b) not persons with respect to whom
the Company wishes to comply with Section 162(m) of the Code and/or) (2)
delegate to a committee of one or more members of the Board who are not Non-
Employee Directors the authority to grant Stock Awards to eligible persons who
are not then subject to Section 16 of the Exchange Act.
(d) Effect of Board's Decision. All determinations, interpretations and
constructions made by the Board in good faith shall not be subject to review by
any person and shall be final, binding and conclusive on all persons.
4. Shares Subject to the Plan.
(a) Share Reserve. Subject to the provisions of Section 11 relating to
adjustments upon changes in Common Stock and subject to the increases in the
number of reserved shares described below, the Common Stock that may be issued
pursuant to Stock Awards shall not exceed in the aggregate three million
(3,000,000) shares of Common Stock (the "Reserved Shares).
(b) Reversion of Shares to the Share Reserve. If any Stock Award shall for
any reason expire or otherwise terminate, in whole or in part, without having
been exercised in full, the shares of Common Stock not acquired under such Stock
Award shall revert to and again become available for issuance under the Plan.
(c) Source of Shares. The shares of Common Stock subject to the Plan may be
unissued shares or reacquired shares, bought on the market or otherwise.
5. Eligibility.
(a) Eligibility for Specific Stock Awards. Incentive Stock Options may be
granted only to Employees. Stock Awards other than Incentive Stock Options may
be granted to Employees, Directors and Consultants.
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(b) Ten Percent Stockholders. A Ten Percent Stockholder shall not be
granted an Incentive Stock Option unless the exercise price of such Option is at
least one hundred ten percent (110%) of the Fair Market Value of the Common
Stock at the date of grant and the Option is not exercisable after the
expiration of five (5) years from the date of grant.
(c) Section 162(m) Limitation. Subject to the provisions of Section 11
relating to adjustments upon changes in the shares of Common Stock, no Employee
shall be eligible to be granted Options covering more than one million five
hundred thousand (1,500,000) shares of Common Stock during any calendar year.
(d) Consultants.
(i) A Consultant shall not be eligible for the grant of a Stock Award
if, at the time of grant, a Form S-8 Registration Statement under the Securities
Act ("Form S-8") is not available to register either the offer or the sale of
the Company's securities to such Consultant because of the nature of the
services that the Consultant is providing to the Company, or because the
Consultant is not a natural person, or as otherwise provided by the rules
governing the use of Form S-8, unless the Company determines both (i) that such
grant (A) shall be registered in another manner under the Securities Act (e.g.,
on a Form S-3 Registration Statement) or (B) does not require registration under
the Securities Act in order to comply with the requirements of the Securities
Act, if applicable, and (ii) that such grant complies with the securities laws
of all other relevant jurisdictions.
(ii) Form S-8 generally is available to consultants and advisors only
if (i) they are natural persons; (ii) they provide bona fide services to the
issuer, its parents, its majority-owned subsidiaries or majority-owned
subsidiaries of the issuer's parent; and (iii) the services are not in
connection with the offer or sale of securities in a capital-raising
transaction, and do not directly or indirectly promote or maintain a market for
the issuer's securities.
6. Option Provisions.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and, if certificates are issued, a separate certificate or certificates
will be issued for shares of Common Stock purchased on exercise of each type of
Option. The provisions of separate Options need not be identical, but each
Option shall include (through incorporation of provisions hereof by reference in
the Option or otherwise) the substance of each of the following provisions:
(a) Term. Subject to the provisions of subsection 5(b) regarding Ten
Percent Stockholders, no Incentive Stock Option shall be exercisable after the
expiration of ten (10) years from the date it was granted.
(b) Exercise Price of an Incentive Stock Option. Subject to the provisions
of subsection 5(b) regarding Ten Percent Stockholders, the exercise price of
each Incentive Stock Option shall be not less than one hundred percent (100%) of
the Fair Market Value of the
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Common Stock subject to the Option on the date the Option is granted.
Notwithstanding the foregoing, an Incentive Stock Option may be granted with an
exercise price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another option
in a manner satisfying the provisions of Section 424(a) of the Code.
(c) Exercise Price of a Nonstatutory Stock Option. The exercise price of
each Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the Fair Market Value of the Common Stock subject to the Option on the date
the Option is granted. Notwithstanding the foregoing, a Nonstatutory Stock
Option may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.
(d) Consideration. The purchase price of Common Stock acquired pursuant to
an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii) at
the discretion of the Board (1) by delivery to the Company of other Common
Stock, (2) according to a deferred payment or other similar arrangement with the
Optionholder or (3) in any other form of legal consideration that may be
acceptable to the Board. Unless otherwise specifically provided in the Option,
the purchase price of Common Stock acquired pursuant to an Option that is paid
by delivery to the Company of other Common Stock acquired, directly or
indirectly from the Company, shall be paid only by shares of the Common Stock of
the Company that have been held for more than six (6) months (or such longer or
shorter period of time required to avoid a charge to the Company's earnings for
financial accounting purposes). At any time that the Company is incorporated in
Delaware, payment of the Common Stock's "par value," as defined in the Delaware
General Corporation Law, shall not be made by deferred payment.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
(e) Transferability of an Incentive Stock Option. An Incentive Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding the foregoing, the Optionholder may,
by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.
(f) Transferability of a Nonstatutory Stock Option. A Nonstatutory Stock
Option shall be transferable to the extent provided in the Option Agreement. If
the Nonstatutory Stock Option does not provide for transferability, then the
Nonstatutory Stock Option shall not be transferable except by will or by the
laws of descent and distribution and shall be exercisable during the lifetime of
the Optionholder only by the Optionholder. Notwithstanding the foregoing, the
Optionholder may, by delivering written notice to the Company, in a form
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satisfactory to the Company, designate a third party who, in the event of the
death of the Optionholder, shall thereafter be entitled to exercise the Option.
(g) Vesting Generally. The total number of shares of Common Stock subject
to an Option may, but need not, vest and therefore become exercisable in
periodic installments that may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem appropriate. The vesting provisions of individual Options may vary. The
provisions of this subsection 6(g) are subject to any Option provisions
governing the minimum number of shares of Common Stock as to which an Option may
be exercised.
(h) Termination of Continuous Service. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise such Option as of the date of
termination) but only within such period of time ending on the earlier of (i)
the date three (3) months following the termination of the Optionholder's
Continuous Service (or such longer or shorter period specified in the Option
Agreement), or (ii) the expiration of the term of the Option as set forth in the
Option Agreement. If, after termination, the Optionholder does not exercise his
or her Option within the time specified in the Option Agreement, the Option
shall terminate.
(i) Extension of Termination Date. An Optionholder's Option Agreement may
also provide that if the exercise of the Option following the termination of the
Optionholder's Continuous Service (other than upon the Optionholder's death or
Disability) would be prohibited at any time solely because the issuance of
shares of Common Stock would violate the registration requirements under the
Securities Act, then the Option shall terminate on the earlier of (i) the
expiration of the term of the Option set forth in the Option Agreement or (ii)
the expiration of a period of three (3) months after the termination of the
Optionholder's Continuous Service during which the exercise of the Option would
not be in violation of such registration requirements.
(j) Disability of Optionholder. In the event that an Optionholder's
Continuous Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise such Option as of the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period specified in
the Option Agreement) or (ii) the expiration of the term of the Option as set
forth in the Option Agreement. If, after termination, the Optionholder does not
exercise his or her Option within the time specified herein, the Option shall
terminate.
(k) Death of Optionholder. In the event (i) an Optionholder's Continuous
Service terminates as a result of the Optionholder's death or (ii) the
Optionholder dies within the period (if any) specified in the Option Agreement
after the termination of the Optionholder's Continuous Service for a reason
other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise such Option as of the date of death) by
the Optionholder's estate, by a person who acquired the right to exercise the
Option by bequest or
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inheritance or by a person designated to exercise the Option upon the
Optionholder's death pursuant to subsection 6(e) or 6(f), but only within the
period ending on the earlier of (1) the date eighteen (18) months following the
date of death (or such longer or shorter period specified in the Option
Agreement) or (2) the expiration of the term of such Option as set forth in the
Option Agreement. If, after death, the Option is not exercised within the time
specified herein, the Option shall terminate.
(l) Early Exercise. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the Optionholder's
Continuous Service terminates to exercise the Option as to any part or all of
the shares of Common Stock subject to the Option prior to the full vesting of
the Option. Any unvested shares of Common Stock so purchased may be subject to a
repurchase option in favor of the Company or to any other restriction the Board
determines to be appropriate. The Company will not exercise its repurchase
option until at least six (6) months (or such longer or shorter period of time
required to avoid a charge to earnings for financial accounting purposes) have
elapsed following exercise of the Option unless the Board otherwise specifically
provides in the Option.
7. Provisions of Stock Awards other than Options.
(a) Stock Bonus Awards. Each stock bonus agreement shall be in such form
and shall contain such terms and conditions as the Board shall deem appropriate.
The terms and conditions of stock bonus agreements may change from time to time,
and the terms and conditions of separate stock bonus agreements need not be
identical, but each stock bonus agreement shall include (through incorporation
of provisions hereof by reference in the agreement or otherwise) the substance
of each of the following provisions:
(i) Consideration. A stock bonus may be awarded in consideration for
past services actually rendered to the Company or an Affiliate for its benefit.
(ii) Vesting. Shares of Common Stock awarded under the stock bonus
agreement may, but need not, be subject to a share repurchase option in favor of
the Company in accordance with a vesting schedule to be determined by the Board.
(iii) Termination of Participant's Continuous Service. In the event a
Participant's Continuous Service terminates, the Company may reacquire any or
all of the shares of Common Stock held by the Participant which have not vested
as of the date of termination under the terms of the stock bonus agreement.
(iv) Transferability. Rights to acquire shares of Common Stock under
the stock bonus agreement shall be transferable by the Participant only upon
such terms and conditions as are set forth in the stock bonus agreement, as the
Board shall determine in its discretion, so long as Common Stock awarded under
the stock bonus agreement remains subject to the terms of the stock bonus
agreement.
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(b) Restricted Stock Awards. Each restricted stock purchase agreement
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. The terms and conditions of the restricted stock
purchase agreements may change from time to time, and the terms and conditions
of separate restricted stock purchase agreements need not be identical, but each
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:
(i) Purchase Price. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board shall determine and
designate in such restricted stock purchase agreement. The purchase price shall
not be less than eighty-five percent (85%) of the Common Stock's Fair Market
Value on the date such award is made or at the time the purchase is consummated.
(ii) Consideration. The purchase price of Common Stock acquired
pursuant to the restricted stock purchase agreement shall be paid either: (i) in
cash at the time of purchase; (ii) at the discretion of the Board, according to
a deferred payment or other similar arrangement with the Participant; or (iii)
in any other form of legal consideration that may be acceptable to the Board in
its discretion; provided, however, that at any time that the Company is
incorporated in Delaware, then payment of the Common Stock's "par value," as
defined in the Delaware General Corporation Law, shall not be made by deferred
payment.
(iii) Vesting. Shares of Common Stock acquired under the restricted
stock purchase agreement may, but need not, be subject to a share repurchase
option in favor of the Company in accordance with a vesting schedule to be
determined by the Board.
(iv) Termination of Participant's Continuous Service. In the event a
Participant's Continuous Service terminates, the Company may repurchase or
otherwise reacquire any or all of the shares of Common Stock held by the
Participant which have not vested as of the date of termination under the terms
of the restricted stock purchase agreement.
(v) Transferability. Rights to acquire shares of Common Stock under
the restricted stock purchase agreement shall be transferable by the Participant
only upon such terms and conditions as are set forth in the restricted stock
purchase agreement, as the Board shall determine in its discretion, so long as
Common Stock awarded under the restricted stock purchase agreement remains
subject to the terms of the restricted stock purchase agreement.
8. Covenants of the Company.
(a) Availability of Shares. During the terms of the Stock Awards, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.
(b) Securities Law Compliance. The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan such authority
as may be required to grant Stock Awards and to issue and sell shares of Common
Stock upon exercise of
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the Stock Awards; provided, however, that this undertaking shall not require the
Company to register under the Securities Act the Plan, any Stock Award or any
Common Stock issued or issuable pursuant to any such Stock Award. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems necessary
for the lawful issuance and sale of Common Stock under the Plan, the Company
shall be relieved from any liability for failure to issue and sell Common Stock
upon exercise of such Stock Awards unless and until such authority is obtained.
9. Use of Proceeds from Stock.
Proceeds from the sale of Common Stock pursuant to Stock Awards shall
constitute general funds of the Company.
10. Miscellaneous.
(a) Acceleration of Exercisability and Vesting. The Board shall have the
power to accelerate the time at which a Stock Award may first be exercised or
the time during which a Stock Award or any part thereof will vest in accordance
with the Plan, notwithstanding the provisions in the Stock Award stating the
time at which it may first be exercised or the time during which it will vest.
(b) Stockholder Rights. No Participant shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares of
Common Stock subject to such Stock Award unless and until such Participant has
satisfied all requirements for exercise of the Stock Award pursuant to its
terms.
(c) No Employment or other Service Rights. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer upon
any Participant any right to continue to serve the Company or an Affiliate in
the capacity in effect at the time the Stock Award was granted or shall affect
the right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant's agreement with the Company
or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the
Company or an Affiliate, and any applicable provisions of the corporate law of
the state in which the Company or the Affiliate is incorporated, as the case may
be.
(d) Incentive Stock Option $100,000 Limitation. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of Common Stock
with respect to which Incentive Stock Options are exercisable for the first time
by any Optionholder during any calendar year (under all plans of the Company and
its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options.
(e) Investment Assurances. The Company may require a Participant, as a
condition of exercising or acquiring Common Stock under any Stock Award, (i) to
give written assurances satisfactory to the Company as to the Participant's
knowledge and experience in financial and
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business matters and/or to employ a purchaser representative reasonably
satisfactory to the Company who is knowledgeable and experienced in financial
and business matters and that he or she is capable of evaluating, alone or
together with the purchaser representative, the merits and risks of exercising
the Stock Award; and (ii) to give written assurances satisfactory to the Company
stating that the Participant is acquiring Common Stock subject to the Stock
Award for the Participant's own account and not with any present intention of
selling or otherwise distributing the Common Stock. The foregoing requirements,
and any assurances given pursuant to such requirements, shall be inoperative if
(1) the issuance of the shares of Common Stock upon the exercise or acquisition
of Common Stock under the Stock Award has been registered under a then currently
effective registration statement under the Securities Act or (2) as to any
particular requirement, a determination is made by counsel for the Company that
such requirement need not be met in the circumstances under the then applicable
securities laws. The Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the Common
Stock.
(f) Withholding Obligations. To the extent provided by the terms of a
Stock Award Agreement, the Participant may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of Common
Stock under a Stock Award by any of the following means (in addition to the
Company's right to withhold from any compensation paid to the Participant by the
Company) or by a combination of such means: (i) tendering a cash payment; (ii)
authorizing the Company to withhold shares of Common Stock from the shares of
Common Stock otherwise issuable to the Participant as a result of the exercise
or acquisition of Common Stock under the Stock Award; provided, however, that no
shares of Common Stock are withheld with a value exceeding the minimum amount of
tax required to be withheld by law; or (iii) delivering to the Company owned and
unencumbered shares of Common Stock of the Company that have been held for more
than six (6) months (or such longer or shorter period of time required to avoid
a charge to the Company's earnings for financial accounting purposes).
11. Adjustments upon Changes in Stock.
(a) Capitalization Adjustments. If any change is made in the Common Stock
subject to the Plan, or subject to any Stock Award, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number of securities subject to the Plan
pursuant to subsection 4(a) and the maximum number of securities subject to
award to any person pursuant to subsection 5(c), and the outstanding Stock
Awards will be appropriately adjusted in the class(es) and number of securities
and price per share of Common Stock subject to such outstanding Stock Awards.
The Board shall make such adjustments, and its determination shall be final,
binding and conclusive. (The conversion of any convertible securities of the
Company shall not be treated as a transaction "without receipt of consideration"
by the Company.)
12.
<PAGE>
(b) Dissolution or Liquidation. In the event of a dissolution or
liquidation of the Company, then all outstanding Stock Awards shall terminate
immediately prior to such event.
(c) Change in Control--Asset Sale, Merger, Consolidation or Reverse
Merger. In the event of (i) a sale, lease or other disposition of all or
substantially all of the assets of the Company, (ii) a merger or consolidation
in which the Company is not the surviving corporation or (iii) a reverse merger
in which the Company is the surviving corporation but the shares of Common Stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise, then any surviving corporation or acquiring corporation shall assume
any Stock Awards outstanding under the Plan or shall substitute similar stock
awards (including an award to acquire the same consideration paid to the
stockholders in the transaction described in this subsection 11(c) for those
outstanding under the Plan). In the event any surviving corporation or acquiring
corporation refuses to assume such Stock Awards or to substitute similar stock
awards for those outstanding under the Plan, then with respect to Stock Awards
held by Participants whose Continuous Service has not terminated, the vesting of
such Stock Awards (and, if applicable, the time during which such Stock Awards
may be exercised) shall be accelerated in full, and the Stock Awards shall
terminate if not exercised (if applicable) at or prior to such event. With
respect to any other Stock Awards outstanding under the Plan, such Stock Awards
shall terminate if not exercised (if applicable) prior to such event.
12. Amendment of the Plan and Stock Awards.
(a) Amendment of Plan. The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in Common Stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3
or any Nasdaq or securities exchange listing requirements.
(b) Stockholder Approval. The Board may, in its sole discretion, submit
any other amendment to the Plan for stockholder approval, including, but not
limited to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.
(c) Contemplated Amendments. It is expressly contemplated that the Board
may amend the Plan in any respect the Board deems necessary or advisable to
provide eligible Employees with the maximum benefits provided or to be provided
under the provisions of the Code and the regulations promulgated thereunder
relating to Incentive Stock Options and/or to bring the Plan and/or Incentive
Stock Options granted under it into compliance therewith.
(d) No Impairment of Rights. Rights under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Participant and (ii) the Participant
consents in writing.
13.
<PAGE>
(e) Amendment of Stock Awards. The Board at any time, and from time to
time, may amend the terms of any one or more Stock Awards; provided, however,
that the rights under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the Participant and
(ii) the Participant consents in writing.
13. Termination or Suspension of the Plan.
(a) Plan Term. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on the day before the tenth
(10th) anniversary of the Effective Date the Plan described in Section 14 or the
date on which the Plan is approved by the stockholders of the Company, whichever
is earlier. No Stock Awards may be granted under the Plan while the Plan is
suspended or after it is terminated.
(b) No Impairment of Rights. Suspension or termination of the Plan shall
not impair rights and obligations under any Stock Award granted while the Plan
is in effect except with the written consent of the Participant.
14. Effective Date of Plan.
The Plan shall become effective simultaneously with the effectiveness of
the Company's registration statement under the Securities Act with respect to
the initial public offering of shares of the Company's Common Stock by the
Board, but no Stock Award shall be exercised (or, in the case of a stock bonus,
shall be granted) unless and until the Plan has been approved by the
stockholders of the Company, which approval shall be within twelve (12) months
before or after the date the Plan is adopted by the Board.
15. Choice of Law.
The law of the State of California shall govern all questions concerning
the construction, validity and interpretation of this Plan, without regard to
such state's conflict of laws rules.
14.
<PAGE>
EXHIBIT 10.4
PlaceWare, Inc.
2000 EMPLOYEE STOCK PURCHASE PLAN
Approved by the Board of Directors February ______, 2000
Approved by Stockholders __________, 2000
1. Purpose.
(a) The purpose of this 2000 Employee Stock Purchase Plan (the "Plan") is
to provide a means by which employees of PlaceWare, Inc. (the "Company") and its
Affiliates, as defined in subparagraph 1(b), which are designated as provided in
subparagraph 2(b), may be given an opportunity to purchase common stock of the
Company (the "Common Stock").
(b) The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company, as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
(the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of its
employees, to secure and retain the services of new employees, and to provide
incentives for such persons to exert maximum efforts for the success of the
Company.
(d) The Company intends that the rights to purchase stock of the Company
granted under the Plan be considered options issued under an "employee stock
purchase plan" as that term is defined in Section 423(b) of the Code.
2. Administration.
(a) The Plan shall be administered by the Board of Directors (the "Board")
of the Company unless and until the Board delegates administration to a
Committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(i) To determine when and how rights to purchase stock of the
Company shall be granted and the provisions of each offering of such rights
(which need not be identical).
(ii) To designate from time to time which Affiliates of the
Company shall be eligible to participate in the Plan.
(iii) To construe and interpret the Plan and rights granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the
1.
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exercise of this power, may correct any defect, omission or inconsistency in the
Plan, in a manner and to the extent it shall deem necessary or expedient to make
the Plan fully effective.
(iv) To amend the Plan as provided in paragraph 13.
(v) To terminate or suspend the Plan as provided in paragraph
15.
(VI) Generally, to exercise such powers and to perform such acts
as the Board deems necessary or expedient to promote the best interests of the
Company and its Affiliates and to carry out the intent that the Plan be treated
as an "employee stock purchase plan" within the meaning of Section 423 of the
Code.
(c) The Board may delegate administration of the Plan to a Committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. Shares Subject to the Plan.
(a) Subject to the provisions of paragraph 12 relating to adjustments upon
changes in stock and subject to the increases in the number of reserved shares
described below, the stock that may be sold pursuant to rights granted under the
Plan shall not exceed in the aggregate five hundred thousand (500,000) shares of
Common Stock (the "Reserved Shares"). As of each December 31, beginning with
December 31, 2001 and continuing through and including December 31, 2008, the
number of Reserved Shares will be increased automatically by the least of (i)
one percent (1%) of the total number of shares of Common Stock outstanding on
each of such dates, (ii) two hundred and fifty thousand (250,000) shares or
(iii) a number of shares determined by the Board prior to each December 31,
which number shall be less than either (i) or (ii). If any right granted under
the Plan shall for any reason terminate without having been exercised, the
Common Stock not purchased under such right shall again become available for the
Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. Grant of Rights; Offering.
The Board or the Committee may from time to time grant or provide for the
grant of rights to purchase Common Stock of the Company under the Plan to
eligible employees (an "Offering") on a date or dates (the "Offering Date(s)")
selected by the Board or the Committee. Each Offering shall be in such form and
shall contain such terms and conditions as the Board or the Committee shall deem
appropriate, which shall comply with the requirements of Section 423(b)(5) of
the Code that all employees granted rights to purchase stock under the Plan
shall have the same rights and privileges. The terms and conditions of an
Offering shall be
2.
<PAGE>
incorporated by reference into the Plan and treated as part of the Plan. The
provisions of separate Offerings need not be identical, but each Offering shall
include (through incorporation of the provisions of this Plan by reference in
the document comprising the Offering or otherwise) the period during which the
Offering shall be effective, which period shall not exceed twenty-seven (27)
months beginning with the Offering Date, and the substance of the provisions
contained in paragraphs 5 through 8, inclusive.
5. Eligibility.
(a) Rights may be granted only to employees of the Company or, as the
Board or the Committee may designate as provided in subparagraph 2(b), to
employees of any Affiliate of the Company. Except as provided in subparagraph
5(b), an employee of the Company or any Affiliate shall not be eligible to be
granted rights under the Plan unless, on the Offering Date, such employee has
been in the employ of the Company or any Affiliate for such continuous period
preceding such grant as the Board or the Committee may require, but in no event
shall the required period of continuous employment be greater than two (2)
years. In addition, unless otherwise determined by the Board or the Committee
and set forth in the terms of the applicable Offering, no employee of the
Company or any Affiliate shall be eligible to be granted rights under the Plan,
unless, on the Offering Date, such employee's customary employment with the
Company or such Affiliate is for at least twenty (20) hours per week and at
least five (5) months per calendar year.
(b) The Board or the Committee may provide that each person who, during
the course of an Offering, first becomes an eligible employee of the Company or
designated Affiliate will, on a date or dates specified in the Offering which
coincides with the day on which such person becomes an eligible employee or
occurs thereafter, receive a right under that Offering, which right shall
thereafter be deemed to be a part of that Offering. Such right shall have the
same characteristics as any rights originally granted under that Offering, as
described herein, except that:
(i) the date on which such right is granted shall be the
"Offering Date" of such right for all purposes, including determination of the
exercise price of such right;
(ii) the period of the Offering with respect to such right shall
begin on its Offering Date and end coincident with the end of such Offering; and
(iii) the Board or the Committee may provide that if such person
first becomes an eligible employee within a specified period of time before the
end of the Offering, he or she will not receive any right under that Offering.
(c) No employee shall be eligible for the grant of any rights under the
Plan if, immediately after any such rights are granted, such employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of this
subparagraph 5(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any employee, and stock which such
3.
<PAGE>
employee may purchase under all outstanding rights and options shall be treated
as stock owned by such employee.
(d) An eligible employee may be granted rights under the Plan only if such
rights, together with any other rights granted under "employee stock purchase
plans" of the Company and any Affiliates, as specified by Section 423(b)(8) of
the Code, do not permit such employee's rights to purchase stock of the Company
or any Affiliate to accrue at a rate which exceeds twenty-five thousand dollars
($25,000) of fair market value of such stock (determined at the time such rights
are granted) for each calendar year in which such rights are outstanding at any
time.
(e) Officers of the Company and any designated Affiliate shall be eligible
to participate in Offerings under the Plan; provided, however, that the Board
may provide in an Offering that certain employees who are highly compensated
employees within the meaning of Section 423(b)(4)(D) of the Code shall not be
eligible to participate.
6. Rights; Purchase Price.
(a) On each Offering Date, each eligible employee, pursuant to an Offering
made under the Plan, shall be granted the right to purchase up to the number of
shares of Common Stock of the Company purchasable with a percentage designated
by the Board or the Committee not exceeding fifteen percent (15%) of such
employee's Earnings (as defined in subparagraph 7(a)) during the period which
begins on the Offering Date (or such later date as the Board or the Committee
determines for a particular Offering) and ends on the date stated in the
Offering, which date shall be no later than the end of the Offering. The Board
or the Committee shall establish one or more dates during an Offering (the
"Purchase Date(s)") on which rights granted under the Plan shall be exercised
and purchases of Common Stock carried out in accordance with such Offering.
(b) In connection with each Offering made under the Plan, the Board or the
Committee may specify a maximum number of shares that may be purchased by any
employee as well as a maximum aggregate number of shares that may be purchased
by all eligible employees pursuant to such Offering. In addition, in connection
with each Offering that contains more than one Purchase Date, the Board or the
Committee may specify a maximum aggregate number of shares which may be
purchased by all eligible employees on any given Purchase Date under the
Offering. If the aggregate purchase of shares upon exercise of rights granted
under the Offering would exceed any such maximum aggregate number, the Board or
the Committee shall make a pro rata allocation of the shares available in as
nearly a uniform manner as shall be practicable and as it shall deem to be
equitable.
(c) The purchase price of stock acquired pursuant to rights granted under
the Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Offering Date; or
4.
<PAGE>
(ii) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Purchase Date.
7. Participation; Withdrawal; Termination.
(a) An eligible employee may become a participant in the Plan pursuant to
an Offering by delivering a participation agreement to the Company within the
time specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll deductions of up to the maximum percentage
specified by the Board or the Committee of such employee's Earnings during the
Offering. "Earnings" is defined as an employee's wages (including amounts
thereof elected to be deferred by the employee, that would otherwise have been
paid, under any arrangement established by the Company that is intended to
comply with Section 125, Section 401(k), Section 402(h) or Section 403(b) of the
Code or that provides non-qualified deferred compensation), which shall include
overtime pay, bonuses, incentive pay, and commissions, but shall exclude profit
sharing or other remuneration paid directly to the employee, the cost of
employee benefits paid for by the Company or an Affiliate, education or tuition
reimbursements, imputed income arising under any group insurance or benefit
program, traveling expenses, business and moving expense reimbursements, income
received in connection with stock options, contributions made by the Company or
an Affiliate under any employee benefit plan, and similar items of compensation,
as determined by the Board or the Committee. The payroll deductions made for
each participant shall be credited to an account for such participant under the
Plan and shall be deposited with the general funds of the Company. A participant
may reduce (including to zero) or increase such payroll deductions, and an
eligible employee may begin such payroll deductions, after the beginning of any
Offering only as provided for in the Offering. A participant may make additional
payments into his or her account only if specifically provided for in the
Offering and only if the participant has not had the maximum amount withheld
during the Offering.
(b) At any time during an Offering, a participant may terminate his or her
payroll deductions under the Plan and withdraw from the Offering by delivering
to the Company a notice of withdrawal in such form as the Company provides.
Such withdrawal may be elected at any time prior to the end of the Offering
except as provided by the Board or the Committee in the Offering. Upon such
withdrawal from the Offering by a participant, the Company shall distribute to
such participant all of his or her accumulated payroll deductions (reduced to
the extent, if any, such deductions have been used to acquire stock for the
participant) under the Offering, without interest, and such participant's
interest in that Offering shall be automatically terminated. A participant's
withdrawal from an Offering will have no effect upon such participant's
eligibility to participate in any other Offerings under the Plan but such
participant will be required to deliver a new participation agreement in order
to participate in subsequent Offerings under the Plan.
(c) Rights granted pursuant to any Offering under the Plan shall terminate
immediately upon cessation of any participating employee's employment with the
Company and any designated Affiliate, for any reason, and the Company shall
distribute to such terminated employee all of his or her accumulated payroll
deductions (reduced to the extent, if any, such
5.
<PAGE>
deductions have been used to acquire stock for the terminated employee), under
the Offering, without interest.
(d) Rights granted under the Plan shall not be transferable by a
participant otherwise than by will or the laws of descent and distribution, or
by a beneficiary designation as provided in paragraph 14 and, otherwise during
his or her lifetime, shall be exercisable only by the person to whom such rights
are granted.
8. Exercise.
(a) On each Purchase Date specified therefor in the relevant Offering, each
participant's accumulated payroll deductions and other additional payments
specifically provided for in the Offering (without any increase for interest)
will be applied to the purchase of whole shares of stock of the Company, up to
the maximum number of shares permitted pursuant to the terms of the Plan and the
applicable Offering, at the purchase price specified in the Offering. No
fractional shares shall be issued upon the exercise of rights granted under the
Plan. The amount, if any, of accumulated payroll deductions remaining in each
participant's account after the purchase of shares which is less than the amount
required to purchase one share of stock on the final Purchase Date of an
Offering shall be held in each such participant's account for the purchase of
shares under the next Offering under the Plan, unless such participant withdraws
from such next Offering, as provided in subparagraph 7(b), or is no longer
eligible to be granted rights under the Plan, as provided in paragraph 5, in
which case such amount shall be distributed to the participant after such final
Purchase Date, without interest. The amount, if any, of accumulated payroll
deductions remaining in any participant's account after the purchase of shares
which is equal to the amount required to purchase whole shares of stock on the
final Purchase Date of an Offering shall be distributed in full to the
participant after such Purchase Date, without interest.
(b) No rights granted under the Plan may be exercised to any extent unless
the shares to be issued upon such exercise under the Plan (including rights
granted thereunder) are covered by an effective registration statement pursuant
to the Securities Act of 1933, as amended (the "Securities Act") and the Plan is
in material compliance with all applicable state, foreign and other securities
and other laws applicable to the Plan. If on a Purchase Date in any Offering
hereunder the Plan is not so registered or in such compliance, no rights granted
under the Plan or any Offering shall be exercised on such Purchase Date, and the
Purchase Date shall be delayed until the Plan is subject to such an effective
registration statement and such compliance, except that the Purchase Date shall
not be delayed more than twelve (12) months and the Purchase Date shall in no
event be more than twenty-seven (27) months from the Offering Date. If on the
Purchase Date of any Offering hereunder, as delayed to the maximum extent
permissible, the Plan is not registered and in such compliance, no rights
granted under the Plan or any Offering shall be exercised and all payroll
deductions accumulated during the Offering (reduced to the extent, if any, such
deductions have been used to acquire stock) shall be distributed to the
participants, without interest.
6.
<PAGE>
9. Covenants of the Company.
(a) During the terms of the rights granted under the Plan, the Company
shall keep available at all times the number of shares of stock required to
satisfy such rights.
(b) The Company shall seek to obtain from each federal, state, foreign or
other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of stock upon exercise of
the rights granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such rights unless and until
such authority is obtained.
10. Use of Proceeds from Stock.
Proceeds from the sale of stock pursuant to rights granted under the Plan
shall constitute general funds of the Company.
11. Rights as a Stockholder.
A participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until the participant's shareholdings acquired upon
exercise of rights under the Plan are recorded in the books of the Company.
12. Adjustments upon Changes in Stock.
(a) If any change is made in the stock subject to the Plan, or subject to
any rights granted under the Plan, due to a change in corporate capitalization
and without the receipt of consideration by the Company (through
reincorporation, stock dividend, stock split, reverse stock split, combination
or reclassification of shares), the Plan will be appropriately adjusted in the
class(es) and maximum number of securities subject to the Plan pursuant to
subsection 3(a), and the outstanding rights will be appropriately adjusted in
the class(es) and number of securities and price per share of stock subject to
such outstanding rights. Such adjustments shall be made by the Board, the
determination of which shall be final, binding and conclusive.
(b) In the event of: (1) a dissolution, liquidation or sale of all or
substantially all of the securities or assets of the Company, (2) a merger or
consolidation in which the Company is not the surviving corporation or (3) a
reverse merger in which the Company is the surviving corporation but the shares
of Common Stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, then any surviving corporation may assume outstanding rights
or substitute similar rights for those under the Plans. In the event that no
surviving corporation assumes outstanding rights or substitutes similar rights
therefor, participants' accumulated payroll deductions shall be used to purchase
Common Stock immediately prior to the transaction described above and the
participants' rights under the ongoing Offering shall terminate immediately
following such purchase.
7.
<PAGE>
13. Amendment of the Plan.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(i) Increase the number of shares reserved for rights under the
Plan;
(ii) Modify the provisions as to eligibility for participation in
the Plan (to the extent such modification requires stockholder approval in order
for the Plan to obtain employee stock purchase plan treatment under Section 423
of the Code or to comply with the requirements of Rule 16b-3 promulgated under
the Securities Exchange Act of 1934, as amended ("Rule 16b-3")); or
(iii) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to obtain employee stock
purchase plan treatment under Section 423 of the Code or to comply with the
requirements of Rule 16b-3.
It is expressly contemplated that the Board may amend the Plan in any respect
the Board deems necessary or advisable to provide eligible employees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to employee stock purchase plans
and/or to bring the Plan and/or rights granted under it into compliance
therewith.
(b) Rights and obligations under any rights granted before amendment of
the Plan shall not be impaired by any amendment of the Plan, except with the
consent of the person to whom such rights were granted, or except as necessary
to comply with any laws or governmental regulations, or except as necessary to
ensure that the Plan and/or rights granted under the Plan comply with the
requirements of Section 423 of the Code.
14. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary who is
to receive any shares and cash, if any, from the participant's account under the
Plan in the event of such participant's death subsequent to the end of an
Offering but prior to delivery to the participant of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death during an Offering.
(b) Such designation of beneficiary may be changed by the participant at
any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its sole discretion, may deliver such shares
and/or cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse,
8.
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dependent or relative is known to the Company, to such other person as the
Company may designate.
15. Termination or Suspension of the Plan.
(a) The Board in its discretion, may suspend or terminate the Plan at any
time. No rights may be granted under the Plan while the Plan is suspended or
after it is terminated.
(b) Rights and obligations under any rights granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except as expressly provided in the Plan or with the consent of the person
to whom such rights were granted, or except as necessary to comply with any laws
or governmental regulation, or except as necessary to ensure that the Plan
and/or rights granted under the Plan comply with the requirements of Section 423
of the Code.
(c) Notwithstanding the foregoing, the Plan shall terminate and no rights
may be granted under the Plan after the tenth anniversary of the Effective Date.
16. Effective Date of Plan.
The Plan shall become effective simultaneously with the effectiveness of
the Company's registration statement under the Securities Act with respect to
the initial public offering of shares of the Company's Common Stock (the
"Effective Date"), but no rights granted under the Plan shall be exercised
unless and until the Plan has been approved by the stockholders of the Company
within twelve (12) months before or after the date the Plan is adopted by the
Board, which date may be prior to the Effective Date.
9.
<PAGE>
EXHIBIT 10.7
SUBLEASE
--------
THIS SUBLEASE (this "Sublease") is dated for reference purposes as of
August 23, 1999, and is made by and between Proxim, Inc., a Delaware corporation
("Sublessor"), and PlaceWare, Inc., a Delaware corporation ("Sublessee").
Sublessor and Sublessee hereby agree as follows:
1. Recitals: This Sublease is made with reference to the fact that the
--------
Vanni Business Park General Partnership, as landlord ("Master Lessor"), and
Sublessor, as tenant, entered into that certain lease, dated as of August 28,
1992 (the "Lease"), which Lease incorporated certain of the terms of that
certain Lease Agreement dated February 20, 1986 between Master Lessor and
Equatorial Communications Company (the "Master Lease Terms"), and which Lease
was amended by a First Amendment to Vanni Business Park Industrial Lease dated
May 5, 1994, a Second Amendment to Vanni Business Park Industrial Lease dated
August 1994 and a Third Amendment to Vanni Business Park Industrial Lease dated
May 1999 (the Lease and the Master Lease Terms, as amended, shall be
collectively referred to herein as the "Master Lease"), with respect to premises
consisting of approximately 40,000 square feet of space, located at 295 North
Bernardo Avenue, Mountain View, California (the "Premises"). A copy of the
Master Lease is attached hereto as Exhibit A.
---------
2. Premises: Sublessor hereby subleases to Sublessee, and Sublessee hereby
--------
subleases from Sublessor, all of the Premises (hereinafter, the "Subleased
Premises"), as more particularly described in the Master Lease.
3. Term: The term (the "Term") of this Sublease shall be for the period
----
commencing on October 1, 1999 (the "Commencement Date") and ending on September
30, 2002 (the "Expiration Date"), unless this Sublease is sooner terminated
pursuant to its terms or the Master Lease is sooner terminated pursuant to its
terms. If Sublessor permits Sublessee to occupy the Subleased Premises prior to
the Commencement Date, such occupancy (i) shall be subject to all of the
provisions of this Sublease, except for the obligation to pay Base Rent (as
defined below); and (ii) shall not advance the Expiration Date of this Sublease.
4. Rent:
----
A. Base Rent. Sublessee shall pay to Sublessor as base rent for the
---------
Subleased Premises for each month during the Term the following amounts per
month ("Base Rent"): (i) from the first (1st) through the twelfth (12th) months,
Ninety-Four Thousand Dollars ($94,000); (ii) from the thirteenth (13th) through
the twenty-fourth (24th) months, Ninety-Six Thousand Dollars ($96,000); and
(iii) from the twenty-fifth (25th) through the thirty-sixth (36th) months,
Ninety-Eight Thousand Dollars ($98,000). Base Rent and Additional Rent, as
defined in Section 4.B below, shall be paid on or before the first (1st) day of
each month. Base Rent and Additional Rent for any period during the Term hereof
which is for less than one (1) month of the Term shall be a pro rata portion of
the monthly installment based on a thirty (30) day month. Base Rent and
Additional Rent shall be payable without notice or demand and without any
deduction, offset, or abatement, in lawful money of the United States of
America. Base Rent and Additional Rent shall be paid directly to Sublessor at
510 DeGuigne Drive, Sunnyvale, California 94086, Attention: Chief Financial
Officer, or such other address as may be designated in writing by Sublessor.
B. Additional Rent. All monies other than Base Rent required to be
---------------
paid by Sublessee under this Sublease, including, without limitation, all
impositions, insurance premiums, operating costs, taxes, common area charges and
other amounts payable under Sections 4.03 and 7.02 and Articles 8 and 10 of the
Master Lease Terms shall be deemed additional rent ("Additional Rent"). Base
Rent and Additional
<PAGE>
Rent hereinafter collectively shall be referred to as "Rent". Sublessee and
Sublessor agree, as a material part of the consideration given by Sublessee to
Sublessor for this Sublease, that Sublessee shall pay all costs, expenses,
taxes, insurance, maintenance and other charges of every kind and nature arising
in connection with this Sublease, the Master Lease or the Subleased Premises,
except for rent due under the Master Lease or Master Lessor's obligations, such
that Sublessor shall receive, as a net consideration for this Sublease, the Base
Rent payable under Section 4.A. hereof.
C. Payment of First Month's Rent. Sublessor recognizes receipt of the
-----------------------------
sum of Ninety-Four Thousand Dollars ($94,000), which shall constitute Base Rent
for the first month of the Term.
5. Security Deposit:
----------------
A. Upon execution hereof, Sublessee shall deposit with Sublessor the
sum of Two Hundred Ninety-Four Thousand Dollars ($294,000) (the "Security
Deposit"), in cash, as security for the performance by Sublessee of the terms
and conditions of this Sublease. If Sublessee fails to pay Rent or other charges
due hereunder or otherwise defaults with respect to any provision of this
Sublease, then Sublessor may draw upon, use, apply or retain all or any portion
of the Security Deposit for the payment of any Rent or other charge in default,
for the payment of any other sum which Sublessor has become obligated to pay by
reason of Sublessee's default, or to compensate Sublessor for any loss or damage
which Sublessor has suffered thereby. If Sublessor so uses or applies all or any
portion of the Security Deposit, then Sublessee, upon demand therefor, shall
deposit cash with Sublessor in the amount required to restore the Security
Deposit to the full amount stated above. Upon the expiration of this Sublease,
if Sublessee is not in default, Sublessor shall return to Sublessee so much of
the Security Deposit as has not been applied by Sublessor pursuant to this
paragraph, or which is not otherwise required to cure Sublessee's defaults.
B. Sublessee shall have the right to provide a portion of the Security
Deposit in the amount of One Hundred Ninety-Six Thousand Dollars ($196,000) in
the form of a letter of credit (the "Letter of Credit"). The Letter of Credit
shall be in a form and issued by a financial institution that is reasonably
acceptable to Sublessor. Sublessee shall cause the Letter of Credit to remain in
effect during the entire Sublease Term and for an additional sixty (60) days
following the expiration or earlier termination of this Sublease, and shall
extend or renew the Letter of Credit from time to time at least thirty (30) days
before its stated expiration date. If Sublessee fails to maintain, renew or
replace the Letter of Credit at least thirty (30) days before its stated
expiration date, Sublessor may, without prejudice to any other right or remedy,
draw upon the entire amount of the Letter of Credit. Any amount drawn by
Sublessor on the Letter of Credit but not applied by Sublessor to satisfy
Sublessee's obligations hereunder shall be held by Sublessor in accordance with
the other provisions of this section. If Sublessor draws on any portion of the
Letter of Credit, Sublessee shall, within three (3) days of demand by Sublessor,
deposit immediately available funds with Sublessor in the full amount of the
Security Deposit.
6. Holdover: In the event that Sublessee does not surrender the Subleased
--------
Premises by the Expiration Date in accordance the terms of this Sublease,
Sublessee shall indemnify, defend, protect and hold harmless Sublessor from and
against all loss and liability resulting from Sublessee's delay in surrendering
the Subleased Premises and pay Sublessor holdover rent equal to one and one-half
times the Rent payable under this Sublease during the last month of the Term.
7. Repairs: Sublessor shall deliver the Subleased Premises to Sublessee
-------
with the exterior walls, roof, interior structure, mechanical equipment,
heating, ventilating and air conditioning systems, fire and life safety systems
and plumbing and electrical distribution in the Subleased Premises in good
working order. Sublessee's failure to make an objection with respect to any
aspect of the foregoing within ninety (90) days of the Commencement Date shall
be deemed a conclusive presumption that Sublessor has complied with its
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<PAGE>
requirements with respect to such aspects. The parties acknowledge and agree
that Sublessee is subleasing the Subleased Premises on an "as is" basis, and
that Sublessor has made no representations or warranties with respect to the
condition of the Subleased Premises as of the Commencement Date except as set
forth in this paragraph. Sublessor shall have no obligation whatsoever to make
or, except as expressly set forth in Section 23 hereof, pay the cost of any
alterations, improvements or repairs to the Subleased Premises, including,
without limitation, any improvement or repair required to comply with any law,
regulation, building code or ordinance (including the Americans with
Disabilities Act of 1990). Sublessee shall look solely to Master Lessor for
performance of any repairs required to be performed by Master Lessor under the
terms of the Master Lease.
8. Right to Cure Defaults: If Sublessee fails to pay any sum of money to
----------------------
Sublessor, or fails to perform any other act on its part to be performed
hereunder, then Sublessor may, but shall not be obligated to, after passage of
any applicable notice and cure periods, make such payment or perform such act.
All such sums paid, and all reasonable costs and expenses of performing any such
act, shall be deemed Additional Rent payable by Sublessee to Sublessor upon
demand, together with interest thereon at the Interest Rate from the date of the
expenditure until repaid.
9. Assignment and Subletting. Sublessee may not assign this Sublease,
-------------------------
sublet the Subleased Premises, transfer any interest of Sublessee therein or
permit any use of the Subleased Premises by another party (collectively,
"Transfer"), without the prior written consent of Sublessor (not to be
unreasonably withheld) and Master Lessor and without complying with the terms of
Article 12 of the Master Lease Terms, as incorporated herein. Sublessor shall
provide such consent or denial within ten (10) business days of a request for
consent, provided such consent includes all information reasonably required by
Sublessor to respond to such request. If Sublessee receives rent or other
consideration for any Transfer in excess of the Rent payable under this
Sublease, or in the case of a sublease of a portion of the Subleased Premises,
in excess of the Rent that is fairly allocable to such portion, Sublessee shall
pay Sublessor seventy-five percent (75%) of the difference between each such
payment of Rent or other consideration and the Rent required hereunder, after
recovering Sublessee's actual, reasonable costs of subleasing, including
attorneys' fees, commissions and alterations (to the extent Sublessor is
permitted to deduct such costs before paying any "profit" to Master Lessor).
Notwithstanding anything to the contrary herein, in the event that Sublessee
requests consent to a Transfer which would result in more than sixty percent
(60%) of the-Subleased Premises being Transferred, Sublessor shall have the
right, by giving notice to Sublessee within thirty (30) days after receipt of
any request by Sublessee to consent to a Transfer, to recapture the portion of
the Subleased Premises to be Transferred (the "Subject Space"). Such recapture
notice shall cancel and terminate this Sublease with respect to the Subject
Space as of the date of Sublessor's proposed Transfer. If this Sublease is
canceled with respect to less than the entire Subleased Premises, the Rent
hereunder shall be prorated on the basis of the number of square feet retained
by Sublessee in proportion to the number of rental square feet in the Subleased
Premises, and this Sublease, as so amended, shall continue thereafter in full
force and effect. Upon request by either party, the parties shall execute
written confirmation of the same, including any additional changes required as a
result of the Premises becoming a multi-tenant site, if applicable.
10. Use: Sublessee may use the Subleased Premises only for the uses
---
identified in Section 6.01 of the Master Lease Terms. Sublessee shall not use,
store, transport or dispose of any hazardous material in or about the Subleased
Premises. Without limiting the generality of the foregoing, Sublessee, at its
sole cost, shall comply with all laws relating to hazardous materials. Sublessee
shall indemnify, defend with counsel reasonably acceptable to Sublessor and hold
Sublessor harmless from and against all claims, losses, costs, damages,
liabilities and expenses of every type and nature, to the extent caused by the
release, disposal, discharge or emission of hazardous materials on or about the
Subleased Premises by Sublessee or its agents, contractors, invitees or
employees. "Hazardous materials" shall mean any material or substance that is
now
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<PAGE>
or hereafter prohibited or regulated by any statute, law, rule, regulation or
ordinance or that is now or hereafter designated by any governmental authority
to be radioactive, toxic, hazardous or otherwise a danger to health,
reproduction or the environment.
11. Effect of Conveyance: As used in this Sublease, the term "Sublessor"
--------------------
means the holder of the tenant's interest under the Master Lease. In the event
of any assignment, transfer or termination of the tenant's interest under the
Master Lease, which assignment, transfer or termination may occur at any time
during the Term hereof in Sublessor's sole discretion, Sublessor shall be and
hereby is entirely relieved of all covenants and obligations of Sublessor
hereunder, and it shall be deemed and construed, without further agreement
between the parties, that any transferee has assumed and shall carry out all
covenants and obligations thereafter to be performed by Sublessor hereunder.
Sublessor may transfer and deliver any security of Sublessee to the transferee
of the tenant's interest under the Master Lease, and thereupon Sublessor shall
be discharged from any further liability with respect thereto.
12. Delivery and Acceptance: If Sublessor fails to deliver possession of
-----------------------
the Subleased Premises to Sublessee on or before the date set forth in Section 3
hereof for any reason whatsoever, then this Sublease shall not be void or
voidable, nor shall Sublessor be liable to Sublessee for any loss or damage;
provided, however, that in such event, Rent shall abate until Sublessor delivers
possession of the Subleased Premises to Sublessee.
13. Improvements: No alteration or improvements shall be made to the
------------
Subleased Premises, except in accordance with the Master Lease, and with the
prior written consent of both Master Lessor and Sublessor, which shall not be
unreasonably withheld or delayed. Sublessee shall have no obligation to remove
alterations or improvements made to the Subleased Premises by Sublessor.
14. Release and Waiver of Subrogation: Sublessor and Sublessee hereby
---------------------------------
release each other from any damage to property or loss of any kind which is
caused by or results from any risk insured against under any property insurance
policy required to be carried by either party under this Sublease.
15. Insurance: Sublessee shall obtain and keep in full force and effect,
---------
at Sublessee's sole cost and expense, during the Term the insurance required of
the tenant under Article 8 of the Master Lease Terms. All such liability
insurance policies shall name Master Lessor, Sublessor and any additional
parties required by Master Lessor or Sublessor as additional insureds.
16. Default: Sublessee shall be in material default of its obligations
-------
under this Sublease if any of the following events occur:
A. Sublessee fails to pay any Rent when due, when such failure
continues for two (2) days after written notice from Sublessor to Sublessee that
any such sum is due; or
B. Sublessee fails to perform any term, covenant or condition of this
Sublease (except those requiring payment of Rent) and fails to cure such breach
within ten (10) days after delivery of a written notice specifying the nature of
the breach; provided, however, that if more than ten (10) days reasonably are
required to remedy the failure, then Sublessee shall not be in default if
Sublessee commences the cure within the ten (10) day period and thereafter
completes the cure within sixty (60) days after the date of the notice; or
C. Sublessee commits any other act or omission which constitutes a
default under the Master Lease, which has not been cured after delivery of
written notice and passage of the applicable grace period provided in the Master
Lease as modified, if at all, by the provisions of this Sublease.
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<PAGE>
17. Remedies: In the event of any default by Sublessee, Sublessor shall
--------
have all remedies provided pursuant to Section 13.02 of the Master Lease Terms
and by applicable law.
18. Broker: Sublessor and Sublessee each represent to the other that they
------
have dealt with no real estate brokers, finders, agents or salesmen other than
Donald H. Reimann and Michael S. Rosendin of Colliers International,
representing Sublessor, and Jack C. Spallino and Scott Lagan of Spallino Reid
Corporate Real Estate Services, representing Sublessee, in connection with this
transaction. Each party agrees to hold the other party harmless from and against
all claims for brokerage commissions, finder's fees or other compensation made
by any other agent, broker, salesman or finder as a consequence of said party's
actions or dealings with such agent, broker, salesman, or finder.
19. Notices: Unless at least five (5) days' prior written notice is given
-------
in the manner set forth in this paragraph, the address of each party for all
purposes connected with this Sublease shall be that address set forth below
their signatures at the end of this Sublease. All notices, demands or
communications in connection with this Sublease shall be (a) personally
delivered; or (b) properly addressed and (i) submitted to an overnight courier
service, charges prepaid, or (ii) deposited in the mail (registered or
certified, return receipt requested, and postage prepaid). Notices shall be
deemed delivered upon receipt, if personally delivered, one (1) business day
after being submitted to an overnight courier service and three (3) business
days after mailing, if mailed as set forth above. All notices given to Master
Lessor under the Master Lease shall be considered received only when delivered
in accordance with the Master Lease.
20. Other Sublease Terms:
--------------------
A. Incorporation By Reference. Except as set forth below, the terms
--------------------------
and conditions of this Sublease shall include all of the terms of the Master
Lease and such terms are incorporated into this Sublease as if fully set forth
herein, except that: (i) each reference in such incorporated sections to "Lease"
shall be deemed a reference to "Sublease"; (ii) each reference to the "Premises"
shall be deemed a reference to the "Subleased Premises"; (iii) each reference to
"Lessor" and "Lessee" shall be deemed a reference to "Sublessor" and
"Sublessee", respectively, except as otherwise expressly set forth herein; (iv)
with respect to work, services, repairs, restoration, insurance, indemnities,
representations, warranties or the performance of any other obligation of Master
Lessor under the Master Lease, the sole obligation of Sublessor shall be to
request the same in writing from Master Lessor as and when requested to do so by
Sublessee, and to use Sublessor's reasonable efforts (without requiring
Sublessor to spend more than a nominal sum) to obtain Master Lessor's
performance; (v) with respect to any obligation of Sublessee to be performed
under this Sublease, wherever the Master Lease grants to Sublessor a specified
number of days to perform its obligations under the Master Lease, except as
otherwise provided herein, Sublessee shall have three (3) fewer days to perform
the obligation, including, without limitation, curing any defaults; (vi) with
respect to any approval required to be obtained from the "Lessor" under the
Master Lease, such consent must be obtained from both Master Lessor and
Sublessor, and the approval of Sublessor may be withheld if Master Lessor's
consent is not obtained; (vii) in any case where the "Lessor" reserves or is
granted the right to manage, supervise, control, repair, alter, regulate the use
of, enter or use the Premises or any areas beneath, above or adjacent thereto,
such reservation or grant of right of entry shall be deemed to be for the
benefit of both Master Lessor and Sublessor; (viii) in any case where "Lessee"
is to indemnify, release or waive claims against "Lessor", such indemnity,
release or waiver shall be deemed to run from Sublessee to both Lessor and
Sublessor; (ix) in any case where "Lessee" is to execute and deliver certain
documents or notices to "Lessor", such obligation shall be deemed to run from
Sublessee to both Master Lessor and Sublessor; (x) in any case where "Lessee" is
to make a payment to "Lessor", such amounts shall be paid to Sublessor; (xi) the
reference to "Section 4.01" in Section 4.03 of the Master Lease Terms shall mean
Section 4 of this Sublease; (xii) the reference to "16.19" in Section 10.03 of
the Master Lease Terms shall be to "16.44"; (xiii) Sublessee shall have the
right to Transfer the Subleased Premises as described in Section 12.02 of the
Master Lease
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<PAGE>
Terms only after providing Sublessor with thirty (30) days prior written notice
and obtaining the prior written consent of Master Lessor, if applicable; (xiv)
the reference in Section 12.04 to "$350" shall be to "$1,000" as to Sublessor
only; (xv) the reference to the square footage of the Premises in Article 43 of
the Master Lease Terms shall be to "40,000"; and (xiv) the provisions of Section
9.05 shall apply only during the last year of the Option term.
Notwithstanding the provisions of subpart (iii) above, (a) the following
provisions of the Master Lease shall not be incorporated herein: Articles 1-3,
Sections 4.01, 4.02 and 4.03 (the last sentence of the first paragraph only),
Article 5, Sections 6.02(a), 6.02(b) (the first line only), 6.03(a) and (b),
7.04 and 13.03 (the last sentence only) and Articles 23, 25, 36 (the second
sentence only), 37, 38 (the last sentence only), 41 and 42 of the Master Lease
Terms, the Lease (except Section F), the First Amendment, the Second Amendment
(except Section 4) and the Third Amendment; (b) references in the following
provisions to "Lessor" shall mean Master Lessor only: Sections 7.01 (the first
reference only), 7.02, 8.01 (the first paragraph only), 8.03, 9.01, 9.02, 10.01
(the second paragraph only), 10.04 (except the reference in the second line of
subpart (c)) and 14.02 and Article 38 of the Master Lease Terms; (c) references
in the following provisions to "Lessor" shall mean Master Lessor and Sublessor:
Sections 8.04 and 12.04 of the Master Lease Terms; and (d) references in the
following provisions to "Lessor" shall mean Master Lessor or Sublessor: Sections
7.01, 10.02 and 10.04(c) (the reference in the second line) and Article 30 of
the Master Lease Terms.
B. Assumption of Obligations. This Sublease is and at all times shall
-------------------------
be subject and subordinate to the Master Lease and the rights of Master Lessor
thereunder. Sublessee hereby expressly assumes and agrees: (i) to comply with
all provisions of the Master Lease which are incorporated hereunder; and (ii) to
perform all the obligations on the part of the "Lessee" to be performed under
the terms of the Master Lease during the term of this Sublease which are
incorporated hereunder. In the event of a conflict between the provisions of
this Sublease and the Master Lease, as between Sublessor and Sublessee, the
provisions of this Sublease shall control.
21. Conditions Precedent: This Sublease and Sublessor's and Sublessee's
--------------------
obligations hereunder are conditioned upon the written consent of Master Lessor.
If Sublessor fails to obtain Master Lessor's consent within thirty (30) days
after execution of this Sublease by Sublessor, then Sublessor or Sublessee may
terminate this Sublease by giving the other party written notice thereof at any
time before receipt of Master Lessor's consent, and Sublessor shall return to
Sublessee the Security Deposit and the first month's rent paid hereunder.
22. Authority to Execute: Sublessee and Sublessor each represent and
--------------------
warrant to the other that each person executing this Sublease on behalf of each
party is duly authorized to execute and deliver this Sublease on behalf of that
party.
23. Carpeting Allowance: Sublessor shall reimburse Sublessee the actual
-------------------
and reasonable costs that Sublessee incurs to install new carpeting within the
Subleased Premises (the "Recarpeting"), up to and not to exceed an amount equal
to One Hundred Twenty Thousand Dollars ($120,000) (the "Cap"). Upon Sublessee's
lien free completion of the Recarpeting, Sublessee shall present to Sublessor
paid invoices, unconditional lien waivers and other items reasonably required by
Sublessor to evidence Sublessee's completion of and payment for the Recarpeting.
Within ten (10) days of Sublessor's receipt of all such items, Sublessor shall
reimburse Sublessee its actual, reasonable costs to perform the Recarpeting, not
to exceed the amount of the Cap. Sublessor's obligations under this section
shall terminate upon the first anniversary of the Commencement Date. Sublessee
shall perform the Recarpeting in a good and workmanlike manner, in compliance
with all laws and otherwise in compliance with the terms of the Master Lease.
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<PAGE>
24. Extension:
---------
A. Provided that a default has not occurred hereunder, Sublessee
shall have one option (the "Option") to extend the term of this Sublease for an
additional term of forty-two (42) months, commencing when the initial term
expires and terminating March 31, 2006, upon the terms and conditions set forth
in this section. Sublessee may exercise such option by giving Sublessor written
notice of its intention not less than nine (9) months nor more than twelve (12)
months prior to the expiration of the initial term of this Sublease. The Option
is personal to PlaceWare, Inc. or a corporate affiliate of PlaceWare, Inc., and
may be not exercised following an assignment of this Sublease or a sublease of
all or any portion of the Subleased Premises.
B. If the Option is exercised, the base rent for the Subleased
Premises shall become the greater of Ninety-Eight Thousand Dollars ($98,000) per
month and the then current fair market monthly rent ("FMR") for the Subleased
Premises as of the commencement date of the extended term, and shall be subject
to rent escalations, if appropriate, as determined by the agreement of the
parties or, if the parties cannot agree within sixty (60) days prior to the
commencement of the extended term, then by an appraisal. All other terms and
conditions contained in this Sublease shall remain in full force and effect and
shall apply during the Option term. If it becomes necessary to determine the FMR
by appraisal, real estate appraiser(s), all of whom shall be Members of the
Appraisal Institute and shall have at least five (5) years experience appraising
comparable space located in the vicinity of the Subleased Premises, shall be
appointed and shall act in accordance with the following procedures:
(i) If the parties are unable to agree on the FMR within the
allowed time, either party may demand an appraisal by giving written notice to
the other party, which demand to be effective must state the name, address and
qualifications of an appraiser selected by the party demanding an appraisal (the
"Notifying Party"). Within ten (10) days following the Notifying Party's
appraisal demand, the other party (the "Non-Notifying Party") shall either
approve the appraiser selected by the Notifying Party or select a second
properly qualified appraiser by giving written notice of the name, address and
qualification of such appraiser to the Notifying Party. If the Non-Notifying
Party fails to select an appraiser within the ten (10) day period, the appraiser
selected by the Notifying Party shall be deemed selected by both parties and no
other appraiser shall be selected. If two appraisers are selected, they shall
select a third appropriately qualified appraiser. If the two appraisers fail to
select a third qualified appraiser, the third appraiser shall be appointed by
the then presiding judge of the county where the Subleased Premises are located
upon application by either party.
(ii) If only one appraiser is selected, that appraiser shall
notify the parties in simple letter form of its determination of the FMR within
fifteen (15) days following his selection, which appraisal shall be conclusively
determinative and binding on the parties as the appraised FMR. If multiple
appraisers are selected, the appraisers shall meet not later than ten (10) days
following the selection of the last appraiser. At such meeting the appraisers
shall attempt to determine the FMR as of the commencement date of the extended
term by the agreement of at least two (2) of the appraisers. If two (2) or more
of the appraisers agree on the FMR at the initial meeting, such agreement shall
be determinative and binding upon the parties hereto and the agreeing appraisers
shall, in simple letter form executed by the agreeing appraisers, forthwith
notify both Sublessor and Sublessee of the amount set by such agreement. If
multiple appraisers are selected and two (2) appraisers are unable to agree on
the FMR, all appraisers shall submit to Sublessor and Sublessee an independent
appraisal of the FMR in simple letter form within twenty (20) days following
appointment of the final appraiser. The parties shall then determine the FMR by
averaging the appraisals; provided that any high or low appraisal, differing
from the middle appraisal by more than ten percent (10%) of the middle
appraisal, shall be disregarded in calculating the average.
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<PAGE>
(iii) If only one appraiser is selected, then each party shall pay
one-half of the fees and expenses of that appraiser. If three appraisers are
selected, each party shall bear the fees and expenses of the appraiser it
selects and one-half of the fees and expenses of the third appraiser.
25. Hazardous Materials: To Sublessor's actual knowledge, Sublessor has
-------------------
not released, discharged or emitted hazardous materials on or about the
Subleased Premises in violation of applicable laws.
IN WITNESS WHEREOF, the parties have executed this Sublease as of the day
and year first above written.
SUBLESSEE: SUBLESSOR:
PROXIM, INC., PLACEWARE, INC.,
a Delaware corporation. a Delaware corporation
By: /s/ Keith E. Glover By: /s/ XXX
------------------------------ -----------------------------
Name: Keith E. Glover Name: XXX
------------------------------ -----------------------------
Its: V.P. & C.F.O. Its: CFO
------------------------------ -----------------------------
Address: 510 DeGuigne Drive Address: 201 Ravendale Drive
Sunnyvale, California 94086 Mountain View, CA 94043
Attn.: Chief Financial Officer Attn: Chief Financial Officer
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<PAGE>
CONSENT TO SUBLEASE
The undersigned ("Lessor") hereby consents to the sublease by PROXIM, INC.,
("Sublessor"), a Delaware corporation to PLACEWARE, INC., ("Sublessee"), a
Delaware corporation, of the entire premises leased by Sublessor as Lessee under
that certain Lease between Lessor and Proxim, Inc., which Lease is dated August
28, 1992, (the "Lease"), which Lease incorporated certain of the terms of that
certain Lease Agreement dated February 20, 1986 between Master Lessor and
Equatorial Communications Company, and which Lease was amended by a First
Amendment to Vanni Business Park Industrial Lease dated May 5, 1994, a Second
Amendment to Vanni Business Park Industrial Lease dated August 1994 and a Third
Amendment to Vanni Business Park Industrial Lease (the "Third Amendment") dated
May 1999, respecting (the "Premises") commonly known as 295 Noah Bernardo
Avenue, Building "C", Mountain View, California, subject to the following:
1. Such sublease shall be effectuated pursuant to the form of Sublease prepared
by Sublessor and delivered by Sublessor to Lessor, a copy of which is attached
hereto as Exhibit A. Such document, when executed by both Sublessor and
---------
Sublessee, shall be deemed the "Sublease" for all purposes under the this
Consent.
2. Sublessor shall pay to Lessor its attorneys fees incurred in connection with
this sublease in the amount of $350.00 pursuant to section 12.04 of the Lease.
3. Sublessor shall pay to Lessor with its regularly scheduled rent payments
(50%) of all sums collected by Sublessor from Sublessee or assignee which are in
excess of the rent owing by Sublessor to Lessor pursuant to provisions of the
Lease and each Amendment thereto after first deducting the cost of (i) broker's
commission paid by Sublessor with regard to the sublease; (ii) reasonable legal
fees related directly to the sublease paid by Sublessor; (iii) the cost of
improvements made to the subleased premises by Sublessor at Sublessor's expense
for the sole purpose of subletting.
4. Sublessor shall effectuate the Third Amendment to Vanni Business Park
Industrial Lease by paying to Lessor the increased security deposit pursuant to
paragraph 3 of the Third Amendment. The Third Amendment shall not be effective
and Lessor's Consent to Sublease deemed null and void at Lessors' option should
Sublessor not pay to Lessor the increased deposit pursuant to paragraph 3 of the
Third Amendment.
5. In accordance with Section 12.03 of the Lease, this Consent does not relieve
Sublessor of any liability as Lessee under the Lease.
6. This Consent shall not be construed to be a consent to any subsequent
sublease, extension of sublease, assignment, mortgage, or other transfer of all
or any portion of the Premises or of all or any interest in the Lease.
-9-
<PAGE>
7. Notwithstanding anything to the contrary contained in the Sublease, nothing
in this Consent shall be deemed to be or construed as an agreement be Lessor to
amend or otherwise modify any of the terms of the Lease. In the event of any
inconsistencies between the provisions of the Sublease and the Provisions of the
Lease, the provisions of the Lease control.
8. Without limiting the generality of paragraphs 6 & 7 above, any subsequent
sublease, extension of sublease, assignment, mortgage or other transfer of all
or any portion of the Premises or of any interest under the Lease shall be
subject to Lessor's consent as provided for in Section 12 of the Lease. Such
consent is further subject to approval and rejection rights that Lessor's lender
may currently have or accrue in the future.
LESSOR
Vanni Business Park LLC,
a Delaware limited liability company
By /s/ David V. Vanni
----------------------------
David V. Vanni, Member
-10-
<PAGE>
EXHIBIT 10.8
SOFTWARE LICENSE AND TECHNOLOGY
ASSIGNMENT AGREEMENT
This Software License and Technology Assignment Agreement ("Agreement") is
entered as of November 25, 1996 ("Effective Date"), by and between Placeware,
Inc., a Delaware corporation ("Company") having its principal place of business
at 600 Hansen Way, Suite 200, Palo Alto, California 94304, and Xerox
Corporation, a New York corporation ("Xerox") having its principal place of
business at 800 Long Ridge Road, Stamford, Connecticut 06904.
A. License and Assignments from Xerox.
----------------------------------
1. Xerox hereby conveys to the Company (i) a non-exclusive, perpetual,
sublicensable (except for patents), worldwide license to fully exploit the
inventions referenced in Attachment A or B and any intellectual property rights
(whether or not patented) and confidential information and know-how related
thereto (specifically no right to sublicense any patent is granted, unless the
patent is sublicensed in support of licenses with respect to products or code of
the Company where the licensees may have the right with respect to such code or
products to use, create, market and/or otherwise exploit such code, products and
derivative works thereof or where said sublicense is needed in connection with
said license in order to utilize said code, products or derivative works) and
(ii) all right, title and interest anywhere in the world to the Software and
other Placeware Project Output referred to in Attachment B and any non-patent
intellectual property rights and confidential information and know-how related
thereto ((i) and (ii) shall collectively comprise the "Rights"). Xerox also
hereby conveys to the Company all right, title and interest in and to the
equipment and, to the extent transferable, the associated software set forth in
Attachment C (these have been used by the personnel working on the "placeware"
project) on an "as-is" basis. Xerox represents and warrants that it has the
full power, authority and right to enter and perform this Agreement and to make
the transfers and licenses herein without violation of any rights of or
obligations to third parties granted in writing by Xerox. The Company agrees
that Xerox makes no other representations and warranties with regard to the
Rights or the equipment and software in Attachment C. In addition, Xerox will
not provide indemnification of the Company with regard to the claims of others
relating to the Rights or the equipment and software in Attachment C. Xerox
agrees to assist the Company, at the Company's expense, in every proper and
reasonable way to further document, evidence and perfect the foregoing rights
and assignments.
B. Licenses and Compensation from Company.
--------------------------------------
1. Xerox will receive a non-exclusive license to the "placeware" source
code transferred by Xerox to the Company at the Effective Date (the "Snapshot
Code") only for internal use and internal non-commercial research purposes. In
the event of bankruptcy (which, if involuntary, is not dismissed within 120
days) or dissolution or winding-up of the Company without a successor within two
years from the Effective Date, Xerox will have the right to distribute or grant
sublicenses to the Snapshot Code.
<PAGE>
2. Xerox shall receive 455,000 shares of Series A Preferred Stock in the
Company ("Shares"), representing approximately 10% of the Company's fully-
diluted shares outstanding following the Series A financing. The Company hereby
makes to Xerox the representations and warranties set forth in Section 2 (other
than Section 2.10) of the Series A Preferred Stock Purchase Agreement.
3. Xerox shall have a royalty-free, perpetual, binary, internal use
license for Company's binary versions of the Snapshot Code (including derivative
works based substantially on the Snapshot Code) that are made generally
commercially available by Company within four years of the Effective Date ("New
Versions"). The Company may provide support for the New Versions on its standard
rates and terms.
4. Xerox will receive $21,047.52 for the equipment to be conveyed to the
Company as specified in Attachment C.
5. Xerox will be entitled to obtain a right to distribute any New Version
directly or for OEM/embedded use in Xerox products on the same terms, conditions
and pricing to Xerox for such New Version under such arrangements as the most
favorable terms, conditions and pricing (taken as a whole) that the Company
grants to any similarly situated third party for such rights with respect to
such New Version.
6. Xerox will receive royalties based upon Net Revenues from New Versions
according to the following formula:
a. 2% of Net Revenues until total accrued and/or paid royalties to
Xerox since the Effective Date reach a cap of $1,000,000.
b. The royalties shall begin to accrue the earlier of (1) the first
day of the fiscal quarter following the Company's first fiscal quarter of
realizing net income from operations or (2) two and a half (2 1/2) years after
the Effective Date of this Agreement. Royalties are to be paid to Xerox
quarterly and within forty-five (45) days after the end of each fiscal quarter
for which royalties are due.
c. For purposes of this Agreement, "Net Revenues" shall mean the
amounts actually received by the Company from distribution or license of New
Versions less any deductions common in the industry including, by way of
example, shipping, handling, insurance, duties, taxes, bad debts and returns
(and reasonable reserves therefor), credits, refunds, rebates, discounts,
allowances, and price protections.
d. Xerox will be entitled to a royalty-free, nonexclusive, grant-back
patent license to the Company's improvements of any patent licensed from Xerox
hereunder.
C. Marketing/Endorsement. A mutually agreed upon press release will be
---------------------
jointly released at the Company's selected product launch and shall include a
quote from a Xerox executive.
2
<PAGE>
D. Standard Investor Representations and Covenants.
-----------------------------------------------
1. Xerox hereby represents and warrants to the Company that:
a. The Shares (including for purposes of this Section D, all
underlying Common Stock or securities that may be issued with respect to any
Shares) will be acquired by Xerox for investment for Xerox' own account, not as
a nominee or agent, and not with a view to the resale or distribution of any
part thereof, and Xerox has no present intention of selling, granting any
participation in, or otherwise distributing such securities. By executing this
Agreement, Xerox further represents that it does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Shares.
b. Xerox is an experienced investor in securities of development-stage
companies and acknowledges that it is able to fend for itself, can bear the
economic risk of its investment and has such knowledge and experience in
financial or business matters that Xerox is capable of evaluating the merits and
risks of the investment in the Shares.
c. Xerox understands that the Shares it is acquiring are characterized
as "restricted securities" under the U.S. federal securities laws inasmuch as
they are being acquired from the Company in a transaction not involving a public
offering and that under such laws and applicable regulations such securities may
be resold without registration under the U.S. Securities Act of 1933, as amended
(the "Act") only in certain limited circumstances. In this connection, Xerox
represents that it is familiar with Rule 144 promulgated pursuant to the Act, as
presently in effect, and understands the resale limitations imposed thereby and
by the Act.
d. Without in any way limiting the representations set forth above,
Xerox further agrees not to make any disposition of all or any portion of the
Shares unless and until:
i. there is then in effect a registration statement under the Act
covering such proposed disposition and such disposition is made in accordance
with such registration statement; or
ii. (1) Xerox shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and (2) if reasonably
requested by the Company, Xerox shall have furnished the Company with an opinion
of counsel, reasonably satisfactory to the Company, that such disposition will
not require registration of such shares under the Act.
e. It is understood that the certificates evidencing the Shares may
bear one or all of the following legends:
i. "These securities have not been registered under the Securities
Act of 1933, as amended (the "Act"). They may not be sold, offered for sale,
pledged or hypothecated in the absence of a registration statement in effect
with respect to the securities
3
<PAGE>
under such Act or, if requested by the Company, an opinion of counsel
satisfactory to the Company that such registration is not required or unless
sold pursuant to Rule 144 of such Act."
ii. Any legend required by the laws of any state of the United
States.
2. Xerox hereby agrees that it shall not, to the extent and during the
period of duration specified by the Company and an underwriter of Shares (or
other securities) of the Company, sell or otherwise transfer or dispose of
(other than to transferees who agree to be similarly bound) any securities of
the Company (other than securities already registered) during a reasonable and
customary period of time not to exceed 180 days, as agreed to by the Company and
the underwriters, following the Effective Date of a registration statement of
the Company filed under the Act. In order to enforce the foregoing covenant, the
Company may impose stop-transfer instructions with respect to the Shares until
the end of such one hundred eighty (180) day period.
E. Confidentiality.
---------------
1. Xerox agrees that the Snapshot Code and Other Placeware Project Output
referred to in Attachment B and any underlying information, concepts and
algorithms are the confidential information of the Company ("Confidential
Information"). Except as licensed or expressly authorized herein, Xerox will
hold in confidence and not use or disclose such Confidential Information without
the express written approval of the Company. Notwithstanding the above, if
Xerox is going to access the Snapshot Code, it shall be required to keep the
Snapshot Code on a segregated, secure server and allow only restricted access to
Xerox employees, consultants or Xerox Company Personnel on a strictly "need-to-
know" basis provided Xerox keeps a log of such use and any such employees or
consultants agree to be bound by the confidentiality obligations herein. A
"Xerox Company Personnel" shall mean an employee or a consultant providing
services for a company in which Xerox directly or indirectly has majority
ownership including Fuji Xerox Limited and Rank Xerox Limited.
a. The obligations of Xerox recited in E(1) hereof shall terminate
with respect to any particular portion of such Confidential Information when and
to the extent that it is or becomes:
i. Part of the public domain through no fault of Xerox;
ii. Legally disclosable to anyone by a third party who receives
such Confidential Information from the Company;
iii. Independently developed by Xerox without any reference to the
Software.
iv. Known to Xerox free of any obligation of confidence or non-
use.
2. In no event shall the obligations of Xerox extend beyond five years for
concepts and algorithms embedded in the source code of the Software, however,
Xerox agrees not to make available any part of the Snapshot Code to a third
party unless Section E(1)(a) applies to same.
4
<PAGE>
F. Warranty Disclaimer. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT,
-------------------
NEITHER PARTY MAKES ANY WARRANTIES TO ANY PERSON OR ENTITY WITH RESPECT TO THE
RIGHTS, LICENSED TECHNOLOGY, SNAPSHOT CODE, NEW VERSIONS OR ANY DERIVATIVES
THEREOF AND EACH PARTY DISCLAIMS ALL IMPLIED WARRANTIES, INCLUDING WITHOUT
LIMITATION WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND
NONINFRINGEMENT.
G. Limitation of Liability. EXCEPT AS OTHERWISE PROVIDED BELOW, AND
-----------------------
NOTWITHSTANDING ANYTHING ELSE IN THIS AGREEMENT OR OTHERWISE, NEITHER PARTY
SHALL BE LIABLE OR OBLIGATED UNDER ANY SECTION OF THIS AGREEMENT OR UNDER
CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR
ANY SPECIAL, INDIRECT, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES, LOST
PROFITS OR LOST DATA.
H. Notices and Requests. All notices, consents, authorizations, and requests
--------------------
in connection with this Agreement shall be deemed given (i) five (5) days after
the day they are deposited in the U.S. air mails, postage prepaid, certified or
registered, return receipt requested; or (ii) four (4) days after they are sent
by air express courier, charges prepaid; and addressed as set forth above or to
such other address as a party so designates by written notice to the other.
I. Export Control. Xerox and the Company hereby agrees to comply with all
--------------
export laws and restrictions and regulations of the Department of Commerce or
other United States or foreign agency or authority, and not to knowingly export,
or allow the export or re-export of any information or technology in violation
of any such restrictions, laws or regulations, or, without all required licenses
and authorizations, to Afghanistan, the People's Republic of China or any Group
Q, S, W, Y or Z country specified in the then current Supplement No. 1 to
Section 770 of the U.S. Export Administration Regulations (or any successor
supplement or regulations).
J. General. Neither this Agreement nor any license granted herein will be
-------
assignable, transferable or sublicensable by either party except as expressly
provided in this Agreement and except to a successor to substantially all that
party's assets or business. Except as otherwise expressly provided herein, any
provision of this Agreement may be amended and the observance of any provision
of this Agreement may be waived only with the written consent of the parties.
In any action or proceeding to enforce rights under this Agreement, the
prevailing party shall be entitled to recover costs and attorneys' fees. This
Agreement shall be construed and applied in accordance with the laws of the
State of California without regard to conflict of laws provisions. This
Agreement supersedes all proposals, oral or written, all negotiations,
conversations, or discussions between or among parties relating to the subject
matter of this Agreement and all past dealing or industry custom. If any
provision of this Agreement is held to be illegal or unenforceable, that
provision shall be limited or eliminated to the minimum extent necessary so that
this Agreement shall otherwise remain in full force and effect and enforceable.
5
<PAGE>
Xerox Corporation Inc. Coyote Hills Systems, Inc.
(Xerox) (Company)
_________________________________ _____________________________________
Signed Signed
_________________________________ _____________________________________
Printed Printed
_________________________________ _____________________________________
Title Title
6
<PAGE>
Exhibit A
Inventions
1. I-IP/950289 Low-Bandwidth Network Window System. Mike Dixon, Pavel Curtis,
David Nichols, John Lamping.
2. F-IP/950990 Jupiter Audio/Video Architecture: Secure Multimedia in Network
Places. Pavel Curtis, Mike Dixon, Ron Frederick David Nichols.
3. A-IP/951514 Automated Access to Expertise. Richard Bruce, David Nichols,
Danny Bobrow, David Goldberg.
4. F-IP/921756, Software Video Compression for Teleconferencing, Ron
Frederick.
F = Patent application filed.
A = Active; may still be filed
I = Inactive Status Recommended
<PAGE>
Exhibit B
Technology
Software:
1) Java, C, and C++ "placeware" source code, providing shared Java
applications over a network in a web browser, with audio communications
between participants. This includes, without limitation, the code developed
by _________, _________, ___________, __________, and ____________ during
calendar year 1996 and third parties working with those developers.
2) C++ source code to implement video send/receive capability for the
Microsoft Windows version of the Jupiter client. This includes, without
limitation, code developed during 1995.
3) Developer's Guide, Administrator's Guide and API Reference Documentation
relating to the above.
- -----------------------
Other Placeware Project Output:
1) Business plan
2) Notes, presentations, video demo
3) Xerox Corporation's trademark application No. 75/160527. Xerox Corporation
does not have and, to the knowledge of the Office of the General Counsel of
Xerox, no Xerox company has any other trademark rights or applications
relating to the term "Placeware".
4) Internet domain name: placeware.com
<PAGE>
Exhibit C
Equipment and Software [TO BE MODIFIED BY PLACEWARE]
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
PURCHASED
- -------------------------------------------------------------------------------------------------
Asset No. Name Machine(s)*:
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Mike Dixon
- -------------------------------------------------------------------------------------------------
2B27346 SUN sparc 10 + b&w monitor + 64 mb + 400 mb disk
- -------------------------------------------------------------------------------------------------
Pavel Curtis
- -------------------------------------------------------------------------------------------------
2B28985 Multimedia P133 w/2G disk & 32 MB Ram & 21" color monitor
- -------------------------------------------------------------------------------------------------
2B25384 . SUN Sparcstation 2 + b&w monitor + 64 mb + 400 mb disk
- -------------------------------------------------------------------------------------------------
2B25854 . SUN IPX + color monitor + 64 mb ram + 400 mb disk
- -------------------------------------------------------------------------------------------------
2B28391 . SGI Indy 133 MHz + 64 MB ram + 1G disk + color monitor + camera
- -------------------------------------------------------------------------------------------------
Connectix color camera
- -------------------------------------------------------------------------------------------------
2B26702 Powerbook 170
- -------------------------------------------------------------------------------------------------
2B26547 SUN sparc printer
- -------------------------------------------------------------------------------------------------
Dave Nichols
- -------------------------------------------------------------------------------------------------
2B28574 SUN Sparc-20 with color & gray-scale monitors, 1G disk, 96MB mem
- -------------------------------------------------------------------------------------------------
& hols
- -------------------------------------------------------------------------------------------------
2B28251 . Multimedia P90 with 20" color monitor, 1G+ disk, and 32MB mem
& software
- -------------------------------------------------------------------------------------------------
2B25097 . SUN Sparc IPX with gray-scale monitor, 400MB disk, 48MB mem
- -------------------------------------------------------------------------------------------------
Bill Shott
- -------------------------------------------------------------------------------------------------
NEC Multisync XE 17
- -------------------------------------------------------------------------------------------------
Demo System
- -------------------------------------------------------------------------------------------------
2B25389 SUN Sparcstation 2 + 128 MB memory + 500 mb disk + Color Monitor
- -------------------------------------------------------------------------------------------------
2B25394 SUN Sparcstation 2 + 128 MB memory + 500 mb disk + Color Monitor
- -------------------------------------------------------------------------------------------------
Tape drive
- -------------------------------------------------------------------------------------------------
2B28737 Multimedia P133 w/2G disk & 32 MB Ram & 21" color monitor
- -------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
LOANED
- -------------------------------------------------------------------------------------------------
Asset No. Name Machine(s)*:
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Bob Krivacic
- -------------------------------------------------------------------------------------------------
2B27510 Multimedia 486 PC with 15" color monitor & software
- -------------------------------------------------------------------------------------------------
2B28214 Multimedia P90 PC with 17" color monitor & software
- -------------------------------------------------------------------------------------------------
2B25853 SUN IPX with 17" color monitor
- -------------------------------------------------------------------------------------------------
2B25844 SUN Sparc 2 with color screen
- -------------------------------------------------------------------------------------------------
9600 Modem
- -------------------------------------------------------------------------------------------------
Connectix b&w camera
- -------------------------------------------------------------------------------------------------
2 color butcher cameras & 2 b&w butcher cameras.
- -------------------------------------------------------------------------------------------------
ISDN Combinet box & NT1
- -------------------------------------------------------------------------------------------------
Richard Bruce
- -------------------------------------------------------------------------------------------------
2B28437 Multimedia P90 with 20" color monitor, 1G+ disk, and 32MB mem.
- -------------------------------------------------------------------------------------------------
2B28259 Multimedia P90 with 20" color monitor, 1G+ disk, and 32MB mem.
- -------------------------------------------------------------------------------------------------
ISDN Combinet box & NT1
- -------------------------------------------------------------------------------------------------
</TABLE>
* Machines will be transferred with all resident software to the extent same
will not violate any rights of third parties.
1. Relocation of equipment and software is the responsibility of the Company.
2. "Loaned" equipment and software are loaned to the Company for so long as
Bob Krivacic and Richard Bruce, respectively, are employees of the Company
. Should they leave the employment of the Company their respective items
will be returned to Xerox. The Company is responsible for the maintenance
on loaned equipment
<PAGE>
Exhibit 10.9
MASTER LEASE AGREEMENT
MASTER LEASE AGREEMENT (the "Master Lease") dated September 30. 1997 by and
between COMDISCO. INC. ("Lessor") and PLACEWARE ("Lessee").
IN CONSIDERATION of the mutual agreements described below, the parties agree as
follows (all capitalized terms are defined in Section 14.18):
1. Property Leased.
Lessor leases to Lessee all of the Equipment described on each Summary Equipment
Schedule. In the event of a conflict, the terms of the applicable Schedule
prevail over this Master Lease.
2. Term.
On the Commencement Date, Lessee will be deemed to accept the Equipment, will be
bound to its rental obligations for each item of Equipment and the term of a
Summary Equipment Schedule will begin and continue through the Initial Term and
thereafter until terminated by either party upon prior written notice received
during the Notice Period. No termination may be effective prior to the
expiration of the Initial Term.
3. Rent and Payment.
Rent is due and payable in advance on the first day of each Rent Interval at the
address specified in Lessor's invoice. Interim Rent is due and payable when
invoiced. If any payment is not made when due, Lessee will pay a Late Charge on
the overdue amount. Upon Lessee's execution of each Schedule, Lessee will pay
Lessor the Advance specified on the Schedule. The Advance will be credited
towards the final Rent payment if Lessee is not then in default. No interest
will be paid on the Advance.
4. Selection; Warranty and Disclaimer of Warranties.
4.1 Selection. Lessee acknowledges that it has selected the Equipment and
disclaims any reliance upon statements made by the Lessor, other than as set
forth in the Schedule.
4.2 Warranty and Disclaimer of Warranties. Lessor warrants to Lessee that, so
long as Lessee is not in default, Lessor will not disturb Lessee's quiet and
peaceful possession, and unrestricted use of the Equipment. To the extent
permitted by the manufacturer, Lessor assigns to Lessee during the term of the
Summary Equipment Schedule any manufacturer's warranties for the Equipment.
LESSOR MAKES NO OTHER WARRANTY, EXPRESS OR IMPLIED AS TO ANY MATTER WHATSOEVER,
INCLUDING, WITHOUT LIMITATION, THE MERCHANTABILITY OF THE EQUIPMENT OR ITS
FITNESS FOR A PARTICULAR PURPOSE. Lessor is not responsible for any liability,
claim, loss, damage or expense of any kind (including strict liability in tort)
caused by the Equipment except for any loss or damage caused by the willful
misconduct or negligent acts of Lessor. In no event is Lessor responsible for
special, incidental or consequential damages.
5. Titles; Relocation or Sublease; and Assignment.
5.1 Title. Lessee holds the Equipment subject and subordinate to the rights of
the Owner, Lessor, any Assignee and any Secured Party. Lessee authorizes Lessor,
as Lessee's agent, and at Lessor's expense, to prepare, execute and file in
Lessee's name precautionary Uniform Commercial Code financing statements showing
the interest of the Owner, Lessor, and any Assignee or Secured Party in the
Equipment and to insert serial numbers in Summary Equipment Schedules as
appropriate. Lessee will, at its expense, keep the Equipment free and clear from
any liens or encumbrances of any kind (except any caused by Lessor) and will
indemnify and hold the Owner, Lessor, any Assignee and Secured Party harmless
from and against any loss caused by Lessee's failure to do so, except where such
is caused by Lessor.
5.2 Relocation or Sublease. Upon prior written notice, Lessee may relocate
Equipment to any location within the continental United States provided (i) the
Equipment will not be used by an entity exempt from federal income tax, and (ii)
all additional costs (including any administrative fees, additional taxes and
insurance coverage) are reconciled and promptly paid by Lessee.
Lessee may sublease the Equipment upon the reasonable consent of the Lessor and
the Secured Party. Such consent to sublease will be granted if: (i) Lessee meets
the relocation requirements set out above, (ii) the sublease is expressly
subject and subordinate to the terms of the Schedule, (iii) Lessee assigns its
rights in the sublease to Lessor and the Secured Party as additional collateral
and security, (iv) Lessee's obligation to maintain and insure the Equipment is
not altered, (v) all financing statements required to continue the Secured
Party's prior perfected security interest are filed, and (vi) Lessee executes
sublease documents acceptable to Lessor.
No relocation or sublease will relieve Lessee from any of its obligations under
this Master Lease and the relevant Schedule.
5.3 Assignment by Lessor. The terms and conditions of each Schedule have been
fixed by Lessor in order to permit Lessor to sell and/or assign or transfer its
interest or grant a security interest in each Schedule and/or the Equipment to a
Secured Party or Assignee. In that event, the term Lessor will mean the Assignee
and any Secured Party. However, any assignment, sale, or other transfer by
Lessor will not relieve Lessor of it's obligations to Lessee and will not
materially change Lessee's duties or materially increase the burdens or risks
imposed on Lessee. The Lessee consents to and will acknowledge such assignments
in a written notice given to Lessee. Lessee also agrees that:
(a) The Secured Party will be entitled to exercise all of Lessor's rights, but
will not be obligated to perform any of the obligations of Lessor. The Secured
Party will not disturb Lessee's quiet and peaceful possession and unrestricted
use of the Equipment so long as Lessee is not in default and the Secured Party
continues to receive all Rent payable under the Schedule; and
(b) Lessee will pay all Rent and all other amounts payable to the Secured
Party, despite any defense or claim which it has against Lessor. Lessee reserves
its right to have recourse directly against Lessor for any defense or claim;
(c) Subject to and without impairment of Lessee's leasehold rights in the
Equipment, Lessee holds the Equipment for the Secured Party to the extent of the
Secured Party's rights in that Equipment.
6. Net Lease; Taxes and Fees.
6.1 Net Lease. Each Summary Equipment Schedule constitutes a net lease. Lessee's
obligation to pay Rent and all other amounts due hereunder is absolute and
unconditional and is not subject to any abatement, reduction, set-off, defense,
counterclaim, interruption, deferment or recoupment for any reason whatsoever.
6.2 Taxes and Fees. Lessee will pay when due or reimburse Lessor for all taxes,
fees or any other charges (together with any related interest or penalties not
arising from the negligence of Lessor) accrued for or arising during the term of
each Summary Equipment Schedule against Lessor, Lessee or the Equipment by any
governmental authority (except only Federal, state, local and franchise taxes on
the capital or the net income of Lessor). Lessor will file all personal property
tax returns for the Equipment and pay all such property taxes due. Lessee will
reimburse Lessor for property taxes within thirty (30) days of receipt of an
invoice.
7. Care, Use and Maintenance; inspection by Lessor.
7.1 Care, Use and Maintenance. Lessee will maintain the Equipment in good
operating order and appearance, protect the Equipment from deterioration, other
than normal wear and tear, and will not use the Equipment for any purpose other
than that for which it was designed. If commercially available and considered
common business practice for each item of Equipment, Lessee will maintain in
force a standard maintenance contract with the manufacturer of the Equipment, or
another party acceptable to Lessor, and will provide Lessor with a complete copy
of that contract. If Lessee has the Equipment maintained by a party other than
the manufacturer or self maintains, Lessee agrees to pay any costs necessary for
the manufacturer to bring the Equipment to then current release, revision and
engineering change levels, and to re-certify the Equipment as eligible for
manufacturer's maintenance at the expiration of the lease term, provided re-
certification is available and is required by Lessor. The lease term will
continue upon the same terms and conditions until recertification has been
obtained.
7.2 Inspection by Lessor. Upon reasonable advance notice, Lessee, during
reasonable business hours and subject to Lessee's security requirements, will
make the Equipment and its related log and maintenance records available to
Lessor for inspection.
8. Representations and Warranties of Lessee. Lessee hereby represents, warrants
and covenants that with respect to the Master Lease and each Schedule executed
hereunder:
(a) The Lessee is a corporation duly organized and validly existing in good
standing under the laws of the jurisdiction of its incorporation, is duly
qualified to do business in each jurisdiction (including the jurisdiction where
the Equipment is, or is to be, located) where its ownership or lease of property
or the conduct of its business requires such qualification, except for where
such lack of qualification would not have a material adverse effect on the
Company's business; and has full corporate power and authority to hold property
under the Master Lease and each Schedule and to enter into and perform its
obligations under the Master Lease and each Schedule.
(b) The execution and delivery by the Lessee of the Master Lease and each
Schedule and its performance thereunder have been duly authorized by all
necessary corporate action on the part of the Lessee, and the Master Lease and
each Schedule are not inconsistent with the Lessee's Articles of Incorporation
or Bylaws, do not contravene any law or governmental rule, regulation or order
applicable to it, do not and will not contravene any provision of, or constitute
a default under, any indenture, mortgage, contract or other instrument to which
it is a party or by which it is bound, and the Master Lease and each
Schedule constitute legal, valid and binding
<PAGE>
agreements of the Lessee, enforceable in accordance with their terms, subject to
the effect of applicable bankruptcy and other similar laws affecting the rights
of creditors generally and rules of law concerning equitable remedies.
(c) There are no actions, suits, proceedings or patent claims pending or, to
the knowledge of the Lessee, threatened against or affecting the Lessee in any
court or before any governmental commission, board or authority which, if
adversely determined, will have a material adverse effect on the ability of the
Lessee to perform its obligations under the Master Lease and each Schedule.
(d) The Equipment is personal property and when subjected to use by the Lessee
will not be or become fixtures under applicable law.
(e) The Lessee has no material liabilities or obligations, absolute or
contingent (individually or in the aggregate), except the liabilities and
obligations of the Lessee as set forth in the Financial Statements and
liabilities and obligations which have occurred in the ordinary course of
business, and which have not been, in any case or in the aggregate, materially
adverse to Lessee's ongoing business.
(f) To the best of the Lessee's knowledge, the Lessee owns, possesses, has
access to, or can become licensed on reasonable terms under all patents, patent
applications, trademarks, trade names, inventions, franchises, licenses,
permits, computer software and copyrights necessary for the operations of its
business as now conducted, with no known infringement of, or conflict with, the
rights of others.
(g) All material contracts, agreements and instruments to which the Lessee is a
party are in full force and effect in all material respects, and are valid,
binding and enforceable by the Lessee in accordance with their respective terms,
subject to the effect of applicable bankruptcy and other similar laws affecting
the rights of creditors generally, and rules of law concerning equitable
remedies.
9. Delivery and Return of Equipment.
Lessee hereby assumes the full expense of transportation and in-transit
insurance to Lessee's premises and installation thereat of the Equipment. Upon
termination (by expiration or otherwise) of each Summary Equipment Schedule,
Lessee shall, pursuant to Lessor's instructions and at Lessee's full expense
(including, without limitation, expenses of transportation and in-transit
insurance), return the Equipment to Lessor in the same operating order, repair,
condition and appearance as when received, less normal depreciation and wear and
tear. Lessee shall return the Equipment to Lessor at 6111 North River Road,
Rosemont, Illinois 60018 or at such other address within the continental United
States as directed by Lessor, provided, however, that Lessee's expense shall be
limited to the cost of returning the Equipment to Lessor's address as set forth
herein. During the period subsequent to receipt of a notice under Section 2,
Lessor may demonstrate the Equipment's operation in place and Lessee will supply
any of its personnel as may reasonably be required to assist in the
demonstrations.
10. Labeling.
Upon request, Lessee will mark the Equipment indicating Lessor's interest with
labels provided by Lessor. Lessee will keep all Equipment free from any other
marking or labeling which might be interpreted as a claim of ownership.
11. Indemnity.
With regard to bodily injury and property damage liability only, Lessee will
indemnify and hold Lessor, any Assignee and any Secured Party harmless from and
against any and all claims, costs, expenses, damages and liabilities, including
reasonable attorneys' fees, arising out of the ownership (for strict liability
in tort only), selection, possession, leasing, operation, control, use,
maintenance, delivery, return or other disposition of the Equipment during the
term of this Master Lease or until Lessee's obligations under the Master Lease
terminate. However, Lessee is not responsible to a party indemnified hereunder
for any claims, costs, expenses, damages and liabilities occasioned by the
negligent acts of such indemnified party. Lessee agrees to carry bodily injury
and property damage liability insurance during the term of the Master Lease in
amounts and against risks customarily insured against by the Lessee on equipment
owned by it. Any amounts received by Lessor under that insurance will be
credited against Lessee's obligations under this Section.
12. Risk of Loss.
Effective upon delivery and until the Equipment is returned, Lessee relieves
Lessor of responsibility for all risks of physical damage to or loss or
destruction of the Equipment. Lessee will carry casualty insurance for each item
of Equipment in an amount not less than the Casualty Value. All policies for
such insurance will name the Lessor and any Secured Party as additional insured
and as loss payee, and will provide for at least thirty (30) days prior written
notice to the Lessor of cancellation or expiration, and will insure Lessor's
interests regardless of any breach or violation by Lessee of any representation,
warranty or condition contained in such policies and will be primary without
right of contribution from any insurance effected by Lessor. Upon the execution
of any Schedule, the Lessee will furnish appropriate evidence of such insurance
acceptable to Lessor.
Lessee will promptly repair any damaged item of Equipment unless such Equipment
has suffered a Casualty Loss. Within fifteen (15) days of a Casualty Loss,
Lessee will provide written notice of that loss to Lessor and Lessee will, at
Lessee's option, either (a) replace the item of Equipment with Like Equipment
and marketable title to the Like Equipment will automatically vest in Lessor or
(b) pay the Casualty Value; and after that payment and the payment of all other
amounts due and owing with respect to that item of Equipment, Lessee's
obligation to pay further Rent for the item of Equipment will cease.
13. Default, Remedies and Mitigation.
13.1 Default. The occurrence of any one or more of the following Events of
Default constitutes a default under a Summary Equipment Schedule:
(a) Lessee's failure to pay Rent or other amounts payable by Lessee when due if
that failure continues for five (5) business days after written notice; or
(b) Lessee's failure to perform any other term or condition of the Schedule or
the material inaccuracy of any representation or warranty made by the Lessee in
the Schedule or in any document or certificate furnished to the Lessor hereunder
if that failure or inaccuracy continues for ten (10) business days after written
notice; or
(c) An assignment by Lessee for the benefit of its creditors, the failure by
Lessee to pay its debts when due, the insolvency of Lessee, the filing by Lessee
or the filing against Lessee of any petition under any bankruptcy or insolvency
law or for the appointment of a trustee or other officer with similar powers,
the adjudication of Lessee as insolvent, the liquidation of Lessee, or the
taking of any action for the purpose of the foregoing; or
(d) The occurrence of an Event of Default under any Schedule, Summary Equipment
Schedule or other agreement between Lessee and Lessor or its Assignee or Secured
Party.
13.2 Remedies. Upon the occurrence of any of the above Events of Default,
Lessor, at its option, may:
(a) enforce Lessee's performance of the provisions of the applicable Schedule
by appropriate court action in law or in equity;
(b) recover from Lessee any damages and or expenses, including Default Costs;
(c) with notice and demand, recover all sums due and accelerate and recover the
present value of the remaining payment stream of all Rent due under the
defaulted Schedule (discounted at the same rate of interest at which such
defaulted Schedule was discounted with a Secured Party plus any prepayment fees
charged to Lessor by the Secured Party or, if there is no Secured Party, then
discounted at 6%) together with all Rent and other amounts currently due as
liquidated damages and not as a penalty;
(d) with notice and process of law and in compliance with Lessee's security
requirements, Lessor may enter on Lessee's premises to remove and repossess the
Equipment without being liable to Lessee for damages due to the repossession,
except those resulting from Lessor's, its assignees', agents' or
representatives' negligence; and
(e) pursue any other remedy permitted by law or equity.
The above remedies, in Lessor's discretion and to the extent permitted by law,
are cumulative and may be exercised successively or concurrently.
13.3 Mitigation. Upon return of the Equipment pursuant to the terms of Section
13.2, Lessor will use its best efforts in accordance with its normal business
procedures (and without obligation to give any priority to such Equipment) to
mitigate Lessor's damages as described below. EXCEPT AS SET FORTH IN THIS
SECTION, LESSEE HEREBY WAIVES ANY RIGHTS NOW OR HEREAFTER CONFERRED BY STATUTE
OR OTHERWISE WHICH MAY REQUIRE LESSOR TO MITIGATE ITS DAMAGES OR MODIFY ANY OF
LESSOR'S RIGHTS OR REMEDIES STATED HEREIN. Lessor may sell, lease or otherwise
dispose of all or any part of the Equipment at a public or private sale for cash
or credit with the privilege of purchasing the Equipment. The proceeds from any
sale, lease or other disposition of the Equipment are defined as either:.
(a) if sold or otherwise disposed of, the cash proceeds less the Fair Market
Value of the Equipment at the expiration of the Initial Term less the Default
Costs; or
(b) if leased, the present value (discounted at 3 percent (3%) over the U.S.
Treasury Notes of comparable maturity to the term of the re-lease) of the
rentals for a term. not to exceed the Initial Term, less the Default Costs.
Any proceeds will be applied against liquidated damages and any other sums due
to Lessor from Lessee. However, Lessee is liable to Lessor for, and Lessor may
recover, the amount by which the proceeds are less than the liquidated damages
and other sums due to Lessor from Lessee.
14. Additional Provisions.
<PAGE>
14.1 Board Attendance. One representative of Lessor will have the right to
attend Lessee's corporate Board of Directors meetings and Lessee will give
Lessor reasonable notice in advance of any special Board of Directors meeting,
which notice will provide an agenda of the subject matter to be discussed at
such board meeting. Lessee will provide Lessor with a certified copy of the
minutes of each Board of Directors meeting within thirty (30) days following the
date of such meeting held during the term of this Master Lease.
14.2 Financial Statements. As soon as practicable at the end of each month (and
in any event within thirty (30) days), Lessee will provide to Lessor the same
information which Lessee provides to its Board of Directors, but which will
include not less than a monthly income statement, balance sheet and statement of
cash flows prepared in accordance with generally accepted accounting principles,
consistently applied (the Financial Statements'). As soon as practicable at the
end of each fiscal year, Lessee will provide to Lessor audited Financial
Statements setting forth in comparative form the corresponding figures for the
fiscal year (and in any event within ninety (90) days), and accompanied by an
audit report and opinion of the independent certified public accountants
selected by Lessee. Lessee will promptly furnish to Lessor any additional
information (including, but not limited to, tax returns, income statements,
balance sheets and names of principal creditors) as Lessor reasonably believes
necessary to evaluate Lessee's continuing ability to meet financial obligations.
After the effective date of the initial registration statement covering a public
offering of Lessee's securities, the term "Financial Statements" will be deemed
to refer to only those statements required by the Securities and Exchange
Commission.
14.3 Obligation to Lease Additional Equipment. Upon notice to Lessee, Lessor
will not be obligated to lease any Equipment which would have a Commencement
Date after said notice if: (i) Lessee is in default under this Master Lease or
any Schedule; (ii) Lessee is in default under any loan agreement, the result of
which would allow the lender or any secured party to demand immediate payment of
any material indebtedness; (iii) there is a material adverse change in Lessee's
credit standing; or (iv) Lessor determines (in reasonable good faith) that
Lessee will be unable to perform its obligations under this Master Lease or any
Schedule.
14.4 Merger and Sale Provisions. Lessee will notify Lessor of any proposed
Merger at least sixty (60) days prior to the closing date. Lessor may, in its
discretion, either (i) consent to the assignment of the Master Lease and all
relevant Schedules to the successor entity, or (ii) terminate the Lease and all
relevant Schedules. If Lessor elects to consent to the assignment, Lessee and
its successor will sign the assignment documentation provided by Lessor. If
Lessor elects to terminate the Master Lease and all relevant Schedules, then
Lessee will pay Lessor all amounts then due and owing and a termination fee
equal to the present value (discounted at 6%) of the remaining Rent for the
balance of the Initial Term(s) of all Schedules, and will return the Equipment
in accordance with Section 9. Lessor hereby consents to any Merger in which the
acquiring entity has a Moody's Bond Rating of BA3 or better or a commercially
acceptable equivalent measure of creditworthiness as reasonably determined by
Lessor.
14.5 Entire Agreement. This Master Lease and associated Schedules and Summary
Equipment Schedules supersede all other oral or written agreements or
understandings between the parties concerning the Equipment including, for
example, purchase orders. ANY AMENDMENT OF THIS MASTER LEASE OR A SCHEDULE, MAY
ONLY BE ACCOMPLISHED BY A WRITING SIGNED BY THE PARTY AGAINST WHOM THE AMENDMENT
IS SOUGHT TO BE ENFORCED.
14.6 No Waiver. No action taken by Lessor or Lessee will be deemed to constitute
a waiver of compliance with any representation, warranty or covenant contained
in this Master Lease or a Schedule. The waiver by Lessor or Lessee of a breach
of any provision of this Master Lease or a Schedule will not operate or be
construed as a waiver of any subsequent breach.
14.7 Binding Nature. Each Schedule is binding upon, and inures to the benefit of
Lessor and its assigns. LESSEE MAY NOT ASSIGN ITS RIGHTS OR OBLIGATIONS.
14.8 Survival of Obligations. All agreements, obligations including, but not
limited to those arising under Section 6.2, representations and warranties
contained in this Master Lease, any Schedule, Summary Equipment Schedule or in
any document delivered in connection with those agreements are for the benefit
of Lessor and any Assignee or Secured Party and survive the execution, delivery,
expiration or termination of this Master Lease.
14.9 Notices. Any notice, request or other communication to either party by the
other will be given in writing and deemed received upon the earlier of (1)
actual receipt or (2) three days after mailing if mailed postage prepaid by
regular or airmail to Lessor (to the attention of the Comdisco "Venture Group")
or Lessee, at the address set out in the Schedule, (3) one day after it is sent
by courier or (4) on the same day as sent via facsimile transmission, provided
that the original is sent by personal delivery or mail by the sending party.
14.10 Applicable Law. THIS MASTER LEASE HAS BEEN, AND EACH SCHEDULE WILL HAVE
BEEN MADE, EXECUTED AND DELIVERED IN THE STATE OF ILLINOIS AND WILL BE GOVERNED
AND CONSTRUED FOR ALL PURPOSES IN ACCORDANCE WITH THE LAWS OF THE STATE OF
ILLINOIS WITHOUT GIVING EFFECT TO CONFLICT OF LAW PROVISIONS. NO RIGHTS OR
REMEDIES REFERRED TO IN ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE WILL BE
CONFERRED ON LESSEE UNLESS EXPRESSLY GRANTED IN THIS MASTER LEASE OR A SCHEDULE.
14.11 Severability. If any one or more of the provisions of this Master Lease or
any Schedule is for any reason held invalid, illegal or unenforceable, the
remaining provisions of this Master Lease and any such Schedule will be
unimpaired, and the invalid, illegal or unenforceable provision replaced by a
mutually acceptable valid, legal and enforceable provision that is closest to
the original intention of the parties.
14.12 Counterparts. This Master Lease and any Schedule may be executed in any
number of counterparts, each of which will be deemed an original, but all such
counterparts together constitute one and the same instrument. If Lessor grants a
security interest in all or any part of a Schedule, the Equipment or sums
payable thereunder, only that counterpart Schedule marked "Secured Party's
Original" can transfer Lessor's rights and all other counterparts will be marked
"Duplicate".
14.13 Licensed Products. Lessee will obtain no title to Licensed Products which
will at all times remain the property of the owner of the Licensed Products. A
license from the owner may be required and it is Lessee's responsibility to
obtain any required license before the use of the Licensed Products. Lessee
agrees to treat the Licensed Products as confidential information of the owner,
to observe all copyright restrictions, and not to reproduce or sell the Licensed
Products.
14.14 Secretary's Certificate. Lessee will, upon execution of this Master Lease,
provide Lessor with a secretary's certificate of incumbency and authority. Upon
the execution of each Schedule with a purchase price in excess of $1,000,000,
Lessee will provide Lessor with an opinion from Lessee's counsel in a form
acceptable to Lessor regarding the representations and warranties in Section 8.
14.15 Electronic Communications. Each of the parties may communicate with the
other by electronic means under mutually agreeable terms.
14.16 Landlord/Mortgagee Waiver. Lessee agrees to provide Lessor with a
Landlord/Mortgagee Waiver with respect to the Equipment. Such waiver shall be in
a form satisfactory to Lessor.
14.17 Equipment Procurement Charges/Progress Payments. Lessee hereby agrees that
Lessor shall not, by virtue of its entering into this Master Lease, be required
to remit any payments to any manufacturer or other third party until Lessee
accepts the Equipment subject to this Master Lease.
14.18 Definitions.
Advance - means the amount due to Lessor by Lessee upon Lessee's execution of
- -------
each Schedule.
Assignee - means an entity to whom Lessor has sold or assigned its rights as
- --------
owner and Lessor of Equipment.
Casualty Loss - means the irreparable loss or destruction of Equipment.
- -------------
Casualty Value - means the greater of the aggregate Rent remaining to be paid
- --------------
for the balance of the lease term or the Fair Market Value of the Equipment
immediately prior to the Casualty Loss. However, if a Casualty Value Table is
attached to the relevant Schedule its terms will control.
Commencement Date -is defined in each Schedule.
- -----------------
Default Costs - means reasonable attorney's fees and remarketing costs resulting
- -------------
from a Lessee default or Lessor's enforcement of its remedies.
Delivery Date - means date of delivery of Inventory Equipment to Lessee's
- -------------
address.
Equipment - means the property described on a Summary Equipment Schedule and any
- ---------
replacement for that property required or permitted by this Master Lease or a
Schedule.
Event of Default - means the events described in Subsection 13.1.
- ----------------
Fair Market Value - means the aggregate amount which would be obtainable in an
- -----------------
arm's-length transaction between an informed and willing buyer/user and an
informed and willing seller under no compulsion to sell.
Initial Term - means the period of time beginning on the first day of the first
- ------------
full Rent Interval following the Commencement Date for all items of Equipment
and continuing for the number of Rent Intervals indicated on a Schedule.
Interim Rent - means the pro-rata portion of Rent due for the period from the
- ------------
Commencement Date through but not including the first day of the first full Rent
Interval included in the Initial Term.
Late Charges - means the lesser of five percent (5%) of the payment due or the
- ------------
maximum amount permitted by the law of the state where the Equipment is located.
<PAGE>
Licensed Products - means any software or other licensed products attached to
- -----------------
the Equipment.
Like Equipment - means replacement Equipment which is lien free and of the same
- --------------
model, type, configuration and manufacture as Equipment.
Merger - means any consolidation or merger of the Lessee with or into any other
- ------
corporation or entity, any sale or conveyance of all or substantially all of the
assets or stock of the Lessee by or to any other person or entity in which
Lessee is not the surviving entity.
Notice Period - means not less than ninety (90) days nor more than twelve (12)
- -------------
months prior to the expiration of the lease term.
Owner - means the owner of Equipment.
- -----
Rent - means the rent Lessee will pay for each item of Equipment expressed in a
- ----
Summary Equipment Schedule either as a specific amount or an amount equal to the
amount which Lessor pays for an item of Equipment multiplied by a lease rate
factor plus all other amounts due to Lessor under this Master Lease or a
Schedule.
Rent Interval - means a full calendar month or quarter as indicated on a
- -------------
Schedule.
Schedule - means either an Equipment Schedule or a Licensed Products Schedule
- --------
which incorporates all of the terms and conditions of this Master Lease.
Secured Party - means an entity to whom Lessor has granted a security interest
- -------------
for the purpose of securing a loan.
Summary Equipment Schedule - means a certificate provided by Lessor summarizing
- --------------------------
all of the Equipment for which Lessor has received Lessee approved vendor
invoices, purchase documents and/or evidence of delivery during a calendar
quarter which will incorporate all of the terms and conditions of the related
Schedule and this Master Lease and will constitute a separate lease for the
equipment leased thereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Master Lease on or as
of the day and year first above written.
PLACEWARE COMDISCO, INC.
as Lessee as Lessor
By: /s/ XXX /s/ XXX
----------------- ---------------------------------
Title: President Title: James P. Labe, President,
--------------- --------------------------
Comdisco Ventures Division
--------------------------
<PAGE>
ADDENDUM TO THE
MASTER LEASE AGREEMENT DATED AS OF SEPTEMBER 30, 1997
BETWEEN PLACEWARE AS LESSEE
AND COMDISCO, INC., AS LESSOR
The undersigned hereby agree that the terms and conditions of the above-
referenced Master Lease are hereby modified and amended as follows:
1) Section 14.1 "Board Attendance"
------------------------------
Delete this section in its entirety.
2) Subsection 14.18, Definitions
-----------------
In the definition "Interim Rent", delete "the pro-rata portion" and replace
------------
with "0.0208%".
PLACEWARE COMDISCO, INC.
as LESSEE as LESSOR
By: /s/ XXX By: /s/ James P. Labe
-------------------- -------------------------------
Title: President Title: James P. Labe, President
------------------ ----------------------------
Comdisco Ventures Division
Date: 9/30/97 Date:
------------------- -----------------------------
<PAGE>
EQUIPMENT SCHEDULE VL-1
DATED AS OF SEPTEMBER 30, 1997
TO MASTER LEASE AGREEMENT
DATED AS OF SEPTEMBER 30, 1997 THE "MASTER LEASE")
LESSEE: PLACEWARE LESSOR: COMDISCO, INC.
Admin. Contact/Phone No.: Address for all Notices:
- ------------------------- ------------------------
(650) 944--0900 Phone 6111 North River Road
(650) 944-0929 Fax Rosemont, Illinois 60018
Attn.: Venture Group
Address for Notices:
- --------------------
2037 Landing Drive
Mountain View, CA 94043
Central Billing Location: Rent Interval: Monthly
- ------------------------- ---------------
same as above
Attn.:
Lessee Reference No.:
(24 digits maximum)
Location of Equipment: Initial Term: 48 months
- ---------------------- --------------
same as above (Number of Rent Intervals)
Lease Rate Factor: 0-6 0%
-------------------
Attn.: 7-48 2.800%
EQUIPMENT (as defined below): Advance: $None
--------
Equipment specifically approved by Lessor, which shall be delivered to and
accepted by Lessee during the period September 30, 1997 through December 30,
1998 ("Equipment Delivery Period"), for which Lessor receives vendor invoices
approved for payment, up to an aggregate purchase price of $510,000 ("Commitment
Amount"); excluding custom use equipment, leasehold improvements, installation
costs and delivery costs, rolling stock, special tooling, "stand-alone"
software, application software bundled into computer hardware, hand held items,
molds and fungible items.
<PAGE>
1. Equipment Purchase
This Schedule contemplates Lessor's acquisition of Equipment for lease to
Lessee, either by one of the first three categories listed below or by providing
Lessee with Equipment from the fourth category, in an aggregate value up to the
Commitment Amount referred to on the face of this Schedule. If the Equipment
acquired is of category (i), (ii), (iii) below, the effectiveness of this
Schedule as it relates to those items of Equipment is contingent upon Lessee's
acknowledgment at the time Lessor acquires the Equipment that Lessee has either
received or approved the relevant purchase documentation between vendor and
Lessor for that Equipment.
(i) NEW ON-ORDER EQUIPMENT. Lessor will purchase new Equipment which is
obtained from a vendor by Lessee for its use subject to Lessor's
prior approval of the Equipment.
(ii) SALE-LEASEBACK EQUIPMENT. Any in-place Equipment installed at
Lessee's site and to which Lessee has clear title and ownership may
be considered by Lessor for inclusion under this Lease (the "Sale-
Leaseback Transaction"). Any request for a Sale-Leaseback Transaction
must be submitted to Lessor in writing (along with accompanying
evidence of Lessee's Equipment ownership satisfactory to Lessor for
all Equipment submitted) no later than October 30, 1997 *. Lessor
will not perform a Sale-Leaseback Transaction for any request or
accompanying Equipment ownership documents which arrive after the
date marked above by an asterisk (*). Further, any sale-leaseback
Equipment will be placed on lease subject to: (1) Lessor prior
approval of the Equipment; and (2) if approved, at Lessor's actual
net appraised Equipment value pursuant to the schedule below:
ORIGINAL EQUIPMENT INVOICE PERCENT OF ORIGINAL MANUFACTURER'S
DATE NET EQUIPMENT COST PAID BY LESSOR
---- ---------------------------------
Between 08/01/97-10/30/97 100%
Lessee represents that it has paid all California sales tax due on the cost of
that portion of Equipment to be installed in California and agrees to provide
evidence of such payment to Lessor, if specifically requested. As a result of
the election, Lessor agrees that it will not invoice Lessee for use tax on the
monthly rental rate. Lessee understands that this is an irrevocable election to
measure the tax by the Equipment cost and cannot be changed except prior to
installation of the Equipment.
(iii) USED ON-ORDER EQUIPMENT. Lessor will purchase used Equipment which
is obtained from a third party by Lessee for its use subject to
Lessor's prior approval of the Equipment and at Lessor's appraised
value for such used Equipment.
(iv) 800 NUMBER EQUIPMENT. Upon Lessee's use of Comdisco's 1-800 Direct
Service, Lessor will purchase new or used Equipment from a third
party or Lessor will supply new or used Equipment from its inventory
for use by Lessee at rates provided by Lessor.
2. Commencement Date
The Commencement Date for each item of new on-order or used on-order
Equipment will be the install date as confirmed in writing by Lessee as set
forth on the vendor invoice of which a facsimile transmission will constitute an
original document. The Commencement Date for sale-leaseback Equipment shall be
the date Lessor tenders the purchase price. The Commencement Date for 800 Number
Equipment shall be fifteen (15) days from the ship date, such ship date to be
set forth on the vendor invoice or if unavailable on the vendor invoice the ship
date will be determined by Lessor upon other supporting shipping documentation.
Lessor will summarize all approved invoices, purchase documentation and evidence
of delivery, as applicable, received in the same calendar month into a Summary
Equipment Schedule in the form attached to this Schedule as Exhibit 1, and the
Initial Term will begin the first day of the calendar month thereafter. Each
Summary Equipment Schedule will contain the Equipment location, description,
serial number(s) and cost and will incorporate the terms and conditions of the
Master Lease and this Schedule and will constitute a separate lease.
<PAGE>
3. Option to Extend
So long as no Event of Default has occurred and is continuing hereunder,
and upon written notice no earlier than twelve (12) months and no later than
ninety (90) days prior to the expiration of the Initial Term of a Summary
Equipment Schedule, Lessee will have the right to extend the Initial Term of
such Summary Equipment Schedule for a period of one (1) year. In such event, the
rent to be paid during said extended period shall be mutually agreed upon and if
the parties cannot mutually agree, then the Summary Equipment Schedule shall
continue in full force and effect pursuant to the existing terms and conditions
until terminated in accordance with its terms. The Summary Equipment Schedule
will continue in effect following said extended period until terminated by
either party upon not less than ninety (90) days prior written notice, which
notice shall be effective as of the date of receipt.
4. Purchase Option
So long as no Event of Default has occurred and is continuing hereunder,
and upon written notice no earlier than twelve (12) months and no later than
ninety (90) days prior to the expiration of the Initial Term or the extended
term of the applicable Summary Equipment Schedule, Lessee will have the option
at the expiration of the Initial Term of the Summary Equipment Schedule to
purchase all, but not less than all, of the Equipment listed therein for a
purchase price not to exceed 15% of Lessor's equipment cost and upon terms and
conditions to be mutually agreed upon by the parties following Lessee's written
notice, plus any taxes applicable at time of purchase. Said purchase price shall
be paid to Lessor at least thirty (30) days before the expiration date of the
Initial Term or extended term. Title to the Equipment shall automatically pass
to Lessee upon payment in full of the purchase price but, in no event, earlier
than the expiration of the fixed Initial Term or extended term, if applicable.
If the parties are unable to agree on the purchase price or the terms and
conditions with respect to said purchase, then the Summary Equipment Schedule
with respect to this Equipment shall remain in full force and effect.
Notwithstanding the exercise by Lessee of this option and payment of the
purchase price, until all obligations under the applicable Summary Equipment
Schedule have been fulfilled, it is agreed and understood that Lessor shall
retain a purchase money security interest in the Equipment listed therein and
the Summary Equipment Schedule shall constitute a Security Agreement under the
Uniform Commercial Code of the state in which the Equipment is located.
5. Option Amount
So long as no Event of Default shall have occurred and is continuing and
upon Lessee's request, subject to final review by Lessor, Lessor agrees to
provide to Lessee an additional $1,000,000 of Equipment upon rates and terms to
be negotiated.
6. Technology Exchange Option
If Lessee is not in default, and there is no material adverse change in
Lessee's credit, on or after the expiration of the 12th month of any Summary
Equipment Schedule, Lessee shall have the option to replace any of the Equipment
subject to such summary Equipment Schedule with new technology equipment ("New
Technology Equipment") utilizing the following guidelines:
1. Equipment being replaced with New Technology Equipment shall have an
aggregate original cost equal to or greater than $20,000 and be comprised of
full configurations of equipment.
2. This technology Exchange Option shall be limited to a maximum in the
aggregate of fifty percent (50%) of the original equipment cost and shall not
apply to software.
3. The cost of the New Technology Equipment must be equal to or greater than
the original equipment cost of the replaced equipment, but in no event shall
exceed 150% of the original equipment cost.
4. The remaining lease payments applicable to the equipment being replaced by
the New Technology Equipment will be discounted to present value at 6%.
The wholesale market value of the equipment being replaced will be established
by Comdisco based upon then current market conditions. Upon the return of the
replaced equipment, the wholesale price will be deducted from the present value
of the remaining rentals and the differential will be added to the cost of the
New Technology Equipment in calculating the new rental. The lease for the New
Technology Equipment will contain terms and conditions substantially similar to
those for the replaced equipment and will have an Initial Term not less than the
balance of the remaining Initial Term for the replaced equipment.
<PAGE>
7. Special Terms
The terms and conditions of the Lease as they pertain to this Schedule are
hereby modified and amended as follows'
Master Lease: This Schedule is issued pursuant to the Lease identified on page 1
of this Schedule. All of the terms and conditions of the Lease are incorporated
in and made a part of this Schedule as if they were expressly set forth in this
Schedule. The parties hereby reaffirm all of the terms and conditions of the
Lease (including, without limitation, the representations and warranties set
forth in Section 8) except as modified herein by this Schedule. This Schedule
may not be amended or rescinded except by a writing signed by both parties.
PLACEWARE COMDISCO, INC.
as Lessee as Lessor
By: /s/ XXX By: /s/ James P. Labe
----------------- --------------------------
Title: President Title: James P. Labe, President
-------------- --------------------------
Comdisco Ventures Division
Date: 9/30/97 Date:
--------------- ---------------------------
<PAGE>
EXHIBIT 1
SUMMARY EQUIPMENT SCHEDULE
--------------------------
This Summary Equipment Schedule dated XXXX is executed pursuant to
Equipment Schedule No. X to the Master Lease Agreement dated XXXX between
Comdisco, Inc. ("Lessor") and XXXX ("Lessee"). All of the terms, conditions,
representations and warranties of the Master Lease Agreement and Equipment
Schedule No. X are incorporated herein and made a part hereof, and this Summary
Equipment Schedule constitutes a Schedule for the Equipment on the attached
invoices.
1. For Period Beginning: And Ending:
-------------------- ----------
2. Initial Term Starts on: Initial Term: (Number of Rent Intervals)
---------------------- ------------
3. Total Summary Equipment Cost:
----------------------------
4. Lease Rate Factor:
-----------------
5. Rent:
----
6. Acceptance Doc Type:
-------------------
<PAGE>
EQUIPMENT SCHEDULE VL-2
DATED AS OF SEPTEMBER 30, 1997
TO MASTER LEASE AGREEMENT
DATED AS OF SEPTEMBER 30, 1997 THE "MASTER LEASE")
LESSEE: PLACEWARE LESSOR: COMDISCO, INC.
Admin. Contact/Phone No.: Address for all Notices:
- ------------------------ -----------------------
(650) 944--0900 Phone 6111 North River Road
(650) 944-0929 Fax Rosemont, Illinois 60018
Attn.: Venture Group
Address for Notices:
- -------------------
2037 Landing Drive
Mountain View, CA 94043
Central Billing Location: Rent Interval: Monthly
- ------------------------ -------------
same as above
Attn.:
Lessee Reference No.:___________
(24 digits maximum)
Location of Equipment: Initial Term: 48 months
- --------------------- --------------
same as above (Number of Rent Intervals)
Attn.: Lease Rate Factor: 0-6 0%
-----------------
7-48 2.800%
EQUIPMENT (as defined below): Advance: $None
-------
Equipment (including software and tenant improvements) specifically approved by
Lessor, which shall be delivered to and accepted by Lessee during the period
September 30, 1997 through December, 1998 ("Equipment Delivery Period"), for
which Lessor receives vendor invoices approved for payment, up to an aggregate
purchase price of $340,000 ("Commitment Amount").
<PAGE>
1. Equipment Purchase
This Schedule contemplates Lessor's acquisition of Equipment for lease to
Lessee, either by one of the first three categories listed below or by providing
Lessee with Equipment from the fourth category, in an aggregate value up to the
Commitment Amount referred to on the face of this Schedule. If the Equipment
acquired is of category (i), (ii), (iii) below, the effectiveness of this
Schedule as it relates to those items of Equipment is contingent upon Lessee's
acknowledgment at the time Lessor acquires the Equipment that Lessee has either
received or approved the relevant purchase documentation between vendor and
Lessor for that Equipment.
(i) NEW ON-ORDER EQUIPMENT. Lessor will purchase new Equipment which is
obtained from a vendor by Lessee for its use subject to Lessor's
prior approval of the Equipment.
(ii) SALE-LEASEBACK EQUIPMENT. Any in-place Equipment installed at
Lessee's site and to which Lessee has clear title and ownership may
be considered by Lessor for inclusion under this Lease (the "Sale-
Leaseback Transaction"). Any request for a Sale-Leaseback Transaction
must be submitted to Lessor in writing (along with accompanying
evidence of Lessee's Equipment ownership satisfactory to Lessor for
all Equipment submitted) no later than October 30, 1997. Lessor will
not perform a Sale-Leaseback Transaction for any request or
accompanying Equipment ownership documents which arrive after the
date marked above by an asterisk ('). Further, any sale-leaseback
Equipment will be placed on lease subject to: (1) Lessor prior
approval of the Equipment; and (2) if approved, at Lessor's actual
net appraised Equipment value pursuant to the schedule below:
ORIGINAL EQUIPMENT INVOICE PERCENT OF ORIGINAL MANUFACTURER'S
DATE NET EQUIPMENT COST PAID BY LESSOR
---- ---------------------------------
Between 08/01/97-10/30/97 100%
Lessee represents that it has paid all California sales tax due on the cost of
that portion of Equipment to be installed in California and agrees to provide
evidence of such payment to Lessor, if specifically requested. As a result of
the election, Lessor agrees that it will not invoice Lessee for use tax on the
monthly rental rate. Lessee understands that this is an irrevocable election to
measure the tax by the Equipment cost and cannot be changed except prior to
installation of the Equipment.
(iii) USED ON-ORDER EQUIPMENT. Lessor will purchase used Equipment which
is obtained from a third party by Lessee for its use subject to
Lessor's prior approval of the Equipment and at Lessor's appraised
value for such used Equipment.
(iv) 800 NUMBER EQUIPMENT. Upon Lessee's use of Comdisco's 1-800 Direct
Service, Lessor will purchase new or used Equipment from a third
party or Lessor will supply new or used Equipment from its inventory
for use by Lessee at rates provided by Lessor.
2. Commencement Date
The Commencement Date for each item of new on-order or used on-order
Equipment will be the install date as confirmed in writing by Lessee as set
forth on the vendor invoice of which a facsimile transmission will constitute an
original document. The Commencement Date for sale-leaseback Equipment shall be
the date Lessor tenders the purchase price. The Commencement Date for 800 Number
Equipment shall be fifteen (15) days from the ship date, such ship date to be
set forth on the vendor invoice or if unavailable on the vendor invoice the ship
date will be determined by Lessor upon other supporting shipping documentation.
Lessor will summarize all approved invoices, purchase documentation and evidence
of delivery, as applicable, received in the same calendar month into a Summary
Equipment Schedule in the form attached to this Schedule as Exhibit 1, and the
Initial Term will begin the first day of the calendar month thereafter. Each
Summary Equipment Schedule will contain the Equipment location, description,
serial number(s) and cost and will incorporate the terms and conditions of the
Master Lease and this Schedule and will constitute a separate lease.
<PAGE>
3. Miscellaneous
In consideration of Lessor financing software and tenant improvements
hereunder, Lessee agrees in addition to its last Monthly Rent Payment to
remit to Lessor an amount equal to 15% of Lessor's aggregate cost of
software and tenant improvements provided hereunder
4. Special Terms
The terms and conditions of the Lease as they pertain to this Schedule are
hereby modified and amended as follows:
Master Lease: This Schedule is issued pursuant to the Lease identified on page 1
of this Schedule. All of the terms and conditions of the Lease are incorporated
in and made a part of this Schedule as if they were expressly set forth in this
Schedule. The parties hereby reaffirm all of the terms and conditions of the
Lease (including, without limitation, the representations and warranties set
forth in Section 8) except as modified herein by this Schedule. This Schedule
may not be amended or rescinded except by a writing signed by both parties.
PLACEWARE COMDISCO, INC.
as Lessee as Lessor
By: /s/ XXX By: /s/ James P. Labe
------------------- ------------------------------
Title: President Title: James P. Labe, President
----------------- ---------------------------
Comdisco Ventures Division
Date: 9/30/97 Date: 11/4/97
------------------ ----------------------------
<PAGE>
EXHIBIT 1
SUMMARY EQUIPMENT SCHEDULE
--------------------------
This Summary Equipment Schedule dated XXXX is executed pursuant to
Equipment Schedule No. X to the Master Lease Agreement dated XXXX between
Comdisco, Inc. ("Lessor") and XXXX ("Lessee"). All of the terms, conditions,
representations and warranties of the Master Lease Agreement and Equipment
Schedule No. X are incorporated herein and made a part hereof, and this Summary
Equipment Schedule constitutes a Schedule for the Equipment on the attached
invoices.
1. For Period Beginning: And Ending:
-------------------- ----------
2. Initial Term Starts on: Initial Term: (Number of Rent Intervals)
---------------------- ------------
3. Total Summary Equipment Cost:
----------------------------
4. Lease Rate Factor:
-----------------
5. Rent:
----
6. Acceptance Doc Type:
-------------------
<PAGE>
LOAN AND SECURITY AGREEMENT
THIS AGREEMENT (the "Agreement"), dated as of September 30, 1997 is entered
into by and between PlaceWare, a Delaware corporation having a principal place
of business at 2037 Landings Drive, Mountain View, CA 94043 (the "Borrower") and
Comdisco, Inc., a Delaware corporation having a principal place of business at
6111 North River Road, Rosemont, Illinois 60018 (the "Lender"). In consideration
of the mutual agreements contained herein, the parties hereto agree as follows:
WHEREAS, Borrower desires to borrow from the Lender hereunder the amount of
Four Hundred Thousand and 00/100 DOLLARS ($400,000) and Lender is willing to
lend said amount to Borrower on or before October 30, 1997 (the "Funding Date");
NOW, THEREFORE, it is agreed:
SECTION 1. THE LOAN
1.1 Subject to the terms and conditions set forth herein, Lender shall
lend to Borrower the aggregate original principal amount of Four Hundred
Thousand and 00/100 DOLLARS ($400,000) (the "Loan") with interest payable in
monthly installments as set forth in the promissory note (the "Note") in the
form attached hereto and made a part hereof as Exhibit A, dated October __,
1997.
1.2 Upon the occurrence of and during an Event of Default (as defined
herein), interest shall thereafter be calculated at a rate of five percent (5%)
in excess of the rate that would otherwise be applicable ("Default Rate"). All
such interest shall be due and payable in arrears, on the first day of the
following month.
1.3 Notwithstanding any provision in this Agreement the Note, or any other
"Loan Document" (as defined herein), it is not the parties' intent to contract
for, charge or receive interest at a rate that is greater than the maximum rate
permissible by law which a court of competent jurisdiction shall deem applicable
hereto (which under the laws of the State of Illinois shall be deemed to be the
laws relating to permissible rates of interest on commercial loans) (the
"Maximum Rate"). If the Borrower actually pays Lender an amount of interest,
chargeable on the total aggregate principal Obligations of Borrower under this
Agreement and the Note (as said rate is calculated over a period of time that is
the longer of (i) the time from the date of this Agreement through the maturity
time as set forth on the Note, or (ii) the entire period of time that any
principal is outstanding on the Note), which amount of interest exceeds interest
calculated at the Maximum Rate on said principal chargeable over said period of
time, then such excess interest actually paid by Borrower shall be applied
first, to the payment of principal outstanding on the Note; second, after all
- -----
principal is repaid, to the payment of Lender's out of pocket costs, expenses,
and professional fees which are owed by Borrower to Lender under the Agreement
or the Loan Documents; and third, after all principal, costs, expenses, and
professional fees owed by Borrower to Lender are repaid, the excess (if any)
shall be refunded to Borrower.
1.4 In the event any interest is not paid when due hereunder, delinquent
interest shall be added to principal and shall bear interest on interest,
compounded at the rate set forth in section 1.1.
-1-
<PAGE>
1.5 Upon and during the continuation of an Event of Default hereunder (as
defined herein), all Obligations, including principal, interest, compounded
interest, and reasonable professional fees, shall bear interest at a rate per
annum equal to the Default Rate.
1.6 Borrower shall have the option to prepay the Note, in whole or in
part, at any time after the date hereof by paying the principal amount together
with all accrued and unpaid interest with respect to such principal amount, as
of the date of such prepayment and the Balloon Payment as described in the Note
together with a prepayment premium equal to the difference, if any, between (x)
the amount being prepaid and (y) the present value, discounted at the Treasury
Rate, of each installment of principal and interest being prepaid discounted to
the date of prepayment, if the amount in (x) is greater than the amount in (y),
no prepayment premium shall be due. The "Treasury Rate" shall mean the then
prevailing yield on US Treasury Constant Maturities for the most recent business
day, as quoted in the Federal Reserve Statistical Release H15, as of the date of
prepayment for an obligation of comparable maturity to the maturity date of the
Note.
SECTION 2. SECURITY INTEREST
As security for the payment of all indebtedness ("Indebtedness") of the
Borrower to the Lender hereunder and under the Note, as the same may be renewed,
extended for any period or rearranged, and the performance by the Borrower of
its other obligations hereunder (the Indebtedness and such other obligations
being hereinafter sometimes collectively referred to as the "Obligations"), the
Borrower hereby assigns to the Lender, and grants to the Lender a first priority
security interest in, all the Borrower's right, title, and interest in and to
the following property ("Collateral"): (i) the equipment and other property (the
"Equipment") described in Exhibit B attached hereto; and (ii) all proceeds,
products, replacements, additions to, substitutions for and accessions to any
and all Equipment including, without limitation, the proceeds applicable to the
insurance referred to in Section 4 hereof.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF BORROWER
The Borrower represents, warrants and agrees that:
3.1 it has good title in and to the Equipment, free of all liens, security
interests, encumbrances and claims whatsoever, except for the interest of the
Lender therein;
3.2 it has the full power and authority to, and does hereby grant and
convey to the Lender, a valid first priority perfected security interest in the
Equipment as security for the Obligations, free of all liens, security
interests, encumbrances and claims, and shall execute such Uniform Commercial
Code ("UCC") financing statements in connection herewith as the Lender may
reasonably request. No other lien, security interest, adverse claim or
encumbrance has been created by Borrower or is known by Borrower to exist with
respect to any Collateral;
3.3 it is a corporation duly organized, legally existing and in good
standing under the laws of the State of Delaware, and is duly qualified as a
foreign corporation in all jurisdictions where the failure to so qualify would
have a material adverse effect on the Collateral or the business of the Borrower
taken as a whole;
3.4 the execution, delivery and performance of the Note, this Agreement,
the Warrant Agreement dated October 30, 1997 pursuant to which Borrower granted
to Lender the right to
-2-
<PAGE>
purchase the number of shares of preferred stock as set forth therein ("Warrant
Agreement"), and all financing statements, certificates and other documents
required to be delivered or executed in connection herewith (collectively, the
"Loan Documents") have been duly authorized by all necessary corporate action of
Borrower, the individual or individuals executing the Documents were duly
authorized to do so, the Equipment is personal property and as used by the
Borrower will not be or become fixtures under applicable law, and the Loan
Documents constitute legal, valid and binding obligations of the Borrower,
enforceable in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, reorganization or other similar laws generally affecting
the enforcement of the rights of creditors;
3.5 it shall only relocate any item of the Equipment provided that: (a) it
shall have caused to be filed and/or delivered to the Lender all UCC financing
statements, certificates or other documents or instruments necessary to continue
in effect the first prior perfected security interest of the Lender in the
Collateral, and (b) it shall have given the Lender no less than fifteen (15)
days prior written notice of such relocation;
3.6 the Loan Documents do not and will not violate any provisions of its
articles or certificate of incorporation, bylaws or any contract, agreement,
law, regulation, order, injunction, judgment, decree or writ to which the
Borrower is subject, or result in the creation or imposition of any lien,
security interest or other encumbrance upon the Collateral, other than those
created by this Agreement;
3.7 the execution, delivery and performance of the Loan Documents do not
require the consent or approval of any other person or entity including, without
limitation, any regulatory authority or governmental body of the United States
or any state thereof or any political subdivision of the United States or any
state thereof.
SECTION 4. INSURANCE AND RISK OF LOSS
4.1 Risk of loss of, damage to or destruction of the Equipment shall be
borne by the Borrower and effective upon the Funding Date under the Note and
until the payment and performance in full of all Obligations, Borrower shall at
its own expense cause to be carried and maintained all risk casualty insurance
(covering risk of fire, theft and other such risks as the Lender may require,
including standard and extended coverage) with respect to each item of Equipment
in an amount no less than the replacement costs applicable to such item of
Equipment during the term of this Agreement. All policies evidencing such
casualty insurance shall contain a standard mortgagee's endorsement and shall
provide for at least thirty days prior written notice by the underwriter or
insurance company to the Lender in the event of cancellation or expiration.
Borrower shall provide Lender with insurance certificates evidencing the
foregoing at time of closing.
4.2 If any item of Equipment is lost or rendered unusable as a result of
any physical damage to or destruction of such item of Equipment during the
period from the Funding Date to and including or the date all Obligations
hereunder have been fully satisfied, whichever is later, Borrower shall give to
Lender prompt notice thereof. Borrower shall determine, within fifteen (15) days
after the date of occurrence of such loss, damage or destruction, whether such
item of Equipment can be repaired and restored to the condition in which such
item of Equipment was required to be maintained as of the date immediately
preceding such damage. If Borrower determines that such item of Equipment can be
repaired, Borrower, at its expense, shall cause such item of Equipment to be
promptly repaired. If Borrower determines that such item of Collateral is lost
or cannot be repaired, Borrower shall promptly notify the Lender and such item
-3-
<PAGE>
of Equipment shall be deemed to have suffered a "Casualty Loss" for purposes of
this Section as of the date of the occurrence of such loss. Within fifteen (15)
days following the occurrence of any such loss, damage or destruction, Borrower
shall notify the Lender of the item(s) of Equipment which has suffered such
Casualty Loss ("Loss Item"), and within thirty (30) days thereafter (the
"Settlement Date"), Borrower shall either (a) replace such item(s) of Equipment
with equipment of the same model, type and feature configuration, in an
operating condition and repair no less than that required hereunder of the
damaged or lost equipment immediately prior to the date of such damage or loss,
and having a fair market value no less than the Casualty Value applicable to
such Equipment as of the date immediately prior to such damage, in which case
such replacement equipment shall for all purposes hereunder become part of the
Collateral and (without limiting the preceding provisions) Borrower shall grant
to Lender a first lien and security interest in respect of such replacement
equipment pursuant to the terms of this Agreement, and Borrower shall provide
the Lender evidence satisfactory to the Lender of Borrower's good and marketable
title to such replacement equipment (free of any liens, security interests or
encumbrances other than those created by this Agreement and Borrower shall be
entitled to receive the amount of any insurance or other recovery received by
Lender up to cost of obtaining the replacement equipment; or (b) so long as no
Event of Default or event which with the giving of notice or passage of time, or
both, would constitute an Event of Default, has occurred and is continuing,
Borrower may provide substitute equipment satisfactory to Lender to become part
of the Collateral and Borrower shall grant to Lender a first lien and security
interest in respect of such substitute equipment pursuant to the terms of this
Agreement, and Borrower shall provide the Lender evidence satisfactory to Lender
of Borrower's good and marketable title to such substitute equipment (free of
any liens, security interests or encumbrances other than created by this
Agreement and Lender shall provide any required endorsements in connection with
any insurance proceeds received by Borrower pursuant to such insurance policies;
or (c) Borrower shall pay Lender the insurance proceeds payable pursuant to such
insurance policies ("Insurance Proceeds")with respect to such Loss Item(s) and
the principal amount of the Note (and interest accrued on the principal amount
so prepayable) shall become due and payable on the Settlement Date to the extent
of the replacement cost for all such Loss Item(s). Moneys so received shall be
applied, on the date of such receipt, as follows: first, to pay any accrued
interest on the outstanding principal amount of the Note on such date; second,
to prepay, the outstanding principal amount of the Note (to the extent of the
fair market value attributable to such Loss Item(s)); third, to pay any other
Indebtedness of amounts then due and owing to the Lender hereunder; and fourth,
so long as there has occurred no Event of Default under Section 8 hereof and no
event which with the giving of notice or passage of time or both would
constitute an Event of Default, has occurred and is continuing, Borrower and
Lender hereby agree that the balance of any such Insurance Proceeds shall be
paid promptly to the Borrower.
4.3 Effective upon the Funding Date under the Note and while there are any
Obligations outstanding, Borrower shall cause to be carried and maintained
comprehensive general liability insurance with regard to the Collateral against
risks customarily insured against in the Borrower's business. Such risks shall
include, without limitation, the risks of death, bodily injury and property
damage associated with the Collateral. All policies evidencing such insurance
shall provide for at least thirty (30) days prior written notice by the
underwriter or insurance company to the Lender in the event of cancellation or
expiration.
4.4 Borrower shall and does hereby indemnify and hold Lender, its agents
and shareholders harmless from and against any and all claims, costs, expenses,
damages and liabilities (including without limitation such claims, costs,
expenses, damages and liabilities based on liability in tort including without
limitation strict liability in tort) including reasonable attorneys'
-4-
<PAGE>
fees, arising out of Borrower's ownership, possession, operation, control, use,
maintenance, delivery, or other disposition of the Collateral. Notwithstanding
the foregoing, Borrower shall not be responsible under the terms of this Section
4.4 to a party indemnified hereunder for any claims, costs, expenses, damages
and liabilities occasioned by the negligence or willful misconduct of such
indemnified party.
SECTION 5. COVENANTS OF BORROWER
Borrower covenants and agrees as follows at all times while any of the
Obligations remain outstanding:
5.1 Borrower shall maintain the Equipment in good operating order, repair,
condition and appearance and protect the Equipment from deterioration, other
than normal wear and tear. Borrower shall not use each of the Equipment or
permit its use for any purpose other than for which it was designed. Borrower's
obligation regarding the maintenance of the Equipment shall include, without
limitation, all maintenance, repair, refurbishment and replacement recommended
or advised either by the manufacturer, or that commonly performed by prudent
business and/or professional practice. Any exceptions or qualifications
expressed in this Agreement relating to normal or ordinary wear and tear shall
not be deemed to limit Borrower's obligations pursuant to the preceding
sentence.
5.2 In the event Borrower adds or installs any Upgrade (as hereinafter
defined) on the Equipment, at the request of Lender, Borrower shall, upon the
occurrence of an Event of Default, remove any such Upgrade and restore the
Equipment to the condition in which such Equipment is required to be maintained
hereunder as if such Upgrade had never been attached thereto. Borrower will not,
without the prior written consent of Lender and subject to such conditions as
Lender may impose for its protection, affix the Equipment to any real property
if, as a result thereof, the Equipment could become a fixture under applicable
law.
For purposes hereof and all Loan Documents relating hereto, the term
"Upgrade" shall mean: (i) any accessory, equipment or device manufactured or
sold by the manufacturer of the Equipment for installation on the Equipment and
installed in compliance with said manufacturer's installation procedures (other
than those added by the manufacturer in order to maintain the Equipment at
current engineering levels), or (ii) any other accessory, equipment or device
installed on the Equipment so long as such item does not impair the original
function or use of the Equipment, capable of being removed without causing
material damage to the Equipment and does not decrease the fair market value of
the Equipment. An Upgrade shall not become an accession to the Equipment. For
purposes hereof and of all Loan Documents relating hereto, the term "Equipment"
shall not be deemed to include any such Upgrade.
5.3 Upon the request of Lender, Borrower shall, during business hours,
make the Equipment available to Lender for inspection at the place where it is
normally located and shall make Borrower's log and maintenance records
pertaining to the Equipment available to the Equipment available to Lender for
inspection. Borrower shall take all action necessary to maintain such logs and
maintenance records in a correct and complete fashion.
5.4 Upon the request of Lender, Borrower shall cause the Equipment to be
plainly, permanently and conspicuously marked, by stenciling or by metal tag or
plate affixed thereto, indicating Lender's security interest in the Equipment.
Borrower shall replace any such stenciling, tag or plate which may be removed or
destroyed or become illegible. Borrower shall keep all
-5-
<PAGE>
Equipment free from any marking or labeling which might be interpreted as a
claim of ownership adverse to Borrower's.
5.5 Borrower covenants and agrees to pay when due, all taxes, fees or
other charges of any nature whatsoever (together with any related interest or
penalties) now or hereafter imposed or assessed against Borrower, Lender or the
Equipment or upon Borrower's ownership, possession, use, operation or
disposition thereof or upon Borrower's rents, receipts or earnings arising
therefrom. Borrower shall file on or before the due date therefor all personal
property tax returns in respect of the Equipment.
5.6 Borrower shall furnish to Lender the financial statements listed
hereinafter, prepared in accordance with generally accepted accounting
principles consistently applied (the "Financial Statements"):
(a) as soon as practicable (and in any event within thirty (30) days)
after the end of each month an internally prepared income statement,
balance sheet, and cash flow statement, (including the commencement of any
material litigation by or against Borrower), each certified by Borrower's
Chief Executive or Financial Officer to be true and correct;
(b) as soon as practicable (and in any event within ninety (90) days)
after the end of each fiscal year, audited Financial Statements, setting
forth in comparative form the corresponding figures for the preceding
fiscal year, and accompanied by any audit report and opinion of the
independent certified public accountants selected by Borrower; and
(c) promptly any additional information (including but not limited to
tax returns, income statements, balance sheets, and names of principal
creditors) as Lender reasonably believes necessary to evaluate Borrower's
continuing ability to meet financial obligations.
5.7 Notwithstanding the foregoing, after the effective date of the initial
registration statement covering a public offering of Borrower's securities, the
term "Financial Statements" shall be deemed to refer to only those statements
required by the Securities and Exchange Commission, to be provided no less
frequently than quarterly. Borrower will from time to time execute, deliver and
file, alone or with Lender, any financing statements, security agreements or
other documents; and take all further action that may be necessary, or that
Lender may reasonably request, to confirm, perfect, preserve and protect the
security interests intended to be granted hereby, and in addition, and for such
purposes only, Borrower hereby authorizes Lender to execute and deliver on
behalf of Borrower and to file such financing statements, security agreement and
other documents without the signature of Borrower either in Lender's name or in
the name of Borrower as agent and attorney-in-fact for Borrower.
5.8 Borrower shall protect and defend Borrower's title as well as the
interest of the Lender against all persons claiming any interest adverse to
Borrower or Lender and shall at all times keep the Collateral free and clear
from any attachment or levy, liens or encumbrances whatsoever (except any placed
thereon by Lender, or any liens arising by operation of law with respect to any
obligations not yet overdue or any other liens consented to in writing by
Lender) and shall give Lender immediate written notice thereof.
5.9 Upon the occurrence of an Event of Default, if Lender seeks to
foreclose on the Equipment, Borrower shall be liable for the full expense of
transportation and in-transit insurance
-6-
<PAGE>
to Lender's premises or, in the event that Lender has immediately available
warehouse space in the San Francisco bay area, Borrower's liability for expense
of transportation of the Equipment shall be limited to the costs of
transportation to such warehouse space, Borrower will arrange for the
deinstallation and audit of the Equipment, and will pack; ship and send the
Equipment to Lender in good operating order, repair, condition and appearance,
and in a condition required pursuant to Section 5 hereof.
SECTION 6. CONDITIONS PRECEDENT TO LOAN
On or prior to the Funding Date, Borrower will provide to Lender the
following, in form and substance satisfactory to Lender:
6.1 Such documentation, including without limitation, a Bill of Sale, and
other documents as shall reasonably evidence Borrower's right, title and
interest in and to the Equipment;
6.2 A certified resolution or other certificate of corporate authority for
the execution and the delivery of, and the performance of all Obligations under
the Loan Documents and all related documentation;
6.3 Incumbency certificate evidencing the authority and facsimile
signatures of the individuals executing the Loan Documents;
6.4 UCC financing statements as deemed appropriate by Lender to perfect
its security interest in the Collateral;
6.5 Certified copies of the [CERTIFICATE/ARTICLES] of incorporation of
Borrower;
6.6 Certificate of good standing for Borrower from its state of
incorporation and similar certificates from all jurisdictions in which it does
business and where the failure to be qualified would have a material adverse
effect on Borrower's business; and
6.7 Insurance certificates as required by Section 4 hereof.
SECTION 7. ASSIGNMENT BY LENDER
7.1 Borrower acknowledges and understands that Lender may sell and assign
all or a part of its interest hereunder and under the Note and Loan Documents to
any person or entity (an "Assignee"). After such assignment the term Lender
shall mean such Assignee, and such Assignee shall be vested with all rights,
powers and remedies of Lender hereunder with respect to the interest so
assigned; but with respect to any such interest not so transferred, the Lender
shall retain all rights, powers and remedies hereby given. No such assignment by
Lender shall relieve Borrower of any of its obligations hereunder. Borrower
shall acknowledge such assignment or assignments as shall be designated by
written notice given by Lender to Borrower. The Lender agrees that in the event
of any transfer by it of the Note, it will endorse thereon a notation as to the
portion of the principal of the Note which shall have been paid at the time of
such transfer and as to the date to which interest shall have been last paid
thereon.
SECTION 8. DEFAULT
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<PAGE>
The occurrence of any one or more of the following events (herein called
"Events of Default") shall constitute a default hereunder and under the Note:
8.1 The Borrower defaults in the payment of any principal or interest
payable under the Note for more than five (5) days after the receipt of notice
of such an Event of Default from Lender;
8.2 The Borrower defaults in the payment or performance of any other
covenant or obligation of the Borrower hereunder or under the Note or any other
Loan Documents for more than thirty (30) days after the Lender has given notice
of such default to the Borrower;
8.3 Any representation or warranty made herein by the Borrower shall prove
to have been false or misleading in any material respect;
8.4 The making of an assignment by Borrower for the benefit of its
creditors or the admission by Borrower in writing of its inability to pay its
debts as they become due, or the insolvency of Borrower, or the filing by
Borrower of a voluntary petition in bankruptcy, or the adjudication of Borrower
as a bankrupt, or the filing by Borrower of any petition or answer seeking for
itself any reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any present or future statute, law or
regulation, or the filing of any answer by Borrower admitting, or the failure by
Borrower to deny, the material allegations of a petition filed against it for
any such relief, or the seeking or consenting by Borrower to, or acquiescence by
Borrower in, the appointment of any trustee, receiver or liquidator of Borrower
or of all or any substantial part of the properties of Borrower, or the
inability of Borrower to pay its debts when due, or the commission by Borrower
of any act of bankruptcy as defined in the Federal Bankruptcy Act, as amended;
8.5 The failure by Borrower, within sixty (60) days after the commencement
of any proceeding against Borrower seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
present or future statute, law or regulation, to obtain the dismissal of such
proceeding or, within sixty (60) days after the appointment, without the written
consent or acquiescence of Lender, of any trustee, receiver or liquidator of
Borrower or of all or any substantial part of the properties of Borrower, to
vacate such appointment; or Lender.
8.6 The default by Borrower under any other notes or other agreement for
borrowed money, lease or other agreement between Borrower and Lender.
SECTION 9. REMEDIES
Upon the occurrence hereof of any one or more Events of Default, Lender, at
its option, may declare the Note to be accelerated and immediately due and
payable, (provided, that upon the occurrence of an Event of Default of the type
described in 8.4 or 8.5, the Note and all other Obligations shall automatically
be accelerated and made due and payable without any further act) whereupon the
unpaid principal of and accrued interest on such Note shall become immediately
due and payable, and shall thereafter bear interest at the Default Rate and
calculated in accordance with section 1.2. Lender may exercise all rights and
remedies with respect to the Collateral granted pursuant hereto for such Note,
or otherwise available to it under applicable law, including the right to
release, hold or otherwise dispose of all or any part of the Collateral and the
right to utilize, process and commingle the Collateral.
-8-
<PAGE>
Upon the happening and during the continuance of any Event of Default,
Lender may then, or at any time thereafter and from time to time, apply,
collect, sell in one or more sales, lease or otherwise dispose of, any or all of
the Collateral, in its then condition or following any commercially reasonably
preparation or processing, in such order as Lender may elect, and any such sale
may be made either at public or private sale at its place of business or
elsewhere. Borrower agrees that any such public or private sale may occur upon
five (5) calendar day's notice to Borrower. Lender may require Borrower to
assemble the Collateral and make it available to Lender at a place designated by
Lender which is reasonably convenient to Lender and Borrower. The proceeds of
any sale, disposition or other realization upon all or any part of the
collateral shall be distributed by Lender in the following order of priorities:
First, to Lender in an amount sufficient to pay in full Lender's reasonable
costs and professionals' and advisors' fees and expenses;
Second, to Lender in an amount equal to the then unpaid amount of the
Obligations in such order and priority as Lender may choose in its sole
discretion; and
Finally, upon payment in full of all of the Obligations, to Borrower or its
representatives or as a court of competent jurisdiction may direct.
The Lender shall return to the Borrower any surplus Collateral remaining after
payment of all Obligations.
SECTION 10. MISCELLANEOUS
10.1 Borrower shall remain liable to Lender for any unpaid Obligations,
advances, costs, charges and expenses, together with interest thereon and shall
pay the same immediately to Lender at Lender's offices.
10.2 The powers conferred upon Lender by this Agreement are solely to
protect its interest in the Collateral and shall not impose any duty upon Lender
to exercise any such powers.
10.3 This is a continuing Agreement and the grant of a security interest
hereunder shall remain in full force and effect and all the rights, powers and
remedies of Lender hereunder shall continue to exist until the Obligations are
paid in full as the same become due and payable. When Borrower has paid in full
all Obligations, Lender will execute a written termination statement,
reassigning to Borrower, without recourse, the Collateral and all rights
conveyed hereby and return possession (if Lender has possession) of the
Collateral to Borrower. The rights, powers and remedies of Lender hereunder
shall be in addition to all rights, powers and remedies given by statute or rule
of law and are cumulative. The exercise of any one or more of the rights, powers
and remedies provided herein shall not be construed as a waiver of any other
rights, powers and remedies of Lender. Furthermore, regardless of whether or not
the UCC is in effect in the jurisdiction where such rights, powers and remedies
are asserted, Lender shall have the rights, powers and remedies of a secured
party under the UCC.
10.4 Upon payment in full of all Obligations, the Lender shall cancel the
Note, this Agreement and all UCC financing statements, if any, and shall
promptly deliver all such canceled documents to the Borrower.
10.5 GOVERNING LAW. This Agreement, the Note and the other Loan Documents
have been negotiated and delivered to Lender in the State of Illinois and shall
not become
-9-
<PAGE>
effective until accepted by Lender in the State of Illinois. Payment to Lender
by Borrower of the Obligations is due in the State of Illinois. This Agreement
shall be governed by, and construed and enforced in accordance with the laws of
the State of Illinois excluding conflict of laws principles that would cause the
application of laws of any other jurisdiction.
10.6 CONSENT TO JURISDICTION AND VENUE. All judicial proceedings arising
in or under or related to this Agreement, the Note or any of the other Loan
Documents may be brought in any state or federal court of competent jurisdiction
located in the State of Illinois. By execution and delivery of this Agreement,
each party hereto generally and unconditionally: (a) consents to personal
jurisdiction in Cook County, State of Illinois; (b) waives any objection as to
jurisdiction or venue in the aforesaid courts; and (d) irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement, the
Note an the other Loan Documents. Service of process on any party hereto in any
action arising out of or relating to this agreement shall be effective if given
in accordance with the requirements for notice set forth in subsection 10.8
below and shall be deemed effective and received as set forth in subsection 10.8
below. Nothing herein shall affect the right to serve process in any other
manner permitted by law or shall limit the right of either party to bring
proceedings in the courts of any other jurisdiction.
10.7 Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid under
such law, such provision shall be ineffective only to the extent and duration of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
10.8 Any notice required or given hereunder shall be deemed properly given
upon the earlier of: (i) the first business day after transmission by facsimile
or hand delivery or deposit with an overnight express service or overnight mail
delivery service; or (ii) or three (3) days after mailed, postage prepaid, in
each case, addressed to the designated recipient at its address set forth herein
or such other address as such party may advise the other party by notice given
in accordance with this provision.
10.9 Lender and Borrower acknowledge that there are no agreements or
understandings, written or oral, between Lender and Borrower with respect to the
Loan, other than as set forth herein, in the Note and the other Loan Documents
and that this Agreement, the Note and the other Loan Documents contain the
entire agreement between Lender and Borrower with respect thereto. None of the
terms of this Agreement, the Note and the other Loan Documents may be amended
except by an instrument executed by each of the parties hereto.
10.10 No omission, or delay, by Lender at any time to enforce any right or
remedy reserved to it, or to require performance of any of the terms, covenants
or provisions hereof by Borrower at any time designated, shall be a waiver of
any such right or remedy to which Lender is entitled, nor shall it in any way
affect the right of Lender to enforce such provisions thereafter.
10.11 All agreements, representations and warranties contained in this
Agreement or the Note, or in any Loan Documents delivered pursuant hereto or in
connection herewith shall be for the benefit of Lender and any Assignee and
shall survive the execution and delivery of this Agreement or the Note and the
expiration or other termination of this Agreement or the Note.
10.12 This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original, but all such counterparts together shall
constitute but one and the same instrument.
-10-
<PAGE>
10.13 This Agreement shall be binding upon, and shall inure to the benefit
of, Borrower and its permitted assigns (if any). Borrower shall not assign its
obligations under this Agreement, the Note or any of the other Loan Documents
without Lender's express written consent and any such attempted assignment shall
be void and of no effect. Any assignment by Borrower in connection with a
"Merger" (as defined below) shall be subject to Lender's prior consent. Any
consent granted by Lender shall be conditioned upon such surviving entity or
transferee assuming Borrower's Obligations hereunder pursuant to assignment
documents reasonably acceptable to Lender. If Lender reasonably withholds its
consent to such assignment in connection with a Merger, the outstanding
principal and accrued and unpaid interest shall be prepaid in whole.
For purposes of this Agreement, a "Merger" shall mean any consolidation or
merger of the Borrower with or into any other corporation or entity, any sale or
conveyance of an or substantially all of the assets or stock of the Borrower by
or to any other person or entity in which Borrower is not the surviving entity.
IN WITNESS WHEREOF, the Borrower and the Lender have duly executed and
delivered this Agreement as of the day and year first above written.
BORROWER: PLACEWARE
By: /s/ XXX
---------------------
Title: President
------------------
Date: 9/30/97
-------------------
ACCEPTED IN ROSEMONT, ILLINOIS:
- ------------------------------
LENDER: COMDISCO, INC.
By: /s/ JAMES P. LABE
------------------------
Title: PRESIDENT, COMDISCO VENTURES DIVISION
-------------------------------------
Date: 11/9/97
------------------------
-11-
<PAGE>
EXHIBIT A
SECURED PROMISSORY NOTE
$400,000 Date: October _____, 1997
Due: October 1, 2001
FOR VALUE RECEIVED, Placeware a Delaware corporation (the "Borrower") hereby
promises to pay to the order of Comdisco, Inc., a Delaware corporation (the
"Lender") at P.O. Box 91744, Chicago, IL 60693 or such other place of payment as
the holder of this Secured Promissory Note (this "Note") may specify from time
to time in writing, in lawful money of the United States of America, the
principal amount of Four Hundred Thousand and 00/100 Dollars ($400,000) together
with interest at seven percent (7.5%) per annum from the date of this Note to
maturity of each installment on the principal hereof remaining from time to time
unpaid, such principal and/or interest to be paid in 6 installments in the
amount of $0.00 and followed by 42 equal monthly installments of $11,201.58
each, commencing November 1, 1997 and on the same day of each month thereafter
to and including October 1, 2001 and an additional final installment of $60,000
("Balloon Payment") to be paid on October 1, 2001, such installments to be
applied first to accrued and unpaid interest and the balance to unpaid
principal. Interest shall be computed on the basis of a year consisting of
twelve months of thirty days each.
This Note is the Note referred to in, and is executed and delivered in
connection with, that certain Loan and Security Agreement of even date herewith
by and between Borrower and Lender (as the same may from time to time be
amended, modified or supplemented in accordance with its terms, the "Loan
Agreement"), and is entitled to the benefit and security of the Loan Agreement
and the other Loan Documents (as defined in the Loan Agreement), to which
reference is made for a statement of all of the terms and conditions thereof.
All terms defined in the Loan Agreement shall have the same definitions when
used herein, unless otherwise defined herein.
The Borrower waives presentment and demand for payment, notice of dishonor,
protest and notice of protest and any other notice as permitted under the UCC or
any applicable law.
This Note has been negotiated and delivered to Lender and is payable in the
State of Illinois, and shall not become effective until accepted by Lender in
the State of Illinois. This Note shall be governed by and construed and enforced
in accordance with, the laws of the State of Illinois, excluding any conflicts
of law rules or principles that would cause the application of the laws of any
other jurisdiction.
BORROWER: PLACEWARE
Signature: ___________________________
Print Name: ___________________________
Title: ___________________________
Accepted in Rosemont, Illinois:
LENDER: COMDISCO, INC.
Signature: ___________________________
Print Name: ___________________________
Title: ___________________________
-1-
<PAGE>
EXHIBIT A
SECURED PROMISSORY NOTE
$333,646 Date: January 15, 1998
Due: January 1, 2002
FOR VALUE RECEIVED, Placeware a Delaware corporation (the "Borrower") hereby
promises to pay to the order of Comdisco, Inc., a Delaware corporation (the
"Lender") at P.O. Box 91744, Chicago, IL 60693 or such other place of payment as
the holder of this Secured Promissory Note (this "Note") may specify from time
to time in writing, in lawful money of the United States of America, the
principal amount of Three Hundred Thirty Three Thousand, Six Hundred Forty Six
and 00/100 Dollars ($333,646) together with interest from the date of this Note
to maturity of each installment on the principal hereof remaining from time to
time unpaid, such principal and/or interest to be paid in 6 installments in the
amount of $0.00 and followed by 42 equal monthly installments of $9,342.04 each,
commencing August 1, 1998 and on the same day of each month thereafter to and
including January 1, 2002 and an additional final installment of $50,046.90
("Balloon Payment") to be paid on January 1, 2002, such installments to be
applied first to accrued and unpaid interest and the balance to unpaid
principal. Interest shall be computed on the basis of a year consisting of
twelve months of thirty days each.
This Note is the Note referred to in, and is executed and delivered in
connection with, that certain Loan and Security Agreement of even date herewith
by and between Borrower and Lender (as the same may from time to time be
amended, modified or supplemented in accordance with its terms, the "Loan
Agreement"), and is entitled to the benefit and security of the Loan Agreement
and the other Loan Documents (as defined in the Loan Agreement), to which
reference is made for a statement of all of the terms and conditions thereof.
All terms defined in the Loan Agreement shall have the same definitions when
used herein, unless otherwise defined herein.
The Borrower waives presentment and demand for payment, notice of dishonor,
protest and notice of protest and any other notice as permitted under the UCC or
any applicable law.
This Note has been negotiated and delivered to Lender and is payable in the
State of Illinois, and shall not become effective until accepted by Lender in
the State of Illinois. This Note shall be governed by and construed and enforced
in accordance with, the laws of the State of Illinois, excluding any conflicts
of law rules or principles that would cause the application of the laws of any
other jurisdiction.
BORROWER: PLACEWARE
Signature: /s/ Barry James Folsom
----------------------
Print Name: Barry James Folsom
----------------------
Title: CEO
----------------------
-1-
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Placeware
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Prepared by Peggy Parker
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
Loan Amount: 333,646
- ---------------------------------------------========----------------------------------------------------------
7.50%
- ---------------------------------------------------------------------------------------------------------------
Payment 9,342.04
- ---------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------
ment Num Date Principal Interest Payment Balance
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
01/15/97 333,646.00
- ---------------------------------------------------------------------------------------------------------------
1 02/01/98 0.00 0.00 0.00 333,646.00
- ---------------------------------------------------------------------------------------------------------------
2 03/01/98 0.00 0.00 0.00 333,646.00
- ---------------------------------------------------------------------------------------------------------------
3 04/01/98 0.00 0.00 0.00 333,646.00
- ---------------------------------------------------------------------------------------------------------------
4 05/01/98 0.00 0.00 0.00 333,646.00
- ---------------------------------------------------------------------------------------------------------------
5 06/01/98 0.00 0.00 0.00 333,646.00
- ---------------------------------------------------------------------------------------------------------------
6 07/01/98 0.00 0.00 0.00 333,646.00
- ---------------------------------------------------------------------------------------------------------------
7 08/01/98 6,747.94 2,594.10 9,342.04 326,898.06
- ---------------------------------------------------------------------------------------------------------------
8 09/01/98 6,800.41 2,541.63 9,342.04 320,097.65
- ---------------------------------------------------------------------------------------------------------------
9 10/01/98 6,853.28 2,488.76 9,342.04 313,244.37
- ---------------------------------------------------------------------------------------------------------------
10 11/01/98 6,906.56 2,435.48 9,342.04 306,337.81
- ---------------------------------------------------------------------------------------------------------------
11 12/01/98 6,960.26 2,381.78 9,342.04 299,377.55
- ---------------------------------------------------------------------------------------------------------------
12 01/01/99 7,014.38 2,327.66 9,342.04 292,363.17
- ---------------------------------------------------------------------------------------------------------------
13 02/01/99 7,068.91 2,273.12 9,342.04 285,294.25
- ---------------------------------------------------------------------------------------------------------------
14 03/01/99 7,123.88 2,218.16 9,342.04 278,170.38
- ---------------------------------------------------------------------------------------------------------------
15 04/01/99 7,179.26 2,162.77 9,342.04 270,991.11
- ---------------------------------------------------------------------------------------------------------------
16 05/01/99 7,235.08 2,106.96 9,342.04 263,756.03
- ---------------------------------------------------------------------------------------------------------------
17 06/01/99 7,291.34 2,050.70 9,342.04 256,464.70
- ---------------------------------------------------------------------------------------------------------------
18 07/01/99 7,348.03 1,994.01 9,342.04 249,116.67
- ---------------------------------------------------------------------------------------------------------------
19 08/01/99 7,405.16 1,936.88 9,342.04 241,711.51
- ---------------------------------------------------------------------------------------------------------------
20 09/01/99 7,462.73 1,879.31 9,342.04 234,248.78
- ---------------------------------------------------------------------------------------------------------------
21 10/01/99 7,520.75 1,821.28 9,342.04 226,728.03
- ---------------------------------------------------------------------------------------------------------------
22 11/01/99 7,579.23 1,762.81 9,342.04 219,148.80
- ---------------------------------------------------------------------------------------------------------------
23 12/01/99 7,638.16 1,703.88 9,342.04 211,510.64
- ---------------------------------------------------------------------------------------------------------------
24 01/01/00 7,697.54 1,644.50 9,342.04 203,813.10
- ---------------------------------------------------------------------------------------------------------------
25 02/01/00 7,757.39 1,584.65 9,342.04 196,055.71
- ---------------------------------------------------------------------------------------------------------------
26 03/01/00 7,817.71 1,524.33 9,342.04 188,238.00
- ---------------------------------------------------------------------------------------------------------------
27 04/01/00 7,878.49 1,463.55 9,342.04 180,359.51
- ---------------------------------------------------------------------------------------------------------------
28 05/01/00 7,939.74 1,402.30 9,342.04 172,419.77
- ---------------------------------------------------------------------------------------------------------------
29 06/01/00 8,001.47 1,340.56 9,342.04 164,418.30
- ---------------------------------------------------------------------------------------------------------------
30 07/01/00 8,063.69 1,278.35 9,342.04 156,354.61
- ---------------------------------------------------------------------------------------------------------------
31 08/01/00 8,126.38 1,215.66 9,342.04 148,228.23
- ---------------------------------------------------------------------------------------------------------------
32 09/01/00 8,189.56 1,152.47 9,342.04 140,038.66
- ---------------------------------------------------------------------------------------------------------------
33 10/01/00 8,253.24 1,088.80 9,342.04 131,785.43
- ---------------------------------------------------------------------------------------------------------------
34 11/01/00 8,317.41 1,024.63 9,342.04 123,468.02
- ---------------------------------------------------------------------------------------------------------------
35 12/01/00 8,382.07 959.96 9,342.04 115,085.94
- ---------------------------------------------------------------------------------------------------------------
36 01/01/01 8,447.25 894.79 9,342.04 106,638.70
- ---------------------------------------------------------------------------------------------------------------
37 02/01/01 8,512.92 829.12 9,342.04 98,125.78
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Sheet 1
Page 1
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
38 03/01/01 8,579.11 762.93 9,342.04 89,546.67
- -------------------------------------------------------------------------------------------------------------------------------
39 04/01/01 8,645.81 696.23 9,342.04 80,900.85
- -------------------------------------------------------------------------------------------------------------------------------
40 05/01/01 8,713.03 629.00 9,342.04 72,187.82
- -------------------------------------------------------------------------------------------------------------------------------
41 06/01/01 8,780.78 561.26 9,342.04 63,407.04
- -------------------------------------------------------------------------------------------------------------------------------
42 07/01/01 8,849.05 492.99 9,342.04 54,557.99
- -------------------------------------------------------------------------------------------------------------------------------
43 08/01/01 8,917.85 424.19 9,342.04 45,640.14
- -------------------------------------------------------------------------------------------------------------------------------
44 09/01/01 8,987.19 354.85 9,342.04 36,652.95
- -------------------------------------------------------------------------------------------------------------------------------
45 10/01/01 9,057.06 284.98 9,342.04 27,595.89
- -------------------------------------------------------------------------------------------------------------------------------
46 11/01/01 9,127.48 214.56 9,342.04 18,468.41
- -------------------------------------------------------------------------------------------------------------------------------
47 12/01/01 9,198.45 143.59 9,342.04 9,269.96
- -------------------------------------------------------------------------------------------------------------------------------
48 01/01/02 9,269.96 72.07 9,342.04 0.00
- -------------------------------------------------------------------------------------------------------------------------------
48 01/01/02 50,046.90
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 2
<PAGE>
THIS WARRANT AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE
144 UNDER SUCH ACT.
No.--WPB-1 Void after September 30, 2007
PLACEWARE, INC.
WARRANT TO PURCHASE SHARES OF SERIES B PREFERRED STOCK
------------------------------------------------------
This Warrant is issued to Comdisco, Inc., a Delaware corporation (the
"Warrantholder") by PlaceWare, Inc., a Delaware corporation (the "Company"), in
consideration of the mutual covenants and agreements contained herein and
Warrantholder's entering into, and performing its obligations under, that
certain Master Lease Agreement dated as of September 30, 1997 by and between the
Company and Warrantholder, including any related equipment schedules
(collectively, the "Leases").
1. Purchase of Shares. Subject to the terms and conditions
------------------
hereinafter set forth, the Warrantholder (and any subsequent holder of this
Warrant) is entitled, upon surrender of this Warrant at the principal office of
the Company (or at such other place as the Company shall notify the holder
hereof in writing), to purchase from the Company up to 40,625 fully paid and
nonassessable shares of Series B Preferred Stock of the Company, as more fully
described below. The shares of Series B Preferred Stock issuable pursuant to
this Section 1 (the "Shares") shall also be subject to adjustment pursuant to
Section 7 hereof.
2. Exercise Price. The exercise price for the Shares shall initially
--------------
be $2.00 per share and shall be subject to adjustment pursuant to Section 7
hereof (such price, as adjusted from time to time, is herein referred to as the
"Exercise Price").
3. Exercise Period. This Warrant is immediately exercisable and it
---------------
shall remain exercisable until the later of and including September 30, 2007 or
five years after the Company's initial public offering; provided, however, that
in the event of (a) the sale of all or substantially all the assets of the
Company or (b) the closing of the acquisition of the Company by another entity
by means of merger, consolidation or other transaction or series of related
transactions, resulting in the exchange of the outstanding shares of the
Company's capital stock such that the stockholders of the Company prior to such
transaction own, directly or indirectly, less than 50% of the voting power of
the surviving entity, this Warrant shall, on the date of such event, terminate
and no longer be exercisable. In the event of a proposed transaction of the kind
<PAGE>
described above, the Company shall notify the holder of the Warrant at least
fifteen (15) days prior to the consummation of such event or transaction.
4. Method of Exercise. While this Warrant remains outstanding and
------------------
exercisable in accordance with Section 3 above, the holder may exercise, in
whole or in part, the purchase rights evidenced hereby. Such exercise shall be
effected by:
(i) the surrender of the Warrant, together with a duly executed
copy of the form of subscription attached hereto, to the Secretary of the
Company at its principal offices; and
(ii) the payment to the Company of the cash mount equal to the
aggregate Exercise Price for the number of Shares being purchased.
5. Net Exercise. In lieu of exercising this Warrant with a cash
------------
payment, the holder of this Warrant may elect to receive shares equal to the
value of this Warrant (or the portion thereof being canceled) by surrender of
this Warrant at the principal office of the Company together with notice of such
election, in which event the Company shall issue to the holder hereof a number
of shares of Series B Preferred Stock computed using the following formula:
Y (A - B)
---------
X = A
Where
X = The number of shares of Series B Preferred Stock to be
issued to the holder of this Warrant upon a net exercise.
Y = The number of shares of Series B Preferred Stock purchasable
under this Warrant (or the portion of this Warrant being
canceled).
A = The fair market value of one share of the Company's Series B
Preferred Stock.
B = The Exercise Price (as adjusted to the date of such
calculations).
For purposes of this Paragraph 5, if the Company's Common Stock is
then actively traded over-the-counter or on a securities exchange or through the
Nasdaq National Market (each referred to herein as an "Exchange"), the fair
market value of Series B Preferred Stock shall mean the average of the closing
bid and asked prices of the Common Stock into which the Series B Preferred Stock
is then convertible as quoted in the over-the-counter market in which the Common
Stock is then traded or the closing price quoted on any Exchange on which the
Common Stock is listed, whichever is applicable, as published in the Western
Edition of The Wall Street Journal for the ten trading days immediately prior to
-----------------------
the date of the net exercise of the Warrant (or such shorter period of time
during which such stock was traded over-
2.
<PAGE>
the-counter or on such exchange). If the Common Stock is not traded on the over-
the-counter market or on an Exchange, the fair market value shall be the price
per share that the Company could obtain from a willing buyer for shares of
Series B Preferred Stock sold by the Company from authorized but unissued
shares, as such prices shall be determined in good faith by the Company's Board
of Directors. Notwithstanding the previous terms of this paragraph, in the case
of a sale or merger of the Company as described under Section 3(a) or (b)
hereof, the fair market value of the Series B Preferred Stock shall be the value
determined in good faith by the Company's Board of Directors.
6. Certificates for Shares. Upon the exercise of the purchase rights
-----------------------
evidenced by this Warrant, one or more certificates for the number of Shares so
purchased shall be issued as soon as practicable thereafter, and in any event
within thirty. (30) days of the delivery of the subscription notice. In case the
holder shall exercise this Warrant with respect to less than all of the Shares
that may be purchased under this Warrant, the Company shall execute a new
warrant in the form of this Warrant for the balance of such Shares and deliver
such new warrant to the holder of this Warrant.
7. Adjustment of Exercise Price and Number of Shares. The number of
-------------------------------------------------
and kind of securities purchasable upon exercise of this Warrant and the
Exercise Price shall be subject to adjustment from time to time as follows:
(a) Subdivisions, Combinations and Other Issuances. If the Company
----------------------------------------------
shall at any time prior to the expiration of this Warrant subdivide its Series B
Preferred Stock, by split-up or otherwise, or combine its Series B Preferred
Stock, or issue additional shares of its Series B Preferred Stock or Common
Stock as a dividend with respect to any shares of its Series B Preferred Stock,
the number of Shares issuable on the exercise of this Warrant shall forthwith be
proportionately increased in the case of a subdivision or stock dividend, or
proportionately decreased in the case of a combination. Appropriate adjustments
shall also be made to the purchase price payable per share, but the aggregate
purchase price payable for the total number of Shares purchasable under this
Warrant (as adjusted) shall remain the same. Any adjustment under this Section
7(a) shall become effective at the close of business on the date the subdivision
or combination becomes effective, or as of the record date of such dividend, or
in the event that no record date is fixed, upon the making of such dividend.
(b) Reclassification, Reorganization and Consolidation. In case
--------------------------------------------------
of any reclassification, capital reorganization, or change in the Series B
Preferred Stock of the Company (other than as a result of a subdivision,
combination, or stock dividend provided for in Section 7(a) above), then, as a
condition of such reclassification, reorganization, or change, lawful provision
shall be made, and duly executed documents evidencing the same from the Company
or its successor shall be delivered to the holder of this Warrant, so that the
holder of this Warrant shall have the right at any time prior to the expiration
of this Warrant to purchase, at a total price equal to that payable upon the
exercise of this Warrant, the kind and mount of shares of stock and other
securities and property receivable in connection with such reclassification,
reorganization, or change by a holder of the same number of shares of Series B
Preferred Stock as were purchasable by the holder of this Warrant immediately
prior to such
3.
<PAGE>
reclassification, reorganization, or change. In any such case appropriate
provisions shall be made with respect to the rights and interest of the holder
of this Warrant so that the provisions hereof shall thereafter be applicable
with respect to any shares of stock or other securities and property deliverable
upon exercise hereof, and appropriate adjustments shall be made to the purchase
price per share payable hereunder, provided the aggregate purchase price shall
remain the same.
(c) Notice of Adjustment. When any adjustment is required to be made
--------------------
in the number or kind of shares purchasable upon exercise of the Warrant, or in
the Warrant Price, the Company shall promptly notify the holder of such event
and of the number of shares of Series B Preferred Stock or other securities or
property thereafter purchasable upon exercise of this Warrant.
8. Representations, Warranties and Covenants of the Company.
--------------------------------------------------------
(a) Reservation and Issuance of Shares. The Company covenants that it
----------------------------------
will at all times keep available such number of authorized shares of its Series
B Preferred Stock, free from all preemptive rights with respect thereto, which
will be sufficient to permit the exercise of this Warrant for the full number of
Shares specified herein. The Company further covenants that the Shares, when
issued pursuant to the exercise of this Warrant, will be duly and validly
issued, fully paid and nonassessable and free from all taxes, liens, and charges
with respect to the issuance thereof.
(b) Due Authority. The execution and delivery by the Company of this
-------------
Warrant and the performance of all obligations of the Company hereunder,
including the issuance to Warrantholder of the right to acquire the Shares, have
been duly authorized by all necessary corporate action on the part of the
Company, and the Leases and this Warrant are not inconsistent with the Company's
Certificate of Incorporation or Bylaws, do not contravene any law or
governmental rule, regulation or order applicable to it, to its knowledge do not
and will not contravene any provision of, or constitute a default under, any
indenture, mortgage, contract or other instrument to which it is a party or by
which it is bound, and the Leases and this Warrant Agreement constitute legal,
valid and binding agreements of the Company, enforceable in accordance with
their respective terms.
(c) Consents and Approvals. No consent or approval of, giving notice
----------------------
to, registration with, or taking of any other action in respect to any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant, except for the filing of notices pursuant to Regulation D under
the 1933 Act and any filing required by applicable state securities law, which
filings will be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common
-----------------
Stock, Preferred Stock or any other securities of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. All
outstanding shares of Common Stock, Preferred Stock and any other securities
were issued in full compliance with all Federal and state securities laws. In
addition:
4.
<PAGE>
(i) The authorized capital of the Company consists of (A)
Ten Million (10,000,000) shares of Common Stock, of which One
Million Nine Hundred Thirty-Five Thousand (1,935,000) shares are
issued and outstanding, and (B) Five Million (5,000,000) shares
of preferred stock, One Million Seven Hundred Five Thousand
(1,705,000) shares of which have been designated Series A
Preferred Stock, One Million Seven Hundred Five Thousand
(1,705,000) of which are outstanding, and Two Million Seven
Hundred Thousand (2,700,000) shares of which have been designated
Series B Preferred Stock, Two Million Five Hundred Thousand
(2,500,000) of which are outstanding.
(ii) Except for (A) the conversion privileges of the Series
A Preferred Stock and Series B Preferred Stock and (B) the rights
provided in Section 2.4 of that certain Restated Investors'
Rights Agreement, dated as of April 23, 1997, by and among the
Company, the investors listed on Schedule A thereto and the
management holders listed on Schedule B thereto (the "Restated
Investors' Rights Agreement"), there are not outstanding any
options, warrants, rights (including conversion or preemptive
rights) or agreements of any kind for the purchase or acquisition
from the Company of any shares of its capital stock or, except
for the outstanding Preferred Stock of the Company, any
securities convertible into or ultimately exchangeable or
exercisable for any shares of its capital stock. The Company has
reserved One Million Eighty-Three Thousand (1,083,500) shares of
its Common Stock for purchase upon exercise of options to be
granted under the Company's 1997 Stock Plan.
(e) Other Commitments to Register Securities. Except as set
----------------------------------------
forth in this Warrant and the Restated Investors' Rights Agreement, the Company
is not, pursuant to the terms of any other agreement currently in existence,
under any obligation to register under the 1933 Act any of its presently
outstanding securities or any of its securities which may hereafter be issued.
(f) Exempt Transaction. Subject to the accuracy of the
------------------
Warrantholder's representations in Section 9 hereof, the issuance of the
Preferred Stock upon exercise of this Warrant will constitute a transaction
exempt from (i) the registration requirements of Section 5 of the 1933 Act, in
reliance upon Section 4(2) thereof, and (ii) the qualification requirements of
the applicable state securities laws.
(g) Compliance with Rule 144. At the written request of the
------------------------
Warrantholder, who proposes to sell Preferred Stock issuable upon the exercise
of the Warrant in compliance with Rule 144 promulgated by the Securities and
Exchange Commission, the Company shall furnish to the Warrantholder, within ten
days after receipt of such request, a written statement confirming the Company's
compliance with the filing requirements of the
5.
<PAGE>
Securities and Exchange Commission as set forth in such Rule, as such Rule may
be amended from time to time.
9. Representations and Covenants of the Warrantholder.
--------------------------------------------------
This Warrant has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire the Shares upon
------------------
exercise of the Warrantholder's rights contained herein, and the Common Stock
into which the Shares are convertible, will be acquired for investment and not
with a view to the sale or distribution of any part thereof, and the
Warrantholder has no present intention of selling or engaging in any public
distribution of the same except pursuant to a registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that the
-------------
Shares issuable upon exercise of this Warrant is not registered under the 1933
Act or qualified under applicable state securities laws on the ground that the
issuance contemplated by this Warrant will be exempt from the registration and
qualifications requirements thereof, and (ii) that the Company's reliance on
such exemption is predicated on the representations set forth in this Section 9.
(c) Financial Risk. The Warrantholder has such knowledge and
--------------
experience in financial and business matters as to be capable of evaluating the
merits and risk of its investment, and has the ability to bear the economic
risks of its investment.
(d) Risk of No Registration. The Warrantholder understands that
-----------------------
if the Company does not register with the Securities and Exchange Commission
pursuant to Section 12 of the 1934 Act (the "1934 Act"), or file reports
pursuant to Section 15(d), of the 1934 Act, or if a registration statement
coveting the securities under the 1933 Act is not in effect when it desire to
sell (i) the rights to purchase the Shares pursuant to this Warrant or (ii) the
Shares issuable upon exercise of the right to purchase, it may be required to
hold such securities for an indefinite period. The Warrantholder also
understands that any sale of (i) the rights of the Warrantholder to purchase the
Shares or (ii) the Shares issuable upon exercise of the right to purchase which
might be made by it in reliance upon Rule 144 under the 1933 Act may be made
only in accordance with the terms and conditions of that Rule.
(e) Accredited Warrantholder. Warrantholder is an "accredited
------------------------
Warrantholder" within the meaning of the Securities and Exchange Rule 501 of
Regulation D, as presently in effect.
10. No Fractional Shares or Scrip. No fractional shares or scrip
-----------------------------
representing fractional shares shall be issued upon the exercise of this
Warrant, but in lieu of such fractional shares the Company shall make a cash
payment therefor on the basis of the Exercise Price then in effect.
6.
<PAGE>
11. No Stockholder Rights. Prior to exercise of this Warrant, the
---------------------
holder shall not be entitled to any rights of a stockholder with respect to the
Shares, including (without limitation) the right to vote such Shares, receive
dividends or other distributions thereon, exercise preemptive rights or be
notified of shareholder meetings, and, except as explicitly stated herein, such
holder shall not be entitled to any notice or other communication concerning the
business or affairs of the Company.
12. Market Stand-Off. By accepting the terms of this Warrant, the
----------------
holder hereby agrees that, upon the exercise of this Warrant, the holder shall
be bound by the following market stand-off requirements with respect to the
Shares:
(a) In connection with the initial public offering of the
Company's securities, the holder hereby agrees, upon request of the Company or
the underwriters managing any underwritten offering of the Company's securities,
not to sell, make any short sale of, loan, grant any option for the purchase of,
or otherwise dispose of any securities of the Company (other than those included
in the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed one
hundred eighty (180) days) from the effective date of such registration as may
be requested by the underwriters, provided that all officers and directors of
the Company who own stock of or hold options to purchase stock of the Company
also agree to such restrictions.
(b) In order to enforce the foregoing covenant, the holder
agrees that the Company may impose stop-transfer instructions with respect to
the Shares (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
(c) Notwithstanding the foregoing, the obligations described in
this Section 11 shall not apply to a registration relating solely to employee
benefit plans on Form S-I or Form S-8 or similar forms which may be promulgated
in the future, or a registration relating solely to a Commission Rule 145
transaction on Form S-4 or similar forms which may be promulgated in the future.
13. Successors and Assigns. The terms and provisions of this Warrant
----------------------
shall inure to the benefit of, and be binding upon, the Company and the holders
hereof and their respective successors and assigns.
14. Amendments and Waivers. Any term of this Warrant may be amended
----------------------
and the observance of any term of this Warrant may be waived (either generally
or in a particular instance and either retroactively or prospectively), with the
written consent of (i) the Company and (ii) the holder of this Warrant or, if
this Warrant has previously been exercised in whole or part, by the holder of a
majority of the shares of Common Stock issued or issuable upon conversion of the
Series B Preferred Stock issued upon exercise of this Warrant. Any waiver or
amendment effected in accordance with this Section 14 shall be binding upon each
holder of any Shares purchased under this Warrant at the time outstanding
(including securities into which such Shares have been convened), each furore
holder of all such Shares, and the Company.
7.
<PAGE>
15. Effect of Amendment or Waiver. The holder of this Warrant
-----------------------------
acknowledges that by the operation of Section 14 hereof, the holders of a
majority of the shares of Series B Preferred Stock issued or issuable upon
exercise of this Warrant that are then outstanding will have the right and power
to diminish or eliminate all rights of such holder under this Warrant.
16. Notices. Any notices or certificates sent by the Company to the
-------
holder of this Warrant or notices or other documents sent by the holder of this
Warrant to the Company shall be deemed delivered if delivered in person or by
registered mail (return receipt requested) addressed, if to the holder, to such
holder's address shown in the Company's records (as the same may be changed from
time to time by notice from the holder), and if to the Company, to PlaceWare,
Inc., 2037 Landings Drive, Mountain View, CA 94043, Attn: President (as the same
may be changed from time to time by notice from the Company).
17. Transferability of Warrant. This Warrant may not be transferred
--------------------------
or assigned in whole or in part without compliance with all applicable federal
and state securities laws by the transferor and the transferee (including the
delivery of investment representation letters and legal opinions satisfactory to
the Company, if such are requested by the Company) and the prior written consent
of the Company.
18. Governing Law. This Warrant shall be governed by the laws of the
-------------
State of California as applied to Agreements among California residents made and
to be performed entirely within the State of California.
PLACEWARE, INC.
By: /s/ Barry James Folsom
-----------------------------
Barry James Folsom, President
Address: 2037 Landings Drive
Mountain View, CA 94043
8.
<PAGE>
SUBSCRIPTION
------------
PlaceWare, Inc.
2037 Landings Drive
Mountain View, CA 94043
Attention: Corporate Secretary
The undersigned hereby elects to purchase, pursuant to the provisions
of the Warrant to Purchase Shares of Series B Preferred Stock dated September
30, 1997, issued by PlaceWare, Inc., a Delaware corporation (the "Company"), and
held by the undersigned,______________ shares of Series B Preferred Stock of the
Company.
Payment of the exercise price per share required under such Warrant
accompanies this Subscription.
The undersigned hereby represents and warrants that the undersigned is
acquiring such shares for its own account for investment purposes only, and not
for resale or with a view to distribution of such shares or any part thereof.
WARRANTHOLDER:
Date:___________ By:___________________________
Signature
Print Name:___________________
Title:________________________
Address:
______________________________
______________________________
______________________________
Exact Name in which shares should be registered:
______________________________
<PAGE>
EXHIBIT 10.10
- --------------------------------------------------------------------------------
PLACEWARE, INC
LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
<PAGE>
This LOAN AND SECURITY AGREEMENT is entered into as of March 11, 1999, by
and between SILICON VALLEY BANK ("Bank") and PLACEWARE, INC. ("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 cash advance under the Revolving
Facility.
"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, and partners.
"Bank Expenses" means all costs or expenses (including reasonable
attorneys' fees and expenses) incurred in connection with the preparation,
negotiation, administration, and enforcement of the Loan Documents; reasonable
Collateral audit fees; and Bank's reasonable attorneys' fees and expenses
incurred in amending, enforcing or defending the Loan Documents (including fees
and expenses of appeal), incurred before, during and after an Insolvency
Proceeding, whether or not suit is brought.
"Borrower's Books" means all of Borrower's books and records
including; ledgers; records concerning Borrower's assets or liabilities, the
Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.
"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.
"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.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code.
"Collateral" means the property described on Exhibit A attached
---------
hereto.
"Committed Revolving Line" means a credit extension of up to
Seven Hundred Fifty Thousand Dollars ($750,000).
1
<PAGE>
"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.
"Copyrights" means any and all copyright rights, copyright
applications, copyright registrations and like protections in each work or
authorship and derivative work thereof, whether published or unpublished and
whether or not the same also constitutes a trade secret, now or hereafter
existing, created, acquired or held.
"Credit Extension" means each Advance, letter of credit, or any
other extension of credit by Bank for the benefit of Borrower hereunder.
"Daily Balance" means the amount of the Obligations owed at the
end of a given day.
"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; provided, that
--------
standards of eligibility may be fixed and revised from time to time by Bank as a
consequence of any Collateral audits done pursuant to Section 6.3 in Bank's
reasonable judgement and upon notification thereof to Borrower in accordance
with the provisions hereof. Unless otherwise agreed to by Bank, 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 which the account debtor is an
officer, employee, or agent of Borrower;
(d) Accounts 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;
(e) Accounts with respect to which the account debtor is an
Affiliate of Borrower;
(f) Accounts with respect to which the account debtor does not
have its principal place of business in the United States;
(g) Accounts with respect to which the account debtor is the
United States or any department, agency, or instrumentality of the United
States;
2
<PAGE>
(h) Accounts with respect to which Borrower is liable to the
account debtor for goods sold or services rendered by the account debtor to
Borrower, but only to the extent of any amounts owing to the account debtor
against amounts owed to Borrower;
(i) Accounts with respect to an account debtor, including
Subsidiaries and 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;
(j) 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
(k) Accounts the collection of which Bank reasonably determines
to be doubtful.
"Equipment" means all present and future machinery, equipment,
tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments
in which Borrower has any interest.
"Equity Event" means the receipt by Borrower of the proceeds from
the sale or issuance of equity securities in excess of Four Million Dollars
($4,000,000) pursuant to Borrower's Series C round of financing.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended and the regulations thereunder.
"Event of Default" has the meaning assigned in Article 8.
"Foreign Exchange Reserve" has the meaning set forth in Section
2.1.3 herein.
"GAAP" means generally accepted accounting principles as in
effect 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.
"Intellectual Property" means:
(l) Copyrights, Trademarks and Patents;
(m) Any and all trade secrets, and any and all intellectual
property rights in computer software and computer software products now or
hereafter existing, created, acquired or held;
(n) Any and all design rights which may be available to Borrower
now or hereafter existing, created, acquired or held;
(o) Any and all claims for damages by way of past, present and
future infringement of any of the rights included above, with the right but not
the obligation, to sue for and collect such damages for said use or infringement
of the intellectual property rights identified above;
3
<PAGE>
(p) All licenses or other rights to use any of the Copyrights,
Patents or Trademarks, and all license fees and royalties arising from such use
to the extent permitted by such license or rights;
(q) All amendments, renewals and extensions of any of the
Copyrights, Trademarks or Patents; and
(r) All proceeds and products of the foregoing, including
without limitation all payments under insurance or any indemnity or warranty
payable in respect of any of the foregoing.
"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, and Borrower's Books relating
to any of the foregoing.
"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.
"Lead Investor Term Sheet" means a term sheet evidencing the
intention of an investor in Borrower to lead the next equity round of financing
in form and substance satisfactory to Bank.
"Letter of Credit" or "Letters of Credit" has the meaning set
forth in Section 2.1.2 herein.
"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 any other agreement entered into between
Borrower and Bank in connection with this Agreement, all as amended or extended
from time to time.
"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.
"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, and Borrower's
Books relating to any of the foregoing.
"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.
"Patents" means all patents, patent applications and like
protections including without limitation improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same.
4
<PAGE>
"Periodic Payments" means all installments or similar recurring
payments that Borrower may now or hereafter become obligated to pay to Bank
pursuant to the terms and provisions of any instrument, or agreement now or
hereafter in existence between Borrower and Bank.
"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) Indebtedness secured by a lien described in clause (c) of
the defined term "Permitted Liens," provided such Indebtedness does not exceed
that lesser of the cost or fair market value of the equipment financed with such
Indebtedness; and
(d) Subordinated Debt.
"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 on (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., (iii) certificates of
deposit maturing no more than one (1) year from the date of investment therein
issued by Bank, and (iv) Bank's money market accounts.
"Permitted Liens" means the following:
(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, 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 in the ordinary course of business, or (ii)
existing on such equipment at the time of its acquisition in the ordinary course
of business, provided that the Lien is confined solely to the property so
--------
acquired and improvements thereon, and the proceeds of such equipment; and
(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.
5
<PAGE>
"Responsible Officer" means each of the Chief Executive Officer,
the Chief Operating Officer, the Chief Financial Officer and the Controller of
Borrower.
"Revolving Facility" means the facility under which Borrower may
request Bank to issue cash advances, as specified in Section 2.1 hereof.
"Revolving Maturity Date" means March 10, 2000.
"Revolving Facility" means the facility under which Borrower may
request Bank to issue Advances, as specified in Section 2.1.1 hereof.
"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 reasonably
acceptable to Bank (and identified as being such by Borrower and Bank).
"Subsidiary" means any corporation or partnership in which (i)
any general partnership interest or (ii) more than 50% of the stock of which by
the terms thereof ordinary voting power to elect the Board of Directors,
managers or trustees of the entity shall, at the time as of which any
-----
determination is being made, be owned by Borrower, either directly or through an
Affiliate.
"Trademark" means any trademark and servicemark rights, whether
registered or not, applications to register and registrations of the same and
like protections, and the entire goodwill of the business of Borrower connected
with and symbolized by such trademarks.
1.2 Accounting Terms. All accounting terms not specifically defined
----------------
herein shall be construed in accordance with GAAP and all calculations made
hereunder shall be made in accordance with GAAP. When used herein, the terms
"financial statements" shall include the notes and schedules thereto.
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. Borrower
shall also pay interest on the unpaid principal amount of such Credit Extensions
at rates in accordance with the terms hereof.
2.1.1 Revolving Advances.
------------------
(a) Subject to and upon the terms and conditions of this
Agreement, Borrower may request Advances in an aggregate outstanding amount not
to exceed the lesser of the Committed Revolving Line or the Borrowing Base,
minus the sum of (a) the face amount of all outstanding Letters of Credit
- -----
(including drawn but unreimbursed Letter of Credit), and (b) Foreign Exchange
Reserve. Subject to the terms and conditions of this Agreement, amounts borrowed
pursuant to this Section 2.1.1 may be repaid and reborrowed at any time prior to
the Revolving Maturity Date, at which time all Advances under this Section 2.1.1
shall be immediately due and payable. Borrower may prepay any advances without
penalty or premium.
(b) Procedures. Whenever Borrower desires an Advance, Borrower
----------
will notify Bank by facsimile transmission or telephone no later than 3:00 p.m.
California 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
6
<PAGE>
or loss suffered by Bank as a result of such reliance. Bank will credit the
amount of Advances made under this Section 2.1.1 to Borrower's deposit account.
2.1.2 Letters of Credit.
-----------------
(a) Subject to the terms and conditions of this Agreement,
Bank agrees to issue or cause to be issued letters of credit (each a "Letter of
Credit," collectively, the "Letters of Credit") for the account of Borrower in
an aggregate outstanding face amount not to exceed (i) the lesser of Five
Hundred Thousand Dollars ($500,000) or the Borrowing Base, minus (ii) the
-----
Foreign Exchange Reserve, provided that in no event shall the face amount of
--------
outstanding Letters of Credit plus the Foreign Exchange Reserve plus the
aggregate amount of outstanding Advances exceed either (i) the Committed
revolving Line or (ii) the Borrowing Base. Each Letter of Credit shall have an
expiry date no later than the Revolving Maturity Date. All Letters of Credit
shall be in form and substance, acceptable to Bank in its sole discretion and
shall be subject to the terms and conditions of Bank's form of standard
application and letter of credit agreement.
(b) The obligation of Borrower to immediately reimburse
Bank for drawings made under Letters of Credit shall be absolute, unconditional
and irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement and such Letters of Credit, under all circumstances whatsoever.
Borrower shall indemnify, defend, protect, and hold Bank harmless from any loss,
cost, expense or liability, including, without limitation, reasonable attorneys'
fees, arising out of or in connection with any Letters of Credit.
(c) Borrower may request that Bank issue a Letter of
Credit payable in a currency other than United States Dollars. If a demand for
payment is made under any such Letter of Credit, Bank shall treat such demand as
an Advance to Borrower of the equivalent of the amount thereof (plus cable
charges) in United States currency at the then prevailing rate of exchange in
San Francisco, California, for sales of that other currency for cable transfer
to the country of which it is the currency.
(d) Upon the issuance of any letter of credit payable in a
currency other than United States Dollars, Bank shall create a reserve under the
Committed Line for letters of credit against fluctuations in currency exchange
rates, in an amount equal to ten percent (10%) of the face amount of such letter
of credit. The amount of such reserve may be amended by Bank from time to time
account for fluctuations in the exchange rate. The availability of funds under
the Committed Line shall be reduced by the amount of such reserve for so long as
such letter of credit remains outstanding.
2.1.3 Foreign Exchange Contract; Foreign Exchange Settlements.
-------------------------------------------------------
(a) Subject to the terms of this Agreement, Borrower may
enter into foreign exchange contracts (the "Exchange Contracts") not to exceed
an aggregate amount of (i) the lesser of Five Hundred Thousand Dollars
($500,000) or the Borrowing Base, minus (ii) the face amount of outstanding
-----
Letters of Credit (the "Contract Limit"), provided that in no event shall the
--------
fact amount of outstanding Letters of Credit plus the Foreign Exchange Reserve
plus the aggregate amount of outstanding Advances exceed either (i) the
Committed Revolving Line or (ii) the Borrowing Base, pursuant to which Bank
shall sell to or purchase from Borrower foreign currency on a spot or future
basis. Borrower shall not request any Exchange Contracts at any time it is out
of compliance with any of the provisions of this Agreement. All Exchange
Contracts must provide for delivery of settlement on or before the Revolving
Maturity Date. The amount available under the Committed Line at any time shall
be reduced by the following amounts (the "Foreign Exchange Reserve") on any
given day (the "Determination Date"): (i) on all outstanding Exchange Contracts
on which delivery is to be effected or settlement allowed more than two business
days after the Determination Date, ten percent (10%) of the gross amount of the
Exchange Contracts; plus (ii) on all outstanding Exchange Contracts on which
delivery is to be effected or settlement allowed within two (2) business days
after the Determination Date, one hundred percent (100%) of the gross amount of
the Exchange Contracts.
7
<PAGE>
(b) Bank may, in its discretion, terminate the Exchange
Contracts at any time (i) that an Event of Default occurs or (ii) that there is
no sufficient availability under the Committed Line and Borrower does not have
available funds in its bank account to satisfy the Foreign Exchange Reserve. If
Bank terminates the Exchange Contracts, and without limitation of any applicable
indemnities. Borrower agrees to reimburse Bank for reasonable fees, costs and
expenses relating thereto to arising in connection therewith.
(c) Borrower shall not permit the total gross amount of all
Exchange Contracts on which delivery is to be effected and settlement allowed in
any two (2) business day period to be more than (i) the lesser of the Committed
Line or the Borrowing Base, minus (ii) the then outstanding principal balance of
-----
the Advances (including drawn but unreimbursed Letters of Credit), minus (iii)
-----
the Foreign Exchange Reserve (the "Settlement Limit"), nor shall Borrower permit
the total gross amount of all Exchange Contracts to which Borrower is a party,
outstanding at any one time, to exceed the Contract Limit. Notwithstanding the
above, however, the amount which may be settled in any two (2) business day
period may be increased above the Settlement Limit up to, but in no event to
exceed, the amount of the Contract Limit under either of the following
circumstances:
(i) if there is sufficient availability under the
Committed Line in the amount of the Foreign Exchange Reserve as of each
Determination Date, provided that Bank in advance shall reserve the full amount
of the Foreign Exchange Foreign Reserve against the Committed Line; or
(ii) if there is insufficient availability under the
committed Line, as to settlements within any two (2) business day period,
provided that Bank, in its sole discretion, may: (A) verify good funds overseas
prior to crediting Borrower's deposit account with Bank (in the case of
Borrower's sale of foreign currency); or (B) debit Borrower's deposit account
with Bank prior to delivering foreign currency overseas (in the case of
Borrower's purchase of foreign currency).
(d) In the case of Borrower's purchase of foreign currency,
Borrower in advance shall instruct Bank upon settlement either to treat the
settlement amount as an advance under the Committed Line, or to debit Borrower's
account for the amount settled.
(e) Borrower shall execute all standard form applications
and agreements of Bank in connection with the Exchange Contracts and, without
limiting any of the terms of such applications and agreements, Borrower will pay
all standard fees and charges of Bank in connection with the Exchange Contracts.
(f) Without limiting any of the other terms of this
Agreement of any such standard form applications and agreement of Bank,
Borrower agrees to indemnify Bank and hold it harmless, from and against any and
all claims, debts, liabilities, demands, obligations, actions, costs and
expenses (including, without limitation, attorney's fees of counsel of Bank's
choice), of every nature and description which it may sustain or incur, based
upon, arising out of, or in any way relating to any of the Exchange Contracts or
any transactions relating thereto or contemplated thereby.
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 of this Agreement
is greater than the lesser (i) the Committed 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 Rates.
--------------
(i) Advances. Except as set forth in Section 2.3(b), the
--------
Advances shall bear interest, on the outstanding daily balance thereof, at a
rate equal to One Percent (1.0%) above the Prime Rate.
(b) Late Fee: Default Rate. If any payment is not made within
-----------------------
ten (10) days after the date such payment is due, Borrower shall pay Bank a late
fee equal to the lesser of (i) five percent (5%) of the amount of such unpaid
amount or (ii) the maximum amount permitted to be charged under applicable law.
All
8
<PAGE>
Obligations shall bear interest, from and after the occurrence and during the
continuance 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 the
--------
tenth (10th) calendar day of each month during the term hereof. Borrower hereby
authorizes Bank to debit any accounts with Bank, including, without limitation,
Account Number ____________ 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. Bank
shall, at its option, charge such interest, all Bank Expenses, and all Periodic
Payments against any of Borrower's deposit accounts or against the Committed
Revolving Line, in which case those amounts shall thereafter accrue interest at
the rate then applicable hereunder. 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. Bank shall
deliver to Borrower statements of account in the ordinary course of business
reflecting charges made 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.
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 of 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 shall be immediately applied to
conditionally reduce Obligations, but shall not be considered a payment on
account 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 California 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. A facility fee equal to Three Thousand Seven
------------
Hundred Fifty Dollars ($3,750), which fee shall be due on the Closing Date and
shall be fully earned and non-refundable.
(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, provided that the cost of the initial audit
shall not exceed One Thousand Five Hundred Dollars ($1,500), and financial
analysis and examination of Borrower performed from time to time by Bank or its
agents;
(c) Bank Expenses. Upon the date hereof, all Bank Expenses
-------------
incurred through the Closing Date, including reasonable attorneys' fees and
expenses, and, after the date hereof, all Bank Expenses, including reasonable
attorney's fees and expenses, as and when they become due.
2.6 Additional Costs. In case any change in 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), in each case
after the date of this Agreement.
(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
9
<PAGE>
(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
(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. 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 Revolving 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, 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
incumbency and resolutions authorizing the execution and delivery of this
Agreement;
(c) a financing statement (Form UCC-1);
(d) a warrant to purchase stock;
(e) a negative pledge agreement;
(f) an audit of the collateral, the results of which shall be
satisfactory to Bank;
(g) an insurance certificate;
(h) evidence in form and substance satisfactory to Bank of due
diligence discussions between Borrower and venture capital investors approved by
Bank regarding their investment in Borrower;
(i) payment of the fees and Bank Expenses then due specified in
Section 2.6 hereof; and
(j) such other documents, and completion of such other matters,
as Bank may reasonably deem necessary or appropriate.
10
<PAGE>
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;
(b) timely receipt by Bank of the invoices or other documents as
provided in Section 2.2; and
(c) 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 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
(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). The making of each Credit Extension 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 refereed to in this Section 3.2(c).
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 repayment 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 constitutes 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.
Borrower also hereby agrees not to sell, transfer, assign, mortgage, pledge,
lease, grant a security interest in, or encumber any of its intellectual
property as detailed in that certain Negative Pledge Agreement between Bank and
Borrower dated as of March 11, 1999.
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, inform 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 but no more than once a year (unless) an
Event of Default has occurred and is continuing) 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 the conduct of its business or its ownership of
property requires that it be so qualified.
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 are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles of Incorporation or Bylaws, nor will
they constitute an event of default under any material agreement to which
Borrower is party or by which Borrower is bound.
11
<PAGE>
Borrower is not in default under 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 property giving rise to such Eligible Accounts has
been 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 that is included in any Borrowing Base Certificate as and
Eligible Account.
5.5 Merchantable Inventory. All Inventory is in all material respects
----------------------
of good and marketable quality, free form all material defects.
5.6 Name; Location of Chief Executive Office. Except as disclosed in
----------------------------------------
the Schedule, Borrower has not done business under any name other than that
specified on the signature page hereof. The chief executive office of Borrowers
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 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 or such
Subsidiary or Borrower's interest or Bank's security interest in the collateral.
Borrower does not have knowledge of any such pending or threatened actions or
proceedings.
5.8 No Material Adverse Change in Financial Statements. All
--------------------------------------------------
consolidated financial statements related to Borrower or any Subsidiary that
have been delivered by Borrower to Bank fairly present in all material respects
Borrower's or such Subsidiary's consolidated financial condition as of the date
thereof and Borrower's or such Subsidiary'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 or Subsidiary since the date of the
most recent of such financial statements submitted to Bank.
5.9 Solvency. The fair saleable value of Borrower's assets (including
--------
goodwill minus disposition costs) exceeds the fair value of its liabilities;
Borrower is not left with unreasonably small capital after the transactions
contemplated by this Agreement; and Borrower is able to pay its debts (including
trade debts) as they mature.
5.10 Regulatory Compliance. Borrower and each Subsidiary have met the
---------------------
minimum funding requirement 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 the 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 Standard Act. Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, violation of which could have a Material
Adverse Effect.
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
bet 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
12
<PAGE>
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 releasing, or otherwise disposing of hazardous waste
or hazardous substances into the environment.
5.12 Taxes. Borrower and each Subsidiary have filed or cause to be
-----
filed all tax returns required to be filed, and has paid, or has make 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 have 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 or such Subsidiary's business as
currently conducted, the failure to obtain which could have a Material Adverse
Effect.
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 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 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 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 thirty (30)
days after the end of each calendar month, a company prepared consolidated
balance sheet and income statement covering Borrower's consolidated operations
during such period, in a form acceptable to Bank and certified by a Responsible
Officer, (b) as soon as available, but in any event within two hundred and
twenty (220) 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 Fifty Thousand Dollars ($50,000) or more;
and (d) such budgets, sales projections, operating plans or other financial
information as Bank may reasonably request from time to time generally prepared
by Borrower in the ordinary course of business.
Within twenty (20) days after the last day of each month, 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.
---------
13
<PAGE>
of accounts receivable and accounts payable. Notwithstanding the foregoing, if
outstanding Advances plus the face value of all outstanding Letters of Credit
plus the Foreign Exchange Reserve equals an amount greater than or equal to
fifty percent (50%) of the Borrowing Base, then within five (5) business days
after the fifteenth, (15th) and thirtieth (30th) days of each month, 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 accounts payable.
Bank shall have a right from time to time hereafter to audit Borrower's
Account and appraise Collateral at Borrower's expense; provided that, such
audits will be conducted no more often than every six (6) months unless an Event
of Default has occurred and is continuing and that the cost of the initial audit
shall not exceed One Thousand Five Hundred Dollars ($1,500).
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
payment if the amount or validity of such payment is contested in good faith by
appropriate proceedings and is reserved against (to the extent required by GAAP)
by Borrower.
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 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. Upon
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
for application to the Obligations.
6.7 Principal Depository. Borrower shall maintain its principal
--------------------
depository and operating accounts with Bank.
6.8 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.
14
<PAGE>
7. NEGATIVE COVENANTS
------------------
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until payment in full of the outstanding Obligations or
for so long as Bank may have any commitments to make any Credit Extensions,
Borrower will not do any of the following without the consent of Bank which will
not be unreasonably withheld:
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, including intellectual property,
other than: (i) Transfer of inventory in the ordinary course of business; (ii)
Transfers of non-exclusive licenses and similar arrangements for the use of the
property of Borrower or its Subsidiaries, or (iii) Transfers of surplus, worn-
out or obsolete Equipment.
7.2 Change in Business. 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). Borrower will not, without thirty (30) days prior
written notification to Bank, relocate its chief executive office.
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 acquired, all or
substantially all of the capital stock or property of another Person, without
the consent of Bank which shall not be unreasonably withheld.
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 the 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 locations of which Borrower gives Bank prior written
notice and as to which Borrower signs and files a financing statement when
needed to perfect Bank's security interest.
7.11 Compliance. Become an "investment company" or be controlled by
----------
an "investment company," within the meaning of the Investment Company Act of
1940, or become principally engaged in, or
15
<PAGE>
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 Credit Extension 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 law or regulation, which violation could have 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. If Borrower fails to perform any obligation
----------------
under Article 6, or violates any of the covenants contained in Article 7 of this
Agreement, or 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, or in any other present or future agreement
between Borrower and Bank 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 Borrower receives notice thereof or
any officer of Borrower becomes aware 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 Credit Extensions will be required to be made
during such cure period);
8.3 Material Adverse Change. If there occurs a material adverse
-----------------------
change in Borrower's business or financial condition, or if there is a material
impairment of the prospect of repayment of any portion of the Obligations or a
material impairment of the value or priority of Bank's security interests in
the Collateral;
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 judgement 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 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 thirty (30) days
(provided that no Credit Extensions 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;
16
<PAGE>
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 thirty (30) 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 delivered to Bank by any Responsible
Officer 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:
(a) 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);
(b) 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;
(c) Demand that Borrower (i) deposit cash with Bank in an amount
equal to the amount of any Letters of Credit remaining undrawn, as collateral
security for the repayment of any future drawings under such Letters of Credit,
and Borrower shall forthwith deposit and pay such amount, and (ii) pay in
advance all Letters of Credit fees scheduled to be paid or payable over the
remaining term of the Letters of Credit;
(d) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;
(e) 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 owned premises, Borrower hereby grants Bank a
license to enter into possession of such premises and to occupy the same,
without charge, in order to exercise any of Bank's rights or remedies provided
herein, at law, in equity, or otherwise;
(f) 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, provided that Bank will give Borrower notice of such set-
offs within a reasonable period of time thereafter;
(g) 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 license or other right, solely
pursuant to the provisions of this Section 9.1, to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
17
<PAGE>
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;
(h) Sell the Collateral at either a public or private sale, or
both, with notice to Bank if required by law, 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
any proceeds to the Obligations in whatever manner or order Bank deems
appropriate;
(i) Bank may credit bid and purchase at any public sale; and
(j) 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) dispose of any Collateral; (e) make, settle, and adjust all claims
under and decisions with respect to Borrower's policies of insurance; and (f)
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 Obligations have been
fully repaid and performed and Bank's obligation to provide advances hereunder
is terminated.
9.3 Accounts Collection. At any rime during the term of this
-------------------
Agreement, 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 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 Revolving Facility 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. All risk of
loss, damage or destruction of the Collateral shall be borne by Borrower.
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 inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy
18
<PAGE>
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.
Borrower does not waive its rights unrelated to the foregoing as otherwise
provided in this Agreement.
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, certified 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: PlaceWare, Inc.
1943 Landings Drive
Mountain View, CA 94043
Attn: Deborah Eudaley, CFO
FAX: (650) 526-6150
with a copy to: Gunderson Dettmer
Attorneys at Law
155 Constitution Drive
Menlo Park, CA 94025
Attn: Steve Spurlock
FAX: (650) 321-2800
If to Bank: Silicon Valley Bank
3003 Tasman Drive, P.O. Box 2607
Santa Clara, CA 95054-1191
Attn: Mr. Chris Stedman
FAX: (408) 496-2599
Notwithstanding the foregoing, notice sent to Borrower in accordance with
this Section 10 shall be effective despite any failure to provide a copy of such
notice to Borrower's counsel. 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 TRIAL WAIVER
------------------------------------------
The Loan Documents shall be governed by, and construed in accordance
with, the internal laws of the State of California, without regard to principles
of conflicts of law. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Santa
Clara, State of 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
19
<PAGE>
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.
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 defend, indemnify 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 provisions of this Agreement for the purpose
of determining the legal enforceability of specific provision.
12.5 Amendments in Writing, Integration. This Agreement cannot be
----------------------------------
amended or terminated orally. 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
determine in connection with the enforcement 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
20
<PAGE>
no fault of Bank; or (b) is disclosed to Bank by a third party, provided Bank
does not have actual knowledge that such third party is prohibited from
disclosing such information.
21
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
PLACEWARE, INC.
By: /s/ Deborah Eudaley
-------------------------------
Title: CFO 3/12/99
----------------------------
SILICON VALLEY BANK
By: /s/ Chris Stedman
-------------------------------
Title: CDS
----------------------------
22
<PAGE>
EXHIBIT A
The Collateral shall consist of all right, title and interest of Borrower in and
to the following:
1. 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;
2. 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;
3. All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
4. 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;
5. All documents, cash, deposit accounts, securities, financial assets,
investment properties, securities accounts, securities entitlements, letters of
credit, certificates of deposit, instruments and chattel paper now owned or
hereafter acquired and Borrower's Books relating to the foregoing;
6. All 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; all trade
secret rights, including all rights to unpatented inventions, know-how,
operating manuals, license rights and agreements and confidential information,
now owned or hereafter acquired; all mask work or similar rights available for
the protection of semiconductor chips, now owned or hereafter acquired; all
claims for damages by way of any past, present and future infringement of any of
the foregoing; and
7. 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 or
future infringement of any of the foregoing; provided Collateral shall include
the proceeds 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) 496-2426 TIME:________________________
- --------------------------------------------------------------------------------
FROM: PlaceWare, Inc.
----------------------------------------------------------------------
CLIENT NAME (BORROWER)
REQUESTED BY:_______________________________________________________________
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:_______________________________________________________
PHONE NUMBER:_______________________________________________________________
FROM ACCOUNT #___________________ TO ACCOUNT #_____________________________
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
-------------------------- ---------------------
PRINCIPAL INCREASE (ADVANCE) $_________________________
PRINCIPAL PAYMENT (ONLY) $_________________________
INTEREST PAYMENT (ONLY) $_________________________
PRINCIPAL AND INTEREST (PAYMENT) $_________________________
OTHER INSTRUCTIONS:_________________________________________________________
____________________________________________________________________________
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
Borrowing Certificate; 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 Phone #
________________________________ _________________________________
Received By (Bank) Phone #
________________________________
Authorized Signature (Bank)
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT C
BORROWING BASE CERTIFICATE
________________________________________________________________________________
Borrower: PlaceWare, Inc. Lender: 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. Outstanding under Sublimits () $__________
20. Outstanding under Sublimits (Letters of Credit) $__________
21. Outstanding under Sublimits (Foreign Exchange) $__________
22. RESERVE POSITION (#17 minus #18, #19, #20, and #21) $__________
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
-------------
Rec'd By:_______________
Auth. Signer
PLACEWARE, INC. Date:___________________
Verified:_______________
Auth. Signer
By:_________________________
Authorized Signer Date:___________________
________________________
--------------------------
<PAGE>
AGREEMENT TO PROVIDE INSURANCE
Grantor: PlaceWare, Inc. Bank: Silicon Valley Bank
================================================================================
INSURANCE REQUIREMENTS. PlaceWare, Inc. ("Grantor") understands that insurance
coverage is required in connection with the extending of a loan or the providing
of other financial accommodations to Grantor by Bank. These requirements are set
forth in the Loan Documents. The following minimum insurance coverages must be
provided on the following described collateral (the "Collateral"):
Collateral: All Inventory, Equipment and Fixtures.
Type: All risks, including fire, theft and liability.
Amount: Full insurable value.
Basis: Replacement value.
Endorsements: Loss payable clause to Bank with stipulation that
coverage will not be canceled or diminished without a
minimum of twenty (20) days' prior written notice to
Bank.
INSURANCE COMPANY. Grantor may obtain insurance from any insurance company
Grantor may choose that is reasonably acceptable to Bank. Grantor understands
that credit may not be denied solely because insurance was not purchased through
Bank.
FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Bank, on or before
closing, evidence of the required insurance as provided above, with an effective
date of March 11, 1999, or earlier. Grantor acknowledges and agrees that if
Grantor fails to provide any required insurance or fails to continue such
insurance in force, Bank may do so at Grantor's expense as provided in the Loan
and Security Agreement. The cost of such insurance, at the option of Bank, shall
be payable on demand or shall be added to the indebtedness as provided in the
security document. GRANTOR ACKNOWLEDGES THAT IF BANK SO PURCHASES ANY SUCH
INSURANCE, THE INSURANCE WILL PROVIDE LIMITED PROTECTION AGAINST PHYSICAL DAMAGE
TO THE COLLATERAL, UP TO THE BALANCE OF THE LOAN; HOWEVER, GRANTOR'S EQUITY IN
THE COLLATERAL MAY NOT BE INSURED. IN ADDITION, THE INSURANCE MAY NOT PROVIDE
ANY PUBLIC LIABILITY OR PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET THE
REQUIREMENTS OF ANY FINANCIAL RESPONSIBILITY LAWS.
AUTHORIZATION. For purposes of insurance coverage on the Collateral, Grantor
authorizes Bank to provide to any person (including any insurance agent or
company) all information Bank deems appropriate, whether regarding the
Collateral, the loan or other financial accommodations, or both.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT TO PROVIDE
INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED MARCH 11, 1999.
GRANTOR:
PLACEWARE, INC.
x /s/ Deborah Eudaley 3/12/99
----------------------------------
Authorized Officer
==========================================================================
FOR BANK USE ONLY
INSURANCE VERIFICATION
DATE: _____________________ PHONE: ___________________
AGENT'S NAME: _________________________________________________________
INSURANCE COMPANY: ____________________________________________________
POLICY NUMBER: ________________________________________________________
EFFECTIVE DATES: ______________________________________________________
COMMENTS: _____________________________________________________________
==========================================================================
<PAGE>
CORPORATE RESOLUTIONS TO BORROW
________________________________________________________________________________
Borrower: PlaceWare, Inc.
________________________________________________________________________________
I, the undersigned Secretary or Assistant Secretary of PlaceWare, Inc. (the
"Corporation"), HEREBY CERTIFY that the Corporation is organized and existing
under and by virtue of the laws of the State of DELAWARE.
I FURTHER CERTIFY that attached hereto as Attachments 1 and 2 are true and
complete copies of the Articles of Incorporation and Bylaws of the Corporation,
each of which is in full force and effect on the date hereof.
I FURTHER CERTIFY that at a meeting of the Directors of the Corporation,
duly called and held, at which a quorum was present and voting (or by other duly
authorized corporate action in lieu of a meeting), the following resolutions
were adopted.
BE IT RESOLVED, that any one (1) of the following named officers,
employees, or agents of this Corporation, whose actual signatures are shown
below.
NAMES POSITIONS ACTUAL SIGNATURES
- --------------------------------------------------------------------------------
Barry James Folsom CEO /s/ Barry James Folsom
- ---------------------- ----------------------- ------------------------
Deborah Eudaley CFO /s/ Deborah Eudaley
- ---------------------- ----------------------- ------------------------
Michael Jordan VP Engineering /s/ Michael Jordan
- ---------------------- ----------------------- ------------------------
acting for an on behalf of this Corporation and as its act and deed be, and they
hereby are, authorized and empowered:
Borrow Money. To borrow from time to time from Silicon Valley Bank
("Bank"), on such terms as may be agreed upon between the officers, employees,
or agents and Bank, such sum or sums of money as in their judgement should be
borrowed, without limitation, including such sums as are specified in that
certain Loan and Security Agreement dated as of March 11, 1999 (the "Loan
Agreement").
Execute Notes. To execute and deliver to Bank the promissory note or notes
of the Corporation on Lender's forms, at such rates of interest and on such
terms as may be agreed upon, evidencing the sums of money so borrowed or any
indebtedness of the Corporation to Bank, and also to execute and deliver to
Lender one or more renewals, extensions, modifications, refinancings,
consolidations, or substitutions for one or more of the notes, or any portion of
the notes.
Grant Security. To grant a security interest to Bank in the Collateral
described in the Loan Agreement, which security interest shall secure all of the
Corporation's Obligations, as described in the Loan Agreement.
Negotiate Items. To draw, endorse, and discount with Bank all drafts, trade
acceptances, promissory notes, or other evidences of indebtedness payable to or
belonging to the Corporation or in which the Corporation may have an interest,
and either to receive cash for the same or to cause such proceeds to be credited
to the account of the Corporation with Bank, or to cause such other disposition
of the proceeds derived therefrom as they may deem advisable.
Letters of Credit; Foreign Exchange. To execute letters of credit
applications, foreign exchange agreements and other related documents pertaining
to Bank's issuance of letters of credit and foreign exchange contracts.
Further Acts. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances thereunder, and in
all cases, to do and perform such other acts and things, to pay any and all fees
and costs, and to execute and deliver such other documents and agreements as
they may in their discretion deem reasonably necessary or proper in order to
carry into effect the provisions of these Resolutions.
1
<PAGE>
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these
resolutions and performed prior to the passage of these resolutions are hereby
ratified and approved, that these Resolutions shall remain in full force and
effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Bank. Any such notice
shall not affect any of the Corporation's agreements or commitments in effect at
the time notice is given.
I FURTHER CERTIFY that the officers, employees, and agents named above are
duly elected, appointed, or employed by or for the Corporation, as the case may
be, and occupy the positions set forth opposite their respective names; that
the foregoing Resolutions now stand of record on the books of the Corporation;
and that the Resolutions are in full force and effect and have not been modified
or revoked in any manner whatsoever.
IN WITNESS WHEREOF, I have hereunto set my hand on March 11, 1999, and
attest that the signatures set opposite the names listed above are their genuine
signatures.
CERTIFIED TO AND ATTESTED BY:
X /s/ Steven M. Spurlock
-------------------------------
================================================================================
Attachment 1 - Articles of Incorporation
Attachment 2 - Bylaws
2
<PAGE>
NEGATIVE PLEDGE AGREEMENT
This Negative Pledge Agreement is made as of March 11, 1999, by and between
PlaceWare, Inc. ("Borrower") and Silicon Valley Bank ("Silicon").
In connection with, among other documents, the Loan and Security Agreement
(the "Loan Documents") being concurrently executed herewith between Borrower and
Silicon, Borrower agrees as follows:
1. Borrower shall not, without the consent of Bank which will not be
unreasonably withheld, sell, transfer, assign, mortgage, pledge,
lease, grant a security interest in, or encumber any of Borrower's
intellectual property, including, without limitation, the following:
a. Any and all copyright rights, copyright applications, copyright
registrations and like protections in each work or authorship and
derivative work thereof, whether published or unpublished and
whether or not the same also constitutes a trade secret, now or
hereafter existing, created, acquired or held;
b. All mask works or similar rights available for the protection of
semiconductor chips, now owned or hereafter acquired;
c. Any and all trade secrets, and any and all intellectual property
rights in computer software and computer software products now or
hereafter existing, created acquired or held;
d. Any and all design rights which may be available to Borrower now
or hereafter existing, created, acquired or held;
e. All patents, patent applications and like protections including,
without limitation, improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the
same, including without limitation the patents and patent
applications;
f. Any trademark and servicemark rights, whether registered or not,
applications to register and registrations of the same and like
protections, and the entire goodwill of the business of Borrower
connected with and symbolized by such trademarks, including
without limitation;
g. Any and all claims for damages by way of past, present and future
infringements of any of the rights included above, with the
right, but not the obligation, to sue for and collect such
damages for said use or infringement of the intellectual property
rights identified above;
h. All licenses or other rights to use any of the Copyrights,
Patents, Trademarks or Mask Works, and all license fees and
royalties arising from such use to the extent permitted by such
license or rights; and
i. All amendments, extensions, renewals and extensions of any of the
Copyrights, Trademarks, Patents, or Mask Works; and
1
<PAGE>
j. All proceeds and products of the foregoing, including without
limitation all payments under insurance or any indemnity or
warranty payable in respect of any of the foregoing.
2. Notwithstanding the foregoing, Borrower may, in the ordinary course of
business, grant non-exclusive licenses for the use of its intellectual
property and develop intellectual property for the ownership of others
without any prior consent from Silicon.
3. It shall be an Event of Default under the Loan Documents between
Borrower and Silicon if there is a breach of any term of this Negative
Pledge Agreement.
4. Capitalized terms used but not otherwise defined herein shall have the
same meaning as in the Loan Documents.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
BORROWER:
PLACEWARE, INC.
By: /s/ Deborah Eudaley
--------------------------
Name: CFO
------------------------
Title: DEBORAH EUDALEY
-----------------------
SILICON:
SILICON VALLEY BANK
By: /s/ Chris Stedman
--------------------------
Name: Chris Stedman
------------------------
Title: AVP
-----------------------
2
<PAGE>
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of April 30, 1999, by
and between Placeware, Inc. ("Borrower") and Silicon Valley Bank ("Bank").
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Borrower and Bank are parties to,
------------------------------------
among other documents, a Loan and Security Agreement, dated March 11, 1999, as
may be amended from time to time, (the "Loan Agreement"). The Loan Agreement
provides for, among other things, a Committed Revolving Line in the original
principal amount of $750,000. 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.
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. Section 2.1.4 entitled "Cash Management Services Sublimit" is
hereby amended to read, in its entirety, as follows:
Cash Management Services Sublimit.
---------------------------------
Borrower may utilize up to an aggregate amount not to exceed
$150,000 for Cash Management Services provided by Lender, which
services will include the business credit card services as
defined in certain cash management service agreements provided to
Borrower from time to time in connection herewith (a "Cash
Management Service", or the "Cash Management Services"). All
amounts actually paid by Bank in respect of a Cash Management
Service or Cash Management Services shall, when paid, constitute
an Advance under the Committed Revolving Line.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
------------------
wherever necessary to reflect the changes described above.
5. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
-----------------------
below) agrees that, as of the date hereof, it has no defenses against the
obligations to pay any amounts under the Indebtedness.
6. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing
-------------------
below) 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
<PAGE>
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.
This Loan Modification Agreement is executed as of the date first written
above.
BORROWER: BANK:
PLACEWARE, INC. SILICON VALLEY BANK
By: By:
__________________________________ ________________________________
Name: Name:
________________________________ ______________________________
Title: Title:
_______________________________ _____________________________
2
<PAGE>
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of January 24, 2000, by
and between Placeware, Inc. ("Borrower") and Silicon Valley Bank ("Bank").
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Borrower and Bank are parties to,
------------------------------------
among other documents, a Loan and Security Agreement, dated March 11, 1999, as
may be amended from time to time, (the "Loan Agreement"). The Loan Agreement
provides for, among other things, a Committed Revolving Line in the original
principal amount of $750,000. 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.
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 following defined terms under Section 1.1 entitled
"Definitions" are hereby amended/incorporated as follows:
"Borrowing Base" means an amount equal to eighty percent 80% of
Eligible Accounts, as determined by Bank with reference to the
most recent Borrowing Base Certificate delivered by Borrower.
"Committed Revolving Line" means a credit extension of up to Two
Million Five Hundred Thousand Dollars ($2,500,000).
"Deferred Revenue" is all amounts received in advance of
performance under contracts and not yet recognized as revenue.
"Revolving Maturity Date" means January 24, 2001.
2. Sub letter (b) under Section 6.3 entitled "Financial Statements,
Reports, Certificates" is hereby amended as follows:
(b) as soon as available, but in any event within one hundred
twenty (120) 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;
3. The third paragraph under Section 6.3 entitled "Financial
Statements, Reports, Certificates" is hereby amended as follows:
<PAGE>
Bank shall have the right from time to time hereafter to audit
Borrower's Accounts and appraise Collateral at Borrower's
expense, provided that, such audits will be conducted no more
than every year unless an Event of Default has occurred and is
continuing. The initial audit shall take place within 30 days of
the date of this Agreement.
4. Section 6.9 entitled "Financial Covenants" is hereby incorporated
into the Agreement as follows:
6.9 Financial Covenants.
Borrower will maintain as of the last day of each month, unless
otherwise noted:
Quick Ratio (Adjusted). A ratio of Quick Assets to Current
Liabilities minus Deferred Revenue of at least 1.75 to 1.0.
Revenue (measured quarterly). A minimum revenue within 25% of
the projected financial plan submitted to Bank prior to January
31/st/ of each year as acceptable to Bank.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
------------------
wherever necessary to reflect the changes described above.
5. PAYMENT OF LOAN FEE. Borrower shall pay to Bank a fee in the amount of
-------------------
Twelve Thousand Five Hundred and 00/100 Dollars ($12,500.00) (the "Loan Fee").
6. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
-----------------------
below) agrees that, as of the date hereof, it has no defenses against the
obligations to pay any amounts under the Indebtedness.
7. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing
-------------------
below) 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.
8. CONDITIONS. The effectiveness of this Loan Modification Agreement is
----------
conditioned upon Borrower's payment of the Loan Fee.
This Loan Modification Agreement is executed as of the date first written
above.
BORROWER: BANK:
PLACEWARE, INC. SILICON VALLEY BANK
<PAGE>
By: By:
__________________________________ ________________________________
Name: Name:
________________________________ ______________________________
Title: Title:
_______________________________ _____________________________
<PAGE>
[LOGO]
SILICON VALLEY BANK
PRO FORMA INVOICE FOR LOAN CHARGES
BORROWER: PLACEWARE, INC.
LOAN OFFICER: Chris Stedman
DATE: December 22, 1999
Loan Fee $12,500.00
Documentation Fee $ 250.00
TOTAL FEE DUE $12,750.00
------------- ==========
Please indicate the method of payment:
{ } A check for the total amount is attached.
{X} Debit DDA #3300032324 for the total amount.
-----------
- ---------------------------------------
Authorized Officer (Date)
- ---------------------------------------
Silicon Valley Bank (Date)
Account Officer's Signature
<PAGE>
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
Corporation: PLACEWARE, INC.
Number of Shares: see below
Class of Stock: see below
Initial Exercise Price: see below
Issue Date: March 11, 1999
Expiration Date: March 11, 2007
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for other
good and valuable consideration, unless on or before July 1, 1999 (i) the
corporation (the "Company") provides Bank with a Lead Investor Term Sheet or
(ii) the Equity Event occurs (both "Lead Investor Term Sheet" and "Equity.
Event" shall be as defined in that certain Loan and Security Agreement between
the Company and the Holder, dated as of the Issue Date (the "Loan Agreement")),
then, once any Advances (as defined in the Loan Agreement) have been made and
prior to the Expiration Date, Silicon Valley Bank ("Holder") is entitled to
purchase the number of fully paid and nonassessable shares of the class of
securities (the "Shares") of the corporation at the Initial Exercise Price per
share (the "Warrant Price") all as set forth herein and as adjusted pursuant to
Article 2 of this Warrant, subject to the provisions and upon the terms and
conditions set forth in this Warrant.
The Warrant Price shall be equal to the price per share at which the company,
after the date hereof, first sells its equity securities in an offering or
series of related offerings in which the net proceeds to the Company is not less
than Four Million Dollars (such offering being the "Next Round", and the price
per share at which the company sells such securities being the "Next Round
Price"), and the shares shall be of the class of securities issued in the Next
Round; provided that if the Next Round is not completed on or before March 11,
2000, the Warrant Price shall be the Next Round Price or the lowest price per
share at which the Company has sold any shares of its Series B, whichever is
less, and the shares shall be Series B. On July 1, 1999, if exercisable, this
Warrant shall be exercisable for a number of Shares equal to the quotient
derived by dividing $22,500 by the Warrant Price.
Notwithstanding the foregoing, on the 1st of each month beginning on August 1,
1999 and continuing until the Equity Event occurs or all the Company's
Obligations (as defined in the Loan Agreement) under the Loan Agreement are
satisfied, this Warrant shall be exercisable for an additional number of Shares
equal to the quotient derived by dividing $7,500 by the Warrant Price. The
number of shares for which this Warrant shall be exercisable shall increase by
such amount each month but shall in no event exceed the quotient derived by
dividing $45,000 by the Warrant Price.
<PAGE>
ARTICLE 1. EXERCISE.
---------
1.1 Method of Exercise. Holder may exercise this Warrant by delivering a
------------------
duly executed Notice of Exercise in substantially the form attached as Appendix
1 to the principal office of the Company. Unless Holder is exercising the
conversion right set forth in Section 1.2, Holder shall also deliver to the
Company a check for the aggregate Warrant Price for the Shares being purchased.
1.2 Conversion Right. In lieu of exercising this Warrant as specified in
----------------
Section 1.1, Holder may from time to time convert this Warrant, in whole or in
part, into a number of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon exercise
of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share. The fair market value of the Shares shall be
determined pursuant Section 1.4.
1.3 No Rights of Shareholder. This Warrant does not entitle Holder to
------------------------
any voting rights as a shareholder of the Company prior to the exercise hereof.
1.4 Fair Market Value. If the Shares are traded in a public market, the
-----------------
fair market value of the Shares shall be the closing price of the Shares (or the
closing price of the Company's stock into which the Shares are convertible)
reported for the business day immediately before Holder delivers its Notice of
Exercise to the Company. If the Shares are not traded in a public market, the
Board of Directors of the Company shall determine fair market value in its
reasonable good faith judgement. The foregoing notwithstanding, if Holder
advises the Board of Directors in writing that Holder disagrees with such
determination, then the Company and Holder shall promptly agree upon a reputable
investment banking or public accounting firm to undertake such valuation. If the
valuation of such investment banking firm is greater than that determined by the
Board of Directors, then all fees and expenses of such investment banking firm
shall be paid by the Company. In all other circumstances, such fees and expenses
shall be paid by Holder.
1.5 Delivery of Certificate and New Warrant. Promptly after Holder
---------------------------------------
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.6 Replacement of Warrants. On receipt of evidence reasonably
-----------------------
satisfactory the Company of the loss, theft, destruction or mutilation of this
Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
1.7 Repurchase on Sale, Merger, or Consolidation of the Company.
-----------------------------------------------------------
1.7.1 "Acquisition". For the purpose of this Warrant,
-----------
"Acquisition" means any sale, license, or other disposition of all or
substantially all of the assets of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.
1.7.2 Assumption of Warrant. Upon the closing of any Acquisition the
---------------------
successor entity shall assume the obligations of this Warrant, and this Warrant
shall be exercisable for the same
2
<PAGE>
securities, cash, and property as would be payable for the Shares issuable upon
exercise of the unexercised portion of this Warrant as if such Shares were
outstanding on the record date for the Acquisition and subsequent closing. The
Warrant Price shall be adjusted accordingly.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
-------------------------
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a
----------------------------
dividend on its common stock payable in common stock, or other securities,
subdivides the outstanding common stock into a greater amount of common stock,
then upon exercise of this Warrant, for each Share acquired, Holder shall
receive, without cost to Holder, the total number and kind of securities to
which Holder would have been entitled had Holder owned the Shares of record as
of the date the dividend or subdivision occurred.
2.2 Reclassification, Exchange or Substitution. Upon any
------------------------------------------
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. The Company or its successor shall promptly issue to Holder a new
Warrant for such new securities or other property. The new Warrant shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 2 including, without limitation,
adjustments to the Warrant Price and to the number of securities or property
issuable upon exercise of the new Warrant. The provisions of this Section 2.2
shall similarly apply to successive reclassifications, exchanges, substitutions,
or other events.
2.3 Adjustments for Combinations, Etc. If the outstanding Shares are
---------------------------------
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased.
2.4 Adjustments for Diluting Issuances. The number of shares of common
----------------------------------
stock issuable upon conversion of the Shares shall be subject to adjustment,
from time to time in the manner set forth in the Company's Amended and Restated
Articles of Incorporation in effect on the Issue Date.
2.5 No Impairment. The Company shall not, by amendment of its Articles
-------------
of Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out of all the provisions of this Article 2 and
in taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment.
2.6 Fractional Shares. No fractional Shares shall be issuable upon
-----------------
exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share interest
arises upon any exercise or conversion of the Warrant, the Company shall
eliminate such fractional share interest by paying Holder amount computed by
multiplying the fractional interest by the fair market value of a full Share.
2.7 Certificate as to Adjustments. Upon each adjustment of the Warrant
-----------------------------
Price, the Company at its expense shall promptly compute such adjustment, and
furnish Holder with a certificate of its Chief Financial Officer setting forth
such adjustment and the facts upon which such adjustment is based. The
3
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Company shall, upon written request, furnish Holder a certificate setting forth
the Warrant Price in effect upon the date thereof and the series of adjustments
leading to such Warrant Price.
ARTICLE 3. REPRESENTATIONS AND CONVENANTS OF THE COMPANY.
---------------------------------------------
3.1 Representations and Warranties. The Company hereby represents and
------------------------------
warrants to the Holder that all Shares which may be issued upon the exercise of
the purchase right represented by this Warrant, and all securities, if any,
issuable upon conversion of the Shares, shall, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable, and free of any liens
and encumbrances except for restrictions on transfer provided for herein or
under applicable federal and state securities laws. The Company shall at all
times reserve a sufficient number of shares of stock for issuance upon Holder's
exercise of its rights hereunder.
3.2 Notice of Certain Events. If the Company proposes at any time (a) to
------------------------
declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock; (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (e) offer holders of registration rights the opportunity
to participate in an underwritten public offering of the company's securities
for cash, then, in connection with each such event, the Company shall give
Holder (1) at least 10 days prior written notice of the date on which a record
will be taken for such dividend, distribution, or subscription rights (and
specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least 10 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in the (e) above, the same notice as is given to the
holders of such registration rights.
3.3 Information Rights. So long as the Holder holds this Warrant and/or
------------------
any of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within ninety (90) days after the end of each
fiscal year of the Company, the annual financial statements of the Company.
3.4 Registration Under Securities Act of 1933, as amended. The Company
-----------------------------------------------------
hereby grants to Holder the same piggyback registration rights granted to the
purchasers of the Series B Preferred Stock.
ARTICLE 4. MISCELLANEOUS.
-------------
4.1 Term. This Warrant is exercisable, in whole or in part, at any time
----
and from time to time on or before the Expiration Date set forth above.
4.2 Legends. This Warrant and the Shares (and the securities issuable,
-------
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
4
<PAGE>
WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO
RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 Compliance with Securities Laws on Transfer. This Warrant and the
-------------------------------------------
Shares issuable upon exercise this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, as reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to an affiliate of Holder or if there is
no material question as to the availability of current information as referenced
in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e)
in reasonable detail, the selling broker represents that it has complied with
Rule 144(f), and the Company is provided with a copy of Holder's notice of
proposed sale.
4.4 Transfer Procedure. Subject to the provisions of Section 4.2. Holder
------------------
may transfer all or part of this Warrant or the Shares issuable upon exercise of
this Warrant (or the securities issuable, directly or indirectly, upon
conversion of the Shares, if any) by giving the Company notice of the portion of
the Warrant being transferred setting forth the name, address and taxpayer
identification number of the transferee and surrendering this Warrant to the
Company for reissuance to the transferee(s) (and Holder if applicable). Unless
the Company is filing financial information with the SEC pursuant to the
Securities Exchange Act of 1934, the Company shall have the right to refuse to
transfer any portion of this Warrant to any person who directly competes with
the Company.
4.5 Notices. All notices and other communications from the Company to
-------
the Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such holder from time
to time.
4.6 Waiver. This Warrant and any term hereof may be changed, waived,
------
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
4.7 Attorneys Fees. In the event of any dispute between the parties
--------------
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorney's fees.
4.8 Governing Law. This Warrant shall be governed by and construed in
-------------
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
PLACEWARE, INC
By: [ILLEGIBLE]^^
------------------------------
Title: CFO
---------------------------
5
<PAGE>
APPENDIX 1
NOTICE OF EXERCISE
------------------
1. The undersigned hereby elects to purchase _________ shares of the
Stock of ______________________________ pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full.
1. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This conversion
is exercised with respect to ____________________________of the Shares covered
by the Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name as is specified below:
_____________________________
(Name)
_____________________________
_____________________________
(Address)
3. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.
________________________________
(Signature)
_________________________
(Date)
6
<PAGE>
EXHIBIT 10.11
LINC CAPITAL, INC. LINC Capital, Inc.
MASTER LEASE AGREEMENT 303 East Wacker Drive, #1000
Chicago, Illinois 60601
Lessee: PLACEWARE, INC. (312) 946-1000
Address: 201 Ravendale Drive, Master Lease Agreement No. 7336
Mountain View, CA 94043 Date: May 3, 1999
LINC Capital, Inc. ("Lessor") hereby leases to Lessee and Lessee leases from
Lessor, in accordance with the terms and conditions hereinafter set forth, the
equipment and property purchased by Lessor for lease to the Lessee hereunder
together with all replacement parts, additions, accessories, alterations and
repairs incorporated therein or now or hereafter affixed thereto Add-on Items
(as defined herein) (herein collectively referred to as the "Equipment")
described in each Schedule which may be executed by Lessor and Lessee from time
to time (individually a "Schedule" and collectively, the "Schedules"), each of
which is made a part hereof. For all purposes of this Master Lease Agreement
("Lease"), each Schedule relating to one or more items of Equipment shall be
deemed a separate lease incorporating all of the terms and provisions of this
Lease. In the event of a conflict between the terms of this Lease and the terms
and conditions of an Schedule, the terms and conditions of the Schedule shall
govern and control that Schedule.
1. Term and Rental. The term of this Lease (the "Initial Lease Term") for any
item of Equipment shall be set forth in the Schedule relating to such item of
Equipment and shall commence (the "Commencement Date") on the Acceptance Date.
The "Acceptance Date" with respect to each Schedule shall be the applicable of
either: (1) the date of delivery to Lessee of all of the Equipment to be leased
thereunder; (2) in the case of Equipment which is the subject of a sale and
leaseback between Lessor and Lessee, the date upon which Lessor purchases such
Equipment from Lessee: or (3) in the case of Equipment requiring installation,
the date of installation of the Equipment. If the Acceptance Date is other than
the first day of a calendar quarter, then the Commencement Date of the Initial
Lease Term set forth in any Schedule shall be the first day of the calendar
quarter following the month which includes the Acceptance Date and Lessee shall
pay to Lessor, in addition to all other sums due hereunder, an amount equal to
one-thirtieth of the amount of the average monthly rental payment due or to
become due hereunder multiplied by the number of days from and including the
Acceptance Date to the Commencement Date of the Initial Lease Term set forth in
the Schedule. During the entire Initial Lease Term and any extension or renewal
of the term of this Lease, Lessee agrees to pay the total rental due hereunder
which shall be the total amount of all rental payments set forth in the Schedule
plus such additional amounts as may become due hereunder or pursuant to any
written modification hereof or additional written agreement hereto. Except as
otherwise specified in the Schedule, rental payments payable hereunder shall be
due monthly and shall be payable in advance on the first day of each month
during the term of this Lease beginning with the Commencement Date of the
Initial Lease Term. All rental payments due hereunder shall be sent to the
address of the Lessor specified in this Lease or in the Schedule or as otherwise
directed by the Lessor in writing. Rental payments or any other payments due
hereunder not made by their scheduled due date shall be overdue and shall be
subject to a service charge in an amount equal to two percent (2%) per month or
the maximum rate permitted by law whichever is less (the "Service Charge Rate")
applied to amount of the overdue payments from the date due until paid. If
Lessor shall at any time accept a rental payment after it shall become due, such
acceptance shall not constitute or be construed as a waiver of any or all of
Lessor's rights hereunder, including without limitation those rights of Lessor
set forth in Sections 12 and 13 hereof.
2. Title. This is an agreement of lease only. Except as otherwise provided in
any applicable Schedule, Lessee shall have no right, title or interest in or to
the Equipment leased hereunder, except as to the lawful use thereof subject to
the terms and conditions of this Lease. All of the Equipment shall remain
personal property (whether or not the Equipment may at any time become attached
or affixed to real property). The Equipment is and shall remain the sole and
exclusive property of Lessor or its assignees. All replacement parts,
modifications, repairs, alterations, additions and accessories now or hereafter
incorporated in or affixed to the Equipment whether before or after the
Commencement Date (herein collectively called "Add-on Items") are hereby
included in the definition of "Equipment". All Add-on Items shall become the
property, of Lessor upon being so incorporated or affixed to the Equipment and
shall be returned to Lessor as provided in Section 3 (other than alterations,
additions and accessions that are attached or affixed by Lessee with notice to
Lessor after the Commencement Date for which the Lessor has not given value or
purchased and which are readily removable by Lessee from the Equipment without
any diminution of value or functionality to the Equipment). Upon the request of
Lessor, Lessee will affix to the Equipment labels or other markings supplied by
Lessor indicating its ownership of the Equipment and shall keep the same affixed
for the entire term of this Lease. Lessee agrees to promptly execute and deliver
or cause to be executed and delivered to Lessor and Lessor is hereby authorized
to record or file, any statement and/or instrument reasonably requested by
Lessor for the purpose of showing Lessor's interest in the Equipment, including
without limitation, financing statements, security agreements, and waivers with
respect to rights in the Equipment from any owners or mortgagees of any real
estate where the Equipment may be located. In the event that Lessee fails or
refuses to execute and/or file Uniform Commercial Code financing statements or
other instruments or recordings which Lessor or its assignee reasonably deems
necessary to perfect or maintain perfection of Lessor's or its assignee's
interests hereunder. Lessee hereby appoints Lessor as Lessee's limited attorney-
in-fact to execute and record all documents necessary to perfect or maintain the
perfection of Lessor's interests hereunder. Lessee shall pay Lessor for any
costs or fees relating to any filings hereunder including, but not limited to
actual out of pocket costs, fees, searches, documentation preparation,
documentary stamps, privilege taxes and reasonable attorneys' fees. If any item
of Equipment includes computer software purchased by Lessor or for which Lessor
has given Lessee value, Lessee shall upon request made by Lessor, execute and
deliver and shall cause Seller (as hereinafter defined) to deliver all such
documents as are necessary to effectuate assignment of all software licenses to
Lessor.
3. Acceptance and Return of Equipment. Lessor shall, at any time prior to
unconditional acceptance of all Equipment by Lessee, have the right to cancel
this Lease with respect to such Equipment (and if the Equipment or any portion
thereof has not previously been delivered, Lessor may refuse to pay for the
Equipment or any portion thereof or refuse to cause the same to be delivered)
if: (a) the Acceptance Date with respect to any item of Equipment to be leased
pursuant to any Schedule has not occurred within ninety (90) days of the
estimated Acceptance Date set forth in such Schedule or (b) there shall be, in
the reasonable judgment of Lessor, a material adverse change in the financial
condition or credit standing of Lessee or of any guarantor of Lessee's
performance under this Lease since the date of the most recent financial
statements of Lessee or of such guarantor submitted to Lessor. Upon any
cancellation by Lessor pursuant to this Section or the provisions of any
Schedule, Lessee shall forthwith reimburse to Lessor all sums paid by Lessor
with respect to such Equipment plus all costs and expenses of Lessor incurred in
connection with such Equipment and any interest or rentals due hereunder in
connection with such Equipment and shall pay to Lessor all other sums then due
hereunder, whereupon if Lessee is not then in default and has fully performed
all of its obligations hereunder, Lessor will, upon request of Lessee, transfer
to Lessee without warranty or recourse any rights that Lessor may then have with
respect to such Equipment.
Lessee agrees to promptly execute and deliver to Lessor (in no event later than
15 days after the Acceptance Date) a confirmation by Lessee of unconditional
acceptance of the Equipment in the form supplied by Lessor (the "Equipment
Acceptance"). Lessee agrees, before execution of the aforesaid Equipment
Acceptance, to inform Lessor in writing of any defects in the Equipment, or in
the installation thereof, which have come to the attention of
1
<PAGE>
Lessee or its agents and which might give rise to a claim by Lessee against the
Seller or any other person. If Lessee fails to give notice to Lessor of any such
defects or fails to deliver to Lessor the Equipment Acceptance as provided
herein, it shall be deemed an acknowledgment by Lessee (for purposes of this
Lease only) that no such defects in the Equipment or its installation exist and
it shall be conclusively presumed, solely as between Lessor and its assignees
and Lessee, that such Equipment has been unconditionally accepted by Lessee xxx
hereunder.
Except as otherwise provided in any Schedule, upon expiration or the
cancellation or termination of the Lease with respect to any Equipment, Lessee
shall return the Equipment to Lessor as provided herein. Lessee shall provide
Lessor with not less than ninety (90) days prior written notice of its intention
to return the Equipment upon expiration of the Initial Lease Term. Upon
expiration or the cancellation or termination of the Lease with respect to any
Equipment, Lessee shall, at its own expense, assemble, crate, insure and deliver
all of the Equipment and all of the service records and all software and
software documentation subject to this Lease and any Schedules hereto to Lessor
in the same good condition and repair as when received, reasonable wear and tear
resulting only from proper use thereof excepted, to such reasonable destination
within the continental United States as Lessor shall designate with all packing,
drayage and freight charges to the return destination designated by Lessor pre-
paid by Lessee with evidence of transit insurance on all items of Equipment at
no less than their estimated fair market value as specified by Lessor. Lessee
shall, immediately prior to such return of each item of Equipment or commercial
unit of Equipment, provide to Lessor a letter from the manufacturer of the
equipment or another service organization reasonably acceptable to Lessor
certifying that said item is in good working order, with reasonable wear and
tear resulting only from proper use thereof excepted, whether such item is
eligible for a maintenance agreement by such manufacturer, and all software and
related attachments are included thereon. If any computer software requires
relicensing when removed from Lessee's premises, Lessee shall bear all costs of
such relicensing. Except as otherwise expressly provided in the Schedule, if
Lessee fails for any reason to provide the notice set forth above or Lessee
fails to redeliver the Equipment back to Lessor in accordance with the terms set
forth above, Lessee shall pay to Lessor, at Lessor's election, an amount equal
to the highest monthly payment set forth in the Schedule for a period of not
less than three (3) months and at the end of such period of time ("Holdover
Period"). Except as otherwise expressly provided in the Schedule, if Lessee
fails or refuses to return the Equipment as provided herein at the end of any
Holdover Period, Lessee shall pay to Lessor, at Lessor's option, an amount equal
to the highest monthly rental payment set forth in the Schedule for each month
or portion thereof, until Lessee so returns the Equipment to Lessor. Should
Lessor permit use by Lessee of any Equipment beyond the Initial Lease Term, or,
if applicable, any exercised extension or renewal term, the lease obligations of
Lessee shall continue and such permissive use shall not be construed as a
renewal of the term thereof, or as a waiver of any right or continuation of any
obligation of Lessor hereunder, and Lessor may take possession of any such
Equipment at any time upon demand.
4. Disclaimer of Warranties. LESSEE HAS EXCLUSIVELY SELECTED AND CHOSEN THE
TYPE, DESIGN, CONFIGURATION, SPECIFICATION AND QUALITY OF THE EQUIPMENT HEREIN
LEASED AND THE VENDOR, DEALER, SELLER, MANUFACTURER OR SUPPLIER THEREOF (HEREIN
COLLECTIVELY CALLED "SELLER"), AS SET FORTH IN THE SCHEDULES. LESSOR MAKES NO
REPRESENTATION OR WARRANTY, EITHER EXPRESS OR IMPLIED, AS TO ANY MATTER
WHATSOEVER, INCLUDING WITHOUT LIMITATION, THE CONDITION OF THE EQUIPMENT, ITS
MERCHANTABILITY OR ITS FITNESS, ADAPTABILITY, ANY IMPLIED WARRANTY OF QUIET
ENJOYMENT OR NON-INTERFERENCE OR SUITABILITY FOR ANY PARTICULAR PURPOSE, AND,
LESSEE LEASES, HIRES AND RENTS THE EQUIPMENT AS IS, WHERE IS." Lessee
understands and agrees that neither Seller, nor any agent of Seller, is an agent
of Lessor or is in any manner authorized to waive or after any term or condition
of this Lease. Lessor shall not be liable for any loss or damage suffered by
Lessor or by any other person or entity, direct or indirect or consequential,
including, but not limited to, business interruption and injury to persons or
property, resulting from non-delivery or late deliver, installation, failure or
faulty operation, condition, suitability or use of the Equipment leased by
Lessee hereunder, or for any failure of any representations, warranties or
covenants made by the Seller. Any claims of Lessee, with respect to claims
discussed in the preceding sentences, shall not be made against Lessor but shall
be made, if at all, solely and exclusively against Seller, or any persons other
than the Lessor. Lessor hereby authorizes Lessee to enforce during the term of
this Lease, in its name, but at Lessee's sole effort and expense, all
warranties, agreements or representations, if any, which may have been made by
Seller to Lessor or to Lessee, and Lessor hereby assigns to Lessee solely for
the limited purpose of making and prosecuting any such claim, all rights which
Lessor may have against Seller for breach of warranty, or other representation
respecting the Equipment.
5. Care, Transfer and Use of Equipment. Lessee, at its own expense, shall
maintain the Equipment in good operating condition, repair and appearance in
accordance with Seller's specifications and in compliance with all laws and
regulations applicable to the Equipment, Lessee and its business and shall
protect the Equipment from deterioration except for reasonable wear and tear
resulting only from proper use thereof. When generally offered with respect to
the Equipment, Lessee shall, at its expense, keep a maintenance contract in full
force and effect, throughout the term of this Lease and any Schedule hereto
unless otherwise agreed on the Schedule. The disrepair or inoperability of the
Equipment regardless of the cause thereof shall not relieve Lessee of the
obligation to pay rental hereunder. Lessee shall not make any modification,
alteration or addition to the Equipment (other than normal operating accessories
or controls). Lessee will not, and will not permit anyone other than the
authorized field engineering representatives of Seller or other maintenance
organization reasonably acceptable to Lessor to effect any inspection,
adjustment, preventative or remedial maintenance or repair to the Equipment.
Lessee may not (a) relocate or operate the Equipment at locations other than the
premises of Lessee specified in the applicable Schedule (the "Premises"), except
with Lessor's prior written consent, which shall not be unreasonably withheld if
such other location within the continental United States, or (b) SELL, CONVEY,
TRANSFER, ENCUMBER, PART WITH POSSESSION OF, OR ASSIGN ANY ITEM OF EQUIPMENT OR
ANY OF ITS RIGHTS HEREUNDER, AND ANY SUCH PURPORTED TRANSACTION SHALL BE NULL
AND VOID AND OF NO FORCE OR EFFECT. In the event of a relocation of the
Equipment or any item thereof to which Lessor consents, all costs (including any
additional property taxes or other taxes and any additional expense of insurance
coverage) resulting from any such relocation, shall be promptly paid by Lessee
upon presentation to Lessee of evidence supporting such cost. Lessor shall have
the right during normal hours upon reasonable notice to Lessee, subject to
applicable laws and regulations, to enter Lessee's Premises in order to inspect,
observe, affix labels or other markings, or to exhibit the Equipment to
prospective purchasers or future lessees thereof, or to otherwise protect
Lessor's interest therein.
6. Net Lease. THIS LEASE AND ANY SCHEDULE HERETO IS A NET LEASE, AND ALL
PAYMENTS HEREUNDER ARE NET TO LESSOR. All taxes, assessments, licenses, and
other charges (including, without limitation personal property taxes and sales
taxes, use taxes, leasing taxes and all other taxes based on gross receipts) and
penalties and interest on such taxes imposed, levied or assessed on the
ownership, possession, rental or use of the Equipment during the term of this
Lease and any Schedule hereto (except for Lessor's federal or state net income
taxes) shall be paid by Lessee when due and before the same shall become
delinquent, whether such taxes are assessed or would ordinarily be assessed
against Lessor or Lessee. To the extent possible under applicable law, for
personal property or ad valorem tax return purposes only, Lessee shall include
the Equipment on such reports and returns as may be required by local law, which
returns shall be timely filed by it. Lessee shall provide Lessor with evidence
that Lessee has complied with the foregoing provisions. In any event, Lessee
shall file all tax returns required for itself or Lessor with respect to the
Equipment and this Lease and Lessor hereby appoints Lessee as its attorney-in-
fact for such purpose. In case of failure by Lessee to so pay said taxes,
assessments, licenses or other charges, Lessor may pay all or any part of such
items, in which event the
2
<PAGE>
amount so paid, by Lessor including any interest or penalties thereon and
reasonable attorneys' fees incurred by Lessor in pursuing its rights against
Lessee or defending against any claims or defenses asserted by or through Lessee
shall be immediately paid by Lessee to Lessor as additional rental hereunder.
Lessee shall promptly pay all costs, expenses and obligations of every kind and
nature incurred in connection with the use or operation of the Equipment which
may arise or become due during the term of this Lease and any Schedule hereto,
whether or not specifically mentioned herein. In case of failure by Lessee to
comply with any provision of this Lease and any Schedule hereto, Lessor shall
have the right, but not the obligation, to effect such compliance on behalf of
Lessee. In such event, all costs and expenses incurred by Lessor in effecting
such compliance shall be immediately payable by Lessee to Lessor as additional
rental hereunder.
7. Indemnity. Lessee shall at its expense: (i) indemnify, protect and defend
Lessor's title to the Equipment from and against all persons claiming against or
through Lessee; (ii) at all times keep the Equipment then subject to this Lease
free from any and all liens, encumbrances, attachments, levies, executions,
burdens, charges or legal process of any and every type whatsoever; (iii) give
Lessor immediate written notice of any breach of this Lease described in clause
(ii); and (iv) indemnify, protect and save Lessor harmless from any loss, cost
or expense (including reasonable attorneys' fees) caused by the Lessee's breach
of any of the provisions of this Lease, whether incurred by Lessor in pursuing
its rights against Lessee or defending against any claims or defenses asserted
by or through Lessee. Lessee shall and does hereby agree to indemnify, defend
and hold Lessor and its assigns harmless from and against any and all liability,
loss, costs, injury, damage, penalties, suits, judgements, demands, claims,
expenses and disbursements (including without limitation, reasonable attorneys'
fees incurred by Lessor in pursuing its rights against Lessee or defending
against any claims or defenses asserted by or through Lessee) of any kind
whatsoever arising out of, on account of, or in connection with this Lease and
the Equipment leased hereunder, including, without limitation, its manufacture,
selection, purchase, delivery, rejection, installation, ownership, possession,
leasing, renting, operation, control, use, maintenance and the return thereof
except for any such claims damages from Lessor's gross negligence or willful
misconduct. This indemnity shall survive the Initial Lease Term or earlier
cancellation or termination of this Lease and any Schedule hereto.
8. Insurance. Commencing on the date that risk of loss or damage passes to
Lessor from the Seller of any Equipment covered under this Lease and continuing
until Lessee has re-delivered possession of the Equipment to Lessor, Lessee
shall, at its own expense, keep the Equipment (including all Add-on Items
thereto) insured against all risks of loss or damage from every and any cause
whatsoever in such amounts (but in no event less than the greater of the
replacement value thereof or the amount set forth in any applicable Casualty
Schedule, whichever is higher) with such deductibles and exclusions as approved
by Lessor and in such form as is reasonably satisfactory to Lessor. All such
insurance policies shall protect Lessor and Lessor's assignee(s) as loss payees
as their interests may appear. Lessee shall also, at its own expense, carry
public liability insurance, with Lessor and Lessor's assignee(s) as an
additional insured, in such amounts with such companies and in such form as is
reasonably satisfactory to Lessor, with respect to injury to person or property
resulting from or based in any way upon or in any way connected with or relating
to the installation, use or alleged use, or operation of any or all of the
Equipment, or its location or condition.
Not less than ten days prior to the Acceptance Date, Lessee shall deliver to
Lessor satisfactory evidence of such insurance and shall further deliver
evidence of renewal of each such policy not less than thirty (30) days prior to
expiration thereof. Each such policy shall contain an endorsement providing that
the insurer will give Lessor not less than thirty (30) days prior written notice
of the effective date of any alteration, change, cancellation, or modification
of such policy or the failure by Lessee to timely pay all required premiums,
costs or charges with respect thereto. Upon Lessor's request, Lessee shall cause
its insurance agent(s) to execute and deliver to Lessor Loss Payable Clause
Endorsement and Additional Insured Endorsement (bodily injury and property
damage liability insurance) forms provided to Lessee by Lessor. In case of the
failure to procure or maintain such insurance, Lessor shall have the right but
not the obligation, to obtain such insurance and any premium paid by Lessor
shall be immediately due and payable by Lessee to Lessor as additional rent
hereunder. The maintenance of any policy or policies of insurance pursuant to
this Section shall not limit any obligation or liability of Lessee pursuant to
Sections 7 or 9 or any other provision of this Lease and any Schedule hereto.
9. Risk of Loss. Until such time as the Equipment is returned and delivered to
and accepted by Lessor at the expiration of this Lease, pursuant to the terms of
this Lease and any Schedule hereto, Lessee hereby assumes and shall bear the
entire risk of loss, damage, theft and destruction of the Equipment, or any
portion thereof, from any cause whatsoever ("Equipment Loss"). Without
limitation of the foregoing, no Equipment Loss shall relieve Lessee in any way
from its obligations hereunder. Lessee shall promptly notify, Lessor in writing
of any Equipment Loss. In the event of any such Equipment Loss, Lessee shall:
(a) in the event Lessor determines such Equipment to be repairable, promptly
place, at Lessee's expense, the Equipment in good repair, condition and working
order in accordance with Seller's specifications and to the satisfaction of
Lessor; or (b) in the event of an actual or constructive total loss of any item
of Equipment, at Lessor's option: (i) promptly replace, at Lessee's expense, the
Equipment with like equipment of the same or a later model with the same Add-on
Items as the Equipment. and in good repair, condition and working order in
accordance with the Seller's specifications and to the satisfaction of Lessor;
or (ii) immediately pay to Lessor the amount obtained by multiplying the actual
Equipment Cost as specified in the applicable Schedule by the percentage
contained in any applicable Casualty Schedule for the date of such Equipment
Loss plus, any unpaid rentals or any amounts due hereunder.
If no Casualty Schedule has been made a part of any applicable Schedule, an
amount equal to the present value of the total amount of unpaid rentals and all
other amounts due and to become due under any applicable Schedule during the
term thereof as of the date of any payment, discounted at a rate equal to
discount rate of the Federal Reserve Bank of Chicago as of the Commencement Date
of the Lease with respect to each applicable Schedule shall be paid to Lessor by
Lessee, plus an additional amount equal to the estimated fair market value of
the Equipment at the end of the Initial Lease Term applicable to such Equipment
(the "End of Term Value"). In no event shall the amount of such End of Term
Value for the Equipment be less than twenty percent (20%) of the actual cost of
the Equipment unless a purchase option is granted (or other end of term payment
is required) under this Lease for other than the fair market value of the
Equipment then the actual amount of such Purchase Option Price (or other end of
term payment) specified in the applicable Equipment Schedule shall be due and
payable to Lessor as the End of Term Value under this section or such lesser or
greater amount specified in the applicable Schedule.
In the event Lessee is required to repair or replace any such item of Equipment
pursuant to Subsections (a) or (b)(i) of the preceding sentence, the insurance
proceeds received by Lessor, if any, pursuant to Section 8, after the use of
such funds to pay any unpaid amounts then due hereunder, shall be paid to Lessee
or, if applicable, to a third party repairing or replacing the Equipment upon
Lessee's furnishing proof reasonably satisfactory to Lessor that such repair or
replacement has been completed in a reasonably satisfactory manner. In the event
Lessor elects option (b)(ii), Lessee shall be entitled to a credit against the
payment required by said Subsection in an amount equal to such insurance
proceeds actually received by Lessor pursuant to Section 8 on account of such
Equipment, and, upon payment by Lessee to Lessor of all of the sums required
pursuant to Subsection (b)(ii), the applicable Schedule shall terminate with
respect to such item of Equipment and Lessee shall be entitled to whatever
interest Lessor may have in such item AS IS, WHERE IS and WITH ALL FAULTS in its
then condition and location without warranties of any type whatsoever, express
or implied.
10. Covenants of Lessee. Lessee agrees that its obligations under this Lease
and any Schedule hereto, including without limitation, the obligation to pay
rental, are irrevocable and absolute, shall not abate for any reason whatsoever
(including any claims against Lessor), and shall continue in full force and
effect regardless of any inability of Lessee to use the Equipment or any part
thereof for any reason whatsoever including,
3
<PAGE>
without limitation, war, act of God, storms, governmental regulations, strike or
other labor troubles, loss, damage, destruction, disrepair, obsolescence,
failure of or delay in delivery of the Equipment, or failure of the Equipment to
properly operate for any cause. In the event of any alleged claim (including a
claim which would otherwise be in the nature of a set-off) against Lessor,
Lessee shall fully perform and pay its obligations hereunder (including the
payment of all rents, without set-off or defense of XXX) and its only exclusive
recourse against Lessor shall be by a separate action. Lessee agrees to furnish
promptly to Lessor the annual financial statements of Lessee (and of any
guarantors of Lessee's performance under this Lease and any Schedule hereto),
prepared in accordance with generally accepted accounting principles and such
interim financial statements of Lessee as Lessor may reasonably require during
the entire term of this Lease and any Schedule hereto. Either independent
certified public accountants or the Lessee's chief financial officer as
requested by Lessor shall certify all such annual financial statements. Lessee,
if requested by Lessor prior to the initial purchase by Lessor of Equipment for
lease hereunder, shall provide at Lessee's expense an opinion of its counsel
acceptable to Lessor affirming the covenants, representations and warranties of
Lessee under this Lease and any Schedule hereto. So long as there are amounts
due Lessor under this Lease, Lessee shall supply Lessor with such other
financial and operating performance data as is provided to its outside investors
or commercial lenders and, if applicable, required to be provided to
shareholders by the Security and Exchange Commission, and Lessee shall
immediately notify Lessor of any material adverse change in its financial
condition or business prospects.
11. Representations and Warranties. In order to induce Lessor to enter into this
Lease and any Schedule hereto and to lease the Equipment to Lessee hereunder,
Lessee represents and warrants that: (a) Financial Statements. (i) applications,
financial statements, and reports which have been submitted by Lessee and any
Obligors (as hereinafter defined) to Lessor are, and all information hereafter
furnished by Lessee and Obligors to Lessor will be, true and correct in all
material respects as of the date submitted; (ii) as of the date hereof, the date
of any Schedule and any Acceptance Date, there has been no material adverse
change in any matter stated in such applications, financial statements and
reports; and, (iii) none of the foregoing omit or omitted to state any material
fact which would make any of the foregoing false or misleading. (b)
Organization. Lessee is an organizational entity described on the signature page
hereof and is duly organized, validly existing and is duly qualified to do
business and is in good standing or subsisting or in other similar active status
in each State in which the Equipment will be located. (c) Authority. Lessee has
full power, authority and right to execute, deliver and perform this Lease and
any Schedule hereto, and the execution, delivery and performance hereof has been
authorized by all necessary action of Lessee. (d) Enforceability. This Lease and
any Schedule or other document executed in connection therewith has been duly
executed and delivered by Lessee and any Obligor and constitutes a legal, valid
and binding obligation of Lessee and any Obligor enforceable in accordance with
its terms. (e) Consents. The execution, delivery and performance of this Lease
and any Schedule hereto does not require any approval or consent of any
stockholders, partners or proprietors or of any trustee or holders of any
indebtedness or obligations of Lessee, and will not contravene any law,
regulation, judgment or decree applicable to Lessee, or the certificate or
articles of incorporation, partnership agreement, by-laws or other governing
documents of Lessee, or contravene the provisions of, or constitute a default
under, or result in the creation of any lien upon any property of Lessee under
any mortgage, instrument or other agreement to which Lessee is a party or by
which Lessee or its assets may be bound or affected. Except as disclosed, no
authorization, approval, license, filing or registration with any court or
governmental agency or instrumentality is necessary in connection with the
execution, delivery, performance, validity and enforceability of this Lease and
any Schedule hereto. (f) Title. On each Commencement Date, Lessor shall have
good and marketable title to the items of Equipment which is subject to this
Lease and any Schedule hereto on such XXX free and clear of all liens, except
the lien of Seller which will be XXXed upon receipt of payment. Lessee warrants
that no party has a security interest in the Equipment which will not be
released on or before payment by Lessor to Seller of the Equipment and that the
Equipment is and shall at all times remain personal property regardless of how
it may be affixed to any real property. (g) Litigation. There is no action,
suit, investigation or proceeding by or before any court, arbitrator, agency or
governmental authority pending or threatened against or affecting Lessee: (i)
which involves the Equipment or the transactions contemplated by this Lease and
any Schedule hereto; or (ii) which, if adversely determined, could have a
material adverse effect on the financial condition, business or operation of
Lessee.
12. Events of Default. An event of default ("Event of Default") shall occur
hereunder if Lessee or any Obligor ("Obligor" shall include any guarantor or
surety of any obligations of Lessee to Lessor under this Lease and any Schedule
hereto): (i) fails to pay any installment of rent or other payment required
hereunder within five (5) days after its due date; or (ii) attempts to or does
remove from the Premises (except a relocation with Lessor's consent as provided
in Section 5), sell, transfer, encumber, part with possession of, or sublet any
item of the Equipment; or (iii) shall suffer or have suffered, in the reasonable
judgment of Lessor, a material adverse change in its financial condition since
the date of the last financial statements submitted to Lessor, and as a result
thereof Lessor in good faith deems itself to be insecure; or (iv) breaches or
shall have breached any representation or warranty made or given by Lessee or
Obligor in this Lease or in any other document furnished to Lessor in connection
herewith, or any such representation or warranty shall be untrue or, by reason
of failure to state a material fact or otherwise, shall be misleading or any of
the statements or other documents or information submitted at any time
heretofore or hereafter by Lessee or Obligor to Lessor shall be untrue or, by
reason of failure to state a material fact or otherwise, shall be misleading or
(v) fails to perform or observe any other covenant, condition or agreement to be
performed or observed by it hereunder, and such failure or breach shall continue
unremedied for a period of ten days after the date on which notice thereof shall
be given by Lessor to Lessee (unless such remedial action cannot be completed
within such ten day period but Lessee has in good faith commenced to remedy such
breach or failure and such remedy is in fact achieved within a time period
agreed to by Lessor): or (vi) shall become insolvent or bankrupt or make an
assignment for the benefit of creditors or consent to the appointment of a
trustee or receiver, or a trustee or receiver shall be appointed for a
substantial part of its property without its consent, or bankruptcy or
reorganization or insolvency proceeding shall be instituted by or against Lessee
or Obligor and Lessee fails to continue to pay all rentals becoming due
hereunder during the pendency of such proceedings and fails to assume this Lease
within sixty (60) days after the commencement of such proceedings; or (vii)
conveys, sells, transfers or assigns substantially all of Lessee's or Obligor's
assets or ceases doing business as a going concern, or, if a corporation, ceases
to be in good standing or files a statement of intent to dissolve, or abandons
any or all of the Equipment; or (viii) shall be in breach of or default under
any lease or other agreement at any time executed with Lessor or any other
lessor or with any lender to Lessee or Obligor such that Lessee's obligations
thereunder have been or are being accelerated.
13. Remedies. Upon the occurrence and during any continuance of an Event of
Default (the "Default Date") set forth in Section 12, Lessor may, in its sole
and absolute discretion, do any one or more of the following: (a) upon notice to
Lessee cancel all or any portion of this Lease or any Schedules executed
pursuant thereto; (b) enter Lessee's Premises and without removal of the
Equipment, render the Equipment unusable or, require Lessee to assemble the
Equipment and make it available to Lessor at a place designated by Lessor.
and/or dispose of the Equipment by sale or otherwise (all of which
determinations may be made by Lessor in its sole and absolute discretion): (c)
declare immediately due and payable all sums due and to become due hereunder for
the full term of the Lease (including any renewal or purchase obligations which
Lessee has contracted to pay); (d) with or without canceling this Lease, recover
from Lessee damages, in an amount equal to the sum of: (i) all unpaid rent and
other amounts that became due and payable on, or prior to, the Default Date,
(ii) the present value of all future rentals and other amounts described in the
Lease and not included in (i) above discounted to the Default Date at a rate
equal to the discount rate of the Federal Reserve Bank of Chicago as of the
Commencement Date of the Lease with respect to each Schedule (which discount
rate, Lessee agrees is a commercially reasonable rate which takes into account
the facts and circumstances at the time such Schedule commenced), (iii) all
commercially reasonable costs and expenses incurred by Lessor in enforcing
Lessor's rights under this Lease, or defending against any claims or defenses
asserted by or through Lessee, including but not limited to, costs of
repossession, recovery, storage, repair, sale, re-lease
4
<PAGE>
and reasonable attorneys' fees, (iv) the estimated residual value of the
Equipment as of the expiration of the Lease, (v) any indemnity amount payable to
Lessor hereunder; and (vi) interest on all of the foregoing from the Default
Date until the date payment is received by Lessor at 2% per month or the highest
rate permitted by law, whichever is less; (e) exercise any other right or remedy
which may be available to it under the Uniform Commercial Code or any other
applicable law.
If Lessor elects to dispose of any Equipment recovered from the possession of
Lessee after an Event of Default, Lessor shall dispose of such Equipment in a
commercially reasonable manner. Lessor reserves the right, in its sole and
absolute discretion, to control the timing and negotiate the terms of any re-
leasing or re-sale of any or all of the Equipment at a public auction or in a
private sale, at such time, on such terms and with such notice as Lessor shall
in its sole and absolute discretion deem commercially reasonable. In such event,
without any duty on Lessor's part to effect any such re-lease or sale of the
Equipment. Lessor will credit the present value of any proceeds from such sale
or re-lease actually received and retainable by it (net of any and all costs or
expenses) discounted from the date of Lessor's receipt thereof to the Default
Date at 2 1/2 % in excess of the Prime Rate (or its equivalent) per annum in
effect at the First National Bank of Chicago on the date of such payment to the
amounts due to Lessor from Lessee under the provisions of (c), (d) and/or (e)
above. A cancellation of this Lease shall occur only upon notice by Lessor and
only as to such items of Equipment as Lessor specifically elects to cancel and
this Lease shall continue in full force and effect as to the remaining items of
Equipment, if any. If this Lease and/or any Schedule is deemed at any time to be
one intended as security, Lessee agrees that the Equipment shall secure, in
addition to the indebtedness set forth herein, any other indebtedness at any
time owing by Lessee to Lessor. No remedy referred to in this Section is
intended to be exclusive, but shall be cumulative and in addition to any other
remedy referred to above or otherwise available to Lessor at law or in equity.
No express or implied waiver by Lessor of any default shall constitute a waiver
of any other default by Lessee or a waiver of any of Lessor's rights.
14. Assignment by Lessor. LESSOR MAY (WITH OR WITHOUT NOTICE TO LESSEE) SELL,
TRANSFER, ASSIGN OR GRANT A SECURITY INTEREST IN ALL OR ANY PART OF ITS INTEREST
IN THIS LEASE, ANY SCHEDULE, ANY ITEMS OF EQUIPMENT OR ANY AMOUNT PAYABLE
HEREUNDER. In such an event, Lessee shall, upon receipt of written notice,
acknowledge any such sale, transfer, assignment or grant of a security, interest
and shall pay its obligations hereunder or amounts equal thereto to the
respective transferee, assignee or secured party in the manner specified in any
instructions received from Lessor. Notwithstanding any such sale, transfer,
assignment or grant of a security interest by Lessor and so long as no Event of
Default shall have occurred hereunder, neither Lessor nor any transferee,
assignee or secured party shall interfere with Lessee's right of use or quiet
enjoyment of the Equipment. In the event of such sale, transfer, assignment or
grant of a security interest in all or any part of this Lease and any Schedule
hereto, or in the Equipment or in sums payable hereunder, as aforesaid, Lessee
agrees to execute such documents as may be reasonably necessary to evidence,
secure and complete such sale, transfer, assignment or grant of a security
interest and to perfect the transferee's, assignee's or secured party's interest
therein (with any filing fees at Lessor's expense) and Lessee further agrees
that the rights of any transferee, assignee or secured party shall not be
subject to any defense, set-off or counterclaim that Lessee may have against
Lessor or any other party, including the Seller, which defenses, set-offs and
counterclaims shall be asserted only against such party, and that any such
transferee, assignee or secured party shall have all of Lessor's rights
hereunder, but shall assume none of Lessor's obligations hereunder. Lessee
acknowledges that any assignment or transfer by Lessor shall not materially
change Lessee's duties or obligations under this Lease and shall not materially
increase the burdens and risks imposed on Lessee.
15. Miscellaneous. All notices and demands relating hereto shall be in writing
and sent by either any nationally recognized overnight air courier or by
certified mail, return receipt requested, to Lessor or Lessee at their
respective addresses above or shown in the Schedule, or at any other address
designated by notice served in accordance herewith. Notice by overnight air
courier shall be effective one (1) business day after delivery. Notice by
certified mail shall be effective five (5) business days after deposit in the
United States mail, with proper postage prepaid, addressed to the party intended
to be served at the address designated herein. All obligations of Lessee shall
survive the termination or expiration of this Lease and any Schedule hereto. If
more than one Lessee is named in this Lease, the liability of each hereunder to
Lessor shall be joint and several. Any general partner executing this Lease on
behalf of the Lessee agrees that its liability to Lessor hereunder shall be
absolute, primary and direct, and that Lessor shall not be required to pursue
any right or remedy it may have against the Lessee under the Lease (and shall
not be required to first commence any action or obtain any judgment against
Lessee) before enforcing this liability against such general partner, and that
such general partner will, upon demand, pay Lessor the amount of all sums then
due under the Lease, the payment of which, by Lessee, is in default under the
Lease, and will, upon demand, perform all other obligations of Lessee, the
performance of which, by Lessee, is in default under the Lease. Lessee shall,
upon request of Lessor from time to time, perform all acts and execute and
deliver to Lessor all documents which Lessor deems reasonably necessary to
implement this Lease and any Schedule hereto, including, without limitation,
certificates addressed to such persons as Lessor may direct stating that this
Lease and the Schedule hereto is in full force and effect, that there are no
amendments or modifications thereto, that Lessor is not in default hereof or
breach hereunder, setting forth the date to which rentals due hereunder have
been paid, and stating such other matters as Lessor may reasonably request. This
Lease and any Schedule hereto shall be binding upon the parties and their
successors, legal representatives and assigns. Lessee's successors and assigns
shall include, without limitation, a receiver, debtor-in-possession, or trustee
of or for Lessee. If any person, firm, corporation or other entity shall
guarantee this Lease and the performance by Lessee of its obligations hereunder,
all of the terms and provisions hereof shall be duly applicable to such Obligor.
16. Conditions Precedent to Leasing. (i) Lessor shall have no obligation to
purchase any Equipment for lease to Lessee under any Schedule hereunder unless
or until acceptable documentation, the form of which will be provided by Lessor
has been executed by Lessee and delivered to Lessor: (ii) Lessor has confirmed
with Lessee that no material adverse change in Lessee's financial condition and
business prospects has occurred prior to each purchase of Equipment.
17. Invalidity. In the event that any provision of this Lease and any Schedule
hereto shall be unenforceable in whole or in part, such provision shall be
limited to the extent necessary to render the same valid, or shall be excised
from this Lease or any Schedule hereto, as circumstances may require, and this
Lease and the applicable Schedule shall be construed as if said provision had
been incorporated herein as so limited, or as if said provision had not been
included herein, as the case may be without invalidating any of the remaining
provisions hereof.
18. End of Term Options. Provided that the Lease has not been terminated and
that no Event of Default or event which, with notice or lapse of time or both,
would become an Event of Default shall have occurred and shall be continuing,
Lessee shall at the end of the Initial Lease Term of the first Schedule be
entitled to elect and to exercise one of the options, if any, indicated in the
applicable Schedule which election shall be binding on Lessee with respect to
all Schedules entered into between Lessor and Lessee under this Lease. The
foregoing options granted hereunder shall be exercised by written notice
delivered to Lessor by Lessee not more than 180 days and not less than ninety
(90) days prior to the expiration of the Initial Lease Term of the Equipment,
subject to Schedule No. 001.
19. Progress Payments. If requested by Lessee, progress payments will be made
for any amount over the Minimum Invoice Amount specified on each Progress
Payment Authorization per invoice to vendors in accordance with Lessor's
standard procedures. Unless, otherwise agreed by Lessor the minimum progress
payment amount shall not be less than the Minimum Progress Payment Amount
specified on the Progress Payment Authorization. Interim rent, on progress
payments, shall be payable from the date progress payments are made by Lessor to
the Commencement Date of the corresponding Schedule. Interim rent shall be
calculated at the daily
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<PAGE>
equivalent of the Monthly Lease Rate XXX Lessee shall deliver to Lessor a
Progress Payment Authorization, not less than 30 days prior to the due date
thereof and in a form acceptable to Lessor, to make a progress payment and,
provided on such due date no Events of Default have occurred and be continuing
hereunder or under the Lease, Lessor shall make the progress payment set forth
to the manufacturer(s) or supplier(s) as set forth in such authorization.
20. Law. This Lease and any Schedule hereto shall be binding only when accepted
by Lessor at its corporate headquarters in Illinois and shall in all respects be
governed and construed, and the rights and the liabilities of the parties hereto
determined, except for local filing requirements, in accordance with the laws of
the State of Illinois. LESSEE WAIVES TRIAL BY JURY AND SUBMITS TO THE
JURISDICTION OF THE FEDERAL DISTRICT COURT OR ANY STATE COURT LOCATED WITHIN
COOK COUNTY IN THE STATE OF ILLINOIS AND WAIVES ANY RIGHT TO ASSERT THAT ANY
ACTION INSTITUTED BY LESSOR IN ANY SUCH COURT IS IN THE IMPROPER VENUE OR SHOULD
BE TRANSFERRED TO A MORE CONVENIENT FORUM.
Lessee's Initials /s/ DE
-----------------
21. Amendments. This Lease and any Schedule hereto contain the entire agreement
between the parties with respect to the Equipment, this Lease and any Schedule
hereto and there is no agreement or understanding oral or written, which is not
set forth herein. This Lease and any Schedule hereto may not be altered,
modified, terminated or discharged except by a writing signed by the party
against whom such alteration, modification, termination or discharge is sought.
Lessee's Initials /s/ DE
-----------------
22. Lessee's Waivers. To the extent permitted by applicable law, Lessee hereby
waives any and all rights and remedies conferred upon a Lessee by Article 2A of
the Uniform Commercial Code as adopted in any jurisdiction, including but not
limited to Lessee's rights to: (i) cancel this Lease; (ii) repudiate this XXX
(iii), eject the Equipment; (iv) revoke acceptance of the Equipment; (v) recover
damages from Lessor for any breaches of warranty or for any other reason related
to the Equipment; (vi) claim a security interest in the Equipment in Lessee's
possession or control for any reason (vii) deduct all or any part of any claimed
damages resulting from Lessor's default, if any, under this Lease; (viii) accept
partial delivery of the Equipment (ix) "cover" by making any purchase or lease
of or contract to purchase or lease Equipment in substitution for those due from
Lessor; (x) recover any general, special, incidental, or consequential damages
for any reason whatsoever; and (xi) specific performance, replevin, detinue,
sequestration, claim, and delivery of the like for any Equipment identified to
this Lease. To the extent permitted by applicable law (unless expressly
otherwise agreed hereunder), Lessee also hereby waives any rights now or
hereafter conferred by statute or otherwise which may require Lessor to sell,
lease or otherwise use any Equipment in mitigation of Lessor's damages as set
forth in Paragraph 13 or which may otherwise limit or modify any of Lessor's
rights or remedies under Paragraph 13. Any action by Lessee against Lessor for
any default by Lessor under this Lease, including breach of warranty or
indemnity, shall be commenced within one (1) year after any such cause of action
accrues.
Lessee's Initials /s/ DE
-----------------
23. Counterparts. This Lease may be executed in any number of counterparts, each
of which shall be deemed an original. Each Schedule shall be executed in three
(3) serially numbered counterparts each of which shall be deemed an original but
only counterpart number 1 shall constitute "chattel paper" or "collateral"
within the meaning of the Uniform Commercial Code in any jurisdiction.
24. Addendum. ("X" if applicable) [_] See Addendum (s) attached hereto and made
a part hereof.
The person executing this Lease for and on behalf of Lessee warrants and
represents, which warranty and representation shall survive the expiration or
termination of this Lease, that this Lease and the execution hereof has been
duly and validly authorized by Lessee, constitutes a valid and binding
obligation of Lessee and that he has authority to make such execution for and on
behalf of Lessee.
IN WITNESS WHEREOF, this Lease has been executed by Lessee this _________day of
____________ 19__.
ACCEPTED AT CHICAGO. ILLINOIS
PLACEWARE, INC. LINC CAPITAL, INC.
Lessee Lessor
By: /s/ Deborah Eudaley By: /s/ XXX
---------------------------- ------------------------------
Title: CFO Title: Senior V.P.
------------------------- ---------------------------
Date: 5/4/99 Date: ___________________________
-------------------------
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LINC CAPITAL, INC. LINC Capital, Inc.
EQUIPMENT SCHEDULE 303 East Wacker Drive
SCHEDULE NO. 001 Chicago, Illinois 60601
DATED: May 3, 1999 (312) 946-I000
- --------------------------------------------------------------------------------
Equipment Location: Master Lease Agreement No.: 7336
---------------------------------
Mountain View, CA 94043 Estimated Acceptance Date:
- --------------------------------------------------------------------------------
LINC Capital, Inc. (Lessor) hereby agrees to lease to the Lessee named below,
and Lessee hereby agrees to lease and rent from Lessor the Equipment identified
below, for the term and at the rental payments specified herein, all subject to
the terms and conditions set forth herein and on the reverse side hereof and in
the referenced Master Lease Agreement except as the same may be varied by the
terms of this Schedule.
================================================================================
- --------------------------------------------------------------------------------
Equipment Description: The Equipment will consist of Cost of Equipment:
servers, office equipment & furniture, computers and $58,403.87
peripherals, and workstations as more fully described
on Schedule "A" attached hereto and made a part hereof.
- --------------------------------------------------------------------------------
================================================================================
TERM AND RENTAL:
- --------------------------------------------------------------------------------
Commencement Date: Initial Payment: $3691.12 Initial Lease Term: 36 months
September 1, 1999 (covering first and last
lease payments.)
- --------------------------------------------------------------------------------
Rental Payments* (plus, if applicable all sales, use or other taxes imposed upon
rental payments) shall be made monthly in advance as follows: $1,845.56 per
rental payment beginning on the Commencement Date until 36 rental payments have
been paid in full followed by either (i) a 37th rental payment of $8,760.58 or
(ii) provided that no Event of Default has occurred and is continuing under the
Lease in lieu of making the foregoing 37th rental payment, Lessee may elect,
by written notice issued to Lessor to pay a sum equal to $934.46 on the due date
of the 37th rental payment and a like rental payment sum on the next eleven
consecutive rental payment dates respectively and upon such election the Initial
Lease Term shall be deemed to have been extended by 12 months.
*Rental Payments are based on the Lease Rate Factor and are subject to
adjustment as described in Paragraph A on the REVERSE SIDE HEREOF. If
applicable, all freight, sales and use taxes, insurance and maintenance expense
paid by Lessor shall be paid by Lessee in accordance with the terms of the Lease
and this Schedule.
================================================================================
PROPERTY TAXES: Lessee shall report all Equipment for personal property or
advalorem tax return purposes as may be required under applicable law, which
returns shall be timely filed by Lessee and all resulting taxes shall be paid by
Lessee. Lessee agrees upon request to provide Lessor with evidence that all such
Equipment has been reported, all returns for all such taxes have been filed and
all taxes paid in a timely manner.
================================================================================
END OF TERM OPTIONS: At the end of the initial lease term the following options
are granted to Lessee in accordance with the terms described on the reverse side
hereof:
Option to Purchase not less than all of the Equipment at the end of the Initial
Lease Term (as described above including any extension thereof) at a Purchase
Option Price of $1.00.
Restocking Charge: 15 % of Total Equipment Cost
================================================================================
ADDITIONAL TERMS AND CONDITIONS TO THIS EQUIPMENT SCHEDULE
ARE ON THE REVERSE SIDE HEREOF.
The person executing this Lease for and on behalf of Lessee warrants and
represents, which warranty and representation shall survive the expiration or
termination of this Lease, that this Lease and the execution hereof has been
duly and validly authorized by Lessee, constitutes a valid and binding
obligation of Lessee and that he has authority to make such execution for and on
behalf of Lessee.
Accepted at Chicago, Illinois
LESSEE: PLACEWARE, INC. LESSOR: LINC Capital, Inc.
By: /s/ Deborah Eudaley By: /s/ XXX
------------------------- -------------------------
Title: CFO Title: Senior V.P.
------------------------- -------------------------
Date: 8/31/99 Date:_________________________
-------------------------
This lease (and Equipment Schedule and Master Lease the terms of which it
incorporate) has been assigned, is subject to the security interests of, and is
held in trust for the benefit of Fleet Bank NA, as Agent, pursuant to the terms
and conditions of a security agreement dated September 28, 1994 and related
documents (as the same may be amended).
<PAGE>
ADDITIONAL TERMS AND CONDITIONS TO EQUIPMENT SCHEDULE
-----------------------------------------------------
A. Adjustments to Rental Payments. Rental Payments are based on a Lease Rate
Factor of 3.16% subject to adjustment as described below. The Monthly Lease Rate
Factor will be indexed to the yield for U.S. Treasury Notes maturing closest to
the date 36 months from the Commencement Date of this Equipment Schedule (the
"Index Instrument"). The yield of the Index Instrument currently 5.20% for the 6
1/2% Treasury Notes maturing as reported in the Wall Street Journal dated May 3,
1999. The Monthly Lease Rate Factor shall be adjusted by Lessor to provide for
any increase in the yield of the Index Instrument on the Commencement Date of
this Equipment Schedule. At the Commencement Date of this Equipment Schedule,
the Monthly Lease Rate Factor (as adjusted) shall be fixed for the Initial Lease
Term of this Equipment Schedule.
B. Estimated Cost of Equipment, Estimated Acceptance Date, Estimated
Commencement Date and Adjustments in Rental. As used herein, "actual cost" means
the total cost to Lessor of purchasing and delivering the Equipment to Lessee
including, subject to Lessor's consent, taxes, transportation charges and other
charges, which may be applicable. The amount of each payment set forth in the
Schedule are based on an estimate of actual cost, which estimate may, but need
not, be set forth in the Schedule, and such amounts shall be adjusted
proportionately (increased or decreased) if the actual cost of the Equipment
differs from said estimate. Lessee hereby authorizes Lessor to adjust, if
necessary, the amounts set forth in the Schedule to reflect actual cost when the
actual cost is known and to add to the amount of each rental payment any sales,
use or leasing tax that may be imposed on or measured by the rental payments.
Lessor will inform Lessee of the adjustments in rent necessary to reflect actual
cost. If the Commencement Date and Acceptance Date are "estimated" Lessee agrees
to execute a replacement Equipment Schedule setting forth the actual
Commencement Date and Acceptance Date as soon as those dates become final.
C. Initial Payment and/or Security Deposit. Lessee shall make a security deposit
and/or initial payment as indicated in this Schedule upon execution of this
Schedule and lessor shall be authorized to apply funds held by Lessor and
otherwise payable to Lessee for such purposes. Any security deposit and/or
initial payment paid by Lessee shall not be refundable to Lessee in the event
that the term of this Lease does not commence unless on account of Lessee's
rightful refusal to accept delivery of the Equipment. At Lessor's option any
security deposit and/or initial payment made hereunder may be applied by Lessor
to cure any default of Lessee under the lease, in which event Lessee shall
promptly restore the security deposit and/or initial payment to their full
amounts as set forth in this Schedule. If all the terms and conditions herein to
be performed by Lessee are fully performed and all of Lessee's obligations
hereunder are fully complied with, that portion of any security deposit not so
applied shall be refunded to Lessee at the termination or expiration of this
Lease.
Purchase Option and/or Option for Renewal of Lease Term. [This section applies
only if this schedule indicates that an option to purchase the Equipment or an
option to renew the Lease Term is applicable.] Provided that the Lease, this
Schedule, or any option granted hereunder has not been terminated by Lessor and
that no Event of Default shall have occurred and shall be continuing, Lessor
agrees to grant Lessee an option to purchase the Equipment and/or renew the
Lease Term. See Section 18 of the Master Lease Agreement for additional terms
and conditions applicable to End of Term Options.
If an Event of Default has not occurred under the Lease, Lessee, by giving
Lessor not less than ninety (90) days written notice by registered or certified
mail prior to the expiration date of this Schedule, may, elect to (1) if
applicable, purchase not less than all of the Equipment then leased hereunder,
at the times and in the manner hereinafter specified, for an amount equal to the
Purchase Option Price stated on the face of this Schedule plus any accrued and
unpaid rental or other amounts due under the Lease and plus any applicable sales
tax with respect thereto or (2) if applicable, renew the lease term of not less
than all of the Equipment then leased hereunder for the period(s) and for the
renewal rental(s) (payable in advance) stated on the face of this Schedule. If
Lessee elects to exercise said purchase option, same shall be exercised on the
day immediately following the date of expiration of the minimum lease term, and
by the delivery at such time by Lessee to Lessor of payment, in cash or by
certified check, of the amount of the Purchase Price for the Equipment as set
forth above.
Upon payment of said purchase price for the Equipment, Lessor shall, upon
request of Lessee, execute and deliver to Lessee a Bill of Sale for the
Equipment, on an "AS IS," "WHERE IS," "WITH ALL FAULTS" basis, without
representations or warranties of any kind whatsoever. If Lessee exercises its
purchase option and fails to make such payment, Lessee shall pay as additional
rent for each month or fraction thereof after the end of the Initial Lease Term,
an amount equal to the highest monthly payment set forth herein. If Lessee does
not elect to exercise either of said options; Lessee shall return each item of
equipment to Lessor, pursuant to and under the terms and conditions of Section 3
of the Lease. If Lessee fails to notify Lessor as provided herein or if Lessor
and Lessee cannot agree on the purchase or renewal terms, then the term of this
Lease shall be automatically extended at the highest rental provided in this
Schedule, for successive three month periods unless and until terminated by
either party giving to the other not less than three months prior written notice
by registered or certified mail of its intention to terminate at the end of the
XXX succeeding extension period, and upon termination of this Schedule, Lessee
shall return all of the Equipment as provided in the Lease.
This lease (and Equipment Schedule and Master Lease the terms of which it
incorporates) has been assigned, is subject to the security interests of, and is
held in trust for the benefit of Fleet Bank NA, as Agent, pursuant to the terms
and conditions of a security agreement dated September 28, 1994 and related
documents (as the same may be amended).
-2-
<PAGE>
SCHEDULE A
TO
MASTER LEASE NO. 7336-001
PLACEWARE, INC.
COMMENCEMENT DATE SEPTEMBER 1, 1999
<TABLE>
<CAPTION>
QUANTITY EQUIPMENT DESCRIPTION LOCATION VENDOR INVOICE NO. PO NO. SERIAL NO.
<S> <C> <C> <C> <C> <C> <C>
1 Storedge Fix-Pk 72-144GB 4MMD Mountain View, CA Avcom Technologies, Inc. 96132
Freight
Taxes
8 9.1GB7200 RPM Ultra SCSI H/D Mountain View, CA Avcom Technologies, Inc. 97623
Freight
Taxes
1 3Com Impact IQ Ext 230.4K ISDN Mountain View, CA CDW Computer Cntrs, Inc. AO43691
Seagate 9.1 GB Ult2/SCSI HD100
Freight
8 550MHz PIII/MDT W/S 210 Base & Rel Mountain View, CA Dell 254037914
Freight
Taxes
9 Unltrastar 36XP 38GB Ultra2SCSI Mountain View, CA Spectrum Trading 29153A
2 M/66-pin wide SCSI3 s.e. terminator
Freight
Taxes
1 9-bay Cabinet Mountain View, CA Spectrum Trading 29153
2 Cable for 9drives, 68 pin wide conn.
9 5.25" Wide SCSI frame + carrier
9 DE1001-SW Hot Swap Board
1 Load Sharing, 300W power supply
2 M/68 pin SCSI13 to M/VHDC cable
Freight
Taxes
3 Workgroup JDBC Type XX SOL Driver Mountain View, CA WebLogic 2168
Annual Support
<CAPTION>
QUANTITY EQUIPMENT DESCRIPTION INVOICE AMOUNT INVOICE BREAKDOWN DATE PAID
<S> <C> <C> <C> <C>
1 Storedge Fix-Pk 72-144GB 4MMD 2,847.00
Freight 9.91
Taxes 234.88
$ 3,091.79
8 9.1GB7200 RPM Ultra SCSI H/D 8,850.00
Freight 19.94
Taxes 482.63
$ 6,352.57
1 3Com Impact IQ Ext 230.4K ISDN 190.53
Seagate 9.1 GB Ult2/SCSI HD100 542.00
Freight 19.26
$ 751.79
8 550MHz PIII/MDT W/S 210 Base & Rel 2,997.00
Freight 90.00
Taxes 254.70
$ 3,341.70
9 Unltrastar 36XP 38GB Ultra2SCSI 12,645.00
2 M/66-pin wide SCSI3 s.e. terminator 90.00
Freight 28.00
Taxes 1,050.64
$13,813.84
1 9-bay Cabinet 905.00
2 Cable for 9drives, 68 pin wide conn. 160.00
9 5.25" Wide SCSI frame + carrier 1,630.00
9 DE1001-SW Hot Swap Board 495.00
1 Load Sharing, 300W power supply 200.00
2 M/68 pin SCSI13 to M/VHDC cable 140.00
Freight 62.00
Taxes 282.98
$ 3,774.98
3 Workgroup JDBC Type XX SOL Driver 3,000.00
Annual Support 800.00
</TABLE>
Lessee's Initials /s/ DE Lessor's Initials ________ Page 1 of 3
-----------------
<PAGE>
SCHEDULE A
TO
MASTER LEASE NO. 7336-001
PLACEWARE, INC.
COMMENCEMENT DATE SEPTEMBER 1, 1999
<TABLE>
<CAPTION>
QUANTITY EQUIPMENT DESCRIPTION LOCATION VENDOR INVOICE NO. PO NO.
<S> <C> <C> <C> <C> <C>
1 CPQ Prollant 1600 512K Mountain View, CA CDW Computer Cntrs, Inc. AL09952
1 CPQ Processor Option Kit
2 CPQ 9.1GB 10K ROM Ultra Wide SCSI
5 CPQ 18.2GB Plug w/u SCSI13 HD1
2 Simple 256MB CPQ Prollant 1600
Freight
1 Mylex Extreme RAID 1100 PCI-UL Mountain View, CA CDW Computer Cntrs, Inc. AL42534
Freight
1 Sendmail Pro on Solaris Processor Mountain View, CA Sendmail IVC10234
1 Annual Support
Shipping
Taxes
1 Visual Routs Mountain View, CA DataMetrics 100178
Taxes
1 MS Office 2000 Developer VER/C Mountain View, CA CDW Computer Cntrs, Inc. AND8916
Shipping
1 ServletEvec 1.0 Reseller 20-IIc bndle Mountain View, CA New Atlanta Comm., LLC 1167
1 Visiontek 32MB CPQ Presario 51 Mountain View, CA CDW Computer Cntrs, Inc. AK95554
1 CPQ Presario 6304 6/368, 3GB
1 INTEL Pro/100+
Shipping
<CAPTION>
QUANTITY EQUIPMENT DESCRIPTION SERIAL NO. INVOICE AMOUNT INVOICE BREAKDOWN DATE PAID
<S> <C> <C> <C> <C> <C>
$ 3,600.00
1 CPQ Prollant 1600 512K 2,569.00
1 CPQ Processor Option Kit 1,329.00
2 CPQ 9.1GB 10K ROM Ultra Wide SCSI 1,378.00
5 CPQ 18.2GB Plug w/u SCSI13 HD1 5,259.00
2 Simple 256MB CPQ Prollant 1600 1,118.00
Freight 224.08
$ 11,913.06
1 Mylex Extreme RAID 1100 PCI-UL 1,219.00
Freight 23.37
$ 1,242.37
1 Sendmail Pro on Solaris Processor 1,298.00
1 Annual Support 260.00
Shipping 9.95
Taxes 107.09
$ 1,675.04
1 Visual Routs 2,495.00
Taxes 205.84
$ 2,700.84
1 MS Office 2000 Developer VER/C 539.00
Shipping 13.90
$ 552.90
1 ServletEvec 1.0 Reseller 20-IIc bndle 3,900.00
$ 3,900.00
1 Visiontek 32MB CPQ Presario 51 95.00
1 CPQ Presario 6304 6/368, 3GB 596.00
1 INTEL Pro/100+ 83.00
Shipping 32.04
$ 806.04
</TABLE>
Lessee's Initials /s/ DE Lessor's Initials ______ Page 2 of 3
-----------------
<PAGE>
SCHEDULE A
TO
MASTER LEASE NO. 7336-001
PLACEWARE, INC.
COMMENCEMENT DATE SEPTEMBER 1, 1999
<TABLE>
<CAPTION>
QUANTITY EQUIPMENT DESCRIPTION LOCATION VENDOR INVOICE NO. PO NO. SERIAL NO.
<S> <C> <C> <C> <C> <C> <C>
1 Brother PPF3750 Plain Paper Fax Mountain View, CA CDW Computer Cntrs, Inc. AM44530
Shipping
<CAPTION>
QUANTITY EQUIPMENT DESCRIPTION INVOICE AMOUNT INVOICE BREAKDOWN DATE PAID
<S> <C> <C> <C> <C>
1 Brother PPF3750 Plain Paper Fax 830.00
Shipping 57.15
$ 887.15
-----------
$ 58,403.87
</TABLE>
A more specific equipment description is included on the attached
invoices
Location:
201 Ravendale Drive
Mountain View, CA 94043-5216
"Some or all of the Equipment is located at the locations described
on this Schedule A"
Lessee's Initials /s/ DE Lessor's Initials ______ Page 3 of 3
-----------------
<PAGE>
BILL OF SALE
Lease No. 7336-001
(See Attached Schedule A)
KNOW ALL PEOPLE BY THESE PRESENTS, that PlaceWare, Inc., a California
corporation; having its principal office and place of business at 201 Ravendale,
Mountain View, CA 94043, (herein, the "Seller"), for and in consideration of the
sum of Ten Dollars ($10.00) and other good and valuable consideration received
from LINC CAPITAL, INC. having its principal office and place of business at 303
East Wacker Drive, Suite 1000, Chicago, Illinois 60601 (herein, the "Buyer"),
the receipt and sufficiency of which is hereby acknowledged, has bargained,
sold, transferred, assigned, set over and conveyed, and by these presents does
bargain, sell, transfer, assign, set over and convey unto the Buyer, its
successors and assigns, the personal property described in Schedule A attached
hereto (the "Equipment"), TO HAVE AND TO HOLD the Equipment unto the Buyer, its
successors and assigns, to its and their own use and behalf forever.
Seller hereby represents and warrants to Buyer that Seller is the absolute owner
of the Equipment, that the Equipment is free and clear of all liens, charges and
encumbrances and that Seller has full right, power and authority to sell the
Equipment and to make this Bill of Sale. Seller hereby represents, warrants and
covenants to and with Buyer on the date hereof that: (1) Seller has full power,
authority and legal right to make and perform its obligations under this Bill of
Sale; and the execution, delivery and performance thereof have been duly
authorized by all necessary actions on the part of Seller, and do not require
any approval or consent of any equity interest holders of Seller or any trustee
or holder or any indebtedness or obligation of Seller or such required approval
and consents have heretofore been duly obtained by Seller; (2) the execution,
delivery and making of this Bill of Sale by Seller does not contravene any law,
governmental rule, regulation, order or ordinance of any governmental entity
having jurisdiction over this matter; (3) the execution and delivery of this
Bill of Sale does not contravene any provision of any internal organizational
instruments of Seller including any applicable Certificate of Incorporation or
Bylaws, Certificate of Limited Partnership, and does not and will not result in
any breach of or constitute a default under any indenture, mortgage, contract,
agreement or instrument to which Seller is a party or by which it or its
property is bound; (4) the obligations set forth in this Bill of Sale are valid
and binding obligations, enforceable in accordance with their terms against
Seller, except as such enforceability may be limited by applicable bankruptcy,
insolvency or similar laws affecting creditor's rights or general principles of
equity; (5) ALL SALES, TRANSFER, FRANCHISE OR SIMILAR TAXES IMPOSED UPON SELLER
IN CONNECTION WITH THE ACQUISITION OF THE EQUIPMENT BY SELLER FROM ITS SUPPLIERS
WILL HAVE BEEN PAID ON THE DATE HEREOF AND ALL SUCH TAXES DUE WITH RESPECT TO
THE EXECUTION AND DELIVERY OF THIS BILL OF SALE WILL BE PAID BY SELLER AND
SELLER AGREES TO PROVIDE BUYER WITH EVIDENCE THAT ALL SUCH SALES TAXES HAVE BEEN
PAID; (6) there are no pending or, to the knowledge of Seller, threatened
actions or proceedings before any court or administrative agency which will
materially adversely affect the condition, business or operation of Seller or
the ability of Seller to perform its obligations under this Bill of Sale; and
(7) Seller will make appropriate notations on its books and records indicating
the sale of Equipment to Buyer pursuant to this Bill of Sale.
Seller hereby further covenants with Buyer that: (1) Seller shall pay or obtain,
as the case may be, when due, all sales, use, property or other taxes (other
than taxes based on the net income
<PAGE>
of Buyer), licenses, tolls, inspection or other fees, bonds, permits or
certificates now or hereafter imposed by or required to be paid or obtained to
or from any jurisdiction in connection with the sale of the Equipment by Seller
to Buyer; (2) Seller hereby assigns to Buyer all warranties and representations
of the manufacturer(s) of the Equipment or suppliers of the Equipment to Seller,
to the extent assignable and to the extent such warranties and representations
are not assignable, Seller agrees to enforce such representations and warranties
for the benefit of Buyer; (3) Seller hereby covenants that with respect to any
item of Equipment at the time of sale to Buyer that is subject to the lien of
any third party claiming through Seller, Seller shall obtain the written
agreement of such third parties to release all such said liens; and (4) Seller
hereby agrees to indemnify Buyer and protect, defend and hold it harmless from
and against any and all loss, cost, damage, injury or expense, including without
limitation, reasonable attorney's fees wheresoever and howsoever arising which
Buyer may incur by reason of any material breach by Seller of any of the
representations by, or obligations of Seller set forth herein.
EXCEPT AS SPECIFICALLY SET FORTH IN A SEPARATE AGREEMENT OR IN THIS BILL OF SALE
THERE ARE NO WARRANTIES OR REPRESENTATIONS OF ANY KIND OR NATURE, EXPRESS OR
IMPLIED, CONCERNING THE EQUIPMENT, ITS CONDITION, ITS FITNESS FOR A PARTICULAR
PURPOSE, OR ITS MERCHANTABILITY.
Seller, for itself and its successors and assigns further covenants and agrees
to do, execute and deliver, or to cause to be done, executed and delivered, all
such further acts, transfers and assurances, for the better assuring, conveying
and confirming unto Buyer and its successors and assigns, all and singular, the
Equipment hereby bargained, sold, assigned, transferred, set over and conveyed,
as Buyer and its successors and assigns shall request.
This Bill of Sale and the representations, warranties, and covenants herein
contained shall inure to the benefit of Buyer and its successors and assigns,
shall-be binding upon Seller and its successors, assigns and transferees, and
shall survive the execution and delivery hereof.
IN WITNESS WHEREOF, Seller has caused this Bill of Sale to be executed as of
______________, 19__ by its duly authorized officers or representatives.
Accepted in Chicago, IL by:
SELLER: PlaceWare, Inc. BUYER: LINC Capital, Inc.
By: /s/ Deborah Eudaley By: /s/ XXX
--------------------------- ----------------------------
Name: Deborah Euadaley Name: XXX
--------------------------- ----------------------------
Title: CFO Title: Senior V.P.
--------------------------- ----------------------------
<PAGE>
(FOR REVIEW PURPOSES ONLY)
SCHEDULE A to BILL OF SALE
--------------------------
Between
PlaceWare, Inc. (as "Seller")
and
LINC Capital, Inc. (as "Buyer")
Lease No. 7336-001
Attached hereto is the Schedule of personal property constituting the Equipment
which is the subject matter of the Bill of Sale between Seller and Buyer.
See Attached Schedule A
SELLER: PlaceWare, Inc.
By: /s/ Deborah Eudaley
----------------------------
Name: Deborah Eudaley
----------------------------
Title: CFO
----------------------------
<PAGE>
SCHEDULE A
TO
MASTER LEASE NO. 7336-001
PLACEWARE, INC.
COMMENCEMENT DATE SEPTEMBER 1, 1999
<TABLE>
<CAPTION>
QUANTITY EQUIPMENT DESCRIPTION LOCATION VENDOR INVOICE NO. PO NO. SERIAL NO.
<S> <C> <C> <C> <C> <C> <C>
1 Storedge Fix-Pk 72-144GB 4MMD Mountain View, CA Avcom Technologies, Inc. 96132
Freight
Taxes
8 9.1GB7200 RPM Ultra SCSI H/D Mountain View, CA Avcom Technologies, Inc. 97623
Freight
Taxes
1 3Com Impact IQ Ext 230.4K ISDN Mountain View, CA CDW Computer Cntrs, Inc. AO43691
Seagate 9.1 GB Ult2/SCSI HD100
Freight
8 550MHz PIII/MDT W/S 210 Base & Rel Mountain View, CA Dell 254037914
Freight
Taxes
9 Unltrastar 36XP 38GB Ultra2SCSI Mountain View, CA Spectrum Trading 29153A
2 M/66-pin wide SCSI3 s.e. terminator
Freight
Taxes
1 9-bay Cabinet Mountain View, CA Spectrum Trading 29153
2 Cable for 9drives, 68 pin wide conn.
9 5.25" Wide SCSI frame + carrier
9 DE1001-SW Hot Swap Board
1 Load Sharing, 300W power supply
2 M/68 pin SCSI13 to M/VHDC cable
Freight
Taxes
3 Workgroup JDBC Type XX SOL Driver Mountain View, CA WebLogic 2168
Annual Support
<CAPTION>
INVOICE INVOICE DATE
QUANTITY EQUIPMENT DESCRIPTION AMOUNT BREAKDOWN PAID
<S> <C> <C> <C> <C>
1 Storedge Fix-Pk 72-144GB 4MMD 2,847.00
Freight 9.91
Taxes 234.88
$ 3,091.79
8 9.1GB7200 RPM Ultra SCSI H/D 8,850.00
Freight 19.94
Taxes 482.63
$ 6,352.57
1 3Com Impact IQ Ext 230.4K ISDN 190.53
Seagate 9.1 GB Ult2/SCSI HD100 542.00
Freight 19.26
$ 751.79
8 550MHz PIII/MDT W/S 210 Base & Rel 2,997.00
Freight 90.00
Taxes 254.70
$ 3,341.70
9 Unltrastar 36XP 38GB Ultra2SCSI 12,645.00
2 M/66-pin wide SCSI3 s.e. terminator 90.00
Freight 28.00
Taxes 1,050.64
$13,813.84
1 9-bay Cabinet 905.00
2 Cable for 9drives, 68 pin wide conn. 160.00
9 5.25" Wide SCSI frame + carrier 1,630.00
9 DE1001-SW Hot Swap Board 495.00
1 Load Sharing, 300W power supply 200.00
2 M/68 pin SCSI13 to M/VHDC cable 140.00
Freight 62.00
Taxes 282.98
$ 3,774.98
3 Workgroup JDBC Type XX SOL Driver 3,000.00
Annual Support 800.00
</TABLE>
Lessee's Initials__________ Lessor's_________ Page 1 of 3
<PAGE>
SCHEDULE A
TO
MASTER LEASE NO. 7336-001
PLACEWARE, INC.
COMMENCEMENT DATE SEPTEMBER 1, 1999
<TABLE>
<CAPTION>
QUANTITY EQUIPMENT DESCRIPTION LOCATION VENDOR INVOICE NO. PO NO. SERIAL NO.
<S> <C> <C> <C> <C> <C> <C>
1 CPQ Prollant 1600 512K Mountain View, CA CDW Computer Cntrs, Inc. AL09952
1 CPQ Processor Option Kit
2 CPQ 9.1GB 10K ROM Ultra Wide SCSI
5 CPQ 18.2GB Plug w/u SCSI13 HD1
2 Simple 256MB CPQ Prollant 1600
Freight
1 Mylex Extreme RAID 1100 PCI-UL Mountain View, CA CDW Computer Cntrs, Inc. AL42534
Freight
1 Sendmail Pro on Solaris Processor Mountain View, CA Sendmail IVC10234
1 Annual Support
Shipping
Taxes
1 Visual Routs Mountain View, CA DataMetrics 100178
Taxes
1 MS Office 2000 Developer VER/C Mountain View, CA CDW Computer Cntrs, Inc. AND8916
Shipping
1 ServletEvec 1.0 Reseller 20-IIc bndle Mountain View, CA New Atlanta Comm., LLC 1167
1 Visiontek 32MB CPQ Presario 51 Mountain View, CA CDW Computer Cntrs, Inc. AK95554
1 CPQ Presario 6304 6/368, 3GB
1 INTEL Pro/100+
Shipping
<CAPTION>
INVOICE INVOICE DATE
QUANTITY EQUIPMENT DESCRIPTION AMOUNT BREAKDOWN PAID
<S> <C> <C> <C> <C>
$ 3,600.00
1 CPQ Prollant 1600 512K 2,569.00
1 CPQ Processor Option Kit 1,329.00
2 CPQ 9.1GB 10K ROM Ultra Wide SCSI 1,378.00
5 CPQ 18.2GB Plug w/u SCSI13 HD1 5,259.00
2 Simple 256MB CPQ Prollant 1600 1,118.00
Freight 224.08
$11,913.06
1 Mylex Extreme RAID 1100 PCI-UL 1,219.00
Freight 23.37
$ 1,242.37
1 Sendmail Pro on Solaris Processor 1,298.00
1 Annual Support 260.00
Shipping 9.95
Taxes 107.09
$ 1,675.04
1 Visual Routs 2,495.00
Taxes 205.84
$ 2,700.84
1 MS Office 2000 Developer VER/C 539.00
Shipping 13.90
$ 552.90
1 ServletEvec 1.0 Reseller 20-IIc bndle 3,900.00
$ 3,900.00
1 Visiontek 32MB CPQ Presario 51 95.00
1 CPQ Presario 6304 6/368, 3GB 596.00
1 INTEL Pro/100+ 83.00
Shipping 32.04
$ 806.04
</TABLE>
Lessee's Initials__________ Lessor's_________ Page 2 of 3
<PAGE>
SCHEDULE A
TO
MASTER LEASE NO. 7336-001
PLACEWARE, INC.
COMMENCEMENT DATE SEPTEMBER 1, 1999
<TABLE>
<CAPTION>
QUANTITY EQUIPMENT DESCRIPTION LOCATION VENDOR INVOICE NO. PO NO. SERIAL NO.
<S> <C> <C> <C> <C> <C> <C>
1 Brother PPF3750 Plain Paper Fax Mountain View, CA CDQ Computer Cntrs, Inc. AM44530
Shipping
<CAPTION>
INVOICE INVOICE DATE
QUANTITY EQUIPMENT DESCRIPTION AMOUNT BREAKDOWN PAID
<S> <C> <C> <C> <C>
1 Brother PPF3750 Plain Paper Fax 830.00
Shipping 57.15
$887.15
----------
$58,403.87
</TABLE>
A more specific equipment description is included on the attached
invoices
Location:
201 Ravendale Drive
Mountain View, CA 94043-5216
"Some or all of the Equipment is located at the locations described
on this Schedule A"
Lessee's Initials__________ Lessor's_________ Page 3 of 3
<PAGE>
EXHIBIT 21.1
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
Jurisdiction
of Percent
Name Incorporation Owned
- ---- -------------- -------
<S> <C> <C>
PlaceWare Europe, Ltd................................... United Kingdom 100%
</TABLE>
<PAGE>
Exhibit 23.1
Consent of Independent Auditors
The Board of Directors
PlaceWare, Inc.
We consent to the use of our report included herein and to the references to our
firm under the headings "Selected Financial Data" and "Experts" in the
prospectus.
/s/ KPMG LLP
Mountain View, California
March 3, 2000
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