<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 31, 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
------------------------
WEBEX, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
CALIFORNIA (prior to reincorporation) 7379 77-0396636
DELAWARE (after reincorporation) (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
(STATE OR OTHER JURISDICTION CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
OF INCORPORATION OR ORGANIZATION)
</TABLE>
110 ROSE ORCHARD WAY
SAN JOSE, CA 95134
(408) 435-7000
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
SUBRAH S. IYAR
CHIEF EXECUTIVE OFFICER
WEBEX, INC.
110 ROSE ORCHARD WAY
SAN JOSE, CA 95134
(408) 435-7000
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
JORGE DEL CALVO, ESQ. LARRY W. SONSINI, ESQ.
ALLISON LEOPOLD TILLEY, ESQ. BRIAN C. ERB, ESQ.
DAVINA K. KAILE, ESQ. ANDREW G. STEPHENS, ESQ.
PILLSBURY MADISON & SUTRO LLP STEPHEN E. GILLETTE, ESQ.
2550 HANOVER STREET WILSON SONSINI GOODRICH & ROSATI
PALO ALTO, CA 94304 650 PAGE MILL ROAD
PALO ALTO, CA 94304
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement numbers of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C>
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- ------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM
CLASS OF SECURITIES AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED PRICE(1) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------
Common Stock, no par value.................................. $86,250,000 $22,770
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE> 2
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PRELIMINARY PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO
BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION DATED MARCH 31, 2000.
Shares
[LOGO] WEBEX, INC.
Common Stock
----------------------
This is an initial public offering of shares of common stock of WebEx, Inc.
All of the shares of common stock are being sold by WebEx.
At the request of WebEx, the underwriters have reserved up to
shares of common stock for sale at the initial public offering price to its
employees, customers and other friends through a directed share program.
Prior to this offering, there has been no public market for the common
stock. It is currently estimated that the initial public offering price per
share will be between $ and $ . WebEx has applied for quotation of the
common stock on the Nasdaq National Market under the symbol "WEBX".
See "Risk Factors" beginning on page 7 to read about factors you should
consider before buying shares of the common stock.
----------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------------------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Initial public offering price............................... $ $
Underwriting discount....................................... $ $
Proceeds, before expenses, to WebEx......................... $ $
</TABLE>
To the extent that the underwriters sell more than shares of
common stock, the underwriters have the option to purchase up to an additional
shares from WebEx at the initial public offering price less the
underwriting discount.
----------------------
The underwriters expect to deliver the shares against payment in New York,
New York on , 2000.
GOLDMAN, SACHS & CO. DEUTSCHE BANC ALEX. BROWN
WIT SOUNDVIEW
CIBC WORLD MARKETS
----------------------
Prospectus dated , 2000.
<PAGE> 3
Inside Front Cover
Upper right hand corner:
Web Infrastructure for Global Interactive Communications WebEx
provides real-time interactive multimedia communications
services for websites. Our services meeting-enable the website
of customers and partners. We deliver our services using our
globally distributed network and scalable platform.
From upper left corner to
lower right hand corner:
three computer screen
shots of customer's use
of our services appear
here
Webex logo appears in
lower right hand corner.
Below the logo appears
picture of computer
<PAGE> 4
Gatefold
In center of Gatefold: Picture of the a globe depicting WebEx Ineractive
Network.
First circle around the globe WebEx Interactive Platform Real-time Data
Sharing/Distributed Servers/APIs/Security
Second circle around the globe WebEx Interactive Services Meeting
Center/Business Exchange/OnCall/Shopping Together
Surrounding the globe - five pictures of WebEx customers using WebEx service
Left side of Gatefold
Left side of the page.
Powering Interactive Online Meetings
WebEx Interactive Network
The WebEx Interactive Network (WIN) is a globally
distributed network that is designed to deliver dependable,
real-time communications services to our customers' and
partners' web sites.
WebWex Interactive Platform
The WebEx Interactive Platform (WIP) is distributed,
standards-based service architecture that provides a
comprehensive set of functionality for web-based interactive
communication services and is designed for maximum
scalability and "dial-tone" reliability.
WebEx Interactive Services
The WebEx Interactive Services (WIS) provide co-branded
turn-key services that can be customized for web sites.
Services include: Meeting Center, Business Exchange,
OnCall and Shopping Together.
Lower right hand side of page.
Service Features
Application Sharing
Document Sharing
Presentation Sharing
Web Co-Browsing
Desktop Remote Control
File Transfers
Polling
Live Chat
Recording and Playback
Live Video
Outer Office Web Page
Business Directory
Meeting Calendar
Public/Private Folders
Lower Right side of Gatefold
The WebEx Solution
WebEx provides co-branded real-time, interactive multimedia communications
services for web sites.
<PAGE> 5
WebEx enables easy and spontaneous sharing of content and applications from any
website with integrated audio and video in a seamless environment.
WebEx enhances effectiveness of business professionals by reducing production
time and generating cost savings with:
live medium for conducting on-line sales and marketing meetings
real-time customer service and support
reducing expenses for travel, communications and training
WebEx allows customers to meeting-enable their websites with scalable, reliable
and secure co-branded interactive services.
WebEx differentiates partner sites by expanding the scope of service offerings
and driving increased traffic and usage.
<PAGE> 6
PROSPECTUS SUMMARY
This summary highlights information described more fully elsewhere in this
prospectus. This summary does not contain all the information you should
consider before investing in our common stock. You should read the entire
prospectus, including the financial statements and related notes, before making
an investment decision.
WEBEX
We provide real-time, interactive multimedia communications services for
websites. We deliver our services using our globally distributed network and
scalable platform. Our services meeting-enable the websites of customers and
partners. End-users access these interactive services through the co-branded
websites of our customers and partners as well as at www.webex.com. Our services
enable end-users to spontaneously share content and applications in a seamless
environment with integrated audio and video. End-users can participate in
meetings from anywhere on the Internet using a standard web browser. Our
interactive communications services help our customers and our partners to:
- improve their productivity and efficiency,
- differentiate and distinguish their product and service offerings, and
- enhance and diversify their revenues.
We are able to deliver these business benefits because our platform and
services have the following characteristics:
OPEN AND FLEXIBLE. We have designed our platform to be open and flexible to
efficiently support many combinations of interactive communications services.
This enables our services to be integrated into a large number of websites and
web applications that offer a variety of functionality. Moreover, our platform
is standards-based and has been designed to enable rapid development and
deployment of new services and applications.
COMPREHENSIVE, INTEGRATED FUNCTIONALITY. Our platform seamlessly integrates
data, audio and video to provide a comprehensive and fluid experience for
end-users. The comprehensive functionality of our platform enables services with
features such as real-time sharing of applications, presentations or documents
as well as web co-browsing, live chat, recording and playback, desktop sharing
and file transfers.
EASY AND SPONTANEOUS INTERACTIVITY. Our services are designed to be easy to
use and spontaneous to enable high levels of interactivity among meeting
participants. For example, files and applications on any meeting participant's
desktop or on the Web can be opened and shared in real time during a WebEx
meeting.
SCALABILITY, RELIABILITY AND SECURITY. Our globally distributed network
platform is designed to scale to support millions of concurrent meetings across
the spectrum of one-to-one, one-to-many or any-to-any interactions. It is also
designed to be highly reliable with a redundant architecture and a globally
distributed network. In addition, we have designed our services to be secure
using measures such as standards-based encryption. Similar to telephone
conversations, information passes through our secure platform in real time.
Our globally distributed network includes more than 120 servers in six data
centers around the world as well as multiple, dedicated, leased lines. Our
platform, which runs on this network, is a distributed, standards-based software
architecture that is designed to provide high reliability, high scalability and
comprehensive functionality for interactive communication services for websites.
To date, we have launched four services on our platform -- WebEx Meeting Center,
WebEx Business Exchange, WebEx OnCall and WebEx Shopping Together.
3
<PAGE> 7
We offer our services on a monthly subscription basis to our customers. To
date, we have generated substantially all of our revenue from sales of our
services to customers to meeting-enable their websites. We have also initiated
efforts to establish revenue-sharing agreements to embed our services into the
offerings of partners such as portals, web application providers and
communications service providers. As of February 25, 2000, we had 425 customers
and had signed agreements with more than 72 partners. Our customers include
Hoover's Online, Juniper Networks, Lawson Software, Oracle and TIBCO Software.
Our partners include Deutsche Telekom, Sales.com and Yahoo!.
Our objective is to be the leading web-based interactive communications
platform. To achieve this objective, we intend to expand our global network,
increase our brand recognition and leverage our partnerships. We also intend to
become a de facto standard for real-time, interactive multimedia communication
services for websites by continuing to enhance the capabilities, applicability
and ease of use of our services.
ADDITIONAL INFORMATION
We were incorporated in California in February 1995 under the name Silver
Computing, Inc. We changed our name to Stellar Computing Corporation in June
1997, to ActiveTouch Systems, Inc. in December 1997, to ActiveTouch, Inc. in May
1998 and to WebEx, Inc. in December 1999. We anticipate reincorporating in
Delaware prior to completion of this offering. Our principal executive offices
are located at 110 Rose Orchard Way, San Jose, California 95134, and our
telephone number is (408) 435-7000. The address of our website is www.webex.com.
Information contained on our website is not part of this prospectus.
ActiveTouch, WebEx, WebEx.com and Meeting-Enable Your Web Site are
trademarks of WebEx, Inc. This prospectus also contains brand names, trademarks
or service marks of companies other than WebEx, Inc., and these brand names,
trademarks and service marks are the property of their respective holders.
4
<PAGE> 8
THE OFFERING
Shares offered by WebEx............... shares
Shares to be outstanding after this
offering.............................. shares
Use of proceeds....................... For general corporate purposes,
including working capital.
Proposed Nasdaq National Market
symbol................................ WEBX
The above information is based on the shares outstanding as of December 31,
1999.
This information includes:
- 787,131 shares of common stock issuable upon conversion of our
Series C preferred stock sold in January 2000;
- 2,052,846 shares of common stock issuable upon conversion of our
Series D preferred stock sold in March 2000; and
- 450,000 shares of common stock issuable upon exercise of a warrant
that expires prior to completion of this offering.
This information excludes:
- 4,675,775 shares issuable upon exercise of options outstanding at a
weighted average exercise price of $0.303 per share as of December
31, 1999;
- 339,915 shares issuable upon exercise of a warrant at an exercise
price of $12.50 per share; and
- a total of 4,677,059 shares available for future issuance under our
various stock plans.
Unless otherwise indicated, this prospectus assumes:
- the automatic conversion of our outstanding preferred stock into
common stock upon completion of this offering;
- our reincorporation in Delaware;
- the filing of our amended and restated certificate of incorporation,
authorizing a class of 5,000,000 shares of undesignated preferred
stock upon closing of this offering; and
- no exercise by the underwriters of their option to purchase
additional shares of stock in this offering.
5
<PAGE> 9
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth a summary of our statements of operations
data for the periods presented. See notes 1(d) and 1(p) of the notes to our
financial statements for an explanation of the method used to determine the
number of shares used in the computing per share data below.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1997 1998 1999
------ ------- --------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue..................................................... $1,289 $ 1,987 $ 2,607
Gross profit................................................ 1,097 1,503 1,919
Operating Income (loss)..................................... 26 (2,437) (14,498)
Net income (loss)........................................... $ 28 $(2,335) $(14,371)
Net income (loss) per share:
Basic and diluted......................................... $ 0.00 $ (0.23) $ (1.34)
Weighted average shares -- basic and diluted.............. 7,192 10,103 10,700
Pro forma net loss per share:
Basic and diluted......................................... $ (0.83)
Weighted average shares -- basic and diluted.............. 17,246
</TABLE>
The following table sets forth a summary of our balance sheet at December
31, 1999:
- on an actual basis;
- on a pro forma basis to give effect to the proceeds of $28.1 million from
the sale of 787,131 shares of our Series C preferred stock in January
2000 and 2,052,846 shares of our Series D preferred stock in March 2000,
the exercise of a warrant to purchase 450,000 shares of common stock and
the automatic conversion of all outstanding shares of our preferred stock
into common stock upon the closing of this offering; and
- on the same pro forma basis as adjusted to reflect our receipt of the
estimated net proceeds from the sale of shares of common
stock in this offering.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................. $ 13,621 $41,647 $
Working capital....................................... 10,588 38,662
Total assets.......................................... 21,649 49,723
Long-term obligations, net of current portion......... -- --
Stockholders' equity.................................. 14,799 42,825
</TABLE>
6
<PAGE> 10
RISK FACTORS
Any investment in our shares of common stock involves a high degree of
risk. You should carefully consider the risks described below and the other
information in this prospectus before deciding to invest in shares of our common
stock. If any of the events described below actually occurs, our business,
results of operations and financial condition would likely suffer. In these
circumstances, the market price of our common stock could decline, and you could
lose all or part of your investment.
RISKS RELATED TO WEBEX
WE EXPECT CONTINUING LOSSES AND MAY NEVER ACHIEVE PROFITABILITY IN THE FUTURE,
IN WHICH CASE THE MARKET PRICE OF OUR STOCK WOULD LIKELY DECLINE.
As of December 31, 1999, we had an accumulated deficit of approximately
$17.1 million. We expect to continue to incur substantial net losses for the
foreseeable future. If we continue to incur net losses, we may not be able to
increase the number of our employees, our investment in expanding our network
services and application platform or our sales, marketing and research and
development programs in accordance with our present plans, each of which is
critical to our long-term success. We do not know when or if we will become
profitable. If we did not become profitable within the time frame expected by
securities analysts or investors, the market price of our stock would likely
decline.
OUR QUARTERLY RESULTS COULD FLUCTUATE, AND IF WE DO NOT MEET QUARTERLY
FINANCIAL EXPECTATIONS OF SECURITIES ANALYSTS OR INVESTORS OUR STOCK PRICE COULD
DECLINE.
We commenced operations in February 1995 and our business originally
consisted of consulting services. In early 1998, we licensed an interactive
communications product to a small number of customers. We launched WebEx Meeting
Center in February 1999, our first real-time, interactive multimedia
communications service, and began selling this service to customers and
partners. Because of our limited operating history providing services, and other
factors, our quarterly revenue and operating results are difficult to predict.
In addition, due to the emerging nature of the market for interactive
communications services for websites, our quarterly revenue and operating
results may fluctuate from quarter to quarter. In addition, a number of other
factors could cause fluctuations in our operating results, including, but not
limited to, the following:
- the growth rate of the market for interactive communications services for
websites;
- our ability to develop, enhance and maintain our network services and
application platform in a timely manner;
- technical difficulties or system outages;
- the mix of services we offer;
- our ability to attract and retain customers and maintain customer
satisfaction;
- our partners' degree of success in distributing our services to
end-users;
- the amount and timing of operating costs and capital expenditures
relating to expansion of our business and network infrastructure;
- the announcement, introduction and market acceptance of new or enhanced
services or products by us or our existing or potential competitors; and
- changes in our pricing policies or those of our existing or potential
competitors.
7
<PAGE> 11
If any of these factors impact our business in a particular period, our
operating results may be below the expectations of securities analysts or
investors, in which case the market price of our common stock would likely
decline.
We expect to continue to spend substantial financial and other resources on
developing and introducing new services, and expanding our sales and marketing
organization and network infrastructure. As a result, we expect that our
operating expenses will continue to increase in absolute dollars. If our revenue
does not correspondingly increase, our business and operating results could
suffer. We base our expense levels in part on our expectations regarding future
revenue levels. If our revenue for a particular quarter is lower than we expect,
we may be unable to proportionately reduce our operating expenses for that
quarter, in which case our operating results for that quarter would be adversely
affected.
OUR CUSTOMERS DO NOT HAVE LONG-TERM OBLIGATIONS TO PURCHASE OUR SERVICES AND
OUR REVENUE AND OPERATING RESULTS COULD DECLINE IF OUR CUSTOMERS DO NOT CONTINUE
TO USE OUR SERVICES.
Our customers do not have long-term obligations to purchase services from
us. Our customer contracts are typically for an initial term of three months or
more and can be terminated at any time thereafter. Our customers may choose not
to continue to use our services, and we may not obtain a sufficient number of
additional customers to compensate for any customers we may lose. In 1999, Baan
Company N.V. accounted for approximately 16% of our revenue. The failure of
existing customers to continue to use our services or our failure to obtain
additional customers would harm our business and operating results.
OUR BUSINESS AND OPERATING RESULTS MAY SUFFER IF WE FAIL TO ESTABLISH
PARTNERSHIPS.
To date, we have generated substantially all of our revenue from sales to
customers to meeting-enable their websites. We expect to derive an increasing
percentage of our revenue from our partnerships with portals, web application
providers and communications service providers to jointly market and sell our
services, provide us the flexibility to rapidly adapt our services to customer
needs and to generate referral sales for our services. We must continue to
establish and extend these partnerships. Establishing these partner
relationships can take as long as several months or more. In addition, our
agreements with our partners are typically 12 months in duration and can be
terminated at any time thereafter. Our partners may choose to devote
insufficient resources to marketing and supporting our services or they may
choose to devote greater resources to marketing and supporting the products and
services of other companies. If we fail to establish new partner relationships
in a timely manner or if our partners do not successfully distribute our
services, our ability to achieve market acceptance of our interactive
communications services for websites will suffer and our business and operating
results will be harmed.
WE HAVE RELIED ON OUR SALES FORCE TO GENERATE SUBSTANTIALLY ALL OF OUR REVENUE
AND THEREFORE OUR SUCCESS DEPENDS ON OUR ABILITY TO EXPAND OUR SALES FORCE.
Our success depends on increasing the size of our sales force. There is
intense competition for sales personnel and we may be unsuccessful in
attracting, integrating, motivating and retaining new sales personnel. If we
fail to increase our sales force, our growth will be impaired and our business
and operating results will suffer.
OUR FUTURE SUCCESS DEPENDS ON THE BROAD MARKET ADOPTION AND ACCEPTANCE OF
INTERACTIVE COMMUNICATIONS SERVICES FOR WEBSITES.
The market for interactive communications services for websites is
relatively new and rapidly evolving. Market demand for communications services
over the Web is unproven. If the market for interactive communications services
does not grow at the rate we expect, our business and operating
8
<PAGE> 12
results will be harmed. Factors that might influence market acceptance of our
services include the following, many of which are beyond our control:
- willingness of businesses and end-users to use interactive communications
services for websites;
- the growth of the Web and commercial on-line services;
- the willingness of our partners to integrate interactive communications
services for websites in their service offerings; and
- the ongoing level of security and reliability for conducting business
over the Web.
WE EXPECT TO DEPEND ON SALES OF OUR WEBEX MEETING CENTER SERVICE FOR
SUBSTANTIALLY ALL OF OUR REVENUE FOR THE FORESEEABLE FUTURE.
Our WebEx Meeting Center service has accounted for substantially all of our
revenue to date. We anticipate that revenue from our WebEx Meeting Center
service will continue to constitute substantially all of our revenue for the
foreseeable future. Consequently, any decline in the demand for our WebEx
Meeting Center service, or its failure to achieve broad market acceptance, would
seriously harm our business.
FAILURE TO SUCCESSFULLY DEVELOP AND INTRODUCE ENHANCED VERSIONS OF OUR
INTERACTIVE COMMUNICATIONS SERVICES FOR WEBSITES THAT MEET CHANGING CUSTOMER
DEMANDS OR EVOLVING TECHNOLOGICAL STANDARDS WOULD HARM OUR BUSINESS.
We must successfully offer our customers a comprehensive, integrated
solution in order for us to expand market acceptance of our interactive
communications services for websites. Our industry is characterized by rapid
technological change, frequent new product introductions and enhancements,
changes in customer demands and evolving industry standards. Our existing
services will be rendered obsolete if we fail to introduce new services or
service enhancements that meet new customer demands, support new standards or
are compatible with upgraded versions of software. In addition, the
technological life cycle of our services is difficult to estimate.
As a result, our future success depends in large part on our ability to
develop, in a timely manner, new or enhanced interactive communications services
for websites and to provide new services that achieve rapid and broad market
acceptance. We may fail, however, to identify new service opportunities
successfully or to develop and bring new services to market in a timely manner.
In addition, we may incur substantial costs in developing new or enhanced
versions of our services. If we experience delays in completing development of,
enhancements to, new or localized versions of, or cross-platform capabilities
for, our services, our operating results would suffer. We also may need to
develop and acquire new technologies or service applications to broaden our
service offerings. We may be unable to develop or acquire marketable services on
a timely basis, if at all. In addition, our service innovations may not achieve
the market penetration or price stability necessary for profitability.
IF OUR SERVICES FAIL TO FUNCTION WHEN USED BY LARGE NUMBERS OF PARTICIPANTS,
WE MAY LOSE CUSTOMERS AND OUR BUSINESS AND REPUTATION MAY BE HARMED.
Our strategy requires that our services be able to accommodate large
numbers of meetings at any one time. We have limited experience in conducting
large numbers of concurrent meetings. If our services do not perform adequately
when used by large numbers of participants, we may lose customers, be unable to
attract new customers and our operating results could suffer.
OUR SALES CYCLE MAKES IT DIFFICULT TO PREDICT OUR QUARTERLY OPERATING RESULTS.
We have a long sales cycle because we generally need to educate potential
customers regarding the benefits of interactive communications services for
websites. Our sales cycle varies
9
<PAGE> 13
depending on the size and type of customer contemplating a purchase. Potential
customers frequently need to obtain approvals from multiple decision makers
within their organization and may evaluate competing products and services prior
to deciding to use our services. Our sales cycle, which can range from several
weeks to several months or more, makes it difficult to predict the quarter in
which use of our services may begin.
IF WE FAIL TO EXPAND OUR MARKETING ACTIVITIES, OR IF OUR BRANDING AND
MARKETING EFFORTS ARE NOT SUCCESSFUL, OUR BUSINESS MAY BE HARMED.
We believe that continued expansion of our marketing and brand recognition
efforts will be critical to achieve widespread acceptance of our interactive
communications services for websites. We plan to increase our marketing
expenditures to create and maintain brand recognition. Our marketing and
advertising campaigns or branding efforts may not be successful or consumers may
not find our marketing efforts compelling. In addition, our sales and marketing
expenses may not be offset by the expenses we incur in building our brand. If
our marketing efforts are not successful, our business and operating results
will be harmed.
WE RELY ON RELATED THIRD PARTIES IN CHINA AND THE LOSS OF THESE THIRD-PARTY
SERVICES WOULD HARM OUR BUSINESS.
We currently rely on third parties, located in China, owned by one of our
executive officers and his spouse to conduct quality assurance testing and to
modify the software underlying our services to enable our services to work with
various operating systems. Most of the personnel who conduct these activities
are contract engineers to these third parties. Our reliance on independent
contractors located in China for quality assurance and software development
activities exposes us to a variety of economic and political risks. In
particular, current tensions between the United States and China could adversely
affect our ability to conduct operations in China, which could increase our
operating costs and harm our business and operations.
WE COULD INCUR SUBSTANTIAL COSTS RESULTING FROM CLAIMS RELATING TO USE OF OUR
SERVICES.
Many of the business interactions supported by our services are critical to
our customers' businesses. Any failure in a customer's business interaction or
other communications activity caused or allegedly caused by our services could
result in a claim for substantial damages against us, regardless of our
responsibility for the failure.
IF OUR SYSTEM SECURITY IS BREACHED, OUR BUSINESS AND REPUTATION COULD BE
HARMED.
A fundamental requirement for on-line communications, transactions and
support is the secure transmission of confidential information over public
networks. Third parties may attempt to breach our security or that of our
customers. Our customers and end-users may use our services to share proprietary
information, the security of which is critical to their business. We may be
liable to our customers for any breach in such security and any breach could
harm our business and our reputation. In addition, computers are vulnerable to
computer viruses, physical or electronic break-ins and similar disruptions,
which could lead to interruptions, delays or loss of data. We may be required to
expend significant capital and other resources to further protect against
security breaches or to rectify problems caused by any breach.
OUR BUSINESS COULD BE HARMED IF OUR SERVICES FAIL TO PERFORM PROPERLY DUE TO
UNDETECTED ERRORS OR SIMILAR PROBLEMS WITH OUR UNDERLYING SOFTWARE.
Complex software, such as the software underlying our services, often
contains undetected errors. Although we conduct testing during development, we
may be forced to delay commercial release of our services until problems are
corrected and, in some cases, may need to provide enhancements to correct errors
that we do not detect until after deployment of our services. If we do
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<PAGE> 14
detect an error in our software before we introduce new versions of our
services, we might have to limit our services for an extended period of time
while we address the problem. In addition, problems with the software underlying
our services could result in:
- damage to our reputation;
- damage to our efforts to build brand awareness;
- loss of or delay in revenue;
- delays in or loss of market acceptance of our services; and
- unexpected expenses and diversion of resources to remedy errors.
IF OUR SERVICES DO NOT WORK WITH THE MANY HARDWARE AND SOFTWARE PLATFORMS USED
BY OUR CUSTOMERS AND END-USERS, OUR BUSINESS MAY BE HARMED.
We currently serve customers and end-users who use a wide variety of
constantly changing hardware and software applications and networking platforms.
If our services are unable to support these platforms, they may fail to gain
broad market acceptance, which would cause our operating results to suffer. Our
success depends on our ability to deliver our services to multiple platforms and
existing, or legacy, systems and to modify our services and underlying
technology as new versions of applications are introduced. In addition, the
success of our services depends on our ability to anticipate and support new
standards, especially web standards.
WE MAY NEED TO LICENSE THIRD-PARTY TECHNOLOGIES, TOOLS AND APPLICATIONS AND
MAY BE UNABLE TO DO SO.
We intend to continue to license technologies from third parties, including
applications used in our research and development activities and technology
which is integrated into our services. For example, we rely on a third-party
vendor for the voice-over IP technology used in our services, and we may
continue to rely on this third-party vendor or others in the future. This
voice-over IP technology and other third-party technologies that we may utilize
in the future may not continue to be available to us on commercially reasonable
terms or at all. In addition, we may fail to successfully integrate any licensed
technology into our services. Third-party licenses and our use of third-party
application programming interfaces, known as APIs, expose us to increased risks,
including the potential diversion of our resources from the development of our
own proprietary technology and our potential inability to generate sufficient
revenue from new technology to offset associated acquisition and maintenance
costs. Our inability to obtain any of these licenses could delay service
development until equivalent technology can be identified, licensed and
integrated. This in turn could harm our business and operating results.
IF WE DO NOT SUCCESSFULLY ADDRESS THE RISKS INHERENT IN THE EXPANSION OF OUR
INTERNATIONAL OPERATIONS, OUR BUSINESS COULD SUFFER.
We intend to expand further into international markets. If our revenue from
international operations does not exceed the expense of establishing and
maintaining these operations, our business could suffer. We have limited
experience in international operations and may not be able to compete
effectively in international markets. Some risks we face in conducting business
internationally include:
- difficulties and costs of staffing and managing international operations;
- difficulties in expanding our network overseas;
- political and economic instability;
- changes in currency exchange rates or controls; and
- longer sales cycles.
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<PAGE> 15
OUR RECENT GROWTH HAS PLACED A STRAIN ON OUR INFRASTRUCTURE AND RESOURCES, AND
IF WE FAIL TO MANAGE OUR FUTURE GROWTH TO MEET CUSTOMER AND PARTNER
REQUIREMENTS, OUR BUSINESS COULD SUFFER.
We are currently experiencing a period of rapid expansion in our personnel,
facilities, and infrastructure that has been placing a significant strain on our
resources. For example, we hired 78 employees in 1999, and we expect that our
hiring rate will continue at a rapid pace. We expect further significant
expansion will be required as the volume and complexity of customer and partner
needs increase and as we are presented with new opportunities. For example, we
will need to obtain additional office space prior to the end of 2000. If we fail
to obtain sufficient space, our business could suffer. Our expansion has placed,
and we expect that it will continue to place, a significant strain on our
management, operational and financial resources. Any failure by us to
effectively manage our growth could disrupt our operations or delay execution of
our business plan and could consequently harm our business.
THE INTEGRATION OF NEW SENIOR MANAGEMENT PERSONNEL INTO OUR MANAGEMENT TEAM
MAY INTERFERE WITH OUR OPERATIONS.
We have recently hired a number of new officers, including our Chief
Financial Officer, Craig Klosterman, who joined us in February 2000, and our
Vice President of Business Development, Leo Jolicoeur, our Vice President of
Corporate Development, Stewart Sonnenfeldt, and our Vice President, General
Counsel and Secretary, David Farrington, each of whom joined us in March 2000.
These individuals must spend a significant amount of time learning our business
in addition to performing their regular duties. Accordingly, the integration of
new personnel could result in some disruption to our ongoing operations. In
addition, if our senior management is unable to work effectively as a team, our
business operations will be harmed.
IF WE LOSE THE SERVICES OF ANY OF OUR SENIOR MANAGEMENT OR OTHER KEY
PERSONNEL, OUR BUSINESS MAY BE HARMED.
Our success will depend on the skills, experience and performance of our
senior management, engineering, sales, marketing and other key personnel, many
of whom have worked together for only a short period of time. We do not have
long-term employment agreements with or life insurance policies on any of our
key employees. The loss of the services of any of our senior management or other
key personnel, including our Chief Executive Officer and co-founder, Subrah S.
Iyar, or our President and Chief Technical Officer and co-founder, Min Zhu,
would harm our business.
WE MUST ATTRACT, INTEGRATE AND RETAIN QUALIFIED PERSONNEL, WHICH IS
PARTICULARLY DIFFICULT FOR US BECAUSE WE ARE HEADQUARTERED IN THE SAN FRANCISCO
BAY AREA WHERE COMPETITION FOR PERSONNEL IS EXTREMELY INTENSE.
Our future success will depend on our ability to attract, train, retain and
motivate highly skilled engineering, technical, managerial, sales and marketing
and customer support personnel. Competition for these personnel is intense,
especially in the San Francisco Bay Area. We are currently experiencing a period
of rapid expansion in the number of our employees, and we currently plan to
substantially increase our headcount over the next 12 months. We have had
difficulty hiring qualified personnel as quickly as we have desired. In
particular, we have had difficulty hiring a sufficient number of qualified
technical, development and support personnel. Our inability to hire, integrate
and retain qualified personnel in sufficient numbers could reduce the quality of
our services. If we fail to retain and recruit necessary sales, marketing or
other personnel, our ability to develop new services and to provide a high level
of customer service, and consequently our business, could suffer. In addition,
if we hire employees from our competitors, these competitors may claim that we
have engaged in unfair hiring practices. We could incur substantial costs in
defending ourselves against any of these claims, regardless of their merits.
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<PAGE> 16
INTERRUPTIONS IN EITHER OUR INTERNAL OR OUTSOURCED COMPUTER AND COMMUNICATIONS
SYSTEMS COULD REDUCE OUR ABILITY TO PROVIDE OUR SERVICES AND COULD HARM OUR
BUSINESS AND REPUTATION.
The success of our interactive communications services for websites depends
on the efficient and uninterrupted operation of our internal and outsourced
computer and communications hardware and software systems. In this regard, our
communications hardware and software are hosted at third-party co-location
facilities. These systems and operations are vulnerable to damage or
interruption from human error, telecommunications failures, break-ins, sabotage,
computer viruses, intentional acts of vandalism and similar events. Because our
central computer and communications hardware and network operations are located
in the San Francisco Bay Area, an earthquake or other natural disaster could
impair the performance of our entire network. We have no formal disaster
recovery plan in the event of damage to or interruption of our internal or
outsourced systems, and business interruption insurance may not adequately
compensate us for losses that may occur. Any system failure that causes an
interruption in our interactive communications services for websites or a
decrease in their performance could harm our relationships with our customers
and partners.
DUE TO THE WEB-BASED NATURE OF OUR SERVICES, WE MIGHT HAVE LIABILITY FOR WEB
CONTENT.
Due to the web-based nature of our services, we face potential liability
for defamation, negligence, copyright, patent or trademark infringement and
other claims based on the nature and content of the materials transmitted via
the Internet. Any imposition of liability could harm our reputation and our
business and operating results, or could result in the imposition of criminal
penalties.
OUR SUCCESS DEPENDS UPON THE PROTECTION OF OUR PATENT RIGHTS.
Our success and ability to compete depend to a significant degree upon the
protection of our underlying software and our proprietary technology rights
through patents. We regard the protection of patentable inventions as important
to our future opportunities. We currently have seven patent applications pending
in the United States and we may seek additional patents in the future. However,
it is possible that:
- any patents acquired by or issued to us may not be broad enough to
protect us;
- any issued patent could be successfully challenged by one or more third
parties, which could result in our loss of the right to prevent others
from exploiting the inventions claimed in those patents;
- current and future competitors may independently develop similar
technology, duplicate our services or design around any of our patents;
- our pending patent applications may not result in the issuance of
patents; and
- effective patent protection may not be available in every country in
which we do business.
WE ALSO RELY UPON TRADEMARKS, COPYRIGHTS AND TRADE SECRETS TO PROTECT OUR
PROPRIETARY RIGHTS, WHICH MAY NOT BE SUFFICIENT TO PROTECT OUR INTELLECTUAL
PROPERTY.
We also rely on a combination of laws, such as copyright, trademark and
trade secret laws, and contractual restrictions, such as confidentiality
agreements and licenses, to establish and protect our technology. However,
despite any precautions that we have taken,
- third parties may infringe or misappropriate our copyrights, trademarks
and similar proprietary rights;
- laws and contractual restrictions may not be sufficient to prevent
misappropriation of our technology or to deter others from developing
similar technologies;
- effective trademark, copyright and trade secret protection may be
unavailable or limited in foreign countries;
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<PAGE> 17
- other companies may claim common law trademark rights based upon state or
foreign laws that precede the federal registration of our marks; and
- policing unauthorized use of our services and trademarks is difficult,
expensive and time-consuming, and we may be unable to determine the
extent of any unauthorized use.
Reverse engineering, unauthorized copying or other misappropriation of our
proprietary technology could enable third parties to benefit from our technology
without paying us for it, which would significantly harm our business.
WE MAY FACE INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS THAT COULD BE COSTLY TO
DEFEND AND RESULT IN OUR LOSS OF SIGNIFICANT RIGHTS.
We may be subject to legal proceedings and claims, including claims of
alleged infringement of the trademarks and other intellectual property rights of
third parties. Although we have not received notice of any alleged infringement,
our services may infringe issued patents that may relate to our services. In
addition, because the contents of patent applications in the United States are
not publicly disclosed until the patent is issued, we may be unaware of filed
patent applications relating to our services. Intellectual property litigation
is expensive and time-consuming and could divert management's attention away
from running our business. This litigation could also require us to develop
non-infringing technology or enter into royalty or license agreements. These
royalty or license agreements, if required, may not be available on acceptable
terms, if at all, in the event of a successful claim of infringement. Our
failure or inability to develop non-infringing technology or license proprietary
rights on a timely basis would harm our business.
WE MAY ENGAGE IN FUTURE ACQUISITIONS OR INVESTMENTS THAT COULD DILUTE THE
OWNERSHIP OF OUR EXISTING STOCKHOLDERS, CAUSE US TO INCUR SIGNIFICANT EXPENSES
OR HARM OUR OPERATING RESULTS.
We may use a portion of the net proceeds of this offering to acquire or
invest in complementary businesses, technologies or services, although we
currently have no specific agreements or commitments with respect to any of
these transactions. Integrating any newly acquired businesses, technologies or
services may be expensive and time-consuming. To finance any acquisitions, it
may be necessary for us to raise additional funds through public or private
financings. Additional funds may not be available on terms that are favorable to
us and, in the case of equity financings, may result in dilution to our
stockholders. We may be unable to complete any acquisitions or investments on
commercially reasonable terms, if at all. Even if completed, we may be unable to
operate any acquired businesses profitably or otherwise implement our growth
strategy successfully. If we are unable to integrate any newly acquired entities
or technologies effectively, our operating results could suffer. Future
acquisitions by us could also result in large and immediate write-offs,
incurrence of debt and contingent liabilities, or amortization of expenses
related to goodwill and other intangibles, any of which could harm our operating
results.
INDUSTRY RISKS
WE MUST COMPETE SUCCESSFULLY IN THE INTERACTIVE COMMUNICATIONS SERVICES
MARKET.
The market for interactive communications services is intensely
competitive, subject to rapid change and is significantly affected by new
product and service introductions and other market activities of industry
participants. Although we do not currently compete against any one entity with
respect to all aspects of our services, we do compete with various companies in
regards to specific elements of our interactive communications solution. For
example, we compete with providers of traditional communications technologies
such as teleconferencing and videoconferencing as well as applications software
and tools companies, such as Centra Software, Contigo Software, Lotus
(SameTime), Microsoft (NetMeeting) and Placeware. We also face potential
competition from a variety of enterprise software vendors, such as Microsoft,
and from a variety of providers of
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<PAGE> 18
infrastructure services for websites, such as Akamai, Inktomi, Infospace and
Critical Path, any of which could choose to extend their products and services
to include interactive communications.
Many of our current and potential competitors have longer operating
histories, significantly greater financial, technical and other resources and
greater name recognition than we do. Our current and future competitors may be
able to respond more quickly to new or emerging technologies and changes in
customer requirements. In addition, current and potential competitors have
established, and may in the future establish, cooperative relationships with
third parties and with each other to increase the availability of their products
and services to the marketplace. Competitive pressures could reduce our market
share or require us to reduce the price of our services, either of which could
harm our business and operating results.
OUR SUCCESS DEPENDS ON THE CONTINUED GROWTH OF WEB USAGE AND THE CONTINUED
RELIABILITY OF THE INTERNET.
Because our services are designed to work over the Web, our revenue growth
depends on the continued development and maintenance of the Internet
infrastructure. This continued development of the Web would include maintenance
of a reliable network with the necessary speed, data capacity and security, as
well as timely development of complementary products and services, including
high speed modems, for providing reliable Internet access and services. Because
global commerce on the Web and the on-line exchange of information is new and
evolving, we cannot predict whether the Web will continue to be a viable
commercial marketplace over the long term. The success of our business will rely
on the continued improvement of the Web as a convenient means of customer
interaction and commerce, as well as an efficient medium for the delivery and
distribution of information by businesses to their employees.
GOVERNMENTAL REGULATION AND LEGAL UNCERTAINTIES COULD IMPAIR THE GROWTH OF THE
WEB AND DECREASE DEMAND FOR OUR PRODUCTS OR INCREASE OUR COST OF DOING BUSINESS.
The laws and regulations that govern our business change rapidly. The
United States government and the governments of other states and foreign
countries have attempted to regulate activities involving the Web and the
distribution of computer software over the Internet. Although there are
currently few laws and regulations directly applicable to the Web and the use of
the Web as a commercial medium, a number of laws have been proposed involving
the Web. These proposed laws include laws addressing user privacy, pricing,
content, copyrights, distribution, antitrust and characteristics and quality of
products and services. Moreover, the applicability to the Web of existing laws
in various jurisdictions governing issues such as property ownership, sales and
other taxes, libel and personal privacy is uncertain and may take years to
resolve. Evolving areas of law that are relevant to our business include privacy
law, proposed encryption laws, telecommunications law and regulations, content
regulations and sales and use tax laws and regulations. Because of this rapidly
evolving and uncertain regulatory environment, we cannot predict how these laws
and regulations might affect our business. Any new laws and regulations could
harm us by subjecting us to liability or forcing us to change how we do
business. For example, in 1996, Congress passed the Telecommunications Act,
which prohibits certain types of information and content from being transmitted
over the Web. The prohibition's scope and the liability associated with its
violation are currently unsettled and might be interpreted to cover our
activities. In addition, regulatory treatment of web-based voice communications
outside the United States varies from country to country. For example, access to
voice-over IP services, which we currently offer as part of our integrated
service offering, may be blocked in some countries in Asia and the Middle East
by government-controlled telecommunication companies. This action and other
similar actions may adversely affect our continuing ability to offer services in
these and other countries, causing us to lose customers and revenue.
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<PAGE> 19
THE YEAR 2000 PROBLEM COULD HARM OUR OPERATIONS.
Prior to January 1, 2000, there was a great deal of concern regarding the
ability of computers to adequately recognize 21st century dates from 20th
century dates due to the two-digit date fields used by many systems. To date,
our computer systems are functioning normally and our compliance and remediation
efforts leading up to 2000 have been effective to prevent any problems. However,
computer experts have warned that there may still be residual consequences of
the change in centuries and any such difficulties could disrupt our ability to
deliver our services.
OFFERING RISKS
OUR STOCK PRICE MAY BE VOLATILE, AND YOU MAY NOT BE ABLE TO SELL YOUR SHARES
AT OR ABOVE THE OFFERING PRICE.
Prior to this offering, our common stock has not been publicly traded, and
an active trading market may not develop or be sustained after this offering.
You may not be able to sell your shares at or above the offering price. The
price at which our common stock will trade after this offering is likely to be
highly volatile and may fluctuate substantially due to factors such as the
following:
- actual or anticipated fluctuations in our operating results;
- changes in or our failure to meet securities analysts' expectations;
- conditions and trends in the Internet and other technology industries;
- fluctuations in stock market valuations and trading volume, which are
particularly common among securities of Internet-related companies; and
- general market conditions.
PURCHASERS OF OUR COMMON STOCK WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION.
Purchasers of our common stock in this offering will experience immediate
dilution of $ in the pro forma net tangible book value per share of
common stock, based on an assumed initial public offering price of $ per
share. Purchasers will also experience additional dilution upon the exercise of
outstanding stock options and warrants. The initial public offering price is
expected to be substantially higher than the book value per share of our common
stock. Some elements of our market value do not originate from measurable
transactions.
AFTER THIS OFFERING, OUR DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL
STOCKHOLDERS WILL CONTINUE TO HAVE SUBSTANTIAL CONTROL OVER MATTERS REQUIRING
STOCKHOLDER APPROVAL AND MAY NOT VOTE IN THE SAME MANNER AS OUR OTHER
STOCKHOLDERS.
After this offering, our directors, executive officers and stockholders who
currently own over 5% of our common stock will collectively beneficially own, in
the aggregate, approximately % of our outstanding common stock. These
stockholders, if they vote together, will be able to significantly influence all
matters requiring stockholder approval, including the election of directors and
approval of significant corporate transactions. This concentration of ownership
may also delay or prevent a change in control of our company.
FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS OUR STOCK PRICE.
Sales of a substantial number of shares of common stock, including shares
issued upon the exercise of outstanding options and warrants, in the public
market after this offering or after the expiration of lockup and holding periods
could cause the market price of our common stock to decline. After this
offering, we will have approximately shares of common stock
outstanding. All the shares sold in this offering will be freely tradable. The
remaining
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<PAGE> 20
shares of common stock outstanding after this offering are subject
to lock-up agreements that prohibit the sale of the shares for 180 days after
the date of this prospectus. Any or all of these shares may be released prior to
expiration of the 180-day lockup period at the discretion of Goldman, Sachs &
Co. Immediately after the 180-day lockup period, of these shares
of outstanding options and warrants will become available for sale. The
remaining shares of our common stock will become available at various times
thereafter upon the expiration of one-year holding periods.
WE MAY NEED ADDITIONAL CAPITAL, AND RAISING ADDITIONAL CAPITAL MAY DILUTE
EXISTING STOCKHOLDERS.
We believe that our existing capital resources, including the anticipated
proceeds of this offering, will enable us to maintain our current and planned
operations for at least the next 12 months. However, we may choose to, or be
required to, raise additional funds due to unforeseen circumstances. If our
capital requirements vary materially from those currently planned, we may
require additional financing sooner than anticipated. This financing may not be
available in sufficient amounts or on terms acceptable to us and may be dilutive
to existing stockholders. If adequate funds are not available or are not
available on acceptable terms, our ability to hire, train or retain employees,
to fund our expansion, take advantage of unanticipated opportunities, develop or
enhance services or products, or otherwise respond to competitive pressures
would be significantly limited.
OUR CERTIFICATE OF INCORPORATION, BYLAWS AND DELAWARE CORPORATE LAW CONTAIN
PROVISIONS WHICH COULD DELAY OR PREVENT A CHANGE IN CONTROL EVEN IF THE CHANGE
IN CONTROL WOULD BE BENEFICIAL TO OUR STOCKHOLDERS.
Delaware law, as well as our certificate of incorporation and bylaws,
contain provisions that could delay or prevent a change in control of our
company, even if it were beneficial to the stockholders to do so. These
provisions could limit the price that investors might be willing to pay in the
future for shares of our common stock. These provisions:
- authorize the issuance of preferred stock that can be created and issued
by the board of directors without prior stockholder approval to increase
the number of outstanding shares and deter or prevent a takeover attempt;
- prohibit stockholder action by written consent, thereby requiring all
stockholder actions to be taken at a meeting of our stockholders;
- establish a classified board of directors requiring that not all members
of the board be elected at one time;
- prohibit cumulative voting in the election of directors, which would
otherwise allow less than a majority of stockholders to elect director
candidates;
- limit the ability of stockholders to call special meetings of
stockholders; and
- establish 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.
In addition, Section 203 of the Delaware General Corporation Law and the
terms of our stock option plans may discourage, delay or prevent a change in
control of our company.
WE MAY NOT USE THE PROCEEDS FROM THIS OFFERING IN A MANNER THAT IMPROVES OUR
OPERATING RESULTS OR INCREASES OUR MARKET VALUE.
We have no current specific plans for the net proceeds from this offering.
As a result, our management will have significant flexibility in applying the
net proceeds of this offering. The net proceeds could be applied in ways that do
not improve our operating results or increase our market value. We intend
generally to use the net proceeds from this offering for working capital and
general
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corporate purposes. We have not yet determined the actual expected expenditures
and thus cannot estimate the amounts to be used for each specified purpose. The
actual amounts and timing of these expenditures will vary significantly
depending on a number of factors, including, but not limited to, the amount of
cash used in or generated by our operations and the market response to the
introduction of any new product and service offerings. Depending on future
developments and circumstances, we may use some of the proceeds for purposes
other than those described above. You will not have the opportunity, as part of
your investment decision, to assess whether proceeds are being used
appropriately.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These statements
relate to our, and in some cases our customers' and/or partners', future plans,
objectives, expectations, intentions and financial performance, and the
assumptions that underlie these statements. In some cases, you can identify
forward-looking statements because they use terms such as "anticipates,"
"believes," "continue," "could," "estimates," "expects," "intends," "may,"
"plans," "potential," "predicts," "should" or "will" or the negative of those
terms or other comparable words. These statements involve known and unknown
risks, uncertainties and other factors that may cause industry trends or our
actual results, level of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these statements. These factors include
those listed under "Risk Factors," "Business," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and elsewhere in this
prospectus.
Although we believe that 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 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 or changes in
our expectations. You should not place undue reliance on these forward-looking
statements, which apply only as of the date of this prospectus.
USE OF PROCEEDS
We estimate that we will receive net proceeds of approximately $ million
from the sale of shares of our common stock, and $ million if the
underwriters' over-allotment option is exercised in full at the initial public
offering price of $ per share, after deducting the estimated underwriting
discounts and commissions and the estimated offering expenses payable by us.
The principal purposes of this offering are to increase our working
capital, create a public market for our common stock, facilitate our future
access to the public capital markets and increase our visibility in our markets.
We intend to use the net proceeds of this offering primarily for general
corporate purposes, including working capital. The amounts and timing of these
expenditures will vary depending on a number of factors, including the amount of
cash generated by our operations, competitive and technological developments and
the rate of growth, if any, of our business. We may also use a portion of the
net proceeds to acquire additional businesses, services, products or
technologies that we believe will complement our current or future business.
However, we have no specific plans, agreements or commitments to do so and are
not currently engaged in any negotiations for any acquisition or joint venture.
As a result, we will retain broad discretion in the allocation of the net
proceeds of this offering. Pending the uses described above, we will invest the
net proceeds of this offering in short-term interest-bearing, investment-grade
securities. We cannot predict whether the proceeds will be invested to yield a
favorable return. We believe that our available cash, together with the net
proceeds of this offering, will be sufficient to meet our capital requirements
for at least the next 12 months.
DIVIDEND POLICY
We have never declared or paid dividends on our capital stock and do not
anticipate paying any dividends in the foreseeable future. We currently expect
to retain our earnings, if any, for the development of our business.
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CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999:
- on an actual basis;
- on a pro forma basis after giving effect to:
-- the issuance of 787,131 shares of Series C preferred stock in January
2000;
-- the issuance of 2,052,846 shares of Series D preferred stock in March
2000;
-- the assumed exercise of an outstanding warrant to purchase 450,000
shares of common stock that expires prior to completion of this
offering; and
-- the conversion of all outstanding shares of preferred stock into
common stock; and
- on the same pro forma basis as adjusted to give effect to our receipt of
the estimated net proceeds from the sale of shares of common
stock in this offering.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS EXCEPT SHARE DATA)
<S> <C> <C> <C>
Stockholders' equity:
Preferred stock, no par value, none authorized, issued
or outstanding, actual; 5,000,000 shares authorized,
none issued or outstanding, pro forma and pro forma
as adjusted.......................................... $ -- $ -- $ --
Series A preferred stock, 1,144,474 shares authorized,
issued and outstanding, actual; none authorized,
issued or outstanding pro forma and pro forma as
adjusted............................................. 1,288 -- --
Series B preferred stock, 4,598,383 shares authorized,
issued and outstanding, actual; none authorized,
issued or outstanding, pro forma and pro forma as
adjusted............................................. 5,817 -- --
Series C preferred stock, 8,856,262 shares authorized,
7,334,194 issued and outstanding, actual; none
authorized, issued or outstanding, pro forma and pro
forma as adjusted.................................... 22,003 -- --
Series D preferred stock, none authorized, issued or
outstanding, actual; none authorized, issued or
outstanding pro forma and pro forma as adjusted...... -- -- --
Common stock, 40,000,000 shares authorized, 11,047,166
shares issued and outstanding, actual; 250,000,000
shares authorized, 27,414,194 shares issued and
outstanding, pro forma; shares authorized,
shares issued and outstanding, pro forma as
adjusted............................................. -- --
Additional paid-in capital.............................. 5,184 62,318
Deferred stock-based compensation....................... (2,431) (2,431) (2,431)
Accumulated deficit..................................... (17,062) (17,062) (17,062)
-------- -------- --------
Total stockholders' equity...................... 14,799 42,825
-------- -------- --------
Total capitalization............................ $ 14,799 $ 42,825 $
======== ======== ========
</TABLE>
This table excludes the following shares:
- 4,675,775 shares issuable upon exercise of options outstanding at a
weighted average exercise price of $0.303 per share as of December 31,
1999;
- 339,915 shares issuable upon exercise of a warrant at an exercise price
of $12.50 per share; and
- a total of shares available for future issuance under our various
stock plans.
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DILUTION
Our pro forma net tangible book value as of December 31, 1999 was
approximately $41.4 million, or $2.40 per share. Pro forma net tangible book
value per share represents the amount of our total tangible assets reduced by
the amount of total liabilities and divided by the total number of shares of
common stock outstanding, assuming the issuance of 450,000 shares of common
stock upon the exercise of a warrant that expires prior to completion of this
offering and the automatic conversion of our preferred stock, and including
787,131 shares of Series C preferred stock issued in January 2000 and 2,052,846
shares of Series D preferred stock issued in March 2000. Dilution in pro forma
net tangible book value per share represents the difference between the amount
per share paid by purchasers of common stock in this offering and the pro forma
net tangible book value per share of common stock immediately after the
completion of this offering. After giving effect to the sale of the
shares of common stock offered by us at an assumed initial public
offering price of $ per share, and after deducting the estimated
underwriting discount and estimated offering expenses payable by us, our pro
forma net tangible book value at December 31, 1999 would have been approximately
$ million or $ per share. This represents an immediate increase in pro
forma net tangible book value of $ per share to the existing stockholders
and an immediate dilution of $ per share to new investors in our common
stock. The following table illustrates this dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share as of December
31, 1999............................................... $
Increase per share attributable to new investors..........
------
Pro forma net tangible book value per share after this
offering..................................................
------
Dilution per share to new investors......................... $
======
</TABLE>
The following table summarizes on a pro forma basis after giving effect to
the offering, as of December 31, 1999, the differences between the existing
stockholders and new investors with respect to the number of shares of common
stock purchased from us, the total consideration paid and the average price per
share paid.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------ ------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------- ------- -------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............ % $ % $
New investors....................
------- ------ -------- ------
Total.......................... 100.00% $ 100.00%
======= ====== ======== ======
</TABLE>
The foregoing discussion and tables are based upon the number of shares
actually issued and outstanding on December 31, 1999 and assume no exercise of
options or warrants outstanding as of December 31, 1999. To the extent theses
options are exercised, there will be further dilution to new investors. As of
December 31, 1999, there were 4,675,775 shares issuable upon exercise of options
outstanding at a weighted average exercise price of $0.303 per share and
additional shares reserved for issuance under our various stock plans.
If the underwriters' over-allotment option is exercised in full, the number
of shares held by new investors will increase to or % of the total
shares of common stock outstanding after this offering.
21
<PAGE> 25
SELECTED FINANCIAL DATA
The selected financial data below should be read together with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and related notes included elsewhere in
this prospectus. The following selected statement of operations data for the
years ended December 31, 1997, 1998 and 1999 and the selected balance sheet data
as of December 31, 1998 and 1999 are derived from our audited financial
statements included elsewhere in this prospectus which have been audited by KPMG
LLP, independent auditors. The balance sheet data as of December 31, 1997 have
been derived from our audited financial statements not included in this
prospectus. Our historical results are not necessarily indicative of results to
be expected for any future period. The data have been derived from financial
statements that have been prepared in accordance with generally accepted
accounting principles. See notes 1(d) and 1(p) of the notes to our financial
statements for an explanation of the determination of the number of shares used
in computing basic and diluted net income (loss) per share.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1997 1998 1999
------ ------- --------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue..................................................... $1,289 $ 1,987 $ 2,607
Cost of revenue............................................. 192 484 688
------ ------- --------
Gross profit................................................ 1,097 1,503 1,919
Operating expenses:
Sales and marketing....................................... 421 2,244 9,319
Research and development.................................. 525 1,406 3,361
General and administrative................................ 125 198 1,732
Stock-based compensation.................................. -- 92 2,005
------ ------- --------
Total operating expenses............................... 1,071 3,940 16,417
------ ------- --------
Operating income (loss)..................................... 26 (2,437) (14,498)
Other income, net........................................... 2 102 127
------ ------- --------
Net income (loss)........................................... $ 28 $(2,335) $(14,371)
====== ======= ========
Net loss per share:
Basic and diluted......................................... $ 0.00 $ (0.23) $ (1.34)
====== ======= ========
Shares used in computing net income (loss) per share:
Basic and diluted......................................... 7,192 10,103 10,700
====== ======= ========
Unaudited pro forma basic and diluted net loss per share.... $ (0.83)
========
Shares used in computing unaudited pro forma basic and
diluted net income (loss) per share....................... 17,246
========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1997 1998 1999
----- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 58 $ 5,522 $ 13,621
Working capital (deficit)................................... (405) 4,880 10,588
Total assets................................................ 283 5,991 21,649
Long-term obligations, net of current portion............... -- -- --
Total stockholders' equity.................................. (332) 5,112 14,799
</TABLE>
22
<PAGE> 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and our results of
operations should be read together with the consolidated financial statements
and the related notes included elsewhere in this prospectus. This discussion
contains forward-looking statements that involve risks and uncertainties. Our
actual results could differ materially from those anticipated in the
forward-looking statements as a result of several factors, including, but not
limited to, those discussed in "Risk Factors" and elsewhere in this prospectus.
OVERVIEW
We commenced operations in February 1995 and until 1996, were engaged in
consulting services. From January 1997 through February 1999, we engaged in
research and development activities for our real-time, interactive multimedia
communications services. During this period, from 1997 to 1998, we provided
contract development services with a focus on assignments that enhanced our
capabilities for the interactive communications marketplace. Our product
development activities were funded primarily from our contract development
business during this period. We released an interactive communications product
built on our technology in early 1998. Based on sales of this product and the
associated customer feedback, we obtained our first external financing in 1998.
We launched WebEx Meeting Center, our first real-time, interactive multimedia
communications service, in February 1999 and began selling the service to
customers and partners. We also made available a subset of our service for free
at www.webex.com to increase awareness and to generate leads for our sales
organization. Since February 1999, our activities have been focused on
continuing to enhance and market our WebEx Interactive Platform (WIP) and our
WebEx Meeting Center service, developing and deploying new services, expanding
our sales and marketing organizations and deploying our global WebEx Interactive
Network (WIN).
To date, we have derived substantially all of our revenue from sales of our
services to customers to meeting-enable their websites. Our services revenue is
generated primarily through subscription services, revenue-sharing arrangements
and pay-per-use services and, to a lesser extent, through hosting arrangements.
Revenue from subscription services consists of monthly usage fees, which are
based upon a fixed number of concurrent users, and initial set up fees.
Typically, our contracts are for an initial term of 90 days, and then renew
monthly unless terminated by either party. Revenue from hosting arrangements
includes initial set up fees, software-use licenses, service charges for hosting
the application and post-contract customer support fees. We have also initiated
efforts to generate revenue from partners such as portals, web application
providers and communications service providers. We derive portal revenue from
website set-up fees and from revenue-sharing agreements with co-branded websites
and from our www.webex.com site, which allows end-users to use our services on a
pay-per-use basis. We have also entered into revenue-sharing agreements with web
application providers to embed our technology within their services or software
products. In addition, we are working with communications service providers that
will sell and support private label services.
As of December 31, 1999, substantially all of our revenue has been derived
from customers based in North America. We expect that revenue from customers
based outside North America will increase in future periods.
Prepaid subscription services revenue is recognized ratably over the
initial term of the agreement, which is typically 90 days. Subscription services
revenue after the initial term of the agreement is recognized monthly.
Pay-per-use services revenue is recognized as our service is used. Hosted
software services revenue is recognized ratably over the non-cancelable
contractual term of the service arrangement.
Cost of revenue consists of expenses for delivering our services to
websites and supporting our customers and partners. These expenses include the
cost of making our services available on websites, Internet communication access
costs, personnel and equipment costs and depreciation
23
<PAGE> 27
associated with hosting the services, technical support and training for
customers, partners and end-users.
Sales and marketing expense includes salaries, commissions and other
expenses related to the sale of our services to customers and establishing
partner relationships, as well as marketing campaigns to generate sales leads
and to build the WebEx brand. Research and development expense includes
personnel, equipment, consulting and other expenses associated with designing,
developing and testing our services and the software underlying our services. In
addition to our U.S. based engineering group, we have relationships with related
third-party companies in China under which contract engineers to these companies
primarily conduct quality assurance testing for our services and modify the
software underlying our services to enable our services to work with various
operating systems. Expenses associated with these relationships are included in
research and development. General and administrative expense includes personnel
and associated expenses relating to general management, finance, legal and human
resources.
Stock-based compensation expense consists of the amortization of deferred
stock-based compensation resulting from the grant of stock options at exercise
prices less than the fair value of the underlying common stock on the grant date
for employees and the fair value of stock options granted to consultants. As of
December 31, 1999, we had recorded cumulative deferred stock-based compensation
costs of approximately $4.5 million in connection with the grant of stock
options to employees and consultants. This amount is being expensed on an
accelerated basis allowable under generally accepted accounting principles over
the vesting periods of the applicable stock options. The options typically vest
over four years, with 25% of the options vesting on the first anniversary of the
grant date and the remainder vesting ratably per month thereafter. Cumulative
amounts of deferred stock-based compensation expensed through December 31, 1999
was $2.1 million. We expect to record additional deferred stock-based
compensation in connection with options granted during the first quarter of
2000. We expect to incur stock-based compensation expense of at least $1.6
million in 2000, $600,000 in 2001, $180,000 in 2002 and $20,000 in 2003.
In June 1999, we issued a warrant to 1. T-Telematik
Beteiligungsgesellschaft mbH, or T-Venture, a venture fund affiliated with
Deutsche Telekom AG, to purchase 450,000 shares of our Series C preferred stock
at an exercise price of $0.01 per share. The warrant vests and becomes
immediately exercisable upon the earlier of: (A) our entering into a
revenue-sharing agreement with Deutsche Telekom AG which assures us of receiving
at least $3.0 million in revenue from the agreement over a one-year period or
(B) the closing of our initial public offering. This warrant expires on April
30, 2000 regardless of whether the warrant has vested by this time. If this
warrant vests and becomes exercisable prior to April 30, 2000, we will incur a
substantial non-cash charge equal to the fair value of the warrant measured at
the date the performance requirement for vesting and exercisability is met.
As of December 31, 1999, we had an accumulated deficit of $17.1 million.
These losses have been funded primarily through the private issuances of equity
securities. We expect our operating expenses to continue to increase as we
continue to expand our business. As a result, we expect to incur substantial net
losses for the foreseeable future and will need to generate significant revenue
to achieve and maintain profitability. In light of the rapidly evolving nature
of our business and our limited operating history with our subscription services
pricing model, we believe that period-to period comparisons of our operating
results are not necessarily meaningful and you should not rely upon them as
indications of future performance.
24
<PAGE> 28
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the statement of
operations data as a percentage of revenue.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Revenue..................................................... 100% 100% 100%
Cost of revenue............................................. 15 24 26
--- ---- ----
Gross profit.............................................. 85 76 74
Operating expenses:
Sales and marketing............................. 32 113 357
Research and development........................ 41 71 129
General and administrative...................... 10 10 66
Stock-based compensation........................ -- 5 77
--- ---- ----
Total operating expenses........... 83 199 629
--- ---- ----
Operating income (loss)................................... 2 (123) (555)
Other income, net........................................... 0 5 5
--- ---- ----
Net income (loss)........................................... 2% (118)% (550)%
=== ==== ====
</TABLE>
COMPARISON OF YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999.
REVENUE. Revenue increased from $1.3 million in 1997 to $2.0 million in
1998 and to $2.6 million in 1999, representing an increase of 54% from 1997 to
1998 and an increase of 30% from 1998 to 1999. The increase from 1997 to 1998
was due primarily to the initial launch of our client server-based products in
1998. In February 1999, we launched our web-based services and changed our
business model from a product-based model to a subscription services model. This
change resulted in a reduced growth rate between 1998 and 1999.
COST OF REVENUE. Cost of revenue increased from $192,000 in 1997 to
$484,000 in 1998 and to $688,000 in 1999. Cost of revenue increased 152% from
1997 to 1998 and 42% from 1998 to 1999. The increase in absolute dollars and in
percentage of revenue in 1997, 1998 and 1999 was due primarily to increasing
sales and our shift from a product-based model to a subscription services model
in 1999. We anticipate that cost of revenue will increase in absolute dollars as
revenue increases.
SALES AND MARKETING. Sales and marketing expense increased from $421,000 in
1997 to $2.2 million in 1998 and to $9.3 million in 1999. As a percentage of
revenue, sales and marketing expense increased from 32% in 1997 to 113% in 1998
to 357% in 1999. The increase in each of these periods in absolute dollars and
as a percentage of revenue was due primarily to the hiring of additional sales
and marketing personnel and increased marketing expense associated with the
launch of a new marketing campaign in 1999. We anticipate that sales and
marketing expense will increase in absolute dollars as we continue to expand our
sales force and build our brand.
RESEARCH AND DEVELOPMENT. Research and development expense increased from
$525,000 in 1997 to $1.4 million in 1998 and to $3.4 million in 1999. The
increase in each of these periods was due primarily to an increase in the number
of research and development personnel as we continued to develop our distributed
network services and application platform. As a percentage of revenue, research
and development expense increased from 41% in 1997 to 71% in 1998 and to 129% in
1999. The increase as a percentage of revenue was due primarily to the increased
efforts to build and launch the client server-based product in 1998 and our
web-based service in 1999. We anticipate that research and development costs
will increase in absolute dollars as we continue to expand our service offerings
and service functionalities.
25
<PAGE> 29
GENERAL AND ADMINISTRATIVE. General and administrative expense increased
from $125,000 in 1997 to $198,000 in 1998 and to $1.7 million in 1999. As a
percentage of revenue, general and administrative expense increased from 10% in
1997 and 1998 to 66% in 1999. The increase in absolute dollars and as a
percentage of revenue from 1998 to 1999 was due primarily to hiring additional
finance and administrative staff. We anticipate that general and administrative
expense will increase in absolute dollars as we hire additional personnel and
incur additional expenses related to the growth of our business and our
operations as a public company.
STOCK-BASED COMPENSATION. Stock-based compensation expense was $0 in 1997,
$92,000 in 1998 and $2.0 million in 1999. As a percentage of revenue,
stock-based compensation increased from 0% in 1997 to 5% in 1998 to 77% in 1999.
The increase in absolute dollars and as a percentage of revenue from 1997 to
1999 was due primarily to increased stock option grants to employees and
non-employees.
OTHER INCOME, NET. Other income, net is comprised primarily of investment
income net of interest and other expense and increased from $2,000 in 1997 to
$102,000 in 1998 and to $127,000 in 1999. This increase was due primarily to
higher average cash balances in each successive year.
INCOME TAXES. We incurred net operating losses in 1998 and 1999 and
consequently paid no federal, state and foreign income taxes in those years. We
incurred a slight operating profit in 1997 and paid a total of $6,000 in taxes
that year, which is included in other income, net.
As of December 31, 1999, we had federal and state net operating loss
carryforwards of approximately $13.6 million and $6.8 million, respectively. We
also had federal and state research and development tax credit carryforwards of
approximately $122,000 and $102,000, respectively. Our net operating loss
carryforwards will expire at various dates beginning in 2003 through 2019, if
not utilized.
26
<PAGE> 30
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth our unaudited quarterly results of
operations data for the four quarters ended December 31, 1999, and this
information expressed as a percentage of our revenue for the periods indicated.
This information is unaudited but has been prepared on the same basis as our
audited consolidated financial statements appearing elsewhere in this
prospectus. In management's opinion, this table includes all normal recurring
adjustments necessary for a fair presentation of our financial position and
operating results for the quarters presented. This information should be read
together with our consolidated financial statements and related notes included
elsewhere in this prospectus. The operating results for any quarter are not
necessarily indicative of the operating results for any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1999 1999 1999 1999
--------- -------- --------- --------
(IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue........................................... $ 469 $ 551 $ 446 $ 1,141
Cost of revenue................................... 65 101 139 383
------- ------- ------- -------
Gross profit...................................... 404 450 307 758
Operating expenses:
Sales and marketing............................. 868 1,472 2,771 4,208
Research and development........................ 584 699 906 1,172
General and administrative...................... 218 329 490 695
Stock-based compensation........................ 143 336 332 1,194
------- ------- ------- -------
Total operating expenses..................... 1,813 2,836 4,499 7,269
------- ------- ------- -------
Operating income (loss)........................... (1,409) (2,386) (4,192) (6,511)
Other income, net................................. 41 44 20 22
------- ------- ------- -------
Net income (loss)................................. $(1,368) $(2,342) $(4,172) $(6,489)
======= ======= ======= =======
AS A PERCENTAGE OF REVENUE:
Revenue........................................... 100% 100% 100% 100%
Cost of revenue................................... 14 18 31 34
Gross profit...................................... 86 82 69 66
Operating expenses:
Sales and marketing............................. 185 267 621 369
Research and development........................ 125 127 203 103
General and administrative...................... 46 60 110 60
Stock-based compensation........................ 30 61 74 104
------- ------- ------- -------
Total operating expenses..................... 386 515 1,008 636
------- ------- ------- -------
Operating income (loss)........................... (300) (433) (939) (570)
Other income, net................................. 9 8 4 2
------- ------- ------- -------
Net income (loss)................................. (291)% (425)% (935)% (568)%
======= ======= ======= =======
</TABLE>
Revenue increased substantially during the fourth quarter due to the
increased investments in sales and marketing earlier in the year.
During the first three quarters of 1999, cost of revenue increased in both
absolute dollars and as a percentage of revenue. This increase was primarily due
to increased investment in technical and training support for our customers as
well as improving the reliability of our hosting service. Cost of revenue
continued to increase during the fourth quarter of 1999 in absolute dollars and
as a percentage of revenue due to these same reasons.
27
<PAGE> 31
During the first three quarters of 1999, sales and marketing expense
increased both in absolute dollars and as a percentage of revenue as we began to
aggressively grow our business. Sales and marketing expense continued to
increase during the fourth quarter of 1999 in absolute dollars due to these same
reasons but decreased as a percentage of revenue as our revenue began to
increase.
During the first three quarters of 1999, research and development expense
increased both in absolute dollars and as a percentage of revenue as we hired
additional engineers to expand the capabilities of our platform and our
services. Research and development expense continued to increase during the
fourth quarter of 1999 in absolute dollars due to these same reasons but
decreased as a percentage of revenue as our revenue began to increase.
During the first three quarters of 1999, general and administrative expense
increased in both absolute dollars and as a percentage of revenue as we hired
additional personnel and further developed the infrastructure necessary to
support our growth. General and administrative expense continued to increase
during the fourth quarter of 1999 in absolute dollars due to these same reasons
but decreased as a percentage of revenue as our revenue began to increase.
In February 1999, we launched WebEx Meeting Center, our first real-time,
interactive multimedia communications service, and began selling this service to
customers and partners. Because we have a limited operating history providing
services and other factors, our quarterly revenue and operating results are
difficult to predict. In addition, due to the emerging nature of the market for
interactive communications services for websites, our quarterly revenue and
operating results may fluctuate from quarter to quarter.
LIQUIDITY AND CAPITAL RESOURCES
We have funded our operations to date primarily through private sales of
preferred equity securities, with proceeds totaling $29.1 million. As of
December 31, 1999, we had $13.6 million in cash and cash equivalents. We sold
803,131 shares of our Series C preferred stock in January 2000 for aggregate
proceeds of $2.4 million and 2,052,846 shares of our Series D preferred stock in
March 2000 for aggregate proceeds of $25.7 million.
Net cash provided by (used in) in operating activities was $76,000 in 1997,
($1.5) million in 1998 and ($10.9) million in 1999. Cash used in operating
activities were primarily due to net operating losses and increases in accounts
receivable for 1998 and 1999 and increases in prepaid expenses for 1999. The
sources of cash were primarily increases in accounts payable, accrued
liabilities, accrued commissions and deferred revenue for 1998 and 1999.
Net cash used in investing activities was $74,000 in 1997, $191,000 in 1998
and $2.9 million in 1999. Net cash used in investing activities consisted
primarily of the purchase of capital equipment. The equipment we purchased was
primarily for computer workstations used for product development, product
demonstrations and customer support, facilities infrastructure and equipment
required for hosting our services. We expect our capital equipment expenditures
to increase in the normal course of our business and as we build out our
network.
Net cash provided by financing activities was $3,000 in 1997, $7.1 million
in 1998 and $21.9 million in 1999. Net cash provided by financing activities
consisted primarily of the proceeds from the issuance of preferred stock.
We believe that the net proceeds from this offering, together with our
current cash balances, will be sufficient to satisfy our anticipated cash needs
for working capital and capital expenditures for at least the next 12 months.
Thereafter, we may require additional funds to support our working capital
requirements, or for other purposes, and may seek to raise these additional
funds through public or private financings or from other sources. We may not be
able to obtain adequate or favorable financing at that time. Any financing we
obtain may dilute your ownership interests.
28
<PAGE> 32
RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Position 97-2, "Software Revenue Recognition," was issued in
October 1997 by the American Institute of Certified Public Accountants and
amended by Statement of Position 98-4. We adopted Statement of Position 97-2
effective January 1, 1999 and Statement of Position 98-4 effective January 1,
1999. Based on our interpretation of Statement of Position 97-2 and Statement of
Position 98-4, we believe our current revenue recognition policies and
practices, as discussed in "Management's Discussion and Analysis of Financial
Condition and Result of Operations -- Overview," are consistent with Statement
of Position 97-2 and Statement of Position 98-4.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement as amended by SFAS No. 137,
Deferral of the Effective Date of FASB Statement No. 133, establishes accounting
and reporting standards for derivative instruments and requires recognition of
all derivatives as assets or liabilities in the statement of financial position
and measurement of those instruments at fair value. The statement is effective
for fiscal quarters of all fiscal years beginning after June 15, 2000. We will
adopt the standard no later than the first quarter of fiscal year 2001 and we
are in the process of determining the impact that adoption will have on our
consolidated financial statements.
In 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-9, Modification of SOP 97-2, Software Revenue
Recognition with Respect to Certain Transactions, which will be effective for us
for transactions entered into beginning January 1, 2000. In December 1999, the
Securities and Exchange Commission published Staff Accounting Bulletin No. 101,
Revenue Recognition in Financial Statements. This staff accounting bulletin
summarizes certain of the staff's views in applying generally accepted
accounting principles to revenue recognition in financial statements and
provides interpretations regarding the application of generally accepted
accounting principles to revenue recognition where there is an absence of
authoritative literature addressing a specific arrangement or a specific
industry. We believe our revenue recognition practices comply with the
applicable guidance in these recent publications.
QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
We do not use derivative financial instruments. We generally place our
marketable security investments in high credit quality instruments, primarily
U.S. Government obligations and corporate obligations with contractual
maturities of less than one year. We do not expect any material loss from our
marketable security investments and therefore believe that our potential
interest rate exposure is not material.
29
<PAGE> 33
BUSINESS
OVERVIEW
WebEx provides a globally distributed network and scalable platform for
powering real-time, interactive multimedia communications services for websites.
Our services meeting-enable the websites of our customers and partners.
End-users access these interactive services through the co-branded websites of
our customers and partners as well as at WebEx.com. Our services enable WebEx
end-users to flexibly and spontaneously share content and applications with
integrated audio and video in a seamless environment. We have designed our
services to help our customers and partners improve their productivity and
efficiency, differentiate and distinguish their product and service offerings
and enhance and diversify their revenues. Our customers include web-based
companies and traditional companies seeking to meeting-enable their websites.
Our partners, who can embed our services into their offerings, include portals,
web application providers and communication service providers. As of February
29, 2000, we had more than 425 customers and had signed agreements with more
than 78 partners.
Our objective is to be the leading web-based interactive communications
platform. To achieve our objective, we intend to expand our global network,
increase our brand recognition and leverage our partnerships. We also intend to
become a de facto standard for real-time, interactive multimedia communications
through websites by continuing to enhance the capabilities, applicability and
ease of use of our platform and services.
INDUSTRY BACKGROUND
As today's extended enterprise of employees, customers, suppliers and
partners becomes larger and more geographically dispersed, the world-wide-web
has become a critical medium for conducting business globally. Forrester
Research estimates that 93% of firms will conduct business on the Web by 2002
and that business-to-business electronic commerce will grow from $406 billion in
2000 to $2.7 trillion in 2004. The rapid and broad acceptance of the Web as a
medium for business communications is enabling new opportunities to streamline
complex business processes and to conduct transactions more efficiently. As a
result, sophisticated web-enabled interactive communications have become
increasingly necessary as companies seek to become more efficient and effective.
To realize the benefits of the Web, companies are increasingly deploying
websites to enhance their business activities, and portals and online
marketplaces have emerged to provide more efficient interactions among
companies. This widespread adoption of the Web is leading to new operating
services for websites, portals and online marketplaces to effectively deliver
functionality and content and to efficiently conduct transactions. Corporate
websites, portals, communications service providers and online marketplaces are
seeking a scalable, customizable multimedia communications services platform
that transforms websites into interactive centers for business professionals to
conduct business in real time.
Recently, the Web has emerged as a new medium for business communications.
International Data Corporation, or IDC, estimates that the worldwide market for
web-based collaborative service and support will increase from approximately
$14.5 billion in 1999 to approximately $42.8 billion in 2003. Existing web-based
applications such as email, text chat, instant messaging and screen sharing are
point solutions that do not address the need for interactive multimedia
communications. In addition, stand-alone server-based web conferencing tools,
training applications and presentation sharing tools address only a small
portion of the real-time interactive communications needs of business
professionals. These tools do not support the needs of corporate websites,
portals, communications service providers and on-line marketplaces to customize
and integrate interactive communications services into their existing service
offerings. The inherent limitations of these point solutions and tools can be
addressed through an integrated distributed network and scalable platform
30
<PAGE> 34
that offers a comprehensive, flexible and customizable service architecture that
can support a broad range of web applications across multiple web environments.
Corporate websites, portals, communications service providers and on-line
marketplaces require real-time, interactive multimedia communications services,
offering spontaneous sharing of content and applications along with integrated
audio and video. To meet the business needs of these websites, these services
must be reliable, secure and scalable to enable a full range of real-time,
two-way, multimedia interactions, including one-to-one, one-to-many and
any-to-any. Additionally, these services must be easy to use and require a
platform that enables access through any standard web browser. The architecture
for this scalable platform would require a standards-based software foundation
and communications infrastructure that is delivered as a service to websites,
ensuring rapid integration, customization and deployment. While operating
services for websites have emerged to address challenges such as distributing
content or conducting transactions, there is a fundamental need for a
comprehensive and flexible platform that enables real-time, interactive
communications services for a broad range of websites.
THE WEBEX SOLUTION
We provide a globally distributed network and scalable platform for
powering real-time, interactive multimedia communications services for websites.
We have designed our services to enable flexible and spontaneous sharing of
content and applications with integrated audio and video in a seamless
environment. Our platform provides end-users with ready access to interactive
multimedia communications services across a broad array of industries, business
functions and applications on a secure and reliable basis. Our services are
available to end-users through our customers' and partners' websites on a
co-branded basis as an extension to their web environments, as well as on our
website, www.webex.com. End-users of our services include employees, customers,
suppliers and partners in the extended enterprise.
We have designed our platform and services to help our customers and
partners to:
IMPROVE PRODUCTIVITY AND EFFICIENCY AND REDUCE TIME TO VALUE
Our services enable the easy sharing of information, knowledge and
expertise through websites, thereby reducing the time it takes business
professionals to act as well as enhancing the effectiveness of their actions. By
making business professionals more productive and efficient, organizations are
able to achieve their goals more quickly thereby reducing the time to value.
Additionally, organizations are able to reduce the cost of interacting with
their extended enterprise by using our services to improve communications
capabilities. Examples of how our services enable our customers to reduce time
to value and generate cost savings include:
- providing an effective medium for conducting interactive on-line sales
and marketing meetings;
- enabling real-time customer service and support;
- enhancing relationships among members of the extended enterprise; and
- reducing expenses for travel, communications and training.
DIFFERENTIATE AND DISTINGUISH THEIR PRODUCT AND SERVICE OFFERINGS
We provide our services to the websites of our customers and partners on a
co-branded basis. Our services enable our customers and partners to distinguish
themselves from their competitors and increase user loyalty by offering their
end-users easy-to-use, real-time, interactive multimedia communications
services. In addition, as end-users continue to invite new users to
WebEx-enabled meetings, our customers and partners are able to attract potential
users to their websites, thereby creating valuable marketing opportunities.
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ENHANCE AND DIVERSIFY REVENUES
Our services can enhance our partners' revenues by expanding the scope of
their service offerings and driving increased traffic and usage. We provide our
partners with opportunities for additional diversified revenues through
revenue-sharing agreements for our services. For example, our partners can add
our pay-per-use meeting services to their existing websites and share with us
the revenue generated by this service.
The key characteristics of our platform and services that enable us to
deliver the business benefits described above include:
OPEN AND FLEXIBLE
We have designed our platform to be open and flexible to efficiently
support many combinations of interactive communications services. This enables
our services to be integrated into a large number of websites and web
applications that offer a variety of functionality. Moreover, our platform is
standards-based and has been designed to enable rapid development and deployment
of new services and applications.
COMPREHENSIVE, INTEGRATED FUNCTIONALITY
Our platform seamlessly integrates data, audio and video into a unified
interface to provide a comprehensive and fluid experience for end-users.
Furthermore, our platform enables our services to be added to a customer's or
partner's website quickly and easily with little development and administrative
expense. Our data services enable efficient real-time sharing of information
including presentations, documents, simple and complex applications of all kinds
and web content. Our audio services provide teleconferencing and voice-over-IP
conferencing for comprehensive interactive audio communications capabilities.
Our video services allow for end-to-end transmission and reception of live
video. We also provide branding services to match the look and feel of each
website for effective integration and rapid deployment of our services.
EASY AND SPONTANEOUS INTERACTIVITY
Within a WebEx meeting, any participant can share information spontaneously
with others. Files and applications accessible on the user's desktop or on the
Web can be opened and shared at any point in real time during a WebEx
meeting -- there is no need to upload predetermined files prior to a meeting.
Additionally, the meeting host can give any participant the capability to
control and modify the information being shared. This provides for a natural and
fluid environment for conducting meetings remotely.
SCALABILITY, RELIABILITY AND SECURITY
Our globally distributed network platform is designed to support millions
of concurrent meetings with the number of participants in each meeting ranging
from two to several thousand. Our platform is designed to facilitate one-to-one,
one-to-many or any-to-any interactions. This scalability allows organizations to
increase the volume and frequency of their interactive communications without
compromising the fluid environment. The clustered architecture of our globally
distributed network platform provides multiple levels of redundancy and
efficient load balancing. This enables us to provide reliable communications
services for our customers and partners. Our services allow customers to monitor
and exclude any users from a meeting, encrypt data that is being shared and work
with existing firewalls. Similar to telephone conversations, information passes
through our secure services in real time and is not stored on our platform.
These measures are designed to ensure data integrity and security of the
information shared through our interactive communications services for websites.
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THE WEBEX STRATEGY
Our mission is to be the leading web-based interactive communications
platform. To pursue this strategy, we intend to:
BECOME A DE FACTO STANDARD FOR REAL-TIME, INTERACTIVE MULTIMEDIA
COMMUNICATIONS FOR WEBSITES
We intend to establish the WebEx platform as the standard for real-time,
interactive multimedia communications services for websites. We have designed
our platform to be open, modular, easy-to-use and broadly applicable to many
different industries and business functions. We intend to enhance and expand the
capabilities of our platform to deliver compelling new services in order to
maintain our leadership position and facilitate broad acceptance of our
platform. Our strategy also involves attracting third-party web developers to
build products and services on our platform. We believe that ongoing
technological innovation will be critical to realizing our objective and
maintaining and enhancing our competitive advantage. As a result, we expect to
continue to invest significantly in research and development.
EXTEND THE DEPLOYMENT OF OUR GLOBAL NETWORK
We seek to provide real-time, interactive multimedia communications
services for websites with ease of access, ease of use and reliability levels
that approach those of the public telephone network. In order to provide this
level of service, we plan to deploy our current network more broadly to increase
the overall performance, availability, scalability and cost-effectiveness of our
platform and services. Our network expansion will include obtaining additional
bandwidth and the build-out of new regional hubs located strategically around
the globe.
INCREASE BRAND RECOGNITION
Our objective is to make the WebEx brand synonymous with meeting-enabling
the Web through on-line multimedia meetings that are powerful and easy-to-use.
We are heavily promoting our services and intend to increase brand awareness
through marketing strategies that involve the extensive use of high profile
on-line and off-line advertising, as well as prominent participation in trade
shows, industry conferences and other events. We also intend to expand our
co-branding relationships with portals, web application providers and
communications service providers that offer our services through joint marketing
and revenue-sharing arrangements.
EXPAND AND LEVERAGE STRATEGIC PARTNERSHIPS
We intend to expand and establish new strategic partnerships with portals,
web application providers, communications service providers, on-line
marketplaces, system integrators and application service providers to reach new
customers and end-users to rapidly increase the use of our WebEx platform and
services. We believe that developing these relationships will allow us to scale
our business more quickly, effectively and inexpensively and generate additional
revenue opportunities. Expanding strategic relationships with recognized
industry leaders in our target markets brings us a high level of understanding
of the specific needs of that market, as well as credibility and visibility with
potential new customers. Developing strategic technology relationships enhances
our ability to develop and deliver new service offerings and enables us to reach
a broader range of customers than we could through our efforts alone.
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OUR SERVICES AND TECHNOLOGY ARCHITECTURE
We have designed and developed our technology architecture to satisfy the
interactive communications requirements of a broad range of websites. Our
architecture consists of three tiers: WebEx Interactive Services (WIS), WebEx
Interactive Platform (WIP) and WebEx Interactive Network (WIN).
WEBEX INTERACTIVE SERVICES GRAPHIC
WEBEX INTERACTIVE SERVICES
WebEx Interactive Services provide co-branded turnkey services that can be
customized easily for websites. These interactive services provide a broad range
of comprehensive features that build on the real-time functionality and
capabilities of the WebEx Interactive Platform and WebEx Interactive Network. We
currently provide the following four services:
WEBEX MEETING CENTER. The WebEx Meeting Center integrates data, audio and
video to provide an on-line meeting environment that simulates the full
spontaneity of face-to-face meetings. The WebEx Meeting Center can be fully
integrated into our customers' and partners' websites, allowing end-users to
participate in meetings anywhere, at any time, from any web browser or
telephone. Personnel throughout an extended enterprise, including sales,
marketing, training, customer service, engineering and business development
personnel, can benefit from the WebEx Meeting Center. WebEx Meeting Center
features include:
- Application Sharing: enables participants to run any software application
on their desktop and have others view and optionally control the
application.
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- Presentation Sharing: allows any meeting participant to spontaneously
share presentations without uploading the file to a server.
- Document Sharing: allows meeting attendees to jointly view any document
or graphic independent of the software application.
- Web Co-Browsing: allows all participants to co-navigate the Web. Web page
annotation and form-filling are supported.
- Desktop Remote Control: allows the control of any user's system remotely
by another meeting participant (once permission is explicitly granted by
the user).
- File Transfer: enables instant file transfer to all participants within a
meeting.
- Polling: enables instant feedback from attendees.
- Live Chat: allows participants to chat publicly and privately.
- Record and Playback: allows the recording of meetings for later playback.
- Live Video: supports simple, low-cost desktop video camera, enabling
videoconferencing through a standard web browser.
- Comprehensive Browser-Controlled Teleconferencing: hosts can allow any
attendee to participate in a teleconference by calling into the meeting
or having the service call out to the attendee.
WEBEX BUSINESS EXCHANGE. The WebEx Business Exchange incorporates WebEx
meeting and office functionality in a seamless "virtual outer office"
environment, thus enabling comprehensive, synchronous and asynchronous
interaction between business professionals. The WebEx Business Exchange is a
multi-tiered service that is available through our customers' and partners'
websites and can be offered with limited capabilities for free, or with full
functionality on a pay-per-use or subscription basis, depending on the needs of
the end-user. Our own website, www.webex.com, is a fully-enabled example of the
WebEx Business Exchange.
The WebEx Business Exchange allows business professionals to establish
their own office homepage and promote their meeting-enabled businesses to other
members of their web community. WebEx Business Exchange also enables business
professionals to more easily organize their real-time on-line meetings and to
better manage off-line communications with their business associates. Office
owners can create multi-category, multi-level directories to allow potential
business associates to easily find the appropriate business professional to help
them with their inquiry.
WebEx Business Exchange includes these key features:
- Meeting Capabilities: allows each office owner to conduct on-line
meetings.
- Personal Web Page: allows each office owner to easily publish his or her
office hours and business information through a directory.
- Business Directory: allows a customer or partner to customize a unique,
searchable business directory of offices on their websites.
- Meeting Calendar: allows an office owner to maintain a public/private
calendar where visitors can request and schedule meetings.
- Address Book: allows an office owner to maintain contact information of
meeting participants.
- Message Notification: allows an office visitor to leave a message for the
office owner.
- Public and Private Folders: allows an office owner to share information
with office visitors.
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WEBEX ONCALL. This service is primarily used by customer service
organizations and can be an extension of customer care websites. WebEx OnCall
enables our customers to enhance the effectiveness of traditional
telephone-based customer support by allowing their service agents to support
end-users through the web browser, with no requirement for preinstalled software
on either computer. The service incorporates a custom user interface to simplify
support interactions for both the support agent and the end-user. The service
includes the following features:
- View Customer Problem: allows a service agent to view any application
running on the end-user's computer.
- Fix Customer Problem: allows a service agent, with end-user permission,
to remotely fix software problems or train the end-user how to use
specific features.
- Download Updates and Patches: allows software fixes to be downloaded onto
the end-user's computer.
- Upload Files from Customer System: allows end-users to move specific
files from their computers to a service agent's system for diagnosis.
WEBEX SHOPPING-TOGETHER. This service is designed for retailing websites to
enable on-line shoppers to co-browse and shop together. This service promotes a
social shopping experience on-line, increasing the likelihood of on-line
shoppers purchasing goods and services at the customer's website. The features
of the service include:
- Browse Together: allows either party to lead the other in browsing web
pages;
- Fill Order Forms Together: allows interactive web form completion; and
- Annotating over Web Pages: allows either party to annotate any web page.
WEBEX INTERACTIVE PLATFORM
The WebEx Interactive Platform is a distributed, standards-based software
architecture that provides a comprehensive set of functionality for interactive
communication services for websites and is designed for maximum scalability and
"dial-tone" reliability. The WebEx Interactive Platform enables the rapid
development, by WebEx or third party developers, of interactive services that
can be easily integrated into any website or web application using a set of
standards-based application programming interfaces, or APIs. These interactive
services can be deployed over multiple servers and locations, enabling each
server cluster to quickly scale to support a large number of meetings. The core
functionality of the WebEx Interactive Platform is provided by the following
service managers:
MEETING MANAGER: provides reliable, real-time data delivery to all
participants, and includes full data sharing functionality for documents,
presentations, applications and web content, as well as live video. The meeting
manager is compatible with existing firewalls.
OFFICE MANAGER: provides personal offices for each registered user and
tools for organizing WebEx meetings and promoting the office holder's business.
SESSION MANAGER: provides browser-based sessions without manual software
installation, and manages meeting scheduling, security and encryption.
TELEPHONY MANAGER: supports Public Switched Telephone Network or
Voice-over-IP communications within browser-based interactions.
The WebEx Interactive Platform is standards-based software. Standards
supported by the WebEx Interactive Platform include:
- T.120: a suite of networking protocol standards for real-time multi-point
data communications;
- H.323: a standard for audio and video communications;
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- SSL: a standard that provides high-level of security for data
transmission;
- LDAP: a standard directory access protocol; and
- XML: a standard that provides high-level APIs for access to underlying
WIP functionality.
We have extended the capabilities of T.120 and H.323 by creating an
HTTP-tunneling protocol that delivers the rich data carried by these protocols
using a standard web browser.
WEBEX INTERACTIVE NETWORK
The WebEx Interactive Network is a globally distributed network that is
designed to deliver dependable, real-time communications services to our
customers' and partners' websites by routing their end-users' sessions through
the nearest WebEx hub. The WebEx Interactive Network includes:
- multiple, dedicated, leased lines with high capacity Internet connections
for high speed connectivity and redundancy;
- more than 120 WebEx servers in six data centers across the U.S., Europe
and Asia, in our own domestic and international facilities and at
third-party co-location facilities;
- our network operations center, located in California, where we monitor
the WebEx Interactive Network 24 hours a day, seven days a week;
- the ability to dynamically add capacity at any facility, enabling each
WebEx server cluster to scale up to meet changes in user demand;
- back-up power provisions and earthquake resistant facilities;
- network management software to minimize technical issues; and
- sophisticated diagnostic software for troubleshooting and rapid problem
resolution.
CUSTOMERS AND PARTNERS
As of February 25, 2000, we had 425 customers who use our services to
meeting-enable their websites for employees, customers, suppliers and partners.
To date, we have derived substantially all of our revenue from sales to
customers. In 1999, Baan Company N.V. accounted for approximately 16% of our
revenue. In addition, as of February 25, 2000, we had entered into agreements
with 72 partners. We meeting-enable the websites of our portal partners. Our web
application provider partners have agreements to resell our services to
end-users by integrating our services into their product or service offerings.
Communications service providers have agreements to resell our services as part
of their teleconferencing and videoconferencing services. Some of our customers
are also partners.
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The following is a representative list of our customers and partners:
<TABLE>
<CAPTION>
CUSTOMERS
- ----------------------------------------------------------------------------------
<S> <C> <C>
ABN AMRO Juniper Networks Portal Software
Computer Sciences Lawson Software Ricoh
Eaton Systems Legato Systems Saba Software
Extreme Networks Mercury Interactive TIBCO Software
First Tennessee Bank Network Appliance W.R. Hambrecht & Co.
Hoover's Online Open Market Zilog
Interwoven Oracle
</TABLE>
<TABLE>
<CAPTION>
PARTNERS
- ----------------------------------------------------------------------------
WEB APPLICATION COMMUNICATIONS SERVICE
PORTALS PROVIDERS PROVIDERS
- ------------------------ ------------------------ ------------------------
<S> <C> <C>
Adobe Corio Conference Call Service
buzzsaw.com Extensity Deutsche Telekom
Compaq Encanto Global Crossing
eWork Exchange Plumtree Premiere Conferencing
Mall.com Portera
Quicken.com Sales Logix
Sales.com TIBCO Software
Yellowpages.com Yahoo!
</TABLE>
The following case studies illustrate how our customers have used our WebEx
services:
JUNIPER NETWORKS. Juniper Networks is a provider of Internet infrastructure
solutions that enable Internet service providers and other telecommunications
service providers to meet the demands resulting from the rapid growth of the
Internet. Juniper's rapidly growing business required solutions for reducing
time to market for new products as well as facilitating customer acquisition and
satisfaction. Juniper uses the WebEx Meeting Center service to provide on-line
training, customer support and demonstrations of new products through their
website. The standards-based security used by our service was an important
factor in Juniper's decision to use our service because Juniper transmits
sensitive product information through the service around the world.
LAWSON SOFTWARE. Lawson Software offers web solutions for financial, human
resources, procurement, supply chain and performance management. Lawson receives
more than 15,000 calls each month from customers who need fast, efficient
assistance using their software. With the WebEx OnCall service, Lawson's
customer support specialists can simultaneously view their customers' screens as
well as take control of the customer's application in real time to troubleshoot
problems and explain how to avoid similar problems in the future. WebEx services
enable Lawson to provide faster, more efficient problem identification and
resolution, thereby increasing customer satisfaction and reducing support costs.
TIBCO SOFTWARE. TIBCO Software is a leading provider of software solutions
that enable businesses to integrate their internal operations, business partners
and customer channels in real time. TIBCO's sales and marketing teams were
seeking to leverage their website as a real-time meeting place to interact with
customers on-line, communicate with partners and roll out new products faster.
The WebEx Meeting Center service enables TIBCO to reach more prospects through
on-line sales presentations and demonstrations while reducing travel time and
expense. It will also enable TIBCO's remote engineering teams to work together
on software development projects through TIBCO's website. In addition, TIBCO's
training and support organizations have implemented virtual training classes and
support services with WebEx.
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In addition, we have arrangements with partners such as portals, web
application providers and communications service providers. The following
summaries illustrate our relationships with some of our partners:
SALES.COM. Sales.com is a portal website that provides tools and services
designed to maximize the productivity of sales professionals. Sales.com was
looking for a way to differentiate its offerings and enhance its revenues by
providing interactive meeting and virtual office services to its users. As a
WebEx portal partner, Sales.com provides the WebEx Business Exchange service to
its members, enabling them to schedule and conduct web-based sales meetings,
presentations and demonstrations in their WebEx offices. Members use WebEx's
document, presentation and application sharing features as well as website
co-browsing feature to enhance sales effectiveness and productivity through
their WebEx offices. Sales.com members can also advertise their presence to
other members by using the WebEx directory feature.
YAHOO!. Yahoo! Inc. is a leading global media company. Its Corporate My
Yahoo! enables corporations to offer their employees a point of entry to
corporate applications and services together with Yahoo! services such as stock
portfolio tracking, search capabilities, instant messaging and message boards.
To meet the real-time interaction and web-based meeting requirements of its
corporate customers, Yahoo! plans to integrate and distribute WebEx Meeting
Center services with its Corporate My Yahoo!. WebEx Meeting Center will enable
corporate users to schedule and join WebEx meetings directly from their
personalized Yahoo! entry point. In addition, Yahoo! Business Services, which
supplies corporate on-line event management services, will integrate WebEx
Meeting Center services as part of its offering for corporate clients.
DEUTSCHE TELEKOM. Deutsche Telekom, a leading European telecommunications
and Internet service provider, has signed an agreement to distribute WebEx
services in the German market. As part of this agreement, Deutsche Telekom and
WebEx are working in a variety of development areas to create new interactive
communication services for the German market. Additionally, Deutsche Telekom
uses various co-branded WebEx Meeting Center services internally to conduct
web-based meetings across geographically dispersed departments.
STRATEGIC TECHNOLOGY ALLIANCES
We have developed key strategic technology alliances with leading
technology and service providers in areas complementary to our services, such as
teleconferencing, videoconferencing, voice-over-IP and communications
infrastructure providers. These technology partnerships enhance our service
offerings by allowing us to take advantage of current and emerging technologies.
We have formed alliances with companies such as Global Crossing, Lipstream,
Net2Phone, TIBCO Software and Voyant.
RESEARCH AND DEVELOPMENT
The emerging market for interactive communications services for websites is
characterized by rapid technological change, new product introductions and
enhancements, evolving customer requirements and rapidly changing industry
standards. We devote a substantial portion of our resources to developing and
enhancing our network services and application platform, extending our global
network, and conducting quality assurance testing.
As of February 29, 2000, we had 41 employees engaged in research and
development activities. Our research and development expenditures for 1997, 1998
and 1999 were approximately $525,000, $1.4 million and $3.4 million. We expect
to continue to devote significant resources to research and development for the
foreseeable future.
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SALES AND MARKETING
Our sales efforts target corporate websites, portals, web application
providers, communications service providers and on-line marketplaces, primarily
through direct sales channels and to a lesser extent through indirect sales
channels. Direct sales are generated through our internal sales force, while
indirect sales are generated through revenue-sharing agreements with our
partners. Our internal sales force uses our own WebEx services to maximize the
effectiveness and efficiency of our direct sales channel. We plan to continue to
invest and increase the size and geographical locations of both our direct and
indirect sales channels on a global basis.
Our marketing programs include customer needs assessment and market
analysis, service and platform marketing, brand awareness, advertising, public
relations and lead generation, and educating organizations in our target
markets. We are heavily promoting our services and intend to increase our brand
awareness through marketing strategies that involve the extensive use of high
profile on-line and off-line advertising, as well as prominent participation in
trade shows, industry conferences and other events.
As of February 29, 2000, 78 of our employees were engaged in sales and
marketing activities.
COMPETITION
The market for interactive communication services is rapidly evolving and
intensely competitive. We expect competition to persist and intensify in the
future. Although we do not currently compete against any one entity with respect
to all aspects of our services, we do compete with various companies and
technologies in regards to specific elements of our services. For example, we
compete with providers of traditional communications technologies such as
teleconferencing and videoconferencing as well as applications software and
tools companies, such as Centra Software, Contigo Software, Lotus (SameTime),
Microsoft (NetMeeting) and Placeware.
Many of our current or potential competitors have longer operating
histories, significantly greater financial, technical and other resources, or
greater name recognition than we do. Our competitors may be able to respond more
quickly to new or emerging technologies and changes in customer requirements.
Competition could seriously harm our ability to sell services on terms favorable
to us. Competitive pressures could reduce our market share or require us to
reduce the price of our services, any of which could harm our business,
financial condition and operating results.
We believe that the principal competitive factors in our market include:
- service functionality, quality and performance;
- ease of use, reliability, scalability and security of services;
- establishing a significant base of customers and partners;
- ability to introduce new services to the market in a timely manner;
- customer service and support;
- attracting third-party web developers; and
- pricing.
Although we believe our services compete favorably with respect to each of
these factors, the market for our services is new and rapidly evolving. We may
not be able to maintain our competitive position against current and potential
competitors, especially those with greater resources.
INTELLECTUAL PROPERTY
The status of United States patent protection in the Internet industry is
not well defined and will evolve as the U.S. Patent and Trademark Office grants
additional patents. We currently have
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seven patent applications pending in the United States, and we may seek
additional patents in the future. We do not know if our patent applications or
any future patent application will result in a patent being issued with the
scope of the claims we seek, if at all, or whether any patents we have or may
receive will be challenged or invalidated. It is difficult to monitor
unauthorized use of technology, particularly in foreign countries where the laws
may not protect our proprietary rights as fully as in the United States, and our
competitors may independently develop technology similar to ours. 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 advantages. The
pending and any future applications may not result in the issuance of valid
patents.
Our success depends in part upon our rights in proprietary technology. We
rely on a combination of copyright, trade secret, trademark and contractual
protection to establish and protect our proprietary rights, and we enter into
confidentiality agreements with those of our employees and consultants involved
in the development of our services. We routinely require our employees,
customers and potential business partners to enter into confidentiality and
nondisclosure agreements before we will disclose any sensitive aspects of our
services, technology or business plans. In addition, we require employees to
agree to surrender to us any proprietary information, inventions or other
intellectual property they generate or come to possess while employed by us.
Despite our efforts to protect our proprietary rights, unauthorized parties may
attempt to copy or otherwise obtain and use our services or technology. These
precautions may not prevent misappropriation or infringement of our intellectual
property.
Third parties may infringe or misappropriate our copyrights, trademarks and
similar proprietary rights. In addition, other parties may assert infringement
claims against us. Although we have not received notice of any alleged
infringement, our services may infringe issued patents that relate to our
services. In addition, because patent applications in the United States are not
publicly disclosed until the patent is issued, we may be unaware of filed
applications which relate to our services. We may be subject to legal
proceedings and claims in the ordinary course of our business, including claims
of alleged infringement of the trademarks and other intellectual property rights
of third parties. Intellectual property litigation is expensive and
time-consuming and could divert management's attention away from running our
business. This litigation could also require us to develop non-infringing
technology or enter into royalty or license agreements. These royalty or license
agreements, if required, may not be available on acceptable terms, if at all.
Our failure or inability to develop non-infringing technology or license the
proprietary rights on a timely basis would harm our business.
EMPLOYEES
As of February 29, 2000, we had 150 full-time employees, including 41 in
research and development, 78 in sales and marketing and 10 in general and
administrative. None of our employees are covered by collective bargaining
agreements. We believe our relations with our employees are good.
LEGAL PROCEEDINGS
We are not a party to any material legal proceeding. We may be subject to
various claims and legal actions arising in the ordinary course of business.
FACILITIES
Our corporate headquarters are located in San Jose, California, where we
occupy approximately 40,320 square feet under a lease expiring in August 2004.
We will need to obtain additional office space prior to the end of 2000 and are
currently in discussions with respect to additional space.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Our directors, executive officers and key employees and their ages as of
December 31, 1999 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Subrah S. Iyar............................. 42 Chairman, Chief Executive Officer
Min Zhu.................................... 51 President, Chief Technical Officer and Director
Craig Klosterman........................... 45 Chief Financial Officer
Thomas Colby............................... 39 Vice President, Worldwide Operations
David Farrington........................... 43 Vice President, General Counsel & Secretary
Leo Jolicoeur.............................. 42 Vice President, Platform Management
Michael LeBlond............................ 49 Vice President, Telecom Business
Steven Li.................................. 29 Vice President, Engineering
Jim Moise.................................. 45 Vice President, Portal Business
Glenn Reinus............................... 46 Vice President, Corporate Business
Praful Shah................................ 44 Vice President, Strategic Relations
Stewart Sonnenfeldt........................ 36 Vice President, Corporate Development
David Thompson............................. 38 Vice President, Marketing
Jan Baan(1)(2)............................. 53 Director
Somshankar Das(1)(2)....................... 49 Director
Scott Sandell(1)(2)........................ 35 Director
Phillip White.............................. 57 Director
</TABLE>
- ---------------
(1) Member of compensation committee.
(2) Member of audit committee.
SUBRAH S. IYAR is a co-founder of WebEx, Inc. and has served as its
Chairman and Chief Executive Officer since January 1997. Prior to founding
WebEx, Mr. Iyar served as the Vice President and General Manager of the Northern
California Internet Business division of Quarterdeck Corporation, a software
company, from October 1995 until November 1996. From February 1983 to 1995, Mr.
Iyar held several senior positions in Business Development, Marketing and Sales
management at Apple Computer, Inc., a computer hardware company, and Intel
Corporation, a semiconductor company. Mr. Iyar holds a B.S. in Electrical
Engineering from Indian Institute of Technology and a M.S. in Computer
Engineering from University of Southwestern Louisiana.
MIN ZHU is a co-founder of WebEx, Inc. and has served as its President and
Chief Technical Officer since February 1997. Prior to founding WebEx, Mr. Zhu
co-founded Future Labs, a real-time collaboration software company, in 1991,
which was subsequently sold to Quarterdeck in 1996. Mr. Zhu holds a M.S. in
Engineering Economics Systems from Stanford University.
CRAIG KLOSTERMAN has served as the Chief Financial Officer of WebEx since
February 2000. From August 1998 through November 1999, Mr. Klosterman served as
the Chief Financial Officer and Senior Vice President of Finance and
Administration for Informatica. From February 1993 to August 1998, Mr.
Klosterman worked at Lumisys, a medical imaging appliances company, and held a
variety of positions including Chief Operating Officer, Chief Financial Officer
and Executive Vice President. Mr. Klosterman currently serves on the board of
directors of Lumisys, a publicly traded company. Mr. Klosterman holds a B.S. in
mechanical engineering from the University of Wisconsin and an M.B.A. in Finance
from The Wharton School at the University of Pennsylvania.
THOMAS COLBY has served as Vice President, Worldwide Operations of WebEx
since March 1999. Prior to joining WebEx, Mr. Colby served as Vice President of
Business Development and manager of the Commercial Data Services division of
CellNet Data Systems, a wireless data services
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<PAGE> 46
provider to Fortune 500 companies from March 1997 to March 1999. From April 1995
to January 1997 Mr. Colby served as Director of Worldwide Software Licensing of
Dell Computers. Prior to joining Dell Computers, Mr. Colby held several
positions at Apple Computer, Inc., a computer hardware company, most recently as
Manager of Business Development and Planning in the Newton division. Mr. Colby
holds a B.S. in Commerce from Santa Clara University.
DAVID FARRINGTON has served as Vice President, General Counsel and
Secretary of WebEx since March 2000. Prior to joining WebEx, Mr. Farrington was
a partner at the law firm of Skjerven, Morrill, Macpherson, Franklin & Friel,
LLP, in San Jose, California. From 1989 through January 1998, Mr. Farrington
held a number of senior positions at Apple Computer, Inc., including Associate
General Counsel in charge of legal support for Apple's Worldwide Sales and
Marketing organization and Director of Apple's Technology Law Group. Mr.
Farrington received a J.D. from Hastings College of the Law in San Francisco and
holds a B.A. from the University of California, Santa Cruz.
LEO JOLICOEUR has served as Vice President, Platform Management of WebEx
since March 2000. Prior to joining WebEx, Mr. Jolicoeur served as Vice President
of Business Development at Third Voice from March 1999 to March 2000. From
October 1995 to January 1999, Mr. Jolicoeur held several executive positions at
Infoseek Corporation, a web portal, including Vice President of Online Services,
Vice President of Product Management and Business Operations, and Vice President
of Infoseek International. From 1987 to 1995, Mr. Jolicoeur served in several
management positions within Apple Computer. Mr. Jolicoeur holds a B.S. degree in
Finance and Computer Science from Boston College.
MICHAEL LEBLOND has served as Vice President, Telecom Business of WebEx
since November 1999. Mr. LeBlond served as Vice President Business Development
for WebSentric, a data conferencing company, from January 1999 to June 1999.
From December 1988 to December 1999, Mr. LeBlond held several Senior positions
in Business Development, Marketing and Sales Management at Sun Microsystems and
Apple Computer including Director of Business Development in Apple's Corporate
Development & Strategic Planning group. Mr. LeBlond holds an MBA from the
University of Denver.
STEVEN LI has served as Vice President, Engineering of WebEx since October
of 1997. Prior to joining WebEx, from July 1995 to September 1997, Mr. Li served
as the Vice President of Engineering at Lyrehc Corp, subsequently renamed
bexcom.com, an enterprise resource planning software and business-to-business
e-commerce provider in Asia. From July 1994 to June 1995, Mr. Li served as a
consultant to major high technology corporations in the Silicon Valley,
including Oracle and Sun Microsystems. From October 1993 to June 1994, Mr. Li
served as lead engineer for Future Labs, a real-time collaboration software
company. Mr. Li holds a B.S. in Electrical Engineering from the University of
Science and Technology of China and a M.S. in Electrical Engineering from the
University of Hawaii.
JIM MOISE has served as Vice President, Portal Business of WebEx since
October 1998. Prior to joining WebEx, Mr. Moise served as Vice President of
WorldWide Sales and Marketing for Vision Solutions, an enterprise software
company, from March 1997 to October 1998. From September 1994 to January 1997,
Mr. Moise held several positions at Quarterdeck Corporation, most recently as
President, Americas and Asia Pacific Sales and Operations. Mr. Moise holds a
B.S. in Finance and Business Administration and an M.B.A. in Marketing and
Entrepreneurial Management from the University of Southern California.
GLENN REINUS has served as Vice President, Corporate Business of WebEx
since October 1998. Prior to joining WebEx, Mr. Reinus served as Vice President
of Business Development of BackWeb Technologies, an automated knowledge
distribution solutions company, from December 1996 to October 1998. From
December 1995 to December 1996 Mr. Reinus served as Assistant General Manager
for the Internet Business Unit and Senior Director of Business Development at
Quarterdeck Corporation. Mr. Reinus holds a B.S. in Marketing and Business
Administration from California State University, Northridge.
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<PAGE> 47
PRAFUL SHAH has served as Vice President, Strategic Relations of WebEx
since October 1997. Prior to joining WebEx, Mr. Shah held several positions and
most recently served as the Senior Director of Marketing for the Internet
Division, at Oracle Corporation, a software company, from June 1995 to October
1997. From July 1984 to May 1995, Mr. Shah held several marketing, product
management and engineering positions at Tandem Computers Corporation. Mr. Shah
holds a B.S. in Electrical Engineering from the Manipal Institute Of Technology
in India and a M.S. in Computer Science from Pennsylvania State University.
STEWART SONNENFELDT has served as Vice President, Corporate Development of
WebEx since March 2000. Prior to joining WebEx, Mr. Sonnenfeldt served as a
Director in Investment Banking at Deutsche Banc Alex. Brown, an investment bank,
from September 1992 to March 2000. Mr. Sonnenfeldt holds an M.B.A. from the MIT
Sloan School of Management and a B.S. in Chemical Engineering from Tufts
University.
DAVID THOMPSON has served as Vice President, Marketing of WebEx since July
1998. Prior to joining WebEx, Mr. Thompson worked as a consultant to Microsoft
Corporation helping with the launch of Internet Explorer 3.0 and ActiveX from
August 1996 to August 1997. From September 1995 to August 1996, Mr. Thompson was
Senior Product Manager for Web publishing products at Quarterdeck. From June
1993 to September 1995, Mr. Thompson served as Director of Marketing at
StarNine, a web server software company. Mr. Thompson holds a B.A. in Humanities
from Yale University.
JAN BAAN has served as a Director of WebEx since January 2000. Since
December 1999, Mr. Baan has served as the Chairman and Chief Executive Officer
of the Vanenburg Group B.V., a private limited liability company, whose main
activities include providing venture capital funding for technology companies
worldwide. Prior to joining the Vanenburg Group, Mr. Baan founded Baan Company
N.V., a publicly held enterprise applications software company, in 1978.
SOMSHANKAR DAS has served as a Director of WebEx since December 1999. Mr.
Das has served as a partner with Walden International Investment Group, an
investment firm, since June 1997. Prior to joining Walden International
Investment Group, Mr. Das served as Director for Worldwide Business Development
at VLSI Technology, Inc., a semiconductor company, from July 1985 to May 1997.
Mr. Das holds a M.S. in Physics and Mathematics and an M.B.A. from Stanford
University.
SCOTT SANDELL has served as a Director of WebEx since December 1999. Mr.
Sandell has been a partner at New Enterprise Associates, an investment firm,
since 1999 and originally joined New Enterprise Associates in 1996. Prior to
this, Mr. Sandell served as a Product manager for Windows at Microsoft
Corporation. Mr. Sandell holds a B.A. in Engineering Sciences from Dartmouth
College and an M.B.A. from Stanford University. Mr. Sandell currently serves on
the board of directors of Mission Critical Software Inc., a publicly traded
company, as well as several private companies.
PHILLIP WHITE has served as a Director of WebEx since December 1999. Mr.
White has served as the President of Marketing Consultants, a consulting firm,
since August 1997. From January 1989 to August 1997, Mr. White was the Chief
Executive Officer of Informix Software, Inc., a provider of innovative database
products. Mr. White holds a B.A. in Business from Illinois Wesleyan University
and an M.B.A. from Illinois State University. Mr. White currently serves on the
board of directors of Legato Systems Inc., Adaptec Inc. and TIBCO Software Inc.,
which are publicly traded companies, as well as several private companies.
There are no family relationships among any of our directors or executive
officers.
BOARD COMPOSITION
Our bylaws currently provide for a board of directors consisting of seven
members. Our certificate of incorporation to be effective upon completion of
this offering provides for a classified board consisting of three classes of
directors, each serving staggered three-year terms. This
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<PAGE> 48
classification of the board of directors may delay or prevent a change in
control of our company or in our management.
BOARD COMMITTEES
Our board of directors has a compensation committee and an audit committee.
Our compensation committee is responsible for determining salaries,
incentives and other forms of compensation for directors and executive officers
of WebEx and administering various incentive compensation and benefit plans. Our
board of directors established executive compensation levels for 1999. Jan Baan,
Somshankar Das and Scott Sandell are the current members of the compensation
committee. Subrah S. Iyar, our Chief Executive Officer, will participate in all
discussions and decisions regarding salaries and incentive compensation for all
non-executive employees and consultants of WebEx.
Our audit committee reviews our annual audit and meets with our independent
auditors to review our internal controls and financial management practices. Jan
Baan, Somshankar Das and Scott Sandell are the current members of the audit
committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No interlocking relationship exists, or has existed in the past, between
the board of directors or compensation committee and the board of directors or
compensation committee of any other company.
BOARD COMPENSATION
Except for the grant of stock options, we do not currently compensate our
directors for their services as directors. Directors who are employees of WebEx
are eligible to participate in our 2000 Stock Incentive Plan and our 2000
Employee Stock Purchase Plan. Directors who are not employees of WebEx are
eligible to participate in our 1998 Stock Plan. In addition, in 1999, we granted
nonstatutory stock options to Phillip White to purchase an aggregate of 270,000
shares, respectively, of our common stock at an exercise price of $0.35 per
share. In March 2000 we granted nonstatutory stock options to Jan Baan,
Somshankar Das, Scott Sandell and Phillip White to purchase 50,000 shares of our
common stock at an exercise price of $1.50 per share. We also reimburse each
member of our board of directors who is not an employee of WebEx for
out-of-pocket expenses incurred in connection with attending board meetings.
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<PAGE> 49
EXECUTIVE COMPENSATION
The following table provides summary information concerning compensation
earned by or paid to our Chief Executive Officer and to our President and Chief
Technical Officer, our two executive officers whose total annual salary and
bonus exceeded $100,000, for services rendered in all capacities to WebEx during
1999. These individuals are referred to as the "named executive officers." Other
than the salary and bonus described below, WebEx did not pay any named executive
officer in the Summary Compensation Table any fringe benefits, perquisites or
other compensation in excess of 10% of that executive officer's salary and bonus
during 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
------------
NAME AND PRINCIPAL POSITION SALARY
--------------------------- ------------
<S> <C>
Subrah S. Iyar.............................................. $180,000
Chairman and Chief Executive Officer
Min Zhu..................................................... $127,500
President and Chief Technical Officer
</TABLE>
We have never granted any options to Mr. Iyar or Mr. Zhu.
1998 STOCK PLAN
Our 1998 Stock Plan was adopted by our board of directors in February 1998.
Our 1998 Stock Plan provides for the grant of incentive stock options as defined
in Section 422 of the Internal Revenue Code to employees and the grant of
nonstatutory stock options and stock purchase rights to employees, non-employee
directors and consultants. A total of 6,400,000 shares of common stock have been
reserved for issuance under our 1998 Stock Plan as of December 31, 1999. In
February and March 2000 we increased the number of shares of common stock
reserved for issuance under our 1998 Stock Plan by an aggregate of 4,000,000
shares.
Our compensation committee and our non-insider option committee administer
our 1998 Stock Plan. Our compensation committee consists of at least two
directors who are "non-employee directors," as defined in Rule 16b-3. The board
of directors may amend our 1998 Stock Plan as desired without further action by
WebEx's stockholders except as required by applicable law. Our 1998 Stock Plan
will continue in effect until terminated by the board or for a term of 10 years
from its amendment and restatement date, whichever is earlier.
The consideration for each award under our 1998 Stock Plan will be
established by the compensation committee, but in no event will the option price
for incentive stock options be less than 100% of the fair market value of the
stock on the date of grant. Awards will have such terms and be exercisable in
such manner and at such times as the compensation committee may determine.
However, each incentive stock option must expire within a period of not more
than 10 years from the date of grant.
Generally, options granted under the 1998 Stock Plan vest over four years
and are nontransferable other than by will or the laws of descent and
distribution. In the event of specified changes in control of WebEx, the
acquiring or successor corporation may assume or substitute for options
outstanding under the 1998 Stock Plan, or these options will terminate. Some
options granted to our executive officers provide for partial acceleration upon
a change in control of WebEx. As of December 31, 1999,
- 1,047,166 shares of common stock have been issued upon the exercise of
options; and
- 4,677,059 shares were available for future awards.
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<PAGE> 50
2000 STOCK INCENTIVE PLAN
The 2000 Stock Incentive Plan was adopted by our board of directors on
March 29, 2000 and will be submitted for approval by our stockholders prior to
the completion of this offering. The 2000 Stock Incentive Plan will be
administered by our compensation committee. The 2000 Stock Incentive Plan
provides for the direct award or sale of shares of common stock and for the
grant of options to purchase shares of common stock. The 2000 Stock Incentive
Plan provides for the grant of incentive stock options as defined in Section 422
of the Internal Revenue Code and the grant of nonstatutory stock options and
stock purchase rights to employees, non-employee directors, advisors and
consultants.
shares of common stock have been authorized for issuance under
the 2000 Stock Incentive Plan. However, in no event may one participant in the
2000 Stock Incentive Plan receive option grants or direct stock issuances for
more than shares in the aggregate per fiscal year. The number of
shares reserved for issuance under the 2000 Stock Incentive Plan will be
increased on the first day of each of our fiscal years from 2000 through 2009 by
the lesser of:
- shares;
- % of our outstanding common stock on the last day of the immediately
preceding fiscal year; or
- the number of shares determined by the board of directors.
The 2000 Stock Incentive Plan will have the following program features:
- Qualified employees will be eligible for the grant of incentive stock
options to purchase shares of common stock;
- Qualified non-employee directors will be eligible to receive automatic
option grants to purchase shares of common stock at an exercise price
equal to 100% of the fair market value of those shares on the date of
grant;
- The compensation committee will determine the exercise price of options
or the purchase price of stock purchase rights, but in no event will the
option price for incentive stock options be less than 100% of the fair
market value of the stock on the date of grant; and
- The exercise price or purchase price may, at the discretion of the
compensation committee, be paid in, among other things, cash, cash
equivalents, full-recourse promissory notes, past services or future
services.
The 2000 Stock Incentive Plan will include change in control provisions
that may result in the accelerated vesting of outstanding option grants and
stock issuances. The committee may grant options or stock purchase rights in
which all or some of the shares shall become vested in the event of a change in
control of the company. Change in control is defined under the 2000 Stock
Incentive Plan as:
- a change in the composition of the board of directors, as a result of
which fewer than one-half of the incumbent directors are directors who
either:
- had been directors of the company 24 months prior to the change; or
- were elected, or nominated for election, to the board with the
affirmative votes of at least a majority of the directors who had been
directors 24 months prior to the change and who were still in office at
the time of the election or nomination; or
- an acquisition or aggregation of securities by a person, as defined in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended, as a result of which the person
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<PAGE> 51
becomes the beneficial owner of twenty percent or more of the voting power of
WebEx's outstanding securities.
The board of directors will be able to amend or modify the 2000 Stock
Incentive Plan at any time, subject to any required stockholder approval. The
2000 Stock Incentive Plan will terminate no later than .
2000 EMPLOYEE STOCK PURCHASE PLAN
The board of directors adopted our 2000 Employee Stock Purchase Plan on
March 29, 2000, to be effective upon completion of this offering. We will be
submitting it for approval by our stockholders prior to the completion of this
offering. A total of shares of common stock have been reserved
for issuance under our employee stock purchase plan. The number of shares
reserved for issuance under the 2000 Employee Stock Purchase Plan will be
increased on the first day of each of our fiscal years from 2000 through 2009 by
the lesser of:
- shares;
- % of our outstanding common stock on the last day of the immediately
preceding fiscal year; or
- the number of shares determined by the board of directors.
Our 2000 Employee Stock Purchase Plan, which is intended to qualify under
Section 423 of the Internal Revenue Code, is administered by the board of
directors or by a committee appointed by the board. Employees (including
officers and employee directors of WebEx but excluding 5% or greater
stockholders) are eligible to participate if they are customarily employed for
more than 20 hours per week and for at least five months in any calendar year.
Our 2000 Employee Stock Purchase Plan permits eligible employees to purchase
common stock through payroll deductions, which may not exceed 15% of an
employee's compensation.
The 2000 Employee Stock Purchase Plan will be implemented by a series of
overlapping offering periods of 24 months' duration, with new offering periods,
other than the first offering period, commencing on and
of each year. The board of directors will establish participation
periods for our 2000 Employee Stock Purchase Plan, none of which will exceed six
months. During each participation period, payroll deductions will accumulate,
without interest. On the purchase dates set by the board of directors for each
participation period, accumulated payroll deductions will be used to purchase
common stock. The initial offering period is expected to commence on the date of
this offering and end on , 200 . The initial purchase period is
expected to begin on the date of this offering and end on , 200 .
The purchase price will be equal to 85% of the fair market value per share
of common stock on either the first day of the participation period or on the
purchase date, whichever is less. Employees may withdraw their accumulated
payroll deductions at any time. Participation in our 2000 Employee Stock
Purchase Plan ends automatically on termination of employment with WebEx.
Immediately prior to the effective time of a corporate reorganization, the
participation period then in progress shall terminate and stock will be
purchased with the accumulated payroll deductions, unless the 2000 Employee
Stock Purchase Plan is assumed by the surviving corporation or its parent
corporation pursuant to the plan of merger or consolidation.
401(k) PLAN
We have established a tax-qualified employee savings and retirement plan
for which WebEx's employees will generally be eligible. Pursuant to the 401(k)
Plan, employees may elect to reduce their current compensation and have the
amount of such reduction contributed to the 401(k) Plan. To date, WebEx has made
no matching contributions. The 401(k) Plan is intended to qualify under Section
401 of the Internal Revenue Code of 1986, as amended, so that contributions to
the 401(k)
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<PAGE> 52
Plan, and income earned on plan contributions, are not taxable to employees
until withdrawn from the 401(k) Plan, and so that contributions by WebEx, if
any, will be deductible by WebEx when made.
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
In August 1998, we entered into formal employment agreements with Subrah S.
Iyar, our Chief Executive Officer, and Min Zhu, our President and Chief
Technical Officer.
Under these agreements, Messrs. Iyar and Zhu are each entitled to an
initial annual salary of $180,000 and bonuses tied to criteria established by
our board of directors. In each agreement the initial term is two years. If Mr.
Iyar or Mr. Zhu is terminated for reasons other than cause before the expiration
of his employment agreement, we must pay the salary and other benefits for the
balance of the term of that employment agreement. These employment agreements
also contain non-solicitation of customers and employees provisions.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
Our certificate of incorporation, to be effective upon completion of this
offering 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 will indemnify
our directors and executive officers and may indemnify our other officers and
employees and other agents to the fullest extent permitted by law. 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 are entering into agreements to indemnify our directors and executive
officers, in addition to indemnification provided for in our certificate of
incorporation and bylaws. We believe that these provisions and agreements are
necessary to attract and retain qualified persons as directors and executive
officers.
The limited liability and indemnification provisions in our certificate of
incorporation and bylaws may discourage stockholders from bringing a lawsuit
against our directors for breach of their fiduciary duty and may reduce the
likelihood of derivative litigation against our directors and officers, even
though derivative litigation, if successful, might otherwise benefit us and our
stockholders. A stockholder's investment in us may be adversely affected to the
extent we pay the costs of settlement or damage awards against our directors or
officers under these indemnification provisions.
At present, there is no pending litigation or proceeding involving any of
our directors, officers or employees in which indemnification is sought, nor are
we aware of any threatened litigation that may result in claims for
indemnification.
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<PAGE> 53
CERTAIN TRANSACTIONS
The following is a description of the transactions or series of
transactions since the beginning of 1999 to which we were or are a party in
which the amount involved exceeded or exceeds $60,000 and in which any director,
executive officer, holder of more than 5% of any class of our voting securities
or any member of the immediate family of any of the foregoing persons had or
will have a direct or indirect material interest.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
Our founders, Subrah S. Iyar and Min Zhu, purchased a total of 10 million
shares of our common stock. Between May 1998 and March 2000, we issued and sold
15,917,028 shares of our preferred stock. Between May 1998 and August 1998, we
sold 1,144,474 shares of Series A preferred stock at a price of $1.125 per
share. We issued and sold 4,598,383 shares of Series B preferred stock at a
price of $1.265 per share in August 1998. We issued and sold 8,121,325 shares of
Series C preferred stock at a price of $3.00 per share in December 1999 and
January 2000. We issued and sold 2,052,846 shares of Series D preferred stock at
a price of $12.50 per share on March 30, 2000. Upon completion of this offering,
each share of Series A, Series B, Series C and Series D preferred stock will
convert into one share of common stock.
The following table summarizes purchases, valued in excess of $60,000, of
shares of our capital stock by our directors, executive officers and our 5%
stockholders:
<TABLE>
<CAPTION>
SHARES
----------------------------------------------
COMMON SERIES B SERIES C SERIES D
--------- -------- --------- --------
<S> <C> <C> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS:
Subrah S. Iyar....................................... 5,000,000 -- -- --
Min Zhu.............................................. 5,000,000 -- -- --
5% STOCKHOLDERS:
Vanenburg Group, B.V.(1)............................. -- 904,474 4,598,383 396,677
Entities affiliated with New Enterprise
Associates(2)...................................... -- -- -- 142,334
Entities affiliated with Walden Ventures(3).......... -- -- -- 81,334
Entities affiliated with T-Venture(4)................ -- -- -- 87,637
</TABLE>
- -------------------------
(1) Jan Baan, one of our directors, is the Chairman and Chief Executive Officer
of the Vanenburg Group B.V.
(2) Scott Sandell, one of our directors, is a partner at New Enterprise
Associates.
(3) Somshankar Das, one of our directors, is a partner at Walden International
Investment Group, which is affiliated with Walden Ventures.
(4) Includes a warrant to purchase 450,000 shares of Series C preferred stock.
The preferred stock described above was purchased at the same price and on
the same terms and conditions as the unaffiliated investors in the private
financings.
Baan Company N.V. paid us $418,000 in 1999 for our services. Jan Baan, one
of our directors, is a founder of Baan Company N.V. and is the Chairman and
Chief Executive Officer of the Vanenberg Group B.V., an entity affiliated with
Baan Company N.V.
We rely on three companies in China, which are majority owned by Mr. Zhu,
our President and Chief Technical Officer and a member of the board of
directors, and his spouse, under which contract engineers of these companies
conduct quality assurance testing of our services and modify the software
underlying our services to enable our services to work with other operating
systems. We paid approximately $290,000 for these services in 1999.
In addition, in 1997, Mr. Zhu loaned us $400,000 at no interest, $200,000
of which remains outstanding as of December 31, 1999.
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<PAGE> 54
The transactions above were negotiated with the unaffiliated directors of
WebEx and approved by our disinterested directors and we believe that this
agreement is on terms no less favorable to WebEx than would have been obtained
from unaffiliated third parties.
INDEBTEDNESS OF MANAGEMENT
In March 2000, our board of directors approved a loan of $3.6 million to
Subrah S. Iyar, our Chief Executive Officer. The loan is for a two-year term and
will bear interest at a rate of 6.5% per annum.
It is our current policy that all transactions between us and our officers,
directors, 5% stockholders and their affiliates will be entered into only if
these transactions are approved by a majority of the disinterested directors,
are on terms no less favorable to us than could be obtained from unaffiliated
parties and are reasonably expected to benefit us.
For information concerning indemnification of directors and officers, see
"Management -- Limitation of Liability and Indemnification Matters."
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PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding beneficial ownership
of common stock as of December 31, 1999, by:
- each person or entity known to us to own beneficially more than 5% of our
common stock;
- each of the named executive officers;
- each of our directors; and
- all executive officers and directors as a group.
The following table assumes no exercise of the underwriters' over-allotment
option. Applicable percentage ownership is based on 27,414,194 shares of common
stock outstanding as of December 31, 1999 assuming the conversion of all
outstanding shares of preferred stock upon the closing of this offering,
including the 787,131 shares of Series C preferred stock and 2,052,846 shares of
Series D preferred stock issued in 2000, and shares outstanding
immediately after completion of this offering.
Beneficial ownership is determined in accordance with the rules and
regulations of the Securities and Exchange Commission. In computing the number
of shares beneficially owned by a person and the percentage ownership of that
person, shares of common stock subject to options held by that person that are
currently exercisable or exercisable within 60 days of December 31, 1999 are
deemed outstanding. These shares, however, are not deemed outstanding for the
purposes of computing the percentage ownership of any other person. Except as
indicated in the footnotes to this table and pursuant to applicable community
property laws, each stockholder named in the table has sole voting and
investment power with respect to the shares set forth opposite that
stockholder's name.
Unless otherwise indicated, the address for the following stockholders is
c/o WebEx, Inc., 110 Rose Orchard Way, San Jose, California 95134
<TABLE>
<CAPTION>
PERCENTAGE OF
COMMON STOCK
TOTAL SHARES --------------------
BENEFICIALLY BEFORE AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED OFFERING OFFERING
------------------------------------ ------------ -------- --------
<S> <C> <C> <C>
5% STOCKHOLDERS:
Vanenburg Group, B.V.(1)............................... 5,899,534 21.5%
Entities affiliated with New Enterprise
Associates(2)....................................... 2,469,001 9.0
Entities affiliated with Walden Ventures(3)............ 1,414,667 5.2
Entities affiliated with T-Venture(4).................. 1,974,304 7.1
EXECUTIVE OFFICERS AND DIRECTORS:
Subrah S. Iyar......................................... 5,000,000 18.2
Min Zhu................................................ 5,000,000 18.2
Somshankar Das(3)...................................... 1,414,667 5.2
Jan Baan(1)............................................ 5,899,534 21.5
Scott Sandell(2)....................................... 2,476,058 9.0
Phillip White(5)....................................... 286,937 1.1
All directors and executive officers as a group (7
persons)(6)......................................... 20,277,196 73.6%
</TABLE>
- ---------------
* Less than 1%.
(1) Principal address is Postbus 231, 3880 AE Putten The Netherlands. Mr. Baan
disclaims beneficial ownership of these shares, except the extent of his
pecuniary interest in Vanenburg Group.
(2) Principal address is 2490 Sand Hill Road, Menlo Park, CA 94025. Includes
2,450,669 shares of common stock held by New Enterprise Associates VIII
Limited Partnership, 16,666 shares of
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<PAGE> 56
common stock held by NEA Presidents Fund, L.P. and 1,666 shares held by NEA
Ventures 1999, Limited Partners. Mr. Sandell disclaims beneficial ownership
of these shares except to the extent of his pecuniary interest in entities
affiliated with New Enterprise Associates.
(3) Principal address is 361 Lytton Avenue, Second Floor, Palo Alto, CA 94301.
Includes 123,784 shares of common stock held by WIIG-TDF Partners, LLC,
53,050 shares of common stock held by Walden EDB Partners II, L.P.,
1,214,810 shares of common stock held by Pacven Walden Ventures IV, L.P. and
23,023 shares held by Pacven Walden Ventures IV Associates Fund, L.P. Mr.
Das disclaims beneficial ownership of these shares except to the extent of
his pecuniary interest in entities affiliated with Walden Ventures.
(4) Principal address is Godesberger Alle 73, 53175 Bonn, Germany. Includes
1,517,391 shares of common stock and a warrant to purchase 450,000 shares of
common stock held by T-Venture and 6,913 shares of common stock held by 2.
Dr. Kuehr & Partner GbR.
(5) Includes 120,000 shares of common stock subject to WebEx's right of
repurchase and 150,000 shares issuable under immediately exercisable options
and subject to WebEx's right of repurchase.
(6) Includes 120,000 shares of common stock subject to WebEx's right of
repurchase and 150,000 shares issuable under immediately exercisable options
and subject to WebEx's right of repurchase.
53
<PAGE> 57
DESCRIPTION OF CAPITAL STOCK
The following information gives effect to our reincorporation into Delaware
and the conversion of all outstanding preferred stock, including the shares of
Series C and Series D preferred stock issued in 2000 and 450,000 shares of
Series C preferred stock issuable upon exercise of a warrant, into common stock
upon completion of this offering. Upon completion of this offering our
authorized capital stock will consist of 250,000,000 shares of common stock and
5,000,000 shares of preferred stock.
COMMON STOCK
As of December 31, 1999, there were 27,414,194 shares of common stock
outstanding held by approximately 85 stockholders of record.
Subject to preferences that may be applicable to any preferred stock
outstanding at the time, the holders of common stock are entitled to the
following:
DIVIDENDS
Holders of common stock are entitled to receive dividends out of assets
legally available for the payment of dividends at the times and in the amounts
as the board of directors from time to time may determine.
VOTING
Holders of common stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders, including the election of
directors, and will not have cumulative voting rights unless we are subject to
Section 2115 of the California Corporations Code. Cumulative voting means that
the holders of a majority of the shares voted can elect all of the directors
then standing for election.
PREEMPTIVE RIGHTS, CONVERSION AND REDEMPTION
The common stock is not entitled to preemptive rights and is not subject to
conversion or redemption.
LIQUIDATION, DISSOLUTION AND WINDING-UP
Upon liquidation, dissolution or winding-up of WebEx, the holders of common
stock are entitled to share ratably in all assets remaining after payment of
liabilities and the liquidation of any preferred stock.
Each outstanding share of common stock is, and all shares of common stock
to be outstanding upon completion of this offering will be, upon payment
therefore, duly and validly issued, fully paid and nonassessable.
PREFERRED STOCK
The board of directors is authorized, without action by the stockholders,
to designate and issue up to 5,000,000 shares of preferred stock in one or more
series. The board of directors can fix the rights, preferences and privileges of
the shares of each series and any qualifications, limitations or restrictions on
these shares.
The board of directors may authorize the issuance of preferred stock with
voting or conversion rights that could adversely affect the voting power or
other rights of the holders of common stock.
The issuance of preferred stock, while providing flexibility in connection
with possible acquisitions and other corporate purposes, could have the effect
of delaying, deferring or preventing a change in control of WebEx. We have no
current plans to issue any shares of preferred stock.
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<PAGE> 58
WARRANTS
In June 1999 we issued a warrant to purchase an aggregate of 450,000 shares
of Series C preferred stock at an exercise price of $0.01 per share. This
warrant expires on April 30, 2000. In March 2000 we issued a warrant to purchase
an aggregate of 339,915 shares of Series D preferred stock at an exercise price
of $12.50 per share. This warrant expires on March 29, 2002.
REGISTRATION RIGHTS
Upon completion of this offering, the holders of 16,706,943 shares of
common stock issuable upon conversion of the Series A, B, C and D preferred
stock and upon the exercise of warrants have the right to cause us to register
these shares under the Securities Act as follows:
- DEMAND REGISTRATION RIGHTS. At the earlier of December 17, 2003 or nine
months after this offering, one or more holders of 25% of the common
stock issued upon conversion of Series A, B, C or D preferred stock may
request that we register their shares.
- PIGGYBACK REGISTRATION RIGHTS. The holders of registrable securities may
request to have their shares registered anytime we file a registration
statement to register any of our securities for our own account or for
the account of others subject to a pro rata cutback to a minimum of 20%
of any offering other than our initial public offering.
- S-3 REGISTRATION RIGHTS. The holders of registrable securities have the
right to request registrations on Form S-3 if we are eligible to use Form
S-3 and have not already effected two such S-3 registrations within the
past 12 months and if the aggregate proceeds are at least $500,000.
Registration of shares of common stock pursuant to the exercise of demand
registration rights, piggyback registration rights or S-3 registration rights
under the Securities Act would result in these shares becoming freely tradable
without restriction under the Securities Act immediately upon the effectiveness
of such registration. WebEx will pay all registration expenses, other than
underwriting discounts and commissions, in connection with any registration. The
registration rights terminate two years after completion of this offering, or,
as to each holder of registrable securities, when the holder can sell all of the
holder's shares in any 90-day period under Rule 144 under the Securities Act.
SECTION 2115
We are currently subject to Section 2115 of the California General
Corporation Law. Section 2115 provides that, regardless of a company's legal
domicile, some provisions of California corporate law will apply to that company
if more than 50% of its outstanding voting securities are held of record by
persons having addresses in California and the majority of the company's
operations occur in California. For example, while we are subject to Section
2115, stockholders may cumulate votes in electing directors. This means that
each stockholder may vote the number of votes equal to the number of candidates
multiplied by the number of votes to which the stockholder's shares are normally
entitled in favor of one candidate. This potentially allows minority
stockholders to elect some members of the board of directors. When we are no
longer subject to Section 2115, cumulative voting will not be allowed and a
holder of 50% or more of our voting stock will be able to control the election
of all directors. In addition, Section 2115 has the following effects:
- enables removal of directors with or without cause with majority
stockholder approval;
- places limitations on the distribution of dividends;
- extends additional rights to dissenting stockholders in any
reorganization, including a merger, sale of assets or exchange of shares;
and
- provides for information rights and required filings in the event we
effect a sale of assets or complete a merger.
55
<PAGE> 59
We anticipate that our common stock will be qualified for trading as a
national market security on the Nasdaq National Market and that we will have at
least 800 stockholders of record by the record date for our annual meeting of
stockholders in 2001. If these two conditions occur, then we will no longer be
subject to Section 2115 as of the record date for our 2000 annual meeting of
stockholders.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS
DELAWARE TAKEOVER STATUTE
We are subject to Section 203 of the Delaware General Corporation Law,
which, subject to some exceptions, prohibits a Delaware corporation from
engaging in any business combination with any interested stockholder for a
period of three years following the date that such stockholder became an
interested stockholder, unless:
- prior to this date, the board of directors of the corporation approved
either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;
- upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding for purposes of determining the
number of shares outstanding those shares owned (x) by persons who are
directors and also officers and (y) by employee stock plans in which
employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer; or
- on or subsequent to such date, the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least 66 2/3% of the outstanding voting stock that is not owned by the
interested stockholder.
In general, Section 203 defines an interested stockholder as any entity or
person who, together with affiliates and associates owns, or within three years,
did own, beneficially 15% or more of the outstanding voting stock of the
corporation. Section 203 defines business combination to include:
- any merger or consolidation involving the corporation and the interested
stockholder; and
- any sale, transfer, pledge or other disposition of 10% or more of the
assets of the corporation involving the interested stockholder.
- subject to certain exceptions, any transaction that results in the
issuance or transfer by the corporation of any stock of the corporation
to the interested stockholder;
- any transaction involving the corporation that has the effect of
increasing the proportionate share of the stock of any class or series of
the corporation beneficially owned by the interested stockholder; or
- the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
CERTIFICATE OF INCORPORATION AND BYLAWS
UNDESIGNATED PREFERRED STOCK. Under our certificate of incorporation, the
board of directors has the power to authorize the issuance of up to 5,000,000
shares of preferred stock and to determine the price, rights, preferences,
privileges and restrictions, including voting rights, of those shares without
further vote or action by the stockholders. The issuance of preferred stock,
while
56
<PAGE> 60
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, may:
- delay, defer or prevent a change in control of WebEx;
- discourage bids for the common stock at a premium over the market price
of our common stock;
- adversely affect the voting and other rights of the holders of our common
stock; and
- discourage acquisition proposals or tender offers for our shares and, as
a consequence, inhibit fluctuations in the market price of our shares
that could result from actual or rumored takeover attempts.
ELECTION AND REMOVAL OF DIRECTORS. Under our certificate of incorporation,
our board of directors is divided into three classes. The directors in each
class will serve for a three-year term, one class being elected each year by our
stockholders. This classified system may discourage a third party from making a
tender offer or otherwise attempting to obtain control of us because it makes it
more difficult for stockholders to replace a majority of the directors.
ADVANCE NOTICE PROVISIONS. Our bylaws establish advance notice procedures
for stockholder proposals and nominations of candidates for election as
directors other than nominations made by or at the direction of the board of
directors or a committee of the board.
SPECIAL MEETING REQUIREMENTS. Our bylaws provide that special meetings of
stockholders be called by the chairman of the board, the chief executive officer
or the board of directors.
CUMULATIVE VOTING. Both our certificate of incorporation and our bylaws do
not provide for cumulative voting in the election of directors.
The provisions described above may only be amended by approval of the
holders of at least 66 2/3% of the outstanding common stock and may have the
effect of deterring a hostile takeover or delaying a change of control or
management of WebEx.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is .
NASDAQ NATIONAL MARKET LISTING
We have applied to have our common stock quoted on the Nasdaq National
Market under the symbol "WEBX."
57
<PAGE> 61
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering there has been no public market for our common
stock, and we cannot predict the effect, if any, that market sales of shares or
the availability of shares for sale will have on the market price prevailing
from time to time. As described below, only a limited number of shares will be
available for sale shortly after this offering due to contractual and legal
restrictions on resale.
Nevertheless, sales of substantial amounts of our common stock in the
public market after the restrictions lapse could cause the market price of our
common stock to decline.
When this offering is completed, we will have a total of
shares of common stock outstanding, assuming no exercise of outstanding options.
The shares offered by this prospectus will be freely tradable
unless they are purchased by our "affiliates," as defined in Rule 144 under the
Securities Act of 1933. The remaining shares are "restricted,"
which means they were originally sold in offerings that were not subject to a
registration statement filed with the Securities and Exchange Commission. These
restricted shares may be resold only through registration under the Securities
Act of 1933 or under an available exemption from registration, such as provided
through Rule 144.
ELIGIBILITY OF RESTRICTED SHARES FOR SALE IN THE PUBLIC MARKET
<TABLE>
<CAPTION>
NUMBER
DATE OF SHARES
---- ---------
<S> <C>
At the effective date.......................................
180 days after the effective date...........................
From time to time after 180 days after the effective date...
</TABLE>
LOCK-UP AGREEMENTS
All officers, directors and principal stockholders have agreed to a 180-day
"lock-up" with respect to these shares. This generally means that they cannot
sell these shares during the 180 days following the date of this prospectus.
After the 180-day lock-up period, these shares may be sold in accordance with
Rule 144. Goldman, Sachs & Co. may release some or all of these shares prior to
the expiration of the lock-up period.
RULE 144
In general, under Rule 144, a person or persons whose shares are
aggregated, who has beneficially owned restricted securities for at least one
year, including the holding period of any holder who is not an affiliate, is
entitled to sell within any three-month period a number of our shares of common
stock that does not exceed the greater of:
- 1% of the then outstanding shares of our common stock, which will equal
approximately shares upon completion of this offering; or
- the average weekly trading volume of our common stock on the Nasdaq
National Market during the four calendar weeks preceding the date on
which notice of sale is filed with the Securities and Exchange
Commission.
Sales under Rule 144 are subject to restrictions relating to manner of
sale, notice and the availability of current public information about us. Under
Rule 144 and subject to volume limitations, of the restricted
shares will be eligible for sale beginning 180 days after the date of the final
prospectus and the remaining restricted shares will become salable at various
times thereafter.
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<PAGE> 62
RULE 144(k)
A person who is not deemed an affiliate of ours at any time during the 90
days preceding a sale and who has beneficially owned shares for at least two
years, including the holding period of any prior owner who is not an affiliate,
would be entitled to sell shares following this offering under Rule 144(k)
without regard to the volume limitations, manner of sale provisions, public
information or notice requirements of Rule 144.
RULE 701 AND OPTIONS
Rule 701 permits resales of shares in reliance upon Rule 144 but without
compliance with some restrictions, including the holding period requirement, of
Rule 144. Any employee, officer or director or consultant who purchased his or
her shares pursuant to a written compensatory plan or contract may be entitled
to rely on the resale provisions of Rule 701. Rule 701 permits affiliates to
sell their Rule 701 shares under Rule 144 without complying with the holding
period requirements of Rule 144. Rule 701 further provides that non-affiliates
may sell such shares in reliance on Rule 144 without having to comply with the
holding period, public information, volume limitation or notice provisions of
Rule 144. All holders of Rule 701 shares are required to wait 90 days after the
date of this prospectus before selling such shares. However, all shares issued
by us pursuant to Rule 701 are subject to lock-up provisions and will only
become eligible for sale upon the expiration of 180 days after the date of this
prospectus.
REGISTRATION
Following this offering, we intend to file a registration statement on Form
S-8 under the Securities Act covering shares of common stock subject to
outstanding options or issued or issuable under our 1998 Stock Plan, our 2000
Stock Incentive Plan and our 2000 Employee Stock Purchase Plan. Based on the
number of shares subject to outstanding options at December 31, 1999, and
currently reserved for issuance under these plans, this registration statement
would cover approximately shares. This registration statement
will automatically become effective upon filing. Shares registered under this
registration statement will, subject to Rule 144 volume limitations applicable
to our affiliates, be available for sale in the open market immediately after
the expiration of the 180-day lock-up agreements. In addition, holders of
16,706,943 shares will be entitled to registration rights. See "Description of
Capital Stock -- Registration Rights."
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<PAGE> 63
UNDERWRITING
WebEx, Inc. and the underwriters named below (the "Underwriters") have
entered into an underwriting agreement with respect to the shares being offered.
Subject to certain conditions, each Underwriter has severally agreed to purchase
the number of shares indicated in the following table. Goldman, Sachs & Co.,
Deutsche Bank Securities Inc., Wit SoundView Corporation and CIBC World Markets
Corp. are the representations of the Underwriters.
<TABLE>
<CAPTION>
Underwriters Number of Shares
------------ ----------------
<S> <C>
Goldman, Sachs & Co.........................................
Deutsche Bank Securities Inc................................
Wit SoundView Corporation...................................
CIBC World Markets Corp.....................................
------
Total.....................................................
======
</TABLE>
If the Underwriters sell more shares than the total number set forth in the
table above, the Underwriters have an option to buy up to an additional
shares from WebEx to cover such sales. They may exercise that
option for 30 days. If any shares are purchased pursuant to this option, the
Underwriters will severally purchase shares in approximately the same proportion
as set forth in the table above.
The following table shows the per share and total underwriting discounts
and commissions to be paid to the Underwriters by WebEx. Such amounts are shown
assuming both no exercise and full exercise of the underwriters' option to
purchase additional shares.
<TABLE>
<CAPTION>
Paid by WebEx
-------------
No Exercise Full Exercise
----------- -------------
<S> <C> <C>
Per Share................................................... $ $
Total....................................................... $ $
</TABLE>
Shares sold by the Underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus. Any
shares sold by the Underwriters to securities dealers may be sold at a discount
of up to $ per share from the initial public offering price. Any such
securities dealers may resell any shares purchased from the Underwriters to
certain other brokers or dealers at a discount of up to $ per share from the
initial public offering price. If all the shares are not sold at the initial
public offering price, the representatives may change the offering price and the
other selling terms.
WebEx, its officers, directors and principal stockholders have agreed with
the Underwriters not to dispose of or hedge any of its common stock or
securities convertible into or exchangeable for shares of common stock during
the period from the date of this prospectus continuing through the date 180 days
after the date of this prospectus, except with the prior written consent of the
representatives. This agreement does not apply to any existing employee benefit
plans. See "Shares Eligible for Future Sale" for a discussion of certain
transfer restrictions.
Prior to the offering, there has been no public market for the shares. The
initial public offering price will be negotiated among WebEx and the
representatives. Among the factors to be considered in determining the initial
public offering price of the shares, in addition to prevailing market
conditions, will be WebEx's historical performance, estimates of the business
potential and earnings prospects of WebEx, an assessment of WebEx's management
and the consideration of the above factors in relation to market valuation of
companies in related businesses.
The common stock is expected to be quoted on the Nasdaq National Market
under the symbol "WEBX".
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<PAGE> 64
In connection with the offering, the Underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the Underwriters of a greater
number of shares than they are required to purchase in the offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the common stock while
the offering is in progress.
The Underwriters also may impose a penalty bid. This occurs when a
particular Underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares sold
by or for the account of such Underwriter in stabilizing or short covering
transactions.
These activities by the Underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
Underwriters at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.
At the request of WebEx, the Underwriters are reserving up to
shares of the common stock for sale at the initial public
offering price to employees, customers and other friends through a directed
share program. The number of shares of common stock available for sale to the
general public in the public offering will be reduced to the extent these
persons purchase these reserved shares. Any shares not so purchased will be
offered by the Underwriters to the general public on the same basis as the other
shares offered hereby.
The Underwriters do not expect sales to discretionary accounts to exceed
five percent of the total number of shares offered.
WebEx estimates that its share of the total expenses of the offering,
excluding underwriting discounts and commissions, will be approximately
$ .
WebEx has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
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<PAGE> 65
LEGAL MATTERS
Selected legal matters with respect to the validity of the common stock
offered by this prospectus are being passed upon for WebEx by Pillsbury Madison
& Sutro LLP, Palo Alto, California. Certain attorneys of Pillsbury Madison &
Sutro LLP beneficially own an aggregate of 70,000 shares of WebEx common stock.
Legal matters in connection with this offering will be passed upon for the
Underwriters by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo
Alto, California.
EXPERTS
The consolidated financial statements of WebEx Inc. as of December 31, 1998
and 1999, and 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 on
the report of KPMG LLP, independent auditors, appearing elsewhere herein, and
upon the authority of that firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the
Securities Act with respect to the common stock offered by this prospectus. This
prospectus, which constitutes a part of the registration statement, does not
contain all of the information in the registration statement or the exhibits and
schedules which are part of the registration statement. For further information
with respect to WebEx and the common stock offered by this prospectus, we refer
you to the registration statement and the exhibits and schedules filed as part
of the registration statement. You may read and copy any document we file at the
SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Our SEC filings are also available to the public from the SEC's
website at www.sec.gov.
Upon completion of this offering, we will become subject to the information
and periodic reporting requirements of the Securities and Exchange Act, as
amended, and will file periodic reports, proxy statements and other information
with the SEC. These periodic reports, proxy statements and other information
will be available for inspection and copying at the SEC's public reference rooms
and the website of the SEC.
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<PAGE> 66
WEBEX, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ F-1
Consolidated Balance Sheets as of December 31, 1998 and
1999...................................................... F-2
Consolidated Statements of Operations for the years ended
December 31, 1997, 1998 and 1999.......................... F-3
Consolidated Statements of Stockholders' Equity (Deficit)
for the years ended December 31, 1997, 1998 and 1999...... F-4
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1998 and 1999.......................... F-5
Notes to Consolidated Financial Statements.................. F-6
</TABLE>
<PAGE> 67
WEBEX, INC.
INDEPENDENT AUDITORS' REPORT
The Board of Directors
WebEx, Inc.
We have audited the accompanying consolidated balance sheets of WebEx, Inc. and
subsidiary (the Company), as of December 31, 1998 and 1999, and the related
consolidated statements of operations, stockholders' equity (deficit), 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 financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe 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 WebEx, 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
March 30, 2000
F-1
<PAGE> 68
WEBEX, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
DECEMBER 31, DECEMBER 31, 1999
1998 1999 PRO FORMA
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 5,522 $ 13,621
Accounts receivable, net of allowances of $22 and $310, at
December 31, 1998 and 1999, respectively................ 201 2,449
Prepaid expenses.......................................... -- 1,299
Other current assets...................................... 36 69
------- --------
Total current assets.................................... 5,759 17,438
Property and equipment, net............................... 223 2,167
Intangibles, net.......................................... -- 1,520
Other non-current assets.................................. 9 524
------- --------
Total assets............................................ $ 5,991 $ 21,649
======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 147 $ 3,435
Accrued liabilities....................................... 252 417
Accrued commissions....................................... -- 296
Due to related party...................................... 400 200
Deferred revenue.......................................... 80 2,502
------- --------
Total current liabilities............................... 879 6,850
------- --------
Total liabilities....................................... 879 6,850
------- --------
Commitments (note 6)
Stockholders' equity:
Preferred stock, no par value; actual -- no shares
authorized, issued or outstanding; pro
forma -- 5,000,000 shares authorized; no shares issued
or outstanding.......................................... -- -- --
Convertible preferred stock, no par value; 15,000,000 and
14,599,119 shares authorized at December 31, 1998 and
1999, respectively; 5,742,857 and 13,077,051 shares
issued and outstanding at December 31, 1998 and 1999,
respectively; aggregate liquidation preference of $7,105
and $29,108 as of December 31, 1998 and 1999,
respectively; pro forma -- no shares authorized, issued
or outstanding.......................................... 7,105 29,108 --
Common stock, no par value; 40,000,000 shares authorized;
10,479,373 and 11,047,166 shares issued and outstanding
at December 31, 1998 and 1999, respectively; pro
forma -- 250,000,000 shares authorized; 24,124,217
shares issued and outstanding........................... -- -- --
Additional paid-in capital................................ 832 5,184 34,292
Deferred stock-based compensation......................... (134) (2,431) (2,431)
Accumulated deficit....................................... (2,691) (17,062) (17,062)
------- -------- --------
Total stockholders' equity.............................. 5,112 14,799 14,799
------- -------- --------
Total liabilities and stockholders' equity.............. $ 5,991 $ 21,649
======= ========
</TABLE>
See accompanying notes to consolidated financial statements
F-2
<PAGE> 69
WEBEX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1997 1998 1999
------ ------- --------
<S> <C> <C> <C>
Revenue..................................................... $1,289 $ 1,987 $ 2,607
Cost of revenue............................................. 192 484 688
------ ------- --------
Gross profit........................................... 1,097 1,503 1,919
Operating expenses
Sales and marketing....................................... 421 2,244 9,319
Research and development.................................. 525 1,406 3,361
General and administrative................................ 125 198 1,732
Stock-based compensation.................................. -- 92 2,005
------ ------- --------
Total operating expenses............................... 1,071 3,940 16,417
------ ------- --------
Operating income (loss)................................ 26 (2,437) (14,498)
Other income, net........................................... 2 102 127
------ ------- --------
Net income (loss)...................................... $ 28 $(2,335) $(14,371)
====== ======= ========
Net income (loss) per share:
Basic and diluted......................................... $ 0.00 $ (0.23) $ (1.34)
====== ======= ========
Shares used in computing net income (loss) per share:
Basic and diluted......................................... 7,192 10,103 10,700
====== ======= ========
</TABLE>
See accompanying notes to consolidated financial statements
F-3
<PAGE> 70
WEBEX, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1997, 1998, AND 1999
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED
STOCK COMMON STOCK ADDITIONAL DEFERRED TOTAL
---------------------- ------------------- PAID-IN STOCK-BASED ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION DEFICIT EQUITY (DEFICIT)
----------- -------- ---------- ------ ---------- ------------ ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at
December 31, 1996.... -- $ -- 5,000,000 $-- $ 21 $ -- $ (384) $ (363)
Net income........... -- -- -- 28 28
Issuance of common
stock for cash..... -- -- 5,000,000 -- 3 -- -- 3
----------- -------- ---------- --- ------- ------- -------- --------
Balances at
December 31, 1997.... -- -- 10,000,000 -- 24 -- (356) (332)
Net loss............. -- -- -- -- -- -- (2,335) (2,335)
Issuance of common
stock upon exercise
of stock options... -- -- 479,373 -- 18 -- -- 18
Issuance of series A
preferred stock.... 1,144,474 1,288 -- -- -- -- -- 1,288
Issuance of series B
warrants........... -- -- -- -- 564 -- -- 564
Issuance of series B
preferred stock
upon exercise of
warrants........... 4,598,383 5,817 -- -- -- -- -- 5,817
Deferred stock-based
compensation....... -- -- -- -- 226 (226) -- --
Amortization of
stock-based
compensation....... -- -- -- -- -- 92 -- 92
----------- -------- ---------- --- ------- ------- -------- --------
Balances at
December 31, 1998.... 5,742,857 7,105 10,479,373 -- 832 (134) (2,691) 5,112
Net loss............. -- -- -- -- -- -- (14,371) (14,371)
Issuance of common
stock upon exercise
of stock options... -- -- 567,793 -- 50 -- -- 50
Issuance of series C
preferred stock.... 7,334,194 22,003 -- -- -- -- -- 22,003
Deferred stock-based
compensation....... -- -- -- -- 4,302 (4,302) -- --
Amortization of
stock-based
compensation....... -- -- -- -- -- 2,005 -- 2,005
----------- -------- ---------- --- ------- ------- -------- --------
Balances at
December 31, 1999.... 13,077,051 29,108 11,047,166 -- 5,184 (2,431) (17,062) 14,799
Assumed conversion of
preferred stock
(unaudited).......... (13,077,051) (29,108) 13,077,051 -- 29,108 -- -- --
----------- -------- ---------- --- ------- ------- -------- --------
Pro forma balances at
December 31, 1999
(unaudited).......... -- $ -- 24,124,217 $-- $34,292 $(2,431) $(17,062) $ 14,799
=========== ======== ========== === ======= ======= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements
F-4
<PAGE> 71
WEBEX, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1997 1998 1999
---- ------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $ 28 $(2,335) $(14,371)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Provision for doubtful accounts...................... -- 22 288
Depreciation and amortization........................ 34 57 392
Stock-based expenses................................. -- 656 2,005
Changes in operating assets and liabilities:
Accounts receivable............................... (37) (105) (2,536)
Prepaid expenses.................................. -- -- (1,299)
Other current assets.............................. 9 (31) (33)
Other non-current assets.......................... 12 4 (15)
Accounts payable.................................. (5) 28 1,788
Accrued liabilities............................... 37 205 165
Accrued commissions............................... -- -- 296
Deferred revenue.................................. -- 51 2,422
Other............................................. (2) (20) --
---- ------- --------
Net cash provided by (used in) operating
activities...................................... 76 (1,468) (10,898)
---- ------- --------
Cash flows from investing activities:
Payments of lease deposits................................ -- -- (500)
Purchases of property and equipment....................... (74) (191) (2,198)
Purchases of intangibles.................................. -- -- (158)
---- ------- --------
Net cash used in investing activities............. (74) (191) (2,856)
---- ------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock.................... 3 18 50
Net proceeds from issuance of preferred stock............. -- 7,105 22,003
Payment of amounts due to related party................... -- -- (200)
---- ------- --------
Net cash provided by financing activities......... 3 7,123 21,853
---- ------- --------
Increase in cash and cash equivalents....................... 5 5,464 8,099
Cash and cash equivalents at beginning of year.............. 53 58 5,522
---- ------- --------
Cash and cash equivalents at end of year.................... $ 58 $ 5,522 $ 13,621
==== ======= ========
Supplemental disclosures of:
Noncash investing and financing activities:
Deferred stock-based compensation...................... $ -- $ 226 $ 4,302
==== ======= ========
Accounts payable for acquisition of intellectual
property rights and patents.......................... $ -- $ -- $ 1,500
==== ======= ========
Cash paid for:
Interest.................................................. $ -- $ -- $ 12
==== ======= ========
Income taxes.............................................. $ 6 $ -- $ --
==== ======= ========
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE> 72
WEBEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1998 AND 1999
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(1) ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
(A) COMPANY BACKGROUND
WebEx was incorporated in February 1995 under the name of Silver Computing,
Inc, and subsequently changed its name to Stellar Computing Corporation in June
1997, to ActiveTouch Systems, Inc. in December 1997, to ActiveTouch, Inc. in May
1998, and finally to WebEx, Inc. in December 1999. WebEx is a provider of
multimedia infrastructure for real-time collaboration on the web. WebEx provides
a globally distributed network services and application platform for powering
real-time, interactive multimedia communications through websites. WebEx
provides its services, based on its platform, to companies seeking to
meeting-enable their websites and to partners who can embed WebEx's services
into their offerings.
(B) BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
WebEx and its wholly owned subsidiary, Golden Age International (Golden or the
Subsidiary) (collectively, WebEx). All significant intercompany accounts and
transactions have been eliminated in consolidation.
(C) REVENUE RECOGNITION
WebEx recognizes revenue in accordance with the provisions of Statement of
Position (SOP) 97-2, Software Revenue Recognition, as amended by SOP 98-4,
Deferral of the Effective Date of a Provision of SOP 97-2, and SOP 98-9,
Modification of SOP 97-2, Software Revenue Recognition with Respect to Certain
Transactions. 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. If the customer
does not have the contractual right or capability to utilize hosted software,
the revenue from the software and hosting arrangement is recognized over the
term of the hosting arrangement.
Revenue in 1997 and 1998 is substantially composed of contract development
services provided to third parties prior to the commercial launch of WebEx's web
communications services. Revenue in 1999 is entirely composed of web
communications services.
Web communications services revenue is generated through a variety of
contractual arrangements that involve subscription services, revenue sharing
arrangements, pay-per-use services and hosted software services. Subscription
services revenue is recognized ratably over the non-cancelable contractual term
of the service arrangement and includes set-up and installation fees and
concurrent-user subscription fees. Pay-per-use services revenue is recognized as
the service is used. Hosted software services revenue is recognized ratably over
the non-cancelable contractual term of the service arrangement and includes
set-up and installation fees, software-use licenses, service charges for hosting
the application on a WebEx server, and post-contract customer support service
fees.
During 1998 and early 1999, WebEx sold a limited number of perpetual
software license agreements for software delivered to customers. Revenue from
perpetual software license agreements is recognized upon shipment of the
software when all of the following criteria have been met:
F-6
<PAGE> 73
WEBEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1998 AND 1999
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
persuasive evidence of an arrangement exists; delivery has occurred; the fee is
fixed or determinable; and collectibility is probable.
Revenue related to contract development services is recognized as the
services are performed.
Cost of revenue consists of direct expenses incurred in supporting the web
communications services including delivering of services to websites and support
to customers. Such expenses include the costs of making services available on
websites, Internet communication access costs, personnel and equipment costs and
depreciation and amortization associated with (1) initial set up and branding,
(2) hosting the service, and (3) technical support and training.
Deferred revenue includes amounts billed to customers for which revenues
have not been recognized, which generally result from the following: (1)
deferred installation and set-up; (2) customer advances received under revenue
sharing arrangements; (3) deferred maintenance and support; and (4) amounts
billed to customers under hosting arrangements.
(D) INITIAL PUBLIC OFFERING AND UNAUDITED PRO FORMA 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 WebEx to sell shares of WebEx's common stock in connection with a
proposed initial public offering (IPO). If the offering is consummated under the
terms presently anticipated, all the then outstanding shares of WebEx'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 unaudited
pro forma balance sheet information reflects the conversion of all of the
convertible preferred stock as if it had occurred on December 31, 1999.
Pro forma basic and diluted net loss per share for the year ended December
31, 1999, is presented below 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
1999, or at the date of issuance if later.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1999
-----------------
(UNAUDITED)
<S> <C>
Pro forma basic and diluted net loss per share............. $ (0.83)
===========
Shares used in computing pro forma basic and diluted net
loss per share........................................... 17,246,006
===========
</TABLE>
(E) CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and highly liquid investments
such as money market funds with remaining maturities of less than three months
at date of purchase.
(F) RESTRICTED CASH
Included in other non-current assets on the consolidated balance sheet at
December 31, 1999 is $500 of restricted cash to support a letter of credit
provided as a security deposit on WebEx's leased facility. The deposit is
required for the full 5-year term of the lease, but the amount can be reduced if
WebEx meets conditions specified in the lease agreement.
F-7
<PAGE> 74
WEBEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1998 AND 1999
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(G) FINANCIAL INSTRUMENTS AND CONCENTRATIONS OF CREDIT RISK
The carrying value of WebEx's financial instruments, including cash and
cash equivalents, accounts receivable, accounts payable, accrued commissions,
accrued liabilities and due to related party, approximates fair market value due
to the short-term nature of these instruments.
Financial instruments that subject WebEx to concentration of credit risk
consist primarily of cash and cash equivalents and trade accounts receivable.
WebEx 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 consolidated balance
sheets. Credit risk is concentrated in the United States. WebEx performs ongoing
credit evaluations of its customers' financial condition, and generally,
requires no collateral from its customers. Allowances provide for credit risk on
amounts due from customers.
(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 years.
Leasehold improvements are amortized over the shorter of the estimated useful
lives of the improvements or the remaining lease term.
(I) INTANGIBLES
Intangible assets consist of purchased intellectual property rights,
trademarks, and domain name. Amortization is calculated using the straight-line
method over the estimated useful lives of three to ten years.
(J) RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred until technological
feasibility has been established. To date, WebEx's software has been available
for internal use and general release concurrent with the establishment of
technological feasibility and, accordingly, no costs have been capitalized.
(K) IMPAIRMENT OF LONG-LIVED ASSETS
WebEx evaluates its long-lived assets and certain identifiable intangibles
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to
be held and used is measured by a comparison of the carrying amount of an asset
to future undiscounted net cash flows expected to be generated by the asset. If
the carrying value exceeds the cash flows, such assets are considered to be
impaired and the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceeds the fair value of the assets. Assets
to be disposed of are reported at the lower of the carrying amount of the assets
or fair value less costs to sell.
(L) 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
F-8
<PAGE> 75
WEBEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1998 AND 1999
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
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.
(M) STOCK-BASED COMPENSATION
WebEx generally grants stock options to its employees for a fixed number of
shares with an exercise price equal to the fair value of the shares on the date
of grant. As allowed under Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation (SFAS 123), WebEx has elected to follow
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees (APB 25) and related interpretations in accounting for stock awards to
employees. Deferred compensation for options granted to employees is determined
as the difference between the deemed fair market value of WebEx's common stock
and the exercise price on the date options were granted. Expense associated with
stock-based compensation is amortized on an accelerated basis over the vesting
period of the individual award consistent with the method described in Financial
Accounting Standards Board Interpretation No. 28.
Deferred compensation for options granted to nonemployees has been
determined in accordance with SFAS 123 as the fair value of the consideration
received or the fair value of the equity instruments issued, whichever is more
reliably measured. Deferred compensation for options granted to nonemployees is
periodically remeasured as the underlying options vest.
(N) COMPREHENSIVE INCOME (LOSS)
WebEx did not have any significant components of other comprehensive income
(loss) for the years ended December 31, 1997, 1998, and 1999.
(O) 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 expenses during the reporting period.
Actual results could differ from those estimates.
(P) NET INCOME (LOSS) PER SHARE
Basic net income (loss) per share is computed using the weighted-average
number of outstanding shares of common stock. Diluted net income (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 on an "if-converted" basis.
F-9
<PAGE> 76
WEBEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1998 AND 1999
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following potential common shares have been excluded from the
computation of diluted net income (loss) per share for 1998 and 1999 because
their effect would have been antidilutive:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------------------
1997 1998 1999
---- --------- ----------
<S> <C> <C> <C>
Shares issuable under stock options....... -- 2,676,207 4,675,775
Shares issuable pursuant to warrants...... -- -- 450,000
Shares of convertible preferred stock on
an "as-if" converted basis.............. -- 5,742,857 13,077,051
</TABLE>
The weighted-average exercise price of stock options outstanding as of
December 31, 1998 and 1999 was $0.136, and $0.303, respectively. The exercise
price of warrants outstanding as of December 31, 1999 was $0.01.
(q) RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. This statement as amended by SFAS No. 137,
Deferral of the Effective Date of FASB Statement No. 133, establishes accounting
and reporting standards for derivative instruments and requires recognition of
all derivatives as assets or liabilities in the statement of financial position
and measurement of those instruments at fair value. The statement is effective
for fiscal quarters of all fiscal years beginning after June 15, 200. WebEx will
adopt the standard no later than the first quarter of fiscal year 2001 and is in
the process of determining the impact that adoption will have on the Company's
consolidated financial statements.
In 1998, the American Institute of Certified Public Accountants issued SOP
98-9, Modification of SOP 97-2, Software Revenue Recognition with Respect to
Certain Transactions, which WebEx will adopt for transactions entered into
beginning January 1, 2000. In December 1999, the Securities and Exchange
Commission published Staff Accounting Bulletin No. 101, Revenue Recognition in
Financial Statements. This staff accounting bulletin summarizes certain of the
staff's views in applying generally accepted accounting principles to revenue
recognition in financial statements and provides interpretations regarding the
application of generally accepted accounting principles to revenue recognition
where there is an absence of authoritative literature addressing a specific
arrangement or a specific industry. The Company believes its revenue recognition
practices comply with the applicable guidance in these recent publications.
(r) ADVERTISING COSTS
WebEx's policy is to expense advertising costs as incurred. WebEx's
advertising and promotion expense was $11, $368 and $2,912 for the years ended
December 31, 1997, 1998, and 1999, respectively. At December 31, 1999, included
in prepaid expenses is $1,299 relating to prepaid production and media costs for
a January 2000 television advertising campaign.
F-10
<PAGE> 77
WEBEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1998 AND 1999
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(2) PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 1998 and 1999, consisted of the
following:
<TABLE>
<CAPTION>
1998 1999
----- ------
<S> <C> <C>
Computer equipment and software........................... $ 274 $2,057
Office furniture and fixtures............................. 64 440
Leasehold improvements.................................... -- 24
Vehicles.................................................. -- 15
----- ------
338 2,536
Less accumulated depreciation and amortization............ (115) (369)
----- ------
$ 223 $2,167
===== ======
</TABLE>
Depreciation and amortization expense for the years ended December 31,
1997, 1998, and 1999 was $34, $57, and $254, respectively.
(3) INTANGIBLES
Intangible assets as of December 31, 1998 and 1999, consisted of the
following:
<TABLE>
<CAPTION>
1998 1999
---- ------
<S> <C> <C>
Intellectual property rights............................... $ -- $1,500
Trademark and domain name.................................. -- 158
---- ------
-- 1,658
Less accumulated amortization.............................. -- (138)
---- ------
$ -- $1,520
==== ======
</TABLE>
Amortization expense for the years ended December 31, 1997, 1998 and 1999
was $0, $0 and $138, respectively.
(4) STOCKHOLDERS' EQUITY
(A) CONVERTIBLE PREFERRED STOCK
Convertible preferred stock outstanding as of December 31, 1999, is as
follows:
<TABLE>
<CAPTION>
SHARES ISSUED AND CARRYING
AUTHORIZED OUTSTANDING VALUE
---------- ----------- --------------
<S> <C> <C> <C>
Series:
A.................................... 1,144,474 1,144,474 $ 1,288
B.................................... 4,598,383 4,598,383 5,817
C.................................... 8,856,262 7,334,194 22,003
---------- ---------- -------
14,599,119 13,077,051 $29,108
========== ========== =======
</TABLE>
F-11
<PAGE> 78
WEBEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1998 AND 1999
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
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 WebEx's
Board of Directors at a rate of $0.1125, $0.1265, and $0.24 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 $1.125, $1.265, and $3.00 per share, respectively, plus any
declared but unpaid dividends over holders of common stock and other
junior equity securities.
- 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 WebEx successfully completes an initial public offering if share
price is at least $10.00 per share and aggregate proceeds exceed $20,000.
- 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) WARRANTS
In connection with customer acquisition efforts, on May 5, 1998 WebEx
issued exercisable warrants to purchase 4,598,383 shares of Series B Preferred
Stock, at an exercise price of $1.265 per share expiring August 17, 1998. The
fair value of the warrants issued of $564 was charged to sales and marketing
expense for the year ended December 31, 1998. The fair value of the warrant was
calculated using the Black-Scholes pricing model with the following assumptions:
contractual life of 106 days, volatility of 70%, risk free interest rate of 5.5%
and zero dividends. On August 14, 1998, the warrants were exercised.
On April 30, 1999, WebEx issued warrants to purchase 450,000 shares of
Series C Preferred Stock at an exercise price of $0.01 per share expiring April
30, 2000. The warrants become exercisable if the recipient fulfills a
performance commitment to enter into a revenue sharing arrangement or upon the
occurrence of an initial public offering. No accounting for the cost of the fair
value of the warrants has been made as neither condition was probable of
fulfillment at December 31, 1999. If a performance requirement for vesting and
exercisability is fulfilled prior to expiration, the fair value of the warrants
measured as of that date will be charged to expense.
(c) STOCK PLANS
WebEx is authorized to issue up to 6,400,000 shares of common stock in
connection with its 1998 stock option plan (the Plan) to directors, employees
and consultants. The Plan provides for the issuance of incentive stock options
or nonstatutory stock options. In February and March 2000 the Company increased
the number of common stock reserved for issuance under the Stock Plan by an
aggregate of 4,000,000 shares.
Under the Plan, vesting begins on the date of grant with 25% of the rights
becoming vested one year after the grant date. The remaining 75% of the rights
become vested at the rate of 2.08% per month, with 100% vesting occurring on the
fourth anniversary of the grant date. Options generally expire in 10 years;
however, expiration may occur earlier in the event of termination or death.
F-12
<PAGE> 79
WEBEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1998 AND 1999
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The exercise price for stock options is not less than 85%, in the case of
nonqualified stock options, and 100%, in the case of incentive stock options, of
the fair market value of the underlying common stock on the date of grant.
Effective March 2000, the Plan was amended to include the issuance of stock
purchase rights that are subject to a restricted stock purchase agreement
whereby WebEx has the right to repurchase stock upon the voluntary or
involuntary termination of the purchaser's employment with WebEx at the original
issuance cost. WebEx's repurchase right lapses at a rate determined by the stock
option plan administrator, which includes a minimum rate of 20% per year.
(d) STOCK-BASED COMPENSATION
WebEx uses the intrinsic-value method in accounting for its employee
stock-based compensation plans. In 1998 and 1999 WebEx recorded deferred
stock-based compensation for the difference at the grant date between the
exercise price of each stock option granted and the fair value of the underlying
common stock.
The amortization of deferred stock-based 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:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------------
1997 1998 1999
---- ---- ------
<S> <C> <C> <C>
Sales and marketing........................................ -- 33 720
Research and development................................... -- 49 113
General and administrative................................. -- 10 1,172
--- --- ------
Total.................................................... $-- $92 $2,005
=== === ======
</TABLE>
Had compensation costs been determined in accordance with SFAS No. 123 for
all of WebEx's stock-based compensation plans, net income (loss) and basic and
diluted net income (loss) per share would have been as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------------
1997 1998 1999
---- ------ -------
<S> <C> <C> <C>
Net income (loss):
As reported........................................... $ 28 (2,335) (14,371)
Pro forma............................................. 28 (2,350) (14,434)
Basic and diluted net earnings (loss) per share:
As reported........................................... $ -- (0.23) (1.34)
Pro forma............................................. -- (0.23) (1.35)
</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 5.0% and 5.78% for the years ended
December 31, 1998 and 1999, respectively, and expected life of 3.5 years for
both 1998 and 1999.
F-13
<PAGE> 80
WEBEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1998 AND 1999
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
A summary of the status of WebEx's options under the Plan for the years
ended December 31, 1998 (the year of inception) and 1999 is as follows:
<TABLE>
<CAPTION>
1998 1999
--------------------- ---------------------
WEIGHTED- WEIGHTED-
AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE
SHARES PRICE SHARES PRICE
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Outstanding at beginning of year............ -- $ -- 2,676,207 $0.136
Granted................................... 3,193,080 0.121 3,296,861 0.389
Exercised................................. (479,373) 0.043 (567,793) 0.172
Canceled.................................. (37,500) 0.050 (729,500) 0.182
--------- ------ --------- ------
Outstanding at end of year.................. 2,676,207 0.136 4,675,775 0.303
========= ====== ========= ======
Options exercisable at end of year.......... 179,246 0.052 1,440,577 0.239
========= ====== ========= ======
</TABLE>
<TABLE>
<CAPTION>
WEIGHTED- WEIGHTED-
NUMBER OF AVERAGE NUMBER OF AVERAGE
SHARES FAIR VALUE SHARES FAIR VALUE
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Options granted during the year with
exercise prices equal to fair value at
date of grant............................. 525,000 $0.020 29,167 $0.955
========= ====== ========= ======
Options granted during the year with
exercise prices less than fair value at
date of grant............................. 2,668,080 $0.127 3,267,694 $1.395
========= ====== ========= ======
</TABLE>
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-
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE (YEARS) PRICE EXERCISABLE PRICE
- -------------- ----------- ------------ --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$0.050 - 0.250.. 2,031,914 8.65 $0.161 1,076,518 $0.139
0.350 - 0.500.. 2,503,861 9.66 $0.351 305,727 $0.350
1.500......... 140,000 9.12 $1.500 58,332 $1.500
--------- ---- ------ --------- ------
4,675,775 9.20 $0.303 1,440,577 $0.239
========= ==== ====== ========= ======
</TABLE>
(5) INCOME TAXES
WebEx'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 income (loss) before income taxes primarily
due to the full valuation allowance recorded against net operating loss tax
assets generated during the periods. The Company paid $6 of income taxes in 1997
that is included in other income, net.
F-14
<PAGE> 81
WEBEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1998 AND 1999
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The tax effects of 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:
<TABLE>
<CAPTION>
1998 1999
----- -------
<S> <C> <C>
Deferred tax assets:
Reserves and accruals..................................... $ 9 $ 239
State income taxes........................................ 1 1
Capital loss carryforward................................. 4 29
Net operating loss and tax credit carryforwards........... 795 5,225
----- -------
Gross deferred tax assets................................. 809 5,494
Less valuation allowance.................................. (803) (5,407)
----- -------
Total deferred tax assets.............................. 6 87
Deferred tax liabilities -- property and equipment.......... 6 87
----- -------
Net deferred tax assets................................ $ -- $ --
===== =======
</TABLE>
The net change in the total valuation allowance for the years ended
December 31, 1998 and 1999, was a net increase of $801, and $4,604,
respectively.
As of December 31, 1999, WebEx has net operating loss carryforwards for
federal and California income tax purposes of approximately $13.6 million and
$6.8 million, respectively. The federal net operating loss carryforward expires
beginning in 2018 through 2019. The California net operating loss carryforward
expires primarily beginning in 2003 to 2004.
As of December 31, 1999, WebEx has research and development credit
carryovers for federal and California income tax purposes of approximately $122
and $102, 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. WebEx's ability to utilize its net operating loss and tax credit
carryforwards may be subject to restriction pursuant to these provisions.
F-15
<PAGE> 82
WEBEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1998 AND 1999
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(6) COMMITMENTS
WebEx leases certain equipment and occupies facilities rented under
non-cancelable operating leases expiring through 2004.
Future minimum lease payments under the non-cancelable operating leases are
as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
------------
<S> <C>
2000...................................................... $ 779
2001...................................................... 812
2002...................................................... 835
2003...................................................... 856
2004...................................................... 583
------
Future minimum lease payments............................. $3,865
======
</TABLE>
Rent expense under non-cancelable operating leases was $210, $134 and $447
for the years ended December 31, 1997, 1998 and 1999, respectively.
(7) SIGNIFICANT CUSTOMER INFORMATION AND SEGMENT REPORTING
SFAS No. 131, Disclosure about Segments of an Enterprise and Related
Information, establishes standards for the reporting by business enterprises of
information about operating segments, products and services, geographic areas,
and major customers. The method for determining what information to report is
based on the way that management organizes the operating segments within WebEx
for making operational decisions and assessments of financial performance.
WebEx's chief operating decision-maker, as defined in SFAS No. 131, 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, WebEx has determined that it
operates in a single operating segment, specifically, web communications
services. For the years ended December 31, 1997, 1998, and 1999 all assets and
revenues of WebEx were in the United States.
Significant customer information is as follows:
<TABLE>
<CAPTION>
PERCENT OF TOTAL REVENUE
YEAR ENDED DECEMBER 31
------------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Customer A.............................................. 19% 4% --
Customer B.............................................. 13% -- --
Customer C.............................................. 17% 20% --
Customer D.............................................. -- 30% --
Customer E.............................................. 5% 40% 16%
</TABLE>
Total revenue for the years ended December 31, 1997 and 1998 relate to
contract development services. Total revenue for the year-ended December 31,
1999 relates to web communications services.
F-16
<PAGE> 83
WEBEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997, 1998 AND 1999
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(8) RELATED PARTY TRANSACTIONS
WebEx receives contract-engineering services from an affiliate in China,
which is majority owned by an executive officer and major stockholder of WebEx.
These companies provided a significant amount of quality assurance testing and
software development activities for WebEx. Amounts paid for engineering services
to this affiliate for the years ended December 31, 1997, 1998 and 1999 were $0,
$20 and $290, respectively.
WebEx recorded revenues of $65, $796 and $418 for the years ended December
31, 1997, 1998 and 1999, respectively, from a software company which is
affiliated with a member of the Company's Board of Directors and a holder of
904,474 and 4,598,383 of Series A and Series B preferred stock, respectively.
Due to related party at December 31, 1998 and 1999 represents a note
payable to an officer for unpaid compensation. The note is non-interest bearing.
In April 1998, WebEx acquired 100% of the common stock of Golden for $1
cash consideration. A co-founder of WebEx and his spouse, together own nearly
50% of the common stock of WebEx and owned approximately 60% of the common stock
of Golden. On the date of acquisition, Golden's assets and liabilities consisted
of the following:
<TABLE>
<S> <C>
Accounts receivable from WebEx.............................. $ 74
Liabilities to outside third parties........................ (44)
----
Net assets acquired......................................... $ 30
====
</TABLE>
The acquisition was considered a purchase business combination. The excess
of the net assets acquired over the cash consideration paid, amounting to $29,
has been recorded as a deferred credit on the balance sheet. The deferred credit
is being amortized over three years. Pro-forma results of operations for periods
prior to the acquisition date have not been presented due to immateriality.
WebEx made payments of $250 to Golden, in relation to research and
development activities, for the year ended December 31, 1997.
(9) SUBSEQUENT EVENTS
During 1999, 7,334,194 shares of Series C convertible preferred stock were
issued at $3.00 per share for net proceeds of $22,003. In January 2000, WebEx
issued an additional 787,131 shares of Series C convertible preferred stock at
$3.00 per share for proceeds of $2,361. The rights, preferences and privileges
of the Series C preferred stock are the same as the Series A and Series B
convertible preferred stock, except that the annual dividend rate is $0.24 per
share and the liquidation preference is $3.00 per share.
In March 2000, the Company issued 2,052,846 shares of Series D preferred
stock at $12.50 per share for net proceeds of 25,661.
In March 2000, the Board of Directors of WebEx approved a loan of $3,600 to
the CEO. The loan will mature after two-years, will bear interest at a rate of
6.5% per annum, and will be secured by the personal assets of the CEO.
F-17
<PAGE> 84
Back Cover
Sites Powered by WebEx
Customer and partner logos appear here with the following language:
TIBCO The Webex Meeting Center enables Tibco to reach more prospects through
online sales presentations and demonstrations while reducing travel time and
expense. It will also enable Tibco's remote engineering teams to work together
on software projects through Tibco's site.
Sales.com As a Webex portal partner, Sales.com provides the WebEx Business
Exchange service to its members, enabling them to schedule and conduct
Web-based sales meetings, presentations, and demonstrations in their WebEx
offices.
Lawson Software With the WebEx OnCall service, Lawson's customer support
specialists can simultaneously view their customers' screens as well as take
control of the customer's application -- in real time -- to troubleshoot
problems and explain how to avoid similar problems in the future.
Juniper Networks Juniper uses the WebEx Meeting Center service to provide
online training, customer support, and demonstrations of new products through
their web site.
WebEx Logo appear in bottom right hand corner
<PAGE> 85
- ------------------------------------------------------
- ------------------------------------------------------
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell only the shares offered hereby, but only under circumstances
and in jurisdictions where it is lawful to do so. The information contained in
this prospectus is current only as of its date.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary................... 3
Risk Factors......................... 7
Special Note Regarding
Forward-Looking Statements......... 19
Use of Proceeds...................... 19
Dividend Policy...................... 19
Capitalization....................... 20
Dilution............................. 21
Selected Financial Data.............. 22
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 23
Business............................. 30
Management........................... 42
Certain Transactions................. 50
Principal Stockholders............... 52
Description of Capital Stock......... 54
Shares Eligible for Future Sale...... 58
Underwriting......................... 60
Legal Matters........................ 62
Experts.............................. 62
Where You Can Find More
Information........................ 62
Index to Consolidated Financial
Statements......................... F-1
</TABLE>
-------------------------
Through and including , 2000 (the 25th day after the date of
this prospectus), all dealers effecting transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to a dealer's obligation to deliver a prospectus
when acting as an underwriter and with respect to an unsold allotment or
subscription.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
Shares
WEBEX, INC.
Common Stock
-------------------------
[LOGO]
-------------------------
GOLDMAN, SACHS & CO.
DEUTSCHE BANC ALEX. BROWN
WIT SOUNDVIEW
CIBC WORLD MARKETS
Representatives of the Underwriters
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 86
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses expected to be incurred
by the Registrant in connection with the sale and distribution of the securities
being registered hereby, other than underwriting discounts and commissions. All
amounts are estimated except the Securities and Exchange Commission registration
fee and the National Association of Securities Dealers, Inc. filing fee.
<TABLE>
<CAPTION>
PAYABLE BY
REGISTRANT
----------
<S> <C>
SEC registration fee........................................ $ 22,770
National Association of Securities Dealers, Inc. filing
fee....................................................... 9,125
Nasdaq National Market Listing Fee.......................... 95,000
Accounting fees and expenses................................ *
Legal fees and expenses..................................... *
Printing and engraving expenses............................. *
Blue Sky fees and expenses.................................. *
Registrar and Transfer Agent's fees......................... *
Miscellaneous fees and expenses............................. *
--------
Total..................................................... $ *
========
</TABLE>
- ---------------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law provides for the
indemnification of officers, directors and other corporate agents in terms
sufficiently broad to indemnify such persons under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act of 1933, as amended (the "Act"). Article XI of the Registrant's
Amended and Restated Certificate of Incorporation (Exhibit 3.3 hereto) and
Article VI of the Registrant's Amended and Restated Bylaws (Exhibit 3.4 hereto)
provide for indemnification of the Registrant's directors, officers, employees
and other agents to the extent and under the circumstances permitted by the
Delaware General Corporation Law. The Registrant has also entered into
agreements with its directors and officers that will require the Registrant,
among other things, to indemnify them against certain liabilities that may arise
by reason of their status or service as directors or officers to the fullest
extent not prohibited by law. The Underwriting Agreement (Exhibit 1.1) provides
for indemnification by the Underwriters of the Registrant, its directors and
officers, and by the Registrant of the Underwriters, for certain liabilities,
including liabilities arising under the Act and affords certain rights of
contribution with respect thereto.
The Underwriting Agreement (Exhibit 1.1) provides for indemnification by
ourselves, our underwriters and our directors and officers of the underwriters,
for certain liabilities, including liabilities arising under the Act and affords
certain rights of contribution with respect thereto.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
1. From July 23, 1997 to December 31, 1999, the Registrant issued and sold
11,047,166 shares of common stock to employees, directors and
consultants at prices ranging from $0.005 to $0.5 per share.
II-1
<PAGE> 87
2. From May 1998 to August 1998, the Registrant issued and sold 1,144,474
shares of Series A preferred stock to 2 investors for an aggregate
purchase price of $1,287,553.
3. On August 14, 1998, the Registrant issued and sold 4,598,383 shares of
Series B preferred stock to 1 investor for an aggregate purchase price
of $5,816,944.50.
4. From December 1999 until January 2000, the Registrant issued and sold
8,121,325 shares of Series C preferred stock to a total of 34 investors
for an aggregate purchase price of $24,363,978.
5. In June 1999 and in March 2000, the Registrant issued warrants to
purchase 450,000 shares of Series C preferred stock and 339,915 shares
of Series D preferred stock, respectively, with exercise prices of $0.01
and $12.50, respectively.
6. On March 30, 2000, the Registrant issued and sold 2,052,846 shares of
Series D preferred stock to a total of 48 investors for an aggregate
purchase price of $25,660,575.
The sales of the above securities were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act, or Regulation D promulgated thereunder, or Rule 701 promulgated
under Section 3(b) of the Securities Act, as transactions by an issuer not
involving a public offering or transactions pursuant to compensatory benefit
plans and contracts relating to compensation as provided under Rule 701. The
recipients of securities in each of these transactions represented their
intention to acquire the securities for investment only and not with view to or
for sale in connection with any distribution thereof and appropriate legends
were affixed to the share certificates and instruments issued in such
transactions. All recipients had adequate access, through their relationship
with the Registrant, to information about the Registrant.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
See exhibits listed on the Exhibit Index following the signature page of
the Form S-1, which is incorporated herein by reference.
(b) FINANCIAL STATEMENT SCHEDULES
Schedules have been omitted because they are not applicable or not required
or because the information is included elsewhere in the Financial Statements or
the notes thereto.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act"), may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, as amended, 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
II-2
<PAGE> 88
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the 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, as amended, 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.
(3) The Registrant will provide to the underwriters at the closing(s)
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.
II-3
<PAGE> 89
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Jose, State of
California, on the 31st day of March, 2000.
WEBEX, INC.
By /s/ SUBRAH S. IYAR
----------------------------------------
Subrah S. Iyar
Chief Executive Officer and Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Subrah S. Iyar, Craig Klosterman and Min Zhu, and
each of them, his or her true and lawful attorneys-in-fact and agents, each with
full power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments, including post-effective amendments, to this Registration Statement,
and any registration statement relating to the offering covered by this
Registration Statement and filed pursuant to Rule 462(b) under the Securities
Act of 1933 and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that each of said attorneys-in-fact and agents or
their substitute or substitutes may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ SUBRAH S. IYAR Chief Executive Officer March 31, 2000
- ----------------------------------------------------- and Director
Subrah S. Iyar (Principal Executive Officer)
/s/ CRAIG KLOSTERMAN Chief Financial Officer March 31, 2000
- ----------------------------------------------------- (Principal Financial Officer
Craig Klosterman and Principal Accounting
Officer)
/s/ MIN ZHU President and Director March 31, 2000
- -----------------------------------------------------
Min Zhu
/s/ JAN BAAN Director March 31, 2000
- -----------------------------------------------------
Jan Baan
</TABLE>
II-4
<PAGE> 90
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ SOMSHANKAR DAS Director March 31, 2000
- -----------------------------------------------------
Somshankar Das
/s/ SCOTT D. SANDELL Director March 31, 2000
- -----------------------------------------------------
Scott D. Sandell
/s/ PHILLIP E. WHITE Director March 31, 2000
- -----------------------------------------------------
Phillip E. White
</TABLE>
II-5
<PAGE> 91
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<S> <C>
1.1* Form of Underwriting Agreement.
3.1 Amended and Restated Articles of Incorporation.
3.2 Amended and Restated Bylaws.
3.3 Restated Certificate of Incorporation, to be effective upon
consummation of this offering.
3.4 Amended and Restated Bylaws, to be effective upon
consummation of this offering.
4.1* Form of Common Stock Certificate.
4.2 Amended and Restated Investors Rights Agreement, dated March
30, 2000 by and among the registrant and the parties who are
signatories thereto.
4.3 Warrant Agreement to Purchase Shares of Series C Convertible
Preferred Stock, dated June 17, 1999, by and between the
registrant and T-Venture.
4.4+ Warrant Agreement to Purchase Shares of Series D Preferred
Stock, dated March 29, 2000, by and between the registrant
and Yahoo! Inc.
5.1* Opinion of Pillsbury Madison & Sutro LLP.
10.1 Registrant's Amended and Restated 1998 Stock Plan.
10.2 Form of Registrant's 2000 Stock Incentive Plan.
10.3 Form of Registrant's 2000 Employee Stock Purchase Plan.
10.4 Form of Directors and Officers' Indemnification Agreement.
10.5 Employment Agreement, dated August 14, 1998, by and between
the registrant and Subrah S. Iyar.
10.6 Employment Agreement, dated August 14, 1998, by and between
the registrant and Min Zhu.
10.7 Lease Agreement by and between Corporate Technology Centre
Associates II LLC and the registrant, dated June 30, 1999.
23.1 Consent of KPMG LLP.
23.2* Consent of Pillsbury Madison & Sutro LLP (contained in their
opinion filed as Exhibit 5.1).
24.1 Power of Attorney. Reference is made to Page II-4.
27.1 Financial Data Schedule for WebEx, Inc.
</TABLE>
- -------------------------
* To be filed by amendment.
+ Confidential treatment requested. Confidential portions of the exhibit have
been omitted and filed separately with the Commission.
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
WEBEX, INC.
Min Zhu and Subrah S. Iyar certify that:
1. They are the President and Secretary, respectively, of WebEx, Inc., a
California corporation.
2. The articles of incorporation of the corporation are amended and restated
to read as follows:
ARTICLE I
The name of the corporation is WebEx, Inc.
ARTICLE II
The purpose of the corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE III
A. The corporation is authorized to issue two classes of shares to be
designated respectively Preferred Stock ("Preferred Stock") and Common Stock
("Common Stock"). The total number of shares of capital stock that the
corporation is authorized to issue is sixty million (60,000,000). The total
number of shares of Preferred Stock the corporation shall have authority to
issue is twenty million (20,000,000). The total number of shares of Common Stock
the corporation shall have authority to issue is forty million (40,000,000).
Both the Preferred Stock and the Common Stock shall have no par value per share.
B. One million one hundred forty-four thousand four hundred seventy-four
(1,144,474) shares of the Preferred Stock are designated "Series A Preferred
Stock." Four million five hundred ninety-eight thousand three hundred
eighty-three (4,598,383) shares of Preferred Stock are designated as "Series B
Preferred Stock." Eight million eight hundred fifty-six thousand two hundred
sixty-two (8,856,262) shares of Preferred Stock are designated as "Series C
Preferred Stock." Two million seven hundred thousand (2,700,000) shares of
Preferred Stock are designated as "Series D Preferred Stock." The remaining
shares of Preferred Stock may be issued from time to time in one or more series.
The Board of Directors of the corporation (the "Board of Directors") is
expressly authorized to provide for the issue of all or any of the remaining
shares of the Preferred Stock in one or more series, and to fix the number of
shares of such series and to determine or alter for each such series, such
voting powers, full or limited, or no voting powers, and such designations,
preferences, and relative, participating, optional, or other rights and such
qualifications, limitations, or restrictions thereof, as shall be
-1-
<PAGE> 2
stated and expressed in the resolution or resolutions adopted by the Board of
Directors providing for the issue of such shares (a "Preferred Stock
Designation") and as may be permitted by the General Corporation Law of
California and otherwise consistent with the terms hereof. The Board of
Directors is also expressly authorized to increase or decrease (but not below
the number of shares of such series then outstanding) the number of shares of
any series other than the Series A, Series B, Series C and Series D Preferred
Stock subsequent to the issue of shares of that series. In case the number of
shares of any such series shall be so decreased, 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.
C. The powers, preferences, rights, restrictions, and other matters
relating to the Series A, Series B, Series C and Series D Preferred Stock are as
follows:
1. Dividends.
(a) The holders of the Series A, Series B, Series C and Series D
Preferred Stock shall be entitled to receive dividends at the rate of $0.1125
per share, $0.1265 per share, $0.24 and $1.00 per share (as adjusted for any
stock dividends, combinations, splits , recapitalizations or the like with
respect to such shares) per annum, respectively, payable out of funds legally
available therefor. Such dividends shall be payable only when, as, and if
declared by the Board of Directors and shall be noncumulative.
(b) No dividends (other than those payable solely in the Common Stock of
the corporation) shall be paid on any Common Stock of the corporation during any
fiscal year of the corporation until dividends in the total amount of $0.1125,
$0.1265, $0.24 and $1.00 per share in cash or any other form of property (the
"Dividend Preference") (as adjusted for any stock dividends, combinations,
splits, recapitalizations or the like with respect to such shares) on the Series
A, Series B, Series C and Series D Preferred Stock, respectively, shall have
been paid or declared and set apart during that fiscal year and no dividends
shall be paid on any share of Common Stock unless a dividend (including the
amount of any dividends paid pursuant to the above provisions of this Section 1)
is paid with respect to all outstanding shares of Series A, Series B, Series C
and Series D Preferred Stock in an amount for each such share of Series A,
Series B, Series C and Series D Preferred Stock equal to or greater than the
aggregate amount of such dividends for all shares of Common Stock into which
each such share of Series A, Series B, Series C and Series D Preferred Stock
could then be converted.
(c) Other Distributions. In the event the corporation shall declare a
distribution (other than any distribution described in Section C.2) payable in
securities of other persons, evidences of indebtedness issued by the corporation
or other persons, assets (excluding cash dividends) or options or rights to
purchase any such securities or evidences of indebtedness, then, in each such
case for the purpose of this Section 1(c), the holders of Series A, Series B,
Series C and Series D Preferred Stock shall first be entitled to receive their
respective Dividend Preference, then a proportionate share of any such
distribution as though they were the holders of the number of shares of Common
Stock of the corporation into which their shares of Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the corporation entitled to receive such distribution. If the
dividend, if any, declared by the Board of Directors is not sufficient to pay to
the holders of the Series A, Series B, Series C
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and Series D Preferred Stock their respective Dividend Preference, then the
dividend paid, if any, will be distributed pro-rata among the Series A, Series
B, Series C and Series D Preferred Stock.
(d) In the event of a conversion of the Series A, Series B, Series C or
Series D Preferred Stock pursuant to Section 4, any accrued and unpaid dividends
shall be paid at the election of the holder in cash or Common Stock at its then
fair market value, as determined by the Board of Directors.
2. Liquidation Preference.
(a) In the event of any liquidation, dissolution or winding up of the
corporation, either voluntary or involuntary, the holders of Series A, Series B,
Series C and Series D Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of any of the assets of the corporation to the
holders of Common Stock or other junior equity security by reason of their
ownership thereof, an amount per share equal to the sum of (i) $1.125 for each
outstanding share of Series A Preferred Stock (the "Original Series A Issue
Price") (as adjusted for any stock dividends, combinations, splits,
recapitalizations or the like with respect to such shares); (ii) $1.265 for each
outstanding share of Series B Preferred Stock (the "Original Series B Issue
Price") (as adjusted for any stock dividends, combinations, splits,
recapitalizations or the like with respect to such shares); (iii) $3.00 for each
outstanding share of Series C Preferred Stock (the "Original Series C Issue
Price") (as adjusted for any stock dividends, combinations, splits,
recapitalizations or the like with respect to such shares); (iv) $12.50 for each
outstanding share of Series D Preferred Stock (the "Original Series D Issue
Price) (as adjusted for any stock dividends, combinations, splits,
recapitalizations or the like with respect to such shares); and (v) an amount
equal to all accrued or declared but unpaid dividends on each such share. If
upon the occurrence of such event, the assets and funds thus distributed among
the holders of the Series A, Series B, Series C and Series D Preferred Stock
shall be insufficient to permit the payment to such holders of the full
aforesaid preferential amounts, then the entire assets and funds of the
corporation legally available for distribution shall be distributed ratably
among the holders of the Series A, Series B, Series C and Series D Preferred
Stock in proportion to the product of the liquidation preference of each such
share and the number of such shares owned by each such holder.
(b) After the distribution described in subsection (a) above has been
paid, the remaining assets of the corporation available for distribution to
shareholders shall be distributed, among the holders of Series A, Series B,
Series C and Series D Preferred Stock and Common Stock pro rata based on the
number of shares of Common Stock held by each (assuming conversion of all such
Series A, Series B, Series C and Series D Preferred Stock), until such time as
(i) the holders of Series A Preferred Stock shall have received an additional
$2.25 per share (as adjusted for any stock dividends, combinations, splits,
recapitalizations or the like with respect to such shares), (ii) the holders of
Series B Preferred Stock shall have received an additional $2.53 per share (as
adjusted for any stock dividends, combinations, splits, recapitalizations or the
like with respect to such shares), (iii) the holders of Series C Preferred Stock
shall have received an additional $6.00 per share (as adjusted for any stock
dividends, combinations, splits, recapitalizations or the like with respect to
such shares) and (iv) the holders of Series D Preferred Stock shall have
received an additional $25.00 per share (as adjusted for any stock dividends,
combinations, splits, recapitalizations or the like with respect to such
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shares). Thereafter, the remaining assets will be distributed among the holders
of Common Stock pro rata, based on the number of shares of Common Stock held by
each such holder.
(c) For purposes of this Section 2, if the corporation shall sell,
convey, or otherwise dispose of or encumber all or substantially all of its
property or business or merge into or consolidate with any other person or
entity in any form (other than a wholly owned subsidiary corporation) or effect
any other transaction or series of related transactions in which more than fifty
percent (50%) of the voting power of the corporation after such transaction is
held by persons or entities who were not shareholders of the corporation prior
to such transaction, such action by the corporation shall be treated as a
liquidation, dissolution or winding up of the corporation and shall entitle the
holders of Series A, Series B, Series C and Series D Preferred Stock and Common
Stock to receive at the closing cash, securities or other property as specified
in Sections 2(a) and 2(b) above, provided that this Section 2(c) shall not apply
to a merger effected solely for the purpose of changing the domicile of the
corporation.
(d) Any securities to be delivered to the holders of Series A, Series B,
Series C or Series D Preferred Stock or Common Stock pursuant to this Section 2
shall be valued as follows:
(i) Securities not subject to investment letter or other similar
restrictions on free marketability:
(A) If traded on a securities exchange or The Nasdaq Stock
Market, the value shall be deemed to be the average of the
closing prices of the securities on such exchange over the thirty
(30) day period ending three (3) days prior to the closing;
(B) If actively traded over-the-counter, the value shall
be deemed to be the average of the closing bid and asked prices
over the thirty (30) day period ending three (3) days prior to
the closing; and
(C) If there is no active public market, the value shall
be the fair market value thereof, as mutually determined by the
corporation and the holders of not less than a majority of the
then outstanding shares of Series A, Series B, Series C and
Series D Preferred Stock, as applicable, voting together as a
separate class.
(ii) The method of valuation of securities subject to investment
letter or other restrictions on free marketability (other than
restriction arising solely by virtue of a shareholder's status as an
affiliate or former affiliate) shall be to make an appropriate discount
from the market value determined as above in clauses (i)(A), (B) or (C)
to reflect the approximate fair market value thereof, as mutually
determined by the corporation and the holders of a majority of the then
outstanding shares of Series A, Series B, Series C and Series D
Preferred Stock, as applicable, voting together as a separate class.
3. Redemption. The Preferred Stock is not redeemable.
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4. Conversion. The holders of Series A, Series B, Series C and Series D
Preferred Stock shall have conversion rights as follows (the "Conversion
Rights"):
(a) Right To Convert. Subject to subsection (d), each share of Series A
Preferred Stock shall be convertible, at the option of the holder thereof, at
any time after the date of issuance of such share, at the office of the
corporation or any transfer agent for such stock, into such number of fully paid
and nonassessable shares of Common Stock as is determined by dividing the
Original Series A Issue Price by the Series A Conversion Price in effect at the
time that the certificate is surrendered for conversion for the Series A
Preferred Stock (the "Series A Conversion Price"). The initial Series A
Conversion Price shall be the Original Series A Issue Price, subject to
adjustment as set forth in subsection (d). Subject to subsection (d), each share
of Series B Preferred Stock shall be convertible, at the option of the holder
thereof, at any time after the date of issuance of such share, at the office of
the corporation or any transfer agent for such stock, into such number of fully
paid and nonassessable shares of Common Stock as is determined by dividing the
Original Series B Issue Price by the Series B Conversion Price in effect at the
time that the certificate is surrendered for conversion for the Series B
Preferred Stock (the "Series B Conversion Price"). The initial Series B
Conversion Price shall be the Original Series B Issue Price, subject to
adjustment as set forth in subsection (d). Subject to subsection (d), each share
of 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
the corporation or any transfer agent for such stock, into such number of fully
paid and nonassessable shares of Common Stock as is determined by dividing the
Original Series C Issue Price by the Series C Conversion Price in effect at the
time that the certificate is surrendered for conversion for the Series C
Preferred Stock (the "Series C Conversion Price"). The initial Series C
Conversion Price shall be the Original Series C Issue Price, subject to
adjustment as set forth in subsection (d). Subject to subsection (d), each share
of Series D Preferred Stock shall be convertible, at the option of the holder
thereof, at any time after the date of issuance of such share, at the office of
the corporation or any transfer agent for such stock, into such number of fully
paid and nonassessable shares of Common Stock as is determined by dividing the
Original Series D Issue Price by the Series D Conversion Price in effect at the
time that the certificate is surrendered for conversion for the Series D
Preferred Stock (the "Series D Conversion Price"). The initial Series D
Conversion Price shall be the Original Series D Issue Price, subject to
adjustment as set forth in subsection (d).
(b) Automatic Conversion. Each share of Series A, Series B, Series C and
Series D Preferred Stock shall automatically be converted into shares of Common
Stock at the Series A Conversion Price, the Series B Conversion Price, the
Series C Conversion Price and the Series D Conversion Price, respectively, then
in effect (collectively, the "Conversion Prices") upon the earlier of (i) the
date specified by vote or written consent or agreement of holders of a majority
of the outstanding shares of Series A Preferred Stock with respect to the Series
A Preferred Stock, (ii) the date specified by vote or written consent or
agreement of holders of a majority of the outstanding shares of Series B
Preferred Stock with respect to the Series B Preferred Stock, (iii) the date
specified by vote or written consent or agreement of holders of a 75% of the
outstanding shares of Series C Preferred Stock with respect to the Series C
Preferred Stock, (iv) the date specified by vote or written consent or agreement
of holders of a majority of the outstanding shares of Series D Preferred Stock
with respect to the Series D Preferred Stock, or (v) immediately upon the
closing of the sale of the corporation's Common Stock in a firm
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commitment, underwritten public offering registered under the Securities Act of
1933, as amended (the "Securities Act"), other than a registration relating
solely to a transaction under Rule 145 under such Act or to an employee benefit
plan of the corporation, at a public offering price (before underwriters'
discounts and expenses) of at least $12.50 per share (adjusted for any stock
splits, stock dividends or other recapitalizations) and the aggregate proceeds
to the corporation (before deduction for underwriters' discounts and expenses)
of which exceed $20,000,000.
(c) Mechanics of Conversion.
(i) Before any holder of Series A, Series B, Series C or Series D
Preferred Stock shall be entitled voluntarily to convert the same into shares of
Common Stock, he shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the corporation or of any transfer agent for such
stock, and shall give written notice to the corporation at such office that he
elects to convert the same and shall state therein the number of shares to be
converted and the name or names in which he wishes the certificate or
certificates for shares of Common Stock to be issued. The corporation shall, as
soon as practicable thereafter, issue and deliver at such office to such holder
of Series A, Series B, Series C or Series D Preferred Stock, a certificate or
certificates for the number of shares of Common Stock to which he shall be
entitled. Such conversion shall be deemed to have been made immediately prior to
the close of business on the date of surrender of the shares of Series A, Series
B, Series C or Series D 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 on such date.
(ii) If the conversion is in connection with an underwritten offering of
securities pursuant to the Securities Act, the conversion may, at the option of
any holder tendering shares of Series A, Series B, Series C or Series D
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, Series B, Series C or Series D Preferred Stock shall not be deemed to have
converted such Series A, Series B, Series C or Series D Preferred Stock until
immediately prior to the closing of such sale of securities.
(d) Adjustments to Series A, Series B, Series C and Series D Conversion
Price.
(i) Special Definitions. For purposes of this Section 4(d), the
following definitions apply:
(A) "Options" shall mean rights, options, or warrants to
subscribe for, purchase or otherwise acquire either Common Stock or
Convertible Securities (defined below).
(B) "Original Issue Date" shall mean the date on which a share
of Series D Preferred Stock was first issued.
(C) "Convertible Securities" shall mean any evidences of
indebtedness, shares (other than Common Stock and Series A, Series B,
Series C and Series D Preferred Stock
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outstanding on the Original Issue Date) or other securities convertible
into or exchangeable for Common Stock.
(D) "Additional Shares of Common Stock" shall mean all shares of
Common Stock issued (or, pursuant to Section 4(d)(iii), deemed to be
issued) by the corporation after the Original Issue Date, other than
shares of Common Stock issued or issuable:
(1) Upon conversion of shares of Series A, Series B,
Series C or Series D Preferred Stock;
(2) To employees, directors, consultants or advisors under
stock option, stock bonus or stock purchase plans or agreements
or similar plans or agreements approved by the Board of Directors
or an authorized committee thereof; provided, however, that this
Section 4(d)(i)(D)(2) shall only apply ten million four hundred
thousand (10,400,000) shares (as adjusted for any stock
dividends, combinations or splits and net of any repurchases of
shares or cancellations or expirations of options) issued (or
deemed to be issued) to such employees, directors, consultants or
advisors;
(3) As a dividend or distribution on Series A, Series B,
Series C or Series D Preferred Stock;
(4) For which adjustment of the Series A, Series B, Series
C or Series D Conversion Price is made pursuant to Section 4(e);
(5) To lending or leasing institutions or pursuant to
agreements to license technology and/or provide sponsored
research which are issued in the ordinary course and approved by
the Board of Directors; provided that in any twelve (12) month
period the number of shares issued under this Section
4(d)(i)(D)(5) do not exceed one percent (1%) of the then
outstanding shares of Common Stock (as defined in Section
4(d)(iv)); or
(6) Which are approved by more by more than fifty percent
(50%) of the outstanding shares of the Preferred Stock, voting
together as a class, and the Board of Directors or an authorized
committee thereof.
(ii) No Adjustment of Conversion Price. Any provision herein to the
contrary notwithstanding, no adjustment in the Conversion Price for any series
of Preferred Stock shall be made in respect of the issuance of Additional Shares
of Common Stock unless the consideration per share (determined pursuant to
Section 4(d)(v) hereof) for an Additional Share of Common Stock issued or deemed
to be issued by the corporation is less than the Conversion Price for such
series of Preferred Stock in effect on the date of, and immediately prior to,
such issue.
(iii) Deemed Issue of Additional Shares of Common Stock. In the event
the corporation at any time or from time to time after the Original Issue Date
shall issue any Options or Convertible Securities or shall fix a record date for
the determination of holders of any class of securities then entitled to receive
any such Options or Convertible Securities, then the maximum number of shares
(as set forth in the instrument relating thereto without regard to any
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provisions contained therein designed to protect against dilution) of Common
Stock issuable upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of such Convertible
Securities, shall be deemed to be Additional Shares of Common Stock issued as of
the time of such issue or, in case such a record date shall have been fixed, as
of the close of business on such record date, provided that in any such case in
which Additional Shares of Common Stock are deemed to be issued:
(A) No further adjustments in the Series A, Series B, Series C or
Series D Conversion Price shall be made upon the subsequent issue of
Convertible Securities or shares of Common Stock upon the exercise of
such Options or conversion or exchange of such Convertible Securities;
(B) If such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase or
decrease in the consideration payable to the corporation, or decrease or
increase in the number of shares of Common Stock issuable, upon the
exercise, conversion or exchange thereof, the Series A, Series B, Series
C or Series D Conversion Price computed upon the original issue thereof
(or upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase or
decrease becoming effective, be recomputed to reflect such increase or
decrease insofar as it affects such Options or the rights of conversion
or exchange under such Convertible Securities (provided, however, that
no such adjustment of the Series A, Series B, Series C or Series D
Conversion Price shall affect Common Stock previously issued upon
conversion of the Series A, Series B, Series C or Series D Preferred
Stock);
(C) Upon the expiration of any such Options or any rights of
conversion or exchange under such Convertible Securities which shall not
have been exercised, the Series A, Series B, Series C or Series D
Conversion Price computed upon the original issue thereof (or upon the
occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon such expiration, be recomputed as
if:
(1) In the case of Convertible Securities or Options for
Common Stock the only Additional Shares of Common Stock issued
were the shares of Common Stock, if any, actually issued upon the
exercise of such Options or the conversion or exchange of such
Convertible Securities and the consideration received therefor
was the consideration actually received by the corporation for
the issue of all such Options, whether or not exercised, plus the
consideration actually received by the corporation upon such
exercise, or for the issue of all such Convertible Securities,
plus the additional consideration, if any, actually received by
the corporation upon such conversion or exchange and
(2) In the case of Options for Convertible Securities
only the Additional Shares of Common Stock, if any, actually
issued upon the exercise thereof were issued at the time of
issue of such Options, and the consideration received by the
corporation for the Additional Shares of Common Stock deemed to
have been then issued was the consideration actually received by
the corporation for the issue of all such Options, whether or
not exercised, plus the
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consideration actually received by the corporation (determined
pursuant to Section 4(d)) upon the issue of the Convertible
Securities with respect to which such Options were actually
exercised;
(D) No readjustment pursuant to clause (B) or (C) above shall
have the effect of increasing the Series A, Series B, Series C or Series
D Conversion Price to an amount which exceeds the lower of (a) the
Series A, Series B, Series C or Series D Conversion Price on the
original adjustment date, as appropriate, or (b) the Series A, Series B,
Series C or Series D Conversion Price that would have resulted from any
issuance of Additional Shares of Common Stock between the original
adjustment date and such readjustment date.
(E) In the case of any Options which expire by their terms not
more than thirty (30) days after the date of issue thereof, no
adjustment of the Series A, Series B, Series C or Series D Conversion
Price shall be made until the expiration or exercise of all such
Options, whereupon such adjustment shall be made in the same manner
provided in clause (C) above.
(F) If any such record date shall have been fixed and such
Options or Convertible Securities are not issued on the date fixed
therefor, the adjustment previously made in the Series A, Series B,
Series C or Series D Conversion Price which became effective on such
record date shall be canceled as of the close of business on such record
date, and shall instead be made on the actual date of issuance, if any.
(iv) Adjustment of Conversion Price Upon Issuance of Additional Shares
of Common Stock. In the event the corporation, at any time after the Original
Issue Date shall issue Additional Shares of Common Stock (including Additional
Shares of Common Stock deemed to be issued pursuant to Section 4(d)(iii))
without consideration or for a consideration per share less than the Conversion
Price with respect to any series of Preferred Stock in effect on the date of and
immediately prior to such issue, then the Conversion Price of such series of
Preferred Stock shall be reduced, concurrently with such issue, to a price
(calculated to the nearest cent) 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 issue plus the number of shares of
Common Stock which the aggregate consideration received by the corporation for
the total number of Additional Shares of Common Stock so issued would purchase
at such Conversion Price in effect immediately prior to such issuance, and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issue plus the number of such Additional Shares of
Common Stock so issued. For the purpose of the above calculation and for
purposes of Section 4(d)(i)(D)(5), the number of shares of Common Stock
outstanding immediately prior to such issue shall be calculated as if all shares
of Series A, Series B, Series C and Series D Preferred Stock and all Convertible
Securities had been fully converted into shares of Common Stock immediately
prior to such issuance and any outstanding warrants, and outstanding options and
any remaining options under the corporation's stock option plan (not to exceed
ten million four hundred thousand (10,400,000) shares as adjusted for any stock
dividends, splits or combinations) or other rights for the purchase of shares of
stock or Convertible Securities had been fully exercised immediately prior
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to such issuance (and the resulting securities fully converted into shares of
Common Stock, if so convertible) as of such date.
(v) Determination of Consideration. For purposes of this Section 4(d),
the consideration received by the corporation for the issue of any Additional
Shares of Common Stock shall be computed as follows:
(A) Cash and Property. Such consideration shall:
(1) Insofar as it consists of cash, be computed at the
aggregate amount of cash received by the corporation excluding
amounts paid or payable for accrued interest or accrued
dividends;
(2) Insofar as it consists of property other than cash, be
computed at the fair value thereof at the time of such issue, as
determined in good faith by the Board of Directors; and
(3) In the event Additional Shares of Common Stock are
issued together with other shares or securities or other assets
of the corporation for consideration which covers both, be the
proportion of such consideration so received, computed as
provided in clauses (1) and (2) above, as determined in good
faith by the Board of Directors.
(B) Options and Convertible Securities. The consideration per
share received by the corporation for Additional Shares of Common Stock
deemed to have been issued pursuant to Section 4(d)(iii), relating to
Options and Convertible Securities shall be determined by dividing:
(1) The total amount, if any, received or receivable by
the corporation as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the instruments
relating thereto, without regard to any provision contained
therein designed to protect against dilution) payable to the
corporation upon the exercise of such Options or the conversion
or exchange of such Convertible Securities, or in the case of
Options for Convertible Securities, the exercise of such Options
for Convertible Securities and the conversion or exchange of such
Convertible Securities by
(2) The maximum number of shares of Common Stock (as set
forth in the instruments relating thereto, without regard to any
provision contained therein designed to protect against the
dilution) issuable upon the exercise of such Options or
conversion or exchange of such Convertible Securities.
(e) Adjustments to Conversion Prices for Stock Dividends and for
Combinations or Subdivisions of Common Stock. In the event that the
corporation at any time or from time to time after the Original Issue
Date shall declare or pay, without consideration, any dividend on the
Common Stock payable in Common Stock or in any right to acquire Common
Stock for no consideration, or shall effect a subdivision of the
outstanding shares of Common Stock into a
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greater number of shares of Common Stock (by stock split,
reclassification or otherwise than by payment of a dividend in Common Stock or
in any right to acquire Common Stock), or in the event the outstanding shares of
Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, then the Conversion
Price for any series of Preferred Stock in effect immediately prior to such
event shall, concurrently with the effectiveness of such event, be
proportionately decreased or increased, as appropriate. In the event that the
corporation shall declare or pay, without consideration, any dividend on the
Common Stock payable in any right to acquire Common Stock for no consideration,
then the corporation shall be deemed to have made a dividend payable in Common
Stock in an amount of shares equal to the maximum number of shares issuable upon
exercise of such rights to acquire Common Stock.
(f) Adjustments for Reclassification and Reorganization. If the Common
Stock issuable upon conversion of the Series A, Series B, Series C or Series D
Preferred Stock shall be changed into the same or a different number of shares
of any other class or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a subdivision or combination of shares
provided for in Section 4(e) or a merger, consolidation or other transaction
referred to in Section 2(c)), the Series A, Series B, Series C and Series D
Conversion Price then in effect shall, concurrently with the effectiveness of
such reorganization or reclassification, be proportionately adjusted so that the
Series A, Series B, Series C and Series D Preferred Stock shall be convertible
into, in lieu of the number of shares of Common Stock which the holders would
otherwise have been entitled to receive, a number of shares of such other class
or classes of stock equivalent to the number of such shares that would have been
subject to receipt by the holders had the conversion of the Series A, Series B,
Series C and Series D Preferred Stock, respectively, occurred immediately before
that change.
(g) No Impairment. The corporation will not, by amendment of its
Articles of Incorporation or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
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, Series B, Series C or Series D Preferred Stock against
impairment.
(h) Certificates as to Adjustments. Upon the occurrence of each
adjustment or readjustment of any Conversion Price pursuant to this Section 4,
the corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Series A, Series B, Series C or Series D Preferred Stock, as
appropriate, a certificate executed by the corporation's President or Chief
Financial Officer setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
corporation shall, upon the written request at any time of any holder of Series
A, Series B, Series C or Series D Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth (i) such adjustments
and readjustments, (ii) the Conversion Price for such series of Preferred Stock
at the time in effect, and (iii) the number of shares of Common Stock and the
amount, if any, of other property which at the time
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would be received upon the conversion of the Series A, Series B, Series C or
Series D Preferred Stock.
(i) Notices of Record Date. In the event that the corporation shall
propose at any time: (i) to declare any dividend or distribution upon its Common
Stock, whether in cash, property, stock or other securities, whether or not a
regular cash dividend and whether or not out of earnings or earned surplus; (ii)
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;
(iii) to effect any reclassification or recapitalization of its Common Stock
outstanding involving a change in the Common Stock; or (iv) to merge or
consolidate with or into any other person, or sell, lease, convey or otherwise
dispose of or encumber all or substantially all of its assets, property or
business, or to effect any other transaction or series of related transactions
in which more than fifty percent (50%) of the voting power of the corporation
after such transaction is held by persons or entities who were not shareholders
of the corporation prior to such transaction, or to liquidate, dissolve or wind
up; then, in connection with each such event, the corporation shall send to the
holders of Series A, Series B, Series C and Series D Preferred Stock:
(A) At least twenty (20) days' prior written notice of the
date on which a record shall be taken for such dividend,
distribution or subscription rights (and specifying the date on
which the holders of Common Stock shall be entitled thereto) or
for determining rights to vote, if any, in respect of the matters
referred to in (iii) and (iv) above; and
(B) In the case of the matters referred to in (iii) and
(iv) above, at least twenty (20) days' prior written notice of
the date when the same shall take place (and specifying the date
on which the holders of Common Stock shall be entitled to
exchange their Common Stock for securities or other property
deliverable upon the occurrence of such event).
(j) Issue Taxes. The corporation shall pay any and all issue and other
taxes that may be payable in respect of any issue or delivery of shares of
Common Stock on conversion of Series A, Series B, Series C or Series D Preferred
Stock pursuant hereto; provided, however, that the corporation shall not be
obligated to pay any transfer taxes resulting from any transfer requested by any
holder in connection with any such conversion.
(k) Reservation of Stock Issuable Upon Conversion. The corporation shall
at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Series A, Series B, Series C and Series D 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,
Series B, Series C and Series D 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, Series B,
Series C and Series D Preferred Stock, the corporation will take such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient
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<PAGE> 13
for such purpose, including, without limitation, engaging in best efforts to
obtain the requisite shareholder approval of any necessary amendment to these
Articles.
(l) Fractional Shares. No fractional share shall be issued upon the
conversion of any share or shares of Series A, Series B, Series C or Series D
Preferred Stock. All shares of Common Stock (including fractions thereof)
issuable upon conversion of more than one share of Series A, Series B, Series C
or Series D Preferred Stock by a holder thereof shall be aggregated for purposes
of determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion would
result in the issuance of a fraction of a share of Common Stock, the corporation
shall, in lieu of issuing any fractional share, pay the holder otherwise
entitled to such fraction a sum in cash equal to the fair market value of such
fraction on the date of conversion (as determined in good faith by the Board of
Directors).
(m) Notices. Any notice required by this Section 4 to be given to the
holders of shares of Series A, Series B, Series C or Series D Preferred Stock
shall be deemed given five (5) days after being deposited in the United States
mail, by registered or certified mail, postage prepaid, and addressed to each
holder of record at his address on the books of the corporation.
5. Voting Rights.
(a) Except as set forth in subparagraph (b) below, the holder of each
share of Series A, Series B, Series C or Series D Preferred Stock shall have the
right to one vote for each share of Common Stock into which such share of Series
A, Series B, Series C or Series D Preferred Stock could be converted on the
record date for the vote or written consent of shareholders. In all cases any
fractional share, determined on an aggregate conversion basis, shall be rounded
to the nearest whole share. 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 (except as otherwise provided herein or as required by
law, voting together with the Common Stock as a single class), and shall be
entitled, notwithstanding any provision hereof, to notice of any shareholders'
meeting in accordance with the bylaws of the corporation. Each holder of Common
Stock shall be entitled to one (1) vote for each share of Common Stock held.
(b) Designation of Directors.
(i) The holders of the Series A and Series B Preferred Stock shall be
entitled, as a group voting as a separate class (the "Series A/B Class"), to
elect one (1) member of the Board of Directors of the corporation. The holders
of the Series C Preferred Stock shall be entitled, as a group voting as a
separate class (the "Series C Class"), to elect two (2) members of the Board of
Directors of the corporation. The holders of the Common Stock shall be entitled,
as a group voting as a separate class (the "Common Class") to elect three (3)
members of the Board of Directors of the corporation. All members of the Board
of Directors not required to be elected separately by the Series A/B Class, the
Series C Class or the Common Class shall be elected by the holders of the Common
Stock and the Preferred Stock voting together.
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<PAGE> 14
(ii) The right of the Series A/B Class to elect directors separately
pursuant to this Section 5(b) shall terminate upon the earlier of (i) whenever
the Common Stock issued upon the conversion of shares of the Series A and Series
B Preferred Stock pursuant to Section 4 hereof constitutes a majority of the
Common Stock issued and outstanding and (ii) whenever less than 10% of the
authorized Series A and Series B Preferred Stock is outstanding.
(iii) The right of the Series C Class to elect directors separately
pursuant to this Section 5(b) shall terminate upon the earlier of (i) whenever
the Common Stock issued upon the conversion of shares of the Series C Preferred
Stock pursuant to Section 4 hereof constitutes a majority of the Common Stock
issued and outstanding and (ii) whenever less than 10% of the authorized Series
C Preferred Stock is outstanding.
(iv) In the case of any vacancy in the office of a director occurring
among the directors elected by the Series A/B Class, the Series C Class or the
Common Class pursuant to Section 4(b)(i) hereof, the remaining director or
directors so elected by the Series A/B Class, the Series C Class or the Common
Class, if any, by affirmative vote of a majority of the remaining directors of
that class, or the holders of a majority of the shares of that class, may elect
a successor or successors to hold the 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 Series A/B Class, the Series C Class, or the
Common Class or any director so elected as provided in the preceding sentence
hereof, may be removed during the aforesaid term of office, whether with or
without cause, only by the affirmative vote of the holders of a majority of the
outstanding shares of the Series A/B Class, the Series C Class or the Common
Class, as the case may be.
6. Restrictions and Limitations.
(a) So long as any shares of Preferred Stock remain outstanding, the
corporation shall not, without the vote or written consent by the holders of a
majority of the then outstanding shares of Preferred Stock, voting together as a
class:
(i) Redeem, purchase or otherwise acquire for value (or pay into
or set aside for a sinking fund for such purpose) any share or shares of
Preferred Stock otherwise than by conversion in accordance with Section
4 hereof;
(ii) Redeem, purchase or otherwise acquire (or pay into or set
aside for a sinking fund for such purpose) or pay or declare any
dividend or make any distribution upon any of the Common Stock;
provided, however, that this restriction shall not apply to the
repurchase of shares of Common Stock from employees, officers,
directors, consultants or other persons performing services for the
corporation or any subsidiary pursuant to agreements under which the
corporation has the option to repurchase such shares at cost or at cost
plus interest upon the occurrence of certain events, such as the
termination of employment;
(iii) Authorize or issue, or obligate itself to issue, any other
equity security (including any security convertible into or exercisable
for any equity security) senior to the Series A, Series B, Series C or
Series D Preferred Stock as to voting, dividend rights, redemption
rights, conversion or liquidation preferences;
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<PAGE> 15
(iv) Engage in sales and transfers of a substantial amount of
the Company's technology;
(v) Increase or decrease (other than by redemption or
conversion) the total number of authorized shares of Preferred Stock;
(vi) Effect a material transaction with a director, employee or
founder of the Company, excluding employment and compensation agreements
(vii) Consummate a merger, acquisition or other transaction or
series of transactions resulting in a change of control at the Company;
and
(viii) Increase the number of shares of Common Stock reserved
under the Company's Stock incentive plans above 10,400,000 shares.
(b) So long as any shares of Series A, Series B, Series C or Series D
Preferred Stock remain outstanding, the corporation shall not amend, alter or
repeal these Articles to change any of the rights, preferences or privileges
provided for herein for the benefit of any holder of the Series A, Series B,
Series C or Series D Preferred Stock or increase or decrease (other than by
redemption or conversion) the total number of authorized shares of Series A,
Series B, Series C or Series D Preferred Stock without the vote or written
consent by the holders of a majority of the then outstanding shares of such
series of Preferred Stock.
(c) So long as any shares of Series C Preferred Stock remain
outstanding, the corporation shall not increase the authorized number of
directors of the Company without the vote or written consent by the holders of a
majority of the then outstanding shares of Series C Preferred Stock.
(d) No share or shares of Series A, Series B, Series C or Series D
Preferred Stock acquired by the Company by reason of redemption, purchase,
conversion or otherwise shall be reissued, and all such shares shall be
cancelled, retired and eliminated from the shares which the Company shall be
authorized to issue.
7. Status of Converted Stock. In the event any shares of Series A,
Series B, Series C or Series D Preferred Stock shall be converted pursuant to
Section 4 hereof, the shares so converted shall be canceled and shall not be
issuable by the corporation, and the Articles of Incorporation of the
corporation shall be appropriately amended to effect the corresponding reduction
in the corporation's authorized capital stock.
ARTICLE IV
A. The liability of directors of the corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
B. The corporation is authorized to provide indemnification of agents
(as defined in section 317 of the California Corporations Code) through bylaw
provisions, agreements with agents, vote of shareholders or disinterested
directors, or otherwise, to the fullest extent permissible under California law.
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<PAGE> 16
C. Any amendment, repeal or modification of any provision of this
Article IV shall not adversely affect any right or protection of an agent of
this corporation existing at the time of such amendment, repeal or modification.
3. The foregoing amendment and restatement of Articles of Incorporation has been
duly approved by the Board of Directors.
4. The foregoing amendment and restatement of Articles of Incorporation has been
duly approved by the required vote of shareholders in accordance with sections
902 and 903 of the California Corporations Code. The total number of outstanding
shares of the corporation is 15,500,000 shares of Common Stock, 1,144,474 shares
of Series A Preferred Stock and 4,598,383 shares of Series B Preferred Stock and
8,121,325 shares of Series C Preferred Stock. The number of shares voting in
favor of the amendment equaled or exceeded the vote required. The percentage
vote required was: (a) a majority of the outstanding shares of Common Stock of
the Company voting separately as a class, (b) a majority of the outstanding
shares of Preferred Stock voting separately as a class, (c) a majority of the
outstanding Series A Preferred Stock voting separately, (d) a majority of the
outstanding Series B Preferred Stock voting separately, (e) a majority of the
outstanding Series C Preferred Stock voting separately shares of Company.
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<PAGE> 17
We further declare under penalty of perjury under the laws of the State
of California that the matters set forth in this Certificate are true and
correct of our own knowledge.
Dated: March __, 2000.
/s/ MIN ZHU
-------------------------------------------
Min Zhu, President
/s/ SUBRAH IYAR
------------------------------------------
Subrah S. Iyar, Secretary
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<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
STELLAR COMPUTING CORPORATION
A CALIFORNIA CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C> <C>
ARTICLE I OFFICES.............................................................. 1
Section I.1 Principal Executive Office .......................................... 1
Section I.2 Other Offices ....................................................... 1
ARTICLE II MEETINGS OF SHAREHOLDERS............................................. 1
Section II.1 Place of Meetings ................................................... 1
Section II.2 Annual Meeting ...................................................... 1
Section II.3 Notice of Annual Meeting ............................................ 2
Section II.4 Special Meetings..................................................... 3
Section II.5 Notice of Special Meetings........................................... 3
Section II.6 Quorum .............................................................. 3
Section II.7 Adjourned Meeting and Notice ........................................ 4
Section II.8 Record Date ......................................................... 4
Section II.9 Voting .............................................................. 5
Section II.10 Proxies ............................................................. 5
Section II.11 Validation of Defectively Called or Noticed Meetings ................ 6
Section II.12 Action Without Meeting .............................................. 7
Section II.13 Inspectors of Election .............................................. 7
ARTICLE III BOARD OF DIRECTORS................................................... 8
Section III.1 Powers; Approval of Loans to Officers ............................... 8
Section III.2 Number and Qualification of Directors ............................... 9
Section III.3 Election and Term of Office ......................................... 9
Section III.4 Vacancies ........................................................... 9
Section III.5 Time and Place of Meetings .......................................... 10
Section III.6 Notice of Special Meetings .......................................... 10
Section III.7 Action at a Meeting: Quorum and Required Vote ...................... 11
Section III.8 Action Without a Meeting ............................................ 11
Section III.9 Adjourned Meeting and Notice ........................................ 11
Section III.10 Fees and Compensation ............................................... 12
Section III.11 Appointment of Executive and Other Committees........................ 12
</TABLE>
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<TABLE>
<CAPTION>
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ARTICLE IV OFFICERS............................................................. 13
Section IV.1 Officers ............................................................ 13
Section IV.2 The Chairman of the Board ........................................... 13
Section IV.3 The President ....................................................... 14
Section IV.4 Vice-Presidents ..................................................... 14
Section IV.5 The Secretary ....................................................... 14
Section IV.6 The Treasurer ....................................................... 15
Section IV.7 The Controller ...................................................... 15
ARTICLE V EXECUTION OF CORPORATE INSTRUMENTS, RATIFICATION AND VOTING
OF STOCKS OWNED BY THE CORPORATION................................... 17
Section V.1 Execution of Corporate Instruments .................................. 16
Section V.2 Ratification by Shareholders ........................................ 16
Section V.3 Voting of Stocks Owned by the Corporation ........................... 16
ARTICLE VI ANNUAL AND OTHER REPORTS............................................. 16
Section VI.1 Reports to Shareholders ............................................. 17
Section VI.2 Report of Shareholder Vote .......................................... 18
Section VI.3 Reports to the Secretary of State ................................... 18
ARTICLE VII SHARES OF STOCK...................................................... 18
ARTICLE VIII INSPECTION OF CORPORATE RECORDS...................................... 19
Section VIII.1 General Records ..................................................... 19
Section VIII.2 Inspection of Bylaws ................................................ 20
ARTICLE IX INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS......... 20
Section IX.1 Right to Indemnification ............................................ 20
Section IX.2 Authority to Advance Expenses ....................................... 21
Section IX.3 Right of Claimant to Bring Suit ..................................... 21
Section IX.4 Provisions Nonexclusive ............................................. 22
Section IX.5 Authority to Insure ................................................. 22
</TABLE>
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<TABLE>
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Section IX.6 Survival of Rights .................................................. 22
Section IX.7 Settlement of Claims ................................................ 22
Section IX.8 Effect of Amendment ................................................. 23
Section IX.9 Subrogation ......................................................... 23
Section IX.10 No Duplication of Payments .......................................... 23
ARTICLE X AMENDMENTS........................................................... 23
Section X.1 Power of Shareholders ............................................... 23
Section X.2 Power of Directors .................................................. 23
ARTICLE XI RIGHT OF FIRST REFUSAL............................................... 24
Section 11.1 Right of First Refusal .............................................. 24
ARTICLE XII DEFINITIONS.......................................................... 26
</TABLE>
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<PAGE> 5
AMENDED AND RESTATED BYLAWS OF
STELLAR COMPUTING CORPORATION
A CALIFORNIA CORPORATION
ARTICLE I
OFFICES
Section I.1 PRINCIPAL EXECUTIVE OFFICE.
The principal executive office of the corporation is hereby fixed
and located at: 1270 Oakmead Parkway, Sunnyvale, California 94086. The Board of
Directors is hereby granted full power and authority to change said principal
executive office from one location to another. Any such change shall be noted on
these Bylaws by the Secretary, opposite this Section, or this Section may be
amended to state the new location.
Section I.2 OTHER OFFICES.
Other business offices may at any time be established at any place
or places specified by the Board of Directors.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section II.1 PLACE OF MEETINGS.
All meetings of shareholders shall be held at the principal
executive office of the corporation, or at any other place, within or without
the State of California, specified by the Board of Directors.
Section II.2 ANNUAL MEETING.
The annual meeting of the shareholders, after the year 1996, shall
be held at the time and date in each year fixed by the Board of Directors. At
the annual meeting directors shall be elected, reports of the affairs of the
corporation shall be considered, and any other business may be transacted that
is within the power of the shareholders.
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<PAGE> 6
Section II.3 NOTICE OF ANNUAL MEETING.
Written notice of each annual meeting shall be given to each
shareholder entitled to vote, either personally or by first-class mail, or, if
the corporation has outstanding shares held of record by 500 or more persons
(determined in accordance with Section 605 of the General Corporation Law) on
the record date for the meeting, by third-class mail, or by other means of
written communication, charges prepaid, addressed to such shareholder at the
shareholder's address appearing on the books of the corporation or given by such
shareholder to the corporation for the purpose of notice. If any notice or
report addressed to the shareholder at the address of such shareholder appearing
on the books of the corporation is returned to the corporation by the United
States Postal Service marked to indicate that the United States Postal Service
is unable to deliver the notice or report to the shareholder at such address,
all future notices or reports shall be deemed to have been duly given without
further mailing if the same shall be available for the shareholder upon written
demand of the shareholder at the principal executive office of the corporation
for a period of one year from the date of the giving of the notice or report to
all other shareholders. If a shareholder gives no address, notice shall be
deemed to have been given to such shareholder if addressed to the shareholder at
the place where the principal executive office of the corporation is situated,
or if published at least once in some newspaper of general circulation in the
county in which said principal executive office is located.
All such notices shall be given to each shareholder entitled thereto
not less than ten (10) days (or, if sent by third-class mail, thirty (30) days)
nor more than sixty (60) days before each annual meeting. Any such notice shall
be deemed to have been given at the time when delivered personally or deposited
in the mail or sent by other means of written communication. An affidavit of
mailing of any such notice in accordance with the foregoing provisions, executed
by the Secretary, Assistant Secretary or any transfer agent of the corporation
shall be prima facie evidence of the giving of the notice.
Such notice shall specify:
(a) the place, the date, and the hour of such meeting;
(b) those matters that the Board of Directors, at the time of
the mailing of the notice, intends to present for action by the shareholders
(but, subject to the provisions of subsection (d) below, any proper matter may
be presented at the meeting for such action);
(c) if directors are to be elected, the names of nominees
intended at the time of the notice to be presented by the Board of Directors
for election;
(d) the general nature of a proposal, if any, to take action
with respect to approval of (i) a contract or other transaction with an
interested director, (ii) amendment of the Articles of Incorporation, (iii) a
reorganization of the corporation as defined in Section 181 of the General
Corporation Law, (iv) voluntary dissolution of the corporation, or (v) a
distribution in dissolution other than in accordance with the rights of
outstanding preferred shares, if any; and
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(e) such other matters, if any, as may be expressly required
by statute.
Section II.4 SPECIAL MEETINGS.
Special meetings of the shareholders for any purpose or purposes
whatsoever may be called at any time by the Chairman of the Board (if there be
such an officer appointed), by the President, by the Board of Directors, or by
one or more shareholders entitled to cast not less than ten percent (10%) of the
votes at the meeting.
Section II.5 NOTICE OF SPECIAL MEETINGS.
Upon request in writing that a special meeting of shareholders be
called for any proper purpose, directed to the Chairman of the Board (if there
be such an officer appointed), President, Vice President or Secretary by any
person (other than the Board of Directors) entitled to call a special meeting of
shareholders, the officer forthwith shall cause notice to be given to the
shareholders entitled to vote that a meeting will be held at a time requested by
the person or persons calling the meeting, not less than thirty-five (35) nor
more than sixty (60) days after the receipt of the request. Except in special
cases where other express provision is made by statute, notice of any special
meeting of shareholders shall be given in the same manner as for annual meetings
of shareholders. In addition to the matters required by Section 2.3(a) and, if
applicable, Section 2.3(c) of these Bylaws, notice of any special meeting shall
specify the general nature of the business to be transacted, and no other
business may be transacted at such meeting.
Section II.6 QUORUM.
The presence in person or by proxy of persons entitled to vote a
majority of the voting shares at any meeting shall constitute a quorum for the
transaction of business. If a quorum is present, the affirmative vote of a
majority of the shares represented and voting at the meeting (which shares
voting affirmatively also constitute at least a majority of the required quorum)
shall be the act of the shareholders, unless the vote of a greater number or
voting by classes is required by the General Corporation Law or the Articles of
Incorporation. Any meeting of shareholders, whether or not a quorum is present,
may be adjourned from time to time by the vote of the holders of a majority of
the shares present in person or represented by proxy thereat and entitled to
vote, but in the absence of a quorum no other business may be transacted at such
meeting, except that the shareholders present or represented by proxy at a duly
called or held meeting, at which a quorum is present, may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum, if any action taken (other than
adjournment) is approved by at least a majority of the shares required to
constitute a quorum.
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<PAGE> 8
Section II.7 ADJOURNED MEETING AND NOTICE.
When any shareholders' meeting, either annual or special, is
adjourned for more than forty-five (45) days, or if after adjournment a new
record date is fixed for the adjourned meeting, notice of the adjourned meeting
shall be given as in the case of an original meeting. Except as provided above,
it shall not be necessary to give any notice of the time and place of the
adjourned meeting or of the business to be transacted thereat, other than by
announcement of the time and place thereof at the meeting at which such
adjournment is taken.
Section II.8 RECORD DATE.
(a) The Board of Directors may fix a time in the future as a record
date for the determination of the shareholders entitled to notice of and to vote
at any meeting of shareholders or entitled to give consent to corporate action
in writing without a meeting, to receive any report, to receive any dividend or
other distribution, or allotment of any rights, or to exercise rights in respect
of any other lawful action. The record date so fixed shall be not more than
sixty (60) days nor less than ten (10) days prior to the date of such meeting,
nor more than sixty (60) days prior to any other action. A determination of
shareholders of record entitled to notice of or to vote at a meeting of
shareholders shall apply to any adjournment of the meeting unless the Board of
Directors fixes a new record date for the adjourned meeting, but the Board of
Directors shall fix a new record date if the meeting is adjourned for more than
forty-five (45) days from the date set for the original meeting. When a record
date is so fixed, only shareholders of record at the close of business on that
date are entitled to notice of and to vote at any such meeting, to give consent
without a meeting, to receive any report, to receive the dividend, distribution,
or allotment of rights, or to exercise the rights, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation after
the record date, except as otherwise provided in the Articles of Incorporation
or these Bylaws.
(b) If no record date is fixed:
(1) The record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at the close of
business on the business day next preceding the day on which notice is given or,
if notice is waived, at the close of business on the business day preceding the
day on which the meeting is held.
(2) The record date for determining shareholders entitled to
give consent to corporate action in writing without a meeting, when no prior
action by the Board of Directors has been taken, shall be the day on which the
first written consent is given.
(3) The record date for determining shareholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto, or the sixtieth (60th) day
prior to the date of such other action, whichever is later.
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Section II.9 VOTING.
(a) Except as provided below with respect to cumulative voting and
except as may be otherwise provided in the Articles of Incorporation, each
outstanding share, regardless of class, shall be entitled to one vote on each
matter submitted to a vote of shareholders. Any holders of shares entitled to
vote on any matter may vote part of the shares in favor of the proposal and
refrain from voting the remaining shares or vote them against the proposal,
other than elections to office, but, if the shareholder fails to specify the
number of shares such shareholder is voting affirmatively, it will be
conclusively presumed that the shareholder's approving vote is with respect to
all shares such shareholder is entitled to vote.
(b) Subject to the provisions of Sections 702 through 704 of the
General Corporation Law (relating to voting of shares held by a fiduciary,
receiver, pledgee, or minor, in the name of a corporation, or in joint
ownership), persons in whose names shares entitled to vote stand on the stock
records of the corporation at the close of business on the record date shall be
entitled to vote at the meeting of shareholders. Such vote may be viva voce or
by ballot; provided, however, that all elections for directors must be by ballot
upon demand made by a shareholder at any election and before the voting begins.
Shares of this corporation owned by a corporation more than twenty-five percent
(25%) of the voting power of which is owned directly by this corporation, or
indirectly through one or more majority-owned subsidiaries of this corporation,
shall not be entitled to vote on any matter.
(c) Subject to the requirements of the next sentence, every
shareholder entitled to vote at any election for directors shall have the right
to cumulate such shareholder'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 shareholder's shares are normally entitled, or to distribute votes
on the same principle among as many candidates as such shareholder thinks fit.
No shareholder shall be entitled to cumulate votes unless such candidate's name
or candidates' names have been placed in nomination prior to the voting and the
shareholder has given notice at the meeting, prior to the voting, of the
shareholder's intention to cumulate such shareholder's votes. If any one
shareholder has given such notice, all shareholders may cumulate their votes for
candidates in nomination. The candidates receiving the highest number of
affirmative votes of shares entitled to be voted for them, up to the number of
directors to be elected by such shares, shall be elected. Votes against a
director and votes withheld shall have no legal effect.
Section II.10 PROXIES.
(a) Every person entitled to vote shares (including voting by
written consent) may authorize another person or other persons to act by proxy
with respect to such shares. "Proxy" means a written authorization signed by a
shareholder or the shareholder's attorney-in-fact giving another person or
persons power to vote with respect to the shares of such shareholder. "Signed"
for the purpose of this Section means the placing of the shareholder's name on
the proxy (whether by manual signature, typewriting, telegraphic transmission or
otherwise) by the shareholder or the shareholder's attorney-in-fact. Any proxy
duly executed is not revoked and continues in full force and effect until (i) a
written instrument revoking it is filed with the Secretary of the corporation
prior to the
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<PAGE> 10
vote pursuant thereto, (ii) a subsequent proxy executed by the person executing
the prior proxy is presented to the meeting, (iii) the person executing the
proxy attends the meeting and votes in person, or (iv) written notice of the
death or incapacity of the maker of such proxy is received by the corporation
before the vote pursuant thereto is counted; provided that no such proxy shall
be valid after the expiration of eleven (11) months from the date of its
execution, unless otherwise provided in the proxy. Notwithstanding the foregoing
sentence, a proxy that states that it is irrevocable, is irrevocable for the
period specified therein to the extent permitted by Section 705(e) and (f) of
the General Corporation Law. The dates contained on the forms of proxy
presumptively determine the order of execution, regardless of the postmark dates
on the envelopes in which they are mailed.
(b) As long as no outstanding class of securities of the corporation
is registered under Section 12 of the Securities Exchange Act of 1934, or is not
exempted from such registration by Section 12(g)(2) of such Act, any form of
proxy or written consent distributed to ten (10) or more shareholders of the
corporation when outstanding shares of the corporation are held of record by 100
or more persons shall afford an opportunity on the proxy or form of written
consent to specify a choice between approval and disapproval of each matter or
group of related matters intended to be acted upon at the meeting for which the
proxy is solicited or by such written consent, other than elections to office,
and shall provide, subject to reasonable specified conditions, that where the
person solicited specifies a choice with respect to any such matter the shares
will be voted in accordance therewith. In any election of directors, any form of
proxy in which the directors to be voted upon are named therein as candidates
and which is marked by a shareholder "withhold" or otherwise marked in a manner
indicating that the authority to vote for the election of directors is withheld
shall not be voted for the election of a director.
Section II.11 VALIDATION OF DEFECTIVELY CALLED OR NOTICED MEETINGS.
The transactions of any meeting of shareholders, however called and
noticed, and wherever held, are as valid as though had at a meeting duly held
after regular call and notice, if a quorum is present either in person or by
proxy, and if, either before or after the meeting, each of the persons entitled
to vote, not present in person or by proxy, signs a written waiver of notice or
a consent to the holding of the meeting or an approval of the minutes thereof.
All such waivers, consents and approvals shall be filed with the corporate
records or made a part of the minutes of the meeting. Attendance of a person at
a meeting shall constitute a waiver of notice of and presence at such meeting,
except when the person objects, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened and except that attendance at a meeting is not a waiver of any right to
object to the consideration of matters required by these Bylaws or by the
General Corporation Law to be included in the notice if such objection is
expressly made at the meeting. Neither the business to be transacted at nor the
purpose of any regular or special meeting of shareholders need be specified in
any written waiver of notice, consent to the holding of the meeting or approval
of the minutes thereof, unless otherwise provided in the Articles of
Incorporation or these Bylaws, or unless the meeting involves one or more
matters specified in Section 2.3(d) of these Bylaws.
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Section II.12 ACTION WITHOUT MEETING.
(a) Directors may be elected without a meeting by a consent in
writing, setting forth the action so taken, signed by all of the persons who
would be entitled to vote for the election of directors, provided that, without
notice except as hereinafter set forth, a director may be elected at any time to
fill a vacancy not filled by the directors (other than a vacancy created by
removal of a director) by the written consent of persons holding a majority of
the outstanding shares entitled to vote for the election of directors.
Any other action that may be taken at a meeting of the shareholders,
may be taken without a meeting, and without prior notice except as hereinafter
set forth, if a consent in writing, setting forth the action so taken, is signed
by the holders of outstanding shares 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.
(b) Unless the consents of all shareholders entitled to vote have
been solicited in writing:
(1) notice of any proposed shareholder approval of (i) a
contract or other transaction with an interested director, (ii) indemnification
of an agent of the corporation, (iii) a reorganization of the corporation as
defined in Section 181 of the General Corporation Law, or (iv) a distribution in
dissolution other than in accordance with the rights of outstanding preferred
shares, if any, without a meeting by less than unanimous written consent, shall
be given at least ten (10) days before the consummation of the action authorized
by such approval; and
(2) prompt notice shall be given of the taking of any other
corporate action approved by shareholders without a meeting by less than
unanimous written consent to those shareholders entitled to vote who have not
consented in writing. Such notices shall be given in the manner provided in
Section 2.3 of these Bylaws.
(c) Any shareholder giving a written consent, or the shareholder's
proxyholders, or a transferee of the shares or a personal representative of the
shareholder or their respective proxyholders, may revoke the consent by a
writing received by the corporation prior to the time that written consents of
the number of shares required to authorize the proposed action have been filed
with the Secretary of the corporation, but may not do so thereafter. Such
revocation is effective upon its receipt by the Secretary of the corporation.
Section II.13 INSPECTORS OF ELECTION.
(a) In advance of any meeting of shareholders, the Board of
Directors may appoint inspectors of election to act at the meeting and any
adjournment thereof. If inspectors of election are not so appointed, or if any
persons so appointed fail to appear or refuse to act, the chairman of any such
meeting may, and on the request of any shareholder or the holder of such
shareholder's proxy shall, appoint inspectors of election (or persons to replace
those who so fail or
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refuse) at the meeting. The number of inspectors shall be either one or three.
If inspectors are appointed at a meeting on the request of one or more
shareholders or holders of proxies, the majority of shares represented in person
or by proxy shall determine whether one inspector or three inspectors are to be
appointed.
(b) The inspectors of election shall determine the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum and the authenticity, validity and effect of proxies;
receive votes, ballots or consents; hear and determine all challenges and
questions in any way arising in connection with the right to vote; count and
tabulate all votes or consents; determine when the polls shall close; determine
the result; and do such acts as may be proper to conduct the election or vote
with fairness to all shareholders.
(c) The inspectors of election shall perform their duties
impartially, in good faith, to the best of their ability and as expeditiously as
is practical. If there are three inspectors of election, the decision, act or
certificate of a majority is effective in all respects as the decision, act or
certificate of all. Any report or certificate made by the inspectors of election
is prima facie evidence of the facts stated therein.
ARTICLE III
BOARD OF DIRECTORS
Section III.1 POWERS; APPROVAL OF LOANS TO OFFICERS.
(a) Subject to the provisions of the General Corporation Law and any
limitations in the Articles of Incorporation relating to action required to be
approved by the shareholders or by the outstanding shares, the business and
affairs of the corporation shall be managed and all corporate powers shall be
exercised by or under the direction of the Board of Directors. The Board of
Directors may delegate the management of the day-to-day operation of the
business of the corporation to a management company or other person provided
that the business and affairs of the corporation shall be managed and all
corporate powers shall be exercised under the ultimate direction of the Board of
Directors.
(b) The corporation may, upon approval of the Board of Directors
alone, make loans of money or property to, or guarantee the obligations of, any
officer (whether or not a director) of the corporation or of its parent, or
adopt an employee benefit plan authorizing such loans or guaranties provided
that:
(1) the Board of Directors determines that such a loan,
guaranty, or plan may reasonably be expected to benefit the corporation;
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(2) the corporation has outstanding shares held of record by
100 or more persons (determined as provided in Section 605 of the General
Corporation Law) on the date of approval by the Board of Directors;
(3) the approval by the Board of Directors is by a vote
sufficient without counting the vote of any interested director(s); and
(4) the loan is otherwise made in compliance with Section 315
of the General Corporation Law.
Section III.2 NUMBER AND QUALIFICATION OF DIRECTORS.
The authorized number of directors shall be four (4) until changed
by an amendment of the Articles of Incorporation or these Bylaws amending this
Section 3.2 duly adopted by a vote or written consent of holders of a majority
of the outstanding shares; provided that if the authorized number of directors
is five or more, any proposal to reduce the authorized number of directors to a
number less than five cannot be adopted if the votes cast against its adoption
at a meeting, or the shares not consenting in the case of action by written
consent, are equal to more than sixteen and two-thirds percent (16-2/3 %) of the
outstanding shares entitled to vote.
Section III.3 ELECTION AND TERM OF OFFICE.
The directors shall be elected at each annual meeting of
shareholders, but, if any such annual meeting is not held or the directors are
not elected thereat, the directors may be elected at any special meeting of
shareholders held for that purpose. Each director, including a director elected
to fill a vacancy, shall hold office until the expiration of the term for which
elected and until a successor has been elected and qualified.
Section III.4 VACANCIES.
A vacancy in the Board of Directors shall be deemed to exist in case
of the death, resignation or removal of any director, if a director has been
declared of unsound mind by order of court or convicted of a felony, if the
authorized number of directors is increased, if the incorporator or
incorporators have failed to appoint the authorized number of directors in any
resolution for appointment of directors upon the initial organization of the
corporation, or if the shareholders fail, at any annual or special meeting of
shareholders at which any director or directors are elected, to elect the full
authorized number of directors to be voted for at that meeting.
Vacancies in the Board of Directors, except for a vacancy created by
the removal of a director, may be filled by a majority of the directors present
at a meeting at which a quorum is present, or if the number of directors then in
office is less than a quorum, (a) by the unanimous written consent of the
directors then in office, (b) by the vote of a majority of the directors then in
office at a meeting held pursuant to notice or waivers of notice in compliance
with these Bylaws, or (c) by a sole remaining director. Each director so elected
shall hold office until his or her successor is elected at an
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annual or a special meeting of the shareholders. A vacancy in the Board of
Directors created by the removal of a director may be filled only by the vote of
a majority of the shares entitled to vote represented at a duly held meeting at
which a quorum is present, or by the written consent of all of the holders of
the outstanding shares.
The shareholders may elect a director or directors at any time to
fill any vacancy or vacancies not filled by the directors. Any such election by
written consent other than to fill a vacancy created by removal shall require
the consent of holders of a majority of the outstanding shares entitled to vote.
Any such election by written consent to fill a vacancy created by removal shall
require the unanimous written consent of all shares entitled to vote for the
election of directors.
Any director may resign effective upon giving written notice to the
Chairman of the Board (if there be such an officer appointed), the President,
the Secretary or the Board of Directors of the corporation, unless the notice
specifies a later time for the effectiveness of such resignation. If the
resignation is effective at a future time, a successor may be elected to take
office when the resignation becomes effective.
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of the director's term
of office.
Section III.5 TIME AND PLACE OF MEETINGS.
The Board of Directors shall hold a regular meeting immediately
after the meeting of shareholders at which it is elected and at the place where
such meeting is held, or at such other place as shall be fixed by the Board of
Directors, for the purpose of organization, election of officers of the
corporation and the transaction of other business. Notice of such meeting is
hereby dispensed with. Other regular meetings of the Board of Directors shall be
held without notice at such times and places as are fixed by the Board of
Directors. Special meetings of the Board of Directors may be held at any time
whenever called by the Chairman of the Board (if there be such an officer
appointed), the President, any Vice-President, the Secretary or any two
directors.
Except as hereinabove provided in this Section 3.5, all meetings of
the Board of Directors may be held at any place within or without the State of
California that has been designated by resolution of the Board of Directors as
the place for the holding of regular meetings, or by written consent of all
directors. In the absence of such designation, meetings of the Board of
Directors shall be held at the principal executive office of the corporation.
Special meetings of the Board of Directors may be held either at a place so
designated or at the principal executive office of the corporation.
Section III.6 NOTICE OF SPECIAL MEETINGS.
Notice of the time and place of special meetings shall be delivered
personally to each director or communicated to each director by telephone,
telegraph or mail, charges prepaid, addressed to the director at the director's
address as it is shown upon the records of the corporation or, if it is not so
shown on such records or is not readily ascertainable, at the place at which the
meetings
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of the directors are regularly held. In case such notice is mailed, it shall be
deposited in the United States mail at least four (4) days prior to the time of
the holding of the meeting. In case such notice is delivered personally or by
telephone or telegraph, as above provided, it shall, be so delivered at least
forty-eight (48) hours prior to the time of the holding of the meeting. Such
mailing, telegraphing or delivery, personally or by telephone, as above
provided, shall be due, legal and personal notice to such director.
Notice of a meeting need not be given to any director who signs a
waiver of notice or a consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or who attends the meeting
without protesting, prior thereto or at its commencement, the lack of notice to
such director. All such waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meetings.
Section III.7 ACTION AT A MEETING: QUORUM AND REQUIRED VOTE.
Presence of a majority of the authorized number of directors at a
meeting of the Board of Directors constitutes a quorum for the transaction of
business, except as hereinafter provided. Members of the Board of Directors may
participate in a meeting through use of conference telephone or similar
communications equipment, so long as all members participating in such meeting
can hear one another. Participation in a meeting as permitted in the preceding
sentence constitutes presence in person at such meeting. Every act or decision
done or made by a majority of the directors present at a meeting duly held at
which a quorum is present is the act of the Board of Directors, unless a greater
number, or the same number after disqualifying one or more directors from
voting, is required by law, by the Articles of Incorporation, or by these
Bylaws. A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for such
meeting.
Section III.8 ACTION WITHOUT A MEETING.
Any action required or permitted to be taken by the Board of
Directors may be taken without a meeting, if all members of the Board of
Directors shall individually or collectively consent in writing to such action.
Such written consent or consents shall be filed with the minutes of the
proceedings of the Board of Directors. Such action by written consent shall have
the same force and effect as a unanimous vote of such directors.
Section III.9 ADJOURNED MEETING AND NOTICE.
A majority of the directors present, whether or not a quorum is
present, may adjourn any meeting to another time and place. If the meeting is
adjourned for more than twenty-four (24) hours, notice of any adjournment to
another time or place shall be given prior to the time of the adjourned meeting
to the directors who were not present at the time of the adjournment.
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Section III.10 FEES AND COMPENSATION.
Directors and members of committees may receive such compensation,
if any, for their services, and such reimbursement for expenses, as may be fixed
or determined by resolution of the Board of Directors.
Section III.11 APPOINTMENT OF EXECUTIVE AND OTHER COMMITTEES.
The Board of Directors may, by resolution adopted by a majority of
the authorized number of directors, designate one or more committees, each
consisting of two or more directors, to serve at the pleasure of the Board of
Directors. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent member at any
meeting of the committee. The appointment of members or alternate members of a
committee requires the vote of a majority of the authorized number of directors.
Any such committee, to the extent provided in the resolution of the Board of
Directors or in these Bylaws, shall have all the authority of the Board of
Directors, except with respect to:
(a) The approval of any action for which the General
Corporation Law also requires shareholders' approval or approval of the
outstanding shares.
(b) The filling of vacancies on the Board of Directors or in
any committee.
(c) The fixing of compensation of the directors for serving on
the Board of Directors or on any committee.
(d) The amendment or repeal of these Bylaws or the adoption of
new Bylaws.
(e) The amendment or repeal of any resolution of the Board of
Directors that by its express terms is not so amendable or repealable.
(f) A distribution to the shareholders of the corporation,
except at a rate, in a periodic amount or within a price range determined by the
Board of Directors.
(g) The appointment of other committees of the Board of
Directors or the members thereof.
The provisions of Sections III.5 through III.9 of these Bylaws apply also to
committees of the Board of Directors and action by such committees, mutatis
mutandis (with the necessary changes having been made in the language thereof).
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ARTICLE IV
OFFICERS
Section IV.1 OFFICERS.
The officers of the corporation shall consist of the President, the
Secretary and the Treasurer, and each of them shall be appointed by the Board of
Directors. The corporation may also have a Chairman of the Board, one or more
Vice-Presidents, a Controller, one or more Assistant Secretaries and Assistant
Treasurers, and such other officers as may be appointed by the Board of
Directors, or with authorization from the Board of Directors by the President.
The order of the seniority of the Vice-Presidents shall be in the order of their
nomination, unless otherwise determined by the Board of Directors. Any two or
more of such offices may be held by the same person. The Board of Directors
shall designate one officer as the chief financial officer of the corporation.
In the absence of such designation, the Treasurer shall be the chief financial
officer. The Board of Directors may appoint, and may empower the President to
appoint, such other officers as the business of the corporation may require,
each of whom shall have such authority and perform such duties as are provided
in these Bylaws or as the Board of Directors may from time to time determine.
All officers of the corporation shall hold office from the date
appointed to the date of the next succeeding regular meeting of the Board of
Directors following the meeting of shareholders at which the Board of Directors
is elected, and until their successors are elected; provided that all officers,
as well as any other employee or agent of the corporation, may be removed at any
time at the pleasure of the Board of Directors, or, except in the case of an
officer chosen by the Board of Directors, by any officer upon whom such power of
removal may be conferred by the Board of Directors, and upon the removal,
resignation, death or incapacity of any officer, the Board of Directors or the
President, in cases where he or she has been vested by the Board of Directors
with power to appoint, may declare such office vacant and fill such vacancy.
Nothing in these Bylaws shall be construed as creating any kind of contractual
right to employment with the corporation.
Any officer may resign at any time by giving written notice to the
Board of Directors, the President, or the Secretary of the corporation, without
prejudice, however, to the rights, if any, of the corporation under any contract
to which such officer is a party. Any such resignation shall take effect at the
date of the receipt of such notice or at any later time specified therein; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
The salary and other compensation of the officers shall be fixed
from time to time by resolution of or in the manner determined by the Board of
Directors.
Section IV.2 THE CHAIRMAN OF THE BOARD.
The Chairman of the Board (if there be such an officer appointed)
shall, when present, preside at all meetings of the Board of Directors and shall
perform all the duties commonly
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incident to that office. The Chairman of the Board shall have authority to
execute in the name of the corporation bonds, contracts, deeds, leases and other
written instruments to be executed by the corporation (except where by law the
signature of the President is required), and shall perform such other duties as
the Board of Directors may from time to time determine.
Section IV.3 THE PRESIDENT.
Subject to such supervisory powers, if any, as may be given by the
Board of Directors to the Chairman of the Board, the President shall be the
chief executive officer of the corporation and shall perform all the duties
commonly incident to that office. The President shall have authority to execute
in the name of the corporation bonds, contracts, deeds, leases and other written
instruments to be executed by the corporation. The President shall preside at
all meetings of the shareholders and, in the absence of the Chairman of the
Board or if there is none, at all meetings of the Board of Directors, and shall
perform such other duties as the Board of Directors may from time to time
determine.
Section IV.4 VICE-PRESIDENTS.
The Vice-Presidents (if there be such officers appointed), in the
order of their seniority (unless otherwise established by the Board of
Directors), may assume and perform the duties of the President in the absence or
disability of the President or whenever the offices of the Chairman of the Board
and President are vacant. The Vice-Presidents shall have such titles, perform
such other duties, and have such other powers as the Board of Directors, the
President or these Bylaws may designate from time to time.
Section IV.5 THE SECRETARY.
The Secretary shall record or cause to be recorded, and shall keep
or cause to be kept, at the principal executive office and such other place as
the Board of Directors may order, a book of minutes of actions taken at all
meetings of directors and committees thereof and of shareholders, with the time
and place of holding, whether regular or special, and, if special, how
authorized, the notice thereof given, the names of those present at directors'
meetings, the number of shares present or represented at shareholders' meetings,
and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the corporation's transfer agent, a share
register or a duplicate share register in a form capable of being converted into
written form, showing the names of the shareholders and their addresses, the
number and classes of shares held by each, the number and date of certificates
issued for the same, and the number and date of cancellation of every
certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all the
meetings of the shareholders and of the Board of Directors and committees
thereof required by these Bylaws or by law to be given, and shall have such
other powers and perform such other duties as may be prescribed by the Board of
Directors or by these Bylaws.
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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 such other duties and have
such other powers as the Board of Directors or the President may designate from
time to time.
Section IV.6 THE TREASURER.
The Treasurer shall keep and maintain, or cause to be kept and
maintained, adequate and correct accounts of the properties and business
transactions of the corporation. The books of account shall at all reasonable
times be open to inspection by any director.
The Treasurer shall deposit all moneys and other valuables in the
name and to the credit of the corporation with such depositaries as may be
designated by the Board of Directors. The Treasurer shall disburse the funds of
the corporation as may be ordered by the Board of Directors, shall render to the
President and directors, whenever they request it, an account of all of the
Treasurer's transactions as Treasurer and of the financial condition of the
corporation, and shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or these Bylaws.
The President may direct any Assistant Treasurer to assume and
perform the duties of the Treasurer in the absence or disability of the
Treasurer, and each Assistant Treasurer shall perform such other duties and have
such other powers as the Board of Directors or the President may designate from
time to time.
Section IV.7 THE CONTROLLER.
The Controller (if there be such an officer appointed) shall be
responsible for the establishment and maintenance of accounting and other
systems required to control and account for the assets of the corporation and
provide safeguards therefor, and to collect information required for management
purposes, and shall perform such other duties and have such other powers as the
Board of Directors or the President may designate from time to time. The
President may direct any Assistant Controller to assume and perform the duties
of the Controller, in the absence or disability of the Controller, and each
Assistant Controller shall perform such other duties and have such other powers
as the Board of Directors, the Chairman of the Board (if there be such an
officer appointed) or the President may designate from time to time.
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ARTICLE V
EXECUTION OF CORPORATE INSTRUMENTS, RATIFICATION
AND VOTING OF STOCKS OWNED BY THE CORPORATION
Section V.1 EXECUTION OF CORPORATE INSTRUMENTS.
In its discretion, the Board of Directors may determine the method
and designate the signatory officer or officers or other person or persons, to
execute any corporate instrument or document, or to sign the corporate name
without limitation, except where otherwise provided by law, and such execution
or signature shall be binding upon the corporation.
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 to do so.
The Board of Directors shall designate an officer who personally, or
through his representative, shall vote shares of other corporations standing in
the name of this corporation. The authority to vote shares shall include the
authority to execute a proxy in the name of the corporation for purposes of
voting the shares.
Section V.2 RATIFICATION BY SHAREHOLDERS.
In its discretion, the Board of Directors may submit any contract or
act for approval or ratification of the shareholders at any annual meeting of
shareholders, or at any special meeting of shareholders called for that purpose;
and any contract or act that shall be approved or ratified by the holders of a
majority of the voting power of the corporation shall be as valid and binding
upon the corporation and upon the shareholders thereof as though approved or
ratified by each and every shareholder of the corporation, unless a greater vote
is required by law for such purpose.
Section V.3 VOTING OF STOCKS OWNED BY THE CORPORATION.
All stock 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 to do so by
resolution of the Board of Directors, or in the absence of such authorization,
by the Chairman of the Board (if there be such an officer appointed), the
President or any Vice-President, or by any other person authorized to do so by
the Chairman of the Board, the President or any Vice President.
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ARTICLE VI
ANNUAL AND OTHER REPORTS
Section VI.1 REPORTS TO SHAREHOLDERS.
The Board of Directors of the corporation shall cause an annual
report to be sent to the shareholders not later than 120 days after the close of
the fiscal year, and at least fifteen (15) days (or, if sent by third-class
mail, thirty-five (35) days) prior to the annual meeting of shareholders to be
held during the next fiscal year. This report shall contain a balance sheet as
of the end of that fiscal year and an income statement and statement of changes
in financial position for that fiscal year, accompanied by any report thereon of
independent accountants or, if there is no such report, the certificate of an
authorized officer of the corporation that the statements were prepared without
audit from the books and records of the corporation. This report shall also
contain such other matters as required by Section 1501(b) of the General
Corporation Law, unless the corporation is subject to the reporting requirements
of Section 13 of the Securities Exchange Act of 1934, and is not exempted
therefrom under Section 12(g)(2) thereof. As long as the corporation has less
than 100 holders of record of its shares (determined as provided in Section 605
of the General Corporation Law), the foregoing requirement of an annual report
is hereby waived.
If no annual report for the last fiscal year has been sent to
shareholders, the corporation shall, upon the written request of any shareholder
made more than 120 days after the close of such fiscal year, deliver or mail to
the person making the request within thirty (30) days thereafter the financial
statements for such year as required by Section 1501(a) of the General
Corporation Law. A shareholder or shareholders holding at least five percent
(5%) of the outstanding shares of any class of the corporation may make a
written request to the corporation for an income statement of the corporation
for the three-month, six-month or nine-month period of the current fiscal year
ended more than thirty (30) days prior to the date of the request and a balance
sheet of the corporation as of the end of such period and, in addition, if no
annual report for the last fiscal year has been sent to shareholders, the annual
report for the last fiscal year, unless such report has been waived under these
Bylaws. The statements shall be delivered or mailed to the person making the
request within thirty (30) days thereafter. A copy of any such statements shall
be kept on file in the principal executive office of the corporation for twelve
(12) months, and they shall be exhibited at all reasonable times to any
shareholder demanding an examination of the statements, or a copy shall be
mailed to the shareholder.
The quarterly income statements and balance sheets referred to in
this Section shall be accompanied by the report thereon, if any, of any
independent accountants engaged by the corporation or the certificate of an
authorized officer of the corporation that the financial statements were
prepared without audit from the books and records of the corporation.
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Section VI.2 REPORT OF SHAREHOLDER VOTE.
For a period of sixty (60) days following the conclusion of an
annual, regular, or special meeting of shareholders, the corporation shall, upon
written request from a shareholder, forthwith inform the shareholder of the
result of any particular vote of shareholders taken at the meeting, including
the number of shares voting for, the number of shares voting against, and the
number of shares abstaining or withheld from voting. If the matter voted on was
the election of directors, the corporation shall report the number of shares (or
votes if voted cumulatively) cast for each nominee for director. If more than
one class or series of shares voted, the report shall state the appropriate
numbers by class and series of shares.
Section VI.3 REPORTS TO THE SECRETARY OF STATE.
(a) Every year, during the calendar month in which the original
articles of incorporation were filed with the California Secretary of State, or
during the preceding five calendar months, the corporation shall file a
statement with the Secretary of State on the prescribed form, setting forth the
authorized number of directors; the names and complete business and residence
addresses of all incumbent directors; the names and complete business or
resident addresses of the chief executive officer, the secretary, and the chief
financial officer; the street address of the corporation's principal executive
office or principal business office in this state; a statement of the general
type of business constituting the principal business activity of the
corporation; and a designation of the agent of the corporation for the purpose
of service of process, all in compliance with Section 1502 of the Corporations
Code of California.
(b) Notwithstanding the provisions of paragraph (a) of this section,
if there has been no change in the information contained in the corporation's
last annual statement on file in the Secretary of State's office, the
corporation may, in lieu of filing the annual statement described in paragraph
(a) of this section, advise the Secretary of State, on the appropriate form,
that no changes in the required information have occurred during the applicable
period.
ARTICLE VII
SHARES OF STOCK
Every holder of shares in the corporation shall be entitled to have
a certificate signed in the name of the corporation by the Chairman or Vice
Chairman of the Board (if there be such officers appointed) or the President or
a Vice-President and by the chief financial officer or any Assistant Treasurer
or the Secretary or any Assistant Secretary, certifying the number of shares and
the class or series of shares owned by the shareholder. Any of the signatures on
the certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate has ceased to be such officer, transfer agent or registrar before
such certificate is issued, it may be issued by the corporation with the same
effect as if such person were an officer, transfer agent or registrar at the
date of issue.
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Any such certificate shall also contain such legends or other
statements as may be required by Sections 417 and 418 of the General Corporation
Law, the Corporate Securities Law of 1968, federal or other state securities
laws, and any agreement between the corporation and the issue of the
certificate.
Certificates for shares may be issued prior to full payment, under
such restrictions and for such purposes as the Board of Directors or these
Bylaws may provide; provided, however, that the certificate issued to represent
any such partly paid shares shall state on the face thereof the total amount of
the consideration to be paid therefor, the amount remaining unpaid and the terms
of payment.
No new certificate for shares shall be issued in lieu of an old
certificate unless the latter is surrendered and cancelled at the same time;
provided, however, that a new certificate will be issued without the surrender
and cancellation of the old certificate if (1) the old certificate is lost,
apparently destroyed or wrongfully taken; (2) the request for the issuance of
the new certificate is made within a reasonable time after the owner of the old
certificate has notice of its loss, destruction, or theft; (3) the request for
the issuance of a new certificate is made prior to the receipt of notice by the
corporation that the old certificate has been acquired by a bona fide purchaser;
(4) the owner of the old certificate files a sufficient indemnity bond with or
provides other adequate security to the corporation; and (5) the owner satisfies
any other reasonable requirement imposed by the corporation. In the event of the
issuance of a new certificate, the rights and liabilities of the corporation,
and of the holders of the old and new certificates, shall be governed by the
provisions of Sections 8104 and 8405 of the California Commercial Code.
ARTICLE VIII
INSPECTION OF CORPORATE RECORDS
Section VIII.1 GENERAL RECORDS.
The accounting books and records and the minutes of proceedings of
the shareholders, the Board of Directors and committees thereof of the
corporation and any subsidiary of the corporation shall be open to inspection
upon the written demand on the corporation of any shareholder or holder of a
voting trust certificate at any reasonable time during usual business hours, for
a purpose reasonably related to such holder's interests as a shareholder or as
the holder of such voting trust certificate. Such inspection by a shareholder or
holder of a voting trust certificate may be made in person or by agent or
attorney, and the right of inspection includes the right to copy and make
extracts. Minutes of proceedings of the shareholders, Board, and committees
thereof shall be kept in written form. Other books and records shall be kept
either in written form or in any other form capable of being converted into
written form.
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A shareholder or shareholders holding at least five percent (5%) in
the aggregate of the outstanding voting shares of the corporation or who hold at
least one percent (1%) of such voting shares and have filed a Schedule 14B with
the United States Securities and Exchange Commission relating to the election of
directors of the corporation shall have (in person, or by agent or attorney) the
right to inspect and copy the record of shareholders' names and addresses and
shareholdings during usual business hours upon five (5) business days' prior
written demand upon the corporation or to obtain from the transfer agent for the
corporation, upon written demand and upon the tender of its usual charges for
such list, a list of the shareholders' names and addresses, who are entitled to
vote for the election of directors, and their shareholdings, as of the most
recent record date for which it has been compiled or as of a date specified by
the shareholder subsequent to the date of demand. The list shall be made
available on or before the later of five (5) business days after the demand is
received or the date specified therein as the date as of which the list is to be
compiled.
Every director shall have the absolute right at any reasonable time
to inspect and copy all books, records and documents of every kind and to
inspect the physical properties of the corporation and its subsidiaries. Such
inspection by a director may be made in person or by agent or attorney, and the
right of inspection includes the right to copy and make extracts.
Section VIII.2 INSPECTION OF BYLAWS.
The corporation shall keep at its principal executive office in
California, or if its principal executive office is not in California, then at
its principal business office in California (or shall otherwise provide upon
written request of any shareholder if it has no such office in California) the
original or a copy of these Bylaws as amended to date, which shall be open to
inspection by the shareholders at all reasonable times during office hours.
ARTICLE IX
INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS
Section IX.1 RIGHT TO INDEMNIFICATION.
Each person who was or is a party or is threatened to be made a
party to or is involved (as a party, witness, or otherwise), in any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (hereafter a "Proceeding"), by reason of the
fact that he, or a person of whom he is the legal representative, is or was a
director, officer, employee, or agent of the corporation or is or was serving at
the request of the corporation as a director, officer, employee, or agent of
another foreign or domestic corporation, partnership, joint venture, trust, or
other enterprise, or was a director, officer, employee, or agent of a foreign or
domestic corporation that was a predecessor corporation of the corporation or of
another enterprise at the request of such predecessor corporation, including
service with respect to employee benefit plans, whether the basis of the
Proceeding is alleged action in an official capacity as a director, officer,
employee, or agent or in any other capacity while serving as a director,
officer, employee, or agent
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(hereafter an "Agent"), shall be indemnified and held harmless by the
corporation to the fullest extent authorized by statutory and decisional law, as
the same exists or may hereafter be interpreted or amended (but, in the case of
any such amendment or interpretation, only to the extent that such amendment or
interpretation permits the corporation to provide broader indemnification rights
than were permitted prior thereto) against all expenses, liability, and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes and penalties,
amounts paid or to be paid in settlement, any interest, assessments, or other
charges imposed thereon, and any federal, state, local, or foreign taxes imposed
on any Agent as a result of the actual or deemed receipt of any payments under
this Article) [reasonably] incurred or suffered by such person in connection
with investigating, defending, being a witness in, or participating in
(including on appeal), or preparing for any of the foregoing in, any Proceeding
(hereafter "Expenses"); provided, however, that except as to actions to enforce
indemnification rights pursuant to Section IX.3 of these Bylaws, the corporation
shall indemnify any Agent seeking indemnification in connection with a
Proceeding (or part thereof) initiated by such person only if the Proceeding (or
part thereof) was authorized by the Board of Directors of the corporation. The
right to indemnification conferred in this Article shall be a contract right. It
is the corporation's intention that these bylaws provide indemnification in
excess of that expressly permitted by Section 317 of the California General
Corporation Law, as authorized by the corporation's Articles of Incorporation.
Section IX.2 AUTHORITY TO ADVANCE EXPENSES.
Expenses incurred by an officer or director (acting in his capacity
as such) in defending a Proceeding shall be paid by the corporation in advance
of the final disposition of such Proceeding, provided, however, that if required
by the California General Corporation Law, as amended, such Expenses shall be
advanced only upon delivery to the corporation of an undertaking by or on behalf
of such director or officer to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the corporation as
authorized in this Article or otherwise. Expenses incurred by other Agents of
the corporation (or by the directors or officers not acting in their capacity as
such, including service with respect to employee benefit plans) may be advanced
upon the receipt of a similar undertaking, if required by law, and upon such
other terms and conditions as the Board of Directors deems appropriate. Any
obligation to reimburse the corporation for Expense advances shall be unsecured
and no interest shall be charged thereon.
Section IX.3 RIGHT OF CLAIMANT TO BRING SUIT.
If a claim under Section IX.1 or IX.2 of these Bylaws is not paid in
full by the corporation within thirty (30) days after a written claim has been
received by the corporation, the claimant may at any time thereafter bring suit
against the corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall be entitled to be paid also
the expense (including attorneys' fees) of prosecuting such claim. It shall be a
defense to any such action (other than an action brought to enforce a claim for
expenses incurred in defending a Proceeding in advance of its final disposition
where the required undertaking has been tendered to the corporation) that the
claimant has not met the standards of conduct that make it permissible under the
California General Corporation Law for the corporation to indemnify the claimant
for the amount claimed. The
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burden of proving such a defense shall be on the corporation. 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 under
the circumstances because he has met the applicable standard of conduct set
forth in the California General Corporation Law, nor an actual determination by
the corporation (including its Board of Directors, independent legal counsel, or
its stockholders) that the claimant had 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.
Section IX.4 PROVISIONS NONEXCLUSIVE.
The rights conferred on any person by this Article shall not be
exclusive of any other rights that such person may have or hereafter acquire
under any statute, provision of the Articles of Incorporation, agreement, vote
of stockholders or disinterested directors, or otherwise, both as to action in
an official capacity and as to action in another capacity while holding such
office. To the extent that any provision of the Articles, agreement, or vote of
the stockholders or disinterested directors is inconsistent with these bylaws,
the provision, agreement, or vote shall take precedence.
Section IX.5 AUTHORITY TO INSURE.
The corporation may purchase and maintain insurance to protect
itself and any Agent against any Expense asserted against or incurred by such
person, whether or not the corporation would have the power to indemnify the
Agent against such Expense under applicable law or the provisions of this
Article, provided that, in cases where the corporation owns all or a portion of
the shares of the company issuing the insurance policy, the company and/or the
policy must meet one of the two sets of conditions set forth in Section 317 of
the California General Corporation Law, as amended.
Section IX.6 SURVIVAL OF RIGHTS.
The rights provided by this Article shall continue as to a person
who has ceased to be an Agent and shall inure to the benefit of the heirs,
executors, and administrators of such person.
Section IX.7 SETTLEMENT OF CLAIMS.
The corporation shall not be liable to indemnify any Agent under
this Article (a) for any amounts paid in settlement of any action or claim
effected without the corporation's written consent, which consent shall not be
unreasonably withheld; or (b) for any judicial award, if the corporation was not
given a reasonable and timely opportunity, at its expense, to participate in the
defense of such action.
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Section IX.8 EFFECT OF AMENDMENT.
Any amendment, repeal, or modification of this Article shall not
adversely affect any right or protection of any Agent existing at the time of
such amendment, repeal, or modification.
Section IX.9 SUBROGATION.
In the event of payment under this Article, the corporation shall be
subrogated to the extent of such payment to all of the rights of recovery of the
Agent, who shall execute all papers required and shall do everything that may be
necessary to secure such rights, including the execution of such documents
necessary to enable the corporation effectively to bring suit to enforce such
rights.
Section IX.10 NO DUPLICATION OF PAYMENTS.
The corporation shall not be liable under this Article to make any
payment in connection with any claim made against the Agent to the extent the
Agent has otherwise actually received payment (under any insurance policy,
agreement, vote, or otherwise) of the amounts otherwise indemnifiable hereunder.
ARTICLE X
AMENDMENTS
Section X.1 POWER OF SHAREHOLDERS.
New bylaws may be adopted or these Bylaws may be amended or repealed
by the affirmative vote of a majority of the outstanding shares entitled to
vote, or by the written assent of shareholders entitled to vote such shares,
except as otherwise provided by law or by the Articles of Incorporation.
Section X.2 POWER OF DIRECTORS.
Subject to the right of shareholders as provided in Section 1 of
this Article X to adopt, amend or repeal these Bylaws, these Bylaws (other than
a bylaw or amendment thereof changing the authorized number of directors, or
providing for the approval by the Board, acting alone, of a loan or guarantee to
any officer or an employee benefit plan providing for the same) may be adopted,
amended or repealed by the Board of Directors.
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ARTICLE XI
RIGHT OF FIRST REFUSAL
Section XI.1 RIGHT OF FIRST REFUSAL.
No shareholder shall sell, assign, pledge, or in any manner transfer
any of the shares of Preferred Stock or Common Stock of the corporation
(collectively, "Securities") or any right or interest therein, whether
voluntarily or by operation of law, or by gift or otherwise, except by a
transfer which meets the requirements hereinafter set forth in this bylaw:
(a) If the shareholder receives from anyone a bona fide offer
acceptable to the shareholder to purchase any Securities held by such
shareholder, then the shareholder shall first give written notice thereof to the
corporation. The notice shall name the proposed transferee and state the type
and number of Securities to be transferred, the price per share and all other
terms and conditions of the offer.
(b) For fifteen (15) days following receipt of such notice,
the corporation or its assigns shall have the option to purchase all or, with
the consent of the shareholder, any lesser part of the Securities specified in
the notice at the price and upon the terms set forth in such bona fide offer. In
the event the corporation elects to purchase all or, as agreed by the
shareholder, a lesser part, of the Securities, it shall give written notice to
the selling shareholder of its election and settlement for said Securities shall
be made as provided below in paragraph (c).
(c) In the event the corporation elects to acquire any of the
Securities of the selling shareholder as specified in said selling shareholder's
notice, the Secretary of the corporation shall so notify the selling shareholder
and settlement thereof shall be made in cash within thirty (30) days after the
Secretary of the corporation receives said selling shareholder's notice;
provided that if the terms of payment set forth in said selling shareholder's
notice were other than cash against delivery, the corporation shall pay for said
Securities on the same terms and conditions set forth in said selling
shareholder's notice.
(d) In the event the corporation does not elect to acquire all
of the Securities specified in the selling shareholder's notice, said selling
shareholder may, within the sixty (60) day period following the expiration of
the option rights granted to the corporation, sell elsewhere the Securities
specified in said selling shareholder's notice which were not acquired by the
corporation, in accordance with the provisions of paragraph (c) of this bylaw,
provided that said sale shall not be on terms and conditions more favorable to
the purchaser than those contained in the bona fide offer set forth in said
selling shareholder's notice. All Securities so sold by said selling shareholder
shall continue to be subject to the provisions of this bylaw in the same manner
as before said transfer.
(e) Anything to the contrary contained herein notwithstanding,
the following transactions shall be exempt from the provisions of this bylaw:
(1) A shareholder's transfer of any or all Securities
held either during such shareholder's lifetime or on death by will or intestacy
to such shareholder's immediate family.
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"Immediate family" as used herein shall mean spouse, lineal descendent, father,
mother, brother, or sister of the shareholder making such transfer.
(2) A shareholder's bona fide pledge or mortgage of
any Securities with a commercial lending institution, provided that any
subsequent transfer of said Securities by said institution shall be conducted in
the manner set forth in this bylaw.
(3) A shareholder's transfer of any or all of such
shareholder's Securities to any other shareholder of the corporation.
(4) A shareholder's transfer of any or all of such
shareholder's Securities to a person who, at the time of such transfer, is an
officer or director of the corporation.
(5) A corporate shareholder's transfer of any or all of
its Securities pursuant to and in accordance with the terms of any merger,
consolidation, reclassification of Securities or capital reorganization of the
corporate shareholder, or pursuant to a sale of all or substantially all of the
stock or assets of a corporate shareholder.
(6) A corporate shareholder's transfer of any or all of
its Securities of to any or all of its shareholders.
(7) A transfer of any or all of the Securities held by a
shareholder which is a limited or general partnership to any or all of its
partners.
In any such case, the transferee, assignee, or other recipient shall
receive and hold such Securities subject to the provisions of this bylaw, and
there shall be no further transfer of such Securities except in accord with this
bylaw.
(f) The provisions of this bylaw may be waived with respect to any
transfer either by the corporation, upon duly authorized action of its Board of
Directors, or by the shareholders, upon the express written consent of the
owners of a majority of the voting power of the corporation (excluding the votes
represented by those Securities to be sold by the selling shareholder). This
bylaw may be amended or repealed either by a duly authorized action of the Board
of Directors or by the shareholders upon the express written consent of the
owners of a majority of the voting power of the corporation.
(g) Any sale or transfer, or purported sale or transfer, of
Securities shall be null and void unless the terms, conditions, and provisions
of this bylaw are strictly observed and followed.
(h) The foregoing right of first refusal shall terminate on either
of the following dates, whichever shall first occur:
(1) On May 30, 2007.
(2) Upon the date securities of the corporation are first
offered to the public pursuant to a registration statement filed with, and
declared effective by, the Securities and Exchange Commission under the
Securities Act of 1933, as amended.
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(i) The certificates representing the Securities shall bear the
following legend so long as the foregoing right of first refusal remains in
effect:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF
FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION, AS PROVIDED IN THE
BYLAWS OF THE CORPORATION. "
ARTICLE XII
DEFINITIONS
Unless the context otherwise requires, the general provisions, rules of
construction and definitions contained in the General Corporation Law as amended
from time to time shall govern the construction of these Bylaws. Without
limiting the generality of the foregoing, the masculine gender includes the
feminine and neuter, the singular number includes the plural and the plural
number includes the singular, and the term "person" includes a corporation as
well as a natural person.
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CERTIFICATE OF SECRETARY
The undersigned, Secretary of Stellar Computing Corporation, a California
corporation, hereby certifies that the foregoing is a full, true and correct
copy of the Bylaws of the corporation with all amendments to date of this
Certificate.
WITNESS the signature of the undersigned this _____ day of June, 1997.
/s/ Yuqing Xu
----------------------------------------
Yuqing Xu
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<PAGE> 32
AMENDMENT TO BYLAWS
OF
STELLAR COMPUTING CORPORATION
Amendment dated, May 5, 1998:
1. The name of the corporation has been changed to ActiveTouch, Inc.
(the "Company") as of the filing of Amended and Restated Articles of
Incorporation on May 1, 1998.
2. The authorized number of directors of the Company as described in
Section III.2 is reduced from four (4) to three (3).
3. The following Section (j) is added to Section XI.1:
(j) Notwithstanding anything to the contrary in this Section XI, the
corporation's right of first refusal shall not apply to: (1) the Series A
Preferred Stock and the Common Stock into which it is convertible; (2) the
Series B Preferred Stock issuable upon exercise of the Warrant to Purchase
Series B Preferred Stock, No. WB-1, and the Common Stock into which it is
convertible; (3) the Series C Preferred Stock issuable upon exercise of
the Warrant to Purchase Series C Preferred Stock, No. WC-1, and the Common
Stock into which it is convertible, and the certificates representing
these Securities shall not bear the legend required by Section XI.1(i).
I, Subrah Iyar, Secretary of ActiveTouch, Inc. certify that the above
amendment, dated May 5, 1998, was approved by the vote of more than 50% of the
holders of the outstanding stock of ActiveTouch, Inc.
/s/ Subrah S. Iyar
-------------------------------------------
<PAGE> 33
AMENDMENT TO BYLAWS
OF
ACTIVETOUCH, INC.
Amendment dated, August 14, 1998:
The authorized number of directors of ActiveTouch, Inc. (the "Company"),
as described in Section III.2 of the Company's Bylaws, shall not be less than
three (3) nor more than (5) and the exact number of directors shall be five (5)
until changed by a resolution amending such exact number, duly adopted by the
Board of Directors or by the shareholders.
I, Subrah Iyar, Secretary of ActiveTouch, Inc. certify that the above
amendment, dated August 14, 1998, was approved by the vote of more than 50% of
the holders of the outstanding stock of ActiveTouch, Inc.
/s/ Subrah S. Iyar
-------------------------------------------
Subrah Iyar
Secretary
<PAGE> 34
EXHIBIT A
AMENDMENT TO BYLAWS
OF
ACTIVETOUCH, INC.
Amendment effective as of March 28, 2000:
1. The name of the company is WebEx, Inc. (the "Company")
2. The authorized number of directors of the Company, as described in
Article III.2 of the Company's Bylaws, shall not be less than six (6) nor more
than nine (9) and the exact number of directors shall be seven (7) until changed
by a resolution amending such exact number, duly adopted by the shareholders.
3. Article XI of the Company's Bylaws, which provides for the Right of
First Refusal, is deleted in its entirety.
I, Subrah Iyar, Secretary of WebEx, Inc. certify that the above
amendment, effective as of March 28, 2000, was approved by the vote of the
holders of more than 50% of the outstanding stock of WebEx, Inc.
/s/ Subrah S. Iyar
---------------------------------------
Subrah S. Iyar
Secretary
<PAGE> 1
EXHIBIT 3.3
RESTATED CERTIFICATE OF INCORPORATION
OF
WEBEX.COM, INC.
WEBEX.COM, INC., a corporation organized and existing under the laws of
the State of Delaware, hereby certifies as follows:
FIRST: The name of this corporation is WebEx, Inc.
SECOND: The original Certificate of Incorporation of the
corporation was filed with the Secretary of State of the State of
Delaware on March __, 2000 and the original name of the corporation was
WebEx.com (Delaware), Inc. A Restated Certificate of Incorporation of
the corporation was filed with the Secretary of State of the State of
Delaware on March __, 2000. A Certificate of Merger whereby WebEx, Inc.,
a California corporation, was merged with and into this corporation and
this corporation's name was changed to WebEx.com, Inc. was filed with
the Secretary of State of the State of Delaware on March __, 2000.
THIRD: The Restated 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 WEBEX.COM, INC.
ARTICLE II
The registered office of the corporation within the State of Delaware is
located at 30 Old Rudnick Lane, in the City of Dover, County of Kent. The name
of its registered agent at such address is CorpAmerica, Inc.
ARTICLE 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 Delaware.
ARTICLE IV
A. Authorized Stock. The total number of shares of all classes of
capital stock which the corporation shall have authority to issue is two hundred
fifty-five million (255,000,000), of which two hundred fifty million
(250,000,000) shares shall be Common Stock (the "Common Stock") and five million
(5,000,000) shares
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shall be Preferred Stock (the "Preferred Stock"). The number of authorized
shares of Common Stock or Preferred Stock may be increased or decreased (but not
below the number of shares thereof then outstanding) by the affirmative vote of
the holders of a majority of the then outstanding shares of Common Stock,
without a vote of the holders of the Preferred Stock, or of any series thereof,
unless a vote of any such Preferred Stock holders is required pursuant to the
provisions established by the Board of Directors of this corporation (the "Board
of Directors") in the resolution or resolutions providing for the issue of such
Preferred Stock, and if such holders of such Preferred Stock are so entitled to
vote thereon, then, except as may otherwise be set forth in this Restated
Certificate of Incorporation, the only stockholder approval required shall be
the affirmative vote of a majority of the combined voting power of the Common
Stock and the Preferred Stock so entitled to vote.
B. Preferred Stock. The Preferred Stock may be issued in any number of
series, as determined by the Board of Directors. The Board of Directors may by
resolution fix the designation and number of shares of any such series, and may
determine, alter, or revoke the rights, preferences, privileges and restrictions
granted to or imposed upon any wholly unissued series. The Board of Directors
may thereafter in the same manner, within the limits and restrictions stated in
any resolution or resolutions of the Board of Directors originally fixing the
number of shares constituting any series, increase or decrease the number of
shares of any such series (but not below the number of shares of that series
then outstanding). In case the number of shares of any series shall be
decreased, the shares constituting such decrease shall resume the status which
they had prior to the adoption of the resolution originally fixing the number of
shares of such series.
ARTICLE V
The corporation is to have perpetual existence.
ARTICLE VI
A. The business and affairs of the corporation shall be managed by or
under the direction of the Board of Directors. In addition to the powers and
authority expressly conferred upon them by statute or by this Restated
Certificate of Incorporation or the Bylaws of the corporation, the directors are
hereby empowered to exercise all such powers and do all such acts and things as
may be exercised or done by the corporation.
B. Classified Board. The Board of Directors shall be divided into three
classes, designated Class I, Class II and Class III. Such classes shall be as
nearly equal in number of directors as possible. Each director shall serve for a
term ending on the third annual meeting following the annual meeting at which
such director was elected; provided, however, that the directors first elected
to Class I shall serve for a term ending on the annual meeting of stockholders
for fiscal year 2001, the directors first elected to Class II shall serve for a
term ending on the annual meeting of stockholders for fiscal year 2002, and the
directors first elected to Class III shall serve for a term ending on the annual
meeting of stockholders for fiscal year 2003. Notwithstanding the foregoing,
each director shall serve until his successor shall have
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been duly elected and qualified, unless he shall resign, become disqualified,
disabled or shall otherwise be removed.
At each annual election, directors chosen to succeed those whose terms
then expire shall be of the same class as the directors they succeed, unless by
reason of any intervening changes in the authorized number of directors, the
Board shall designate one or more directorships whose term then expires as
directorships of another class in order to more nearly achieve equality of
number of directors among the classes.
Notwithstanding the rule that the three classes shall be as nearly equal
in number of directors as possible, in the event of any change in the authorized
number of directors, each director then continuing to serve as such shall
nevertheless continue as a director of the class of which he is a member until
the expiration of his current term, or his prior death, resignation or removal.
If any newly created directorship may, consistently with the rule that the three
classes shall be as nearly equal in number of directors as possible, be
allocated to either class, the Board shall allocate it to that of the available
class whose term of office is due to expire at the earliest date following such
allocation.
C. Changes. The Board of Directors of this corporation, by amendment to
the corporation's bylaws, is expressly authorized to change the number of
directors in any or all of the classes of directors without the consent of the
stockholders.
D. Elections. Elections of directors need not be by written ballot
unless the Bylaws of the corporation shall so provide.
ARTICLE VII
A. Power of Stockholder to Act by Written Consent. No action required or
permitted to be taken at any annual or special meeting of the stockholders may
be taken without a meeting and the power of stockholders to consent in writing,
without a meeting, to the taking of any action is specifically denied.
B. Special Meetings of Stockholders. Special meetings of the
stockholders of the corporation may be called for any purpose or purposes,
unless otherwise prescribed by statute or by this Restated Certificate of
Incorporation, only at the request of the Chairman of the Board of Directors,
the Chief Executive Officer or President of the corporation or by a resolution
duly adopted by the affirmative vote of a majority of the Board of Directors.
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C. Cumulative Voting. The stockholders of corporation shall not have
cumulative voting.
ARTICLE VIII
The Board of Directors is expressly empowered to adopt, amend or repeal
the Bylaws of the corporation; provided, however, that any adoption, amendment
or repeal of the Bylaws of the corporation by the Board of Directors shall
require the approval of at least sixty-six and two-thirds percent (66 2/3%) of
the total number of authorized directors (whether or not there exist any
vacancies in previously authorized directorships at the time any resolution
providing for adoption, amendment or repeal is presented to the Board of
Directors). The stockholders shall also have the power to adopt, amend or repeal
the Bylaws of the corporation, provided, however, that in addition to any vote
of the holders of any class or series of stock of the corporation required by
law or by this Restated Certificate of Incorporation, 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 stock of the corporation
entitled to vote generally in the election of directors, voting together as a
single class, shall be required for such adoption, amendment or repeal by the
stockholders of any provisions of the Bylaws of the corporation.
ARTICLE IX
The books of the corporation may be kept at such place within or without
the State of Delaware as the bylaws of the corporation may provide or as may be
designated from time to time by the board of directors of the corporation.
ARTICLE X
Whenever a compromise or arrangement is proposed between the corporation
and its creditors or any class of them and/or between the corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of the
corporation or of any creditor or stockholder thereof or on the application of
any receivers appointed for the corporation under the provisions of section 291
of Title 8 of the Delaware Code or on the application of trustees in dissolution
or of any receiver or receivers appointed for the corporation under the
provisions of section 279 of Title 8 of the Delaware Code order a meeting of the
creditors or class of creditors, and/or the stockholders or class of
stockholders of the corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority, in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall if sanctioned by the
court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the corporation, as the case may be, and also on the
corporation.
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<PAGE> 5
ARTICLE XI
A. Limitation on Liability. A director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (1) for any
breach of the director's duty of loyalty to the corporation or its stockholders;
(2) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; (3) under Section 174 of the Delaware
General Corporation Law; or (4) for any transaction from which the director
derived an improper personal benefit.
If the Delaware General Corporation Law hereafter is amended to further
eliminate or limit the liability of directors, then the liability of a director
of the corporation, in addition to the limitation on personal liability provided
herein, shall be limited to the fullest extent permitted by the amended Delaware
General Corporation Law.
B. Indemnification. Each person who is or is made a party or is
threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer
of the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged action
in an official capacity as a director, officer, employee or agent or in any
other capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the corporation to the fullest extent
authorized by the Delaware General Corporation Law, as the same exists or may
hereafter be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the corporation to provide broader indemnification
rights than said law permitted the corporation to provide prior to such
amendment), against all expense, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement) reasonably incurred or suffered by such person in connection
therewith and such indemnification shall continue as to a person who has ceased
to be a director, officer, employee or agent and shall inure to the benefit of
his or her heirs, executors and administrators; provided, however, that, except
as provided in the second paragraph hereof, the corporation shall indemnify any
such person seeking indemnification in connection with a proceeding (or part
thereof) initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the corporation. The right to
indemnification conferred in this section shall be a contract right and shall
include the right to be paid by the corporation for any expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that, if the Delaware General Corporation Law requires, the payment of
such expenses incurred by a director or officer in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding, shall be made only upon delivery to the corporation
of an undertaking, by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such director or
officer is not entitled to be indemnified under this section or otherwise. The
corporation may, by action of its Board of Directors, provide indemnification to
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<PAGE> 6
employees and agents of the corporation with the same scope and effect as the
foregoing indemnification of directors and officers.
If a claim under the first paragraph of this section is not paid in full
by the corporation within thirty (30) days after a written claim has been
received by the corporation, the claimant may at any time thereafter bring suit
against the corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such claim. It shall be a defense to any such action
(other than an action brought to enforce a claim for expenses incurred in
defending any proceeding in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the corporation) that the
claimant has not met the standards of conduct which make it permissible under
the Delaware General Corporation Law for the corporation to indemnify the
claimant for the amount claimed, but the burden of proving such defense shall be
on the corporation. 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 or she has met the
applicable standard of conduct set forth in the Delaware General Corporation
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 the claimant has not met the applicable standard of
conduct.
The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in this
section shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Restated Certificate of
Incorporation, by-law, agreement, vote of stockholders or disinterested
directors or otherwise.
C. Insurance. The corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the corporation
or another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the corporation
would have the power to indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law.
D. Repeal and Modification. Any repeal or modification of the foregoing
provisions of this Article XI shall not adversely affect any right or protection
of any director, officer, employee or agent of the corporation existing at the
time of such repeal or modification.
ARTICLE XII
The corporation reserves the right to amend or repeal any provision
contained in this Restated Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon a stockholder
herein are granted subject to this reservation.
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<PAGE> 7
ARTICLE XIII
Notwithstanding any other provision of this Restated Certificate of
Incorporation, 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 stock of the corporation entitled to vote generally in the
election of directors, voting together as a single class, shall be required to
amend in any respect or repeal this Article XIII, or Articles VI, VII, VIII and
XI.
* * * * *
Four: This Restated Certificate of Incorporation was duly
adopted by the Board of Directors of this corporation.
Five: This Restated Certificate of Incorporation was duly
adopted by written consent of the stockholders of the corporation in
accordance with Sections 228, 242 and 245 of the General Corporation Law
of the State of Delaware and written notice of such action has been
given as provided in Section 228.
IN WITNESS WHEREOF, WebEx.com, Inc. has caused this certificate to be
signed by the undersigned officers, thereunto duly authorized, this ____ day of
__________, 2000.
By:
------------------------------------
Subrah S. Iyar
Chief Executive Officer
By:
------------------------------------
David G. Farrington
Secretary
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<PAGE> 1
EXHIBIT 3.4
AMENDED AND RESTATED
B Y L A W S
OF
WEBEX.COM, INC.
(A DELAWARE CORPORATION)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 - Offices ......................................................... 1
1.1 Principal Office ............................................. 1
1.2 Additional Offices ........................................... 1
ARTICLE 2 - Meeting of Stockholders ......................................... 1
2.1 Place of Meeting ............................................. 1
2.2 Annual Meeting ............................................... 1
2.3 Special Meetings ............................................. 2
2.4 Notice of Meetings ........................................... 2
2.5 Business Matter of a Special Meeting ......................... 3
2.6 List of Stockholders ......................................... 3
2.7 Organization and Conduct of Business ......................... 3
2.8 Quorum and Adjournments ...................................... 3
2.9 Voting Rights ................................................ 4
2.10 Majority Vote ................................................ 4
2.11 Record Date for Stockholder Notice and Voting ................ 4
2.12 Proxies ...................................................... 4
2.13 Inspectors of Election ....................................... 4
2.14 Action Without a Meeting ..................................... 5
ARTICLE 3 - Directors ....................................................... 5
3.1 Number, Election, Tenure and Qualifications .................. 5
3.2 Vacancies .................................................... 6
3.3 Resignation and Removal ...................................... 6
3.4 Powers ....................................................... 7
3.5 Chairman of the Board ........................................ 7
3.6 Place of Meetings ............................................ 7
3.7 Annual Meetings .............................................. 7
3.8 Regular Meetings ............................................. 7
3.9 Special Meetings ............................................. 7
3.10 Quorum, Action at Meeting, Adjournments ...................... 7
3.11 Action Without Meeting ....................................... 8
3.12 Telephone Meetings ........................................... 8
3.13 Committees ................................................... 8
3.14 Fees and Compensation of Directors ........................... 8
3.15 Rights of Inspection ......................................... 8
ARTICLE 4 - Officers ........................................................ 9
4.1 Officers Designated .......................................... 9
4.2 Election ..................................................... 9
4.3 Tenure ....................................................... 9
4.4 Compensation ................................................. 9
4.5 The Chief Executive Officer .................................. 9
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
4.6 The President ................................................ 9
4.7 The Vice President ........................................... 10
4.8 The Secretary ................................................ 10
4.9 The Assistant Secretary ...................................... 10
4.10 The Chief Financial Officer .................................. 10
4.11 Bond ......................................................... 11
4.12 Delegation of Authority ...................................... 11
ARTICLE 5 - Notices ......................................................... 11
5.1 Deliver ...................................................... 11
5.2 Waiver of Notice ............................................. 11
ARTICLE 6 - Indemnification ................................................. 11
6.1 Actions Other Than By or in the Right of the Corporation ..... 11
6.2 Actions By or in the Right of the Corporation ................ 12
6.3 Success on the Merits ........................................ 12
6.4 Specific Authorization ....................................... 12
6.5 Advance Payment .............................................. 13
6.6 Non-Exclusivity .............................................. 13
6.7 Insurance .................................................... 13
6.8 Severability ................................................. 13
6.9 Intent of Article ............................................ 13
ARTICLE 7 - Capital Stock ................................................... 13
7.1 Certificates for Shares ...................................... 13
7.2 Signatures on Certificates ................................... 14
7.3 Transfer of Stock ............................................ 14
7.4 Registered Stockholders ...................................... 14
7.5 Lost, Stolen or Destroyed Certificates ....................... 14
ARTICLE 8 - Certain Transactions ............................................ 15
8.1 Transactions with Interested Parties ......................... 15
8.2 Quorum ....................................................... 15
ARTICLE 9 - General Provisions .............................................. 15
9.1 Dividends .................................................... 15
9.2 Dividend Reserve ............................................. 15
9.3 Checks ....................................................... 16
9.4 Corporate Seal ............................................... 16
9.5 Fiscal Year .................................................. 16
9.6 Execution of Corporate Contracts and Instruments ............. 16
9.7 Representation of Shares of Other Corporations ............... 16
ARTICLE 10 - Amendments ..................................................... 16
</TABLE>
ii
<PAGE> 4
AMENDED AND RESTATED
B Y L A W S
OF
WEBEX.COM, INC.
(A DELAWARE CORPORATION)
ARTICLE 1
Offices
1.1 Principal Office. The registered office of the corporation shall
be 30 Old Rudnick Lane, Dover, Delaware, and the name of the registered agent in
charge thereof is CorpAmerica, Inc.
1.2 Additional Offices. The corporation may also have offices at such
other places, either within or without the State of Delaware, as the Board of
Directors (the "Board") may from time to time designate or the business of the
corporation may require.
ARTICLE 2
Meeting of Stockholders
2.1 Place of Meeting. Meetings of stockholders may be held at such
place, either within or without of the State of Delaware, as may be designated
by or in the manner provided in these Bylaws, or, if not so designated, at the
registered office of the corporation or the principal executive offices of the
corporation.
2.2 Annual Meeting. Annual meetings of stockholders shall be held
each year at such date and time as shall be designated from time to time by the
Board and stated in the notice of the meeting. At such annual meeting, the
stockholders shall elect by a plurality vote the number of directors equal to
the number of directors of the class whose term expires at such meetings (or, if
fewer, the number of directors properly nominated and qualified for election) to
hold office until the third succeeding annual meeting of stockholders after
their election. The stockholders shall also transact such other business as may
properly be brought before the meetings.
To be properly brought before the 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 or the Chief Executive Officer, (b)
otherwise properly brought before the meeting by or at the direction of the
Board of Directors or the Chief Executive Officer, or (c) otherwise properly
brought before the meeting by a stockholder of record. In addition to any other
applicable requirements, for business to be properly brought before the 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 personally or deposited
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<PAGE> 5
in the United States mail, or delivered to a common carrier for transmission to
the recipient or actually transmitted by the person giving the notice by
electronic means to the recipient or sent by other means of written
communication, postage or delivery charges prepaid in all such cases, and
received at the principal executive offices of the corporation, addressed to the
attention of the Secretary of the corporation, not less than fifty (50) days nor
more than seventy-five (75) days prior to the scheduled date of the meeting
(regardless of any postponements, deferrals or adjournments of that meeting to a
later date); provided, however, that in the event that less than sixty-five (65)
days' notice or prior public disclosure of the date of the scheduled meeting is
given or made to stockholders, notice by the stockholder to be timely must be so
received not later than the earlier of (a) the close of business on the 15th day
following the day on which such notice of the date of the scheduled annual
meeting was mailed or such public disclosure was made, whichever first occurs,
and (b) two days prior to the date of the scheduled meeting. A stockholder's
notice to the Secretary shall set forth as to each matter the stockholder
proposes to bring before the 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 record address
of the stockholder proposing such business, (iii) the class, series and number
of shares of the corporation that are owned beneficially by the stockholder, and
(iv) any material interest of the stockholder in such business.
Notwithstanding anything in these Bylaws to the contrary, no business
shall be conducted at the annual meeting except in accordance with the
procedures set forth in this Section; provided, however, that nothing in this
Section shall be deemed to preclude discussion by any stockholder of any
business properly brought before the annual meeting.
The Chairman of the Board of the corporation (or such other person
presiding at the meeting in accordance with these Bylaws) shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting in accordance with the provisions of this Section,
and if he should so determine, he shall so declare to the meeting and any such
business not properly brought before the meeting shall not be transacted.
2.3 Special Meetings. Special meetings of the stockholders may be
called for any purpose or purposes, unless otherwise prescribed by statute or by
the Restated Certificate of Incorporation, by the Chief Executive Officer or
Secretary only at the request of the Chairman of the Board of Directors, the
Chief Executive Officer or President of the corporation or by a resolution duly
adopted by the affirmative vote of a majority of the Board of Directors. Such
request shall state the purpose or purposes of the proposed meeting. Business
transacted at any special meeting shall be limited to matters relating to the
purpose or purposes stated in the notice of meeting.
2.4 Notice of Meetings. Written notice of stockholders' meetings,
stating the place, date and time of the meeting and, in the case of a special
meeting, the purpose or purposes for which such special meeting is called, shall
be given to each stockholder entitled to vote at such meeting not less than ten
(10) nor more than sixty (60) days prior to the meeting.
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting
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<PAGE> 6
is more than thirty (30) days after the date for which the meeting was
originally noticed, or if a new record date is fixed for the adjourned meeting,
written notice of the place, date and time of the adjourned meeting shall be
given in conformity herewith. At any adjourned meeting, any business may be
transacted which might have been transacted at the original meeting.
2.5 Business Matter of a Special Meeting. Business transacted at any
special meeting of stockholders shall be limited to the purposes stated in the
notice, except to the extent such notice is waived or is not required.
2.6 List of Stockholders. The officer in charge of the stock ledger
of the corporation or the transfer agent shall prepare and make, at least ten
(10) days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting arranged in alphabetical order, and
showing the address of each stockholder and the number of shares registered in
the name of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten (10) days prior to the meeting, at a place
within the city where the meeting is to be held, which place, if other than the
place of the meeting, shall be specified in the notice of the meeting. The list
shall also be produced and kept at the place of the meeting during the whole
time thereof, and may be inspected by any stockholder who is present in person
thereat.
2.7 Organization and Conduct of Business. The Chairman of the Board
or, in his or her absence, the Chief Executive Officer or President of the
corporation or, in their absence, such person as the Board may have designated
or, in the absence of such a person, such person as may be chosen by the holders
of a majority of the shares entitled to vote who are present, in person or by
proxy, shall call to order any meeting of the stockholders and act as Chairman
of the meeting. In the absence of the Secretary of the corporation, the
Secretary of the meeting shall be such person as the Chairman appoints.
The Chairman of any meeting of stockholders shall determine the order of
business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of discussion as seems to him or her in order.
2.8 Quorum and Adjournments. Except where otherwise provided by law
or the Restated Certificate of Incorporation or these Bylaws, the holders of a
majority of the stock issued and outstanding and entitled to vote, present in
person or represented in proxy, shall constitute a quorum at all meetings of the
stockholders. The stockholders present at a duly called or held meeting at which
a quorum is present may continue to do business until adjournment,
notwithstanding the withdrawal of enough stockholders to have less than a quorum
if any action taken (other than adjournment) is approved by at least a majority
of the shares required to constitute a quorum. At such adjourned meeting at
which a quorum is present or represented, any business may be transacted which
might have been transacted at the meeting as originally notified. If, however, a
quorum shall not be present or represented at any meeting of the stockholders,
the stockholders entitled to vote thereat who are present in person or
represented by proxy shall have the 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.
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<PAGE> 7
2.9 Voting Rights. Unless otherwise provided in the Restated
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.
2.10 Majority Vote. 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 any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the Restated Certificate of Incorporation or of these Bylaws, a different vote
is required in which case such express provision shall govern and control the
decision of such question.
2.11 Record Date for Stockholder Notice and Voting. For purposes of
determining the stockholders entitled to notice of any meeting or to vote, or
entitled to receive payment of any dividend or other distribution, or entitled
to exercise any right in respect of any change, conversion or exchange of stock
or for the purpose of any other lawful action, the Board may fix, in advance, a
record date, which shall not be more than sixty (60) days nor less than ten (10)
days before the date of any such meeting nor more than sixty (60) days before
any other action. If the Board does not so fix a record date, 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 business day next
preceding the day on which notice is given or, if notice is waived, at the close
of business on the business day next preceding the day on which the meeting is
held.
2.12 Proxies. Every person entitled to vote for directors or on any
other matter shall have the right to do so either in person or by one or more
agents authorized by a written proxy signed by the person and filed with the
Secretary of the corporation. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the stockholder or the
stockholder's attorney-in-fact. A validly executed proxy which does not state
that it is irrevocable shall continue in full force and effect unless (i)
revoked by the person executing it, before the vote pursuant to that proxy, by a
writing delivered to the corporation stating that the proxy is revoked or by a
subsequent proxy executed by, or attendance at the meeting and voting in person
by, the person executing the proxy; or (ii) written notice of the death or
incapacity of the maker of that proxy is received by the corporation before the
vote pursuant to that proxy is counted; provided, however, that no proxy shall
be valid after the expiration of three years from the date of the proxy, unless
otherwise provided in the proxy.
2.13 Inspectors of Election. The corporation shall, in advance of any
meeting of stockholders, appoint one or more inspectors of election to act at
the meeting and make a written report thereof. The corporation may designate one
or more persons to act as alternate inspectors to replace any inspector who
fails to act. If no inspector or alternate is able to act at a meeting of
stockholders, the person presiding at the meeting shall appoint one or more
inspectors to act at the meeting. Each inspector, before entering upon the
discharge of his or her duties, shall take and sign an oath faithfully to
execute the duties of inspector with strict impartiality and according to the
best of his or her ability.
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<PAGE> 8
2.14 Action Without a Meeting. No action required or permitted to be
taken at any annual or special meeting of the stockholders of the corporation
may be taken without a meeting and the power of the stockholders to consent in
writing, without a meeting, to the taking of any action is specifically denied.
ARTICLE 3
Directors
3.1 Number, Election, Tenure and Qualifications. The number of
directors which shall constitute the whole Board of Directors shall be fixed at
eight (8). Thereafter, the number of directors which shall constitute the whole
Board of Directors shall be fixed from time to time by resolution of the Board
of Directors or stockholders at the annual meeting or any special meeting called
for that purpose.
The Board of Directors shall be divided into three classes, each class
to serve for a term of three (3) years and to be as nearly equal in number as
possible. Class I shall be comprised of directors who shall serve until the
annual meeting of stockholders in 2001 and until their successors shall have
been elected and qualified. Class II shall be comprised of directors who shall
serve until the annual meeting of stockholders in 2002 and until their
successors shall have been elected and qualified. Class III shall be comprised
of directors who shall serve until the annual meeting of stockholders in 2003
and until their successors shall have been elected and qualified.
The directors shall be elected at the annual meeting or at any special
meeting of the stockholders, except as otherwise provided in this Section, and
each director elected shall hold office until such director's successor is
elected and qualified, unless sooner displaced.
Subject to the rights of holders of any class or series of stock having
a preference over the common stock as to dividends or upon liquidation,
nominations of persons for election to the Board of Directors at the annual
meeting, by or at the direction of the Board of Directors, may be made by any
nominating committee or person appointed by the Board of Directors; nominations
may also be made by any stockholder of record of the corporation entitled to
vote for the election of directors at the meeting who complies with the notice
procedures set forth in this Section. 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. To be timely, a
stockholder's notice shall be delivered personally or deposited in the United
States mail, or delivered to a common carrier for transmission to the recipient
or actually transmitted by the person giving the notice by electronic means to
the recipient or sent by other means of written communication, postage or
delivery charges prepaid in all such cases, and received at the principal
executive offices of the corporation addressed to the attention of the Secretary
of the corporation not less than one hundred twenty (120) days prior to the
scheduled date of the meeting (regardless of any postponements, deferrals or
adjournments of that meeting to a later date); provided, however, that, in the
case of an annual meeting and in the event that less than one hundred (100)
days' notice or prior public disclosure of the date of the scheduled meeting is
given or made to stockholders, notice by the stockholder to be timely must be so
received not later than the close of business on the 7th day following the day
on which such notice of the date
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<PAGE> 9
of the scheduled meeting was mailed or such public disclosure was made,
whichever first occurs. Such stockholder's notice to the Secretary shall set
forth (a) as to each person whom the stockholder proposes to nominate for
election or reelection as a director, (i) the name, age, business address and
residence address of the person, (ii) the principal occupation or employment of
the person, (iii) the class, series and number of shares of capital stock of the
corporation that are owned beneficially by the person, (iv) a statement as to
the person's citizenship, and (v) any other information relating to the person
that is required to be disclosed in solicitations for proxies for election of
directors pursuant to Section 14 of the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder; and (b) as to the
stockholder giving the notice, (i) the name and record address of the
stockholder and (ii) the class, series and number of shares of capital stock of
the corporation that are owned beneficially by the stockholder. The corporation
may require any proposed nominee to furnish such other information as may
reasonably be required by the corporation to determine the eligibility of such
proposed nominee to serve as director of the corporation. No person shall be
eligible for election as a director of the corporation unless nominated in
accordance with the procedures set forth herein.
In connection with any annual meeting, the Chairman of the Board of
Directors (or such other person presiding at such meeting in accordance with
these Bylaws) shall, if the facts warrant, determine and declare to the meeting
that a nomination was not made in accordance with the foregoing procedure, and
if he should so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
Directors shall serve as provided in the Restated Certificate of
Incorporation of the corporation. Directors need not be stockholders.
3.2 Vacancies. 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 at which the term of the class to which they have been
elected expires 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. In the event of a
vacancy in the Board of Directors, the remaining directors, except as otherwise
provided by law or these bylaws, may exercise the powers of the full board until
the vacancy is filled.
3.3 Resignation and Removal. Any director may resign at any time upon
written notice to the corporation at its principal place of business or to the
Chief Executive Officer or the Secretary. Such resignation shall be effective
upon receipt of such notice unless the notice specifies such resignation to be
effective at some other time or upon the happening of some other event. Any
director or the entire Board of Directors may be removed, but only for cause, by
the holders of a majority of the shares then entitled to vote at an election of
directors, unless otherwise specified by law or the Restated Certificate of
Incorporation.
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3.4 Powers. The business of the corporation shall be managed by or
under the direction of the Board which may exercise all such powers of the
corporation and do all such lawful acts and things which are not by statute or
by the Restated Certificate of Incorporation or by these Bylaws directed or
required to be exercised or done by the stockholders.
3.5 Chairman of the Board. If the Board of Directors appoints a
Chairman of the Board, such Chairman shall, when present, preside at all
meetings of the stockholders and the Board. The Chairman shall perform such
duties and possess such powers as are customarily vested in the office of the
Chairman of the Board or as may be vested in the Chairman by the Board of
Directors.
3.6 Place of Meetings. The Board may hold meetings, both regular and
special, either within or without the State of Delaware.
3.7 Annual Meetings. The annual meetings of the Board shall be held
immediately following the annual meeting of stockholders, and no notice of such
meeting shall be necessary to the Board, provided a quorum shall be present. The
annual meetings shall be for the purposes of organization, and an election of
officers and the transaction of other business.
3.8 Regular Meetings. Regular meetings of the Board may be held
without notice at such time and place as may be determined from time to time by
the Board; provided that any director who is absent when such a determination is
made shall be given prompt notice of such determination.
3.9 Special Meetings. Special meetings of the Board may be called by
the Chairman of the Board, the Chief Executive Officer, the President, the
Secretary, or on the written request of two or more directors, or by one
director in the event that there is only one director in office. Four hours'
notice to each director, either personally or by telegram, cable, telecopy,
commercial delivery service, telex or similar means sent to such director's
business or home address, or two days' notice by written notice deposited in the
mail or delivered by a nationally recognized courier service, shall be given to
each director by the secretary or by the officer or one of the directors calling
the meeting. A notice or waiver of notice of a meeting of the Board of Directors
need not specify the purposes of the meeting.
3.10 Quorum, Action at Meeting, Adjournments. At all meetings of the
Board, a majority of directors then in office, but in no event less than one
third (1/3) of the entire Board, 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, except as may be
otherwise specifically provided by law or by the Restated Certificate of
Incorporation. For purposes of this section, the term "entire Board" shall mean
the number of directors last fixed by the stockholders or directors, as the case
may be, in accordance with law and these Bylaws; provided, however, that if less
than all the number so fixed of directors were elected, the "entire Board" shall
mean the greatest number of directors so elected to hold office at any one time
pursuant to such authorization. If a quorum shall not be present at any meeting
of the Board, a majority of 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.
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3.11 Action Without Meeting. Unless otherwise restricted by the
Restated Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board or of any committee thereof
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee.
3.12 Telephone Meetings. Unless otherwise restricted by the Restated
Certificate of Incorporation or these Bylaws, any member of the Board or any
committee thereof may participate in a meeting of the Board or of any committee,
as the case may be, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.13 Committees. 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. Any
such committee, to the extent provided in the resolution of the Board, shall
have and may exercise all the powers and authority of the Board 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
Restated 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 designating such committee or the Restated Certificate of
Incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend or to 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. Each committee shall keep
regular minutes of its meetings and make such reports to the Board as the Board
may request. Except as the Board may otherwise determine, any committee may make
rules for the conduct of its business, but unless otherwise provided by the
directors or in such rules, its business shall be conducted as nearly as
possible in the same manner as is provided in these Bylaws for the conduct of
its business by the Board.
3.14 Fees and Compensation of Directors. Unless otherwise restricted
by the Restated Certificate of Incorporation or these Bylaws, the Board 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 and may
be paid a fixed sum for attendance at each meeting of the Board 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.
3.15 Rights of Inspection. Any director shall have the right to
examine the corporation's stock ledger, a list of its stockholders and its other
books and records for a purpose reasonably related to his or her position as a
director.
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ARTICLE 4
Officers
4.1 Officers Designated. The officers of the corporation shall be
chosen by the Board of Directors and shall be a Chief Executive Officer, a
President, a Secretary and a Chief Financial Officer. The Board may also choose
a Chief Operating Officer, one or more Vice Presidents, and one or more
assistant Secretaries. Any number of offices may be held by the same person,
unless the Restated Certificate of Incorporation or these Bylaws otherwise
provide.
4.2 Election. The Board of Directors at its first meeting after each
annual meeting of stockholders shall choose a Chief Executive Officer, a
President, a Secretary and a Chief Financial Officer. Other officers may be
appointed by the Board of Directors at such meeting, at any other meeting, or by
written consent or may be appointed by the Chief Executive Officer pursuant to a
delegation of authority from the Board of Directors.
4.3 Tenure. The officers of the corporation shall hold office until
their successors are chosen and qualify, unless a different term is specified in
the vote choosing or appointing such officer, or until such officer's earlier
death, resignation or removal. Any officer elected or appointed by the Board of
Directors or by the Chief Executive Officer may be removed with or without cause
at any time by the affirmative vote of a majority of the Board of Directors or a
committee duly authorized to do so, except that any officer appointed by the
Chief Executive Officer may also be removed at any time by the Chief Executive
Officer. Any vacancy occurring in any office of the corporation may be filled by
the Board of Directors, at its discretion. Any officer may resign by delivering
such officer's written resignation to the corporation at its principal place of
business or to the Chief Executive Officer or the Secretary. Such resignation
shall be effective upon receipt unless it is specified to be effective at some
other time or upon the happening of some other event.
4.4 Compensation. The salaries of all officers of the corporation
shall be fixed from time to time by the Board and no officer shall be prevented
from receiving a salary because he is also a director of the corporation.
4.5 The Chief Executive Officer. Subject to such supervisory powers,
if any, as may be given by the Board to the Chairman of the Board, the Chief
Executive Officer shall preside at all meetings of the stockholders and in the
absence of the Chairman of the Board, or if there be none, at all meetings of
the Board, shall have general and active management of the business of the
corporation and shall see that all orders and resolutions of the Board are
carried into effect. He or she shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
Board to some other officer or agent of the corporation.
4.6 The President. The President shall, in the event there be no
Chief Executive Officer or in the absence of the Chief Executive Officer or in
the event of his or her disability or refusal to act, perform the duties of the
Chief Executive Officer, and when so acting, shall have the powers of and
subject to all the restrictions upon the Chief Executive Officer. The President
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shall perform such other duties and have such other powers as may from time to
time be prescribed for them by the Board, the Chairman of the Board, the Chief
Executive Officer or these Bylaws.
4.7 The Vice President. The Vice President (or in the event there be
more than one, the Vice Presidents in the order designated by the directors, or
in the absence of any designation, in the order of their election), shall, in
the absence of the President or in the event of his or her disability or refusal
to act, perform the duties of the President, and when so acting, shall have the
powers of and subject to all the restrictions upon the President. The Vice
President(s) shall perform such other duties and have such other powers as may
from time to time be prescribed for them by the Board, the President, the
Chairman of the Board or these Bylaws.
4.8 The Secretary. The Secretary shall attend all meetings of the
Board and the stockholders and record all votes and the proceedings of the
meetings in a book to be kept for that purpose and shall perform like duties for
the standing committees, when required. The Secretary shall give, or cause to be
given, notice of all meetings of stockholders and special meetings of the Board,
and shall perform such other duties as may from time to time be prescribed by
the Board, the Chairman of the Board or the Chief Executive Officer, under whose
supervision he or she shall act. The Secretary shall have custody of the seal of
the corporation, and the Secretary, or an Assistant Secretary, shall have
authority to affix the same to any instrument requiring it, and, when so
affixed, the seal may be attested by his or her signature or by the signature of
such Assistant Secretary. The Board may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing thereof
by his or her signature. The Secretary shall keep, or cause to be kept, at the
principal executive office or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the Board, a share register, or a
duplicate share register, showing the names of all stockholders and their
addresses, the number and classes of shares held by each, the number and date of
certificates issued for the same and the number and date of cancellation of
every certificate surrendered for cancellation.
4.9 The Assistant Secretary. The Assistant Secretary, or if there be
more than one, the Assistant Secretaries in the order designated by the Board
(or in the absence of any designation, in the order of their election) shall, in
the absence of the Secretary or in the event of his or her inability or refusal
to act, perform the duties and exercise the powers of the Secretary and shall
perform such other duties and have such other powers as may from time to time be
prescribed by the Board.
4.10 The Chief Financial Officer. The Chief Financial Officer 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
and to the credit of the corporation in such depositories as may be designated
by the Board. The Chief Financial Officer shall disburse the funds of the
corporation as may be ordered by the Board, taking proper vouchers for such
disbursements, and shall render to the Chief Executive Officer and the Board, at
its regular meetings, or when the Board so requires, an account of all his or
her transactions as Chief Financial Officer and of the financial condition of
the corporation.
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4.11 Bond. If required by the Board of Directors, any officer shall
give the corporation a bond in such sum and with such surety or sureties and
upon such terms and conditions as shall be satisfactory to the Board of
Directors, including without limitation a bond for the faithful performance of
the duties of such officer's office and for the restoration to the corporation
of all books, papers, vouchers, money and other property of whatever kind in
such officer's possession or under such officer's control and belonging to the
corporation.
4.12 Delegation of Authority. The Board of Directors may from time to
time delegate the powers or duties of any officer to any other officers or
agents, notwithstanding any provision hereof.
ARTICLE 5
Notices
5.1 Deliver. Whenever, under the provisions of law, or of the
Restated Certificate of Incorporation or these Bylaws, written notice is
required to be given to any director or stockholder, such notice may be given by
mail, addressed to such director or stockholder, at such person's address as it
appears on the records of the corporation, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail or delivered to a nationally recognized
courier service. Unless written notice by mail is required by law, written
notice may also be given by telegram, cable, telecopy, commercial delivery
services, telex or similar means, addressed to such director or stockholder at
such person's address as it appears on the records of the corporation, in which
case such notice shall be deemed to be given when delivered into the control of
the persons charged with effecting such transmission, the transmission charge to
be paid by the corporation or the person sending such notice and not by the
addressee. Oral notice or other in-hand delivery, in person or by telephone,
shall be deemed given at the time it is actually given.
5.2 Waiver of Notice. Whenever any notice is required to be given
under the provisions of law or of the Restated 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. In addition to the foregoing, notice of a meeting
need not be given to any director who signs a waiver of notice or a consent to
holding the meeting or an approval of the minutes thereof, whether before or
after the meeting, or who attends the meeting without protesting, prior thereto
or at its commencement, the lack of notice to such director. All such waivers,
consents and approvals executed under this Section 5.2 shall be filed with the
corporate records or made a part of the minutes of the meeting.
ARTICLE 6
Indemnification
6.1 Actions Other Than By or in the Right of the Corporation. The
corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
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investigative (other than an action by or in the right of the corporation) by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceedings, had no reasonable cause to
believe such person's conduct was unlawful. The termination of any action, suit
or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which such person
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that such person's conduct was unlawful.
6.2 Actions By or in the Right of the Corporation. The corporation
shall indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the right
of the corporation to procure a judgment in its favor by reason of the fact that
such person is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of such person's duty to
the corporation unless and only to the extent that the Court of Chancery of the
State of Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery of the State
of Delaware or such other court shall deem proper.
6.3 Success on the Merits. To the extent that any person described in
Sections 6.1 or 6.2 of this Article 6 has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in said
Sections, or in defense of any claim, issue or matter therein, such person shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection therewith.
6.4 Specific Authorization. Any indemnification under Sections 6.1 or
6.2 of this Article 6 (unless ordered by a court) shall be made by the
corporation only as authorized in the specific case upon a determination that
indemnification of any person described in said Sections is proper in the
circumstances because such person has met the applicable standard of conduct set
forth in said Sections. Such determination shall be made (1) by the Board of
Directors by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (2) if such a quorum is not
obtainable, or even if obtainable a quorum of
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disinterested directors so directs, by independent legal counsel in a written
opinion, or (3) by the stockholders of the corporation.
6.5 Advance Payment. Expenses incurred in defending a civil or
criminal action, suit or proceeding may be paid by the corporation in advance of
the final disposition of such action, suit or proceeding as authorized by the
Board of Directors in the manner provided for in Section 6.4 of this Article 6
upon receipt of an undertaking by or on behalf of any person described in said
Section to repay such amount unless it shall ultimately be determined that such
person is entitled to indemnification by the corporation as authorized in this
Article 6.
6.6 Non-Exclusivity. The indemnification provided by this Article 6
shall not be deemed exclusive of any other rights to which those indemnified may
be entitled under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in such person's official capacity and
as to action in another capacity while holding such office, and shall continue
as to a person who has ceased to be director, officer, employee or agent of the
corporation and shall inure to the benefit of the heirs, executors and
administrators of such a person.
6.7 Insurance. The Board of Directors may authorize, by a vote of the
majority of the full board, the corporation to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the corporation would have the power to
indemnify such person against such liability under the provisions of this
Article 6.
6.8 Severability. If any word, clause or provision of this Article 6
or any award made hereunder shall for any reason be determined to be invalid,
the provisions hereof shall not otherwise be affected thereby but shall remain
in full force and effect.
6.9 Intent of Article. The intent of this Article 6 is to provide for
indemnification to the fullest extent permitted by Section 145 of the General
Corporation Law of the State of Delaware. To the extent that such Section or any
successor Section may be amended or supplemented from time to time, this Article
6 shall be amended automatically and construed so as to permit indemnification
to the fullest extent from time to time permitted by law.
ARTICLE 7
Capital Stock
7.1 Certificates for Shares. The shares of the corporation shall be
represented by certificates or shall be uncertificated. Certificates shall be
signed by, or in the name of the corporation by, the Chairman of the Board, the
Chief Executive Officer, the President or a Vice President and by the Chief
Financial Officer, the Secretary or an Assistant Secretary of the corporation.
Any or all of the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed
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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 such person were such officer, transfer agent or
registrar at the date of issue. 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.
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 by the General Corporation
Law of the State of Delaware or 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.
7.2 Signatures on Certificates. Any or all of the signatures on a
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
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.
7.3 Transfer of Stock. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate of 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. Upon receipt of proper transfer instructions from
the registered owner of uncertificated share, such uncertificated shares shall
be canceled and issuance of new equivalent uncertificated shares or certificated
shares shall be made to the person entitled thereto and the transaction shall be
recorded upon the books of the corporation.
7.4 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 to hold liable
for calls and assessments a percent 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.
7.5 Lost, Stolen or Destroyed Certificates. The Board may direct that
a new certificate or certificates be issued to replace 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 the issue of a new certificate or certificates, the Board may, in
its discretion and as a condition precedent to the issuance thereof, require the
owner of the lost, stolen or destroyed certificate or certificates, or his or
her 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.
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ARTICLE 8
Certain Transactions
8.1 Transactions with Interested Parties. No contract or transaction
between the corporation and one or more of its directors or officers, or between
the corporation and any other corporation, partnership, association or other
organization in which one or more of its directors or officers are directors or
have a financial interest, shall be void or voidable solely for this reason, or
solely because the director or officer is present at or participates in the
meeting of the board or committee thereof which authorizes the contract or
transaction or solely because the vote or votes of such director or officer are
counted for such purpose, if:
(a) the material facts as to such person's relationship or interest
and as to the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the board or committee in good faith authorizes
the contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or
(b) the material facts as to such person's relationship or interest
and as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or
(c) the contract or transaction is fair as to the corporation as of
the time it is authorized, approved or ratified, by the Board of Directors, a
committee thereof, or the stockholders.
8.2 Quorum. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
ARTICLE 9
General Provisions
9.1 Dividends. Dividends upon the capital stock of the corporation,
subject to any restrictions contained in the General Corporation Law of the
State of Delaware or the provisions of the Restated Certificate of
Incorporation, if any, may be declared by the Board 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 Restated Certificate of Incorporation.
9.2 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 directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purpose as the directors shall think conducive to the interest of
the corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
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9.3 Checks. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the Board may from time to time designate.
9.4 Corporate Seal. The Board of Directors may, by resolution, adopt
a corporate seal. The corporate seal shall have inscribed thereon the name of
the corporation, the year of its organization and the word "Delaware." The seal
may be used by causing it or a facsimile thereof to be impressed or affixed or
otherwise reproduced. The seal may be altered from time to time by the Board of
Directors.
9.5 Fiscal Year. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
9.6 Execution of Corporate Contracts and Instruments. The Board,
except as otherwise provided in these Bylaws, may authorize any officer or
officers, or agent or agents, to enter into any contract or execute any
instrument in the name of and on behalf of the corporation; such authority may
be general or confined to specific instances. Unless so authorized or ratified
by the Board 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.
9.7 Representation of Shares of Other Corporations. The Chief
Executive Officer, the President or any Vice President or the Secretary or any
Assistant Secretary of this corporation is authorized to vote, represent and
exercise on behalf of this corporation all rights incident to any and all shares
of any corporation or corporations standing in the name of this corporation. The
authority herein granted to said officers to vote or represent on behalf of this
corporation any and all shares held by this corporation in any other corporation
or corporations may be exercised either by such officers in person or by any
other person authorized so to do by proxy or power of attorney duly executed by
said officers.
ARTICLE 10
Amendments
The Board of Directors is expressly empowered to adopt, amend or repeal
these Bylaws, provided, however, that any adoption, amendment or repeal of these
Bylaws by the Board of Directors shall require the approval of at least
sixty-six and two-thirds percent (66-2/3%) of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any resolution providing for adoption, amendment or
repeal is presented to the board). The stockholders shall also have power to
adopt, amend or repeal these Bylaws, provided, however, that in addition to any
vote of the holders of any class or series of stock of this corporation required
by law or by the Restated Certificate of Incorporation of this corporation, 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 stock
of the corporation entitled to vote generally in the election of directors,
voting together as a single class, shall be required for such adoption,
amendment or repeal by the stockholders of any provisions of these Bylaws.
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EXHIBIT 4.2
WEBEX, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (this "Agreement")
is made and entered into as of the 30th day of March, 2000, by and among WEBEX,
INC., a California corporation (the "Company"), SUBRAH IYAR, MIN ZHU and YUQING
XU (collectively, the "Founders") and the undersigned parties identified on
Schedule A attached hereto (the "Investors").
W I T N E S S E T H:
WHEREAS, certain of the Investors hold shares of the Company's Series A,
Series B, and Series C Preferred Stock and possess registration rights,
information rights and other rights pursuant to an Investors' Rights Agreement
among the Company and such Investors dated as of December 17, 1999 (the "1999
Rights Agreement"); and
WHEREAS, the undersigned Investors who hold Series A, Series B and
Series C Preferred Stock desire to terminate the 1999 Rights Agreement and to
accept the rights created pursuant hereto in lieu of the rights granted to them
under this Rights Agreement; and
WHEREAS, the obligations of certain Investors to purchase Series D
Preferred Stock are conditioned upon the execution and delivery of this
Agreement by such Investors, and holders of in excess of 75% of the Series A,
Series B and Series C Preferred Stock and the Company:
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the Investors who are parties to the 1999 Rights Agreement
hereby agree that the 1999 Rights Agreement shall be superseded and replaced in
its entirety by this Agreement, and the parties hereto further agree as follows:
SECTION 1
Restrictions on Transferability of Securities; Registration Rights
1.1 Certain Definitions. As used in this Agreement, the following terms
shall have the meanings set forth below:
(a) "Affiliate" shall mean a person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under common
control with, a Holder . The term "person" for the purpose of this definition
includes, in addition to such Holder, the following persons: (i) any relative or
spouse of such Holder; (ii) any trust or estate in which such Holder or any of
the persons specified in subsection (i) collectively own fifty percent or more
of the total beneficial interest or of which any of such persons serve as
trustee, executor or in any similar capacity; and (iii) any corporation or other
organization (other than the Holder) in which such Holder or any of the persons
specified in of this section are the beneficial owners collectively of fifty
percent or more of the voting securities or fifty percent or more of the equity
interest.
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(b) "Closing" shall mean the date of the initial sale of shares of the
Company's Series C Preferred Stock.
(c) "Commission" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
(d) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
(e) "Holder" shall mean any Investor who holds Registrable Securities
and any holder of Registrable Securities to whom the registration rights
conferred by this Agreement have been transferred in compliance with Section
1.11 and Section 3 hereof.
(f) "Initiating Holders" shall mean any Holder or Holders who in the
aggregate hold not less than twenty-five percent (25%) of the outstanding
Registrable Securities.
(g) "Investors" shall mean persons who: (i) purchased Shares pursuant to
the Series D Preferred Stock Purchase Agreement, dated as of the date hereof
(ii) possessed registration rights pursuant to the 1999 Rights Agreement or
(iii) hold warrants to purchase Series C Preferred Stock.
(h) "Other Shareholders" shall mean persons other than Holders who, by
virtue of agreements with the Company, are entitled to include their securities
in certain registrations hereunder.
(i) "Registrable Securities" shall mean (i) shares of the Company's
Common Stock (the "Common Stock") issued or issuable pursuant to the conversion
of the Shares, (ii) any shares of stock or other securities into which or for
which shares of Common Stock issued or issuable pursuant to the conversion of
the Shares may hereafter be changed, converted or exchanged and any other shares
or securities issued to holders of Common Stock (or such shares of stock or
other securities into which or for which shares of Common Stock are so changed,
converted or exchanged) upon any reclassification, share combination, share
subdivision, share dividend, share exchange, merger, consolidation or similar
transaction or event and (iii) any Common Stock 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 provided, however, that Registrable Securities
shall not include any shares of Common Stock or shares of stock or other
securities referenced in (ii) above which have previously been registered or
which have been sold to the public either pursuant to a registration statement
or Rule 144, or which have been sold in a private transaction in which the
transferor's rights under this Agreement are not assigned.
(j) The terms "register," "registered" and "registration" shall refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the declaration or ordering of the effectiveness of such
registration statement.
(k) "Registration Expenses" shall mean all expenses incurred in
effecting any registration pursuant to this Agreement, including, without
limitation, all registration,
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qualification, and filing fees, printing expenses, escrow fees, fees and
disbursements of counsel for the Company, blue sky fees and expenses, expenses
of any regular or special audits incident to or required by any such
registration, and the reasonable fees and disbursements of one counsel for the
Holders, selected by a majority in interest of the Holders, (but excluding the
compensation of regular employees of the Company, which shall be paid in any
event by the Company).
(l) "Rule 144" shall mean Rule 144 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
(m) "Rule 145" shall mean Rule 145 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
(n) "Securities Act" shall mean the Securities Act of 1933, as amended,
or any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
(o) "Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and the reasonable
fees and disbursements of counsel for any Holder (other than the fees and
disbursements of counsel included in Registration Expenses).
(p) "Shares" shall mean collectively the Company's Series A, Series B,
Series C and Series D Preferred Stock currently outstanding or issuable upon
exercise of warrants therefor.
1.2 Requested Registration.
(a) Request for Registration. If the Company shall receive from the
Initiating Holders at any time after the earlier of (i) December 17, 2003 or
(ii) nine (9) months after the effective date of the first registration
statement filed by the Company covering an underwritten offering of any of its
securities to the general public, a written request that the Company effect any
registration with respect to shares of Registrable Securities with an expected
aggregate offering price, net of underwriting discounts and expenses related to
the issuance, to the public exceeding $5,000,000 for an initial public offering
or, in the event of a secondary offering, exceeding $2,500,000, the Company
will:
(i) promptly give written notice of the proposed registration to
all other Holders; and
(ii) as soon as practicable, use its best efforts to effect such
registration (including, without limitation, filing post-effective
amendments, appropriate qualifications under applicable blue sky or
other state securities laws, and appropriate compliance with the
Securities Act) as would permit or facilitate the sale and distribution
of all such Registrable Securities as are specified in such request,
together with all of the Registrable Securities of any Holder or Holders
joining in such request as are specified in a written request received
by the
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<PAGE> 4
Company within twenty (20) days after such written notice from the Company is
mailed or delivered.
The Company shall not be obligated to effect, or to take any action to
effect, any such registration pursuant to this Section 1.2:
(A) In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting
such registration, qualification, or compliance, unless the Company is
already subject to service in such jurisdiction and except as may be
required by the Securities Act;
(B) After the Company has initiated two such registrations
pursuant to this Section 1.2(a) (counting for these purposes only
registrations which have been declared or ordered effective and pursuant
to which securities have been sold and registrations which have been
withdrawn by the Holders as to which the Holders have not elected to
bear the Registration Expenses pursuant to Section 1.4 hereof and would,
absent such election, have been required to bear such expenses);
(C) 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 (180) days after the effective date
of, a Company-initiated registration; provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective, and provided that the
Company may only invoke this subsection (C) once;
(D) If the Initiating Holders propose to dispose of shares of
Registrable Securities which may be immediately registered on Form S-3
pursuant to a request made under Section 1.5 hereof;
(E) If the Initiating Holders do not request that such offering
be underwritten by underwriters selected by the Initiating Holders
(subject to the consent of the Company, which consent will not be
unreasonably withheld on a firm commitment basis); or
(F) If the Company and the Initiating Holders are unable to
obtain the commitment of the underwriter described in clause (E) above
to firmly underwrite the offer.
(b) Subject to the foregoing clauses (A) through (F), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable after receipt of the request or requests
of the Initiating Holders; provided, however, that if (i) in the good faith
judgment of the Board of Directors of the Company, such registration would be
seriously detrimental to the Company and the Board of Directors of the Company
concludes, as a result, that it is essential to defer the filing of such
registration statement at such time, and (ii) the Company shall furnish to such
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 for such registration statement to be filed
in the near future and that it is, therefore, essential to defer the filing of
such registration statement, then the Company shall have the right to defer such
filing for the period during which such
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<PAGE> 5
disclosure would be seriously detrimental, provided that (except as provided in
clause (C) above) the Company may not defer the filing for a period of more than
one hundred eighty (180) days after receipt of the request of the Initiating
Holders, and, provided further, that the Company shall not defer its obligation
in this manner more than once.
The registration statement filed pursuant to the request of the
Initiating Holders may, subject to the provisions of Section 1.13 hereof,
include other securities of the Company, with respect to which registration
rights have been granted, and may include securities of the Company being sold
for the account of the Company.
(c) Underwriting. The right of any Holder to registration pursuant to
Section 1.2 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 with respect to such participation and
inclusion) to the extent provided herein. A Holder may elect to include in such
underwriting all or a part of the Registrable Securities he holds.
(d) Procedures. If the Company shall request inclusion in any
registration pursuant to Section 1.2 of securities being sold for its own
account, or if other persons shall request inclusion in any registration
pursuant to Section 1.2, the Initiating Holders shall, on behalf of all Holders,
offer to include such securities in the underwriting and may condition such
offer on their acceptance of the further applicable provisions of this Section 1
(including Section 1.12). The Company shall (together with all Holders and other
persons proposing to distribute their securities through such underwriting)
enter into an underwriting agreement in customary form with the representative
of the underwriter or underwriters selected for such underwriting by a majority
in interest of the Initiating Holders, which underwriters are reasonably
acceptable to the Company. Notwithstanding any other provision of this Section
1.2, if the representative of the underwriters advises the Initiating Holders in
writing that marketing factors require a limitation on the number of shares to
be underwritten, the number of shares to be included in the underwriting or
registration shall be allocated as set forth in Section 1.13 hereof. If a person
who has requested inclusion in such registration as provided above does not
agree to the terms of any such underwriting, such person shall be excluded
therefrom by written notice from the Company, the underwriter or the Initiating
Holders. The securities so excluded shall also be withdrawn from registration.
If shares are so withdrawn from the registration and if the number of shares to
be included in such registration was previously reduced as a result of marketing
factors pursuant to this Section 1.2(d), then the Company shall offer to all
Holders who have retained rights to include securities in the registration the
right to include additional securities in the registration in an aggregate
amount equal to the number of shares so withdrawn, with such shares to be
allocated among such Holders requesting additional inclusion in accordance with
Section 1.13, provided, however, that the number of shares of Registrable
Securities to be included in such underwriting and registration will not be
reduced unless all other securities of Company (not including securities to be
issued as part of the offering) are first entirely excluded from the
underwriting and registration, and provided further, that in no event will the
number of Registrable Securities to be included in any such registration be
reduced below 30% of the shares included in the registration. Any Registrable
Securities excluded and withdrawn from such underwriting will be withdrawn from
the registration.
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1.3 Company Registration.
(a) If the Company shall determine to register any of its securities
either for its own account or the account of a security holder or holders
exercising their respective demand registration rights (other than pursuant to
Section 1.2 or 1.5 hereof), other than a registration relating solely to
employee benefit plans, or a registration relating solely to a Rule 145
transaction, or a registration on any registration form that does not permit
secondary sales, the Company will:
(i) promptly give to each Holder written notice thereof, but in
no event less than 30 days prior to the filing of any registration
statement; and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), except as set forth in Section
1.3(b) below, and in any underwriting involved therein, all the
Registrable Securities specified in a written request or requests made
by any Holder and received by the Company within twenty (20) days after
the written notice from the Company described in clause (i) above is
mailed or delivered by the Company. Such written request may specify all
or a part of a Holder's Registrable Securities.
(b) Underwriting. If the registration of which the Company gives notice
is for a registered public offering involving an underwriting, the Company shall
so advise the Holders as a part of the written notice given pursuant to Section
1.3(a)(i). In such event, the right of any Holder to registration pursuant to
this Section 1.3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with the Company and
the other holders of securities of the Company with registration rights to
participate therein distributing their securities through such underwriting)
enter into an underwriting agreement in customary form with the representative
of the underwriter or underwriters selected by the Company.
Notwithstanding any other provision of this Agreement, if the managing
underwriter determine(s) in good faith that marketing factors require a
limitation of the number of shares to be underwritten, then the managing
underwriter(s) may exclude shares (including Registrable Securities) from the
registration and the underwriting, and the number of shares that may be included
in the registration and the underwriting will be allocated first, to Company,
and second, to each of the Holders requesting inclusion of their Registrable
Securities in such registration statement on a pro rata basis based on the total
number of Registrable Securities then held by each such Holder provided,
however, that the right of the underwriters to exclude shares (including
Registrable Securities) from the registration and underwriting as described
above will be restricted so that the number of Registrable Securities included
in any such registration is not reduced below 20% of the shares included in the
registration. Notwithstanding the foregoing, if the registration is the first
Company-initiated registered offering of the Company's securities to the general
public, the Company may limit, to the extent so advised by the underwriters, on
a pro rata basis according to the number of securities each shareholder
(including the Holders) has requested for registration, the amount of securities
(including Registrable Securities) to be included in the registration by the
Company's shareholders (including the Holders), or may
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<PAGE> 7
exclude, to the extent so advised by the underwriters, such underwritten
securities entirely from such registration.
If shares are so withdrawn from the registration and if the number of
shares of Registrable Securities to be included in such registration was
previously reduced as a result of marketing factors, the Company shall then
offer to all persons who have retained the right to include securities in the
registration the right to include additional securities in the registration in
an aggregate amount equal to the number of shares so withdrawn, with such shares
to be allocated among the persons requesting additional inclusion in accordance
with Section 1.13 hereof.
1.4 Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Sections 1.3 and 1.5 hereof, and the first two registrations pursuant to Section
1.2 hereof, and reasonable fees and disbursements of one counsel for the selling
Holders in the case of registrations pursuant to Sections 1.2, 1.3 and 1.5 shall
be borne by the Company; provided, however, that if the Holders bear the
Registration Expenses for any registration begun pursuant to Section 1.2 and
subsequently withdrawn by the Holders registering shares therein, such
registration proceeding shall not be counted as a requested registration
pursuant to Section 1.2 hereof, except in the event that such withdrawal is
based upon material adverse information relating to the Company that is
different from the information known or available (upon request from the Company
or otherwise) to the Holders requesting registration at the time of their
request for registration under Section 1.2, in which event such registration
shall not be treated as a counted registration for purposes of Section 1.2
hereof, even though the Holders do not elect to bear the Registration Expenses
for such registration. All Selling Expenses relating to securities so registered
shall be borne by the holders of such securities pro rata on the basis of the
number of shares of securities so registered on their behalf.
1.5 Registration on Form S-3.
(a) After its initial public offering, the Company shall use its best
efforts to qualify for registration on Form S-3 or any comparable or successor
form or forms. After the Company has qualified for the use of Form S-3, in
addition to the rights contained in the foregoing provisions of this Section 1,
the Holders of Registrable Securities shall have the right to request
registrations on Form S-3 (such requests shall be in writing and shall state the
number of shares of Registrable Securities to be disposed of and the intended
methods of disposition of such shares by such Holder or Holders), provided,
however, that the Company shall not be obligated to effect any such registration
if (i) 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) on Form S-3 at an aggregate price
to the public of less than $500,000, or (ii) in the event that the Company shall
furnish the certification described in paragraph 1.2(b)(ii) (but subject to the
limitations set forth therein) or (iii) in a given twelve (12) month period,
after the Company has effected two (2) such registrations in any such period.
(b) If a request complying with the requirements of Section 1.5(a)
hereof is delivered to the Company, the provisions of Sections 1.2(a)(i) and
(ii) and Section 1.2(b) hereof shall apply to such registration. If the
registration is for an underwritten offering, the provisions of
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Sections 1.2(c) and 1.2(d) hereof shall apply to such registration. Any
registration on Form S-3 will not be deemed to be a Requested Registration under
Section 1.2.
1.6 Registration Procedures. In the case of each registration effected
by the Company pursuant to Section 1, the Company will keep each Holder advised
in writing as to the initiation of each registration and as to the completion
thereof. At its expense, the Company will use its best efforts to:
(a) Keep such registration effective for a period of one hundred twenty
(120) days or until the Holder or Holders have completed the distribution
described in the registration statement relating thereto, whichever first
occurs; provided, however, that (i) such one hundred twenty (120) day period
shall be extended for a period of time equal to the period the Holder refrains
from selling any securities included in such registration at the request of an
underwriter of Common Stock (or other securities) of the Company; and (ii) the
case of any registration of Registrable Securities on Form S-3 which are
intended to be offered on a continuous or delayed basis, such one hundred twenty
(120) day period shall be extended, if necessary, to keep the registration
statement effective until all such Registrable Securities are sold, provided
that Rule 415 as promulgated by the Commission under the Securities Act, or any
successor rule under the Securities Act, permits an offering on a continuous or
delayed basis, and provided further that applicable rules under the Securities
Act governing the obligation to file a post-effective amendment permit, in lieu
of filing a post-effective amendment that (A) includes any prospectus required
by section 10(a)(3) of the Securities Act or (B) reflects facts or events
representing a material or fundamental change in the information set forth in
the registration statement, the incorporation by reference of information
required to be included in (A) and (B) above to be contained in periodic reports
filed pursuant to section 13 or 15(d) of the Exchange Act in the registration
statement;
(b) Prepare and file with the Commission 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
Securities Act with respect to the disposition of all securities covered by such
registration statement;
(c) Furnish such number of prospectuses and other documents incident
thereto, including any amendment of or supplement to the prospectus, as a Holder
from time to time may reasonably request;
(d) Notify each seller of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, contains 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 light of the circumstances under which they
were made, and at the request of any such seller, prepare and furnish to such
seller a reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such shares, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light of
the circumstances under which it was made;
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(e) Cause all such Registrable Securities registered pursuant hereunder
to be listed or quoted on each securities exchange or automated dealer quotation
system on which similar securities issued by the Company are then listed or
quoted;
(f) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant to such registration statement and a CUSIP number
for all such Registrable Securities, in each case not later than the effective
date of such registration;
(g) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 1.2 hereof, the Company will
enter into an underwriting agreement reasonably necessary to effect the offer
and sale of Registrable Securities, provided such underwriting agreement
contains customary underwriting provisions and provided further that if the
underwriter so requests the underwriting agreement will contain customary
contribution provisions.
(h) Register and qualify securities covered by such registration
statement under such other securities or Blue Sky laws of such jurisdiction as
shall reasonably be requested by the Holders, however, the Company shall not be
obligated to register and qualify securities in any particular jurisdiction in
which the Company would be required to execute a general consent to service of
process in effecting such registration, qualification, or compliance, unless the
Company is already subject to service in such jurisdiction and except as may be
required by the Securities Act.
1.7 Indemnification.
(a) The Company will indemnify each Holder, each of its officers,
directors and partners, legal counsel, and accountants and each person
controlling such Holder within the meaning of section 15 of the Securities Act
or section 20 of the Exchange Act, with respect to which registration,
qualification, or compliance has been effected pursuant to this Section 1, and
each underwriter, if any, and each person who controls within the meaning of
section 15 of the Securities Act or section 20 of the Exchange Act, any
underwriter, against all expenses, claims, losses, damages, and liabilities (or
actions, proceedings, or settlements in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, offering circular, or other
document (including any related registration statement, notification, or the
like) incident to any such registration, qualification, or compliance, or based
on any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or any violation by the Company of the Securities Act or any rule or regulation
thereunder applicable to the Company and relating to action or inaction required
of the Company in connection with any such registration, qualification, or
compliance, and will reimburse each such Holder, each of its officers,
directors, partners, legal counsel, and accountants and each person controlling
such Holder, each such underwriter, and each person who controls any such
underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating and defending or settling any such claim, loss,
damage, liability, or action, provided that the Company will not be liable in
any such case to the extent that any such claim, loss, damage, liability, or
expense arises out of or is based on any untrue statement or omission made in
conformity with written information furnished to the Company by such Holder or
underwriter
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and stated to be specifically for use therein. It is agreed that the indemnity
agreement contained in this Section 1.7(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 has not
been unreasonably withheld).
(b) Each Holder will, if Registrable Securities held by him are included
in the securities as to which such registration, qualification, or compliance is
being effected, indemnify the Company, each of its directors, officers,
partners, legal counsel, and accountants and each underwriter, if any, of the
Company's securities covered by such a registration statement, each person who
controls the Company or such underwriter within the meaning of section 15 of the
Securities Act (or section 20 of the Exchange Act), each other such Holder and
Other Shareholder, and each of their officers, directors, and partners, and each
person controlling such Holder or Other Shareholder, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such registration statement, prospectus, offering circular, or
other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company and such Holders, Other
Shareholders, directors, officers, partners, legal counsel, and accountants,
persons, underwriters, or control persons for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability, or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular, or other document in reliance upon and in
conformity with written information furnished to the Company by such Holder and
stated to be specifically for use therein provided, however, that the
obligations of such Holder hereunder shall not apply to amounts paid in
settlement of any such claims, losses, damages, or liabilities (or actions in
respect thereof) if such settlement is effected without the consent of such
Holder (which consent shall not be unreasonably withheld), provided, that in no
event shall any indemnity under this Subsection 1.7(b) exceed the net proceeds
from the offering received by such Holder, except in the case of willful fraud
by such Holder.
(c) Each party entitled to indemnification under this Section 1.7 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 1, to the extent such
failure is not prejudicial. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement that 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. Each Indemnified Party shall furnish such information
regarding itself or the claim in
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question as an Indemnifying Party may reasonably request in writing and as shall
be reasonably required in connection with defense of such claim and litigation
resulting therefrom.
(d) If the indemnification provided for in this Section 1.7 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.
(e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement entered
into in connection with the underwritten public offering are in conflict with
the foregoing provisions, the provisions in the underwriting agreement shall
control.
(f) The obligations of the Company and the Holders under this Section
1.7 shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1, and otherwise.
1.8 Information by Holder. Each Holder of Registrable Securities shall
furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request in
writing and as shall be reasonably required in connection with any registration,
qualification, or compliance referred to in this Section 1.
1.9 Limitations on Registration of Issues of Securities. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of a majority in interest of the Holders, enter into any agreement with
any holder or prospective holder of any securities of the Company giving such
holder or prospective holder any registration rights the terms of which are more
favorable than the registration rights granted to the Holders hereunder
(including demand registration rights which may be requested by such holder or
prospective holder prior to the time that the Holders may request registration
under Section 1.2 hereof).
1.10 Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission that may permit the sale of the
Restricted Securities to the public without registration, the Company agrees to
use its best efforts to:
(a) Make and keep public information regarding the Company available as
those terms are understood and defined in Rule 144 under the Securities Act, at
all times from and after
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ninety (90) days following the effective date of the first registration under
the Securities Act filed by the Company for an offering of its securities to the
general public;
(b) File with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act
at any time after it has become subject to such reporting requirements;
(c) So long as a Holder owns any Restricted Securities, furnish to the
Holder forthwith upon written request a written statement by the Company as to
its compliance with the reporting requirements of Rule 144 (at any time from and
after ninety (90) days following the effective date of the first registration
statement filed by the Company for an offering of its securities to the general
public), and of the Securities Act and the Exchange Act (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
so filed as a Holder may reasonably request in availing itself of any rule or
regulation of the Commission allowing a Holder to sell any such securities
without registration.
1.11 Transfer or Assignment of Registration Rights. The rights to cause
the Company to register securities granted to a Holder by the Company under this
Section 1 may be transferred or assigned by a Holder only to (i) an affiliate
(as defined in the Securities Act) of such Holder or (ii) a transferee or
assignee of not less than 80,000 shares of Registrable Securities (as presently
constituted and subject to subsequent adjustments for stock splits, stock
dividends, reverse stock splits, and the like), provided that the Company is
given written notice at the time of or within a reasonable time after such
transfer or assignment, stating the name and address of the transferee or
assignee and identifying the securities with respect to which such registration
rights are being transferred or assigned in accordance with the requirements of
Section 3, and, provided further, that the transferee or assignee of such rights
assumes the obligations of such Holder under this Agreement.
1.12 "Market Stand-Off" Agreement. If requested by the Company and an
underwriter of Common Stock (or other securities) of the Company, a Holder shall
not sell or otherwise transfer or dispose of any Common Stock (or other
securities) of the Company held by such Holder (other than those included in the
registration) during the one hundred eighty (180) day period following the
effective date of a registration statement if it is the first such registration
statement of the Company, and ninety (90) days in any subsequent offering,
provided that the Company uses its best efforts to have all of the Company's
officers, directors and employees then holding Company Stock enter into similar
agreements.
The obligations described in this Section 1.12 shall not apply to a
registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms that may be promulgated in the future, or a registration
relating solely to a Commission Rule 145 transaction on Form S-4 or similar
forms that may be promulgated in the future. The Company may impose
stop-transfer instructions with respect to the shares (or securities) subject to
the foregoing restriction until the end of such one hundred eighty (180) day (or
ninety (90) day) period.
1.13 Allocation of Registration Opportunities. In any circumstance in
which all of the Registrable Securities and other shares of Common Stock of the
Company (including shares of
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Common Stock issued conform with inserts so Registrable Securities have priority
in registration over other shares or issuable upon conversion of shares of any
currently unissued series of Preferred Stock of the Company) with registration
rights (the "Other Shares") requested to be included in a registration on behalf
of the Holders or other selling shareholders cannot be so included as a result
of limitations of the aggregate number of shares of Registrable Securities and
Other Shares that may be so included, the number of shares of Registrable
Securities and Other Shares that may be so included shall be allocated among the
Holders and other selling shareholders requesting inclusion of shares pro rata
on the basis of the number of shares of Registrable Securities and Other Shares
that would be held by such Holders and other selling shareholders, assuming
conversion; provided, however, so that such allocation shall not operate to
reduce the aggregate number of Registrable Securities and Other Shares to be
included in such registration, if any Holder or other selling shareholder does
not request inclusion of the maximum number of shares of Registrable Securities
and Other Shares allocated to him pursuant to the above-described procedure, the
remaining portion of his allocation shall be reallocated among those requesting
Holders and other selling shareholders whose allocations did not satisfy their
requests pro rata on the basis of the number of shares of Registrable Securities
and Other Shares which would be held by such Holders and other selling
shareholders, assuming conversion, and this procedure shall be repeated until
all of the shares of Registrable Securities and Other Shares which may be
included in the registration on behalf of the Holders and other selling
shareholders have been so allocated. The Company shall not limit the number of
Registrable Securities to be included in a registration pursuant to this
Agreement in order to include shares held by shareholders with no registration
rights or to include founder's stock or any other shares of stock issued to
employees, officers, directors, or consultants pursuant to Company's 1998 Stock
Plan, or with respect to registrations under Section 1.5 or 1.8 hereof, in order
to include in such registration securities registered for the Company's own
account.
1.14 Delay of Registration. No Holder shall have any right to take any
action to restrain, enjoin, or otherwise delay any registration as the result of
any controversy that might arise with respect to the interpretation or
implementation of this Section 1.
1.15 Termination of Registration Rights. The right of any Holder to
request registration or inclusion in any registration pursuant to Section 1.2,
1.3 or 1.5 shall terminate on the closing of the first Company-initiated
registered public offering of Common Stock of the Company, provided that all
shares of Registrable Securities held or entitled to be held upon conversion by
such Holder may immediately be sold under Rule 144 during the following ninety
(90) day period, or on such date after the closing of the first
Company-initiated registered public offering of Common Stock of the Company as
all shares of Registrable Securities held or entitled to be held upon conversion
by such Holder may immediately be sold under Rule 144 during any ninety (90) day
period; provided, however, that the provisions of this Section 1.15 shall not
apply to any Holder who owns more than two percent (2%) of the Company's
outstanding stock until the earlier of (x) such time as such Holder owns less
than two percent (2%) of the outstanding stock of the Company, or (y) the
expiration of two (2) years after the closing of the first registered public
offering of Common Stock of the Company.
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SECTION 2
Covenants of the Company
The Company hereby covenants and agrees, so long as any Holder owns any
Registrable Securities, as follows:
2.1 Basic Financial Information. The Company will furnish the following
reports to each Holder:
(a) As soon as practicable after the end of each fiscal year of the
Company, and in any event within ninety (90) days thereafter, a consolidated
balance sheet of the Company and its subsidiaries, if any, as at the end of such
fiscal year, and consolidated statements of income and cash flows of the Company
and its subsidiaries, if any, for such year, prepared and audited by a
nationally recognized accounting firm in accordance with generally accepted
accounting principles consistently applied and setting forth in each case in
comparative form the figures for the previous fiscal year, all in reasonable
detail.
(b) As soon as practicable after the end of each quarterly accounting
period in each fiscal year of the Company, and in any event within forty-five
(45) days thereafter, a consolidated balance sheet of the Company and its
subsidiaries, if any, as of the end of each such quarterly period, and
consolidated statements of income and cash flows of the Company and its
subsidiaries for such period and for the current fiscal year to date, prepared
in accordance with generally accepted accounting principles consistently applied
and setting forth in comparative form the figures for the corresponding periods
of the previous fiscal year and to the Company's operating plan then in effect
and approved by its Board of Directors, subject to changes resulting from normal
year-end audit adjustments, all in reasonable detail and certified by the
principal financial or accounting officer of the Company, except that such
financial statements need not contain the notes required by generally accepted
accounting principles.
(c) As soon as practicable before the beginning of the Company's fiscal
year, and in any event at least thirty (30) days before the beginning of the
Company's fiscal year, an annual budget and operating plan.
(d) From the date the Company becomes subject to the reporting
requirements of the Exchange Act (which shall include any successor federal
statute), and in lieu of the financial information required pursuant to Sections
2.1(a) and (b), copies of its annual reports on Form 10-K and its quarterly
reports on Form 10-Q, respectively.
2.2 Right of Participation. The Company hereby grants to each Holder who
owns any Shares or any shares of Common Stock issued upon conversion of the
Shares the right of participation to purchase a pro rata share of New Securities
(as defined below) which the Company may, from time to time, propose to sell and
issue. A Holder's pro rata share, for purposes of this right of participation,
is the ratio of the number of shares of Common Stock owned by such Holder
immediately prior to the issuance of New Securities, assuming full conversion of
the Shares and exercise of any option or warrant held by such Holder which is
exercisable at such time, to the total number of shares of Common Stock
outstanding
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<PAGE> 15
immediately prior to the issuance of New Securities, assuming full conversion of
the Shares and exercise of all outstanding rights, options and warrants to
acquire Common Stock of the Company. Each Holder shall have a right of
over-allotment such that if any Holder fails to exercise its right hereunder to
purchase its pro rata share of New Securities, the other Holders may purchase
the non-purchasing Holder's portion on a pro rata basis within ten (10) days
from the date such non-purchasing Holder fails to exercise its right hereunder
to purchase its pro rata share of New Securities. This right of participation
shall be subject to the following provisions:
(a) "New Securities" shall mean any capital stock (including Common
Stock and/or Preferred Stock) of the Company whether now authorized or not, and
rights, options or warrants to purchase such capital stock, and securities of
any type whatsoever that are, or may become, convertible into capital stock;
provided that the term "New Securities" does not (i) securities issued upon
conversion of the Shares; (ii) securities issued pursuant to the acquisition of
another business entity or business segment of any such entity by the Company by
merger, purchase of substantially all the assets or other reorganization whereby
the Company will own more than fifty percent (50%) of the voting power of such
business entity or business segment of any such entity; (iii) any borrowings,
direct or indirect, from financial institutions or other persons by the Company,
whether or not presently authorized, including any type of loan or payment
evidenced by any type of debt instrument, provided such borrowings do not have
any equity features including warrants, options or other rights to purchase
capital stock and are not convertible into capital stock of the Company; (iv)
securities issued to employees, consultants, officers or directors of the
Company pursuant to any stock option, stock purchase or stock bonus plan,
agreement or arrangement approved by the Board of Directors, provided such
securities do not exceed 10,400,000; (v) securities issued to vendors or
customers or to other persons in similar commercial situations with the Company
or securities issued in connection with obtaining financing, whether issued to a
lender, lessor, guarantor or other person if such issuance is approved by the
Board of Directors; provided that in any twelve (12) month period the number of
shares issued under Section 2.2(a)(v) do not exceed one percent (1%) of the then
outstanding shares of Common Stock; (vi) securities issued in a public offering
pursuant to a registration under the Securities Act with an aggregate offering
price to the public of at least $20,000,000 at a public offering price of at
least $12.50 per share; (vii) securities issued in connection with any stock
split, stock dividend or recapitalization of the Company; (viii) securities
issued to strategic investors involving technology transfers or similar items
critical to expansion and improvement of the Company's business; and (ix) any
right, option or warrant to acquire any security convertible into the securities
excluded from the definition of New Securities pursuant to subsections (i)
through (viii) above. For purposes of subsection (v), the number of shares of
Common Stock outstanding shall be calculated as if all shares of the Preferred
Stock of the Company and all securities convertible into Common Stock of the
Company ("Convertible Securities") had been fully converted into shares of
Common Stock immediately prior to such calculation, any outstanding warrants,
outstanding options and any remaining options under the corporation's stock
option plan or other rights for the purchase of shares of stock or Convertible
Securities had been fully exercised immediately prior to such calculation and
any remaining options under the corporation's stock option plan had been issued
(and the resulting securities fully converted into shares of Common Stock, if so
convertible in each case) as of such date.
(b) In the event the Company proposes to undertake an issuance of New
Securities, it shall give each Holder written notice of its intention,
describing the type of New Securities, and
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<PAGE> 16
their price and the general terms upon which the Company proposes to issue the
same. Each Holder shall have twenty (20) days after the date of any such notice
to elect to purchase such Holder's pro rata share of such New Securities for the
price and upon the terms specified in the notice by giving written notice to the
Company and stating therein the quantity of New Securities to be purchased.
(c) In the event the Holders fail to exercise fully the right of
participation within such twenty (20) day period and after the expiration of the
ten (10) day period for the exercise of the over-allotment provisions of this
Section 2.2, the Company shall have ninety (90) days thereafter to sell or enter
into an agreement (pursuant to which the sale of New Securities covered thereby
shall be closed, if at all, within ninety (90) days from the date of such
agreement) to sell the New Securities respecting which the Holders' right of
participation option set forth in this Section 2.2 was not exercised, at a price
and upon terms no more favorable to the purchasers thereof than specified in the
Company's notice to Holders pursuant to Section 2.2(b). In the event the Company
has not sold within such ninety (90) day period or entered into an agreement to
sell the New Securities in accordance with the foregoing within ninety (90) days
from the date of such agreement, the Company shall not thereafter issue or sell
any New Securities, without first again offering such securities to the Holders
in the manner provided in Section 2.2(b) above.
(d) The right of participation granted under this Agreement shall expire
upon, and shall not be applicable to, the first sale of Common Stock of the
Company to the public effected pursuant to a registration statement filed with,
and declared effective by, the Commission under the Securities Act, with
proceeds of more than $20,000,000 and at a public offering price of at least
$12.50 per share.
(e) The right of participation set forth in this Section 2.2 may not be
assigned or transferred, except that (i) such right is assignable by each Holder
to any wholly owned subsidiary or parent of, or to any corporation or entity
that is, within the meaning of the Securities Act an affiliate of and/or
controlling, controlled by or under common control with, any such Holder, and
(ii) such right is assignable between and among any of the Holders, and (iii) to
any transferee of at least 80,000 shares.
2.3 Termination of Covenants. The covenants set forth in this Section 2
shall terminate and be of no further force and effect after the time of
effectiveness of the Company's first firm commitment underwritten public
offering registered under the Securities Act, with proceeds of more than
$20,000,000 and at a public offering price of at least $12.50 per share.
2.4 Person Insurance. Following the Closing, the Company will seek to
obtain reasonable key person life insurance policies on the lives of Subrah S.
Iyar and Min Zhu, the proceeds of which will be payable to Company.
2.5 Directors and Officers Liability Insurance. Promptly following the
Closing, Company will seek to procure an appropriate Directors and Officers
Liability insurance policy covering the directors and officers of Company in the
amount of at least $1,000,000, so long as in the opinion of the Board of
Directors the premiums are reasonable. Company will seek to increase the
coverage amount under such policy to at least $5,000,000 immediately prior to
the
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<PAGE> 17
closing of an underwritten public offering for the sale of Company's Common
Stock, so long as in the opinion of the Board of Directors the premiums are
reasonable.
SECTION 3
Stock Transfers
3.1 Standstill Provisions. Without the prior written consent of the
Board of Directors, neither Vanenburg Ventures nor any of their affiliates may
acquire more than 15% of the Company's voting securities. If any such holder
holds more than 15% of the Company's voting securities, then any additional
acquisitions of the Company's voting securities by such holder requires the
prior written consent of the Board of Directors.
3.2 Permitted Transfers. In addition to the transfer of Shares as
described in the Series D Preferred Stock Purchase Agreement, a Holder may
transfer (i) a minimum of 80,000 of its Shares and/or shares of Common Stock of
the Company (as adjusted for any stock splits, stock dividends, reverse stock
splits, and the like), (ii) all of its shares if such Holder holds fewer than
80,000, or (iii) any of its shares to an affiliate (as defined in the Securities
Act) subject to Section 1.11 and applicable securities laws.
3.3 Right of First Refusal. The Company, is hereby granted the primary
right of first refusal (the "Primary First Refusal Right") and the Founders and
the Holders are granted the secondary right of first refusal (the "Secondary
First Refusal Right"), exercisable in connection with any proposed sale or other
transfer of Common Stock only (the "Target Shares") held by a Holder or his
assigns and a Founder (the "Selling Shareholder"). For purposes of this Section,
the term "transfer" shall include any assignment, pledge, encumbrance or other
disposition for value of the Target Shares intended to be made by the Selling
Shareholder, but shall not include any of the permitted transfers under Section
3.2.
3.4 Notice of Intended Disposition. In the event a Selling Shareholder
desires to accept a bona fide third-party offer for any Target Shares, the
Selling Shareholder shall promptly (a) deliver to the Secretary of the Company a
written notice (the "Disposition Notice") of the offer and the basic terms and
conditions thereof, including the proposed purchase price and the identity of
the third-party offeror, and (b) provide satisfactory proof that the disposition
of the Target Shares to the third-party offeror would not contravene applicable
securities laws.
3.5 Exercise of Right of First Refusal. The Company (or its assignees)
shall, for a period of twenty (20) days following receipt of the Disposition
Notice, have the right to purchase any or all of the Target Shares specified in
the Disposition Notice upon substantially the same terms and conditions
specified therein. Such right shall be exercisable by written notice (the
"Exercise Notice") delivered to the Selling Shareholder prior to the expiration
of the twenty (20) day exercise period. If such right is exercised with respect
to all or some of the Target Shares specified in the Disposition Notice, then
the Company (or its assignees) shall effect the purchase of such Target Shares,
including payment of the purchase price, not more than ten (10) business days
after delivery of the Exercise Notice; and at such time the Selling Shareholder
shall deliver to the Company the certificates representing the Target Shares to
be purchased, properly
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<PAGE> 18
endorsed for transfer. The Target Shares so purchased shall thereupon be
canceled and cease to be issued and outstanding shares of the Company's Common
Stock.
Should the purchase price specified in the Disposition Notice be payable in
property other than cash or evidences of indebtedness, the Company (or its
assignees) shall have the right to pay the purchase price in the form of cash
equal in amount to the value of such property. If the Selling Shareholder and
the Company (or its assignees) cannot agree on such cash value within ten (10)
days after the Company's receipt of the Disposition Notice, the valuation shall
be made by an appraiser of recognized standing selected by the Selling
Shareholder and the Company (or its assignees), or, if they cannot agree on an
appraiser within twenty (20) days after the Company's receipt of the Disposition
Notice, each shall select an appraiser of recognized standing and the two
appraisers shall designate a third appraiser of recognized standing, whose
appraisal shall be determinative of such value. The cost of such appraisal shall
be shared equally by the Selling Shareholder and the Company. The closing shall
then be held on the latter of (a) the fifth business day following delivery of
the Exercise Notice or (b) the 15th day after such cash valuation shall have
been made.
3.6 Partial or Non-Exercise of the Primary Right of First Refusal. In
the event the Company does not deliver the Exercise Notice to the Selling
Shareholder within twenty (20) days following the date of the Company's receipt
of the Disposition Notice, or in the event the Company delivers an Exercise
Notice for a portion, but not all of the Target Shares, then the Selling
Shareholder shall promptly deliver a second Disposition Notice to the Founders
and the Holders (the "Remaining Shareholders"), at the addresses listed on
Schedule A hereto, describing the Target Shares remaining for sale along with
the basic terms and conditions thereof, including the proposed purchase price
and the identity of the third-party offeror. The Remaining Shareholders may
purchase their pro rata share of the remaining Target Shares pursuant to the
same procedures described in Section 3.5. A Remaining Shareholders' pro rata
share, for purposes of this Secondary Right of First Refusal, is the ratio of
the number of shares of Common Stock owned by such Remaining Shareholder at the
date of the second Disposition Notice, assuming full conversion of the Shares
and exercise of any option or warrant held by such Remaining Shareholder which
is exercisable at such time, to the total number of shares of Common Stock owned
by all Remaining Shareholders at the date of the second Disposition Notice,
assuming full conversion of the Shares and exercise of any option or warrant
held by any Remaining Shareholder which is exercisable at such time. Each
Remaining Shareholder shall have a right of over-allotment such that if any
Remaining Shareholder fails to exercise its right hereunder to purchase its pro
rata share of the Target Shares, the other Remaining Shareholders may purchase
the non-purchasing Remaining Shareholders' portion on a pro rata basis within
ten (10) days from the date such non-purchasing Holder fails to exercise its
right hereunder to purchase its pro rata share of the Target Shares.
3.7 Partial or Non-Exercise of the Secondary Right of First Refusal. In
the event the Remaining Shareholders do not deliver any Exercise Notices to the
Selling Shareholder within twenty (20) days following the date of their receipt
of the second Disposition Notice, or in the event the Remaining Shareholders
deliver Exercise Notices for a portion, but not all of the Target Shares, and
the remainder of the Target Shares are not purchased pursuant to the right of
over-allotment provided for in Section 3.6, then the Selling Shareholder shall
have a period of sixty (60) days thereafter, in which to sell or otherwise
dispose of the Target Shares upon terms and
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<PAGE> 19
conditions (including the purchase price) no more favorable than those specified
in the Disposition Notices to the third-party offeror identified in the second
Disposition Notice; provided that any such sale or disposition must comply with
applicable state and federal securities laws and Section 1.11 of this Agreement.
If the Selling Shareholder does not sell or otherwise dispose of the Target
Shares within the specified sixty (60) day period, the First Refusal Right shall
continue to apply to any subsequent disposition of the Target Shares by the
Selling Shareholder until such right lapses in accordance with Section 3.8.
3.8 Lapse. The First Refusal Right under this Section 3 shall lapse and
cease to have effect upon the closing of a firm commitment underwritten public
offering pursuant to a registration under the Securities Act with an aggregate
offering price to the public of at least $20,000,000 at a public offering price
of at least $12.50 per share.
3.9 Legend. All certificates representing Shares or Common Stock subject
to the Right of First Refusal shall be endorsed with the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN
COMPLIANCE WITH THE TERMS OF A WRITTEN AGREEMENT BETWEEN THE COMPANY AND
THE INITIAL HOLDER HEREOF. SUCH AGREEMENT PROVIDES FOR CERTAIN
RESTRICTIONS ON TRANSFER OF THE SECURITIES, INCLUDING RIGHTS OF FIRST
REFUSAL UPON AN ATTEMPTED TRANSFER OF THE SECURITIES. THE SECRETARY OF
THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENT
TO THE HOLDER HEREOF WITHOUT CHARGE."
SECTION 4
Miscellaneous
4.1 Governing law. This Agreement shall be governed in all respects by
the laws of the State of California, as if entered into by and between
California residents exclusively for performance entirely within California.
4.2 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
4.3 Entire Agreement; Amendment; Waiver. This Agreement (including the
Exhibits hereto) constitutes the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof. Neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated,
except by a written instrument signed by the Company and the holders of a
majority of the Preferred shares (on an as converted basis) not resold to the
public and any such amendment, waiver, discharge or termination shall be binding
on all the Holders, but in no event shall the obligation of any Holder hereunder
be materially increased, except upon the written consent of such Holder.
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4.4 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by United States
first-class mail, postage prepaid, or delivered personally by hand or nationally
recognized courier addressed (a) if to a Holder, as indicated on the list of
Holders attached hereto as Schedule A, or at such other address as such holder
or permitted assignee shall have furnished to the Company in writing, or (b) if
to the Company, at WebEx, Inc., 110 Rose Orchard Way, San Jose, CA 95134, or at
such other address as the Company shall have furnished to each holder in
writing. All such notices and other written communications shall be effective
(i) if mailed, five (5) days after mailing and (ii) if delivered, upon delivery.
4.5 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any Holder, upon any breach or default of the
Company under this Agreement shall impair any such right, power or remedy of
such Holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default therefore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any Holder of any breach or default under this Agreement or any
waiver on the part of any Holder of any provisions or conditions of this
Agreement must be made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any Holder, shall be cumulative and
not alternative.
4.6 Rights; Separability. Unless otherwise expressly provided herein, a
Holder's rights hereunder are several rights, not rights jointly held with any
of the other Holders. In case any provision of the Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
4.7 Information Confidential. Each Holder acknowledges that the
information received by them pursuant hereto may be confidential and for its use
only, and it will not use such confidential information in violation of the
Exchange Act or reproduce, disclose or disseminate such information to any other
person (other than its employees or agents having a need to know the contents of
such information, and its attorneys), except in connection with the exercise of
rights under this Agreement, unless the Company has made such information
available to the public generally or such Holder is required to disclose such
information by a governmental body.
4.8 Titles and Subtitles. The titles of the paragraphs and subparagraphs
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
4.9 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
4.10 Subsequent Closings. In the event that the Company shall conduct
subsequent sales of Series D Preferred Stock, any holder of such shares of
Series D Preferred Stock shall be deemed an Investor with all of the rights of
an Investor under this Agreement; provided that as a
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condition thereto such Investor and the Company shall sign a counterpart
signature page to this Agreement.
4.11 Assignment. The Investor's rights hereunder, and the rights of any
of the Investors permitted assigns, may only be assigned to a party who acquires
an aggregate at least 80,000 shares of Preferred Stock - or such lesser amount
if it represents the Investor's entire holdings; provided, however, that no
party may be assigned any of the foregoing rights unless Company is given
written notice by the assigning party at the time of such assignment stating the
name and address of the assignee and identifying the securities of Company as to
which the rights in question are being assigned; and provided further that any
such assignee will receive such assigned rights subject to all the terms and
conditions of this Agreement, including without limitation the provisions of
this Section 4. Assignment of the Investor's right hereunder to an affiliate (as
defined in the Securities Act) a partner, retired partner, spouse, lineal
descendent, ancestor or shareholder of any Investor will be without restriction
as to minimum shareholdings.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
-21-
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have executed this Investors'
Rights Agreement effective as of the day and year first above written.
WEBEX, INC.
By /s/ Subrah S. Iyar
--------------------------------------
Subrah S. Iyar
Chief Executive Officer
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 23
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
Antenna Venture Partners
-------------------------------------------
Print Name of Investor
By /s/ C. Daisy Pravo
---------------------------------------
Signature
Address: 301 Howard #1440
---------------------------------
San Francisco, CA 94105
---------------------------------
---------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 24
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
Arno Penzias
-------------------------------------------
Print Name of Investor
By /s/ Arno Penzias
---------------------------------------
Signature
Address: ARNO PENZIAS
---------------------------------
1960 GRANT AVE., #16
---------------------------------
SAN FRANCISCO, CA 94133
---------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 25
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
Craig Klosterman
-------------------------------------------
Print Name of Investor
By /s/ Craig Klosterman
-------------------------------------
Signature
Address: 20781 Via Corta
---------------------------------
San Jose, CA 95120
---------------------------------
---------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 26
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
GEOFFREY E. BOCK
-------------------------------------------
Print Name of Investor
By /s/ Geoffrey E. Bock
-------------------------------------
Signature
Address: 181 Gibbs St.
---------------------------------
Newton, MA
---------------------------------
02454
---------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 27
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
GEORGE B. BOLTON
-------------------------------------------
Print Name of Investor
By /s/ George Brown Bolton
-------------------------------------
Signature
Address: 2655 Scott St.
---------------------------------
San Francisco, CA
---------------------------------
94123
---------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 28
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
GC DEV. CO., INC.
-------------------------------------------
Print Name of Investor
By /s/
-------------------------------------
Signature
Address: 360 NORTH CRESCENT DRIVE
---------------------------------
BEVERLY HILLS, CA 90210
---------------------------------
---------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 29
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
HIKARI TSUSHIN, INC.
-------------------------------------------
Print Name of Investor
By /s/ Masabide Saito, Managing Director
-------------------------------------
Signature
Address: 23F Ohtemachi Nemura Bldg.
---------------------------------
2-1-1 Ohterrachi, Chiyoda-Ka
---------------------------------
TOKYO 100-0004 JAPAN
---------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 30
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
JEFFREY LIU
-------------------------------------------
Print Name of Investor
By /s/ Jeffrey Liu
-------------------------------------
Signature
Address: 924 Clayton St.
---------------------------------
SAN FRAN, CA 94117
---------------------------------
---------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 31
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
Larry Smarr
-------------------------------------------
Print Name of Investor
By /s/ Larry Smarr
-------------------------------------
Signature
Address: 501 W. Pennsylvania
---------------------------------
Urbana, IL 61801
---------------------------------
---------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 32
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
North America Venture Fund, L.P.
-------------------------------------------
Print Name of Investor
By /s/
-------------------------------------
Signature
Address: 3945 Freedom Circle
---------------------------------
Suite 270
---------------------------------
Santa Clara, CA 95054
---------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 33
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
Peter B. Breck
-------------------------------------------
Print Name of Investor
By /s/ Peter B. Breck
-------------------------------------
Signature
Address: PETER B. BRECK
---------------------------------
Deutsche Banc Alex. Brown
---------------------------------
101 California Street, 48th Floor
---------------------------------
San Francisco, CA 94111
---------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 34
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
Peter S. Kastner
-------------------------------------------
Print Name of Investor
By /s/ Peter S. Kastner
-------------------------------------
Signature
Address: 8 Lincoln Circle
---------------------------------
Wellesley, MA 02481
---------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 35
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
PTEK Holdings, Inc.
-------------------------------------------
Print Name of Investor
By /s/
-------------------------------------
Signature
Address:
---------------------------------
---------------------------------
---------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 36
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
Stephen D. Hendrick
-------------------------------------------
Print Name of Investor
By /s/ Stephen D. Hendrick
-------------------------------------
Signature
Address: 7 Whistler Lane
---------------------------------
Southborough, MA 01772
---------------------------------
---------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 37
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
Broadview SLP
-------------------------------------------
Print Name of Investor
By /s/
-------------------------------------
Signature
Address: One Bridge Plaza
---------------------------------
---------------------------------
---------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 38
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
TIBCO SOFTWARE INC.
-------------------------------------------
Print Name of Investor
By /s/ Robert P. Stefanski
-------------------------------------
Signature
ROBERT P. STEFANSKI
EXECUTIVE VICE PRESIDENT
TIBCO SOFTWARE INC.
Address: 3165 Porter Drive
---------------------------------
Palo Alto, CA 94304
---------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 39
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
Dr. Thomas W. Kuhr
Managing Director
-------------------------------------------
Print Name of Investor
By /s/ Dr. Thomas W. Kuhr
-------------------------------------
Signature
Address: 1. T-Telematik Venture
---------------------------------
Beteiligungsgesellschatt mbH
---------------------------------
Godesberger Allee 73
---------------------------------
53175 Bonn
---------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 40
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
Ardara Us Direct Investment Inc.
-------------------------------------------
Print Name of Investor
DUCAT LIMITED
two DIRECTORS:
By /s/
-------------------------------------
Signature
Address: 11 rue de la Corraterie
---------------------------------
1204 Geneva, Switzerland
---------------------------------
---------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 41
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
FRANCIS A. DeSOUZA
-------------------------------------------
Print Name of Investor
By /s/ Francis A. DeSouza
-------------------------------------
Signature
Address: 108 2ND AVE SOUTH, #205
---------------------------------
KIRKLAND, WA 98033
---------------------------------
---------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 42
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
FRANK L. WALTERS
-------------------------------------------
Print Name of Investor
By /s/ Frank L. Walters
-------------------------------------
Signature
Address: 2400 Sand Hill Rd #202
---------------------------------
Menlo Park
---------------------------------
CA 94027
---------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 43
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
-------------------------------------------
Print Name of Investor
By /s/ Nitin T. Mehta
-------------------------------------
Signature
Address:
---------------------------------
---------------------------------
---------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 44
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
I C P, LLC
-------------------------------------------
Print Name of Investor
By /s/
-------------------------------------
Signature
Address:
---------------------------------
---------------------------------
---------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 45
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
James A. Moore
-------------------------------------------
Print Name of Investor
By /s/ James A. Moore
-------------------------------------
Signature
Address: 2355 Vallejo St.
---------------------------------
SF, CA 94123
---------------------------------
---------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 46
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
JAY MORRISON
-------------------------------------------
Print Name of Investor
By /s/ Jay Morrison
-------------------------------------
Signature
Address: 460 Dalewood Dr.
---------------------------------
Orinda, CA 94563
---------------------------------
---------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 47
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
Leo Richard Jolicoeur and Cynthia Anne
Jolicoeur, Trustees of the Jolicoeur
Family Trust, June 16, 1999
------------------------------------------
Print Name of Investor
By /s/ Leo Jolicoeur
----------------------------------------
Signature
Address: 12220 Menalto Dr.
----------------------------------
Los Altos Hills, CA 94022
----------------------------------
----------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 48
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
MARK THOMPSON
------------------------------------
Print Name of Investor
By /s/ Mark Thompson
----------------------------------
Signature
Address: One Spring Lane
----------------------------
----------------------------
Tiburon, CA 94720
----------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 49
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
NEA Presidents Fund, L.P.
By: NEA General Partners, L.P.
By: General Partner
----------------------------------------
Print Name of Investor
By /s/ Thomas C. McConnell
----------------------------------------
Signature
Address: 2490 Sand Hill Road
-----------------------------------
Menlo Park, CA 94025
-----------------------------------
-----------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 50
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
NEA Ventures 1999, Limited Partnership
By: Vice President
---------------------------------------
Print Name of Investor
By /s/ Susie Greathouse
---------------------------------------
Signature
Address: 2490 Sand Hill Road
----------------------------------
Menlo Park, CA 94025
----------------------------------
----------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 51
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
Net2Phone, Inc.
------------------------------------
Print Name of Investor
By /s/ Kan Slasky C.F.O.
---------------------------------
Signature
Address: 171 MAIN ST
----------------------------
HACKENSACK, NJ 07601
----------------------------
----------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 52
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
NEW ENTERPRISE ASSOCIATES VIII, LIMITED
PARTNERSHIP
By: NEA Partners VIII, Limited Partnership
Its General Partner
------------------------------------------
Print Name of Investor
By /s/ Thomas C. McConnell
------------------------------------------
Signature
Address: 2490 Sand Hill Road
-------------------------------------
Menlo Park, CA 94025
-------------------------------------
-------------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 53
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
ORACLE CORPORATION
------------------------------------
Print Name of Investor
By /s/
----------------------------------
Signature
Address: Oracle Corporation
----------------------------
500 Oracle Parkway
----------------------------
Redwood Shores, CA 94065
----------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 54
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
Pacven Walden Ventures IV
Associates Fund, L.P.
---------------------------------------------
Print Name of Investor
By /s/
-------------------------------------------
Signature
Director of Pacven Walden
Management Co., Ltd.
as General Partner of Pacven Walden
Management II, L.P. as General
Partner of Pacven Walden Ventures
IV Associates Fund, L.P.
Address: 750 Battery Street, Ste. 700
-------------------------------------
San Francisco, CA 94111
-------------------------------------
-------------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 55
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
Pacven Walden Ventures IV, L.P.
---------------------------------------------
Print Name of Investor
By /s/
------------------------------------------
Signature
Director of Pacven Walden
Management Co., Ltd.
as General Partner of Pacven Walden
Management II, L.P. as General Partner
of Pacven Walden Ventures IV, L.P.
Address: 750 Battery Street, Ste. 700
-------------------------------------
San Francisco, CA 94111
-------------------------------------
-------------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 56
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
PHILLIP WHITE
------------------------------------
Print Name of Investor
By /s/ Phillip White
---------------------------------
Signature
Address: 95 ATHERTON AVE
----------------------------
----------------------------
ATHERTON, CA 94021
----------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 57
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
Scott Sandell
------------------------------------
Print Name of Investor
By /s/ Scott Sandell
----------------------------------
Signature
Address: c/o NEA
----------------------------
2490 Sand Hill
----------------------------
Menlo Park, CA 94025
----------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 58
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
SPRINGVEST CORPORATION
------------------------------------
Print Name of Investor
By /s/ Min fu Chang
----------------------------------
Signature
MIN FU CHANG
Address: 301-1, MIN SHENG WEST ROAD
----------------------------
TAIPEI 103, TAIWAN R.O.C.
----------------------------
----------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 59
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
STEWART H. SONNENFELDT
------------------------------------
Print Name of Investor
By /s/ Stewart H. Sonnenfeldt
----------------------------------
Signature
Address:
----------------------------
----------------------------
----------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 60
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
Summit (SAF) Investors IV, L.P.
------------------------------------
Print Name of Investor
By /s/
----------------------------------
Signature
Address: Summit Accelerator Fund
----------------------------
499 Hamilton Ave., #200
----------------------------
Palo Alto, CA 94301
----------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 61
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
Summit Accelerator Founders Fund, L.P.
---------------------------------------
Print Name of Investor
By /s/
-------------------------------------
Signature
Address: Summit Accelerator Fund
-------------------------------
499 Hamilton Ave., #200
-------------------------------
Palo Alto, CA 94301
-------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 62
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
Summit Accelerator Fund L.P.
----------------------------------
Print Name of Investor
By /s/
----------------------------------
Signature
Address: Summit Accelerator Fund
----------------------------
499 Hamilton Ave., #200
----------------------------
Palo Alto, CA 94301
----------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 63
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
THOMAS L. HERSHNER
------------------------------------
Print Name of Investor
By /s/ Thomas L. Hershner
----------------------------------
Signature
Address: 700 KING'S MOUNTAIN ROAD
----------------------------
WOODSIDE, CA 94062
----------------------------
----------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 64
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
TSUNAMI INVESTMENTS LLC
------------------------------------
Print Name of Investor
By /s/
----------------------------------
Signature
Address: 940 LA MESA DRIVE
----------------------------
PORTOLA VALLEY, CA
----------------------------
94028
----------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 65
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
VANENBURG GROUP B.V.
------------------------------------
Print Name of Investor
By /s/ W.H. Heijting
----------------------------------
Signature
Address: VANENBURGER ALLEE 13
----------------------------
P.O. BOX 231
----------------------------
BSSO DE PUTTEW
----------------------------
THE NETHERLANDS
----------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 66
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
Walden EDB Partners II, L.P.
-----------------------------------------
Print Name of Investor
By /s/
---------------------------------------
Signature
General Partner
Address: 750 Battery Street, Ste. 700
---------------------------------
San Francisco, CA 94111
---------------------------------
---------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 67
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
WIIG-TDF Partners LLC
-------------------------------------------
Print Name of Investor
By /s/
-----------------------------------------
Signature
Director of WIIG Management Co., Ltd.
for and behalf of the Fund Managers
Address: 750 Battery Street, Ste. 700
-----------------------------------
San Francisco, CA 94111
-----------------------------------
-----------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 68
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
William B. Ayer
------------------------------------
Print Name of Investor
By /s/ William B. Ayer
----------------------------------
Signature
Address: 285 Oak St. / PO Box 1445
----------------------------
White Salmon, WA 98672
----------------------------
----------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 69
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
SUBRAH S. IYAR
------------------------------------
Print Name of Investor
By /s/ Subrah S. Iyar
------------------------------------
Signature
Address: 3205 HANCOCK PL
----------------------------
FREMONT, CA 94530
----------------------------
----------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 70
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended
and Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
Yuqing Xu
-----------------------------------------
Print Name of Investor
By /s/ YUQING XU
---------------------------------------
Signature
Address: 24920 La Loma Ct.
---------------------------------
Los Altos Hills, CA 94022
---------------------------------
---------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 71
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended
and Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
Min Zhu
-----------------------------------------
Print Name of Investor
By /s/ MIN ZHU
---------------------------------------
Signature
Address: 24920 La Loma Ct.
---------------------------------
Los Altos Hills, CA 94022
---------------------------------
---------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 72
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
REUTERS HOLDINGS SWITZERLAND SA
------------------------------------
Print Name of Investor
By /s/
------------------------------------
Signature
Address: 153 Route de Thonon
----------------------------
1245 Collogne - Bellerive
----------------------------
Switzerland
----------------------------
Copies of all notices should be
sent to:
Reuters Limited
85 Fleet Street
London EC4P 4AJ
United Kingdom
Attention: General Counsel
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 73
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
Yahoo! Inc.
------------------------------------
Print Name of Investor
By /s/ Ellen Siminoff
------------------------------------
Signature
Ellen Siminoff
Address:
----------------------------
----------------------------
----------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 74
SIGNATURE PAGE TO
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
DATED AS OF MARCH ___ , 2000
BY AND AMONG
WEBEX, INC.
AND EACH HOLDER NAMED THEREIN
The undersigned hereby executes and delivers the WebEx, Inc. Amended and
Restated Investor Rights Agreement (the "Agreement") to which this Signature
Page is attached effective as of the date of the Agreement, which Agreement and
Signature Page, together with all counterparts of such Agreement and signature
pages of the other Holders named in such Agreement, shall constitute one and the
same document in accordance with the terms of such Agreement.
Dr. Thomas W. Kuhr
Managing Director
-----------------------------------------
Print Name of Investor
By /s/ Dr. Thomas W. Kuhr
--------------------------------------
Signature
Address: 2. Dr. Kuhr & Partners GbR
--------------------------------
Godesberger Allee 73
--------------------------------
53175 Bonn
--------------------------------
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
<PAGE> 75
SCHEDULE A
<TABLE>
<CAPTION>
Founders Number of Shares
- -------- ----------------
<S> <C>
Subrah Iyar 5,000,000 Common
c/o WebEx, Inc.
110 Rose Orchard Way
San Jose, CA 95134
Fax: (408) 435-7004
Min Zhu and Yuqing Xu 5,000,000 Common
c/o WebEx, Inc.
110 Rose Orchard Way
San Jose, CA 95134
Fax: (408) 435-7004
</TABLE>
<TABLE>
<CAPTION>
Investors Number of Shares
- --------- ----------------
<S> <C>
Baan Investments 904,474 Series A Preferred
___________________ 4,598,383 Series B Preferred
___________________
New Enterprise Associates 2,333,333 Series C Preferred
___________________
___________________
T-Telematik Venture Beteiligungsgesellschaft MBH 1,436,667 Series C Preferred
___________________
___________________
Walden Ventures 1,333,333 Series C Preferred
Attn: Lip-Bu Tan
___________________
___________________
Vanenburg Group, B.V. 1,000,000 Series C Preferred
___________________
___________________
International Capital Partners, LLC 550,000 Series C Preferred
Attn: Mr. Nicholas Sinacori
300 First Stamford Place
Stamford, CT 06902
Oracle 333,333 Series C Preferred
___________________
___________________
</TABLE>
<PAGE> 76
<TABLE>
<CAPTION>
Investors Number of Shares
- --------- ----------------
<S> <C>
SAP 333,333 Series C Preferred
___________________
___________________
Summit Accelerator Fund, L.P. 333,333 Series C Preferred
___________________
___________________
Net2Phone 240,000 Series C Preferred
___________________
___________________
[Others] 455,930 Series C Preferred
___________________
___________________
</TABLE>
<PAGE> 1
EXHIBIT 4.3
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. SUCH SECURITIES AND ANY SECURITIES OR SHARES ISSUED
HEREUNDER MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN EXEMPTION THEREFROM UNDER SAID ACT.
No. WC-1 Warrants to Purchase 450,000 shares
of Series C Preferred Stock (subject
to adjustment)
WARRANT TO PURCHASE SERIES C PREFERRED STOCK
OF
ACTIVETOUCH, INC.
VOID APRIL 30, 2000
This certifies that, for value received, receipt and sufficiency of which
are hereby acknowledged, 1. T-TELEMATIK VENTURE BETEILIGUNGSGESELLSCHAFT MBH, or
its registered assigns (the "Holder"), is entitled, subject to the terms and
conditions set forth herein, to purchase from ActiveTouch, Inc., a California
corporation, (the "Company"), 450,000 shares of the Company's Series C
Preferred Stock (the "Series C Preferred Stock") at an exercise price as
provided for in Section 2. The term "Warrant" as used herein shall mean this
Warrant, and any warrants delivered in substitution or exchange therefor as
provided herein.
This Warrant is issued pursuant to that certain Series C Preferred Stock
and Warrant Purchase Agreement of even date herewith (the "Purchase
Agreement"), by and among the Company and the Holder. This is one of the
"Warrants" referred to in the Purchase Agreement and the Holder is subject to
certain obligations set forth in the Purchase Agreement.
1. Term of Warrant. Subject to the terms and conditions set forth
herein, this Warrant shall vest and become exercisable, in whole only, during
the term (the "Exercise Period") commencing on the earlier of: (a) the date on
which the Company enters into revenue sharing agreements with Deutsche Telekom
AG ("D.T.") which the Company determines will assure the Company of receiving
in the aggregate at least $3,000,000 in revenues in the one year period
following the earliest effective date of such revenue sharing agreements
(collectively the "D. Telekom Agreement") and (b) the closing of a firmly
underwritten public offering pursuant to a registration statement filed by the
Company under the Securities Act of 1933, as amended (the "Securities Act"),
with a public offering price of at least $10.00 per share and with gross
proceeds to the company of $20,000,000 or more (the "IPO"). The Exercise Period
will end and the Warrant will expire at 5:00 p.m., Pacific standard time, on
April 30, 2000, regardless of whether the Warrant has vested by such time.
2. Number of Shares, Exercise Price. The Warrant shall be exercisable
for 450,000 shares of Series C Preferred Stock at an exercise price per share
of $0.01.
-1-
<PAGE> 2
3. Exercise of Warrant.
(a) Cash Exercise. This Warrant may be exercised in whole by the Holder
during the Exercise Period by (i) the surrender of this Warrant to the Company,
with the Notice of Exercise annexed hereto duly completed and executed on behalf
of the Holder, including a copy of the D. Telekom Agreement (unless this Warrant
is being exercised in connection with the IPO), at the office of the Company (or
such other office or agency of the Company as it may designate by notice in
writing to the Holder at the address of the Holder appearing on the books of the
Company) and (ii) the delivery of payment to the Company, for the account of the
Company, by (i) cash, (ii) wire transfer of immediately available funds to a
bank account specified by the Company, (iii) certified or bank cashier's check,
or (iv) a combination of any of the above, of the Exercise Price for the number
of shares of Series C Preferred Stock specified in the Exercise Form in lawful
money of the United States of America.
(b) Net Issue Exercise. In lieu of exercising this Warrant pursuant to
Section 3(a) hereof, this Warrant may be exercised in whole by the Holder by the
surrender of this Warrant to the Company, with a duly executed Notice of
Exercise marked to reflect Net Issue Exercise, during normal business hours on
any business day during the Exercise Period. Upon such exercise, the Company
shall issue to Holder a number of Shares of Series C Preferred Stock, computed
as of the date of surrender of this Warrant to the Company using the following
formula:
X = Y(A-B)
------
A
Where X = the number of shares of Series C Preferred Stock to be issued to
Holder under this Section 3(b);
Where Y = the number of share of Series C Preferred Stock otherwise
purchasable under this Warrant;
Where A = the fair market value of one share of the Company's Series
C Preferred Stock at the date of such calculation;
Where B = the Exercise Price.
(c) Fair Market Value. For purposes of Section 3(b) hereof, if there
exists a public market for the Company's Common Stock at the time of such
exercise, the fair market value of one share of Series C Preferred Stock shall
mean, as of any such exercise date:
(i) the fair market value of (x) the shares of Common Stock into
which such share of Series C Preferred Stock is convertible as of such
date, or (y) one (1) share of the Company's Common Stock, as the case may
be, as determined from the last closing price per share of the Company's
Common Stock on the principal national securities exchange on which the
Common Stock is listed or admitted to trading, or
(ii) the fair market value of (x) the shares of Common Stock into
which such share of Series C Preferred Stock is convertible as of such
date, or (y) one (1) share of
-2-
<PAGE> 3
Common Stock, as the case may be, as determined from the last reported
sales price per share of the Company's Common Stock on the Nasdaq
National Market or the Nasdaq Small-Cap Market (collectively, "Nasdaq")
if the Company's Common Stock is not listed or traded on any such
exchange, or
(iii) the fair market value of (x) the shares of Common Stock into
which such share of Series C Preferred Stock is convertible as of such
date, or (y) one (1) share of Common Stock, as the case may be, as
determined from the average of the bid and asked price per share as
reported in the "pink sheets" published by the National Quotation Bureau,
Inc. (the "pink sheets") if the Company's Common Stock is not listed or
traded on any exchange or Nasdaq, or
(iv) if there is no such public market for the Company's Common
Stock or if such quotations are not available, the fair market value per
share of the Company's Series C Preferred Stock or Common Stock on the
date such notice was received by the Company as reasonably determined in
good faith by the Board of Directors of the Company.
(d) Delivery of Stock Certificates. This Warrant shall be deemed to
have been exercised immediately prior to the close of business on the date of
its surrender for exercise as provided above, and the person entitled to
receive the Series C Preferred Stock issuable upon such exercise shall be
treated for all purposes as the holder of record of such shares as of the close
of business on such date. As promptly as practicable on or after such date and
in any event within ten (10) business days thereafter, the Company at its
expense shall issue and deliver to the person of persons entitled to receive
the same a certificate or certificates for the number of shares issuable upon
such exercise.
(e) Adjustment. In the event the Company (i) splits, subdivides, or
combines the Series C Preferred Stock into a different number of securities of
the same class, (ii) redeems or converts its Series C Preferred Stock into
shares of the Company's Common Stock, (iii) pays a dividend on the Series C
Preferred Stock in securities or property other than cash, (iv) reclassifies
the Series C Preferred Stock into the same or a different number of securities
(each, an "Adjustment Event"), then the Exercise Price shall be appropriately
adjusted and this Warrant shall represent the right to acquire such number and
the kind of securities that would have been issued had the Holder exercised
this Warrant immediately prior to such an Adjustment Event.
(f) Registration Rights. Upon exercise of this Warrant, the Holder
shall have registration rights under that certain Amended and Restated
Registration Rights Agreement, of even date herewith, by and among the Company
and the parties who have executed the counterpart signature pages thereto or
are otherwise bound thereby (the "Investors' Rights Agreement").
4. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. In lieu of any fractional share to which the Holder would otherwise be
entitled, the Company shall make a cash payment equal to the Exercise Price
multiplied by such fraction.
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<PAGE> 4
5. Replacement of Warrant. On receipt of evidence reasonably satisfactory
to 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 substance to the Company or, in
the case of mutilation, on 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 and amount.
6. Rights as Shareholder. The Holder shall not be entitled to vote or
receive dividends or be deemed the holder of Series C Preferred Stock or any
other securities of the Company that may at any time be issuable on the
exercise hereof for any purpose, nor shall anything contained herein be
construed to confer upon the Holder, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors
or upon any matter submitted to shareholders at any meeting thereof, or to give
or withhold consent to any corporate action (whether upon any recapitalization,
issuance of stock, reclassification of stock, change of par value, or change of
stock to no par value, consolidation, merger, conveyance, or otherwise) or to
receive notice of meetings, or to receive dividends or subscription rights or
otherwise until the Warrant shall have been exercised as provided herein.
7. Transfer of Warrant.
(a) Warrant Register. The Company will maintain a register (the "Warrant
Register") containing the names and addresses of the Holder or Holders. Any
Holder of this Warrant or any portion thereof may change his address as shown
on the Warrant Register by written notice to the Company requesting such
change. Any notice or written communication required or permitted to be given
to the Holder may be delivered or given by mail to such Holder as shown on the
Warrant Register and at the address shown on the Warrant Register. Until this
Warrant is transferred on the Warrant Register of the Company, the Company may
treat the Holder as shown on the Warrant Register as the absolute owner of this
Warrant for all purposes, notwithstanding any notice to the contrary.
(b) Warrant Agent. The Company may, by written notice to the Holder,
appoint an agent for the purpose of maintaining the Warrant Register referred
to in Section 7(a) hereof, issuing the Series C Preferred Stock or other
securities then issuable upon the exercise of this Warrant, exchanging this
Warrant, replacing this Warrant, or any or all of the foregoing. Thereafter,
any such registration, issuance, exchange, or replacement as the case may be,
shall be made at the office of such agent.
(c) Transferability and Nonnegotiability of Warrant. This Warrant is
nontransferable except to Affiliates of the Holder. For purposes of this
section 7(c) "Affiliate" shall have the same meaning as provided for in the
Investors' Rights Agreement. With respect to any offer, sale or other
disposition of this Warrant to an Affiliate, the Holder will give written
notice to the Company prior thereto, describing briefly the manner thereof.
Unless the Company reasonably determines that such transfer would violate
applicable securities laws, or that such transfer would adversely affect the
Company's ability to account for future transactions to which it is a party as
a pooling of interests, and notifies the Holder thereof within ten (10)
business days after receiving notice of the transfer, the Holder may effect
such transfer. Such transfer shall not be valid until the transferee executes
an agreement in form and substance satisfactory to the
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<PAGE> 5
Company to be bound by the provisions of this Warrant and the Investors Rights
Agreement. Each Warrant thus transferred and each certificate representing the
securities thus transferred shall bear a legend as to the applicable
restrictions on transferability in order to ensure compliance with the 1933
Act, unless in the opinion of counsel for the Company such legend is not
required in order to ensure compliance with the 1933 Act. The Company may issue
stop transfer instructions to its transfer agent in connection with such
restrictions.
(d) Exchange of Warrant Upon a Transfer. On surrender of this Warrant for
exchange, properly endorsed on the Assignment Form and subject to the
provisions of this Warrant with respect to compliance with the Securities Act
and with the limitations on assignments and transfers and contained in this
Section 7, the Company at its expense shall issue to or on the order of the
Holder a new warrant or warrants of like tenor, in the name of the Holder or as
the Holder (on payment by the Holder of any applicable transfer taxes) may
direct, for the number of shares issuable upon exercise hereof.
(e) Compliance with Securities Laws.
(i) The Holder of this Warrant, by acceptance hereof, acknowledges
that this Warrant and the Series C Preferred Stock to be issued upon
exercise hereof and the Common Stock to be issued upon conversion thereof
are being acquired solely for the Holder's own account and not as a
nominee for any other party, and for investment, and that the Holder will
not offer, sell or otherwise dispose of this Warrant or any Series C
Preferred Stock to be issued upon exercise hereof or conversion thereof
except under circumstances that will not result in a violation of the
Securities Act or any applicable state securities laws. Upon exercise of
this Warrant, the Holder shall, if requested by the Company, confirm in
writing, in a form satisfactory to the Company, that the Series C
Preferred Stock (or Common Stock issuable upon conversion thereof) so
purchased are being acquired solely for the Holder's own account and not
as a nominee for any other party, for investment, and not with a view
toward distribution or resale.
(ii) This Warrant and all certificates representing the Series C
Preferred Stock issued upon exercise hereof (or Common Stock issuable upon
conversation thereof) (the "Securities") shall be stamped or imprinted
with a legend in substantially the following form (in addition to any
legend required by state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES AND ANY SECURITIES OR
SHARES ISSUED HEREUNDER MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT.
(iii) The Company agrees to remove promptly, upon the request of the
holder of this Warrant and Securities issuable upon exercise of the
Warrant, the legend set forth in Section 7(e)(ii) hereof from the
documents/certificates for such securities upon full compliance with this
Agreement and Rules 144 and 145.
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<PAGE> 6
8. Notices.
(a) In case:
(i) the Company shall take a record of the holders of its Preferred
Stock or Common Stock (or other stock or securities at the time receivable
upon the exercise of this Warrant) for the purpose of entitling them to
receive any dividend or other distribution, or any right to subscribe for
or purchase any shares of stock of any class or any other securities, or to
receive any other right;
(ii) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company with or into another corporation, or any conveyance
of all or substantially all of the assets of the Company to another
corporation;
(iii) of any voluntary dissolution, liquidation or winding-up of the
Company;
(iv) of an Adjustment Event as provided for in Section 3(c);
(v) of any redemption or conversion of all outstanding Series C
Preferred Stock; or
(vi) of the filing of the Company's first registration statement
with the U.S. Securities and Exchange Commission (the "SEC");
then, and in each such case, the Company will mail or cause to be mailed to the
Holder or Holders a notice specifying, as the case may be, (A) the date on
which a record is to be taken for the purpose of such dividend, distribution or
right, and stating the amount and character of such dividend, distribution or
right, (B) the date on which such reorganization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation, winding-up,
redemption or conversion is to take place, and the time, if any is to be fixed,
as of which the holders of record of Preferred Stock or Common Stock (or such
stock or securities at the time receivable upon the exercise of this Warrant)
shall be entitled to exchange their shares of Preferred Stock or Common Stock
(or such other stock or securities) for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
conveyance, dissolution, liquidation or winding-up, (C) the date on which the
Adjustment Event took place and a detailed description of its effect on the
terms of this Warrant or (D) the anticipated date on which the Company expects
its first registration statement with the SEC to become effective. Such notice
shall be mailed at least fifteen (15) days prior to the date therein specified.
(b) Any notice required or permitted hereunder shall be delivered in
person or sent by telecopier or air courier fees prepaid in all cases; to the
address for such party shown on the signature pages hereto, or to such other
address as has been specified by prior written notice to the sending party.
Notice shall be effective upon delivery if it is hand-delivered; upon receipt
if it is transmitted by telecopier or air courier.
9. Amendments. Any provision of this Warrant may be amended, waived or
modified (either generally or in a particular instance, either retroactively or
prospectively and
-6-
<PAGE> 7
either for a specified period of time or indefinitely), upon the written
consent of the Company and Holder.
10. Representations and Covenants of Holder. This Warrant has been
entered into by the Company in reliance upon the representations and covenants
of the Holder which the Holder makes by execution of the Purchase Agreement.
11. Miscellaneous.
(a) This Warrant shall be governed by and construed in accordance with
California law, without regard to the conflict of laws provisions thereof.
(b) In the event of a dispute with regard to the interpretation of this
Warrant, the prevailing party may collect the cost of attorney's fees,
litigation expenses or such other expenses as may be incurred in the
enforcement of the prevailing party's rights hereunder.
(c) This Warrant shall be exercisable as provided for herein, except that
in the event that the expiration date of this Warrant shall fall on a Saturday,
Sunday and or United States federally recognized Holiday, this expiration date
for this Warrant shall be extended to 5:00 p.m. Pacific standard time on the
business day following such Saturday, Sunday or recognized Holiday.
12. Headings; References. All headings used herein are used for
convenience only and shall not be used to continue or interpret this Warrant.
Except as otherwise indicated, all references herein to Sections refer to
Sections hereof.
-7-
<PAGE> 8
13. Counterparts. This Warrant may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, ActiveTouch, Inc. and the Holder have caused this
Warrant to be executed by their officers thereunto duly authorized.
Dated: June __, 1999.
ACTIVETOUCH, INC.
By /s/ Subrah Iyar
------------------------------------------
Subrah Iyar
Chief Executive Officer
Address: 5225 Betsy Ross Drive
Santa Clara CA 95054
Attn: Subrah Iyar
Fax: (408) 980-5280
1. T-TELEMATIK VENTURE
BETEILIGUNGSGESELLSCHAFT MBH
By /s/ Dr. Thomas W. Kohr
------------------------------------------
Name Dr. Thomas W. Kohr
----------------------------------------
Title Geschattsfuhrer
---------------------------------------
Address: T-Telematik Beteiligungsgesellschaft
mbH
Godesberger Allee 73
53175 Bonn
Germany
Attn: Dr. Thomas Kuehr
Fax: 011-49-228-30848-19
-8-
<PAGE> 9
NOTICE OF EXERCISE
To: ACTIVETOUCH, INC.
(1) The undersigned hereby elects to purchase 450,000 shares of Series C
Preferred Stock of ACTIVETOUCH, INC., pursuant to the terms of the attached
Warrant and [ ] tenders herewith payment of the purchase price for such shares
in full along with a copy of the D. Telekom Agreement (as defined this Warrant)
or [ ] elects the Net Issue Exercise Option.
(2) In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the shares of Series C Preferred Stock to be issued upon
conversion thereof are being acquired solely for the account of the undersigned
and not as a nominee for any other party, or for investment, and that the
undersigned will not offer, sell or otherwise dispose of any such shares of
Series C Preferred Stock except under circumstances that will not result in a
violation of the Securities Act of 1933, as amended, or any applicable state
securities laws.
(3) Please issue a certificate or certificates representing said shares
of Series C Preferred Stock in the name of the undersigned Holder.
Dated: ________________.
HOLDER
______________________________
By ___________________________
Name _________________________
Title ________________________
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<PAGE> 10
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under the within Warrant and does hereby irrevocably
constitute and appoint Attorney ____________________________ to make such
transfer on the books of ACTIVETOUCH, INC., maintained for the purpose, with
full power of substitution in the premises.
The Assignee acknowledges that this Warrant and the shares of stock to
be issued upon exercise hereof or conversion thereof are being acquired for
investment and that the Assignee will not offer, sell or otherwise dispose of
this Warrant or any shares of stock to be issued upon exercise hereof or
conversion thereof except under circumstances which will not result in a
violation of the Securities Act of 1933, as amended, or any applicable state
securities laws. Further, the Assignee acknowledges that upon exercise of this
Warrant, the shares of stock so purchased are being acquired for investment and
not with a view toward distribution or resale and that such shares of stock are
subject to the terms and conditions contained in the Investors' Rights
Agreement (as defined in this Warrant).
Dated:
---------------
HOLDER
---------------------------------------
By
-------------------------------------
Name
-----------------------------------
Title
----------------------------------
ASSIGNEE
---------------------------------------
By
-------------------------------------
Name
-----------------------------------
Title
----------------------------------
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<PAGE> 1
EXHIBIT 4.4
CONFIDENITAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE
BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION
NEITHER THE WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). NO
SALE, TRANSFER OR OTHER DISPOSITION OF THIS WARRANT OR SAID SHARES MAY BE
EFFECTED WITHOUT (i) AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (ii)
AN OPINION OF COUNSEL FOR THE PURCHASER, WHICH COUNSEL SHALL BE REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED OR (iii)
RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION TO THE
EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED.
Date of Issuance: March 29, 2000 ("Date of Issuance") Warrant No.: W-D1
WARRANT TO PURCHASE UP TO 339,915
SHARES OF SERIES D PREFERRED STOCK
OF WEBEX, INC.
THIS CERTIFIES THAT Yahoo! Inc., a Delaware corporation ("Purchaser"),
is entitled to purchase under this Warrant up to 339,915 shares of Series D
Preferred Stock, no par value per share (including any other class of securities
for which this Warrant becomes exercisable pursuant to the provisions hereof,
the "Company Stock") of WebEx, Inc., California corporation (the "Company"), at
a per share price of $12.50 (the "Exercise Price"), subject to the provisions
and upon the terms and conditions hereinafter set forth. The shares of Company
Stock or other securities for which this Warrant becomes exercisable pursuant to
the provisions hereof are hereinafter referred to as the "Shares."
1. Vesting and Term.
1.1 Vesting Date. All of the Shares subject to this Warrant
shall be fully vested on the Date of Issuance. This Warrant shall become
exercisable with respect to all of the Shares on the first annual anniversary of
the Date of Issuance.
1.2 Termination Date. This Warrant shall remain exercisable with
respect to the Shares until 5:00 p.m. California time on the second annual
anniversary of the Date of Issuance.
2. Conversion.
2.1 Method of Exercise; Payment; Issuance of New Warrant. This
Warrant may be exercised by the Purchaser hereof, in whole or in part and from
time to time, by the surrender of this Warrant (with a notice of exercise in the
form attached as Exhibit A and the investment representation certificate in the
form attached as Exhibit B duly executed) at the principal office of the Company
and by the payment to the Company by check or wire transfer, of an amount equal
to the then current Exercise Price per share multiplied by the number of
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<PAGE> 2
Shares then being purchased (the "Aggregate Exercise Price"). The person or
persons in whose name(s) any certificate(s) representing Shares shall be
issuable upon exercise of this Warrant shall be deemed to have become the
Purchaser(s) of record of, and shall be treated for all purposes as the record
Purchaser(s) of the shares represented thereby (and such shares shall be deemed
to have been issued) immediately prior to the close of business on the date or
dates upon which this Warrant is exercised. In the event of any exercise of this
Warrant, certificates for the Shares so purchased shall be delivered to the
Purchaser hereof as soon as possible and in any event within thirty (30) days of
receipt of such notice by the Company and, unless this Warrant has been fully
exercised or expired, a new Warrant representing the portion of the Shares, if
any, with respect to which this Warrant shall not then have been exercised shall
also be issued to the Purchaser hereof as soon as possible and in any event
within such thirty-day period.
2.2 Right to Convert Warrant into Stock; Net Issuance. In
addition to and without limiting the rights of the Purchaser under the terms of
this Warrant, the Purchaser may elect to convert this Warrant or any portion
thereof (the "Conversion Right"), but only to the extent that the Purchaser then
has a right to exercise this Warrant, into Shares, the aggregate value of which
Shares shall be equal to the value of this Warrant or the portion thereof being
converted. The Conversion Right may be exercised by the Purchaser by surrender
of this Warrant at the principal office of the Company together with notice of
the Purchaser's intention to exercise the Conversion Right, in which event the
Company shall issue to the Purchaser a number of Shares computed using the
following formula:
X= Y(A-B)
------
A
Where:
X The number of Shares to be issued to the Purchaser.
Y The number of Shares representing the portion of this
Warrant that is being converted.
A The fair market value of one Share.
B The Exercise Price (as adjusted to the date of such
calculations).
For purposes of this Section 2.2, the "fair market value" per Share shall mean:
(a) the product of (i) the average daily Market Price (as defined
below) during the period of the most recent 20 days, ending on the last business
day before the effective date of exercise of the Conversion Right, on which the
national securities exchanges were open for trading and (ii) the number of
shares of the Common Stock (as defined herein) into which each Share is
convertible on such date; or
2
<PAGE> 3
(b) if no class of Common Stock is then listed or admitted to
trading on any national securities exchange or quoted in the over-counter
market, the fair market value shall be the Market Price on the last business day
before the effective date of exercise of the Conversion Right.
If the Common Stock is traded on a national securities exchange
or admitted to unlisted trading privileges on such an exchange, or is listed on
the National Market System (the "National Market System") of the National
Association of Securities Dealers Automated Quotations System (the "NASDAQ"),
the Market Price as of a specified day shall be the last reported sale price of
Common Stock on such exchange or on the National Market System on such date or
if no such sale is made on such day, the mean of the closing bid and asked
prices for such day on such exchange or on the National Market System. If the
Common Stock is not so listed or admitted to unlisted trading privileges, the
Market Price as of a specified day shall be the mean of the last bid and asked
prices reported on such date (x) by the NASDAQ or (y) if reports are unavailable
under clause (x) above by the National Quotation Bureau Incorporated. If the
Common Stock is not so listed or admitted to unlisted trading privileges and bid
and ask prices are not reported, the Market Price as of a specified day shall be
determined in good faith by written resolution of the Board of Directors of the
Company.
3. Securities Fully Paid; Reservation of Shares; Capitalization
Representations. All Shares that may be issued upon the exercise of the rights
represented by this Warrant (and shares of the Company's Common Stock issuable
upon conversion of the Shares), upon issuance, will be fully paid and
nonassessable, and free from all taxes, liens and charges with respect to the
issue thereof. During the period within which the rights represented by the
Warrant may be exercised, the Company will at all times have authorized and
reserved for the purpose of issuance upon exercise of the purchase rights
evidenced by this Warrant, a sufficient number of shares of Company Stock (and
shares of Common Stock issuable upon conversion of the Shares) as from time to
time shall be issuable upon the exercise of this Warrant. As of the Date of
Issuance, each share of Preferred Stock may be converted into one (1) share of
Common Stock.
4. Adjustment of Exercise Price and Number of Shares. The number and
kind of securities purchasable upon the exercise of the Warrant and the Exercise
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
4.1 Reclassification or Merger. In case of any reclassification,
change or conversion of securities in the class issuable upon exercise of this
Warrant (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision or combination),
or in case of any merger of the Company with or into another corporation (other
than a merger with another corporation in which the Company is a continuing
corporation and which does not result in any reclassification or change of
outstanding securities issuable upon exercise of this Warrant), or in case of
any sale or transfer of all or substantially all of the assets of the Company,
unless this Warrant shall have been exercised or terminated in accordance with
its terms, the Purchaser of this Warrant shall have the right to exercise this
Warrant and upon such exercise to receive, in lieu of the Shares theretofore
issuable upon
3
<PAGE> 4
exercise of this Warrant, the kind and amount of consideration, including but
not limited to shares of stock, other securities, money and property receivable
upon such reclassification, change, conversion, merger, sale or transfer as
would have been received if this Warrant had been exercised in full immediately
prior to such event. The provisions of this subparagraph shall similarly apply
to successive reclassifications, changes, conversions, mergers, sales or
transfers.
4.2 Subdivisions or Combination of Shares. If at any time while
this Warrant remains outstanding and unexpired the Company shall subdivide or
combine its Company Stock, the Exercise Price and the number of Shares issuable
upon exercise hereof shall be proportionately adjusted.
4.3 Stock Dividends. If at any time while this Warrant is
outstanding and unexpired the Company shall pay a dividend payable in shares of
Company Stock (except any distribution specifically provided for in the
foregoing subparagraphs 4.1 and 4.2), then the Exercise Price shall be adjusted,
from and after the date of determination of shareholders entitled to receive
such dividend or distribution, to that price determined by multiplying the
Exercise Price in effect immediately prior to such date of determination by a
fraction (a) the numerator of which shall be the total number of shares of
Company Stock outstanding immediately prior to such dividend or distribution,
and (b) the denominator of which shall be the total number of shares of Company
Stock outstanding immediately after such dividend or distribution and the number
of Shares subject to this Warrant shall be proportionately adjusted.
4.4 Notice of Adjustments. Whenever the Exercise Price shall be
adjusted pursuant to the provisions hereof, the Company shall within thirty (30)
days of such adjustment deliver a certificate signed by its chief financial
officer to Purchaser setting forth, in reasonable detail, the event requiring
the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated, and the number of Shares subject to this Warrant and
the Exercise Price therefor, as applicable, after giving effect to such
adjustment.
5. Compliance with Securities Laws.
5.1 Accredited Investor. This Warrant is conditioned upon, and by
its acceptance hereof Purchaser hereby confirms, that Purchaser is an
"accredited investor" as that term is defined under Regulation D under the
Securities Act of 1933, as amended (the "Securities Act").
5.2 Legend. Upon issuance, the Shares 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
WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO
RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
4
<PAGE> 5
CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
together with any legend required under applicable State securities laws.
5.3 Compliance with Securities Laws on Transfer. This Warrant and
the Shares issuable upon exercise of this Warrant 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).
6. Fractional Shares. No fractional shares will be issued in connection
with any exercise hereunder, but in lieu of such fractional shares the Company
shall make a cash payment therefor upon the basis of the Exercise Price then in
effect.
7. Registration Rights. Purchaser shall be a party to the Company's
Amended and Restated Investors Rights Agreement dated as of March 29, 2000 (the
"Investors Rights Agreement"). In addition, the Shares subject to this Warrant
shall be deemed to be "Registrable Securities" pursuant to the Investors Rights
Agreement, and Purchaser shall be entitled to receive registration rights and
other rights contained in the Investors Rights Agreement on a pari passu basis
with the other Holders (as defined in the Investors Rights Agreement) of
Registrable Securities as set forth in the Investors Rights Agreement.
8. Modification and Waiver. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
9. Notices.
9.1 Notice of Certain Events. The Company shall provide the
Purchaser with at least ten (10) business days notice (or such greater amount of
notice as California law requires to be given to shareholders having the right
to vote at a meeting on any Sale Event, as defined herein) prior to (i) a merger
of the Company with or into, the consolidation of the Company with, or the sale
or transfer by the Company of all or substantially all of its assets to, another
person or entity (other than such a transaction wherein the shareholders of the
Company prior to such transaction retain or obtain a majority of the voting
capital stock of the surviving, resulting or purchasing entity)(a "Sale Event"),
(ii) any liquidation, dissolution or winding up of the Company or (iii) the
record date for any cash dividend declared on the Company Stock (each, a "Notice
Event"). If the notice is provided pursuant to subsection (i) or (ii) of the
previous sentence, the notice will indicate the expected date of the Notice
Event.
9.2 Notice Procedure. Any notice required or permitted pursuant
to this Warrant shall be in writing and shall be deemed sufficient when either
(a) delivered personally, (b) sent by e-mail or fax with confirmation of receipt
or (c) deposited in the U.S. mail, as certified or registered mail, with postage
prepaid, addressed as follows:
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<PAGE> 6
IF TO THE PURCHASER:
Yahoo! Inc.
3420 Central Expressway
Santa Clara, California 95051
Attention: Senior Vice President Corporate Development
e-mail: ****
Fax: ****
with a copy to:
Yahoo! Inc.
3420 Central Expressway
Santa Clara, California 95051
Attention: General Counsel
e-mail: ****
Fax: ****
IF TO THE COMPANY:
WebEx, Inc.
110 Rose Orchard Way
San Jose, California 95134
Attention: Subrah S. Iyar
e-mail: ****
Fax: ****
With a copy to:
Pillsbury Madison & Sutro LLP
2550 Hanover Street
Palo Alto, California 94304
Attention: Allison Leopold Tilley
e-mail: ****
Fax: ****
Each of the foregoing parties shall be entitled to specify a different
address by giving five (5) days advance written notice as aforesaid to the other
parties. All such notices and communications shall be deemed to have been
received (i) in the case of personal delivery or delivery by e-mail or fax, on
the date of such delivery (provided there is confirmation of such delivery) and
(ii) in the case of mailing, on the third business day following the date of
such mailing.
10. Lost Warrants or Stock Certificates. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction, or
mutilation of this Warrant or any
* CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.
6
<PAGE> 7
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
11. Non-Disclosure. The terms and conditions of this Warrant shall be
considered confidential and shall not be disclosed to any third parties except
to Company's or Purchaser's accountants, attorneys, members of its board of
directors or existing shareholders (solely in connection with the Company's
private financings) or except as otherwise required by law. Neither Company nor
Purchaser shall make any public announcement regarding the existence of this
Warrant without the other party's prior written approval and consent. If Company
or Purchaser desires to make a public announcement regarding the existence of
this Warrant, it shall provide the other with a minimum of three (3) business
days notice of the intended disclosure. If this Agreement or any of its terms
must be disclosed by Company under any law, rule or regulation, Company shall
(i) give written notice of the intended disclosure to Purchaser at least five
(5) days in advance of the date of disclosure, (ii) redact portions of this
Agreement as reasonably requested by Purchaser, and (iii) submit a request, to
be agreed upon by Purchaser, that such portions and other provisions of this
Agreement requested by Purchaser pursuant to the preceding clause (ii) receive
confidential treatment under the laws, rules and regulations of the body or
tribunal to which disclosure is being made or otherwise be held in the strictest
confidence to the fullest extent permitted under the laws, rules or regulations
of any other applicable governing body.
12. No Impairment. The Company will not, through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution,
issuance or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Company, but will at all times in good faith assist
in the carrying out of all the provisions of this Warrant and in the taking of
all such action as may be necessary or appropriate in order to protect the
rights of the holder of this Warrant against impairment.
13. Governing Law. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of California, without regard to conflict of laws provisions thereof.
7
<PAGE> 8
IN WITNESS WHEREOF, this Warrant has been executed as of the Date of
Issuance.
WEBEX, INC.
By /s/ Subrah S. Iyar
---------------------------------
Name Subrah S. Iyar
---------------------------------
Title CEO
---------------------------------
YAHOO! INC.
By /s/ Ellen Siminoff
---------------------------------
Name Ellen Siminoff
---------------------------------
Title SVP Corporate Development
---------------------------------
8
<PAGE> 9
EXHIBIT "A"
NOTICE OF EXERCISE FORM
(To be executed only upon partial or full
exercise of the within Warrant)
The undersigned registered Purchaser of the within Warrant hereby
irrevocably exercises the within Warrant for and purchases shares of Series D
Preferred Stock of WebEx, Inc. and herewith makes payment therefor in the amount
of $___ , all at the price and on the terms and conditions specified in the
within Warrant and requests that a certificate (or ___ certificates in
denominations of shares) for the shares of Series D Preferred Stock of WebEx,
Inc. hereby purchased be issued in the name of and delivered to (choose one) (a)
the undersigned or (b) [NAME], whose address is
____________________________________ and, if such shares of Series D Preferred
Stock shall not include all the shares of Series D Preferred Stock issuable as
provided in the within Warrant, that a new Warrant of like tenor for the number
of shares of Series D Preferred Stock of WebEx, Inc. not being purchased
hereunder be issued in the name of and delivered to (choose one) (a) the
undersigned or (b) [NAME], whose address is _____________________________.
Date:
----------------------
-----------------------------------
-----------------------------------
By:
-----------------------------------
(Signature of Registered Purchaser)
Title:
-----------------------------------
NOTICE: The signature to this Notice of Exercise must correspond with the name
as written upon the face of the within Warrant in every particular,
without alteration or enlargement or any change whatever.
9
<PAGE> 10
EXHIBIT "B"
INVESTMENT REPRESENTATION CERTIFICATE
Purchaser:
Company: WebEx, Inc.
Security: Series D Preferred Stock
Amount:
Date:
In connection with the purchase of the above-listed securities (the
"Securities"), the undersigned (the "Purchaser") represents to the Company as
follows:
The Purchaser is aware of the Company's business affairs and financial
condition, and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Securities. The Purchaser is
purchasing the Securities for its own account for investment purposes only and
not with a view to, or for the resale in connection with, any "distribution"
thereof for purposes of the Securities Act of 1933, as amended (the "Securities
Act");
The Purchaser understands that the Securities have not been registered
under the Securities Act in reliance upon a specific exemption therefor, which
exemption depends upon, among other things, the bona fide nature of the
Purchaser's investment intent as expressed herein. In this connection, the
Purchaser understands that, in the view of the Securities and Exchange
Commission ("SEC"), the statutory basis for such exemption may be unavailable if
the Purchaser's representation was predicated solely upon a present intention to
hold these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. The Purchaser is an "accredited investor" as that term is
defined under Regulation D promulgated by the Securities and Exchange Commission
under the Securities Act;
The Purchaser further understands that the Securities must be held
indefinitely unless subsequently registered under the Securities Act or unless
an exemption from registration is otherwise available. In addition, the
Purchaser understands that the certificate evidencing the Securities will be
imprinted with the legend referred to in this Warrant under which the Securities
are being purchased;
The Purchaser is aware of the provisions of Rule 144, promulgated under
the Securities Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering subject
to the satisfaction of certain conditions, if applicable, including, among other
things:
10
<PAGE> 11
(i) the availability of certain public information about the Company; (ii) the
resale occurring not less than one (1) year after the party has purchased and
paid for the securities to be sold; (iii) the sale being made through a broker
in an unsolicited "broker's transaction" or in transactions directly with a
market maker (as said term is defined under the Securities Exchange Act of 1934,
as amended) and the amount of securities being sold during any three-month
period not exceeding the specified limitations stated therein;
The Purchaser further understands that at the time it wishes to sell the
Securities there may be no public market upon which to make such a sale, and
that, even if such a public market upon which to make such a sale then exists,
notwithstanding the Company's best efforts obligation to do so set forth in the
Warrant, the Company may not be satisfying the current public information
requirements of Rule 144, and that, in such event, the Purchaser may be
precluded from selling the Securities under Rule 144 even if the one-year
minimum holding period had been satisfied; and
The Purchaser further understands that in the event all of the
requirements of Rule 144 are not satisfied, registration under the Securities
Act, compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive, the
staff of the SEC has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rule 144 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk.
Date:
-----------------
PURCHASER:
----------------------------------------
11
<PAGE> 1
EXHIBIT 10.1
ACTIVETOUCH, INC.
AMENDED AND RESTATED
1998 STOCK PLAN
(AS AMENDED EFFECTIVE MARCH 12, 1999)
(AS AMENDED EFFECTIVE APRIL 28, 1998)
(ORIGINALLY ADOPTED AS OF FEBRUARY 18, 1998)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
SECTION 1. PURPOSE...........................................................................1
SECTION 2. DEFINITIONS.......................................................................1
(a) "Board of Directors".................................................................1
(b) "Code"...............................................................................1
(c) "Committee"..........................................................................1
(d) "Company"............................................................................1
(e) "Disability".........................................................................2
(f) "Employee"...........................................................................2
(g) "Exercise Price".....................................................................2
(h) "Fair Market Value"..................................................................2
(i) "ISO"................................................................................2
(j) "Nonstatutory Option"................................................................2
(k) "Offeree"............................................................................2
(l) "Option".............................................................................2
(m) "Optionee"...........................................................................2
(n) "Plan"...............................................................................2
(o) "Purchase Price".....................................................................2
(p) "Service"............................................................................2
(q) "Share"..............................................................................3
(r) "Stock"..............................................................................3
(s) "Stock Option Agreement".............................................................3
(t) "Stock Purchase Agreement"...........................................................3
(u) "Subsidiary".........................................................................3
SECTION 3. ADMINISTRATION....................................................................3
(a) Committee Membership.................................................................3
(b) Committee Procedures.................................................................3
(c) Committee Responsibilities...........................................................4
(d) Financial Reports....................................................................5
SECTION 4. ELIGIBILITY.......................................................................5
(a) General Rule.........................................................................5
(b) Ten-Percent Shareholders.............................................................5
(c) Attribution Rules....................................................................6
(d) Outstanding Stock....................................................................6
SECTION 5. STOCK SUBJECT TO PLAN.............................................................6
(a) Basic Limitation.....................................................................6
(b) Additional Shares....................................................................6
SECTION 6. TERMS AND CONDITIONS OF AWARDS OR SALES...........................................7
(a) Stock Purchase Agreement.............................................................7
(b) Duration of Offers and Nontransferability of Rights..................................7
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
(c) Purchase Price.......................................................................7
(d) Withholding Taxes....................................................................8
(e) Restrictions on Transfer of Shares...................................................8
SECTION 7. TERMS AND CONDITIONS OF OPTIONS...................................................8
(a) Stock Option Agreement...............................................................8
(b) Number of Shares.....................................................................8
(c) Exercise Price.......................................................................9
(d) Withholding Taxes....................................................................9
(e) Exercisability.......................................................................9
(f) Term.................................................................................9
(g) Nontransferability..................................................................10
(h) Exercise of Options on Termination of Service.......................................10
(i) No Rights as a Shareholder..........................................................10
(j) Modification, Extension and Assumption of Options...................................10
(k) Restrictions on Transfer of Shares..................................................11
SECTION 8. PAYMENT FOR SHARES...............................................................11
(a) General Rule........................................................................11
(b) Surrender of Stock..................................................................11
(c) Promissory Notes....................................................................11
(d) Cashless Exercise...................................................................12
SECTION 9. ADJUSTMENT OF SHARES.............................................................12
(a) General.............................................................................12
(b) Reorganizations.....................................................................12
(c) Reservation of Rights...............................................................12
SECTION 10. LEGAL REQUIREMENTS..............................................................13
SECTION 11. NO EMPLOYMENT RIGHTS............................................................13
SECTION 12. DURATION AND AMENDMENTS.........................................................14
(a) Term of the Plan....................................................................14
(b) Right to Amend or Terminate the Plan................................................14
(c) Effect of Amendment or Termination..................................................14
SECTION 13. EXECUTION.......................................................................15
</TABLE>
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<PAGE> 4
ACTIVETOUCH, INC.
AMENDED AND RESTATED
1998 STOCK PLAN
(EFFECTIVE AS OF FEBRUARY 18, 1998)
SECTION 1. PURPOSE.
The purpose of the Plan is to offer selected employees, directors and
consultants an opportunity to acquire a proprietary interest in the success of
the Company, or to increase such interest, to encourage such selected persons to
remain in the employ of the Company and to attract new employees with
outstanding qualifications. The Plan provides for the direct award or sale of
Shares and for the grant of Options to purchase Shares. Options granted under
the Plan may include Nonstatutory Options as well as incentive stock options
intended to qualify under section 422 of the Internal Revenue Code.
SECTION 2. DEFINITIONS.
(a) "Board of Directors" shall mean the Board of Directors of the
Company, as constituted from time to time.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Committee" shall mean a committee consisting of members of the
Board of Directors that is appointed by the Board of Directors. If no Committee
has been appointed, the entire Board of Directors shall constitute the
Committee. At such time as the officers and directors of the Company become
reporting persons with respect to the Securities Exchange Act of 1934, the
Committee shall have membership composition which enables the Plan to qualify
under Rule 16b-3 with regard to the grant of Options or other rights to acquire
Shares to persons who are subject to Section 16 of the Securities Exchange Act
of 1934.
(d) "Company" shall mean ActiveTouch, Inc., a California corporation.
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<PAGE> 5
(e) "Disability" shall means that an Optionee is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment.
(f) "Employee" shall mean (i) any individual who is a common-law
employee of the Company or of a Subsidiary, (ii) a member of the Board of
Directors, or (iii) a consultant who performs services for the Company or a
Subsidiary. Service as a member of the Board of Directors or as a consultant
shall be considered employment for all purposes under the Plan except the second
sentence of Section 4(a).
(g) "Exercise Price" shall mean the amount for which one Share may be
purchased upon exercise of an Option, as specified by the Committee in the
applicable Stock Option Agreement.
(h) "Fair Market Value" shall mean the fair market value of a Share, as
determined by the Committee in good faith. Such determination shall be
conclusive and binding on all persons.
(i) "ISO" shall mean an employee incentive stock option described in
Code section 422(b).
(j) "Nonstatutory Option" shall mean an employee stock option that is
not an ISO.
(k) "Offeree" shall mean an individual to whom the Committee has offered
the right to acquire Shares (other than upon exercise of an Option).
(l) "Option" shall mean an ISO or Nonstatutory Option granted under the
Plan and entitling the holder to purchase Shares.
(m) "Optionee" shall mean an individual who holds an Option.
(n) "Plan" shall mean this ActiveTouch, Inc. Amended and Restated 1998
Stock Plan.
(o) "Purchase Price" shall mean the consideration for which one Share
may be acquired under the Plan (other than upon exercise of an Option), as
specified by the Committee.
(p) "Service" shall mean service as an Employee.
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<PAGE> 6
(q) "Share" shall mean one share of Stock, as adjusted in accordance
with Section 9 (if applicable).
(r) "Stock" shall mean the common stock of the Company.
(s) "Stock Option Agreement" shall mean the agreement between the
Company and an Optionee which contains the terms, conditions and restrictions
pertaining to his or her Option.
(t) "Stock Purchase Agreement" shall mean the agreement between the
Company and an Offeree who acquires Shares under the Plan which contains the
terms, conditions and restrictions pertaining to the acquisition of such Shares.
(u) "Subsidiary" shall mean any corporation, of which the Company and/or
one or more other Subsidiaries own not less than 50 percent of the total
combined voting power of all classes of outstanding stock of such corporation. A
corporation that attains the status of a Subsidiary on a date after the adoption
of the Plan shall be considered a Subsidiary commencing as of such date.
SECTION 3. ADMINISTRATION.
(a) Committee Membership. The Plan shall be administered by the
Committee, which shall consist of members of the Board of Directors. The members
of the Committee shall be appointed by the Board of Directors.
(b) Committee Procedures. The Board of Directors shall designate one of
the members of the Committee as chairperson. The Committee may hold meetings at
such times and places as it shall determine. The acts of a majority of the
Committee members present at meetings at which a quorum exists, or acts reduced
to or approved in writing by all Committee members, shall be valid acts of the
Committee.
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<PAGE> 7
(c) Committee Responsibilities. Subject to the provisions of the Plan,
the Committee shall have full authority and discretion to take the following
actions:
(i) To interpret the Plan and to apply its provisions;
(ii) To adopt, amend or rescind rules, procedures and forms
relating to the Plan;
(iii) To authorize any person to execute, on behalf of the
Company, any instrument required to carry out the purposes of the Plan;
(iv) To determine when Shares are to be awarded or offered for
sale and when Options are to be granted under the Plan;
(v) To select Offerees and Optionees;
(vi) To determine the number of Shares to be awarded or offered
for sale or to be made subject to each Option;
(vii) To prescribe the terms and conditions of each award or
sale of Shares, including (without limitation) the Purchase Price and
vesting of the award, and to specify the provisions of the Stock
Purchase Agreement relating to such award or sale;
(viii) To prescribe the terms and conditions of each Option,
including (without limitation) the Exercise Price and vesting of the
Option, to determine whether such Option is to be classified as an ISO
or as a Nonstatutory Option, and to specify the provisions of the Stock
Option Agreement relating to such Option;
(ix) To amend any outstanding Stock Purchase or Stock Option
Agreement; provided, however, that the rights and obligations under any
Stock Purchase or Stock Option Agreement shall not be materially altered
or impaired adversely by any such amendment, except with the consent of
the Optionee or Offeree;
(x) To determine the disposition of an Option or other right to
acquire Shares in the event of an Optionee's or Offeree's divorce or
dissolution of marriage;
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<PAGE> 8
(xi) To correct any defect, supply any omission, or reconcile
any inconsistency in the Plan and any Stock Purchase or Stock Option
Agreement; and
(xii) To take any other actions deemed necessary or advisable
for the administration of the Plan.
All decisions, interpretations and other actions of the Committee shall
be final and binding on all Offerees, Optionees, and all persons deriving their
rights from an Offeree or Optionee. No member of the Committee shall be liable
for any action that he or she has taken or has failed to take in good faith with
respect to the Plan, any Option or any other right to acquire Shares under the
Plan.
(d) Financial Reports. To the extent required by applicable law, and not
less often than annually, the Company shall furnish to Optionees and Offerees
Company summary financial information including a balance sheet regarding the
Company's financial condition and results of operations, unless such Optionees
or Offerees have duties with the Company that assure them access to equivalent
information. Such financial statements need not be audited.
SECTION 4. ELIGIBILITY.
(a) General Rule. Only Employees shall be eligible for designation as
Optionees or Offerees by the Committee. In addition, only individuals who are
employed as common-law employees by the Company or a Subsidiary shall be
eligible for the grant of ISOs.
(b) Ten-Percent Shareholders. An Employee who owns more than 10 percent
of the total combined voting power of all classes of outstanding stock of the
Company or any of its Subsidiaries shall not be eligible for designation as an
Optionee or Offeree unless (i) the Exercise Price for an option is at least 110
percent of Fair Market Value on the date of grant, (ii) the Purchase Price for a
sale of Shares is at least 100% of Fair Market Value at the date of
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<PAGE> 9
purchase, and (ii) in the case of an ISO, such ISO by its terms is not
exercisable after the expiration of five years from the date of grant.
(c) Attribution Rules. For purposes of Subsection (b) above, in
determining stock ownership, an Employee shall be deemed to own the stock owned,
directly or indirectly, by or for his brothers, sisters, spouse, ancestors and
lineal descendants. Stock owned, directly or indirectly, by or for a
corporation, partnership, estate or trust shall be deemed to be owned
proportionately by or for its shareholders, partners or beneficiaries.
(d) Outstanding Stock. For purposes of Subsection (b) above,
"outstanding stock" shall include all stock actually issued and outstanding
immediately after the grant. "Outstanding stock" shall not include shares
authorized for issuance under outstanding options held by the Employee or by any
other person.
SECTION 5. STOCK SUBJECT TO PLAN.
(a) Basic Limitation. Shares offered under the Plan shall be authorized
but unissued Shares, or issued Shares that have been reacquired by the Company.
The aggregate number of Shares which may be issued under the Plan (upon exercise
of Options or other rights to acquire Shares) shall not exceed Six Million Four
Hundred Thousand (6,400,000) Shares, subject to adjustment pursuant to Section
9. The number of Shares which are subject to Options or other rights to acquire
Shares outstanding at any time under the Plan shall not exceed the number of
Shares which then remain available for issuance under the Plan. During the term
of the Plan, the Company shall at all times reserve and keep available
sufficient Shares to satisfy the requirements of the Plan.
(b) Additional Shares. In the event that any outstanding Option or other
right to acquire Shares for any reason expires or is canceled or otherwise
terminated, the Shares
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<PAGE> 10
allocable to the unexercised portion of such Option or other right shall again
be available for the purposes of the Plan.
SECTION 6. TERMS AND CONDITIONS OF AWARDS OR SALES.
(a) Stock Purchase Agreement. Each award or sale of Shares under the
Plan (other than upon exercise of an Option) shall be evidenced by a Stock
Purchase Agreement between the Offeree and the Company. Such award or sale shall
be subject to all applicable terms and conditions of the Plan and may be subject
to any other terms and conditions which are not inconsistent with the Plan and
which the Committee deems appropriate for inclusion in a Stock Purchase
Agreement. The provisions of the various Stock Purchase Agreements entered into
under the Plan need not be identical.
(b) Duration of Offers and Nontransferability of Rights. Any right to
acquire Shares under the Plan (other than an Option) shall automatically expire
if not exercised by the Offeree within the number of days specified by the
Committee and communicated to the Offeree by the Committee. Such right shall not
be transferable and shall be exercisable only by the Offeree to whom such right
was granted.
(c) Purchase Price. To the extent required by applicable law, the
Purchase Price of Shares to be offered under the Plan shall not be less than
eighty-five percent (85%) of the Fair Market Value of such Shares, except as
otherwise provided in Section 4(b). Subject to the preceding sentence, the
Purchase Price shall be determined by the Committee at its sole discretion. The
Purchase Price shall be payable in a form described in Section 8 or in the form
of services previously rendered to the Company.
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<PAGE> 11
(d) Withholding Taxes. As a condition to the purchase of Shares, the
Offeree shall make such arrangements as the Committee may require for the
satisfaction of any federal, state or local withholding tax obligations that may
arise in connection with such purchase.
(e) Restrictions on Transfer of Shares. No Shares awarded or sold under
the Plan may be sold or otherwise transferred or disposed of by the Offeree
during the one hundred eighty (180) day period following the effective date of a
registration statement covering securities of the Company filed under the
Securities Act of 1933. Subject to the preceding sentence, any Shares awarded or
sold under the Plan shall be subject to such special conditions, rights of
repurchase, rights of first refusal and other transfer restrictions as the
Committee may determine. Such restrictions shall be set forth in the applicable
Stock Purchase Agreement and shall apply in addition to any general restrictions
that may apply to all holders of Shares. To the extent required by applicable
law, any service-based vesting conditions shall not be less rapid than the
schedule set forth in Section 7(e).
SECTION 7. TERMS AND CONDITIONS OF OPTIONS.
(a) Stock Option Agreement. Each grant of an Option under the Plan shall
be evidenced by a Stock Option Agreement between the Optionee and the Company.
Such Option shall be subject to all applicable terms and conditions of the Plan
and may be subject to any other terms and conditions which are not inconsistent
with the Plan and which the Committee deems appropriate for inclusion in a Stock
Option Agreement. The provisions of the various Stock Option Agreements entered
into under the Plan need not be identical.
(b) Number of Shares. Each Stock Option Agreement shall specify the
number of Shares that are subject to the Option and shall provide for the
adjustment of such number in
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<PAGE> 12
accordance with Section 9. The Stock Option Agreement shall also specify whether
the Option is an ISO or a Nonstatutory Option.
(c) Exercise Price. Each Stock Option Agreement shall specify the
Exercise Price. The Exercise Price of an ISO shall not be less than one hundred
percent (100%) of the Fair Market Value of a Share on the date of grant, except
as otherwise provided in Section 4(b). The Exercise Price of a Nonstatutory
Option shall not be less than eighty-five percent (85%) of the Fair Market Value
of a Share on the date of grant, except as otherwise provided in Section 4(b).
Subject to the preceding two sentences, the Exercise Price under any Option
shall be determined by the Committee in its sole discretion. The Exercise Price
shall be payable in a form described in Section 8.
(d) Withholding Taxes. As a condition to the exercise of an Option, the
Optionee shall make such arrangements as the Committee may require for the
satisfaction of any federal, state, local or foreign withholding tax obligations
that may arise in connection with such exercise. The Optionee shall also make
such arrangements as the Committee may require for the satisfaction of any
federal, state, local or foreign withholding tax obligations that may arise in
connection with the disposition of Shares acquired by exercising an Option.
(e) Exercisability. Each Stock Option Agreement shall specify the date
when all or any installment of the Option is to become exercisable. To the
extent required by applicable law, an Option shall become exercisable no less
rapidly than the rate of twenty percent (20%) per year for each of the first
five years from the date of grant. Subject to the preceding sentence, the
vesting of any Option shall be determined by the Committee in its sole
discretion.
(f) Term. The Stock Option Agreement shall specify the term of the
Option. The term shall not exceed ten (10) years from the date of grant, except
as otherwise provided in Section
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<PAGE> 13
4(b). Subject to the preceding sentence, the Committee at its sole discretion
shall determine when an Option is to expire.
(g) Nontransferability. No Option shall be transferable by the Optionee
other than by will or by the laws of descent and distribution. An Option may be
exercised during the lifetime of the Optionee only by him or by his guardian or
legal representative. No Option or interest therein may be transferred,
assigned, pledged or hypothecated by the Optionee during his lifetime, whether
by operation of law or otherwise, or be made subject to execution, attachment or
similar process.
(h) Exercise of Options on Termination of Service. Each Stock Option
Agreement shall set forth the extent to which the Optionee shall have the right
to exercise the Option following termination of the Optionee's service with the
Company and its Subsidiaries. Such provisions shall be determined in the sole
discretion of the Committee, need not be uniform among all Options issued
pursuant to the Plan, and may reflect distinctions based on the reasons for
termination of employment. Notwithstanding the foregoing, to the extent required
by applicable law, each Option shall provide that the Optionee shall have the
right to exercise the vested portion of any Option held at termination for at
least 30 days following termination of service with the Company for any reason
other than "cause" (within the meaning of the rules of the California Department
of Corporations), and that the Optionee shall have the right to exercise the
Option for at least six months if the Optionee's service terminates due to death
or Disability.
(i) No Rights as a Shareholder. An Optionee, or a transferee of an
Optionee, shall have no rights as a shareholder with respect to any Shares
covered by an Option until the date of the issuance of a stock certificate for
such Shares.
(j) Modification, Extension and Assumption of Options. Within the
limitations of the Plan, the Committee may modify, extend or assume outstanding
Options or may accept the
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<PAGE> 14
cancellation of outstanding Options (whether granted by the Company or another
issuer) in return for the grant of new Options for the same or a different
number of Shares and at the same or a different Exercise Price.
(k) Restrictions on Transfer of Shares. No Shares issued upon exercise
of an Option may be sold or otherwise transferred or disposed of by the Optionee
during the one hundred eighty (180) day period following the effective date of a
registration statement covering securities of the Company filed under the
Securities Act of 1933. Subject to the preceding sentence, any Shares issued
upon exercise of an Option shall be subject to such rights of repurchase, rights
of first refusal and other transfer restrictions as the Committee may determine.
Such restrictions shall be set forth in the applicable Stock Option Agreement
and shall apply in addition to any restrictions that may apply to holders of
Shares generally.
SECTION 8. PAYMENT FOR SHARES.
(a) General Rule. The entire Exercise Price of Shares issued under the
Plan shall be payable in lawful money of the United States of America at the
time when such Shares are purchased, except as provided in Subsections (b), (c)
and (d) below.
(b) Surrender of Stock. To the extent that a Stock Option Agreement so
provides, payment may be made all or in part with Shares which have already been
owned by the Optionee or the Optionee's representative for any time period
specified by the Committee and which are surrendered to the Company in good form
for transfer. Such Shares shall be valued at their Fair Market Value on the date
when the new Shares are purchased under the Plan.
(c) Promissory Notes. To the extent that a Stock Option Agreement so
provides, payment may be made all or in part with a full recourse promissory
note executed by the Optionee. The interest rate and other terms and conditions
of such note shall be determined by
-11-
<PAGE> 15
the Committee. The Committee may require that the Optionee pledge his or her
Shares to the Company for the purpose of securing the payment of such note. In
no event shall the stock certificate(s) representing such Shares be released to
the Optionee until such note is paid in full.
(d) Cashless Exercise. To the extent that a Stock Option Agreement so
provides and a public market for the Shares exists, payment may be made all or
in part by delivery (on a form prescribed by the Committee) of an irrevocable
direction to a securities broker to sell Shares and to deliver all or part of
the sale proceeds to the Company in payment of the aggregate Exercise Price.
SECTION 9. ADJUSTMENT OF SHARES.
(a) General. In the event of a subdivision of the outstanding Stock, a
declaration of a dividend payable in Shares, a declaration of a dividend payable
in a form other than Shares in an amount that has a material effect on the value
of Shares, a combination or consolidation of the outstanding Stock into a lesser
number of Shares, a recapitalization, a reclassification or a similar
occurrence, the Committee shall make appropriate adjustments in one or more of
(i) the number of Shares available for future grants of Options or other rights
to acquire Shares under Section 5, (ii) the number of Shares covered by each
outstanding Option or other right to acquire Shares or (iii) the Exercise Price
of each outstanding Option or the Purchase Price of each other right to acquire
Shares.
(b) Reorganizations. In the event that the Company is a party to a
merger or reorganization, outstanding Options or other rights to acquire Shares
shall be subject to the agreement of merger or reorganization.
(c) Reservation of Rights. Except as provided in this Section 9, an
Optionee or Offeree shall have no rights by reason of (i) any subdivision or
consolidation of shares of stock of any
-12-
<PAGE> 16
class, (ii) the payment of any dividend, or (iii) any other increase or decrease
in the number of shares of stock of any class. Any issue by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall not affect, and no adjustment by reason thereof shall be made
with respect to, the number or Exercise Price of Shares subject to an Option, or
the number or Purchase Price of shares subject to any other right to acquire
Shares. The grant of an Option or other right to acquire Shares pursuant to the
Plan shall not affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structure, to merge or consolidate or to dissolve, liquidate, sell or
transfer all or any part of its business or assets.
SECTION 10. LEGAL REQUIREMENTS.
Shares shall not be issued under the Plan unless the issuance and
delivery of such Shares complies with (or is exempt from) all applicable
requirements of law, including (without limitation) the Securities Act of 1933,
as amended, the rules and regulations promulgated thereunder, state securities
laws and regulations, and the regulations of any stock exchange on which the
Company's securities may then be listed, and the Company has obtained the
approval or favorable ruling from any governmental agency which the Company
determines is necessary or advisable.
SECTION 11. NO EMPLOYMENT RIGHTS.
No provision of the Plan, nor any Option granted or other right to
acquire Shares awarded under the Plan, shall be construed to give any person any
right to become, to be treated as, or to remain an Employee. The Company and its
Subsidiaries reserve the right to terminate any person's Service at any time and
for any reason.
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<PAGE> 17
SECTION 12. DURATION AND AMENDMENTS.
(a) Term of the Plan. The Plan, as set forth herein, shall become
effective on the date of its adoption by the Board of Directors, subject to the
approval of the Company's shareholders. In the event that the shareholders fail
to approve the Plan within twelve (12) months after its adoption by the Board of
Directors, any Option grants or other right to acquire Shares already made shall
be null and void, and no additional Option grants or other right to acquire
Shares shall be made after such date. The Plan shall terminate automatically ten
(10) years after its adoption by the Board of Directors and may be terminated on
any earlier date pursuant to Subsection (b) below.
(b) Right to Amend or Terminate the Plan. The Board of Directors may
amend the Plan at any time and from time to time. Rights and obligations under
any Option granted or other right to acquire Shares awarded before amendment of
the Plan shall not be materially altered, or impaired adversely, by such
amendment, except with consent of the Optionee or Offeree. An amendment of the
Plan shall be subject to the approval of the Company's shareholders only to the
extent required by applicable laws, regulations or rules.
(c) Effect of Amendment or Termination. No Shares shall be issued or
sold under the Plan after the termination thereof, except upon exercise of an
Option granted prior to such termination. The termination of the Plan, or any
amendment thereof, shall not affect any Share previously issued or Option
previously granted under the Plan.
-14-
<PAGE> 18
SECTION 13. EXECUTION.
To record the amendment of the Plan by the Board of Directors as of
March 12, 1999, the Company has caused its authorized officer to execute the
same.
ACTIVETOUCH, INC.
By /s/ Subrah S. Iyar
----------------------------------
Title CEO
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<PAGE> 19
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED OR
QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE, AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED
PURSUANT TO THE RELEVANT PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS OR IF
THE COMPANY IS PROVIDED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
REGISTRATION AND QUALIFICATION UNDER FEDERAL AND STATE SECURITIES LAWS ARE NOT
REQUIRED.
ACTIVETOUCH, INC.
1998 STOCK PLAN
INCENTIVE STOCK OPTION AGREEMENT
MONTHLY VESTING OVER FOUR YEARS
ActiveTouch, Inc., a California corporation (the "Company"), hereby
grants an option to purchase Shares of its Common Stock to the optionee named
below. The terms and conditions of the option are set forth in this cover sheet,
in the attachment and in the Company's 1998 Stock Plan (the "Plan").
Date of Option Grant: ((2))
Name of Optionee: ((1))
Optionee's Social Security Number: _____-____-_____
Number of Shares of Common Stock Covered by Option (post-split): ((3))
Exercise Price per Share (post-split): $((4))
Vesting Start Date: ((5))
BY SIGNING THIS COVER SHEET, YOU AGREE TO ALL OF THE TERMS AND
CONDITIONS DESCRIBED IN THE ATTACHED AGREEMENT AND IN THE PLAN,
A COPY OF WHICH IS ALSO ENCLOSED.
Optionee:
-----------------------------------------------------------------------
(Signature)
Company:
------------------------------------------------------------------------
(Signature)
Title:
-------------------------------------------------------------
Attachment
<PAGE> 20
ACTIVETOUCH, INC.
1998 STOCK PLAN
INCENTIVE STOCK OPTION AGREEMENT
MONTHLY VESTING OVER FOUR YEARS
<TABLE>
<S> <C>
INCENTIVE STOCK OPTION This option is intended to be an incentive stock option
under section 422 of the Internal Revenue Code and will
be interpreted accordingly.
VESTING Beginning on the Vesting Start Date, the Shares under
this option will vest and become exercisable over a
four-year period at the rate of 1/48th per month, in
accordance with the vesting schedule indicated below:
</TABLE>
<TABLE>
<CAPTION>
Portion of
Shares Vested
-------------
<S> <C>
From the Vesting Start Date until None
twelve months thereof
At the end of twelve months from 25%
the Vesting Start Date
For each additional full month of 1/48th
your Service to the Company
thereafter
On the fourth anniversary of the 100%
Vesting Start Date
</TABLE>
<TABLE>
<S> <C>
Your vesting will cease in the event that your Service
terminates for any reason. Your Service shall cease when
you cease to be actively employed by, or a consultant or
adviser to, the Company (or any subsidiary) as
determined in the sole discretion of the Committee. A
leave of absence, regardless of the reason, shall be
deemed to constitute the cessation of your Service
unless such leave is authorized by the Company, and you
return within the time specified in such authorization.
TERM Your option will expire in any event at the close of
business at Company headquarters on the day before the
10th anniversary of the Date of Grant, as shown on the
cover sheet. (It will expire earlier if your Service to
the Company terminates, as described below.)
</TABLE>
-2-
<PAGE> 21
<TABLE>
<S> <C>
REGULAR TERMINATION If your Service terminates for any reason except death
or Disability, then your option will expire at the close
of business at Company headquarters on the 30th day
after your termination date.
DEATH In the event of your death while in Service, then your
option will expire at the close of business at Company
headquarters on the date six months after the date of
death. During that six-month period, your estate or
heirs may exercise the vested portion of your option.
DISABILITY If your Service terminates because of your Disability,
then your option will expire at the close of business at
Company headquarters on the date six months after your
termination date.
However, for purposes of determining whether your option
is entitled to ISO status, unless your Disability
satisfies the definition set forth in section 22(e)(3)
of the Code (as cited below), ISO status will terminate
three (3) months after your termination date.
"Disability" means that you are unable to engage in any
substantial gainful activity by reason of any medically
determinable physical or mental impairment.
LEAVES OF ABSENCE For purposes of this option, your Service does not
terminate when you go on a bona fide leave of absence,
that was approved by the Company in writing, if the
terms of the leave provide for continued service
crediting, or when continued service crediting is
required by applicable law. However, for purposes of
determining whether your option is entitled to ISO
status, your Service will be treated as terminating
ninety (90) days after you went on leave, unless your
right to return to active work is guaranteed by law or
by a contract. Your Service terminates in any event when
the approved leave ends, unless you immediately return
to active work.
The Company determines which leaves count for this
purpose, and when your Service terminates for all
purposes under the Plan.
RESTRICTIONS ON The Company will not permit you to exercise this option
EXERCISE if the issuance of Shares at that time would violate any
law or regulation.
NOTICE OF EXERCISE When you wish to exercise this option, you must notify
the Company by filing the proper "Notice of Exercise"
form at the address given on the form. Your notice must
specify how many
</TABLE>
-3-
<PAGE> 22
<TABLE>
<S> <C>
Shares you wish to purchase. Your notice must also
specify how your Shares should be registered (in your
name only or in your and your spouse's names as
community property or as joint tenants with right of
survivorship). The notice will be effective when it is
received by the Company.
If someone else wants to exercise this option after your
death, that person must prove to the Company's
satisfaction that he or she is entitled to do so.
FORM OF PAYMENT When you submit your notice of exercise, you must
include payment of the option price for the Shares
you are purchasing. Payment may be made in one (or a
combination) of the following forms:
- Your personal check, a cashier's check or a money
order.
- To the extent that a public market for the Shares
exists as determined by the Company, by delivery
(on a form prescribed by the Committee) of an
irrevocable direction to a securities broker to sell
Shares and to deliver all or part of the sale proceeds
to the Company in payment of the aggregate Exercise
Price.
WITHHOLDING TAXES You will not be allowed to exercise this option unless
you make acceptable arrangements to pay any withholding
or other taxes that may be due as a result of the option
exercise or the sale of Shares acquired upon exercise of
this option.
MARKET STAND-OFF In connection with any underwritten public offering by
AGREEMENT the Company of its equity securities pursuant to an
effective registration statement filed under the
Securities Act, including the Company's initial public
offering, you shall not sell, make any short sale of,
loan, hypothecate, pledge, grant any option for the
purchase of, or otherwise dispose or transfer for value
or agree to engage in any of the foregoing transactions
with respect to any Shares without the prior written
consent of the Company or its underwriters, for such
period of time after the effective date of such
registration statement as may be requested by the
Company or such underwriters (not to exceed one
hundred-eighty (180) days).
In order to enforce the provisions of this paragraph,
the Company may impose stop-transfer instructions with
respect to the Shares until the end of the applicable
stand-off period.
</TABLE>
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<PAGE> 23
<TABLE>
<S> <C>
RESTRICTIONS ON By signing this Agreement, you agree not to sell any
RESALE option Shares at a time when applicable laws,
regulations or Company or underwriter trading policies
prohibit a sale.
You represent and agree that the Shares to be acquired
upon exercising this option will be acquired for
investment, and not with a view to the sale or
distribution thereof.
In the event that the sale of Shares under the Plan is
not registered under the Securities Act but an exemption
is available which requires an investment representation
or other representation, you shall represent and agree
at the time of exercise to make such representations as
are deemed necessary or appropriate by the Company and
its counsel.
THE COMPANY'S RIGHT In the event that you propose to sell, pledge or
OF FIRST REFUSAL otherwise transfer to a third party any vested Shares
acquired under this Agreement, or any interest in such
Shares, the Company shall have the "Right of First
Refusal" with respect to all (and not less than all) of
such Shares. If you desire to transfer vested Shares
acquired under this Agreement, you must give a written
"Transfer Notice" to the Company describing fully the
proposed transfer, including the number of Shares
proposed to be transferred, the proposed transfer price
and the name and address of the proposed transferee. The
Transfer Notice shall be signed both by you and by the
proposed new transferee and must constitute a binding
commitment of both parties to the transfer of the
Shares. The Company shall have the right to purchase
all, and not less than all, of the Shares on the terms
of the proposal described in the Transfer Notice
(subject, however, to any change in such terms permitted
in the next paragraph) by delivery of a notice of
exercise of the Right of First Refusal within 30 days
after the date when the Transfer Notice was received by
the Company.
If the Company fails to exercise its Right of First
Refusal before or within 30 days after the date when it
received the Transfer Notice, you may, not later than 90
days following receipt of the Transfer Notice by the
Company, conclude a transfer of the Shares subject to
the Transfer Notice on the terms and conditions
described in the Transfer Notice. Any proposed transfer
on terms and conditions different from those described
in the Transfer Notice, as well as any subsequent
proposed transfer by you, shall again be subject to the
Right of First Refusal and shall require compliance with
the procedure described in the paragraph above. If the
Company exercises its Right of First Refusal, the
parties shall consummate the sale of the Shares on the
terms set forth in the Transfer Notice within 60 days
after the date when the
</TABLE>
-5-
<PAGE> 24
<TABLE>
<S> <C>
Company received the Transfer Notice (or within such
longer period as may have been specified in the Transfer
Notice); provided, however, that in the event the
Transfer Notice provided that payment for the Shares was
to be made in a form other than lawful money paid at the
time of transfer, the Company shall have the option of
paying for the Shares with lawful money equal to the
present value of the consideration described in the
Transfer Notice.
The Company's Right of First Refusal shall inure to the
benefit of its successors and assigns, shall be freely
assignable in whole or in part and shall be binding upon
any transferee of the Shares.
The Company's Right of First Refusal shall terminate in
the event that stock is listed on an established stock
exchange or is quoted regularly on the Nasdaq Stock
Market.
TRANSFER OF OPTION Prior to your death, only you may exercise this option.
You cannot transfer or assign this option. For instance,
you may not sell this option or use it as security for a
loan. If you attempt to do any of these things, this
option will immediately become invalid. You may,
however, dispose of this option in your will.
Regardless of any marital property settlement agreement,
the Company is not obligated to honor a notice of
exercise from your spouse or former spouse, nor is the
Company obligated to recognize such individual's
interest in your option in any other way.
NO RETENTION RIGHTS Your option or this Agreement do not give you the right
to be retained by the Company (or any subsidiaries) in
any capacity. The Company (and any subsidiaries) reserve
the right to terminate your Service at any time and for
any reason.
SHAREHOLDER RIGHTS You, or your estate or heirs, have no rights as a
shareholder of the Company until a certificate for your
option Shares has been issued. No adjustments are made
for dividends or other rights if the applicable record
date occurs before your stock certificate is issued,
except as described in the Plan.
ADJUSTMENTS In the event of a stock split, a stock dividend or a
similar change in the Company stock, the number of
Shares covered by this option and the exercise price per
share may be adjusted pursuant to the Plan. Your option
shall be subject to the terms of the agreement of
merger, liquidation or reorganization in the event the
Company is subject to such corporate activity.
</TABLE>
-6-
<PAGE> 25
<TABLE>
<S> <C>
LEGENDS All certificates representing the Shares issued upon
exercise of this option shall, where applicable, have
endorsed thereon the following legends:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT
BE SOLD, TRANSFERRED, ENCUMBERED OR IN ANY MANNER
DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE TERMS OF A
WRITTEN AGREEMENT BETWEEN THE COMPANY AND THE INITIAL
HOLDER HEREOF. SUCH AGREEMENT PROVIDES FOR CERTAIN
TRANSFER RESTRICTIONS, INCLUDING RIGHTS OF FIRST REFUSAL
UPON AN ATTEMPTED TRANSFER OF THE SECURITIES. THE
SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST
FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER HEREOF
WITHOUT CHARGE."
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE,
AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED AND
QUALIFIED PURSUANT TO THE RELEVANT PROVISIONS OF FEDERAL
AND STATE SECURITIES LAWS OR IF THE COMPANY IS PROVIDED
AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
REGISTRATION AND QUALIFICATION UNDER FEDERAL AND STATE
SECURITIES LAWS ARE NOT REQUIRED."
APPLICABLE LAW This Agreement will be interpreted and enforced under
the laws of the State of California.
THE PLAN AND OTHER The text of the Plan is incorporated in this Agreement
AGREEMENTS by reference. Certain capitalized terms used in this
Agreement are defined in the Plan.
This Agreement and the Plan constitute the entire
understanding between you and the Company regarding this
option. Any prior agreements, commitments or
negotiations concerning this option are superseded.
</TABLE>
BY SIGNING THE COVER SHEET OF THIS AGREEMENT, YOU AGREE TO ALL
OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.
-7-
<PAGE> 26
NOTICE OF EXERCISE OF STOCK OPTION
ActiveTouch, Inc.
1270 Oakmead Parkway
Suite 301
Sunnyvale, CA 94086
Re: Exercise of Stock Option to Purchase Shares of Company Stock
Ladies and Gentlemen:
Pursuant to the Stock Option Agreement dated __________, 199___ (the
"Stock Option Agreement"), between ActiveTouch, Inc., a California corporation
(the "Company"), and the undersigned, I hereby elect to purchase _____________
shares of the common stock of the Company (the "Shares"), at the price of
$__________ per Share. My check in the amount of $______________ is enclosed.
The Shares are to be issued and registered in the name(s) of:
--------------------------
--------------------------
The undersigned understands there may be tax consequences as a result of
the purchase or disposition of the Shares. The undersigned represents that
he/she has received and reviewed the Plan's federal income tax information and
consulted with any tax consultants he/she deems advisable in connection with the
purchase or disposition of the Shares and the undersigned is not relying on the
Company for any tax advice.
The undersigned acknowledges that he/she has received, read and
understood the Stock Option Agreement and agrees to abide by and be bound by
their terms and conditions. The undersigned represents that the Shares are being
acquired solely for his/her own account and not as a nominee for any other
party, or for investment, and that the undersigned purchaser will not offer,
sell or otherwise dispose of any such Shares except under circumstances that
will not result in a violation of the Securities Act of 1933, as amended, or any
state securities laws.
Dated: _____________________
------------------------------------
(Signature)
------------------------------------
(Please Print Name)
Social Security No.
-----------------
------------------------------------
------------------------------------
(Full Address)
<PAGE> 27
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED OR
QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE, AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED
PURSUANT TO THE RELEVANT PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS OR IF
THE COMPANY IS PROVIDED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
REGISTRATION AND QUALIFICATION UNDER FEDERAL AND STATE SECURITIES LAWS ARE NOT
REQUIRED.
ACTIVETOUCH, INC.
1998 STOCK PLAN
NONSTATUTORY STOCK OPTION AGREEMENT
MONTHLY VESTING OVER FOUR YEARS
ActiveTouch, Inc., a California corporation (the "Company"), hereby
grants an option to purchase Shares of its Common Stock to the optionee named
below. The terms and conditions of the option are set forth in this cover sheet,
in the attachment and in the Company's 1998 Stock Plan (the "Plan").
Date of Option Grant: ((2))
Name of Optionee: ((1))
Optionee's Social Security Number: _____-____-_____
Number of Shares of Common Stock Covered by Option (post-split): ((3))
Exercise Price per Share (post-split): $((4))
Vesting Start Date: ((5))
BY SIGNING THIS COVER SHEET, YOU AGREE TO ALL OF THE TERMS
AND CONDITIONS DESCRIBED IN THE ATTACHED AGREEMENT AND IN
THE PLAN, A COPY OF WHICH IS ALSO ENCLOSED.
Optionee:
-----------------------------------------------------------------------
(Signature)
Company:
-----------------------------------------------------------------------
(Signature)
Title:
Attachment
<PAGE> 28
ACTIVETOUCH, INC.
1998 STOCK PLAN
NONSTATUTORY STOCK OPTION AGREEMENT
MONTHLY VESTING OVER FOUR YEARS
NONSTATUTORY This option is not intended to be an incentive stock option under
STOCK OPTION section 422 of the Internal Revenue Code and will be interpreted
accordingly.
VESTING Beginning on the Vesting Start Date, the Shares under this option
will vest and become exercisable over a four-year period at the
rate of 1/48th per month, in accordance with the vesting schedule
indicated below:
Portion of
Shares Vested
-------------
From the Vesting Start Date until twelve months
thereof None
At the end of twelve months from the Vesting
Start Date 25%
For each additional full month of your Service
to the Company thereafter 1/48th
On the fourth anniversary of the Vesting Start
Date 100%
Your vesting will cease in the event that your Service terminates
for any reason. Your Service shall cease when you cease to be
actively employed by, or a consultant or adviser to, the Company
(or any subsidiary) as determined in the sole discretion of the
Committee. A leave of absence, regardless of the reason, shall be
deemed to constitute the cessation of your Service unless such
leave is authorized by the Company, and you return within the
time specified in such authorization.
TERM Your option will expire in any event at the close of business at
Company headquarters on the day before the 10th anniversary of
the Date of Grant, as shown on the cover sheet. (It will expire
earlier if your Service to the Company terminates, as described
below.)
-2-
<PAGE> 29
<TABLE>
<S> <C>
REGULAR TERMINATION If your Service terminates for any reason except death
or Disability, then your option will expire at the close
of business at Company headquarters on the 30th day
after your termination date.
DEATH In the event of your death while in Service, your option
will expire at the close of business at Company
headquarters on the date six months after the date of
death. During that six-month period, your estate or
heirs may exercise the vested portion of your option.
DISABILITY If your Service terminates because of your Disability,
then your option will expire at the close of business at
Company headquarters on the date six months after your
termination date.
"Disability" means that you are unable to engage in any
substantial gainful activity by reason of any medically
determinable physical or mental impairment.
LEAVES OF ABSENCE For purposes of this option, your Service does not
terminate when you go on a bona fide leave of absence,
that was approved by the Company in writing, if the
terms of the leave provide for continued service
crediting, or when continued service crediting is
required by applicable law. Your Service terminates in
any event when the approved leave ends, unless you
immediately return to active service.
The Company determines which leaves count for this
purpose, and when your Service terminates for all
purposes under the Plan.
RESTRICTIONS ON The Company will not permit you to exercise this option
EXERCISE if the issuance of Shares at that time would violate any
law or regulation.
NOTICE OF EXERCISE When you wish to exercise this option, you must notify
the Company by filing the proper "Notice of Exercise"
form at the address given on the form. Your notice must
specify how many Shares you wish to purchase. Your
notice must also specify how your Shares should be
registered (in your name only or in your and your
spouse's names as community property or as joint tenants
with right of survivorship). The notice will be
effective when it is received by the Company.
If someone else wants to exercise this option after your
death, that person must prove to the Company's
satisfaction that he or she is entitled to do so.
</TABLE>
-3-
<PAGE> 30
<TABLE>
<S> <C>
FORM OF PAYMENT When you submit your notice of exercise, you must
include payment of the option price for the Shares you
are purchasing. Payment may be made in one (or a
combination) of the following forms:
- Your personal check, a cashier's check or a money
order.
- To the extent that a public market for the Shares
exists as determined by the Company, by delivery (on a
form prescribed by the Committee) of an irrevocable
direction to a securities broker to sell Shares and to
deliver all or part of the sale proceeds to the
Company in payment of the aggregate Exercise Price.
WITHHOLDING TAXES You will not be allowed to exercise this option unless
you make acceptable arrangements to pay any withholding
or other taxes that may be due as a result of the option
exercise or the sale of the Shares acquired upon
exercise of this option.
MARKET STAND-OFF In connection with any underwritten public offering by
AGREEMENT the Company of its equity securities pursuant to an
effective registration statement filed under the
Securities Act, including the Company's initial public
offering, you shall not sell, make any short sale of,
loan, hypothecate, pledge, grant any option for the
purchase of, or otherwise dispose or transfer for value
or agree to engage in any of the foregoing transactions
with respect to any Shares without the prior written
consent of the Company or its underwriters, for such
period of time after the effective date of such
registration statement as may be requested by the
Company or such underwriters (not to exceed one
hundred-eighty (180) days).
In order to enforce the provisions of this paragraph,
the Company may impose stop-transfer instructions with
respect to the Shares until the end of the applicable
stand-off period.
RESTRICTIONS ON RESALE By signing this Agreement, you agree not to sell any
option Shares at a time when applicable laws,
regulations or Company or underwriter trading policies
prohibit a sale.
You represent and agree that the Shares to be acquired
upon exercising this option will be acquired for
investment, and not with a view to the sale or
distribution thereof.
In the event that the sale of Shares under the Plan is
not registered under the Securities Act but an exemption
is available
</TABLE>
-4-
<PAGE> 31
<TABLE>
<S> <C>
which requires an investment representation or other
representation, you shall represent and agree at the
time of exercise to make such representations as are
deemed necessary or appropriate by the Company and its
counsel.
THE COMPANY'S RIGHT In the event that you propose to sell, pledge or
OF FIRST REFUSAL otherwise transfer to a third party any vested Shares
acquired under this Agreement, or any interest in such
Shares, the Company shall have the "Right of First
Refusal" with respect to all (and not less than all) of
such Shares. If you desire to transfer vested Shares
acquired under this Agreement, you must give a written
"Transfer Notice" to the Company describing fully the
proposed transfer, including the number of Shares
proposed to be transferred, the proposed transfer price
and the name and address of the proposed transferee. The
Transfer Notice shall be signed both by you and by the
proposed new transferee and must constitute a binding
commitment of both parties to the transfer of the
Shares. The Company shall have the right to purchase
all, and not less than all, of the Shares on the terms
of the proposal described in the Transfer Notice
(subject, however, to any change in such terms permitted
in the next paragraph) by delivery of a notice of
exercise of the Right of First Refusal within thirty
(30) days after the date when the Transfer Notice was
received by the Company.
If the Company fails to exercise its Right of First
Refusal before or within 30 days after the date when it
received the Transfer Notice, you may, not later than 90
days following receipt of the Transfer Notice by the
Company, conclude a transfer of the Shares subject to
the Transfer Notice on the terms and conditions
described in the Transfer Notice. Any proposed transfer
on terms and conditions different from those described
in the Transfer Notice, as well as any subsequent
proposed transfer by you, shall again be subject to the
Right of First Refusal and shall require compliance with
the procedure described in the paragraph above. If the
Company exercises its Right of First Refusal, the
parties shall consummate the sale of the Shares on the
terms set forth in the Transfer Notice within 60 days
after the date when the Company received the Transfer
Notice (or within such longer period as may have been
specified in the Transfer Notice); provided, however,
that in the event the Transfer Notice provided that
payment for the Shares was to be made in a form other
than lawful money paid at the time of transfer, the
Company shall have the option of paying for the Shares
with lawful money equal to the present value of the
consideration described in the Transfer Notice.
</TABLE>
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<TABLE>
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The Company's Right of First Refusal shall inure to the
benefit of its successors and assigns, shall be freely
assignable in whole or in part and shall be binding upon
any transferee of the Shares.
The Company's Right of First Refusal shall terminate in
the event that Stock is listed on an established stock
exchange or is quoted regularly on the Nasdaq Stock
Market.
TRANSFER OF OPTION Prior to your death, only you may exercise this option.
You cannot transfer or assign this option. For instance,
you may not sell this option or use it as security for a
loan. If you attempt to do any of these things, this
option will immediately become invalid. You may,
however, dispose of this option in your will.
Regardless of any marital property settlement agreement,
the Company is not obligated to honor a notice of
exercise from your spouse or former spouse, nor is the
Company obligated to recognize such individual's
interest in your option in any other way.
NO RETENTION RIGHTS Your option or this Agreement do not give you the right
to be retained by the Company (or any subsidiaries) in
any capacity. The Company (and any subsidiaries) reserve
the right to terminate your Service at any time and for
any reason.
SHAREHOLDER RIGHTS You, or your estate or heirs, have no rights as a
shareholder of the Company until a certificate for your
option Shares has been issued. No adjustments are made
for dividends or other rights if the applicable record
date occurs before your stock certificate is issued,
except as described in the Plan.
ADJUSTMENTS In the event of a stock split, a stock dividend or a
similar change in the Company stock, the number of
Shares covered by this option and the exercise price per
share may be adjusted pursuant to the Plan. Your option
shall be subject to the terms of the agreement of
merger, liquidation or reorganization in the event the
Company is subject to such corporate activity.
LEGENDS All certificates representing the Shares issued upon
exercise of this option shall, where applicable, have
endorsed thereon the following legends:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE
MAY NOT BE SOLD, TRANSFERRED, ENCUMBERED OR IN ANY
MANNER DISPOSED OF, EXCEPT IN
</TABLE>
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<TABLE>
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COMPLIANCE WITH THE TERMS OF A WRITTEN AGREEMENT
BETWEEN THE COMPANY AND THE INITIAL HOLDER HEREOF.
SUCH AGREEMENT PROVIDES FOR CERTAIN TRANSFER
RESTRICTIONS, INCLUDING RIGHTS OF FIRST REFUSAL
UPON AN ATTEMPTED TRANSFER OF THE SECURITIES. THE
SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST
FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER
HEREOF WITHOUT CHARGE."
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE, AND MAY BE OFFERED
AND SOLD ONLY IF REGISTERED AND QUALIFIED PURSUANT
TO THE RELEVANT PROVISIONS OF FEDERAL AND STATE
SECURITIES LAWS OR IF THE COMPANY IS PROVIDED AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT REGISTRATION AND QUALIFICATION UNDER FEDERAL
AND STATE SECURITIES LAWS ARE NOT REQUIRED."
APPLICABLE LAW This Agreement will be interpreted and enforced under
the laws of the State of California.
THE PLAN AND OTHER The text of the Plan is incorporated in this Agreement
AGREEMENTS by reference. Certain capitalized terms used in this
Agreement are defined in the Plan.
This Agreement and the Plan constitute the entire
understanding between you and the Company regarding this
option. Any prior agreements, commitments or
negotiations concerning this option are superseded.
</TABLE>
BY SIGNING THE COVER SHEET OF THIS AGREEMENT, YOU AGREE TO ALL OF THE
TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.
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NOTICE OF EXERCISE OF STOCK OPTION
ActiveTouch, Inc.
1270 Oakmead Parkway
Suite 301
Sunnyvale, CA 94086
Re: Exercise of Stock Option to Purchase Shares of Company Stock
Ladies and Gentlemen:
Pursuant to the Stock Option Agreement dated __________, 199___ (the
"Stock Option Agreement"), between ActiveTouch, Inc., a California corporation
(the "Company"), and the undersigned, I hereby elect to purchase _____________
shares of the common stock of the Company (the "Shares"), at the price of
$__________ per Share. My check in the amount of $______________ is enclosed.
The Shares are to be issued and registered in the name(s) of:
--------------------------
--------------------------
The undersigned understands there may be tax consequences as a result of
the purchase or disposition of the Shares. The undersigned represents that
he/she has received and reviewed the Plan's federal income tax information and
consulted with any tax consultants he/she deems advisable in connection with the
purchase or disposition of the Shares and the undersigned is not relying on the
Company for any tax advice.
The undersigned acknowledges that he/she has received, read and
understood the Stock Option Agreement and agrees to abide by and be bound by
their terms and conditions. The undersigned represents that the Shares are being
acquired solely for his/her own account and not as a nominee for any other
party, or for investment, and that the undersigned purchaser will not offer,
sell or otherwise dispose of any such Shares except under circumstances that
will not result in a violation of the Securities Act of 1933, as amended, or any
state securities laws.
Dated: _____________________
------------------------------------
(Signature)
------------------------------------
(Please Print Name)
Social Security No.
-----------------
------------------------------------
------------------------------------
(Full Address)
<PAGE> 1
EXHIBIT 10.2
FORM OF
WEBEX, INC.
2000 STOCK INCENTIVE PLAN
(Adopted by the Board on March __, 2000)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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Page
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SECTION 1. ESTABLISHMENT AND PURPOSE................................................. 1
SECTION 2. DEFINITIONS............................................................... 1
(a) "Affiliate"...................................................................... 1
(b) "Award".......................................................................... 1
(c) "Board of Directors"............................................................. 1
(d) "Change in Control".............................................................. 1
(e) "Code"........................................................................... 2
(f) "Committee"...................................................................... 2
(g) "Company"........................................................................ 2
(h) "Consultant"..................................................................... 2
(i) "Employee"....................................................................... 2
(j) "Exchange Act"................................................................... 2
(k) "Exercise Price"................................................................. 2
(l) "Fair Market Value".............................................................. 2
(m) "ISO"............................................................................ 3
(n) "Nonstatutory Option" or "NSO"................................................... 3
(o) "Offeree"........................................................................ 3
(p) "Option"......................................................................... 3
(q) "Optionee"....................................................................... 3
(r) "Outside Director"............................................................... 3
(s) "Parent"......................................................................... 3
(t) "Participant".................................................................... 3
(u) "Plan"........................................................................... 3
(v) "Purchase Price"................................................................. 3
(w) "Restricted Share"............................................................... 3
(x) "Restricted Share Agreement" .................................................... 3
(y) "SAR"............................................................................ 3
(z) "SAR Agreement".................................................................. 3
(aa) "Service"........................................................................ 4
(bb) "Share".......................................................................... 4
(cc) "Stock".......................................................................... 4
(dd) "Stock Option Agreement"......................................................... 4
(ee) "Stock Purchase Agreement"....................................................... 4
(ff) "Stock Unit"..................................................................... 4
(gg) "Stock Unit Agreement"........................................................... 4
(hh) "Subsidiary"..................................................................... 4
(ii) "Total and Permanent Disability"................................................. 4
SECTION 3. ADMINISTRATION............................................................ 4
(a) Committee Procedures............................................................. 4
(b) Committee Responsibilities....................................................... 4
</TABLE>
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SECTION 4. ELIGIBILITY............................................................... 6
(a) General Rule..................................................................... 6
(b) Outside Directors................................................................ 6
(c) Limitation On Grants............................................................. 6
(d) Ten-Percent Stockholders......................................................... 6
(e) Attribution Rules................................................................ 7
(f) Outstanding Stock................................................................ 7
SECTION 5. STOCK SUBJECT TO PLAN..................................................... 7
(a) Basic Limitation................................................................. 7
(b) Annual Increase in Shares........................................................ 7
(c) Additional Shares................................................................ 7
(d) Dividend Equivalents............................................................. 8
SECTION 6. RESTRICTED SHARES......................................................... 8
(a) Restricted Stock Agreement....................................................... 8
(b) Payment for Awards............................................................... 8
(c) Vesting.......................................................................... 8
(d) Voting and Dividend Rights....................................................... 8
SECTION 7. OTHER TERMS AND CONDITIONS OF AWARDS OR SALES............................. 8
(a) Duration of Offers and Nontransferability of Rights.............................. 8
(b) Purchase Price................................................................... 9
(c) Withholding Taxes................................................................ 9
(d) Restrictions on Transfer of Shares............................................... 9
SECTION 8. TERMS AND CONDITIONS OF OPTIONS........................................... 9
(a) Stock Option Agreement........................................................... 9
(b) Number of Shares................................................................. 9
(c) Exercise Price................................................................... 9
(d) Withholding Taxes................................................................ 9
(e) Exercisability and Term.......................................................... 10
(f) Nontransferability............................................................... 10
(g) Exercise of Options Upon Termination of Service.................................. 10
(h) Effect of Change in Control...................................................... 10
(i) Leaves of Absence................................................................ 10
(j) No Rights as a Stockholder....................................................... 11
(k) Modification, Extension and Renewal of Options................................... 11
(l) Restrictions on Transfer of Shares............................................... 11
(m) Buyout Provisions................................................................ 11
SECTION 9. PAYMENT FOR SHARES........................................................ 11
(a) General Rule..................................................................... 11
(b) Surrender of Stock............................................................... 11
(c) Services Rendered................................................................ 11
(d) Cashless Exercise................................................................ 12
(e) Exercise/Pledge.................................................................. 12
</TABLE>
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(f) Promissory Note.................................................................. 12
(g) Other Forms of Payment........................................................... 12
SECTION 10. STOCK APPRECIATION RIGHTS................................................. 12
(a) SAR Agreement.................................................................... 12
(b) Number of Shares................................................................. 12
(c) Exercise Price................................................................... 12
(d) Exercisability and Term.......................................................... 12
(e) Effect of Change in Control...................................................... 13
(f) Exercise of SARs................................................................. 13
(g) Modification or Assumption of SARs............................................... 13
SECTION 11. STOCK UNITS............................................................... 13
(a) Stock Unit Agreement............................................................. 13
(b) Payment for Awards............................................................... 13
(c) Vesting Conditions............................................................... 14
(d) Voting and Dividend Rights....................................................... 14
(e) Form and Time of Settlement of Stock Units....................................... 14
(f) Death of Recipient............................................................... 14
(g) Creditors' Rights................................................................ 15
SECTION 12. PROTECTION AGAINST DILUTION............................................... 15
(a) Adjustments...................................................................... 15
(b) Dissolution or Liquidation....................................................... 15
(c) Reorganizations.................................................................. 15
SECTION 13. DEFERRAL OF AWARDS........................................................ 16
SECTION 14. AWARDS UNDER OTHER PLANS.................................................. 16
SECTION 15. PAYMENT OF DIRECTOR'S FEES IN SECURITIES.................................. 17
(a) Effective Date................................................................... 17
(b) Elections to Receive NSOs, Restricted Shares or Stock Units...................... 17
(c) Number and Terms of NSOs, Restricted Shares or Stock Units....................... 17
SECTION 16. ADJUSTMENT OF SHARES...................................................... 17
(a) General.......................................................................... 17
(b) Reorganizations.................................................................. 17
(c) Reservation of Rights............................................................ 17
SECTION 17. LEGAL AND REGULATORY REQUIREMENTS......................................... 18
SECTION 18. WITHHOLDING TAXES......................................................... 18
(a) General.......................................................................... 18
(b) Share Withholding................................................................ 18
SECTION 19. LIMITATION ON PARACHUTE PAYMENTS.......................................... 18
(a) Scope of Limitation.............................................................. 18
</TABLE>
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(b) Basic Rule....................................................................... 18
(c) Reduction of Payments............................................................ 18
(d) Overpayments and Underpayments................................................... 19
(e) Related Corporations............................................................. 19
SECTION 20. NO EMPLOYMENT RIGHTS...................................................... 19
SECTION 21. DURATION AND AMENDMENTS................................................... 20
(a) Term of the Plan................................................................. 20
(b) Right to Amend or Terminate the Plan............................................. 20
(c) Effect of Amendment or Termination............................................... 20
SECTION 22. EXECUTION................................................................. 20
</TABLE>
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WEBEX, INC.
2000 STOCK INCENTIVE PLAN
(Adopted by the Board on March __, 2000)
SECTION 1. ESTABLISHMENT AND PURPOSE.
The Plan was adopted by the Board of Directors effective March __, 2000.
The purpose of the Plan is to promote the long-term success of the Company and
the creation of stockholder value by (a) encouraging Employees, Outside
Directors and Consultants to focus on critical long-range objectives, (b)
encouraging the attraction and retention of Employees, Outside Directors and
Consultants with exceptional qualifications and (c) linking Employees, Outside
Directors and Consultants directly to stockholder interests through increased
stock ownership. The Plan seeks to achieve this purpose by providing for Awards
in the form of Restricted Shares, Stock Units, Options (which may constitute
incentive stock options or nonstatutory stock options) or stock appreciation
rights.
SECTION 2. DEFINITIONS.
(a) "Affiliate" shall mean any entity other than a Subsidiary, if
the Company and/or one of more Subsidiaries own not less than fifty percent
(50%) of such entity.
(b) "Award" shall mean any award of an Option, a SAR, a
Restricted Share or a Stock Unit under the Plan.
(c) "Board of Directors" shall mean the Board of Directors of the
Company, as constituted from time to time.
(d) "Change in Control" shall mean the occurrence of either of
the following events:
(i) A change in the composition of the Board of Directors,
as a result of which fewer than one-half of the incumbent directors are
directors who either:
(A) Had been directors of the Company twenty-four
(24) months prior to such change; or
(B) Were elected, or nominated for election, to the
Board of Directors with the affirmative votes of at least a
majority of the directors who had been directors of the Company
twenty-four (24) months prior to such change and who were still
in office at the time of the election or nomination; or
(ii) Any "person" (as such term is used in sections 13(d)
and 14(d) of the Exchange Act) who by the acquisition or aggregation of
securities, is or becomes the beneficial owner, directly or indirectly,
of securities of the Company representing twenty percent (20%) or more
of the combined voting power of the Company's then outstanding
securities ordinarily (and apart from rights accruing under special
circumstances) having
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<PAGE> 7
the right to vote at elections of directors (the "Base Capital Stock");
except that any change in the relative beneficial ownership of the
Company's securities by any person resulting solely from a reduction in
the aggregate number of outstanding shares of Base Capital Stock, and
any decrease thereafter in such person's ownership of securities, shall
be disregarded until such person increases in any manner, directly or
indirectly, such person's beneficial ownership of any securities of the
Company. For purposes of this Subsection (ii), the term "person" shall
not include an employee benefit plan maintained by the Company.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(f) "Committee" shall mean the committee designated by the Board of
Directors, which is authorized to administer the Plan under Section 3 hereof.
The Committee shall have membership composition which enables the Options or
other rights granted under the Plan to qualify for exemption under Rule 16b-3
with respect to persons who are subject to Section 16 of the Exchange Act.
(g) "Company" shall mean WebEx, Inc., a Delaware corporation.
(h) "Consultant" shall mean a consultant or advisor who provides bona
fide services to the Company, a Parent, a Subsidiary or an Affiliate as an
independent contractor. Service as a Consultant shall be considered employment
for all purposes of the Plan, except as provided in the second sentence of
Section 4(a) and Section 4(b).
(i) "Employee" shall mean (i) any individual who is a common-law
employee of the Company or of a Subsidiary; (ii) a member of the Board of
Directors, including (without limitation) an Outside Director, or an affiliate
of a member the Board of Directors; (iii) a member of the board of directors of
a Subsidiary; or (iv) an independent contractor or advisor who performs services
for the Company or a Subsidiary. Service as a member of the Board of Directors,
a member of the board of directors of a Subsidiary or as an independent
contractor or advisor shall be considered employment for all purposes of the
Plan except the second sentence of Section 4(a) and Section 4(b).
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(k) "Exercise Price" shall mean, in the case of an Option, the amount
for which one Common Share may be purchased upon exercise of such Option, as
specified in the applicable Stock Option Agreement. "Exercise Price," in the
case of a SAR, shall mean an amount, as specified in the applicable SAR
Agreement, which is subtracted from the Fair Market Value of one Common Share in
determining the amount payable upon exercise of such SAR.
(l) "Fair Market Value" shall mean (i) the closing price of a Share on
the principal exchange which the Shares are trading, on the date on which the
Fair Market Value is determined (if Fair Market Value is determined on a date
which the principal exchange is closed, Fair Market Value shall be determined on
the last immediately preceding trading day), or (ii) if the Shares are not
traded on an exchange but are quoted on the Nasdaq National Market or a
successor quotation system, the closing price on the date on which the Fair
Market Value is determined, or (iii) if the Shares are not traded on an exchange
or quoted on the Nasdaq National
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<PAGE> 8
Market or a successor quotation system, the fair market value of a Share, as
determined by the Committee in good faith. Such determination shall be
conclusive and binding on all persons.
(m) "ISO" shall mean an employee incentive stock option described in
Code section 422.
(n) "Nonstatutory Option" or "NSO" shall mean an employee stock option
that is not an ISO.
(o) "Offeree" shall mean an individual to whom the Committee has offered
the right to acquire Shares under the Plan (other than upon exercise of an
Option).
(p) "Option" shall mean an ISO or Nonstatutory Option granted under the
Plan and entitling the holder to purchase Shares.
(q) "Optionee" shall mean an individual or estate who holds an Option or
SAR.
(r) "Outside Director" shall mean a member of the Board of Directors who
is not a common-law employee of the Company or of a Subsidiary. Service as an
Outside Director shall be considered employment for all purposes of the Plan,
except as provided in the second sentence of Section 4(a).
(s) "Parent" shall mean any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain. A corporation that attains the status of a
Parent on a date after the adoption of the Plan shall be a parent commencing as
of such date.
(t) "Participant" shall mean an individual or estate who holds an Award.
(u) "Plan" shall mean this 2000 Stock Incentive Plan of WebEx, Inc., as
amended from time to time.
(v) "Purchase Price" shall mean the consideration for which one Share
may be acquired under the Plan (other than upon exercise of an Option), as
specified by the Committee.
(w) "Restricted Share" shall mean a Common Share awarded under the Plan.
(x) "Restricted Share Agreement " shall mean the agreement between the
Company and the recipient of a Restricted Share which contains the terms,
conditions and restrictions pertaining to such Restricted Shares.
(y) "SAR" shall mean a stock appreciation right granted under the Plan.
(z) "SAR Agreement" shall mean the agreement between the Company and an
Optionee which contains the terms, conditions and restrictions pertaining to his
or her SAR.
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<PAGE> 9
(aa) "Service" shall mean service as an Employee.
(bb) "Share" shall mean one share of Stock, as adjusted in accordance
with Section 9 (if applicable).
(cc) "Stock" shall mean the Common Stock of the Company.
(dd) "Stock Option Agreement" shall mean the agreement between the
Company and an Optionee which contains the terms, conditions and restrictions
pertaining to his Option.
(ee) "Stock Purchase Agreement" shall mean the agreement between the
Company and an Offeree who acquires Shares under the Plan which contains the
terms, conditions and restrictions pertaining to the acquisition of such Shares.
(ff) "Stock Unit" shall mean a bookkeeping entry representing the
equivalent of one Common Share, as awarded under the Plan.
(gg) "Stock Unit Agreement" shall mean the agreement between the Company
and the recipient of a Stock Unit which contains the terms, conditions and
restrictions pertaining to such Stock Unit.
(hh) "Subsidiary" shall mean any corporation, if the Company and/or one
or more other Subsidiaries own not less than fifty percent (50%) of the total
combined voting power of all classes of outstanding stock of such corporation. A
corporation that attains the status of a Subsidiary on a date after the adoption
of the Plan shall be considered a Subsidiary commencing as of such date.
(ii) "Total and Permanent Disability" shall mean that the Optionee is
unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted, or can be expected to last, for a continuous period
of not less than twelve (12) months.
SECTION 3. ADMINISTRATION.
(a) Committee Procedures. The Plan shall be administered by the
Committee. The Committee shall consist exclusively of two or more directors of
the Company, who shall be appointed by the Board of Directors. The Board of
Directors shall designate one of the members of the Committee as chairman. The
Committee may hold meetings at such times and places as it shall determine. The
acts of a majority of the Committee members present at meetings at which a
quorum exists, or acts reduced to or approved in writing by all Committee
members, shall be valid acts of the Committee.
(b) Committee Responsibilities. Subject to the provisions of the Plan,
the Committee shall have full authority and discretion to take the following
actions:
(i) To interpret the Plan and to apply its provisions;
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<PAGE> 10
(ii) To adopt, amend or rescind rules, procedures and
forms relating to the Plan;
(iii) To authorize any person to execute, on behalf of the
Company, any instrument required to carry out the purposes of the Plan;
(iv) To determine when Shares are to be awarded or offered
for sale and when Options are to be granted under the Plan;
(v) To select the Offerees and Optionees;
(vi) To determine the number of Shares to be offered to
each Offeree or to be made subject to each Option;
(vii) To prescribe the terms and conditions of each award
or sale of Shares, including (without limitation) the Purchase Price,
the vesting of the award (including accelerating the vesting of awards)
and to specify the provisions of the Stock Purchase Agreement relating
to such award or sale;
(viii) To prescribe the terms and conditions of each
Option, including (without limitation) the Exercise Price, the vesting
or duration of the Option (including accelerating the vesting of the
Option), to determine whether such Option is to be classified as an ISO
or as a Nonstatutory Option, and to specify the provisions of the Stock
Option Agreement relating to such Option;
(ix) To amend any outstanding Stock Purchase Agreement or
Stock Option Agreement, subject to applicable legal restrictions and to
the consent of the Offeree or Optionee who entered into such agreement;
(x) To prescribe the consideration for the grant of each
Option or other right under the Plan and to determine the sufficiency of
such consideration;
(xi) To determine the disposition of each Option or other
right under the Plan in the event of an Optionee's or Offeree's divorce
or dissolution of marriage;
(xii) To determine whether Options or other rights under
the Plan will be granted in replacement of other grants under an
incentive or other compensation plan of an acquired business;
(xiii) To correct any defect, supply any omission, or
reconcile any inconsistency in the Plan, any Stock Option Agreement or
any Stock Purchase Agreement; and
(xiv) To take any other actions deemed necessary or
advisable for the administration of the Plan.
Subject to the requirements of applicable law, the Committee may designate
persons other than members of the Committee to carry out its responsibilities
and may prescribe such conditions and limitations as it may deem appropriate,
except that the Committee may not delegate its
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<PAGE> 11
authority with regard to the selection for participation of or the granting of
Options or other rights under the Plan to persons subject to Section 16 of the
Exchange Act. All decisions, interpretations and other actions of the Committee
shall be final and binding on all Offerees, all Optionees, and all persons
deriving their rights from an Offeree or Optionee. No member of the Committee
shall be liable for any action that he has taken or has failed to take in good
faith with respect to the Plan, any Option, or any right to acquire Shares under
the Plan.
SECTION 4. ELIGIBILITY.
(a) General Rule. Only Employees shall be eligible for the grant of
Restricted Shares, Stock Units, NSOs or SARs. In addition, only individuals who
are employed as common-law employees by the Company, a Parent or a Subsidiary
shall be eligible for the grant of ISOs. In addition, an Employee who owns more
than ten percent (10%) of the total combined voting power of all classes of
outstanding stock of the Company or any of its Parents or Subsidiaries shall not
be eligible for the grant of an ISO unless the requirements set forth in section
422(c)(6) of the Code are satisfied.
(b) Outside Directors. Any other provision of the Plan notwithstanding,
the participation of Outside Directors in the Plan shall be subject to the
following restrictions:
(i) Outside Directors shall only be eligible for the grant
of Restricted Shares, Stock Units, Nonstatutory Options and SARs.
(ii) Each Outside Director shall automatically be granted
a Nonstatutory Option to purchase ________ Shares (subject to adjustment
under Section 16) as a result of their appointment as an Outside
Director on, or after, the effectiveness of the Company's initial public
offering of the Stocks. In addition, upon the conclusion of each regular
annual meeting of the Company's stockholders occurring after 2000 and
following the meeting at which they were appointed, each Outside
Director who will continue serving as a member of the Board thereafter
shall receive a Nonstatutory Option to purchase ___________ Shares
(subject to adjustment under Section 16). All such Nonstatutory Options
shall vest and become exercisable at the date of grant;
(iii) The Exercise Price of all Nonstatutory Options
granted to an Outside Director under this Section 4(b) shall be equal to
one hundred percent (100%) of the Fair Market Value of a Share on the
date of grant, payable in one of the forms described in Section 9(a),
(b) and (d).
(iv) All Nonstatutory Options granted to an Outside
Director under this Section 4(b) shall terminate on the earliest of (A)
the tenth (10th) anniversary of the date of grant of such Options or (B)
the date twelve (12) months after the termination of such Outside
Director's service for any reason.
(c) Limitation On Grants. No Employee shall be granted Options to
purchase more than __________ (________) Shares in any fiscal year of the
Company.
(d) Ten-Percent Stockholders. An Employee who owns more than ten percent
(10%) of the total combined voting power of all classes of outstanding stock of
the Company or any of
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its Subsidiaries shall not be eligible for the grant of an ISO unless such grant
satisfies the requirements of Code section 422(c)(6).
(e) Attribution Rules. For purposes of Subsection (d) above, in
determining stock ownership, an Employee shall be deemed to own the stock owned,
directly or indirectly, by or for his brothers, sisters, spouse, ancestors and
lineal descendants. Stock owned, directly or indirectly, by or for a
corporation, partnership, estate or trust shall be deemed to be owned
proportionately by or for its shareholders, partners or beneficiaries.
(f) Outstanding Stock. For purposes of Subsection (d) above,
"outstanding stock" shall include all stock actually issued and outstanding
immediately after the grant. "Outstanding stock" shall not include shares
authorized for issuance under outstanding options held by the Employee or by any
other person.
SECTION 5. STOCK SUBJECT TO PLAN.
(a) Basic Limitation. Shares offered under the Plan shall be authorized
but unissued Shares or treasury Shares. The maximum aggregate number of Options,
SARs, Stock Units and Restricted Shares awarded under the Plan shall not exceed
______________________ (________) Shares, plus the additional Common Shares
described in Sections (b) and (c). The limitation of this Section 5(a) shall be
subject to adjustment pursuant to Section 12.
(b) Annual Increase in Shares. As of January 1 of each year, commencing
with the year 2001, the aggregate number of Options, SARs, Stock Units and
Restricted Shares that may be awarded under the Plan shall automatically
increase by a number equal to the lesser of (i) ___________ (__________) shares,
(ii) ___% of the outstanding shares on such date or (iii) a lesser amount
determined by the Board. The aggregate number of Shares which may be issued
under the Plan shall at all times be subject to adjustment pursuant to Section
16. The number of Shares which are subject to Options or other rights
outstanding at any time under the Plan shall not exceed the number of Shares
which then remain available for issuance under the Plan. The Company, during the
term of the Plan, shall at all times reserve and keep available sufficient
Shares to satisfy the requirements of the Plan.
(c) Additional Shares. If Restricted Shares or Common Shares issued upon
the exercise of Options are forfeited, then such Common Shares shall again
become available for Awards under the Plan. If Stock Units, Options or SARs are
forfeited or terminate for any other reason before being exercised, then the
corresponding Common Shares shall again become available for Awards under the
Plan. If Stock Units are settled, then only the number of Common Shares (if any)
actually issued in settlement of such Stock Units shall reduce the number
available under Section 5(a) and the balance shall again become available for
Awards under the Plan. If SARs are exercised, then only the number of Common
Shares (if any) actually issued in settlement of such SARs shall reduce the
number available in Section 5(a) and the balance shall again become available
for Awards under the Plan. The foregoing notwithstanding, the aggregate number
of Common Shares that may be issued under the Plan upon the exercise of ISOs
shall not be increased when Restricted Shares or other Common Shares are
forfeited.
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(d) Dividend Equivalents. Any dividend equivalents paid or credited
under the Plan shall not be applied against the number of Restricted Shares,
Stock Units, Options or SARs available for Awards, whether or not such dividend
equivalents are converted into Stock Units.
SECTION 6. RESTRICTED SHARES
(a) Restricted Stock Agreement. Each grant of Restricted Shares under
the Plan shall be evidenced by a Restricted Stock Agreement between the
recipient and the Company. Such Restricted Shares shall be subject to all
applicable terms of the Plan and may be subject to any other terms that are not
inconsistent with the Plan. The provisions of the various Restricted Stock
Agreements entered into under the Plan need not be identical.
(b) Payment for Awards. Subject to the following sentence, Restricted
Shares may be sold or awarded under the Plan for such consideration as the
Committee may determine, including (without limitation) cash, cash equivalents,
full-recourse promissory notes, past services and future services. To the extent
that an Award consists of newly issued Restricted Shares, the Award recipient
shall furnish consideration with a value not less than the par value of such
Restricted Shares in the form of cash, cash equivalents, or past services
rendered to the Company (or a Parent or Subsidiary), as the Committee may
determine.
(c) Vesting. Each Award of Restricted Shares may or may not be subject
to vesting. Vesting shall occur, in full or in installments, upon satisfaction
of the conditions specified in the Restricted Stock Agreement. The Committee may
include among such conditions the requirement that the performance of the
Company or a business unit of the Company for a specified period of one or more
years equal or exceed a target determined in advance by the Committee. Such
performance shall be determined by the Company's independent auditors. Such
target shall be based on one or more of the criteria set forth in Appendix A.
The Committee shall determine such target not later than the 90th day of such
period. In no event shall the number of Restricted Shares which are subject to
performance based vesting conditions exceed ____________, subject to adjustment
in accordance with Section 16. A Restricted Stock Agreement may provide for
accelerated vesting in the event of the Participant's death, disability or
retirement or other events. The Committee may determine, at the time of granting
Restricted Shares of thereafter, that all or part of such Restricted Shares
shall become vested in the event that a Change in Control occurs with respect to
the Company.
(d) Voting and Dividend Rights. The holders of Restricted Shares awarded
under the Plan shall have the same voting, dividend and other rights as the
Company's other stockholders. A Restricted Stock Agreement, however, may require
that the holders of Restricted Shares invest any cash dividends received in
additional Restricted Shares. Such additional Restricted Shares shall be subject
to the same conditions and restrictions as the Award with respect to which the
dividends were paid.
SECTION 7. OTHER TERMS AND CONDITIONS OF AWARDS OR SALES.
(a) Duration of Offers and Nontransferability of Rights. Any right to
acquire Shares under the Plan (other than an Option) shall automatically expire
if not exercised by the Offeree within thirty (30) days after the grant of such
right was communicated to him by the Committee.
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Such right shall not be transferable and shall be exercisable only by the
Offeree to whom such right was granted.
(b) Purchase Price. The Purchase Price shall be determined by the
Committee at its sole discretion. The Purchase Price shall be payable in one of
the forms described in Sections 9(a), (b) or (c).
(c) Withholding Taxes. As a condition to the purchase of Shares, the
Offeree shall make such arrangements as the Committee may require for the
satisfaction of any federal, state or local withholding tax obligations that may
arise in connection with such purchase.
(d) Restrictions on Transfer of Shares. Any Shares awarded or sold under
the Plan shall be subject to such special forfeiture conditions, rights of
repurchase, rights of first refusal and other transfer restrictions as the
Committee may determine. Such restrictions shall be set forth in the applicable
Stock Purchase Agreement and shall apply in addition to any general restrictions
that may apply to all holders of Shares.
SECTION 8. TERMS AND CONDITIONS OF OPTIONS.
(a) Stock Option Agreement. Each grant of an Option under the Plan shall
be evidenced by a Stock Option Agreement between the Optionee and the Company.
Such Option shall be subject to all applicable terms and conditions of the Plan
and may be subject to any other terms and conditions which are not inconsistent
with the Plan and which the Committee deems appropriate for inclusion in a Stock
Option Agreement. The Stock Option Agreement shall specify whether the Option is
an ISO or an NSO. The provisions of the various Stock Option Agreements entered
into under the Plan need not be identical. Options may be granted in
consideration of a reduction in the Optionee's other compensation. A Stock
Option Agreement may provide that a new Option will be granted automatically to
the Optionee when he or she exercises a prior Option and pays the Exercise Price
in a form described in Section 9.
(b) Number of Shares. Each Stock Option Agreement shall specify the
number of Shares that are subject to the Option and shall provide for the
adjustment of such number in accordance with Section 16. Options granted to an
Optionee in a single fiscal year of the Company shall not cover more than
_________ Shares.
(c) Exercise Price. Each Stock Option Agreement shall specify the
Exercise Price. The Exercise Price of an ISO shall not be less than 100 percent
(100%) of the Fair Market Value of a Share on the date of grant, except as
otherwise provided in Section 4(d). Subject to the foregoing in this Section
8(c), the Exercise Price under any Option shall be determined by the Committee
at its sole discretion. The Exercise Price shall be payable in one of the forms
described in Sections 9.
(d) Withholding Taxes. As a condition to the exercise of an Option, the
Optionee shall make such arrangements as the Committee may require for the
satisfaction of any federal, state or local withholding tax obligations that may
arise in connection with such exercise. The Optionee shall also make such
arrangements as the Committee may require for the satisfaction of any federal,
state or local withholding tax obligations that may arise in connection with the
disposition of Shares acquired by exercising an Option.
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(e) Exercisability and Term. Each Stock Option Agreement shall specify
the date when all or any installment of the Option is to become exercisable. The
Stock Option Agreement shall also specify the term of the Option; provided that
the term of an ISO shall in no event exceed ten (10) years from the date of
grant (five (5) years for Employees described in Section 4(d)). A Stock Option
Agreement may provide for accelerated exercisability in the event of the
Optionee's death, disability, or retirement or other events and may provide for
expiration prior to the end of its term in the event of the termination of the
Optionee's service. Options may be awarded in combination with SARs, and such an
Award may provide that the Options will not be exercisable unless the related
SARs are forfeited. Subject to the foregoing in this Section 8(e), the Committee
at its sole discretion shall determine when all or any installment of an Option
is to become exercisable and when an Option is to expire.
(f) Nontransferability. During an Optionee's lifetime, his Option(s)
shall be exercisable only by him and shall not be transferable. In the event of
an Optionee's death, his Option(s) shall not be transferable other than by will
or by the laws of descent and distribution.
(g) Exercise of Options Upon Termination of Service. Each Stock Option
Agreement shall set forth the extent to which the Optionee shall have the right
to exercise the Option following termination of the Optionee's Service with the
Company and its Subsidiaries, and the right to exercise the Option of any
executors or administrators of the Optionee's estate or any person who has
acquired such Option(s) directly from the Optionee by bequest or inheritance.
Such provisions shall be determined in the sole discretion of the Committee,
need not be uniform among all Options issued pursuant to the Plan, and may
reflect distinctions based on the reasons for termination of Service.
(h) Effect of Change in Control. The Committee may determine, at the
time of granting an Option or thereafter, that such Option shall become
exercisable as to all or part of the Shares subject to such Option in the event
that a Change in Control occurs with respect to the Company, subject to the
following limitations:
(i) In the case of an ISO, the acceleration of
exercisability shall not occur without the Optionee's written consent.
(ii) If the Company and the other party to the transaction
constituting a Change in Control agree that such transaction is to be
treated as a "pooling of interests" for financial reporting purposes,
and if such transaction in fact is so treated, then the acceleration of
exercisability shall not occur to the extent that the Company's
independent accountants and such other party's independent accountants
separately determine in good faith that such acceleration would preclude
the use of "pooling of interests" accounting.
(i) Leaves of Absence. An Employee's Service shall cease when such
Employee ceases to be actively employed by, or a consultant or adviser to, the
Company (or any subsidiary) as determined in the sole discretion of the Board of
Directors. For purposes of Options, Service does not terminate when an Employee
goes on a bona fide leave of absence, that was approved by the Company in
writing, if the terms of the leave provide for continued service crediting, or
when continued service crediting is required by applicable law. However, for
purposes of
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determining whether an Option is entitled to ISO status, an Employee's Service
will be treated as terminating ninety (90) days after such Employee went on
leave, unless such Employee's right to return to active work is guaranteed by
law or by a contract. Service terminates in any event when the approved leave
ends, unless such Employee immediately returns to active work. The Company
determines which leaves count toward Service, and when Service terminates for
all purposes under the Plan.
(j) No Rights as a Stockholder. An Optionee, or a transferee of an
Optionee, shall have no rights as a stockholder with respect to any Shares
covered by his Option until the date of the issuance of a stock certificate for
such Shares. No adjustments shall be made, except as provided in Section 16.
(k) Modification, Extension and Renewal of Options. Within the
limitations of the Plan, the Committee may modify, extend or renew outstanding
options or may accept the cancellation of outstanding options (to the extent not
previously exercised), whether or not granted hereunder, in return for the grant
of new Options for the same or a different number of Shares and at the same or a
different exercise price. The foregoing notwithstanding, no modification of an
Option shall, without the consent of the Optionee, impair his rights or increase
his obligations under such Option.
(l) Restrictions on Transfer of Shares. Any Shares issued upon exercise
of an Option shall be subject to such special forfeiture conditions, rights of
repurchase, rights of first refusal and other transfer restrictions as the
Committee may determine. Such restrictions shall be set forth in the applicable
Stock Option Agreement and shall apply in addition to any general restrictions
that may apply to all holders of Shares.
(m) Buyout Provisions. The Committee may at any time (a) offer to buy
out for a payment in cash or cash equivalents an Option previously granted or
(b) authorize an Optionee to elect to cash out an Option previously granted, in
either case at such time and based upon such terms and conditions as the
Committee shall establish.
SECTION 9. PAYMENT FOR SHARES.
(a) General Rule. The entire Exercise Price of Shares issued under the
Plan shall be payable in lawful money of the United States of America at the
time when such Shares are purchased, except as provided in Subsections (b)
through (g) below.
(b) Surrender of Stock. To the extent that a Stock Option Agreement so
provides, payment may be made all or in part by surrendering, or attesting to
the ownership of, Shares which have already been owned by the Optionee or his
representative for more than twelve (12) months. Such Shares shall be valued at
their Fair Market Value on the date when the new Shares are purchased under the
Plan. The Optionee shall not surrender, or attest to the ownership of, Shares in
payment of the Exercise Price if such action would cause the Company to
recognize compensation expense (or additional compensation expense) with respect
to the Option for financial reporting purposes.
(c) Services Rendered. At the discretion of the Committee, Shares may be
awarded under the Plan in consideration of services rendered to the Company or a
Subsidiary prior to the
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award. If Shares are awarded without the payment of a Purchase Price in cash,
the Committee shall make a determination (at the time of the award) of the value
of the services rendered by the Offeree and the sufficiency of the consideration
to meet the requirements of Section 6(c).
(d) Cashless Exercise. To the extent that a Stock Option Agreement so
provides, payment may be made all or in part by delivery (on a form prescribed
by the Committee) of an irrevocable direction to a securities broker to sell
Shares and to deliver all or part of the sale proceeds to the Company in payment
of the aggregate Exercise Price.
(e) Exercise/Pledge. To the extent that a Stock Option Agreement so
provides, payment may be made all or in part by delivery (on a form prescribed
by the Committee) of an irrevocable direction to a securities broker or lender
to pledge Shares, as security for a loan, and to deliver all or part of the loan
proceeds to the Company in payment of the aggregate Exercise Price.
(f) Promissory Note. To the extent that a Stock Option Agreement so
provides, payment may be made all or in part by delivering (on a form prescribed
by the Company) a full-recourse promissory note. However, the par value of the
Common Shares being purchased under the Plan, if newly issued, shall be paid in
cash or cash equivalents.
(g) Other Forms of Payment. To the extent that a Stock Option Agreement
so provides, payment may be made in any other form that is consistent with
applicable laws, regulations and rules.
SECTION 10. STOCK APPRECIATION RIGHTS.
(a) SAR Agreement. Each grant of a SAR under the Plan shall be evidenced
by a SAR Agreement between the Optionee and the Company. Such SAR shall be
subject to all applicable terms of the Plan and may be subject to any other
terms that are not inconsistent with the Plan. The provisions of the various SAR
Agreements entered into under the Plan need not be identical. SARs may be
granted in consideration of a reduction in the Optionee's other compensation.
(b) Number of Shares. Each SAR Agreement shall specify the number of
Common Shares to which the SAR pertains and shall provide for the adjustment of
such number in accordance with Section 12. SARs granted to any Optionee in a
single calendar year shall in no event pertain to more than _______ Common
Shares, except that SARs granted to a new Employee in the fiscal year of the
Company in which his or her service as an Employee first commences shall not
pertain to more than _________ Common Shares. The limitations set forth in the
preceding sentence shall be subject to adjustment in accordance with Section 12.
(c) Exercise Price. Each SAR Agreement shall specify the Exercise Price.
A SAR Agreement may specify an Exercise Price that varies in accordance with a
predetermined formula while the SAR is outstanding.
(d) Exercisability and Term. Each SAR Agreement shall specify the date
when all or any installment of the SAR is to become exercisable. The SAR
Agreement shall also specify the term of the SAR. A SAR Agreement may provide
for accelerated exercisability in the event of
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the Optionee's death, disability or retirement or other events and may provide
for expiration prior to the end of its term in the event of the termination of
the Optionee's service. SARs may be awarded in combination with Options, and
such an Award may provide that the SARs will not be exercisable unless the
related Options are forfeited. A SAR may be included in an ISO only at the time
of grant but may be included in an NSO at the time of grant or thereafter. A SAR
granted under the Plan may provide that it will be exercisable only in the event
of a Change in Control.
(e) Effect of Change in Control. The Committee may determine, at the
time of granting a SAR or thereafter, that such SAR shall become fully
exercisable as to all Common Shares subject to such SAR in the event that a
Change in Control occurs with respect to the Company, subject to the following
sentence. If the Company and the other party to the transaction constituting a
Change in Control agree that such transaction is to be treated as a "pooling of
interests" for financial reporting purposes, and if such transaction in fact is
so treated, then the acceleration of exercisability shall not occur to the
extent that the Company's independent accountants and such other party's
independent accountants separately determine in good faith that such
acceleration would preclude the use of "pooling of interests" accounting.
(f) Exercise of SARs. Upon exercise of a SAR, the Optionee (or any
person having the right to exercise the SAR after his or her death) shall
receive from the Company (a) Common Shares, (b) cash or (c) a combination of
Common Shares and cash, as the Committee shall determine. The amount of cash
and/or the Fair Market Value of Common Shares received upon exercise of SARs
shall, in the aggregate, be equal to the amount by which the Fair Market Value
(on the date of surrender) of the Common Shares subject to the SARs exceeds the
Exercise Price. If, on the date when a SAR expires, the Exercise Price under
such SAR is less than the Fair Market Value on such date but any portion of such
SAR has not been exercised or surrendered, then such SAR shall automatically be
deemed to be exercised as of such date with respect to such portion.
(g) Modification or Assumption of SARs. Within the limitations of the
Plan, the Committee may modify, extend or assume outstanding SARs or may accept
the cancellation of outstanding SARs (whether granted by the Company or by
another issuer) in return for the grant of new SARs for the same or a different
number of shares and at the same or a different exercise price. The foregoing
notwithstanding, no modification of a SAR shall, without the consent of the
Optionee, may alter or impair his or her rights or obligations under such SAR.
SECTION 11. STOCK UNITS.
(a) Stock Unit Agreement. Each grant of Stock Units under the Plan shall
be evidenced by a Stock Unit Agreement between the recipient and the Company.
Such Stock Units shall be subject to all applicable terms of the Plan and may be
subject to any other terms that are not inconsistent with the Plan. The
provisions of the various Stock Unit Agreements entered into under the Plan need
not be identical. Stock Units may be granted in consideration of a reduction in
the recipient's other compensation.
(b) Payment for Awards. To the extent that an Award is granted in the
form of Stock Units, no cash consideration shall be required of the Award
recipients.
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(c) Vesting Conditions. Each Award of Stock Units may or may not be
subject to vesting. Vesting shall occur, in full or in installments, upon
satisfaction of the conditions specified in the Stock Unit Agreement. A Stock
Unit Agreement may provide for accelerated vesting in the event of the
Participant's death, disability or retirement or other events. The Committee may
determine, at the time of granting Stock Units or thereafter, that all or part
of such Stock Units shall become vested in the event that a Change in Control
occurs with respect to the Company, except as provided in the next following
sentence. If the Company and the other party to the transaction constituting a
Change in Control agree that such transaction is to be treated as a "pooling of
interests" for financial reporting purposes, and if such transaction in fact is
so treated, then the acceleration of vesting shall not occur to the extent that
the Company's independent accountants and such other party's independent
accountants separately determine in good faith that such acceleration would
preclude the use of "pooling of interests" accounting.
(d) Voting and Dividend Rights. The holders of Stock Units shall have no
voting rights. Prior to settlement or forfeiture, any Stock Unit awarded under
the Plan may, at the Committee's discretion, carry with it a right to dividend
equivalents. Such right entitles the holder to be credited with an amount equal
to all cash dividends paid on one Common Share while the Stock Unit is
outstanding. Dividend equivalents may be converted into additional Stock Units.
Settlement of dividend equivalents may be made in the form of cash, in the form
of Common Shares, or in a combination of both. Prior to distribution, any
dividend equivalents which are not paid shall be subject to the same conditions
and restrictions as the Stock Units to which they attach.
(e) Form and Time of Settlement of Stock Units. Settlement of vested
Stock Units may be made in the form of (a) cash, (b) Common Shares or (c) any
combination of both, as determined by the Committee. The actual number of Stock
Units eligible for settlement may be larger or smaller than the number included
in the original Award, based on predetermined performance factors. Methods of
converting Stock Units into cash may include (without limitation) a method based
on the average Fair Market Value of Common Shares over a series of trading days.
Vested Stock Units may be settled in a lump sum or in installments. The
distribution may occur or commence when all vesting conditions applicable to the
Stock Units have been satisfied or have lapsed, or it may be deferred to any
later date. The amount of a deferred distribution may be increased by an
interest factor or by dividend equivalents. Until an Award of Stock Units is
settled, the number of such Stock Units shall be subject to adjustment pursuant
to Section 12.
(f) Death of Recipient. Any Stock Units Award that becomes payable after
the recipient's death shall be distributed to the recipient's beneficiary or
beneficiaries. Each recipient of a Stock Units Award under the Plan shall
designate one or more beneficiaries for this purpose by filing the prescribed
form with the Company. A beneficiary designation may be changed by filing the
prescribed form with the Company at any time before the Award recipient's death.
If no beneficiary was designated or if no designated beneficiary survives the
Award recipient, then any Stock Units Award that becomes payable after the
recipient's death shall be distributed to the recipient's estate.
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(g) Creditors' Rights. A holder of Stock Units shall have no rights
other than those of a general creditor of the Company. Stock Units represent an
unfunded and unsecured obligation of the Company, subject to the terms and
conditions of the applicable Stock Unit Agreement.
SECTION 12. PROTECTION AGAINST DILUTION.
(a) Adjustments. In the event of a subdivision of the outstanding Common
Shares, a declaration of a dividend payable in Common Shares, a declaration of a
dividend payable in a form other than Common Shares in an amount that has a
material effect on the price of Common Shares, a combination or consolidation of
the outstanding Common Shares (by reclassification or otherwise) into a lesser
number of Common Shares, a recapitalization, a spin-off or a similar occurrence,
the Committee shall make such adjustments as it, in its sole discretion, deems
appropriate in one or more of:
(i) The number of Options, SARs, Restricted Shares and
Stock Units available for future Awards under Section 5;
(ii) The limitations set forth in Sections 8(b) and 10(b);
(iii) The number of NSOs to be granted to Outside
Directors under Section 4(b);
(iv) The number of Common Shares covered by each
outstanding Option and SAR;
(v) The Exercise Price under each outstanding Option and
SAR; or
(vi) The number of Stock Units included in any prior Award
which has not yet been settled.
Except as provided in this Section 12, a Participant shall have no rights by
reason of any issue by the Company of stock of any class or securities
convertible into stock of any class, any subdivision or consolidation of shares
of stock of any class, the payment of any stock dividend or any other increase
or decrease in the number of shares of stock of any class.
(b) Dissolution or Liquidation. To the extent not previously exercised
or settled, Options, SARs and Stock Units shall terminate immediately prior to
the dissolution or liquidation of the Company.
(c) Reorganizations. In the event that the Company is a party to a
merger or other reorganization, outstanding Awards shall be subject to the
agreement of merger or reorganization. Such agreement shall provide for:
(i) The continuation of the outstanding Awards by the
Company, if the Company is a surviving corporation;
(ii) The assumption of the outstanding Awards by the
surviving corporation or its parent or subsidiary;
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(iii) The substitution by the surviving corporation or its
parent or subsidiary of its own awards for the outstanding Awards;
(iv) Full exercisability or vesting and accelerated
expiration of the outstanding Awards; or
(v) Settlement of the full value of the outstanding Awards
in cash or cash equivalents followed by cancellation of such Awards.
SECTION 13. DEFERRAL OF AWARDS.
The Committee (in its sole discretion) may permit or require a
Participant to:
a) Have cash that otherwise would be paid to such Participant as a
result of the exercise of a SAR or the settlement of Stock Units
credited to a deferred compensation account established for such
Participant by the Committee as an entry on the Company's books;
b) Have Common Shares that otherwise would be delivered to such
Participant as a result of the exercise of an Option or SAR
converted into an equal number of Stock Units; or
c) Have Common Shares that otherwise would be delivered to such
Participant as a result of the exercise of an Option or SAR or
the settlement of Stock Units converted into amounts credited to
a deferred compensation account established for such Participant
by the Committee as an entry on the Company's books. Such
amounts shall be determined by reference to the Fair Market
Value of such Common Shares as of the date when they otherwise
would have been delivered to such Participant.
A deferred compensation account established under this Section 13 may be
credited with interest or other forms of investment return, as determined by the
Committee. A Participant for whom such an account is established shall have no
rights other than those of a general creditor of the Company. Such an account
shall represent an unfunded and unsecured obligation of the Company and shall be
subject to the terms and conditions of the applicable agreement between such
Participant and the Company. If the deferral or conversion of Awards is
permitted or required, the Committee (in its sole discretion) may establish
rules, procedures and forms pertaining to such Awards, including (without
limitation) the settlement of deferred compensation accounts established under
this Section 13.
SECTION 14. AWARDS UNDER OTHER PLANS.
The Company may grant awards under other plans or programs. Such awards
may be settled in the form of Common Shares issued under this Plan. Such Common
Shares shall be treated for all purposes under the Plan like Common Shares
issued in settlement of Stock Units and shall, when issued, reduce the number of
Common Shares available under Section 5.
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SECTION 15. PAYMENT OF DIRECTOR'S FEES IN SECURITIES.
(a) Effective Date. No provision of this Section 15 shall be effective
unless and until the Board has determined to implement such provision.
(b) Elections to Receive NSOs, Restricted Shares or Stock Units. An
Outside Director may elect to receive his or her annual retainer payments and/or
meeting fees from the Company in the form of cash, NSOs, Restricted Shares or
Stock Units, or a combination thereof, as determined by the Board. Such NSOs,
Restricted Shares and Stock Units shall be issued under the Plan. An election
under this Section 15 shall be filed with the Company on the prescribed form.
(c) Number and Terms of NSOs, Restricted Shares or Stock Units. The
number of NSOs, Restricted Shares or Stock Units to be granted to Outside
Directors in lieu of annual retainers and meeting fees that would otherwise be
paid in cash shall be calculated in a manner determined by the Board. The terms
of such NSOs, Restricted Shares or Stock Units shall also be determined by the
Board.
SECTION 16. ADJUSTMENT OF SHARES.
(a) General. In the event of a subdivision of the outstanding Stock, a
declaration of a dividend payable in Shares, a declaration of a dividend payable
in a form other than Shares in an amount that has a material effect on the value
of Shares, a combination or consolidation of the outstanding Stock (by
reclassification or otherwise) into a lesser number of Shares, a
recapitalization or a similar occurrence, the Committee shall make appropriate
adjustments in one or more of (i) the number of Shares available for future
grants under Section 5, (ii) the number of Shares available for grants under
Section 4(c), (iii) the number of Shares covered by each outstanding Option,
(iv) the Exercise Price under each outstanding Option, (v) the number of shares
covered by each outstanding award or (vi) the Purchase Price of each outstanding
award.
(b) Reorganizations. In the event that the Company is a party to a
merger or other reorganization, outstanding Options shall be subject to the
agreement of merger or reorganization. Such agreement may provide for the
assumption of outstanding Options by the surviving corporation or its parent or
for their continuation by the Company (if the Company is a surviving
corporation); provided, however, that if assumption or continuation of the
outstanding Options is not provided by such agreement then the Committee shall
have the option of offering the payment of a cash settlement equal to the
difference between the amount to be paid for one Share under such agreement and
the Exercise Price, in all cases without the Optionees' consent.
(c) Reservation of Rights. Except as provided in this Section 16, an
Optionee or Offeree shall have no rights by reason of any subdivision or
consolidation of shares of stock of any class, the payment of any dividend or
any other increase or decrease in the number of shares of stock of any class.
Any issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or
Exercise Price of Shares subject to an Option. The grant of an Option pursuant
to the Plan shall not affect in any way the right or power of the
-17-
<PAGE> 23
Company to make adjustments, reclassifications, reorganizations or changes of
its capital or business structure, to merge or consolidate or to dissolve,
liquidate, sell or transfer all or any part of its business or assets.
SECTION 17. LEGAL AND REGULATORY REQUIREMENTS.
Shares shall not be issued under the Plan unless the issuance and
delivery of such Shares complies with (or is exempt from) all applicable
requirements of law, including (without limitation) the Securities Act of 1933,
as amended, the rules and regulations promulgated thereunder, state securities
laws and regulations and the regulations of any stock exchange on which the
Company's securities may then be listed, and the Company has obtained the
approval or favorable ruling from any governmental agency which the Company
determines is necessary or advisable.
SECTION 18. WITHHOLDING TAXES.
(a) General. To the extent required by applicable federal, state, local
or foreign law, a Participant or his or her successor shall make arrangements
satisfactory to the Company for the satisfaction of any withholding tax
obligations that arise in connection with the Plan. The Company shall not be
required to issue any Common Shares or make any cash payment under the Plan
until such obligations are satisfied.
(b) Share Withholding. The Committee may permit a Participant to satisfy
all or part of his or her withholding or income tax obligations by having the
Company withhold all or a portion of any Common Shares that otherwise would be
issued to him or her or by surrendering all or a portion of any Common Shares
that he or she previously acquired. Such Common Shares shall be valued at their
Fair Market Value on the date when taxes otherwise would be withheld in cash.
SECTION 19. LIMITATION ON PARACHUTE PAYMENTS.
(a) Scope of Limitation. This Section 19 shall apply to an Award unless
the Committee, at the time of making an Award under the Plan or at any time
thereafter, specifies in writing that such Award shall not be subject to this
Section 19. If this Section 19 applies to an Award, it shall supersede any
contrary provision of the Plan or of any Award granted under the Plan.
(b) Basic Rule. In the event that the independent auditors most recently
selected by the Board (the "Auditors") determine that any payment or transfer by
the Company under the Plan to or for the benefit of a Participant (a "Payment")
would be nondeductible by the Company for federal income tax purposes because of
the provisions concerning "excess parachute payments" in Section 280G of the
Code, then the aggregate present value of all Payments shall be reduced (but not
below zero) to the Reduced Amount. For purposes of this Section 19, the "Reduced
Amount" shall be the amount, expressed as a present value, which maximizes the
aggregate present value of the Payments without causing any Payment to be
nondeductible by the Company because of Section 280G of the Code.
(c) Reduction of Payments. If the Auditors determine that any Payment
would be nondeductible by the Company because of Section 280G of the Code, then
the Company shall
-18-
<PAGE> 24
promptly give the Participant notice to that effect and a copy of the detailed
calculation thereof and of the Reduced Amount, and the Participant may then
elect, in his or her sole discretion, which and how much of the Payments shall
be eliminated or reduced (as long as after such election the aggregate present
value of the Payments equals the Reduced Amount) and shall advise the Company in
writing of his or her election within 10 days of receipt of notice. If no such
election is made by the Participant within such 10-day period, then the Company
may elect which and how much of the Payments shall be eliminated or reduced (as
long as after such election the aggregate present value of the Payments equals
the Reduced Amount) and shall notify the Participant promptly of such election.
For purposes of this Section 19, present value shall be determined in accordance
with Section 280G(d)(4) of the Code. All determinations made by the Auditors
under this Section 19 shall be binding upon the Company and the Participant and
shall be made within sixty (60) days of the date when a Payment becomes payable
or transferable. As promptly as practicable following such determination and the
elections hereunder, the Company shall pay or transfer to or for the benefit of
the Participant such amounts as are then due to him or her under the Plan and
shall promptly pay or transfer to or for the benefit of the Participant in the
future such amounts as become due to him or her under the Plan.
(d) Overpayments and Underpayments. As a result of uncertainty in the
application of Section 280G of the Code at the time of an initial determination
by the Auditors hereunder, it is possible that Payments will have been made by
the Company that should not have been made (an "Overpayment") or that additional
Payments that will not have been made by the Company could have been made (an
"Underpayment"), consistent in each case with the calculation of the Reduced
Amount hereunder. In the event that the Auditors, based upon the assertion of a
deficiency by the Internal Revenue Service against the Company or the
Participant that the Auditors believe has a high probability of success,
determine that an Overpayment has been made, such Overpayment shall be treated
for all purposes as a loan to the Participant which he or she shall repay to the
Company, together with interest at the applicable federal rate provided in
Section 7872(f)(2) of the Code; provided, however, that no amount shall be
payable by the Participant to the Company if and to the extent that such payment
would not reduce the amount subject to taxation under Section 4999 of the Code.
In the event that the Auditors determine that an Underpayment has occurred, such
Underpayment shall promptly be paid or transferred by the Company to or for the
benefit of the Participant, together with interest at the applicable federal
rate provided in Section 7872(f)(2) of the Code.
(e) Related Corporations. For purposes of this Section 19, the term
"Company" shall include affiliated corporations to the extent determined by the
Auditors in accordance with Section 280G(d)(5) of the Code.
SECTION 20. NO EMPLOYMENT RIGHTS.
No provision of the Plan, nor any right or Option granted under the
Plan, shall be construed to give any person any right to become, to be treated
as, or to remain an Employee. The Company and its Subsidiaries reserve the right
to terminate any person's Service at any time and for any reason, with or
without notice.
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<PAGE> 25
SECTION 21. DURATION AND AMENDMENTS.
(a) Term of the Plan. The amended and restated Plan, as set forth
herein, shall terminate automatically on _____________, ________ and may be
terminated on any earlier date pursuant to Subsection (b) below.
(b) Right to Amend or Terminate the Plan. The Board of Directors may
amend the Plan at any time and from time to time. Rights and obligations under
any Option granted before amendment of the Plan shall not be materially impaired
by such amendment, except with consent of the person to whom the Option was
granted. An amendment of the Plan shall be subject to the approval of the
Company's stockholders only to the extent required by applicable laws,
regulations or rules.
(c) Effect of Amendment or Termination. No Shares shall be issued or
sold under the Plan after the termination thereof, except upon exercise of an
Option granted prior to such termination. The termination of the Plan, or any
amendment thereof, shall not affect any Share previously issued or any Option
previously granted under the Plan.
SECTION 22. EXECUTION.
To record the adoption of the amended and restated Plan by the Board of
Directors effective as of March __, 2000, the Company has caused its authorized
officer to execute the same.
WEBEX, INC.
By
--------------------------------------
Subrah S. Iyar
Chief Executive Officer
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<PAGE> 26
NOTICE OF STOCK OPTION GRANT
THE WEBEX, INC. 2000 STOCK INCENTIVE PLAN
You have been granted the following option to purchase Common Stock of
WebEx, Inc. (the "Company") under the WebEx, Inc. 2000 Stock Incentive Plan (the
"Plan"):
Name of Optionee:_______________________________________________________________
Total Number of Option Shares Granted:_______________________
Type of Option: [ ] Incentive Stock Option [ ] Nonstatutory Stock Option
Exercise Price Per Share: $__________________________________
Grant Date:__________________________________________________
Vesting Commencement Date:___________________________________
Vesting Schedule: [Check only one box]
[ ] Full vesting: This option is fully vested and exercisable as of
the date of grant.
[ ] Two-Year Vesting: Subject to the following terms and conditions
set forth in this Notice of Stock Option Grant, this option shall
vest as to 12/24ths of the shares on the first anniversary of the
Vesting Commencement Date and 1/24ths of the shares each full
month thereafter.
[ ] Three-Year Vesting: Subject to the following terms and conditions
set forth in this Notice of Stock Option Grant, this option shall
vest as to 12/36ths of the shares on the first anniversary of the
Vesting Commencement Date and 1/36th of the shares each full
month thereafter.
[ ] Four-Year Vesting: Subject to the following terms and conditions
set forth in this Notice of Stock Option Grant, this option shall
vest as to 12/48ths of the shares on the first anniversary of the
Vesting Commencement Date and 1/48th of the shares each full
month thereafter.
Accelerated Vesting: [Check only one box]
[ ] Your option is not subject to accelerated vesting.
Your option will become fully vested and exercisable if:
<PAGE> 27
[ ] The Company is subject to a Change in Control (as defined
in Section 2(b) of the Plan) prior to the date your
service terminates.
[ ] The Company involuntarily terminates your employment
without good cause.
[ ] You experience a Total and Permanent Disability (as
defined in Section 2(ii) of the Plan).
Post-Termination Exercise Period: [Check only one box]
If your service with the Company terminates for any reason other than Total and
Permanent Disability or death, then your option expires on:
[ ] the date of your termination.
[ ] the date 90 days after your termination date.
[ ] the date 6 months after your termination date.
[ ] the date 12 months after your termination date.
[ ] the date 24 months after your termination date.
[ ] the Expiration Date of your option.
Form of Payment: [Check one or more boxes]
Payment may be made in the following form(s):
[ ] Your personal check, a cashier's check or a money order.
[ ] In shares of Company stock which have been owned by you
or your representative for more than 12 months and which are
surrendered to the Company in good form for transfer.
[ ] By delivering on a form approved by the Committee of an
irrevocable direction to a securities broker approved by the
Company to sell all or part of your option shares and to deliver
to the Company from the sale proceeds in an amount sufficient to
pay the option exercise price and any withholding taxes. The
balance of the sale proceeds, if any, will be delivered to you.
Expiration Date: ____________________
-2-
<PAGE> 28
By your signature and the signature of the Company's representative
below, you and the Company agree that this option is granted under and governed
by the term and conditions of the Plan and this Stock Option Agreement, both of
which are attached to and made a part of this document.
OPTIONEE: WEBEX, INC.
By:
- ----------------------------------- ----------------------------------
Title:
- ----------------------------------- ----------------------------------
Please Print Name
-3-
<PAGE> 29
STOCK OPTION AGREEMENT
FOR THE WEBEX, INC.
2000 STOCK INCENTIVE PLAN
TAX TREATMENT This option is intended to be an incentive stock option
under Section 422 of the Internal Revenue Code or a
nonstatutory option, as provided in the Notice of Stock
Option Grant.
VESTING This option becomes exercisable in accordance with the
vesting schedule set forth in the Notice of Stock Option
Grant
TERM This option expires on the date shown in the Notice of
Stock Option Grant, but in no event later than the 10th
anniversary of the Grant Date.
REGULAR TERMINATION If your service as an employee, consultant or director of
the Company or a subsidiary of the Company terminates for
any reason excluding death or total and permanent
disability, then this option will expire on the date
specified in the Notice of Stock Option Grant under the
heading "Post-Termination Exercise Period."
DEATH OR DISABILITY If you become Totally and Permanently Disabled (as defined
in Section 2(ii) of the Plan) or die as an employee,
consultant or director of the Company or a subsidiary of
the Company, then this option will expire at the close of
business at Company headquarters on the date 12 months
after the date of your termination of employment.
LEAVES OF ABSENCE For purposes of this option, your service does not
terminate when you go on a military leave, a sick leave or
another bona fide leave of absence, if the leave was
approved by the Company in writing and if continued
crediting of service is required by the terms of the leave
or by applicable law. But your service terminates when the
approved leave ends, unless you immediately return to
active work.
RESTRICTIONS ON The Company will not permit you to exercise this option if
EXERCISE the issuance of shares at that time would violate any law
or regulation.
NOTICE OF EXERCISE When you wish to exercise this option you must notify the
Company by completing the attached "Notice of Exercise of
Stock Option" form and filing it with the Human Resources
Department of the Company. The notice will be effective
when it is received by the Company. If someone else wants
to exercise this option after your death, that person must
prove to the Company's satisfaction that he or she is
entitled to do so.
-1-
<PAGE> 30
FORM OF PAYMENT When you submit your notice of exercise, you must include
payment of the option exercise price for the shares you
are purchasing. Payment may be made in the form specified
on your Notice of Stock Option Grant.
WITHHOLDING TAXES You will not be allowed to exercise this option unless you
AND STOCK make arrangements acceptable to the Company to pay any
WITHHOLDING withholding taxes that may be due as a result of the
option exercise. These arrangements may include
withholding shares of Company stock that otherwise would
be issued to you when you exercise this option. The value
of these shares, determined as of the effective date of
the option exercise, will be applied to the withholding
taxes.
RESTRICTIONS ON By signing this Agreement, you agree not to sell any
RESALE option shares at a time when applicable laws, Company
policies or an agreement between the Company and its
underwriters prohibit a sale (e.g., a lock-up period after
the Company goes public). This restriction will apply as
long as you are an employee, consultant or director of the
Company or a subsidiary of the Company.
TRANSFER OF OPTION Prior to your death, only you can exercise this option.
You cannot transfer or assign this option. For instance,
you may not sell this option or use it as security for a
loan. If you attempt to do any of these things, this
option will immediately become invalid. You may in any
event dispose of this option in your will.
Regardless of any marital property settlement agreement,
the Company is not obligated to honor a notice of exercise
from your former spouse, nor is the Company obligated to
recognize your former spouse's interest in your option in
any other way.
RETENTION RIGHTS Neither your option nor this Agreement give you the right
to be retained by the Company or a subsidiary of the
Company in any capacity. The Company and its subsidiaries
reserve the right to terminate your service at any time,
with or without cause.
STOCKHOLDER RIGHTS You, or your estate or heirs, have no rights as a
stockholder of the Company until you have exercised this
option by giving the required notice to the Company and
paying the exercise price. No adjustments are made for
dividends or other rights if the applicable record date
occurs before you exercise this option, except as
described in the Plan.
ADJUSTMENTS In the event of a stock split, a stock dividend or a
similar change in Company stock, the number of shares
covered by this option and the exercise price per share
may be adjusted pursuant to the Plan.
APPLICABLE LAW This Agreement will be interpreted and enforced under the
laws of the State of California (without regard to their
choice-of-law provisions).
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<PAGE> 31
THE PLAN AND OTHER The text of the Plan is incorporated in this Agreement by
AGREEMENTS reference. This Agreement and the Plan constitute the
entire understanding between you and the Company regarding
this option. Any prior agreements, commitments or
negotiations concerning this option are superseded. This
Agreement may be amended only by another written
agreement, signed by both parties.
BY SIGNING THE COVER SHEET OF THIS AGREEMENT,
YOU AGREE TO ALL OF THE TERMS AND CONDITIONS
DESCRIBED ABOVE AND IN THE PLAN.
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<PAGE> 32
NOTICE OF EXERCISE
(exercise by check)
WebEx, Inc.
_____________________________
_____________________________
Attn: Chief Financial Officer
Re: Exercise of Stock Option
Dear Sir or Madam:
Pursuant to the Stock Option Agreement dated __________, 200__ (the "Stock
Option Agreement") and the Company's 2000 Stock Incentive Plan (the "Plan"), I
hereby elect to purchase _____________ shares of the Common Stock of the Company
at aggregate exercise price of $__________. I enclose payment and other
documents (check all that are applicable):
[ ] My check in the amount of $___________.
The Common Stock is to be issued and registered in the name(s) of:
____________________________
____________________________
I understand that there may be tax consequences as a result of the purchase or
disposition of the Common Stock, and I have consulted with any tax consultants I
wished to consult and I am not relying on the Company for any tax advice. I
understand that my exercise is governed by my Stock Option Agreement and the
Plan and agree to abide by and be bound by their terms and conditions. I
represent that the Common Stock is being acquired solely for my own account and
not as a nominee for any other party, or for investment, and that I will not
offer, sell or otherwise dispose of any such Common Stock except under
circumstances that will not result in a violation of the Securities Act of 1933,
as amended, or any state securities laws.
Dated: __________, _____.
_______________________________________
(Signature)
_______________________________________
(Please Print Name)
_______________________________________
_______________________________________
(Address)
<PAGE> 33
TAX CONSEQUENCES RELATED TO YOUR INCENTIVE STOCK OPTION
THIS MEMORANDUM IS PROVIDED TO YOU MERELY AS A SERVICE AND IS NOT MEANT
TO ADVISE YOU AS TO YOUR PERSONAL TAX SITUATION. YOU SHOULD CONTACT YOUR
PERSONAL LEGAL OR TAX ADVISERS WITH RESPECT TO THE STATE AND FEDERAL INCOME TAX
TREATMENT OF PURCHASING AND DISPOSING OF YOUR STOCK.
INTERNAL REVENUE CODE SECTIONS
Section 421 of the Internal Revenue Code (the "Code") provides rules for
the tax treatment of "incentive stock options"("ISOs"), as that term is defined
by Section 422 of the Code.
ISO TAX TREATMENT - USUALLY NO TAX UNTIL YOU SELL YOUR STOCK
Your option is intended to be an ISO. If you hold the stock you are
purchasing under your option for more than two (2) years from the date of grant
and more than one (1) year from the date of exercise, upon any subsequent sale
or other disposition of such shares you will have capital gains or loss. Capital
gains are taxed at reduced rates if you held the shares for more than 1 year
(20% federal rate).
If you sell or dispose of the stock within two (2) years from the date
of grant or within 1 year from the date of exercise (a "disqualifying
disposition"), the special capital gains tax treatment of Code Section 421 will
not apply. Generally, in that event, you will recognize taxable ordinary income
in an amount equal to the lesser of: (i) the excess of the fair market value of
the shares at the time of exercise over the exercise price of the option, or
(ii) your actual gain on the purchase and sale. The gain (if any) in excess of
the amount of ordinary income recognized, or the loss (if any) will be a capital
gain or loss. An exception to this general rule applies if your stock is subject
to the company's repurchase right (see "Early Exercise" below).
ALTERNATIVE MINIMUM TAX - POTENTIAL TAX AT EXERCISE
The alternative minimum tax is a separately computed tax that is imposed
only if and to the extent it exceeds your regular tax for the taxable year.
Basically, the alternative minimum tax is an amount equal to twenty-six percent
(26%) of your "alternative minimum taxable income" for the year of up to
$175,000 and twenty-eight percent (28%) of any excess ($87,500 in the case of a
married individual filing a separate return). "Alternative minimum taxable
income" generally is determined by (i) reducing adjusted gross income by an
exemption amount ($45,000 for joint declarations and $33,750 for single
taxpayers, less $0.25 for each dollar of alternative minimum taxable income in
excess of $150,000 or $112,500, respectively) and certain specifically defined
deductions, and (ii) by adding to the amount so calculated certain tax
preference items and other adjustments.
As a general rule, when you exercise an ISO, the excess of the (1) fair
market value of the stock acquired on the date of exercise over (2) the exercise
price (the "spread") is added to your alternative minimum taxable income.
-1-
<PAGE> 34
WEBEX, INC.
2000 STOCK INCENTIVE PLAN
NOTICE OF RESTRICTED STOCK AWARD
You have been granted restricted shares of Common Stock of WebEx, Inc.
(the "Company") on the following terms:
<TABLE>
<S> <C>
Name of Recipient: _________________________
Total Number of Shares Granted: _________________________
Fair Market Value per Share: $_________________________
Total Fair Market Value of Award: $_________________________
Date of Grant: _______ __, ____
Vesting Commencement Date: _______ __, ____
Vesting Schedule: The first __% of the total number
of shares granted vest when you
complete __ months of continuous
service from the Vesting
Commencement Date. An additional
__% of the shares vest when you
complete each month of continuous
service thereafter.
</TABLE>
By your signature and the signature of the Company's representative below, you
and the Company agree that these shares are granted under and governed by the
terms and conditions of the 2000 Stock Incentive Plan (the "Plan") and the
Restricted Stock Agreement, both of which are attached to and made a part of
this document.
<TABLE>
<CAPTION>
RECIPIENT: WEBEX, INC.
- ---------- -----------
<S> <C>
_________________________ By:_______________________
_________________________ Title:______________________
Print Name
</TABLE>
-1-
<PAGE> 35
WEBEX, INC.
2000 STOCK INCENTIVE PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
This Restricted Stock Purchase Agreement (the "Agreement") is made as of
_____________, 2000 by and between WebEx, Inc., a Delaware corporation (the
"Company"), and ________________ ("Purchaser") pursuant to the Company's 2000
Stock Incentive Plan. To the extent any capitalized terms used in this Agreement
are not defined, they shall have the meaning ascribed to them in the 2000 Stock
Incentive Plan.
1. SALE OF STOCK. Subject to the terms and conditions of this Agreement,
on the Purchase Date (as defined below) the Company will issue and sell to
Purchaser, and Purchaser agrees to purchase from the Company, _______ shares of
the Company's Common Stock (the "Shares") at a purchase price of $____ per Share
for a total purchase price of $______. The per share purchase price of the
Shares shall be not less than 100% of the Fair Market Value of the Shares as of
the date of the offer of such Shares to the Purchaser, or, in the case of any
person owning stock representing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company (or any affiliated
company), the per share purchase price shall be not less than 110% of the Fair
Market Value of the Shares as of such date. The term "Shares" refers to the
purchased Shares and all securities received in replacement of or in connection
with the Shares pursuant to stock dividends or splits, all securities received
in replacement of the Shares in a recapitalization, merger, reorganization,
exchange or the like, and all new, substituted or additional securities or other
properties to which Purchaser is entitled by reason of Purchaser's ownership of
the Shares.
2. TIME AND PLACE OF EXERCISE. The purchase and sale of the Shares under
this Agreement shall occur at the principal office of the Company simultaneously
with the execution of this Agreement by the parties, or on such other date as
the Company and Purchaser shall agree (the "Purchase Date"). On the Purchase
Date, the Company will deliver to Purchaser a certificate representing the
Shares to be purchased by Purchaser (which shall be issued in Purchaser's name)
against payment of the purchase price therefor by Purchaser by (a) check made
payable to the Company, (b) cancellation of indebtedness of the Company to
Purchaser, or (c) by a combination of the foregoing.
3. RESTRICTIONS ON RESALE. By signing this Agreement, you agree not to
sell any Shares acquired pursuant to the Plan, the Restricted Stock Agreement
and this Agreement at a time when applicable laws, regulations or Company or
underwriter trading policies prohibit exercise or sale. This restriction will
apply as long as you are an Employee, director or Consultant of the Company or a
Subsidiary of the Company.
-1-
<PAGE> 36
4. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
(a) LEGENDS. The certificate or certificates representing
the Shares shall bear the following legend (as well as any legends required by
applicable state and federal corporate and securities laws):
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY
BE TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS
OF AN AGREEMENT BETWEEN THE COMPANY AND THE
STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.
(b) STOP-TRANSFER NOTICES. Purchaser agrees that, in order
to ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) REFUSAL TO TRANSFER. The Company shall not be required
(i) to transfer on its books any Shares that have been sold or otherwise
transferred in violation of any of the provisions of this Agreement or (ii) to
treat as owner of such Shares or to accord the right to vote or pay dividends to
any purchaser or other transferee to whom such Shares shall have been so
transferred.
5. NO EMPLOYMENT RIGHTS. Nothing in this Agreement shall affect in any
manner whatsoever the right or power of the Company, or a Parent or Subsidiary
of the Company, to terminate Purchaser's employment, for any reason, with or
without cause.
6. MARKET STANDOFF AGREEMENT. Upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities,
Purchaser agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Shares (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 180
days) from the effective date of such registration as may be requested by the
Company or such managing underwriters and to execute an agreement reflecting the
foregoing as may be requested by the underwriters at the time of the public
offering.
7. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement and all acts and
transactions pursuant hereto and the rights and obligations of the parties
hereto shall be governed, construed and interpreted in accordance with the laws
of the State of California, without giving effect to principles of conflicts of
law.
(b) THE PLAN AND OTHER AGREEMENTS; ENFORCEMENT OF RIGHTS.
The text of the Plan and the Restricted Stock Agreement are incorporated into
this Agreement by reference.
-2-
<PAGE> 37
This Agreement, the Plan and the Restricted Stock Agreement constitute the
entire agreement and understanding of the parties relating to the subject matter
herein and merges all prior discussions between them. Any prior agreements,
commitments or negotiations concerning the purchase of the Restricted Shares
hereunder are superseded. No modification of or amendment to this Agreement, nor
any waiver of any rights under this Agreement, shall be effective unless in
writing signed by the parties to this Agreement. The failure by either party to
enforce any rights under this Agreement shall not be construed as a waiver of
any rights of such party.
(c) SEVERABILITY. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, the parties agree
to renegotiate such provision in good faith. In the event that the parties
cannot reach a mutually agreeable and enforceable replacement for such
provision, then (i) such provision shall be excluded from this Agreement, (ii)
the balance of the Agreement shall be interpreted as if such provision were so
excluded and (iii) the balance of the Agreement shall be enforceable in
accordance with its terms.
(d) CONSTRUCTION. This Agreement is the result of
negotiations between and has been reviewed by each of the parties hereto and
their respective counsel, if any; accordingly, this Agreement shall be deemed to
be the product of all of the parties hereto, and no ambiguity shall be construed
in favor of or against any one of the parties hereto.
(e) NOTICES. Any notice to be given under the terms of the
Plan shall be addressed to the Company in care or its principal office, and any
notice to be given to the Purchaser shall be addressed to such Purchaser at the
address maintained by the Company for such person or at such other address as
the Purchaser may specify in writing to the Company.
(f) COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(g) SUCCESSORS AND ASSIGNS. The rights and benefits of
this Agreement shall inure to the benefit of, and be enforceable by the
Company's successors and assigns. The rights and obligations of Purchaser under
this Agreement may only be assigned with the prior written consent of the
Company.
[Signature Page Follows]
-3-
<PAGE> 38
The parties have executed this Agreement as of the date first set forth
above.
WEBEX, INC.
By:
---------------------------------
Title:
---------------------------------
Address:
---------------------------------
---------------------------------
PURCHASER:
------------------------------------------
(Signature)
Address:
---------------------------------
---------------------------------
I, ________________________________, spouse of ___________, have read and hereby
approve the foregoing Agreement. In consideration of the Company's granting my
spouse the right to purchase the Shares as set forth in the Agreement, I hereby
agree to be irrevocably bound by the Agreement and further agree that any
community property or other such interest shall be similarly bound by the
Agreement. I hereby appoint my spouse as my attorney-in-fact with respect to any
amendment or exercise of any rights under the Agreement.
------------------------------------------
Spouse of
--------------------------------
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<PAGE> 39
RECEIPT
WebEx, Inc. hereby acknowledges receipt of (check as applicable):
_____ A check in the amount of $__________
_____ The cancellation of indebtedness in the amount of
$__________
given by ________________ as consideration for Certificate No. CS-____ for _____
shares of Common Stock of WebEx, Inc.
Dated: ________________
WEBEX, INC.
By:
---------------------------------
Title:
---------------------------------
<PAGE> 40
RECEIPT AND CONSENT
The undersigned hereby acknowledges receipt of a photocopy of
Certificate No. CS-____ for _________ shares of Common Stock of WebEx, Inc. (the
"Company").
The undersigned further acknowledges that the Secretary of the Company,
or his or her designee, is acting as escrow holder pursuant to the Restricted
Stock Purchase Agreement Purchaser has previously entered into with the Company.
As escrow holder, the Secretary of the Company, or his or her designee, holds
the original of the aforementioned certificate issued in the undersigned's name.
Dated: _________________________
___________________________________
Name
<PAGE> 1
EXHIBIT 10.3
FORM OF
WEBEX, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
(Adopted by the Board on _______ __, 2000)
<PAGE> 2
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1 Purpose Of The Plan.............................................................1
SECTION 2 Definitions.....................................................................1
(a) "Accumulation Period"...........................................................1
(b) "Board".........................................................................1
(c) "Code"..........................................................................1
(d) "Committee".....................................................................1
(e) "Company".......................................................................1
(f) "Compensation"..................................................................1
(g) "Corporate Reorganization"......................................................1
(h) "Eligible Employee".............................................................2
(i) "Exchange Act"..................................................................2
(j) "Fair Market Value".............................................................2
(k) "IPO"...........................................................................2
(l) "Offering Period"...............................................................2
(m) "Participant"...................................................................2
(n) "Participating Company".........................................................2
(o) "Plan"..........................................................................3
(p) "Plan Account"..................................................................3
(q) "Purchase Price"................................................................3
(r) "Stock".........................................................................3
(s) "Subsidiary"....................................................................3
SECTION 3 Administration Of The Plan......................................................3
(a) Committee Composition...........................................................3
(b) Committee Responsibilities......................................................3
SECTION 4 Enrollment And Participation....................................................3
(a) Offering Periods................................................................3
(b) Accumulation Periods............................................................3
(c) Enrollment......................................................................3
(d) Duration of Participation.......................................................3
(e) Applicable Offering Period......................................................4
SECTION 5 Employee Contributions..........................................................4
(a) Frequency of Payroll Deductions.................................................4
(b) Amount of Payroll Deductions....................................................4
(c) Changing Withholding Rate.......................................................4
(d) Discontinuing Payroll Deductions................................................4
(e) Limit on Number of Elections....................................................5
SECTION 6 Withdrawal From The Plan........................................................5
(a) Withdrawal......................................................................5
(b) Re-enrollment After Withdrawal..................................................5
SECTION 7 Change In Employment Status.....................................................5
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
(a) Termination of Employment.......................................................5
(b) Leave of Absence................................................................5
(c) Death...........................................................................5
SECTION 8 Plan Accounts And Purchase Of Shares............................................5
(a) Plan Accounts...................................................................5
(b) Purchase Price..................................................................6
(c) Number of Shares Purchased......................................................6
(d) Available Shares Insufficient...................................................6
(e) Issuance of Stock...............................................................6
(f) Unused Cash Balances............................................................6
(g) Stockholder Approval............................................................7
SECTION 9 Limitations On Stock Ownership..................................................7
(a) Five Percent Limit..............................................................7
(b) Dollar Limit....................................................................7
SECTION 10 Rights Not Transferable.....................................................7
SECTION 11 No Rights As An Employee....................................................8
SECTION 12 No Rights As A Stockholder..................................................8
SECTION 13 Securities Law Requirements.................................................8
SECTION 14 Stock Offered Under The Plan................................................8
(a) Authorized Shares...............................................................8
(b) Antidilution Adjustments........................................................8
(c) Reorganizations.................................................................8
SECTION 15 Amendment Or Discontinuance.................................................9
SECTION 16 Execution...................................................................9
</TABLE>
-ii-
<PAGE> 4
WEBEX, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
SECTION 1 Purpose Of The Plan.
The Plan was adopted by the Board on _______ __, 2000, effective as of
the date of the IPO. The purpose of the Plan is to provide Eligible Employees
with an opportunity to increase their proprietary interest in the success of the
Company by purchasing Stock from the Company on favorable terms and to pay for
such purchases through payroll deductions. The Plan is intended to qualify under
section 423 of the Code.
SECTION 2 Definitions.
(a) "Accumulation Period" means a six-month period during which
contributions may be made toward the purchase of Stock under the Plan, as
determined pursuant to Section 4(b).
(b) "Board" means the Board of Directors of the Company, as constituted
from time to time.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a committee of the Board, as described in Section
3.
(e) "Company" means WebEx, Inc., a Delaware Corporation.
(f) "Compensation" means (i) the total compensation paid in cash to a
Participant by a Participating Company, including salaries, wages, bonuses,
incentive compensation, commissions, overtime pay and shift premiums, plus (ii)
any pre-tax contributions made by the Participant under section 401(k) or 125 of
the Code. "Compensation" shall exclude all non-cash items, moving or relocation
allowances, cost-of-living equalization payments, car allowances, tuition
reimbursements, imputed income attributable to cars or life insurance, severance
pay, fringe benefits, contributions or benefits received under employee benefit
plans, income attributable to the exercise of stock options, and similar items.
The Committee shall determine whether a particular item is included in
Compensation.
(g) "Corporate Reorganization" means:
(i) The consummation of a merger or consolidation of the Company
with or into another entity, or any other corporate reorganization; or
(ii) The sale, transfer or other disposition of all or
substantially all of the Company's assets or the complete liquidation or
dissolution of the Company.
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<PAGE> 5
(h) "Eligible Employee" means any employee of a Participating Company
who meets both of the following requirements:
(i) His or her customary employment is for more than five months
per calendar year and for more than 20 hours per week; and
(ii) He or she has been an employee of a Participating Company
for not less than ___ consecutive months.
The foregoing notwithstanding, an individual shall not be considered an
Eligible Employee if his or her participation in the Plan is prohibited by the
law of any country which has jurisdiction over him or her or if he or she is
subject to a collective bargaining agreement that does not provide for
participation in the Plan.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value" means the market price of Stock, determined by
the Committee as follows:
(i) If Stock was traded on The Nasdaq National Market on the
date in question, then the Fair Market Value shall be equal to the
last-transaction price quoted for such date by The Nasdaq National
Market;
(ii) If Stock was traded on a stock exchange on the date in
question, then the Fair Market Value shall be equal to the closing price
reported by the applicable composite transactions report for such date;
or
(iii) If none of the foregoing provisions is applicable, then
the Fair Market Value shall be determined by the Committee in good faith
on such basis as it deems appropriate.
Whenever possible, the determination of Fair Market Value by the
Committee shall be based on the prices reported in the Wall Street Journal or as
reported directly to the Company by Nasdaq or a stock exchange. Such
determination shall be conclusive and binding on all persons.
(k) "IPO" means the initial offering of Stock to the public pursuant to
a registration statement filed by the Company with the Securities and Exchange
Commission.
(l) "Offering Period" means a 24-month period with respect to which the
right to purchase Stock may be granted under the Plan, as determined pursuant to
Section 4(a).
(m) "Participant" means an Eligible Employee who elects to participate
in the Plan, as provided in Section 4(c).
(n) "Participating Company" means (i) the Company and (ii) each present
or future Subsidiary designated by the Committee as a Participating Company.
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<PAGE> 6
(o) "Plan" means this WebEx, Inc. 2000 Employee Stock Purchase Plan, as
it may be amended from time to time.
(p) "Plan Account" means the account established for each Participant
pursuant to Section 8(a).
(q) "Purchase Price" means the price at which Participants may purchase
Stock under the Plan, as determined pursuant to Section 8(b).
(r) "Stock" means the Common Stock of the Company.
(s) "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
SECTION 3 Administration Of The Plan.
(a) Committee Composition. The Plan shall be administered by the
Committee. The Committee shall consist exclusively of one or more directors of
the Company, who shall be appointed by the Board.
(b) Committee Responsibilities. The Committee shall interpret the Plan
and make all other policy decisions relating to the operation of the Plan. The
Committee may adopt such rules, guidelines and forms as it deems appropriate to
implement the Plan. The Committee's determinations under the Plan shall be final
and binding on all persons.
SECTION 4 Enrollment And Participation.
(a) Offering Periods. While the Plan is in effect, two Offering Periods
shall commence in each calendar year. The Offering Periods shall consist of the
24-month periods commencing on each __________ and __________, except that the
first Offering Period shall commence on the date of the IPO and end on
__________.
(b) Accumulation Periods. While the Plan is in effect, two Accumulation
Periods shall commence in each calendar year. The Accumulation Periods shall
consist of the six month periods commencing on _________ and ___________, except
that the first Accumulation Period shall commence on the dated of the IPO and
end on _____________.
(c) Enrollment. Any individual who, on the day preceding the first day
of an Offering Period, qualifies as an Eligible Employee may elect to become a
Participant in the Plan for such Offering Period by executing the enrollment
form prescribed for this purpose by the Committee. The enrollment form shall be
filed with the Company at the prescribed location not later than 15 days prior
to the commencement of such Offering Period.
(d) Duration of Participation. Once enrolled in the Plan, a Participant
shall continue to participate in the Plan until he or she ceases to be an
Eligible Employee, withdraws from the Plan under Section 5(a) or reaches the end
of the Offering Period in which his or her employee
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<PAGE> 7
contributions were discontinued under Section 5(d) or 9(b). A Participant who
discontinued employee contributions under Section 5(d) or 9(b) or withdrew from
the Plan under Section 6(a) may again become a Participant, if he or she then is
an Eligible Employee, by following the procedure described in Subsection (c)
above. A Participant whose employee contributions were discontinued
automatically under Section 9(b) shall automatically resume participation at the
beginning of the earliest Offering Period ending in the next calendar year, if
he or she then is an Eligible Employee.
(e) Applicable Offering Period. For purposes of calculating the purchase
price under Section 8(b), the applicable Offering Period shall be determined as
follows:
(i) Once a Participant is enrolled in the Plan for an Offering
Period, such Offering Period shall continue to apply to him or her until
the earliest of: (A) the end of such Offering Period; (B) the end of his
or her participation under Subsection (d) above; or (C) re-enrollment in
a subsequent Offering Period under Paragraph (ii) below.
(ii) In the event that the Fair Market Value of Stock on the
last trading day before the commencement of the Offering Period in which
the Participant is enrolled is higher than on the last trading day
before the commencement of any subsequent Offering Period, the
Participant shall automatically be re-enrolled for such subsequent
Offering Period.
(iii) When a Participant reaches the end of an Offering Period
but his or her participation is to continue, then such Participant shall
automatically be re-enrolled for the Offering Period that commences
immediately after the end of the prior Offering Period.
SECTION 5 Employee Contributions.
(a) Frequency of Payroll Deductions. A Participant may purchase shares
of Stock under the Plan solely by means of payroll deductions. Payroll
deductions, as designated by the Participant pursuant to Subsection (b) below,
shall occur on each payday during participation in the Plan.
(b) Amount of Payroll Deductions. An Eligible Employee shall designate
on the enrollment form the portion of his or her Compensation that he or she
elects to have withheld for the purchase of Stock. Such portion shall be a whole
percentage of the Eligible Employee's Compensation, but not less than __% nor
more than __%.
(c) Changing Withholding Rate. If a Participant wishes to change the
rate of payroll withholding, he or she may do so by filing a new enrollment form
with the Company at the prescribed location at any time. The new withholding
rate shall be effective as soon as reasonably practicable after such form has
been received by the Company. The new withholding rate shall be a whole
percentage of the Eligible Employee's Compensation, but not less than __% nor
more than __%.
(d) Discontinuing Payroll Deductions. If a Participant wishes to
discontinue employee contributions entirely, he or she may do so by filing a new
enrollment form with the
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<PAGE> 8
Company at the prescribed location at any time. Payroll withholding shall cease
as soon as reasonably practicable after such form has been received by the
Company. In addition, employee contributions may be discontinued automatically
pursuant to Section 9(b). A Participant who has discontinued employee
contributions may resume such contributions by filing a new enrollment form with
the Company at the prescribed location. Payroll withholding shall resume as soon
as reasonably practicable after such form has been received by the Company.
(e) Limit on Number of Elections. No Participant shall make more than __
elections under Subsection (c) or (d) above during any Offering Period.
SECTION 6 Withdrawal From The Plan.
(a) Withdrawal. A Participant may elect to withdraw from the Plan by
filing the prescribed form with the Company at the prescribed location at any
time before the last day of an Accumulation Period. As soon as reasonably
practicable thereafter, payroll deductions shall cease and the entire amount
credited to the Participant's Plan Account shall be refunded to him or her in
cash, without interest. No partial withdrawals shall be permitted.
(b) Re-enrollment After Withdrawal. A former Participant who has
withdrawn from the Plan shall not be a Participant until he or she re-enrolls in
the Plan under Section 4(c). Re-enrollment may be effective only at the
commencement of an Offering Period.
SECTION 7 Change In Employment Status.
(a) Termination of Employment. Termination of employment as an Eligible
Employee for any reason, including death, shall be treated as an automatic
withdrawal from the Plan under Section 6(a). Notwithstanding the foregoing in
this Section 7, a transfer from one Participating Company to another shall not
be treated as a termination of employment.
(b) Leave of Absence. For purposes of the Plan, employment shall not be
deemed to terminate when the Participant goes on a military leave, a sick leave
or another bona fide leave of absence, if the leave was approved by the Company
in writing. Employment, however, shall be deemed to terminate 90 days after the
Participant goes on a leave, unless a contract or statute guarantees his or her
right to return to work. Employment shall be deemed to terminate in any event
when the approved leave ends, unless the Participant immediately returns to
work.
(c) Death. In the event of the Participant's death, the amount credited
to his or her Plan Account shall be paid to a beneficiary designated by him or
her for this purpose on the prescribed form or, if none, to the Participant's
estate. Such form shall be valid only if it was filed with the Company at the
prescribed location before the Participant's death.
SECTION 8 Plan Accounts And Purchase Of Shares.
(a) Plan Accounts. The Company shall maintain a Plan Account on its
books in the name of each Participant. Whenever an amount is deducted from the
Participant's Compensation under the Plan, such amount shall be credited to the
Participant's Plan Account. Amounts credited to Plan Accounts shall not be trust
funds and may be commingled with the Company's
-5-
<PAGE> 9
general assets and applied to general corporate purposes. No interest shall be
credited to Plan Accounts.
(b) Purchase Price. The Purchase Price for each share of Stock purchased
at the close of an Accumulation Period shall be the lower of:
(i) 85% of the Fair Market Value of such share on the last
trading day in such Accumulation Period; or
(ii) 85% of the Fair Market Value of such share on the last
trading day before the commencement of the applicable Offering Period
(as determined under Section 4(e)) or, in the case of the first Offering
Period under the Plan, 85% of the price at which one share of Stock is
offered to the public in the IPO.
(c) Number of Shares Purchased. As of the last day of each Accumulation
Period, each Participant shall be deemed to have elected to purchase the number
of shares of Stock calculated in accordance with this Subsection (c), unless the
Participant has previously elected to withdraw from the Plan in accordance with
Section 6(a). The amount then in the Participant's Plan Account shall be divided
by the Purchase Price, and the number of shares that results shall be purchased
from the Company with the funds in the Participant's Plan Account. The foregoing
notwithstanding, no Participant shall purchase more than _____ shares of Stock
with respect to any Accumulation Period nor more than the amounts of Stock set
forth in Sections 9(b) and 14(a). The Committee may determine with respect to
all Participants that any fractional share, as calculated under this Subsection
(c), shall be (i) rounded down to the next lower whole share or (ii) credited as
a fractional share.
(d) Available Shares Insufficient. In the event that the aggregate
number of shares that all Participants elect to purchase during an Accumulation
Period exceeds the maximum number of shares remaining available for issuance
under Section 14(a), then the number of shares to which each Participant is
entitled shall be determined by multiplying the number of shares available for
issuance by a fraction, the numerator of which is the number of shares that such
Participant has elected to purchase and the denominator of which is the number
of shares that all Participants have elected to purchase.
(e) Issuance of Stock. Certificates representing the shares of Stock
purchased by a Participant under the Plan shall be issued to him or her as soon
as reasonably practicable after the close of the applicable Accumulation Period,
except that the Committee may determine that such shares shall be held for each
Participant's benefit by a broker designated by the Committee (unless the
Participant has elected that certificates be issued to him or her). Shares may
be registered in the name of the Participant or jointly in the name of the
Participant and his or her spouse as joint tenants with right of survivorship or
as community property.
(f) Unused Cash Balances. An amount remaining in the Participant's Plan
Account that represents the Purchase Price for any fractional share shall be
carried over in the Participant's Plan Account to the next Accumulation Period.
Any amount remaining in the Participant's Plan Account that represents the
Purchase Price for whole shares that could not be
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<PAGE> 10
purchased by reason of Subsection (c) above, Section 9(b) or Section 14(a) shall
be refunded to the Participant in cash, without interest.
(g) Stockholder Approval. Any other provision of the Plan
notwithstanding, no shares of Stock shall be purchased under the Plan unless and
until the Company's stockholders have approved the adoption of the Plan.
SECTION 9 Limitations On Stock Ownership.
(a) Five Percent Limit. Any other provision of the Plan notwithstanding,
no Participant shall be granted a right to purchase Stock under the Plan if such
Participant, immediately after his or her election to purchase such Stock, would
own stock possessing more than 5% of the total combined voting power or value of
all classes of stock of the Company or any parent or Subsidiary of the Company.
For purposes of this Subsection (a), the following rules shall apply:
(i) Ownership of stock shall be determined after applying the attribution
rules of section 424(d) of the Code;
(ii) Each Participant shall be deemed to own any stock that he or she has a
right or option to purchase under this or any other plan; and
(iii) Each Participant shall be deemed to have the right to purchase _____
shares of Stock under this Plan with respect to each Accumulation
Period.
(b) Dollar Limit. Any other provision of the Plan notwithstanding, no
Participant shall purchase Stock with a Fair Market Value in excess of the
following limit:
Any other provision of the Plan notwithstanding, no Participant shall
purchase Stock with a Fair Market Value in excess of $25,000 per calendar year
(under this Plan and all other employee stock purchase plans of the Company or
any parent or Subsidiary of the Company).
For purposes of this Subsection (b), the Fair Market Value of Stock
shall be determined in each case as of the beginning of the Offering Period in
which such Stock is purchased. Employee stock purchase plans not described in
section 423 of the Code shall be disregarded. If a Participant is precluded by
this Subsection (b) from purchasing additional Stock under the Plan, then his or
her employee contributions shall automatically be discontinued and shall resume
at the beginning of the earliest Accumulation Period ending in the next calendar
year (if he or she then is an Eligible Employee).
SECTION 10 Rights Not Transferable.
The rights of any Participant under the Plan, or any Participant's
interest in any Stock or moneys to which he or she may be entitled under the
Plan, shall not be transferable by voluntary or involuntary assignment or by
operation of law, or in any other manner other than by beneficiary designation
or the laws of descent and distribution. If a Participant in any manner attempts
to transfer, assign or otherwise encumber his or her rights or interest under
the Plan,
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<PAGE> 11
other than by beneficiary designation or the laws of descent and distribution,
then such act shall be treated as an election by the Participant to withdraw
from the Plan under Section 6(a).
SECTION 11 No Rights As An Employee.
Nothing in the Plan or in any right granted under the Plan shall confer
upon the Participant any right to continue in the employ of a Participating
Company for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Participating Companies or of the
Participant, which rights are hereby expressly reserved by each, to terminate
his or her employment at any time and for any reason, with or without cause.
SECTION 12 No Rights As A Stockholder.
A Participant shall have no rights as a stockholder with respect to any
shares of Stock that he or she may have a right to purchase under the Plan until
such shares have been purchased on the last day of the applicable Offering
Period.
SECTION 13 Securities Law Requirements.
Shares of Stock shall not be issued under the Plan unless the issuance
and delivery of such shares comply with (or are exempt from) all applicable
requirements of law, including (without limitation) the Securities Act of 1933,
as amended, the rules and regulations promulgated thereunder, state securities
laws and regulations, and the regulations of any stock exchange or other
securities market on which the Company's securities may then be traded.
SECTION 14 Stock Offered Under The Plan.
(a) Authorized Shares. The maximum aggregate number of shares of Stock
available for purchase under the Plan is ______________________ (________), plus
an annual increase to be added on the first day of the Company's fiscal year
beginning in 2001 equal to the lesser of (i) ___________ (__________) shares,
(ii) ___% of the outstanding shares on such date or (iii) a lesser amount
determined by the Board. The aggregate number of Shares available for purchase
under the Plan shall at all times be subject to adjustment pursuant to Section
14.
(b) Antidilution Adjustments. The aggregate number of shares of Stock
offered under the Plan, the _____ share limitation described in Section 8(c) and
the price of shares that any Participant has elected to purchase shall be
adjusted proportionately by the Committee for any increase or decrease in the
number of outstanding shares of Stock resulting from a subdivision or
consolidation of shares or the payment of a stock dividend, any other increase
or decrease in such shares effected without receipt or payment of consideration
by the Company, the distribution of the shares of a Subsidiary to the Company's
stockholders or a similar event.
(c) Reorganizations. Any other provision of the Plan notwithstanding,
immediately prior to the effective time of a Corporate Reorganization, the
Offering Period then in progress shall terminate and shares shall be purchased
pursuant to Section 8, unless the Plan is assumed by the surviving corporation
or its parent corporation pursuant to the plan of merger or consolidation. The
Plan shall in no event be construed to restrict in any way the Company's right
to undertake a dissolution, liquidation, merger, consolidation or other
reorganization.
-8-
<PAGE> 12
SECTION 15 Amendment Or Discontinuance.
The Board shall have the right to amend, suspend or terminate the Plan
at any time and without notice. Except as provided in Section 14, any increase
in the aggregate number of shares of Stock to be issued under the Plan shall be
subject to approval by a vote of the stockholders of the Company. In addition,
any other amendment of the Plan shall be subject to approval by a vote of the
stockholders of the Company to the extent required by an applicable law or
regulation.
SECTION 16 Execution.
To record the adoption of the Plan by the Board on ________ __, 2000,
the Company has caused its authorized officer to execute the same.
WebEx, Inc.
By:
---------------------------------
Title:
------------------------------
Title:
------------------------------
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<PAGE> 1
EXHIBIT 10.4
WEBEX, INC.
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "Agreement"), effective as of
_______________, by and between, WEBEX, INC., a Delaware corporation (the
"Company"), and _____________________ (the "Indemnitee").
1. Indemnification. The Company shall indemnify Indemnitee to the
fullest extent permitted by section 145 of the Delaware General Corporation Law,
as amended (the "Delaware Law"), the Certificate of Incorporation (the
"Certificate") and the Bylaws of the Company (the "Bylaws") in effect on the
date hereof or as such Law, Certificate, and Bylaws may from time to time be
amended (but, in the case of any such amendment, only to the extent such
amendment permits the Company to provide broader indemnification rights than the
Law, Certificate or Bylaws permitted the Company to provide before such
amendment), if and whenever he is or was a party or is threatened to be made a
party to any Proceeding, against Expenses and Liabilities actually and
reasonably incurred by Indemnitee or on his behalf in connection with the
investigation, defense, settlement or appeal of such Proceeding. The right to
indemnification conferred herein shall be presumed to have been relied upon by
Indemnitee in serving or continuing to serve the Company as an officer or
director and shall be enforceable as a contract right. Without in any way
diminishing the scope of the indemnification provided by this Section 1, the
Company will indemnify Indemnitee if Indemnitee:
(a) was or is a party or is threatened to be made a party to any
Proceeding (other than an action by or in the right of the Company to procure a
judgment in its favor) by reason of the fact Indemnitee is or was an Agent,
against Expenses and Liabilities actually and reasonably incurred in connection
with such Proceeding if Indemnitee acted in good faith and in a manner
reasonably believed to be in the best interests of the Company and, in the case
of a criminal proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any Proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that Indemnitee did not act in good faith and in a
manner which Indemnitee reasonably believed to be in the best interests of the
Company or that Indemnitee had reasonable cause to believe that Indemnitee's
conduct was unlawful, or
(b) was or is a party or is threatened to be made a party to any
threatened, pending or completed action by or in the right of the Company to
procure a judgment in its favor by reason of the fact that Indemnitee is or was
an agent of the Company, against Expenses and Liabilities actually and
reasonably incurred by Indemnitee in connection with the defense or settlement
of such action if Indemnitee acted in good faith, in a manner Indemnitee
believed to be in the best interests of the Company and its shareholders.
(c) To the extent that Indemnitee has been successful on the merits in
defense of any Proceeding referred to in clause (a) or (b) above or in defense
of any action, claim, issue or matter therein, Indemnitee shall be indemnified
against Expenses actually and reasonably incurred by Indemnitee in connection
therewith.
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<PAGE> 2
In addition to, and not as a limitation of, the foregoing, the rights of
indemnification of Indemnitee provided under this Agreement shall include those
rights set forth below.
2. Advancement of Expenses and Costs. All reasonable Expenses incurred
by or on behalf of Indemnitee shall be advanced by the Company to Indemnitee
within thirty (30) calendar days after the receipt by the Company of a statement
or statements from Indemnitee requiring an advance or advances of Expenses from
time to time, whether prior to or after final disposition of such Proceeding.
The statement or statements shall reasonably evidence the Expenses incurred or
to be incurred by him in connection therewith. If required by law at the time of
such advance, Indemnitee hereby undertakes to repay the amounts advanced if it
shall ultimately be determined that Indemnitee is not entitled to be indemnified
pursuant to the terms of this Agreement.
3. Other Rights to Indemnification. Indemnitee's rights of
indemnification and advancement of expenses provided by this Agreement shall not
be deemed exclusive of any other rights to which Indemnitee may now or in the
future be entitled under applicable law, the Certificate, Bylaws, agreement,
vote of stockholders, resolution of directors, or otherwise.
4. Limitations on Indemnity. Any provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to this Agreement:
(a) Insured Claims. To make any payment to Indemnitee to the extent that
Indemnitee is indemnified other than pursuant to this Agreement or to the extent
that Indemnitee is reimbursed pursuant to any D&O or other insurance the Company
may maintain for Indemnitee's benefit; provided, however, that notwithstanding
the availability of such insurance, Indemnitee may claim indemnification
pursuant to this Agreement by assigning to the Company, at its request, any
claims under such insurance to the extent Indemnitee is paid by the Company.
(b) Claims Initiated by Indemnitee. To indemnify or advance expenses to
Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except with respect to
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law or otherwise as required under
Delaware Law, but such indemnification or advancement of Expenses may be
provided by the Company in specific cases if the Board of Directors has approved
the initiation or bringing of such suit.
(c) Claims Under Section 16(b). To indemnify Indemnitee for Expenses and
the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute.
5. Duration of Agreement. This Agreement shall continue so long as
Indemnitee shall be subject to any possible Proceeding by reason of the fact
that he is or was an Agent. This Agreement shall be binding upon the Company and
its successors and assigns and shall inure to the benefit of Indemnitee and his
spouse, assigns, heirs, devisees, executors, administrators or other legal
representatives.
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<PAGE> 3
6. Miscellaneous.
(a) Procedure. Any indemnification and advances provided for in Sections
1 and 2 shall be made no later than thirty (30) calendar days, respectively,
after receipt of a written request therefor of Indemnitee. If a claim under this
Agreement, under any statute, or under any provision of the Company's
Certificate or Bylaws providing for indemnification, is not paid in full by the
Company within such period, Indemnitee may, but need not, at any time thereafter
bring an action against the Company to recover the unpaid amount of the claim
and, subject to Section 6(l) of this Agreement, Indemnitee shall also be
entitled to be paid for the Expenses (including attorney's fees) of bringing
such action. It shall be a defense to any such action (other than an action
brought to enforce a claim for Expenses incurred in connection with any action
or proceeding in advance of its final disposition) that Indemnitee has not met
the standards of conduct which make it permissible under applicable law for the
Company to indemnify Indemnitee for the amount claimed, and Indemnitee shall be
entitled to receive interim payments of expenses pursuant to Section 2 unless
and until such defense is finally adjudicated by court order or judgment from
which no further right of appeal exists. It is the parties' intention that if
the Company contests Indemnitee's right to indemnification, the Company shall be
entitled to select the forum in which Indemnitee's entitlement to
indemnification will be heard. The Company shall notify the Indemnitee in
writing as to the forum selected, which selection shall be from among the
following:
(i) The stockholders of the Company;
(ii) A quorum of the Board consisting of Disinterested
Directors;
(iii) Independent Counsel selected by Indemnitee, and reasonably
approved by the Board, which counsel shall make the determination in a
written opinion; or
(iv) A panel of three arbitrators, one of whom is selected by
the Company, another of whom is selected by Indemnitee and the last of
whom is selected by the first two arbitrators so selected; or if for any
reason three arbitrators are not selected within 30 days after the
appointment of the first arbitrator, then selection of additional
arbitrators to complete the three person panel shall be made by the
American Arbitration Association under its commercial arbitration rules
now in effect.
Neither the failure of the Company (including its Board of Directors, any
committee or subgroup of the Board of Directors, independent legal counsel, or
its shareholder) to have made a determination that indemnification of Indemnitee
is proper in the circumstances because Indemnitee has met the applicable
standard of conduct required by applicable law, nor an actual determination by
the Company (including its Board of Directors, any committee or subgroup of the
Board of Directors, independent legal counsel, or its shareholders) that
Indemnitee has not met such applicable standard of conduct, shall create a
presumption that Indemnitee has or has not met the applicable standard of
conduct.
-3-
<PAGE> 4
(b) Mutual Acknowledgment. Both the Company and Indemnitee acknowledge
that in certain instances, federal or state law or applicable public policy may
prohibit the Company from indemnifying its directors and officers under this
Agreement or otherwise. Indemnitee understands and acknowledges that the Company
has undertaken or may be required in the future to undertake with the Securities
and Exchange Commission to submit the question of indemnification to a court in
certain circumstances for a determination of the Company's right under public
policy to indemnify Indemnitee.
(c) Severability. If any provision or provisions of this Agreement shall
be held to be invalid, illegal or unenforceable for any reason whatsoever: (i)
the validity, legality and enforceability of the remaining provisions of this
Agreement (including without limitation, all portions of any paragraphs of this
Agreement containing any provision held to be invalid, illegal or unenforceable,
that are not themselves invalid, illegal or unenforceable) shall not in any way
be affected or impaired thereby; and (ii) to the fullest extent possible, the
provisions of this Agreement (including, without limitation, all portions of any
paragraph of this Agreement containing any provision held to be invalid, illegal
or unenforceable, that are not themselves invalid, illegal or unenforceable)
shall be construed so as to give effect to the intent manifested by the
provision held invalid, illegal or unenforceable.
(d) Identical Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute one and the same Agreement.
Only one such counterpart signed by the party against whom enforceability is
sought needs to be produced to evidence the existence of this Agreement.
(e) Interpretation of Agreement. It is understood that the parties
hereto intend this Agreement to be interpreted and enforced so as to provide
indemnification to Indemnitee to the fullest extent now or hereafter permitted
by law.
(f) Headings. The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction thereof.
(g) Definitions. For purposes of this Agreement:
(i) "Agent" shall mean any person who is or was a director,
officer, employee, agent, fiduciary or other official of the Company or
a subsidiary of the Company; or is or was serving at the request of, for
the convenience of, or to represent the interests of the Company or a
subsidiary of the Company as a director, officer, foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise; or was a director, officer, employee, agent, fiduciary
or other official of a foreign or domestic corporation which was a
predecessor corporation of the Company or a subsidiary of the Company,
or was a director, officer, employee, agent, fiduciary or other official
of another enterprise at the request of, for the convenience of, or to
represent the interests of such predecessor corporation.
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<PAGE> 5
(ii) "Expenses" shall include all direct and indirect costs
(including, without limitation, attorneys' fees, retainers, court costs,
transcripts, fees of experts, witness fees, travel expenses, duplicating
costs, printing and binding costs, telephone charges, postage, delivery
service fees, all other disbursements or out-of-pocket expenses and
reasonable compensation for time spent by Indemnitee for which he is
otherwise not compensated by the Company or any third party) actually
and reasonably incurred in connection with either the investigation,
defense, settlement or appeal of a Proceeding or establishing or
enforcing a right to indemnification under this Agreement, applicable
law or otherwise; provided,however, that expenses shall not include any
judgments, fines, ERISA excise taxes or penalties or amounts paid in
settlement of a Proceeding.
(iii) "Liabilities" shall mean liabilities of any type
whatsoever, including, but not limited to, judgments, fines, ERISA
excise taxes and penalties and amounts paid in settlement of a
Proceeding.
(iv) "Proceeding" shall mean any action, suit arbitration,
alternate dispute resolution mechanism, investigation, administrative
hearing or any other proceeding whether civil, criminal, administrative
or investigative to which Indemnitee is or was a party or is threatened
to be a party by reason of the fact that he is or was an Agent or by
reason of anything done or not done by Indemnitee in such capacity.
(v) "Delaware Law" shall mean Title 8 of the Delaware Code as
amended and in effect from time to time or any successor or other
statutes of Delaware having similar import and effect.
(h) Pronouns. Use of the masculine pronoun shall be deemed to include
usage of the feminine pronoun where appropriate.
(i) Modification and Waiver. No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by both of the
parties to this Agreement. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.
(j) Notice by Indemnitee and Defense of Claims. Indemnitee agrees
promptly to notify the Company in writing upon being served with any summons,
citation, subpoena, complaint, indictment, information or other document
relating to any matter which may be subject to indemnification covered
hereunder, either civil, criminal or investigative; but the omission so to
notify the Company will not relieve it from any liability which it may have to
Indemnitee if such omission does not prejudice the Company's rights and if such
omission does prejudice the Company's rights, it will relieve the Company from
liability only to the extent of such prejudice; nor will such omission, in any
event, relieve the Company from any liability which it may have to Indemnitee
otherwise than under this Agreement. With respect to any Proceeding as to which
Indemnitee notifies the Company of the commencement thereof:
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<PAGE> 6
(i) The Company will be entitled to participate therein at its
own expense; and
(ii) Except as otherwise provided below, to the extent that it
may wish, the Company jointly with any other indemnifying party
similarly notified will be entitled to assume the defense thereof, with
counsel reasonably satisfactory to Indemnitee. After notice from the
Company to Indemnitee of its election so to assume the defense thereof,
the Company will not be liable to Indemnitee under this Agreement for
any legal or other expenses subsequently incurred by Indemnitee in
connection with the defense thereof except as otherwise provided below.
Indemnitee shall have the right to employ his counsel in such action,
suit or proceeding but the fees and expenses of such counsel incurred
after notice from the Company of its assumption of the defense thereof
shall be at the expense of Indemnitee unless (A) the employment of
counsel by Indemnitee has been authorized by the Company, or (B) the
Company shall not in fact have employed counsel to assume the defense of
such action, in each of which cases the fees and expenses of counsel
shall be at the expense of the Company, or (C) Indemnitee shall have
reasonably concluded that there may be a conflict of interest between
the Company and Indemnitee in the conduct of any such defense.
(iii) The Company shall not be liable to indemnify Indemnitee
under this Agreement for any amounts paid in settlement of any action or
claim effected without its written consent. The Company shall not settle
any action or claim in any manner which would impose any penalty or
limitation on Indemnitee without Indemnitee's written consent. Neither
the Company nor Indemnitee will unreasonably withhold their consent to
any proposed settlement.
(k) Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if (i)
delivered by hand and receipted for by the party to whom said notice or other
communication shall have been directed or (ii) mailed by certified or registered
mail with postage prepaid, on the third business day after the date on which it
is so mailed:
If to Indemnitee: _____________________
_____________________
_____________________
If to Company: WEBEX, INC.
110 Rose Orchard Way
San Jose, CA 95134
Attention: President
or to such other address as may have been furnished to Indemnitee by the Company
or to the Company by Indemnitee, as the case may be.
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<PAGE> 7
(l) Attorneys' Fees. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, the court of competent jurisdiction determines
that each of the material assertions made by Indemnitee as a basis for such
action were not made in good faith or were frivolous. In the event of an action
instituted by or in the name of the Company under this Agreement or to enforce
or interpret any of the terms of this Agreement, Indemnitee shall be entitled to
be paid all court costs and expenses, including attorneys' fees, incurred by
Indemnitee in defense of such action (including with respect to Indemnitee's
counterclaims and cross-claims made in such action), unless as a part of such
action the court determines that each of Indemnitee's material defenses to such
action were made in bad faith or were frivolous.
(m) Consent to Jurisdiction. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be brought only in the state courts of the State of Delaware.
(n) Partial Indemnification. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred by him in the investigation, defense, appeal or settlement of any
Proceeding, but not, however, for the total amount thereof, the Company shall
nevertheless indemnify Indemnitee for the portion of such expenses, judgments,
fines or penalties to which Indemnitee is entitled.
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<PAGE> 8
(o) Governing Law; Binding Effect. The parties agree that this Agreement
shall be governed by, and construed and enforced in accordance with, the laws of
the State of Delaware, as applied to contracts between Delaware residents
entered into and to be performed entirely within Delaware. This Agreement shall
be binding upon Indemnitee and upon the Company, its successors and assigns, and
shall inure to the benefit of Indemnitee, his heirs, personal representatives
and assigns and to the benefit of the Company, its successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
WEBEX, INC., a Delaware corporation
By
----------------------------------
Its
---------------------------------
------------------------------------
Indemnitee
<PAGE> 1
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This Employment Agreement (hereinafter "Agreement") is entered into between
ActiveTouch, Inc. (hereinafter "Employer") and SUBRAH S. IYAR (hereinafter
"Employee"), effective August 14, 1998 ("Effective Date").
WHEREAS, Vanenburg Ventures B.V. ("VV") intends to exercise its Warrant to
purchase Series B preferred stock of Employer;
WHEREAS, in consideration of the additional investment that VV will be making
in Employer, VV desires that Employer's key employees enter into an employment
agreement with Employer;
Now therefore, in consideration of the foregoing, the parties agree as follows:
1. EMPLOYMENT, COMPLETE AGREEMENT AND MODIFICATION
Employer agrees to continue to employ Employee and Employee agrees to be
employed by Employer on the terms and conditions set forth herein. This
Agreement supersedes previous correspondence, promises, representations and
agreements, if any, either written or oral, provided however that the Employee
Proprietary Information and Inventions Agreement that Employee signed on March
12, 1998, remains in full force and effect to the extent that it does not
conflict with the provisions of this Agreement. No provision of this Agreement
may be modified except by a writing signed by both Employer and Employee.
2. DUTIES AND COMPENSATION
Employee's title is Chairman and CEO. Employee shall perform any and all duties
now and hereafter assigned by Employer for a salary as may be from time to time
fixed by Employer. Employee agrees to abide by Employer's rules, regulations
and practices, including those concerning work schedules, vacation and sick
leave, as they may be from time to time adopted or modified. Employee's title
shall only be changed by mutual agreement.
3. SALARY MAY BE CHANGED
Employee's salary is $15,000 per month. Employer and Employee understand and
agree that his salary may be adjusted from time to time consistent with local
market practice and the needs of the business.
4. TERM OF EMPLOYMENT
Employee agrees to work for Employer for a two (2) year term from the Effective
Date of this Agreement, subject to the conditions set forth in section 5 of
this Agreement.
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<PAGE> 2
5. TERMINATION OF EMPLOYMENT
(a) Employee's employment with Employer shall continue as long as it is
mutually agreeable between Employer and Employee; provided, however,
that if Employee is terminated by Employer prior to August 14, 2000, for
reasons other than "Cause", Employee will be paid a separation package
consisting of the base monthly salary, medical benefits and benefits
under a 401K plan that he would have received for the balance of the
term of this Agreement. The salary shall be paid on Employer's regularly
scheduled paydays and shall be subject to regular payroll deductions.
Employee shall not be entitled to any other separation benefits. As a
condition of receiving the separation package set forth in this section
5(a), Employee shall be required to execute a release, in a form
satisfactory to Employer, of any and all claims Employee may have
against Employer, its officers, directors, employees or agents, arising
out of or related to his employment with Employer.
(b) "Cause" includes but is not limited to failure to perform the job;
failure to achieve performance levels for Employer consistent with
Employer's goals, as determined by the Board of Directors; violation of
Employer policy; insubordination; failure of Employee to devote his full
time and energy to Employer's business; failure of Employee to protect
Employer's proprietary and confidential information; or, other conduct
which, in the judgment of the Board of Directors, in inconsistent with
the performance of the job a satisfactory level of competence.
6. OTHER COMPENSATION
Employee understands and agrees that any additional compensation to Employee
shall rest in the Employer's sole discretion and that Employee shall not earn
or accrue any right to additional compensation by virtue of his employment.
7. EMPLOYEE BENEFITS PLAN
Employer may adopt or continue in force benefits plans for the benefit of
employees. Employer may terminate any or all such plans at any time and choose
not to adopt additional plans. Employee's rights under any benefit plans now in
force or later adopted shall be governed solely by their terms.
8. DUTY TO DEVOTE FULL TIME AND TO AVOID CONFLICT OF INTEREST
Employee agrees that during the period of employment, he shall devote full time
efforts to his duties as an employee of Employer. During the period of
employment, Employee agrees not to (i) solely or jointly with others undertake
any business activity that competes with Employer's business, and (ii) directly
or indirectly, engage or participate in any other activities in conflict with
the best interests of Employer.
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<PAGE> 3
9. INFORMATION DISCLOSED REMAINS PROPERTY OF EMPLOYER
All ideas, concepts, information, and written material disclosed to Employee by
Employer, or acquired form a customer or prospective customer of Employer, are
and shall remain the sole and exclusive property and proprietary information of
Employer or such customers, and are disclosed in confidence by Employer or
permitted to be acquired from such customers in reliance on Employer's
agreement to maintain them in confidence and not to use or disclose them to any
other person except in furtherance of Employer's business.
10. INVENTIONS BELONG TO EMPLOYER
(a) Any and all inventions, discoveries, improvements or creations
(collectively, the "Invention Ideas") which Employee has conceived or
made, or may conceive or make during the period of employment in any way,
directly or indirectly, connected with Employer's business, shall be the
sole and exclusive property of Employer. The term "Inventions Ideas" means
any and all ideas, processes, trademarks, service makes, inventions,
technology, computer programs, original works of authorship, designs,
formulas, patents, discoveries, copyrights and all improvements, rights,
and claims related to the foregoing that are conceived, developed or
reduced to practice by Employee alone or with others, except to the extent
California Labor Code Section 2870 lawfully prohibits the assignment of
rights in such ideas, processes, inventions, etc. Employee agrees that all
patentable and copyrightable works created by Employee or under Employer's
direction, in connection with Employer's business are "works made for
hire" and Employee hereby assigns all proprietary rights, including patent
and copyright, in these works to Employer without further compensation.
(b) Employee further agrees to (i) disclose promptly to Employer all such
Invention Ideas which Employee has made or may make solely, jointly or
commonly with others, (ii) assign all such Invention Ideas to Employer,
and (iii) execute and sign any and all applications, assignments or other
instruments which Employer may deem necessary in order to enable it, at
its expense, to apply for, prosecute, and obtain patents, copyrights, or
other proprietary rights in the United States and foreign countries, or in
order to transfer to Employer all right, title and interest in said
Invention Ideas.
(c) This Agreement does not apply to inventions which qualify fully for
protection under Section 2870 of the California Labor Code ("Section
2870"). Currently, Section 2870 applies to inventions for which no
equipment, supplies, facility or trade secret information of Employer was
used and which was developed entirely in Employee's own time, and (i)
which does not relate, at the time of conception or reduction to practice
of the invention, to the business of Employer, or to Employer's actual or
demonstrably anticipated research or development, or (ii) which does not
result from any work performed by Employee for Employer. Notwithstanding
this section 10(c), during the term of Employee's employment, Employee
shall disclose in confidence to Employer any invention in order to permit
Employer to make a determination as compliance by Employee with the terms
and conditions of this Agreement. Employee
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<PAGE> 4
understands that he bears the full burden of proving to Employer that
the invention qualifies fully under Section 2870.
11. Confidentiality
(a) Definition. During the term of employment with Employer, Employee will
have access to and become acquainted with the various trade secrets and
other proprietary and confidential information owned by Employer and
used by Employer in its business. "Trade secrets and other proprietary
and confidential information" consist of, for example and not intending
to be exclusive, (i) software (source and object code), algorithms,
computer processing systems, techniques, methodologies, formulae,
processes, compilations of information, drawings, proposals, job notes,
reports, records, and specifications, and (ii) information concerning
any matters relating to the business of Employer, any of its customers,
customer contacts, licenses, the prices it obtains or has obtained for
the licensing of its software products and services, or any other
information concerning the business of the Employer and Employer's good
will.
(b) No Disclosure. Employee shall not disclose or use in any manner,
directly or indirectly, any such trade secrets and other proprietary
and confidential information either during the term of this Agreement
or at any time thereafter, except as required in the course of
employment with Employer.
(c) No Engaging in Unfair Competition. By signing this Agreement, Employee
acknowledges and agrees that the names, addresses and product
specifications of Employer's customers constitute "trade secrets and
other proprietary and confidential information" and that the sale or
unauthorized use or disclosure of this or any other trade secrets and
other proprietary and confidential information that Employee obtained
during the course of this Agreement would constitute unfair competition
with Employer. Employee promises not to engage in any unfair
competition with Employee either during the terms of Employee's
employment or at any time thereafter.
12. RETURN OF MATERIAL
Employee agrees that, upon Employer's request or termination of employment, he
shall turn over to Employer all documents, disks or other computer media, or
other material in his possession or under his control, that (i) may contain or
be derived from concepts, Invention Ideas, or trade secrets and other
proprietary and confidential information as set forth in paragraphs 9, 10 and
11 above, or (ii) are connected with or derived from Employee's services to
Employer.
13. INDUCING EMPLOYEES TO LEAVE EMPLOYER; EMPLOYMENT OF EMPLOYEES
Any attempt on the part of Employee to induce others to leave Employer's
employ, or any effort by Employee to interfere with Employer's relationship
with its other employees, could be harmful and damaging to Employer. Employee
agrees that during
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<PAGE> 5
the term of employment and for a period of one year thereafter, Employee will
not directly or indirectly (i) induce or attempt to induce any employee of
Employer to quit employment with Employer; (ii) otherwise interfere with or
disrupt Employer's relationship with its employers; or (iii) solicit or entice
away any Employee of Employer.
14. NONSOLICITATION OF BUSINESS
For a period of one year from the date of termination of employment, Employee
will not divert or attempt to divert from Employer any business Employer has
enjoyed or solicited from its customers during the two (2) years prior to
termination of his employment.
15. REMEDIES -- INJUNCTION
In the event of a breach or threatened breach by Employee of the provisions of
sections 8 through 14 of this Agreement, Employee agrees that Employer -- in
addition to and not in limitation of any other rights, remedies or damages
available to Employer at law or in equity -- shall be entitled to a permanent
injunction to prevent or restrain any such breach by Employee or by Employee's
partners, agents, representatives, servants, employees and/or any and all
persons directly or indirectly acting for or with Employee.
16. SEVERABILITY
If any of the provisions of this Agreement is held to be invalid or
unenforceable in whole or in part, those provisions to the extent enforceable
and all other provisions shall nevertheless continue to be valid and
enforceable as if the invalid or unenforceable parts had not been included in
this Agreement. If any provision relating to the time period or scope of a
restriction shall be declared by a court of competent jurisdiction to exceed
the maximum time period or scope such court deems reasonable and enforceable,
then the time period or scope or the restriction which is deemed reasonable and
enforceable by the court shall become and shall thereafter be the maximum time
period or the applicable scope of the restriction. To the extent that any
provision in this Agreement conflicts with one or more provisions of the
Employee Proprietary Information and Inventions Agreement dated March 12, 1998,
the latter shall prevail.
17. GOVERNING LAW
This Agreement shall be construed and enforced according to the laws of the
State of California. All legal actions arising under this Agreement shall be
instituted in, and both Employer and Employee consent to jurisdiction in
California.
18. AGREEMENT READ, UNDERSTOOD AND FAIR
Employee has carefully read and considered all provisions of this Agreement and
agrees that all restrictions set forth are fair and reasonably required for the
protection of the interests of Employer.
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<PAGE> 6
AGREED:
EMPLOYER:
ACTIVETOUCH, INC.
/s/ Klaas De Boer /s/ Min Zhu
- ---------------------------- ------------------------------
By: Klaas De Boer Min Zhu
Title: Director President & CTO
Date: 14 Aug 1998 8/14/98
EMPLOYEE:
/s/ Subrah S. Iyar
- -----------------------------
By: Subrah S. Iyar
Date: Aug. 14, 1998
6
<PAGE> 1
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
This Employment Agreement (hereinafter "Agreement") is entered into between
ActiveTouch, Inc. (hereinafter "Employer") and MIN ZHU (hereinafter "Employee"),
effective August 14, 1998 ("Effective Date").
WHEREAS, Vanenburg Ventures B.V. ("VV") intends to exercise its Warrant to
purchase Series B preferred stock of Employer;
WHEREAS, in consideration of the additional investment that VV will be making in
Employer, VV desires that Employer's key employees enter into an employment
agreement with Employer;
Now therefore, in consideration of the foregoing, the parties agree as follows:
1. EMPLOYMENT, COMPLETE AGREEMENT AND MODIFICATION
Employer agrees to continue to employ Employee and Employee agrees to be
employed by Employer on the terms and conditions set forth herein. This
Agreement supersedes previous correspondence, promises, representations and
agreements, if any, either written or oral, provided however that the Employee
Proprietary Information and Inventions Agreement that Employee signed on March
12, 1998, remains in full force and effect to the extent that it does not
conflict with the provisions of this Agreement. No provision of this Agreement
may be modified except by a writing signed by both Employer and Employee.
2. DUTIES AND COMPENSATION
Employee's title is President and CTO. Employee shall perform any and all duties
now and hereafter assigned by Employer for a salary as may be from time to time
fixed by Employer. Employee agrees to abide by Employer's rules, regulations and
practices, including those concerning work schedules, vacation and sick leave,
as they may be from time to time adopted or modified. Employee's title shall
only be changed by mutual agreement.
3. SALARY MAY BE CHANGED
Employee's salary is $15,000 per month. Employer and Employee understand and
agree that his salary may be adjusted from time to time consistent with local
market practice and the needs of the business.
4. TERM OF EMPLOYMENT
Employee agrees to work for Employer for a two (2) year term from the Effective
Date of this Agreement, subject to the conditions set forth in section 5 of this
Agreement.
1
<PAGE> 2
5. TERMINATION OF EMPLOYMENT
(a) Employee's employment with Employer shall continue as long as it is mutually
agreeable between Employer and Employee; provided, however, that if Employee
is terminated by Employer prior to August 14, 2000, for reasons other than
"Cause", Employee will be paid a separation package consisting of the base
monthly salary, medical benefits and benefits under a 401K plan that he
would have received for the balance of the term of this Agreement. The
salary shall be paid on Employer's regularly scheduled paydays and shall be
subject to regular payroll deductions. Employee shall not be entitled to any
other separation benefits. As a condition of receiving the separation
package set forth in this section 5(a), Employee shall be required to
execute a release, in a form satisfactory to Employer, of any and all claims
Employee may have against Employer, its officers, directors, employees or
agents, arising out of or related to his employment with Employer.
(b) "Cause" includes but is not limited to failure to perform the job; failure
to achieve performance levels for Employer consistent with Employer's goals,
as determined by the Board of Directors; violation of Employer policy;
insubordination; failure of Employee to devote his full time and energy to
Employer's business; failure of Employee to protect Employer's proprietary
and confidential information; or, other conduct which, in the judgment of
the Board of Directors, in inconsistent with the performance of the job a
satisfactory level of competence.
6. OTHER COMPENSATION
Employee understands and agrees that any additional compensation to Employee
shall rest in the Employer's sole discretion and that Employee shall not earn or
accrue any right to additional compensation by virtue of his employment.
7. EMPLOYEE BENEFITS PLAN
Employer may adopt or continue in force benefits plans for the benefit of
employees. Employer may terminate any or all such plans at any time and choose
not to adopt additional plans. Employee's rights under any benefit plans now in
force or later adopted shall be governed solely by their terms.
8. DUTY TO DEVOTE FULL TIME AND TO AVOID CONFLICT OF INTEREST
Employee agrees that during the period of employment, he shall devote full time
efforts to his duties as an employee of Employer. During the period of
employment, Employee agrees not to (i) solely or jointly with others undertake
any business activity that competes with Employer's business, and (ii) directly
or indirectly, engage or participate in any other activities in conflict with
the best interests of Employer.
2
<PAGE> 3
9. INFORMATION DISCLOSED REMAINS PROPERTY OF EMPLOYER
All ideas, concepts, information, and written material disclosed to Employee by
Employer, or acquired form a customer or prospective customer of Employer, are
and shall remain the sole and exclusive property and proprietary information of
Employer or such customers, and are disclosed in confidence by Employer or
permitted to be acquired from such customers in reliance on Employer's agreement
to maintain them in confidence and not to use or disclose them to any other
person except in furtherance of Employer's business.
10. INVENTIONS BELONG TO EMPLOYER
(a) Any and all inventions, discoveries, improvements or creations
(collectively, the "Invention Ideas") which Employee has conceived or made,
or may conceive or make during the period of employment in any way, directly
or indirectly, connected with Employer's business, shall be the sole and
exclusive property of Employer. The term "Inventions Ideas" means any and
all ideas, processes, trademarks, service makes, inventions, technology,
computer programs, original works of authorship, designs, formulas, patents,
discoveries, copyrights and all improvements, rights, and claims related to
the foregoing that are conceived, developed or reduced to practice by
Employee alone or with others, except to the extent California Labor Code
Section 2870 lawfully prohibits the assignment of rights in such ideas,
processes, inventions, etc. Employee agrees that all patentable and
copyrightable works created by Employee or under Employer's direction, in
connection with Employer's business are "works made for hire" and Employee
hereby assigns all proprietary rights, including patent and copyright, in
these works to Employer without further compensation.
(b) Employee further agrees to (i) disclose promptly to Employer all such
Invention Ideas which Employee has made or may make solely, jointly or
commonly with others, (ii) assign all such Invention Ideas to Employer, and
(iii) execute and sign any and all applications, assignments or other
instruments which Employer may deem necessary in order to enable it, at its
expense, to apply for, prosecute, and obtain patents, copyrights, or other
proprietary rights in the United States and foreign countries, or in order
to transfer to Employer all right, title and interest in said Invention
Ideas.
(c) This Agreement does not apply to inventions which qualify fully for
protection under Section 2870 of the California Labor Code ("Section 2870").
Currently, Section 2870 applies to inventions for which no equipment,
supplies, facility or trade secret information of Employer was used and
which was developed entirely in Employee's own time, and (i) which does not
relate, at the time of conception or reduction to practice of the invention,
to the business of Employer, or to Employer's actual or demonstrably
anticipated research or development, or (ii) which does not result from any
work performed by Employee for Employer. Notwithstanding this section 10(c),
during the term of Employee's employment, Employee shall disclose in
confidence to Employer any invention in order to permit Employer to make a
determination as compliance by Employee with the terms and conditions of
this Agreement. Employee
3
<PAGE> 4
understands that he bears the full burden of proving to Employer that
the invention qualifies fully under Section 2870.
11. CONFIDENTIALITY
(a) Definition. During the term of employment with Employer, Employee will have
access to and become acquainted with the various trade secrets and other
proprietary and confidential information owned by Employer and used by
Employer in its business. "Trade secrets and other proprietary and
confidential information" consist of, for example and not intending to be
exclusive, (i) software (source and object code), algorithms, computer
processing systems, techniques, methodologies, formulae, processes,
compilations of information, drawings, proposals, job notes, reports,
records, and specifications, and (ii) information concerning any matters
relating to the business of Employer, any of its customers, customer
contacts, licenses, the prices it obtains or has obtained for the licensing
of its software products and services, or any other information concerning
the business of the Employer and Employer's good will.
(b) No Disclosure. Employee shall not disclose or use in any manner, directly or
indirectly, any such trade secrets and other proprietary and confidential
information either during the term of this Agreement or at any time
thereafter, except as required in the course of employment with Employer.
(c) No Engaging in Unfair Competition. By signing this Agreement, Employee
acknowledges and agrees that the names, addresses and product specifications
of Employer's customers constitute "trade secrets and other proprietary and
confidential information" and that the sale or unauthorized use or
disclosure of this or any other trade secrets and other proprietary and
confidential information" that Employee obtained during the course of this
Agreement would constitute unfair competition with Employer. Employee
promises not to engage in any unfair competition with Employee either during
the terms of Employee's employment or at any time thereafter.
12. RETURN OF MATERIAL
Employee agrees that, upon Employer's request or termination of employment, he
shall turn over to Employer all documents, disks or other computer media, or
other material in his possession or under his control, that (i) may contain or
be derived from concepts, Invention Ideas, or trade secrets and other
proprietary and confidential information as set forth in paragraphs 9, 10 and 11
above, or (ii) are connected with or derived from Employee's services to
Employer.
13. INDUCING EMPLOYEES TO LEAVE EMPLOYER; EMPLOYMENT OF EMPLOYEES
Any attempt on the part of Employee to induce others to leave Employer's employ,
or any effort by Employee to interfere with Employer's relationship with its
other employees, could be harmful and damaging to Employer. Employee agrees that
during
4
<PAGE> 5
the term of employment and for a period of one year thereafter, Employee will
not directly or indirectly (i) induce or attempt to induce any employee of
Employer to quit employment with Employer; (ii) otherwise interfere with or
disrupt Employer's relationship with its employers; or (iii) solicit or entice
away any Employee of Employer.
14. NONSOLICITATION OF BUSINESS
For a period of one year from the date of termination of employment, Employee
will not divert or attempt to divert from Employer any business Employer has
enjoyed or solicited from its customers during the two (2) years prior to
termination of his employment.
15. REMEDIES--INJUNCTION
In the event of a breach or threatened breach by Employee of the provisions of
sections 8 through 14 of this Agreement, Employee agrees that Employer--in
addition to and not in limitation of any other rights, remedies or damages
available to Employer at law or in equity--shall be entitled to a permanent
injunction to prevent or restrain any such breach by Employee or by Employee's
partners, agents, representatives, servants, employees and/or any and all
persons directly or indirectly acting for or with Employee.
16. SEVERABILITY
If any of the provisions of this Agreement is held to be invalid or
unenforceable in whole or in part, those provisions to the extent enforceable
and all other provisions shall nevertheless continue to be valid and enforceable
as if the invalid or unenforceable parts had not been included in this
Agreement. If any provision relating to the time period or scope of a
restriction shall be declared by a court of competent jurisdiction to exceed the
maximum time period or scope such court deems reasonable and enforceable, then
the time period or scope or the restriction which is deemed reasonable and
enforceable by the court shall become and shall thereafter be the maximum time
period or the applicable scope of the restriction. To the extent that any
provision in this Agreement conflicts with one or more provisions of the
Employee Proprietary Information and Inventions Agreement dated March 12, 1998,
the latter shall prevail.
17. GOVERNING LAW
This Agreement shall be construed and enforced according to the laws of the
State of California. All legal actions arising under this Agreement shall be
instituted in, and both Employer and Employee consent to jurisdiction in
California.
18. AGREEMENT READ, UNDERSTOOD AND FAIR
Employee has carefully read and considered all provisions of this Agreement and
agrees that all restrictions set forth are fair and reasonably required for the
protection of the interests of Employer.
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AGREED:
EMPLOYER:
ACTIVETOUCH INC.
/s/ Klaas De Boer /s/ Subrah S. Iyar
- ----------------------------------- ------------------------------------
By: Klaas De Boer Subrah S. Iyar
Title: Director CEO
Date: 14 Aug 1998 14 Aug. 1998
EMPLOYEE:
/s/ Min Zhu
- -----------------------------------
By: Min Zhu
Date: 8/14/98
6
<PAGE> 1
EXHIBIT 10.7
LEASE
BY AND BETWEEN
CORPORATE TECHNOLOGY CENTRE ASSOCIATES II LLC,
A CALIFORNIA LIMITED LIABILITY COMPANY
AS LANDLORD
AND
ACTIVE TOUCH, INC.,
A CALIFORNIA CORPORATION
AS TENANT
JUNE 30, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE 1 REFERENCE................................................................1
1.1 References....................................................................1
ARTICLE 2 LEASED PREMISES, TERM AND POSSESSION.....................................2
2.1 Demise Of Leased Premises.....................................................2
2.2 Right To Use Outside Areas....................................................2
2.3 Lease Commencement Date And Lease Term........................................2
2.4 Delivery Of Possession........................................................2
2.5 Performance Of Tenant Improvements; Acceptance Of Possession..................3
2.6 Surrender Of Possession.......................................................3
ARTICLE 3 RENT, LATE CHARGES AND SECURITY DEPOSITS.................................3
3.1 Base Monthly Rent.............................................................3
3.2 Additional Rent...............................................................3
3.3 Year-End Adjustments..........................................................4
3.4 Late Charge, And Interest On Rent In Default..................................4
3.5 Payment Of Rent...............................................................4
3.6 Prepaid Rent..................................................................4
3.7 Security Deposit..............................................................5
ARTICLE 4 USE OF LEASED PREMISES AND OUTSIDE AREA..................................5
4.1 Permitted Use.................................................................5
4.2 General Limitations On Use....................................................5
4.3 Noise And Emissions...........................................................6
4.4 Trash Disposal................................................................6
4.5 Parking.......................................................................6
4.6 Signs.........................................................................6
4.7 Compliance With Laws And Private Restrictions.................................6
4.8 Compliance With Insurance Requirements........................................7
4.9 Landlord's Right To Enter.....................................................7
4.10 Use Of Outside Areas..........................................................7
4.11 Environmental Protection......................................................7
4.12 Rules And Regulations.........................................................8
ARTICLE 5 REPAIRS, MAINTENANCE, SERVICES AND UTILITIES.............................9
5.1 Repair And Maintenance........................................................9
(a) Tenant's Obligations.....................................................9
(b) Landlord's Obligation....................................................9
5.2 Utilities.....................................................................9
5.3 Security......................................................................9
5.4 Energy And Resource Consumption...............................................9
5.5 Limitation Of Landlord's Liability...........................................10
ARTICLE 6 ALTERATIONS AND IMPROVEMENTS............................................10
6.1 By Tenant....................................................................10
6.2 Ownership Of Improvements....................................................10
6.3 Alterations Required By Law..................................................10
6.4 Liens........................................................................11
ARTICLE 7 ASSIGNMENT AND SUBLETTING BY TENANT.....................................11
7.1 By Tenant....................................................................11
7.2 Merger, Reorganization, or Sale of Assets....................................11
7.3 Landlord's Election..........................................................12
</TABLE>
i.
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<S> <C>
7.4 Conditions To Landlord's Consent.............................................12
7.5 Assignment Consideration And Excess Rentals Defined..........................13
7.6 Payments.....................................................................13
7.7 Good Faith...................................................................13
7.8 Effect Of Landlord's Consent.................................................13
ARTICLE 8 LIMITATION ON LANDLORD'S LIABILITY AND INDEMNITY........................13
8.1 Limitation On Landlord's Liability And Release...............................13
8.2 Tenant's Indemnification Of Landlord.........................................14
ARTICLE 9 INSURANCE...............................................................14
9.1 Tenant's Insurance...........................................................14
9.2 Landlord's Insurance.........................................................15
9.3 Mutual Waiver Of Subrogation.................................................15
ARTICLE 10 DAMAGE TO LEASED PREMISES...............................................15
10.1 Landlord's Duty To Restore...................................................15
10.2 Insurance Proceeds...........................................................16
10.3 Landlord's Right To Terminate................................................16
10.4 Tenant's Right To Terminate..................................................16
10.5 Tenant's Waiver..............................................................16
10.6 Abatement Of Rent............................................................16
ARTICLE 11 CONDEMNATION............................................................16
11.1 Tenant's Right To Terminate..................................................16
11.2 Landlord's Right To Terminate................................................16
11.3 Restoration..................................................................17
11.4 Temporary Taking.............................................................17
11.5 Division Of Condemnation Award...............................................17
11.6 Abatement Of Rent............................................................17
11.7 Taking Defined...............................................................17
ARTICLE 12 DEFAULT AND REMEDIES....................................................17
12.1 Events Of Tenant's Default...................................................17
12.2 Landlord's Remedies..........................................................18
12.3 Landlord's Default And Tenant's Remedies.....................................19
12.4 Limitation Of Tenant's Recourse..............................................19
12.5 Tenant's Waiver..............................................................19
ARTICLE 13 GENERAL PROVISIONS......................................................19
13.1 Taxes On Tenant's Property...................................................19
13.2 Holding Over.................................................................19
13.3 Subordination To Mortgages...................................................20
13.4 Tenant's Attornment Upon Foreclosure.........................................20
13.5 Mortgagee Protection.........................................................20
13.6 Estoppel Certificate.........................................................20
13.7 Tenant's Financial Information...............................................20
13.8 Transfer By Landlord.........................................................20
13.9 Force Majeure................................................................21
13.10 Notices......................................................................21
13.11 Attorneys' Fees..............................................................21
13.12 Definitions..................................................................21
</TABLE>
ii.
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<S> <C>
(a) Real Property Taxes.....................................................21
(b) Landlord's Insurance Costs..............................................22
(c) Property Maintenance Costs..............................................22
(d) Building Maintenance Costs..............................................22
(e) Property Operating Expenses.............................................22
(f) Law ....................................................................22
(g) Lender..................................................................22
(h) Private Restrictions....................................................22
(i) Rent....................................................................22
13.13 General Waivers..............................................................22
13.14 Miscellaneous................................................................22
ARTICLE 14 CORPORATE AUTHORITY BROKERS AND ENTIRE AGREEMENT........................23
14.1 Corporate Authority..........................................................23
14.2 Brokerage Commissions........................................................23
14.3 Entire Agreement.............................................................23
14.4 Landlord's Representations...................................................23
ARTICLE 15 OPTIONS TO EXTEND.......................................................23
ARTICLE 16 TELEPHONE SERVICE.......................................................25
</TABLE>
iii.
<PAGE> 5
LEASE
THIS LEASE, dated June 30, 1999 for reference purposes only, is made by
and between CORPORATE TECHNOLOGY CENTRE ASSOCIATES II LLC, a California limited
liability company ("Landlord") and ACTIVE TOUCH, INC., a California corporation
("Tenant") to be effective and binding upon the parties as of the date the last
of the designated signatories to this Lease shall have executed this Lease (the
"Effective Date of this Lease").
ARTICLE 1
REFERENCE
1.1 REFERENCES. All references in this Lease (subject to any further
clarifications contained in this Lease) to the following terms shall have the
following meaning or refer to the respective address, person, date, time period,
amount, percentage, calendar year or fiscal year as below set forth:
<TABLE>
<S> <C>
Tenant's Address for Notice: Active Touch, Inc.
110 Rose Orchard Way
San Jose, California 95112
Tenant's Representative: Neil Perrelli, Director of Infrastructure,
Business Development
Landlord's Address for Notices: c/o Menlo Equities LLC
525 University Avenue, Suite 100
Palo Alto, California 94301
Landlord's Representative: Henry Bullock/Richard Holmstrom
Phone Number: (650) 326-9300
Intended Commencement Date: August 1, 1999
Lease Term: Five (5) years
Lease Expiration Date: Expiration Date: Five (5) years from
the Lease Commencement Date, unless
earlier terminated by Landlord in
accordance with the terms of this
Lease, or extended by Tenant
pursuant to Article 15.
Options to Renew: One (1) option(s) to renew for a term
of three (3) years.
First Month's Prepaid Rent: $38,400.00
Tenant's Security Deposit: $500,000.00, subject to adjustment pursuant to
Section 3.7
Late Charge Amount: Five Percent (5%) of the Delinquent Amount
Tenant's Required Liability
Coverage: $3,000,000 Combined Single Limit
Tenant's Broker(s): Jon Condrey and Steve Condrey of Colliers
International
Property: That certain real property situated in the City
of San Jose, County of Santa Clara, State of
California, as presently improved with five (5)
building(s), which real property is shown on the
Site Plan attached hereto as Exhibit "A" and is
commonly known as or otherwise described as
follows: Technology Centre, San Jose, California.
Building: That certain building within the Property in
which the Leased Premises are located, which
building is shown outlined on Exhibit "A" hereto
(the "Building"), located on Assessor's Parcel
No. 097-82-001. The Building is commonly known
as or otherwise described as follows: 110 Rose
Orchard Way.
Outside Areas: The "Outside Areas" shall mean all areas within
Assessor's Parcel No. 097-82-001 which are located
outside the Building, such as pedestrian walkways,
parking areas, landscaped area, open areas and enclosed
trash disposal areas.
Leased Premises Premises: All the interior space within the Building,
including stairwells, connecting walkways, and atriums,
consisting of approximately 40,320 square feet and, for
purposes of this Lease, agreed to contain said number of
square feet.
Base Monthly Rent: The term "Base Monthly Rent" shall mean the following:
</TABLE>
1.
<PAGE> 6
<TABLE>
<CAPTION>
Period Monthly Amount
------ --------------
<S> <C>
Months 1-6 $38,400.00
Months 7-12 $51,200.00
Months 13-24 $66,528.00
Months 25-36 $68,544.00
Months 37-48 $70,560.00
Months 49-60 $72,576.00
</TABLE>
<TABLE>
<S> <C>
The foregoing monthly amounts are
subject to adjustment as set forth
in the Work Letter attached as
Exhibit B.
Use: Office, research and development, and other legal
related uses.
Tenant's Project
Proportionate Share: 12.95%
Tenant's Building
Proportionate Share: 100%
Exhibits: The term "Exhibits" shall mean the Exhibits of
this Lease which are described as follows:
Exhibit "A" - Site Plan showing the
Property and delineating the
Building in which the Leased
Premises are located.
Exhibit "B" - Work Letter
Exhibit "C" - Form of Tenant Estoppel Certificate
Exhibit "D" - Form of Lease Commencement Date
Certificate
</TABLE>
ARTICLE 2
LEASED PREMISES, TERM AND POSSESSION
2.1 DEMISE OF LEASED PREMISES. Landlord hereby leases to Tenant and Tenant
hereby leases from Landlord for Tenant's own use in the conduct of Tenant's
business and not for purposes of speculating in real estate, for the Lease Term
and upon the terms and subject to the conditions of this Lease, that certain
interior space described in Article 1 as the Leased Premises, reserving and
excepting to Landlord the right to fifty percent (50%) of all assignment
consideration and excess rentals as provided in Article 7 below. Tenant's lease
of the Leased Premises, together with the appurtenant right to use the Outside
Areas as described in Paragraph 2.2 below, shall be conditioned upon and be
subject to the continuing compliance by Tenant with (i) all the terms and
conditions of this Lease, (ii) all Laws governing the use of the Leased Premises
and the Property, (iii) all Private Restrictions, easements and other matters
now of public record respecting the use of the Leased Premises and Property, and
(iv) all reasonable rules and regulations from time to time established by
Landlord.
2.2 RIGHT TO USE OUTSIDE AREAS. As an appurtenant right to Tenant's right to the
use and occupancy of the Leased Premises, Tenant shall have the right to use the
Outside Areas in conjunction with its use of the Leased Premises solely for the
purposes for which they were designated and intended and for no other purposes
whatsoever. Such purposes include, without limitation, occasional company
meetings, catered events, and other incidental uses. Tenant's right to so use
the Outside Areas shall be subject to the limitations on such use as set forth
in Article 1 and shall terminate concurrently with any termination of this
Lease.
2.3 LEASE COMMENCEMENT DATE AND LEASE TERM. Subject to Paragraph 2.4 below, the
term of this Lease shall begin, and the Lease Commencement Date shall be deemed
to have occurred, on the Intended Commencement Date, as set forth in Article 1
(the "Lease Commencement Date"). The term of this Lease shall in all events end
on the Lease Expiration Date (as set forth in Article 1). The Lease Term shall
be that period of time commencing on the Lease Commencement Date and ending on
the Lease Expiration Date (the "Lease Term").
2.4 DELIVERY OF POSSESSION. Landlord shall deliver to Tenant possession of the
Leased Premises at such time as the Tenant Improvements (as defined in Paragraph
2.5 below) are substantially completed pursuant to the Work Letter. If Landlord
is unable to so deliver possession of the Leased Premises to Tenant in the
agreed condition on or before the Intended Commencement Date, Landlord shall not
be in default under this Lease, nor shall this Lease be void, voidable or
cancelable by Tenant until the lapse of ninety (90) days after the Intended
Commencement Date (the "delivery grace period"); however, if Landlord's
inability to so deliver the Leased Premises to Tenant is caused by the existing
tenant's hold over in the Leased Premises beyond the term of its current lease
or by Landlord's gross negligence or willful misconduct, the Lease Commencement
Date shall not be deemed to have occurred until the actual date of delivery.
Additionally, the delivery grace period above set forth shall be extended for
such number of days as Landlord may be delayed in delivering possession of the
Leased Premises to Tenant by reason of Force Majeure or the action or inaction
of Tenant. If Landlord is unable to deliver possession of the Leased Premises in
the agreed condition to Tenant within the described delivery grace period
(including any extension thereof by reason of Force Majeure or the actions or
inactions of Tenant), then Tenant's sole remedy shall be to terminate this Lease
in which case Landlord shall refund to Tenant any prepaid rent and/or Security
Deposit deposited by Tenant with Landlord, and in no event shall Landlord be
liable in damages to Tenant for such delay. Tenant may not terminate
2.
<PAGE> 7
this Lease at any time after the date Landlord notifies Tenant that the Leased
Premises have been put into the agreed condition and are available for delivery
to Tenant, unless Landlord's notice is not given in good faith. After delivery
of the Leased Premises to Tenant pursuant to the terms hereof, Landlord and
Tenant shall execute a Commencement Date Certificate in the form attached as
Exhibit D, confirming the actual Lease Commencement Date.
2.5 PERFORMANCE OF TENANT IMPROVEMENTS; ACCEPTANCE OF POSSESSION. Landlord
shall, pursuant to the work letter attached hereto as Exhibit B and made a part
of this Lease (the "Work Letter"), perform the work and make the installations
in the Leased Premises substantially as set forth in the Work Letter (such work
and installations hereinafter referred to as the "Tenant Improvements"). Without
limiting the foregoing, Landlord agrees to deliver in good working order the
roof surface and all existing plumbing, lighting, heating, ventilating and air
conditioning systems within the Leased Premises. All work to be performed
pursuant to the Work Letter shall be performed by contractors licensed in the
State of California and in accordance with commercially reasonable standards. If
any dispute arises as to whether the Leased Premises are substantially completed
and ready for Tenant's occupancy, a certificate furnished by the Construction
Manager (as defined in the Work Letter) certifying the date of substantial
completion shall be conclusive of that fact and date and binding upon Landlord
and Tenant. It is agreed that by occupying the Leased Premises, Tenant formally
accepts same and acknowledges that the Leased Premises are in the condition
called for hereunder, subject to normal punchlist items specified by Tenant to
Landlord in writing within ten (10) days of such occupancy. Landlord represents
that it has obtained or will obtain, to the extent necessary, all governmental
approvals to construct the Tenant Improvements in accordance with all Laws.
2.6 SURRENDER OF POSSESSION. Immediately prior to the expiration or upon the
sooner termination of this Lease, Tenant shall remove all of Tenant's signs from
the exterior of the Building and shall remove all of Tenant's equipment, trade
fixtures, furniture, supplies, wall decorations and other personal property from
within the Leased Premises, the Building and the Outside Areas, and shall vacate
and surrender the Leased Premises, the Building, the Outside Areas and the
Property to Landlord in the same condition, broom clean, as existed at the Lease
Commencement Date, damage by casualty or condemnation (which events shall be
governed by Articles 10 and 11) and reasonable wear and tear excepted. Tenant
shall repair all damage to the Leased Premises, the exterior of the Building and
the Outside Areas caused by Tenant's removal of Tenant's property. Tenant shall
patch and refinish, to Landlord's reasonable satisfaction, all penetrations made
by Tenant or its employees to the floor, walls or ceiling of the Leased
Premises, whether such penetrations were made with Landlord's approval or not.
Tenant shall repair or replace all stained or damaged ceiling tiles, wall
coverings and floor coverings to the reasonable satisfaction of Landlord. Tenant
shall repair all damage caused by Tenant to the exterior surface of the Building
and the paved surfaces of the Outside Areas and, where necessary, replace or
resurface same. Additionally, to the extent that Landlord shall have notified
Tenant in writing at the time the improvements were completed that it desired to
have certain improvements removed at the expiration or sooner termination of the
Lease, Tenant shall, upon the expiration or sooner termination of the Lease,
remove any such improvements constructed or installed by Landlord or Tenant and
repair all damage caused by such removal. If the Leased Premises, the Building,
the Outside Areas and the Property are not surrendered to Landlord in the
condition required by this paragraph at the expiration or sooner termination of
this Lease, Landlord may, at Tenant's expense, so remove Tenant's signs,
property and/or improvements not so removed and make such repairs and
replacements not so made or hire, at Tenant's expense, independent contractors
to perform such work. Tenant shall be liable to Landlord for all costs incurred
by Landlord in returning the Leased Premises, the Building and the Outside Areas
to the required condition, together with interest on all costs so incurred from
the date paid by Landlord at a rate equal to the greater of (a) 12%, or (b) the
sum of that rate quoted by Wells Fargo Bank, N.T. & S.A. from time to time as
its prime rate, plus two percent (2%) ("Wells Prime Plus Two"), but no event
greater than the then maximum rate of interest not prohibited or made usurious
by law until paid. Tenant shall pay to Landlord the amount of all costs so
incurred plus such interest thereon, within ten (10) days of Landlord's billing
Tenant for same. Tenant shall indemnify Landlord against loss or liability
resulting from delay by Tenant in surrendering the Leased Premises, including,
without limitation, any claims made by any succeeding Tenant or any losses to
Landlord with respect to lost opportunities to lease to succeeding tenants.
ARTICLE 3
RENT, LATE CHARGES AND SECURITY DEPOSITS
3.1 BASE MONTHLY RENT. Commencing on the Lease Commencement Date (as determined
pursuant to Paragraph 2.3 above) and continuing throughout the Lease Term,
Tenant shall pay to Landlord, without prior demand therefor, in advance on the
first day of each calendar month, the amount set forth as "Base Monthly Rent" in
Article 1 (the "Base Monthly Rent").
3.2 ADDITIONAL RENT. Commencing on the Lease Commencement Date (as determined
pursuant to Paragraph 2.3 above) and continuing throughout the Lease Term, in
addition to the Base Monthly Rent and to the extent not required by Landlord to
be contracted for and paid directly by Tenant, Tenant shall pay to Landlord as
additional rent (the "Additional Rent") the following amounts:
(a) An amount equal to all Property Operating Expenses (as defined in
Article 13) incurred by Landlord. Payment shall be made by whichever of the
following methods (or combination of methods) is (are) from time to time
designated by Landlord:
(i) Landlord may forward invoices or bills for such expenses to
Tenant, and Tenant shall, no later than the due date, pay such invoices or bills
and deliver satisfactory evidence of such payment to Landlord, and/or
3.
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(ii) Landlord may bill to Tenant, on a periodic basis not more
frequently than monthly, the amount of such expenses (or group of expenses) as
paid or incurred by Landlord, and Tenant shall pay to Landlord the amount of
such expenses within ten days after receipt of a written bill therefor from
Landlord, and/or
(iii) Landlord may deliver to Tenant Landlord's reasonable
estimate of any given expense (such as Landlord's Insurance Costs or Real
Property Taxes), or group of expenses, which it anticipates will be paid or
incurred for the ensuing calendar or fiscal year, as Landlord may determine, and
Tenant shall pay to Landlord an amount equal to the estimated amount of such
expenses for such year in equal monthly installments during such year with the
installments of Base Monthly Rent.
Landlord reserves the right to change from time to time the methods of billing
Tenant for any given expense or group of expenses or the periodic basis on which
such expenses are billed.
(b) Landlord's share of the consideration received by Tenant upon
certain assignments and sublettings as required by Article 7.
(c) Any legal fees and costs that Tenant is obligated to pay or
reimburse to Landlord pursuant to Article 13; and
(d) Any other charges or reimbursements due Landlord from Tenant
pursuant to the terms of this Lease.
Notwithstanding the foregoing, Landlord may elect by written notice to Tenant to
have Tenant pay Real Property Taxes or any portion thereof directly to the
applicable taxing authority, in which case Tenant shall make such payments and
deliver satisfactory evidence of payment to Landlord no later than ten (10) days
before such Real Property Taxes become delinquent.
3.3 YEAR-END ADJUSTMENTS. If Landlord shall have elected to bill Tenant for the
Property Operating Expenses (or any group of such expenses) on an estimated
basis in accordance with the provisions of Paragraph 3.2(a)(iii) above, Landlord
shall furnish to Tenant within three months following the end of the applicable
calendar or fiscal year, as the case may be, a statement setting forth (i) the
amount of such expenses paid or incurred during the just ended calendar or
fiscal year, as appropriate, and (ii) the amount that Tenant has paid to
Landlord for credit against such expenses for such period. If Tenant shall have
paid more than its obligation for such expenses for the stated period, Landlord
shall, at its election, either (i) credit the amount of such overpayment toward
the next ensuing payment or payments of Additional Rent that would otherwise be
due or (ii) refund in cash to Tenant the amount of such overpayment. If such
year-end statement shall show that Tenant did not pay its obligation for such
expenses in full, then Tenant shall pay to Landlord the amount of such
underpayment within ten (10) days from Landlord's billing of same to Tenant.
Tenant, at its sole cost and expense, shall have the right to audit Landlord's
books and records concerning the amount of Property Operating Costs payable by
Tenant as Additional Rent hereunder, provided such audit is conducted within
sixty (60) days after Tenant's receipt of the year-end statement described in
Section 3.2 above setting forth the annual reconciliation of the Property
Operating Expenses. The provisions of this Paragraph shall survive the
expiration or sooner termination of this Lease.
3.4 LATE CHARGE, AND INTEREST ON RENT IN DEFAULT. Tenant acknowledges that the
late payment by Tenant of any monthly installment of Base Monthly Rent or any
Additional Rent will cause Landlord to incur certain costs and expenses not
contemplated under this Lease, the exact amounts of which are extremely
difficult or impractical to fix. Such costs and expenses will include without
limitation, administration and collection costs and processing and accounting
expenses. Therefore, if any installment of Base Monthly Rent is not received by
Landlord from Tenant within ten (10) calendar days after the same becomes due,
Landlord may assess Tenant with a late charge in an amount equal to the amount
set forth in Article 1 as the "Late Charge Amount," and if any Additional Rent
is not received by Landlord within ten (10) calendar days after same becomes
due, Landlord may assess Tenant with a late charge in an amount equal to 5% of
the Additional Rent not so paid. Landlord and Tenant agree that this late charge
represents a reasonable estimate of such costs and expenses and is fair
compensation to Landlord for the anticipated loss Landlord would suffer by
reason of Tenant's failure to make timely payment. In no event shall this
provision for a late charge be deemed to grant to Tenant a grace period or
extension of time within which to pay any rental installment or prevent Landlord
from exercising any right or remedy available to Landlord upon Tenant's failure
to pay each rental installment due under this Lease when due, including the
right to terminate this Lease. If any rent remains delinquent for a period in
excess of ten (10) calendar days, then, in addition to such late charge, Tenant
shall pay to Landlord interest on any rent that is not so paid from said tenth
day at a rate equal to the greater of (a) 12%, or (b) Wells Prime Plus Two, but
no event greater than the then maximum rate of interest not prohibited or made
usurious by law until paid.
3.5 PAYMENT OF RENT. Except as specifically provided otherwise in this Lease,
all rent shall be paid in lawful money of the United States, without any
abatement, reduction or offset for any reason whatsoever, to Landlord at such
address as Landlord may designate from time to time. Tenant's obligation to pay
Base Monthly Rent and all Additional Rent shall be appropriately prorated at the
commencement and expiration of the Lease Term. The failure by Tenant to pay any
Additional Rent as required pursuant to this Lease when due shall be treated the
same as a failure by Tenant to pay Base Monthly Rent when due, and Landlord
shall have the same rights and remedies against Tenant as Landlord would have
had Tenant failed to pay the Base Monthly Rent when due.
3.6 PREPAID RENT. Tenant shall, upon execution of this Lease, pay to Landlord
the amount set forth in Article 1 as "First Month's Prepaid Rent" as prepayment
of rent for credit against the first payment of Base Monthly Rent due hereunder.
4.
<PAGE> 9
3.7 SECURITY DEPOSIT. Subject to the provisions regarding the Letter of Credit
described below in this Section 3.7, Tenant has deposited with Landlord the
amount set forth in Article 1 as the "Security Deposit" as security for the
performance by Tenant of the terms of this Lease to be performed by Tenant, and
not as prepayment of rent. In the event (i) Tenant becomes a publicly traded
company and maintains a market capitalization acceptable to Landlord, (ii)
Tenant reports net profits for three (3) consecutive quarters (as shown on its
quarterly financial statements prepared in accordance with generally accepted
accounting principles), and (iii) provided that Tenant is not then in default
(and has never been in default beyond any applicable notice and cure period) in
its payment of Base Monthly Rent or Additional Rent, the Security Deposit shall
be reduced to an amount equal to two (2) months of the Base Monthly Rent then in
effect. Provided that the conditions set forth in (i)-(iii) above are satisfied
and the Security Deposit has been accordingly reduced, and provided that Tenant
is not then in default (and has never been in default beyond any applicable
notice and cure period), then at any such time after the thirtieth (30th) month
of the Lease Term, the Security Deposit shall be reduced to amount equal to one
(1) month of the Base Monthly Rent then in effect. Notwithstanding the
foregoing, if the conditions set forth in (i)-(iii) above have not been
satisfied as of the thirtieth (30th) month of the Lease Term, and Tenant is not
then in default (and has never been in default beyond any applicable notice and
cure period), the amount of the Security Deposit shall be reduced to Two Hundred
Fifty Thousand Dollars ($250,000). Landlord may apply such portion or portions
of the Security Deposit as are reasonably necessary for the following purposes:
(i) to remedy any default by Tenant in the payment of Base Monthly Rent or
Additional Rent or a late charge or interest on defaulted rent, or any other
monetary payment obligation of Tenant under this Lease; (ii) to repair damage to
the Leased Premises, the Building or the Outside Areas caused or permitted to
occur by Tenant; (iii) to clean and restore and repair the Leased Premises, the
Building or the Outside Areas following their surrender to Landlord if not
surrendered in the condition required pursuant to the provisions of Article 2,
and (iv) to remedy any other default of Tenant to the extent permitted by Law
including, without limitation, paying in full on Tenant's behalf any sums
claimed by materialmen or contractors of Tenant to be owing to them by Tenant
for work done or improvements made at Tenant's request to the Leased Premises.
In this regard, Tenant hereby waives any restriction on the uses to which the
Security Deposit may be applied as contained in Section 1950.7(c) of the
California Civil Code and/or any successor statute. In the event the Security
Deposit or any portion thereof is so used, Tenant shall pay to Landlord,
promptly upon demand, an amount in cash sufficient to restore the Security
Deposit to the full original sum. If Tenant fails to promptly restore the
Security Deposit and if Tenant shall have paid to Landlord any sums as "Last
Month's Prepaid Rent," Landlord may, in addition to any other remedy Landlord
may have under this Lease, reduce the amount of Tenant's Last Month's Prepaid
Rent by transferring all or portions of such Last Month's Prepaid Rent to
Tenant's Security Deposit until such Security Deposit is restored to the amount
set forth in Article 1. Landlord shall not be deemed a trustee of the Security
Deposit. Landlord may use the Security Deposit in Landlord's ordinary business
and shall not be required to segregate it from Landlord's general accounts.
Tenant shall not be entitled to any interest on the Security Deposit. If
Landlord transfers the Building or the Property during the Lease Term, Landlord
may pay the Security Deposit to any subsequent owner in conformity with the
provisions of Section 1950.7 of the California Civil Code and/or any successor
statute, in which event the transferring landlord shall be released from all
liability for the return of the Security Deposit. Tenant specifically grants to
Landlord (and Tenant hereby waives the provisions of California Civil Code
Section 1950.7 to the contrary) a period of ninety (90) days following a
surrender of the Leased Premises by Tenant to Landlord within which to inspect
the Leased Premises, make required restorations and repairs, receive and verify
workmen's billings therefor, and prepare a final accounting with respect to the
Security Deposit. In no event shall the Security Deposit or any portion thereof,
be considered prepaid rent. Notwithstanding the foregoing, in lieu of a cash
Security Deposit, Tenant may deliver to Landlord a clean, unconditional,
irrevocable, transferable letter of credit in the full amount of the Security
Deposit required pursuant to Article 1 hereof (the "Letter of Credit") in form
and issued by a financial institution ("Issuer") satisfactory to Landlord in its
sole discretion. The Letter of Credit shall permit partial draws, and provide
that draws thereunder will be honored upon receipt by Issuer of a written
statement signed by Landlord or its authorized agent stating that Landlord is
entitled to draw down on the Letter of Credit pursuant to the terms of the
Lease. The Letter of Credit shall have an expiration period of one (1) year but
shall automatically renew by its terms unless affirmatively cancelled by either
Issuer or Tenant, in which case Issuer must provide Landlord thirty (30) days'
prior written notice of such expiration or cancellation. If the Letter of Credit
is cancelled or terminated, and not replaced within ten (10) days of Landlord's
receipt of notice thereof, Landlord shall be entitled to draw on the entire
amount of the Letter of Credit. Any amount drawn under the Letter of Credit
shall be held or used by Landlord in accordance with this Section 3.7. If the
Tenant fails to renew or replace the Letter of Credit as required under this
Lease at least thirty (30) days before its stated expiration date, Landlord may
draw upon the entire amount of the Letter of Credit, which amount shall be held
or used by Landlord in accordance with this Section 3.7.
ARTICLE 4
USE OF LEASED PREMISES AND OUTSIDE AREA
4.1 PERMITTED USE. Tenant shall be entitled to use the Leased Premises solely
for the "Permitted Use" as set forth in Article 1 and for no other purpose
whatsoever. Tenant shall continuously and without interruption use the Leased
Premises for such purpose for the entire Lease Term. Any discontinuance of such
use for a period of sixty (60) consecutive calendar days shall be, at Landlord's
election, a default by Tenant under the terms of this Lease. Tenant shall have
the right to use the Outside Areas in conjunction with its Permitted Use of the
Leased Premises solely for the purposes for which they were designed and
intended and for no other purposes whatsoever.
4.2 GENERAL LIMITATIONS ON USE. Tenant shall not do or permit anything to be
done in or about the Leased Premises, the Building, the Outside Areas or the
Property which does or could (i) jeopardize the structural integrity of the
Building or (ii) cause damage to any part of the Leased Premises, the Building,
the Outside Areas or the Property. Tenant shall not operate any equipment within
the Leased Premises which does or could (i) injure, vibrate or shake the Leased
Premises or the Building, (ii) damage, overload or impair the efficient
operation of any electrical, plumbing, heating, ventilating or air conditioning
systems within or servicing the Leased Premises or the
5.
<PAGE> 10
Building, or (iii) damage or impair the efficient operation of the sprinkler
system (if any) within or servicing the Leased Premises or the Building. Tenant
shall not (i) install any equipment or antennas on or make any penetrations of
the exterior walls or roof of the Building or (ii) affix any equipment or make
any penetrations or cuts in the floors, ceiling or walls of the Leased Premises,
without Landlord's prior written consent, which consent shall not be
unreasonably withheld; provided, however, that it shall be reasonable for
Landlord to withhold its consent if Tenant's proposed installations or
penetrations impact the structural integrity of the Building. Any installations,
penetrations or cuts in the interior or exterior walls, roof, floor or ceiling
of the Building will be subject to Tenant's restoration obligations set forth in
Section 2.6. Tenant shall not place any loads upon the floors, walls, ceiling or
roof systems which could endanger the structural integrity of the Building or
damage its floors, foundations or supporting structural components. Tenant shall
not place any explosive, flammable or harmful fluids or other waste materials in
the drainage systems of the Leased Premises, the Building, the Outside Areas or
the Property. Tenant shall not drain or discharge any fluids in the landscaped
areas or across the paved areas of the Property. Tenant shall not use any of the
Outside Areas for the storage of its materials, supplies, inventory or equipment
and all such materials, supplies, inventory or equipment shall at all times be
stored within the Leased Premises. Tenant shall not commit nor permit to be
committed any waste in or about the Leased Premises, the Building, the Outside
Areas or the Property. Notwithstanding the foregoing, Landlord agrees that with
Landlord's prior written consent (which shall not be unreasonably withheld),
Tenant may install microwave antennae and other communication facilities on the
roof of the Building in locations approved by Landlord. Tenant shall remove such
microwave antennae and other communication facilities at the expiration or
sooner termination of this Lease pursuant to the repair and restoration
obligations set forth in Section 2.6 of this Lease. Tenant acknowledges and
agrees that other than installations of microwave antennae and other
communication facilities pursuant to the foregoing, Landlord hereby reserves to
itself and its designees all rights of access, use and occupancy of the Building
roof, and Tenant shall have no right of access, use or occupancy of the Building
roof except (if at all) to the extent required in order to enable Tenant to
perform Tenant's maintenance and repair obligations pursuant to this Lease
4.3 NOISE AND EMISSIONS. All noise generated by Tenant in its use of the Leased
Premises shall be confined or muffled so that it does not interfere with the
businesses of or annoy the occupants and/or users of adjacent properties. All
dust, fumes, odors and other emissions generated by Tenant's use of the Leased
Premises shall be sufficiently dissipated in accordance with sound environmental
practice and exhausted from the Leased Premises in such a manner so as not to
interfere with the businesses of or annoy the occupants and/or users of adjacent
properties, or cause any damage to the Leased Premises, the Building, the
Outside Areas or the Property or any component part thereof or the property of
adjacent property owners.
4.4 TRASH DISPOSAL. Tenant shall provide trash bins or other adequate garbage
disposal facilities within the trash enclosure areas provided or permitted by
Landlord outside the Leased Premises sufficient for the interim disposal of all
of its trash, garbage and waste. All such trash, garbage and waste temporarily
stored in such areas shall be stored in such a manner so that it is not readily
visible from outside of such areas, and Tenant shall cause such trash, garbage
and waste to be regularly removed from the Property in a clean, safe and neat
condition free and clear of all trash, garbage, waste and/or boxes, pallets and
containers containing same at all times.
4.5 PARKING. Tenant shall have the nonexclusive right to use up to 158 parking
spaces on the legal parcel on which the Building is located as shown on the site
plan attached as Exhibit A hereto and in no other location on the Property.
Tenant shall not, at any time, park or permit to be parked any recreational
vehicles, inoperative vehicles or equipment in the Outside Areas or on any
portion of the Property. Tenant agrees to assume responsibility for compliance
by its employees and invitees with the parking provisions contained herein.
4.6 SIGNS. Except for business identification signs allowed pursuant to this
Section 4.6, Tenant shall not place or install on or within any portion of the
Leased Premises, the exterior of the Building, the Outside Areas or the Property
any sign, advertisement, banner, placard, or picture which is visible from the
exterior of the Leased Premises. Tenant shall not place or install on or within
any portion of the Leased Premises, the exterior of the Building, the Outside
Areas or the Property any business identification sign which is visible from the
exterior of the Leased Premises until Landlord shall have approved in writing
and in its reasonable discretion the location, size, content, design, method of
attachment and material to be used in the making of such sign; provided,
however, that so long as such signs are normal and customary business
directional or identification signs within the Building, Tenant shall not be
required to obtain Landlord's approval. Landlord shall use commercially
reasonable efforts to obtain approval for signage on the Building and a monument
sign in the Outside Areas near Rose Orchard Way, identifying Tenant as the
occupant of the Leased Premises, which signage shall be in form reasonably
acceptable to both Landlord and Tenant, and shall comply with all City of San
Jose regulations and requirements, provided that such types of signage are
generally available to other tenants of the Property. Any sign, once approved by
Landlord, shall be installed at Tenant's sole cost and expense and only in
strict compliance with Landlord's approval, using a person approved by Landlord
to install same and in strict compliance with all requirements of the City of
San Jose. Landlord may remove any signs (which have not been approved in writing
by Landlord), advertisements, banners, placards or pictures so placed by Tenant
on or within the Leased Premises, the exterior of the Building, the Outside
Areas or the Property and charge to Tenant the cost of such removal, together
with any costs incurred by Landlord to repair any damage caused thereby,
including any cost incurred to restore the surface (upon which such sign was so
affixed) to its original condition. Tenant shall remove all of Tenant's signs,
repair any damage caused thereby, and restore the surface upon which the sign
was affixed to its original condition, all to Landlord's reasonable
satisfaction, upon the termination of this Lease.
4.7 COMPLIANCE WITH LAWS AND PRIVATE RESTRICTIONS. Tenant shall abide by and
shall promptly observe and comply with, at its sole cost and expense, all Laws
and Private Restrictions respecting the use and occupancy of the Leased
Premises, the Building, the Outside Areas or the Property including, without
limitation, all Laws governing the use and/or disposal of hazardous materials,
and shall defend with competent counsel, indemnify and hold
6.
<PAGE> 11
Landlord harmless from any claims, damages or liability resulting from Tenant's
failure to so abide, observe, or comply. Tenant's obligations hereunder shall
survive the expiration or sooner termination of this Lease.
4.8 COMPLIANCE WITH INSURANCE REQUIREMENTS. With respect to any insurance
policies required or permitted to be carried by Landlord in accordance with the
provision of this Lease, copies of which have been or will, upon Tenant's
written request therefor, be provided to Tenant, Tenant shall not conduct nor
permit any other person to conduct any activities nor keep, store or use (or
allow any other person to keep, store or use) any item or thing within the
Leased Premises, the Building, the Outside Areas or the Property which (i) is
prohibited under the terms of any such policies, (ii) could result in the
termination of the coverage afforded under any of such policies, (iii) could
give to the insurance carrier the right to cancel any of such policies, or (iv)
could cause an increase in the rates (over standard rates) charged for the
coverage afforded under any of such policies. Tenant shall comply with all
commercially reasonable requirements of any insurance company, insurance
underwriter, or Board of Fire Underwriters which are necessary to maintain, at
standard rates, the insurance coverages carried by either Landlord or Tenant
pursuant to this Lease.
4.9 LANDLORD'S RIGHT TO ENTER. Landlord and its agents shall have the right to
enter the Leased Premises during normal business hours after giving Tenant
reasonable notice and subject to Tenant's reasonable security measures for the
purpose of (i) inspecting the same; (ii) showing the Leased Premises to
prospective purchasers, mortgagees or tenants; (iii) making necessary
alterations, additions or repairs; and (iv) performing any of Tenant's
obligations when Tenant has failed to do so. Landlord shall have the right to
enter the Leased Premises during normal business hours (or as otherwise agreed),
subject to Tenant's reasonable security measures, for purposes of supplying any
maintenance or services agreed to be supplied by Landlord. In any such case,
Landlord shall use commercially reasonable efforts not to interfere with
Tenant's normal business operations. Landlord shall have the right to enter the
Outside Areas during normal business hours for purposes of (i) inspecting the
exterior of the Building and the Outside Areas; (ii) posting notices of
nonresponsibility (and for such purposes Tenant shall provide Landlord at least
ten (10) days' prior written notice of any work to be performed on the Leased
Premises); and (iii) supplying any services to be provided by Landlord. Any
entry into the Leased Premises or the Outside Areas obtained by Landlord in
accordance with this paragraph shall not under any circumstances be construed or
deemed to be a forcible or unlawful entry into, or a detainer of, the Leased
Premises, or an eviction, actual or constructive of Tenant from the Leased
Premises or any portion thereof.
4.10 USE OF OUTSIDE AREAS. Tenant, in its use of the Outside Areas, shall at all
times keep the Outside Areas in a safe condition free and clear of all
materials, equipment, debris, trash (except within existing enclosed trash
areas), inoperable vehicles, and other items which are not specifically
permitted by Landlord to be stored or located thereon by Tenant. If, in the
opinion of Landlord, unauthorized persons are using any of the Outside Areas by
reason of, or under claim of, the express or implied authority or consent of
Tenant, then Tenant, upon demand of Landlord, shall use reasonable methods to
restrain such unauthorized use.
4.11 ENVIRONMENTAL PROTECTION. Tenant's obligations under this Section 4.11
shall survive the expiration or termination of this Lease.
(a) As used herein, the term "Hazardous Materials" shall mean any toxic
or hazardous substance, material or waste or any pollutant or infectious or
radioactive material, including but not limited to those substances, materials
or wastes regulated now or in the future under any of the following statutes or
regulations and any and all of those substances included within the definitions
of "hazardous substances," "hazardous materials," "hazardous waste," "hazardous
chemical substance or mixture," "imminently hazardous chemical substance or
mixture," "toxic substances," "hazardous air pollutant," "toxic pollutant," or
"solid waste" in the (a) Comprehensive Environmental Response, Compensation and
Liability Act of 1990 ("CERCLA" or "Superfund"), as amended by the Superfund
Amendments and Reauthorization Act of 1986 ("SARA"), 42 U.S.C. Section 9601 et
seq., (b) Resource Conservation and Recovery Act of 1976 ("RCRA"), 42 U.S.C.
Section 6901 et seq., (c) Federal Water Pollution Control Act ("FSPCA"), 33
U.S.C. Section 1251 et seq., (d) Clean Air Act ("CAA"), 42 U.S.C. Section 7401
et seq., (e) Toxic Substances Control Act ("TSCA"), 14 U.S.C. Section 2601 et
seq., (f) Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et
seq., (g) Carpenter-Presley-Tanner Hazardous Substance Account Act ("California
Superfund"), Cal. Health & Safety Code Section 25300 et seq., (h) California
Hazardous Waste Control Act, Cal. Health & Safety code Section 25100 et seq.,
(i) Porter-Cologne Water Quality Control Act ("Porter-Cologne Act"), Cal. Water
Code Section 13000 et seq., (j) Hazardous Waste Disposal Land Use Law, Cal.
Health & Safety codes Section 25220 et seq., (k) Safe Drinking Water and Toxic
Enforcement Act of 1986 ("Proposition 65"), Cal. Health & Safety code Section
25249.5 et seq., (l) Hazardous Substances Underground Storage Tank Law, Cal.
Health & Safety code Section 25280 et seq., (m) Air Resources Law, Cal. Health &
Safety Code Section 39000 et seq., and (n) regulations promulgated pursuant to
said laws or any replacement thereof, or as similar terms are defined in the
federal, state and local laws, statutes, regulations, orders or rules. Hazardous
Materials shall also mean any and all other biohazardous wastes and substances,
materials and wastes which are, or in the future become, regulated under
applicable Laws for the protection of health or the environment, or which are
classified as hazardous or toxic substances, materials or wastes, pollutants or
contaminants, as defined, listed or regulated by any federal, state or local
law, regulation or order or by common law decision, including, without
limitation, (i) trichloroethylene, tetrachloroethylene, perchloroethylene and
other chlorinated solvents, (ii) any petroleum products or fractions thereof,
(iii) asbestos, (iv) polychlorinted biphenyls, (v) flammable explosives, (vi)
urea formaldehyde, (vii) radioactive materials and waste, and (viii) materials
and wastes that are harmful to or may threaten human health, ecology or the
environment.
(b) Notwithstanding anything to the contrary in this Lease, Tenant, at
its sole cost, shall comply with all Laws relating to the storage, use and
disposal of Hazardous Materials; provided, however, that Tenant shall not be
responsible for contamination of the Leased Premises by Hazardous Materials
existing as of the date the Leased Premises are delivered to Tenant (whether
before or after the Scheduled Delivery Date) unless caused by Tenant. Landlord
represents and warrants that it has no actual knowledge of Hazardous Materials
contamination at the
7.
<PAGE> 12
Property as of the date hereof, except as may be set forth in any environmental
assessment reports provided to Tenant. Tenant shall not store, use or dispose of
any Hazardous Materials except for reasonable amounts of fuel for necessary
generators at the Leased Premises, small quantities of normal cleaning,
janitorial and office supplies, and those Hazardous Materials listed in a
Hazardous Materials management plan ("HMMP") which Tenant shall deliver to
Landlord upon execution of this Lease and update at least annually with Landlord
("Permitted Materials") which may be used, stored and disposed of provided (i)
such Permitted Materials are used, stored, transported, and disposed of in
strict compliance with applicable laws, (ii) such Permitted Materials shall be
limited to the materials listed on and may be used only in the quantities
specified in the HMMP, and (iii) Tenant shall provide Landlord with copies of
all material safety data sheets and other documentation required under
applicable Laws in connection with Tenant's use of Permitted Materials as and
when such documentation is provided to any regulatory authority having
jurisdiction, in no event shall Tenant cause or permit to be discharged into the
plumbing or sewage system of the Building or onto the land underlying or
adjacent to the Building any Hazardous Materials. Tenant shall be solely
responsible for and shall defend, indemnify, and hold Landlord and its agents
harmless from and against all claims, costs and liabilities, including
attorneys' fees and costs, arising out of or in connection with Tenant's
storage, use and/or disposal of Hazardous Materials. If the presence of
Hazardous Materials on the Leased Premises caused or permitted by Tenant results
in contamination or deterioration of water or soil, then Tenant shall promptly
take any and all action necessary to clean up such contamination, but the
foregoing shall in no event be deemed to constitute permission by Landlord to
allow the presence of such Hazardous Materials. At any time prior to the
expiration of the Lease Term if Tenant has a reasonable basis to suspect that
there has been any release or the presence of Hazardous Materials in the ground
or ground water on the Leased Premises which did not exist upon commencement of
the Lease Term, Tenant shall have the right to conduct appropriate tests of
water and soil and to deliver to Landlord the results of such tests to
demonstrate that no contamination in excess of permitted levels has occurred as
a result of Tenant's use of the Leased Premises. Tenant shall further be solely
responsible for, and shall defend, indemnify, and hold Landlord and its agents
harmless from and against all claims, costs and liabilities, including
attorneys' fees and costs, arising out of or in connection with any removal,
cleanup and restoration work and materials required hereunder to return the
Leased Premises and any other property of whatever nature to their condition
existing prior to the appearance of the Hazardous Materials which occurred after
the Lease Commencement Date and while Tenant was in possession of the Leased
Premises.
(c) Upon termination or expiration of the Lease, Tenant at its sole
expense shall cause all Hazardous Materials placed in or about the Leased
Premises, the Building and/or the Property by Tenant, its agents, contractors,
or invitees, and all installations (whether interior or exterior) made by or on
behalf of Tenant relating to the storage, use, disposal or transportation of
Hazardous Materials to be removed from the property and transported for use,
storage or disposal in accordance and compliance with all Laws and other
requirements respecting Hazardous Materials used or permitted to be used by
Tenant. Tenant shall apply for and shall obtain from all appropriate regulatory
authorities (including any applicable fire department or regional water quality
control board) all permits, approvals and clearances necessary for the closure
of the Property and shall take all other actions as may be required to complete
the closure of the Building and the Property. In addition, prior to vacating the
Leased Premises, upon Landlord's request (if Landlord has reasonable cause to
believe that Hazardous Materials may be present in, around or under the Leased
Premises), Tenant shall undertake and submit to Landlord an environmental site
assessment from an environmental consulting company reasonably acceptable to
Landlord which site assessment shall evidence Tenant's compliance with this
Paragraph 4.11.
(d) At any time prior to expiration of the Lease term, subject to
reasonable prior notice (not less than forty-eight (48) hours) and Tenant's
reasonable security requirements and provided such activities do not
unreasonably interfere with the conduct of Tenant's business at the Leased
Premises, Landlord shall have the right to enter in and upon the Property,
Building and Leased Premises in order to conduct appropriate tests of water and
soil to determine whether levels of any Hazardous Materials in excess of legally
permissible levels has occurred as a result of Tenant's use thereof. Landlord
shall furnish copies of all such test results and reports to Tenant and, at
Tenant's option and cost, shall permit split sampling for testing and analysis
by Tenant. Such testing shall be at Tenant's expense if Landlord has a
reasonable basis for suspecting and confirms the presence of Hazardous Materials
in the soil or surface or ground water in, on, under, or about the Property, the
Building or the Leased Premises, which has been caused by or resulted from the
activities of Tenant, its agents, contractors, or invitees.
(e) Landlord may voluntarily cooperate in a reasonable manner with the
efforts of all governmental agencies in reducing actual or potential
environmental damage. Tenant shall not be entitled to terminate this Lease or to
any reduction in or abatement of rent by reason of such compliance or
cooperation. Tenant agrees at all times to cooperate fully with the requirements
and recommendations of governmental agencies regulating, or otherwise involved
in, the protection of the environment.
4.12 RULES AND REGULATIONS. In the event Active Touch, Inc. is no longer the
sole tenant of the Building, Landlord shall have the right from time to time to
establish reasonable rules and regulations and/or amendments or additions
thereto respecting the use of the Leased Premises and the Outside Areas for the
care and orderly management of the Property. Upon delivery to Tenant of a copy
of such rules and regulations or any amendments or additions thereto, Tenant
shall comply with such rules and regulations. A violation by Tenant of any of
such rules and regulations shall constitute a default by Tenant under this
Lease, subject to any applicable cure period. If there is a conflict between the
rules and regulations and any of the provisions of this Lease, the provisions of
this Lease shall prevail. Landlord shall not be responsible or liable to Tenant
for the violation of such rules and regulations by any other tenant of the
Property.
4.13 RESERVATIONS. Landlord reserves the right from time to time to grant,
without the consent or joinder of Tenant, such easements, rights of way and
dedications that Landlord deems necessary, and to cause the recordation of
parcel maps and covenants, conditions and restrictions, so long as such
easements, rights of way, dedications and covenants, conditions and restrictions
do not materially and adversely affect the use of the Leased Premises by
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Tenant, and do not prohibit any Permitted Use. Tenant agrees to execute any
documents reasonably requested by Landlord to effectuate any such easement
rights, dedications, maps or covenants, conditions and restrictions. Landlord
agrees to use its best efforts (but shall not be required to expend more than
$5,000 for fees, costs and other charges) to change the address of the Building
to 118 Rose Orchard Way, or such other number acceptable to Tenant, provided
that failure to obtain such address change shall not be default under this Lease
and shall not entitle Tenant to any claim, offset or termination right.
ARTICLE 5
REPAIRS, MAINTENANCE, SERVICES AND UTILITIES
5.1 REPAIR AND MAINTENANCE. Except in the case of damage to or destruction of
the Leased Premises, the Building, the Outside Areas or the Property caused by
an act of God or other peril, in which case the provisions of Article 10 shall
control, the parties shall have the following obligations and responsibilities
with respect to the repair and maintenance of the Leased Premises, the Building,
the Outside Areas, and the Property.
(a) TENANT'S OBLIGATIONS. Tenant shall, at all times during the Lease
Term and at its sole cost and expense, regularly clean and continuously keep and
maintain in good order, condition and repair the Leased Premises and every part
thereof including, without limiting the generality of the foregoing, (i) all
interior walls, floors and ceilings, (ii) all windows, doors and skylights,
(iii) all electrical wiring, conduits, connectors and fixtures, (iv) all
plumbing, pipes, sinks, toilets, faucets and drains, (v) all lighting fixtures,
bulbs and lamps and all heating, ventilating and air conditioning equipment, and
(vi) all entranceways to the Leased Premises. Tenant, if requested to do so by
Landlord, shall hire, at Tenant's sole cost and expense, a licensed heating,
ventilating and air conditioning contractor to regularly and periodically (not
less frequently than every six months) inspect and perform required maintenance
on the heating, ventilating and air conditioning equipment and systems serving
the Leased Premises, or alternatively, Landlord may, at its election, contract
in its own name for such regular and periodic inspections of and maintenance on
such heating, ventilating and air conditioning equipment and systems and charge
to Tenant, as Additional Rent, the cost thereof. Tenant, if requested to do so
by Landlord, shall hire, at Tenant's sole cost and expense, a licensed roofing
contractor to regularly and periodically (not less frequently than every twelve
(12) months) inspect and perform required maintenance on the roof of the Leased
Premises, or alternatively, Landlord may, at its election, contract in its own
name for such regular and periodic inspections of and maintenance on the roof
and charge to Tenant, as Additional Rent, the cost thereof. Tenant shall, at all
times during the Lease Term, keep in a clean and safe condition the Outside
Areas. Tenant shall, at its sole cost and expense, repair all damage to the
Leased Premises, the Building, the Outside Areas or the Property caused by the
activities of Tenant, its employees, invitees or contractors promptly following
written notice from Landlord to so repair such damages. If Tenant shall fail to
perform the required maintenance or fail to make repairs required of it pursuant
to this paragraph within a commercially reasonable period of time following
notice from Landlord to do so, then Landlord may, at its election and without
waiving any other remedy it may otherwise have under this Lease or at law,
perform such maintenance or make such repairs and charge to Tenant, as
Additional Rent, the costs so incurred by Landlord for same. All glass within or
a part of the Leased Premises, both interior and exterior, is at the sole risk
of Tenant and any broken glass shall promptly be replaced by Tenant at Tenant's
expense with glass of the same kind, size and quality.
(b) LANDLORD'S OBLIGATION. Landlord shall, at its sole cost and expense,
at all times during the Lease Term, maintain in good condition and repair the
foundation, structural roof, load-bearing and exterior walls of the Building,
except to the extent any of the repairs or maintenance are necessitated by the
actions or inactions of Tenant, or result from the failure of Tenant to comply
with the terms of the Lease. Notwithstanding anything to the contrary contained
in this Lease, and except to the extent any of the repairs or maintenance are
necessitated by the actions or inactions of Tenant, or result from the failure
of Tenant to comply with the terms of the Lease, (1) for a period of ninety (90)
days after the Lease Commencement Date, Landlord, at its sole cost and expense,
shall maintain and repair all HVAC units at the Building, mechanical,
electrical, plumbing and other Building systems, and (2) for a period of one (1)
year after the Lease Commencement Date, maintain and repair the roof membrane.
5.2 UTILITIES. Tenant shall arrange at its sole cost and expense and in its own
name, for the supply of gas and electricity to the Leased Premises. In the event
that such services are not separately metered, Tenant shall, at its sole
expense, cause such meters to be installed. Landlord shall maintain the water
meter(s) in its own name; provided, however, that if at any time during the
Lease Term Landlord shall require Tenant to put the water service in Tenant's
name, Tenant shall do so at Tenant's sole cost. Tenant shall be responsible for
determining if the local supplier of water, gas and electricity can supply the
needs of Tenant and whether or not the existing water, gas and electrical
distribution systems within the Building and the Leased Premises are adequate
for Tenant's needs. Tenant shall be responsible for determining if the existing
sanitary and storm sewer systems now servicing the Leased Premises and the
Property are adequate for Tenant's needs. Tenant shall pay all charges for
water, gas, electricity and storm and sanitary sewer services as so supplied to
the Leased Premises, irrespective of whether or not the services are maintained
in Landlord's or Tenant's name.
5.3 SECURITY. Tenant acknowledges that Landlord has not undertaken any duty
whatsoever to provide security for the Leased Premises, the Building, the
Outside Areas or the Property and, accordingly, Landlord is not responsible for
the security of same or the protection of Tenant's property or Tenant's
employees, invitees or contractors. To the extent Tenant determines that such
security or protection services are advisable or necessary, Tenant shall arrange
for and pay the costs of providing same.
5.4 ENERGY AND RESOURCE CONSUMPTION. Landlord may voluntarily cooperate in a
reasonable manner with the efforts of governmental agencies and/or utility
suppliers in reducing energy or other resource consumption within the Property.
Tenant shall not be entitled to terminate this Lease or to any reduction in or
abatement of rent
9.
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by reason of such compliance or cooperation. Tenant agrees at all times to
cooperate fully with Landlord and to abide by all reasonable rules established
by Landlord (i) in order to maximize the efficient operation of the electrical,
heating, ventilating and air conditioning systems and all other energy or other
resource consumption systems with the Property and/or (ii) in order to comply
with the requirements and recommendations of utility suppliers and governmental
agencies regulating the consumption of energy and/or other resources.
5.5 LIMITATION OF LANDLORD'S LIABILITY. Landlord shall not be liable to Tenant
for injury to Tenant, its employees, agents, invitees or contractors, damage to
Tenant's property or loss of Tenant's business or profits, nor shall Tenant be
entitled to terminate this Lease or to any reduction in or abatement of rent by
reason of (i) Landlord's failure to provide security services or systems within
the Property for the protection of the Leased Premises, the Building or the
Outside Areas, or the protection of Tenant's property or Tenant's employees,
invitees, agents or contractors, or (ii) Landlord's failure to perform any
maintenance or repairs to the Leased Premises, the Building, the Outside Areas
or the Property until Tenant shall have first notified Landlord, in writing, of
the need for such maintenance or repairs, and then only after Landlord shall
have had a reasonable period of time following its receipt of such notice within
which to perform such maintenance or repairs (other than Landlord's gross
negligence or willful misconduct), or (iii) any failure, interruption, rationing
or other curtailment in the supply of water, electric current, gas or other
utility service to the Leased Premises, the Building, the Outside Areas or the
Property from whatever cause (other than Landlord's gross negligence or willful
misconduct), or (iv) the unauthorized intrusion or entry into the Leased
Premises by third parties (other than Landlord).
ARTICLE 6
ALTERATIONS AND IMPROVEMENTS
6.1 BY TENANT. Tenant shall not make any alterations to or modifications of the
Leased Premises or construct any improvements within the Leased Premises until
Landlord shall have first approved, in writing, the plans and specifications
therefor, which approval may be withheld in Landlord's sole discretion. All such
modifications, alterations or improvements, once so approved, shall be made,
constructed or installed by Tenant at Tenant's expense (including all permit
fees and governmental charges related thereto), using a licensed contractor
first approved by Landlord, in substantial compliance with the Landlord-approved
plans and specifications therefor. All work undertaken by Tenant shall be done
in accordance with all Laws and in a good and workmanlike manner using new
materials of good quality. Tenant shall not commence the making of any such
modifications or alterations or the construction of any such improvements until
(i) all required governmental approvals and permits shall have been obtained,
(ii) all requirements regarding insurance imposed by this Lease have been
satisfied, (iii) Tenant shall have given Landlord at least five business days
prior written notice of its intention to commence such work so that Landlord may
post and file notices of non-responsibility, and (iv) if requested by Landlord,
Tenant shall have obtained contingent liability and broad form builder's risk
insurance in an amount satisfactory to Landlord in its reasonable discretion to
cover any perils relating to the proposed work not covered by insurance carried
by Tenant pursuant to Article 9. In no event shall Tenant make any modification,
alterations or improvements whatsoever to the Outside Areas or the exterior or
structural components of the Building including, without limitation, any cuts or
penetrations in the floor, roof or exterior walls of the Leased Premises unless
such modifications have been approved in writing by Landlord. As used in this
Article, the term "modifications, alterations and/or improvements" shall
include, without limitation, the installation of additional electrical outlets,
overhead lighting fixtures, drains, sinks, partitions, doorways, or the like.
Notwithstanding the foregoing, Tenant, without Landlord's prior written consent,
shall be permitted to make non-structural alterations to the Building, provided
that: (a) such alterations do not exceed $10,000 individually, (b) Tenant shall
timely provide Landlord the notice required pursuant to Paragraph 4.9 above, (c)
Tenant shall notify Landlord in writing within thirty (30) days of completion of
the alteration and deliver to Landlord a set of the plans and specifications
therefor, either "as built" or marked to show construction changes made, and (d)
Tenant shall, upon Landlord's request, remove the alteration at the termination
of the Lease and restore the Leased Premises to their condition prior to such
alteration.
6.2 OWNERSHIP OF IMPROVEMENTS. All modifications, alterations and improvements
made or added to the Leased Premises by Tenant (other than Tenant's inventory,
equipment, movable furniture, furnishings, partitions, wall decorations and
trade fixtures) shall be deemed real property and a part of the Leased Premises,
but shall remain the property of Tenant during the Lease. Any such
modifications, alterations or improvements, once completed, shall not be altered
or removed from the Leased Premises during the Lease Term without Landlord's
written approval first obtained in accordance with the provisions of Paragraph
6.1 above. At the expiration or sooner termination of this Lease, all such
modifications, alterations and improvements other than Tenant's inventory,
equipment, movable furniture, furnishings, partitions, wall decorations and
trade fixtures, shall automatically become the property of Landlord and shall be
surrendered to Landlord as part of the Leased Premises as required pursuant to
Article 2, unless Landlord shall require Tenant to remove any of such
modifications, alterations or improvements in accordance with the provisions of
Article 2, in which case Tenant shall so remove same. Landlord shall have no
obligations to reimburse Tenant for all or any portion of the cost or value of
any such modifications, alterations or improvements so surrendered to Landlord.
All modifications, alterations or improvements which are installed or
constructed on or attached to the Leased Premises by Landlord and/or at
Landlord's expense shall be deemed real property and a part of the Leased
Premises and shall be property of Landlord. All lighting, plumbing, electrical,
heating, ventilating and air conditioning fixtures, partitioning, window
coverings, wall coverings and floor coverings installed by Tenant shall be
deemed improvements to the Leased Premises and not trade fixtures of Tenant.
6.3 ALTERATIONS REQUIRED BY LAW. Tenant shall make all modifications,
alterations and improvements to the Leased Premises, at its sole cost, that are
required by any Law because of (i) Tenant's use or occupancy of the Leased
Premises, the Building, the Outside Areas or the Property, (ii) Tenant's
application for any permit or governmental approval, or (iii) Tenant's making of
any modifications, alterations or improvements to or within the
10.
<PAGE> 15
Leased Premises. If Landlord shall, at any time during the Lease Term, be
required by any governmental authority to make any modifications, alterations or
improvements to the Building or the Property, the cost incurred by Landlord in
making such modifications, alterations or improvements, including interest at a
rate equal to the greater of (a) 12%, or (b) Wells Prime Plus Two, shall be
amortized by Landlord over the useful life of such modifications, alterations or
improvements, as determined in accordance with generally accepted accounting
principles, and the monthly amortized cost of such modifications, alterations
and improvements as so amortized shall be considered a Property Maintenance
Cost. Landlord represents that Landlord has received no notice of non-compliance
with the Americans With Disabilities Act of 1990 with respect to the Building
and that Landlord has no current actual knowledge of any conditions existing at
the Building which are not in compliance with such Act.
6.4 LIENS. Tenant shall keep the Property and every part thereof free from any
lien, and shall pay when due all bills arising out of any work performed,
materials furnished, or obligations incurred by Tenant, its agents, employees or
contractors relating to the Property. If any such claim of lien is recorded
against Tenant's interest in this Lease, the Property or any part thereof,
Tenant shall bond against, discharge or otherwise cause such lien to be entirely
released within thirty (30) days after the same has been recorded. Tenant's
failure to do so shall be deemed a material default under the terms of this
Lease (subject to Section 12.1 hereof).
ARTICLE 7
ASSIGNMENT AND SUBLETTING BY TENANT
7.1 BY TENANT. Tenant shall not sublet the Leased Premises or any portion
thereof or assign its interest in this Lease, whether voluntarily or by
operation of Law, without Landlord's prior written consent which shall not be
unreasonably withheld. Any attempted subletting or assignment without Landlord's
prior written consent, at Landlord's election, shall constitute a default by
Tenant under the terms of this Lease. The acceptance of rent by Landlord from
any person or entity other than Tenant, or the acceptance of rent by Landlord
from Tenant with knowledge of a violation of the provisions of this paragraph,
shall not be deemed to be a waiver by Landlord of any provision of this Article
or this Lease or to be a consent to any subletting by Tenant or any assignment
of Tenant's interest in this Lease. Without limiting the circumstances in which
it may be reasonable for Landlord to withhold its consent to an assignment or
subletting, Landlord and Tenant acknowledge that it shall be reasonable for
Landlord to withhold its consent in the following instances:
(a) the proposed assignee or sublessee is a governmental agency;
(b) in Landlord's reasonable judgment, the use of the Leased Premises by
the proposed assignee or sublessee would involve occupancy by other than the
Permitted Use, would entail any alterations which would lessen the value of the
leasehold improvements in the Leased Premises, or would require increased
services by Landlord;
(c) with respect to an assignment, in Landlord's reasonable judgment,
the financial worth of the proposed assignee is less than that of Tenant or does
not meet the credit standards applied by Landlord;
(d) the proposed assignee or sublessee) has been in material default
under a lease, has been in litigation with a previous landlord within the last
five years, or in the five years prior to the assignment or sublease has filed
for bankruptcy protection, has been the subject of an involuntary bankruptcy, or
has been adjudged insolvent;
(e) Landlord has experienced a previous default by or is in litigation
with the proposed assignee or sublessee;
(f) in Landlord's reasonable judgment, the Leased Premises, or the
relevant part thereof, will be used in a manner that will violate any negative
covenant as to use contained in this Lease;
(g) the use of the Leased Premises by the proposed assignee or sublessee
will violate any applicable law, ordinance or regulation;
(h) the proposed assignee or sublessee is, as of the date of this Lease,
a tenant in the Building;
(i) the proposed assignment or sublease fails to include all of the
terms and provisions required to be included therein pursuant to this Article 7;
(j) Tenant is in default of any obligation of Tenant under this Lease,
or Tenant has defaulted under this Lease on three or more occasions during the
12 months preceding the date that Tenant shall request consent; or
(k) in the case of a subletting of less than the entire Leased Premises,
if the subletting would result in the division of the Leased Premises into more
than two subparcels or would require improvements to be made outside of the
Leased Premises.
7.2 MERGER, REORGANIZATION, OR SALE OF ASSETS. Any dissolution, merger,
consolidation or other reorganization of Tenant, or the sale or other transfer
in the aggregate over the Lease Term of a controlling percentage of the capital
stock of Tenant (except in the case of an initial public offering by Tenant, or
a merger or acquisition described in the last sentence of this Section 7.2), or
the sale or transfer of all or a substantial portion of the assets of Tenant,
shall be deemed a voluntary assignment of Tenant's interest in this Lease. The
phrase "controlling percentage" means the ownership of and the right to vote
stock possessing more than fifty percent of
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<PAGE> 16
the total combined voting power of all classes of Tenant's capital stock issued,
outstanding and entitled to vote for the election of directors. If Tenant is a
partnership, a withdrawal or change, voluntary, involuntary or by operation of
Law, of any general partner, or the dissolution of the partnership, shall be
deemed a voluntary assignment of Tenant's interest in this Lease.
Notwithstanding the foregoing, so long as Tenant remains primarily liable on
this Lease, Tenant shall have the right to assign this Lease or sublease the
Leased Premises or any part thereof to any wholly-owned subsidiary or an
affiliate of Tenant, without the consent of Landlord. Further, Tenant shall have
the absolute right to assign this Lease in the event of a merger or acquisition
where Tenant is acquired by or merged into another entity, without the need for
the consent of the Landlord, so long as the acquiring or surviving entity has a
net worth of at least that of Tenant as of the Lease Commencement Date.
7.3 LANDLORD'S ELECTION. If Tenant shall desire to assign its interest under the
Lease or to sublet the Leased Premises, Tenant must first notify Landlord, in
writing, of its intent to so assign or sublet, at least thirty (30) days in
advance of the date it intends to so assign its interest in this Lease or sublet
the Leased Premises but not sooner than one hundred eighty days in advance of
such date, specifying in detail the terms of such proposed assignment or
subletting, including the name of the proposed assignee or sublessee, the
property assignee's or sublessee's intended use of the Leased Premises, current
financial statements (including a balance sheet, income statement and statement
of cash flow, all prepared in accordance with generally accepted accounting
principles) of such proposed assignee or sublessee, and such other information
as Landlord may reasonably request. Landlord shall have a period of ten (10)
business days following receipt of such notice and the required information
within which to do one of the following: (i) consent to such requested
assignment or subletting subject to Tenant's compliance with the conditions set
forth in Paragraph 7.4 below, or (ii) refuse to so consent to such requested
assignment or subletting, provided that such consent shall not be unreasonably
refused, or (iii) terminate this Lease as to the portion (including all) of the
Leased Premises that is the subject of the proposed assignment or subletting.
Any such termination shall relieve Tenant from any Base Monthly Rent or
Additional Rent obligations for the period after the termination date to the
extent of the portion of the Leased Premises so terminated. During such ten (10)
business day period, Tenant covenants and agrees to supply to Landlord, upon
request, all necessary or relevant information which Landlord may reasonably
request respecting such proposed assignment or subletting and/or the proposed
assignee or sublessee.
7.4 CONDITIONS TO LANDLORD'S CONSENT. If Landlord elects to consent, or shall
have been ordered to so consent by a court of competent jurisdiction, to such
requested assignment or subletting, such consent shall be expressly conditioned
upon the occurrence of each of the conditions below set forth, and any purported
assignment or subletting made or ordered prior to the full and complete
satisfaction of each of the following conditions shall be void and, at the
election of Landlord, which election may be exercised at any time following such
a purported assignment or subletting but prior to the satisfaction of each of
the stated conditions, shall constitute a material default by Tenant under this
Lease until cured by satisfying in full each such condition by the assignee or
sublessee. The conditions are as follows:
(a) Landlord having approved in form and substance the assignment or
sublease agreement and any ancillary documents, which approval shall not be
unreasonably withheld by Landlord if the requirements of this Article 7 are
otherwise complied with.
(b) Each such sublessee or assignee having agreed, in writing
satisfactory to Landlord and its counsel and for the benefit of Landlord, to
assume, to be bound by, and to perform the obligations of this Lease to be
performed by Tenant which relate to space being subleased.
(c) Tenant having fully and completely performed all of its obligations
under the terms of this Lease through and including the date of such assignment
or subletting.
(d) Tenant having reimbursed to Landlord all reasonable costs and
reasonable attorneys' fees incurred by Landlord in conjunction with the
processing and documentation of any such requested subletting or assignment.
(e) Tenant having delivered to Landlord a complete and fully-executed
duplicate original of such sublease agreement or assignment agreement (as
applicable) and all related agreements.
(f) Tenant having paid, or having agreed in writing to pay as to future
payments, to Landlord fifty percent (50%) of all assignment consideration or
excess rentals to be paid to Tenant or to any other on Tenant's behalf or for
Tenant's benefit for such assignment or subletting as follows:
(i) If Tenant assigns its interest under this Lease and if all
or a portion of the consideration for such assignment is to be paid by the
assignee at the time of the assignment, that Tenant shall have paid to Landlord
and Landlord shall have received an amount equal to fifty percent (50%) of the
assignment consideration so paid or to be paid (whichever is the greater) at the
time of the assignment by the assignee; or
(ii) If Tenant assigns its interest under this Lease and if
Tenant is to receive all or a portion of the consideration for such assignment
in future installments, that Tenant and Tenant's assignee shall have entered
into a written agreement with and for the benefit of Landlord satisfactory to
Landlord and its counsel whereby Tenant and Tenant's assignee jointly agree to
pay to Landlord an amount equal to fifty percent (50%) of all such future
assignment consideration installments to be paid by such assignee as and when
such assignment consideration is so paid.
(iii) If Tenant subleases the Leased Premises, that Tenant and
Tenant's sublessee shall have entered into a written agreement with and for the
benefit of Landlord satisfactory to Landlord and its counsel whereby Tenant and
Tenant's sublessee jointly agree to pay to Landlord fifty percent (50%) of all
excess rentals to be paid by such sublessee as and when such excess rentals are
so paid.
12.
<PAGE> 17
7.5 ASSIGNMENT CONSIDERATION AND EXCESS RENTALS DEFINED. For purposes of this
Article, including any amendment to this Article by way of addendum or other
writing, the term "assignment consideration" shall mean all consideration to be
paid by the assignee to Tenant or to any other party on Tenant's behalf or for
Tenant's benefit as consideration for such assignment, after deduction for
reasonable attorneys' fees, market rate leasing commissions incurred by Tenant
and, subject to the limitation set forth in the final sentence of this Section
7.5, tenant inducement costs, but without deduction for any other costs or
expenses whatsoever incurred by Tenant in connection with such assignment, and
the term "excess rentals" shall mean all consideration to be paid by the
sublessee to Tenant or to any other party on Tenant's behalf or for Tenant's
benefit for the sublease of all or a portion of the Leased Premises in excess of
the rent due to Landlord under the terms of this Lease for the portion so
subleased for the same period, after deduction for reasonable attorneys' fees,
market rate leasing commissions incurred by Tenant and, subject to the
limitation set forth in the final sentence of this Section 7.5, tenant
inducement costs, but without deduction for any other costs or expenses
whatsoever incurred by Tenant in connection with such sublease. Tenant agrees
that the portion of any assignment consideration and/or excess rentals arising
from any assignment or subletting by Tenant which is to be paid to Landlord
pursuant to this Article now is and shall then be the property of Landlord and
not the property of Tenant. Notwithstanding anything to the contrary contained
herein, tenant inducement costs may be deducted from assignment consideration or
excess rentals only up to a maximum of $40,320 in the aggregate (for all
assignments of this Lease or subleases of the Leased Premises) over the term of
this Lease.
7.6 PAYMENTS. All payments required by this Article to be made to Landlord shall
be made in cash in full as and when they become due. At the time Tenant,
Tenant's assignee or sublessee makes each such payment to Landlord, Tenant or
Tenant's assignee or sublessee, as the case may be, shall deliver to Landlord an
itemized statement in reasonable detail showing the method by which the amount
due Landlord was calculated and certified by the party making such payment as
true and correct.
7.7 GOOD FAITH. The rights granted to Tenant by this Article are granted in
consideration of Tenant's express covenant that all pertinent allocations which
are made by Tenant between the rental value of the Leased Premises and the value
of any of Tenant's personal property which may be conveyed or leased generally
concurrently with and which may reasonably be considered a part of the same
transaction as the permitted assignment or subletting shall be made fairly,
honestly and in good faith. Tenant hereby agrees that Tenant's breach of the
foregoing covenant shall be a material default by Tenant under this Lease
(subject to Section 12. 1 hereof).
7.8 EFFECT OF LANDLORD'S CONSENT. No subletting or assignment, even with the
consent of Landlord, shall relieve Tenant of its personal and primary obligation
to pay rent and to perform all of the other obligations to be performed by
Tenant hereunder. Consent by Landlord to one or more assignments of Tenant's
interest in this Lease or to one or more sublettings of the Leased Premises
shall not be deemed to be a consent to any subsequent assignment or subletting.
If Landlord shall have been ordered by a court of competent jurisdiction to
consent to a requested assignment or subletting, or such an assignment or
subletting shall have been ordered by a court of competent jurisdiction over the
objection of Landlord, such assignment or subletting shall not be binding
between the assignee (or sublessee) and Landlord until such time as all
conditions set forth in Paragraph 7.4 above have been fully satisfied (to the
extent not then satisfied) by the assignee or sublessee, including, without
limitation, the payment to Landlord of all agreed assignment considerations
and/or excess rentals then due Landlord.
ARTICLE 8
LIMITATION ON LANDLORD'S LIABILITY AND INDEMNITY
8.1 LIMITATION ON LANDLORD'S LIABILITY AND RELEASE. Landlord shall not be liable
to Tenant for, and Tenant hereby releases Landlord and its partners, principals,
members, officers, agents, employees, lenders, attorneys, and consultants from,
any and all liability, whether in contract, tort or on any other basis, for any
injury to or any damage sustained by Tenant, Tenant's agents, employees,
contractors or invitees, any damage to Tenant's property, or any loss to
Tenant's business, loss of Tenant's profits or other financial loss of Tenant
resulting from or attributable to the condition of, the management of, the
repair or maintenance of, the protection of, the supply of services or utilities
to, the damage in or destruction of the Leased Premises, the Building, the
Property or the Outside Areas, including without limitation (i) the failure,
interruption, rationing or other curtailment or cessation in the supply of
electricity, water, gas or other utility service to the Property, the Building
or the Leased Premises; (ii) the vandalism or forcible entry into the Building
or the Leased Premises; (iii) the penetration of water into or onto any portion
of the Leased Premises; (iv) the failure to provide security and/or adequate
lighting in or about the Property, the Building or the Leased Premises, (v) the
existence of any design or construction defects within the Property, the
Building or the Leased Premises; (vi) the failure of any mechanical systems to
function properly (such as the HVAC systems); (vii) the blockage of access to
any portion of the Property, the Building or the Leased Premises, except that
Tenant does not so release Landlord from such liability to the extent such
damage was proximately caused by Landlord's gross negligence, willful
misconduct, or Landlord's failure to perform an obligation expressly undertaken
pursuant to this Lease after a reasonable period of time shall have lapsed
following receipt of written notice from Tenant to so perform such obligation.
In this regard, Tenant acknowledges that it is fully apprised of the provisions
of Law relating to releases, and particularly to those provisions contained in
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."
Notwithstanding such statutory provision, and for the purpose of implementing a
full and complete release and discharge, Tenant hereby (i) waives the benefit of
such statutory provision and (ii) acknowledges that, subject to the exceptions
specifically set forth herein, the release and discharge set forth in this
paragraph is a full and complete
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settlement and release and discharge of all claims and is intended to include in
its effect, without limitation, all claims which Tenant, as of the date hereof,
does not know of or suspect to exist in its favor.
8.2 TENANT'S INDEMNIFICATION OF LANDLORD. Subject to Section 9.3 hereof, Tenant
shall defend with competent counsel satisfactory to Landlord any claims made or
legal actions filed or threatened against Landlord with respect to the violation
of any Law, or the death, bodily injury, personal injury, property damage, or
interference with contractual or property rights suffered by any third party
occurring within the Leased Premises or resulting from Tenant's use or occupancy
of the Leased Premises, the Building or the Outside Areas, or resulting from
Tenant's activities in or about the Leased Premises, the Building, the Outside
Areas or the Property, and Tenant shall indemnify and hold Landlord, Landlord's
partners, principals, members, employees, agents and contractors harmless from
any loss liability, penalties, or expense whatsoever (including any loss
attributable to vacant space which otherwise would have been leased, but for
such activities) resulting therefrom, except to the extent proximately caused by
the gross negligence or willful misconduct of Landlord. This indemnity and any
other indemnity agreements contained in this Lease are not intended to and shall
not relieve any insurance carrier of its obligations under policies required to
be carried by Landlord or Tenant, respectively, pursuant to this Lease to the
extent that such policies cover any such indemnified claims. This indemnity
agreement shall survive the expiration or sooner termination of this Lease.
8.3 LANDLORD'S INDEMNIFICATION OF TENANT. Landlord shall indemnify, defend, and
hold harmless Tenant with competent counsel satisfactory to Tenant from and
against any claims made or legal actions filed or threatened against Tenant (to
the extent proximately caused by the gross negligence or willful misconduct of
Landlord or Landlord's failure to perform an obligation expressly undertaken
pursuant to this Lease after a reasonable period of time shall have lapsed
following receipt of written notice from Landlord to so perform such obligation)
with respect to the violation of any Law, or the death, bodily injury, personal
injury, property damage, or interference with contractual or property rights
suffered by any third party. This indemnity agreement shall survive the
expiration or sooner termination of this Lease.
ARTICLE 9
INSURANCE
9.1 TENANT'S INSURANCE. Tenant shall maintain insurance complying with all of
the following:
(a) Tenant shall procure, pay for and keep in full force and effect, at
all times during the Lease Term, the following:
(i) Comprehensive general liability insurance insuring Tenant
against liability for personal injury, bodily injury, death and damage to
property occurring within the Leased Premises, or resulting from Tenant's use or
occupancy of the Leased Premises, the Building, the Outside Areas or the
Property, or resulting from Tenant's activities in or about the Leased Premises
or the Property, with coverage in an amount equal to Tenant's Required Liability
Coverage (as set forth in Article 1), which insurance shall contain a "broad
form liability" endorsement insuring Tenant's performance of Tenant's
obligations to indemnify Landlord as contained in this Lease.
(ii) Fire and property damage insurance in so-called "fire and
extended coverage" form insuring Tenant against loss from physical damage to
Tenant's personal property, inventory, trade fixtures and improvements within
the Leased Premises with coverage for the full actual replacement cost thereof;
(iii) Plate glass insurance, at actual replacement cost;
(iv) Pressure vessel insurance, if applicable;
(v) Product liability insurance (including, without limitation,
if food and/or beverages are distributed, sold and/or consumed within the Leased
Premises, to the extent obtainable, coverage for liability arising out of the
distribution, sale, use or consumption of food and/or beverages (including
alcoholic beverages, if applicable) at the Leased Premises for not less than
Tenant's Required Liability Coverage (as set forth in Article 1);
(vi) Workers' compensation insurance and any other employee
benefit insurance sufficient to comply with all laws; and
(vii) With respect to making of alterations or the construction
of improvements or the like undertaken by Tenant, contingent liability and
builder's risk insurance, in an amount and with coverage reasonably satisfactory
to Landlord.
(b) Each policy of liability insurance required to be carried by Tenant
pursuant to this paragraph or actually carried by Tenant with respect to the
Leased Premises or the Property: (i) shall, except with respect to insurance
required by subparagraph (a)(vi) above, name Landlord, and such others as are
designated by Landlord, as additional insureds; (ii) shall be primary insurance
providing that the insurer shall be liable for the full amount of the loss, up
to and including the total amount of liability set forth in the declaration of
coverage, without the right of contribution from or prior payment by any other
insurance coverage of Landlord; (iii) shall be in a form satisfactory to
Landlord; (iv) shall be carried with companies reasonably acceptable to Landlord
with Best's ratings of at least A and XI; (v) shall provide that such policy
shall not be subject to cancellation, lapse or change except after at least
thirty days prior written notice to Landlord, and (vi) shall contain a so-called
"severability" or "cross liability" endorsement. Each policy of property
insurance maintained by Tenant with respect to the Leased Premises or the
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Property or any property therein (i) shall provide that such policy shall not be
subject to cancellation, lapse or change except after at least thirty days prior
written notice to Landlord and (ii) shall contain a waiver and/or a permission
to waive by the insurer of any right of subrogation against Landlord, its
partners, principals, members, officers, employees, agents and contractors,
which might arise by reason of any payment under such policy or by reason of any
act or omission of Landlord, its partners, principals, members, officers,
employees, agents and contractors.
(c) Prior to the time Tenant or any of its contractors enters the Leased
Premises, Tenant shall deliver to Landlord, with respect to each policy of
insurance required to be carried by Tenant pursuant to this Article, a copy of
such policy (appropriately authenticated by the insurer as having been issued,
premium paid) or a certificate of the insurer certifying in form satisfactory to
Landlord that a policy has been issued, premium paid, providing the coverage
required by this Paragraph and containing the provisions specified herein. With
respect to each renewal or replacement of any such insurance, the requirements
of this Paragraph must be complied with not less than thirty days prior to the
expiration or cancellation of the policies being renewed or replaced. Landlord
may, at any time and from time to time, inspect and/or copy any and all
insurance policies required to be carried by Tenant pursuant to this Article. If
Landlord's Lender, insurance broker, advisor or counsel reasonably determines at
any time that the amount of coverage set forth in Paragraph 9.1(a) for any
policy of insurance Tenant is required to carry pursuant to this Article is not
adequate, then Tenant shall increase the amount of coverage for such insurance
to such greater amount as Landlord's Lender, insurance broker, advisor or
counsel reasonably deems adequate.
9.2 LANDLORD'S INSURANCE. With respect to insurance maintained by Landlord:
(a) Landlord shall maintain, as the minimum coverage required of it by
this Lease, fire and property damage insurance in so-called "fire and extended
coverage" form insuring Landlord (and such others as Landlord may designate)
against loss from physical damage to the Building with coverage of not less than
one hundred percent (100%) of the full actual replacement cost thereof and
against loss of rents for a period of not less than six months. Such fire and
property damage insurance, at Landlord's election but without any requirements
on Landlord's behalf to do so, (i) may be written in so-called "all risk" form,
excluding only those perils commonly excluded from such coverage by Landlord's
then property damage insurer; (ii) may provide coverage for physical damage to
the improvements so insured for up to the entire full actual replacement cost
thereof; (iii) may be endorsed to cover loss or damage caused by any additional
perils against which Landlord may elect to insure, including earthquake and/or
flood; and/or (iv) may provide coverage for loss of rents for a period of up to
twelve months. Landlord shall not be required to cause such insurance to cover
any of Tenant's personal property, inventory, and trade fixtures, or any
modifications, alterations or improvements made or constructed by Tenant to or
within the Leased Premises. Landlord shall use commercially reasonable efforts
to obtain such insurance at competitive rates.
(b) Landlord shall maintain comprehensive general liability insurance
insuring Landlord (and such others as are designated by Landlord) against
liability for personal injury, bodily injury, death, and damage to property
occurring in, on or about, or resulting from the use or occupancy of the
Property, or any portion thereof, with combined single limit coverage of at
least Three Million Dollars ($3,000,000). Landlord may carry such greater
coverage as Landlord or Landlord's Lender, insurance broker, advisor or counsel
may from time to time determine is reasonably necessary for the adequate
protection of Landlord and the Property.
(c) Landlord may maintain any other insurance which in the opinion of
its insurance broker, advisor or legal counsel is prudent to carry under the
given circumstances, provided such insurance is commonly carried by owners of
property similarly situated and operating under similar circumstances.
9.3 MUTUAL WAIVER OF SUBROGATION. Landlord hereby releases Tenant, and Tenant
hereby releases Landlord and their respective partners, principals, members,
officers, agents, employees, shareholders and directors and servants, from any
and all liability for loss, damage or injury to the property of the other in or
about the Leased Premises or the Property which is caused by or results from a
peril or event or happening which is covered by insurance actually carried and
in force at the time of the loss by the party sustaining such loss; provided,
however, that such waiver shall be effective only to the extent permitted by the
insurance covering such loss and to the extent such insurance is not prejudiced
thereby.
ARTICLE 10
DAMAGE TO LEASED PREMISES
10.1 LANDLORD'S DUTY TO RESTORE. If the Leased Premises, the Building or the
Outside Area are damaged by any peril after the Effective Date of this Lease,
Landlord shall restore the same, as and when required by this paragraph, unless
this Lease is terminated by Landlord pursuant to Paragraph 10.3 or by Tenant
pursuant to Paragraph 10.4. If this Lease is not so terminated, then upon the
issuance of all necessary governmental permits, Landlord shall commence and
diligently prosecute to completion the restoration of the Leased Premises, the
Building or the Outside Area, as the case may be, to the extent then allowed by
law, to substantially the same condition in which it existed as of the Lease
Commencement Date. Landlord's obligation to restore shall be limited to actual
receipt of insurance proceeds and to the improvements constructed by Landlord.
Landlord shall have no obligation to restore any Improvements made by Tenant to
the Leased Premises or any of Tenant's personal property, inventory or trade
fixtures. Upon completion of the restoration by Landlord, Tenant shall forthwith
replace or fully repair all improvements constructed by Tenant to like or
similar conditions as existed at the time immediately prior to such damage or
destruction.
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10.2 INSURANCE PROCEEDS. All insurance proceeds available from the fire and
property damage insurance carried by Landlord shall be paid to and become the
property of Landlord. If this Lease is terminated pursuant to either Paragraph
10.3 or 10.4, all insurance proceeds available from insurance carried by Tenant
which cover loss of property that is Landlord's property or would become
Landlord's property on termination of this Lease shall be paid to and become the
property of Landlord, and the remainder of such proceeds shall be paid to and
become the property of Tenant. If this Lease is not terminated pursuant to
either Paragraph 10.3 or 10.4, all insurance proceeds available from insurance
carried by Tenant which cover loss to property that is Landlord's property shall
be paid to and become the property of Landlord, and all proceeds available from
such insurance which cover loss to property which would only become the property
of Landlord upon the termination of this Lease shall be paid to and remain the
property of Tenant. The determination of Landlord's property and Tenant's
property shall be made pursuant to Paragraph 6.2.
10.3 LANDLORD'S RIGHT TO TERMINATE. Landlord shall have the option to terminate
this Lease in the event any of the following occurs, which option may be
exercised only by delivery to Tenant of a written notice of election to
terminate within thirty days after the date of such damage or destruction:
(a) The Building is damaged by any peril covered by valid and
collectible insurance actually carried by Landlord and in force at the time of
such damage or destruction (an "insured peril") to such an extent that the
estimated cost to restore the Building exceeds the lesser of (i) the insurance
proceeds available from insurance actually carried by Landlord, or (ii) fifty
percent of the then actual replacement cost thereof;
(b) The Building is damaged by an uninsured peril, which peril Landlord
was not required to insure against pursuant to the provisions of Article 9 of
this Lease.
(c) The Building is damaged by any peril and, because of the laws then
in force, the Building (i) cannot be restored at reasonable cost or (ii) if
restored, cannot be used for the same use being made thereof before such damage.
10.4 TENANT'S RIGHT TO TERMINATE. If the Leased Premises, the Building or the
Outside Area are damaged by any peril and Landlord does not elect to terminate
this Lease or is not entitled to terminate this Lease pursuant to this Article,
then as soon as reasonably practicable, Landlord shall furnish Tenant with the
written opinion of Landlord's architect or construction consultant as to when
the restoration work required of Landlord may be complete. Tenant shall have the
option to terminate this Lease in the event any of the following occurs, which
option may be exercised only by delivery to Landlord of a written notice of
election to terminate within seven days after Tenant receives from Landlord the
estimate of the time needed to complete such restoration:
(a) If the time estimated to substantially complete the restoration
exceeds nine (9) months from and after the date of the damage; or
(b) If more than twenty five percent (25%) of the Leased Premises are
destroyed and the damage occurs within twelve months of the last day of the
Lease Term (or the end of the Extension Period, if Tenant has exercised the
extension option as provided in Article 15).
10.5 TENANT'S WAIVER. Landlord and Tenant agree that the provisions of Paragraph
10.4 above, captioned "Tenant's Right To Terminate", are intended to supersede
and replace the provisions contained in California Civil Code, Section 1932,
Subdivision 2, and California Civil Code, Section 1934, and accordingly, Tenant
hereby waives the provisions of such Civil Code Sections and the provisions of
any successor Civil Code Sections or similar laws hereinafter enacted.
10.6 ABATEMENT OF RENT. In the event of damage to the Leased Premises which does
not result in the termination of this Lease, the Base Monthly Rent (and any
Additional Rent) shall be temporarily abated during the period of restoration in
proportion to the degree to which Tenant's use of the Leased Premises is
impaired by such damage. In addition, in the event the Lease is terminated
pursuant to this Article 10, Tenant's obligation to pay Rent shall terminate as
of the date of such lease termination.
ARTICLE 11
CONDEMNATION
11.1 TENANT'S RIGHT TO TERMINATE. Except as otherwise provided in Paragraph 11.4
below regarding temporary takings, Tenant shall have the option to terminate
this Lease if, as a result of any taking, (i) all of the Leased Premises is
taken, or (ii) twenty-five percent (25%) or more of the Leased Premises is taken
and the part of the Leased Premises that remains cannot, within a reasonable
period of time, be made reasonably suitable for the continued operation of
Tenant's business. Tenant must exercise such option within a reasonable period
of time, to be effective on the later to occur of (i) the date that possession
of that portion of the Leased Premises that is condemned is taken by the
condemnor or (ii) the date Tenant vacated the Leased Premises.
11.2 LANDLORD'S RIGHT TO TERMINATE. Except as otherwise provided in Paragraph
11.4 below regarding temporary takings, Landlord shall have the option to
terminate this Lease if, as a result of any taking, (i) all of the Leased
Premises is taken, (ii) twenty-five percent (25%) or more of the Leased Premises
is taken and the part of the Leased Premises that remains cannot, within a
reasonable period of time, be made reasonably suitable for the continued
operation of Tenant's business, or (iii) because of the laws then in force, the
Leased Premises may not be used for the same use being made before such taking,
whether or not restored as required by Paragraph 11.3 below.
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Any such option to terminate by Landlord must be exercised within a reasonable
period of time, to be effective as of the date possession is taken by the
condemnor.
11.3 RESTORATION. If any part of the Leased Premises or the Building is taken
and this Lease is not terminated, then Landlord shall, to the extent not
prohibited by laws then in force, repair any damage occasioned thereby to the
remainder thereof to a condition reasonably suitable for Tenant's continued
operations and otherwise, to the extent practicable, in the manner and to the
extent provided in Paragraph 10.1.
11.4 TEMPORARY TAKING. If a portion of the Leased Premises is temporarily taken
for a period of one year or less and such period does not extend beyond the
Lease Expiration Date, this Lease shall remain in effect. If any portion of the
Leased Premises is temporarily taken for a period which exceeds one year or
which extends beyond the Lease Expiration Date, then the rights of Landlord and
Tenant shall be determined in accordance with Paragraphs 11.1 and 11.2 above.
11.5 DIVISION OF CONDEMNATION AWARD. Any award made for any taking of the
Property, the Building, or the Leased Premises, or any portion thereof, shall
belong to and be paid to Landlord, and Tenant hereby assigns to Landlord all of
its right, title and interest in any such award; provided, however, that Tenant
shall be entitled to receive any portion of the award that is made specifically
(i) for the taking of personal property, inventory or trade fixtures belonging
to Tenant, (ii) for the interruption of or loss to Tenant's business or its
moving costs, or (iii) for the value of any leasehold improvements installed and
paid for by Tenant. The rights of Landlord and Tenant regarding any condemnation
shall be determined as provided in this Article, and each party hereby waives
the provisions of Section 1265.130 of the California Code of Civil Procedure,
and the provisions of any similar law hereinafter enacted, allowing either party
to petition the Supreme Court to terminate this Lease and/or otherwise allocate
condemnation awards between Landlord and Tenant in the event of a taking of the
Leased Premises.
11.6 ABATEMENT OF RENT. In the event of a taking of the Leased Premises which
does not result in a termination of this Lease (other than a temporary taking),
then, as of the date possession is taken by the condemning authority, the Base
Monthly Rent shall be reduced in the same proportion that the area of that part
of the Leased Premises so taken (less any addition to the area of the Leased
Premises by reason of any reconstruction) bears to the area of the Leased
Premises immediately prior to such taking.
11.7 TAKING DEFINED. The term "taking" or "taken" as used in this Article 11
shall mean any transfer or conveyance of all or any portion of the Property to a
public or quasi-public agency or other entity having the power of eminent domain
pursuant to or as a result of the exercise of such power by such an agency,
including any inverse condemnation and/or any sale or transfer by Landlord of
all or any portion of the Property to such an agency under threat of
condemnation or the exercise of such power.
ARTICLE 12
DEFAULT AND REMEDIES
12.1 EVENTS OF TENANT'S DEFAULT. Tenant shall be in default of its obligations
under this Lease if any of the following events occur:
(a) Tenant shall have failed to pay Base Monthly Rent or any Additional
Rent when due; provided, however, that once but only once in any twelve (12)
month period during the Lease Term, Tenant shall be entitled to written notice
of non-receipt of Base Monthly Rent or Additional Rent from Landlord, and Tenant
shall not be in default for such delinquency if such installment of Base Monthly
Rent or Additional Rent is received by Landlord within five (5) business days
after Tenant's receipt of such notice from Landlord; or
(b) Tenant shall have done or permitted to be done any act, use or thing
in its use, occupancy or possession of the Leased Premises or the Building or
the Outside Areas which is prohibited by the terms of this Lease or Tenant shall
have failed to perform any term, covenant or condition of this Lease (except
those requiring the payment of Base Monthly Rent or Additional Rent, which
failures shall be governed by subparagraph (a) above) within thirty (30) days
after written notice from Landlord to Tenant specifying the nature of such
failure and requesting Tenant to perform same or within such longer period as is
reasonably required in the event such default is curable but not within such
thirty (30) day period, provided, however, that if the nature of such failure
reasonably requires more than thirty (30) days to cure, then Tenant shall not be
in default if Tenant commences such cure within such thirty (30) day period and
thereafter diligently prosecutes such cure to completion, if the breach is
capable of being cured; or
(c) Tenant shall have sublet the Leased Premises or assigned or
encumbered its interest in this Lease in violation of the provisions contained
in Article 7, whether voluntarily or by operation of law; or
(d) Tenant shall have abandoned the Leased Premises; or
(e) Tenant or any guarantor of this Lease shall have permitted or
suffered the sequestration or attachment of, or execution on, or the appointment
of a custodian or receiver with respect to, all or any substantial part of the
property or assets of Tenant (or such guarantor) or any property or asset
essential to the conduct of Tenant's (or such guarantor's) business, and Tenant
(or such guarantor) shall have failed to obtain a return or release of or bond
against the same within thirty days thereafter, or prior to sale pursuant to
such sequestration, attachment or levy, whichever is earlier; or
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(f) Tenant or any guarantor of this Lease shall have made a general
assignment of all or a substantial part of its assets for the benefit of its
creditors; or
(g) Tenant or any guarantor of this Lease shall have allowed (or sought)
to have entered against it a decree or order which: (i) grants or constitutes an
order for relief, appointment of a trustee, or condemnation or a reorganization
plan under the bankruptcy laws of the United States; (ii) approves as properly
filed a petition seeking liquidation or reorganization under said bankruptcy
laws or any other debtor's relief law or similar statute of the United States or
any state thereof; or (iii) otherwise directs the winding up or liquidation of
Tenant; provided, however, if any decree or order was entered without Tenant's
consent or over Tenant's objection, Landlord may not terminate this Lease
pursuant to this Subparagraph if such decree or order is rescinded or reversed
within sixty (60) days after its original entry; or
(h) Tenant or any guarantor of this Lease shall have availed itself of
the protection of any debtor's relief law, moratorium law or other similar law
which does not require the prior entry of a decree or order.
12.2 LANDLORD'S REMEDIES. In the event of any default by Tenant, and without
limiting Landlord's right to indemnification as provided in Article 8.2,
Landlord shall have the following remedies, in addition to all other rights and
remedies provided by law or otherwise provided in this Lease, to which Landlord
may resort cumulatively, or in the alternative:
(a) Landlord may, at Landlord's election, keep this Lease in effect and
enforce, by an action at law or in equity, all of its rights and remedies under
this Lease including, without limitation, (i) the right to recover the rent and
other sums as they become due by appropriate legal action, (ii) the right to
make payments required by Tenant, or perform Tenant's obligations and be
reimbursed by Tenant for the cost thereof with interest at the then maximum rate
of interest not prohibited by law from the date the sum is paid by Landlord
until Landlord is reimbursed by Tenant, and (iii) the remedies of injunctive
relief and specific performance to prevent Tenant from violating the terms of
this Lease and/or to compel Tenant to perform its obligations under this Lease,
as the case may be.
(b) Landlord may, at Landlord's election, terminate this Lease by giving
Tenant written notice of termination, in which event this Lease shall terminate
on the date set forth for termination in such notice. Any termination under this
subparagraph shall not relieve Tenant from its obligation to pay to Landlord all
Base Monthly Rent and Additional Rent then or thereafter due, or any other sums
due or thereafter accruing to Landlord, or from any claim against Tenant for
damages previously accrued or then or thereafter accruing. In no event shall any
one or more of the following actions by Landlord, in the absence of a written
election by Landlord to terminate this Lease constitute a termination of this
Lease:
(i) Appointment of a receiver or keeper in order to protect
Landlord's interest hereunder;
(ii) Consent to any subletting of the Leased Premises or
assignment of this Lease by Tenant, whether pursuant to the provisions hereof or
otherwise; or
(iii) Any action taken by Landlord or its partners, principals,
members, officers, agents, employees, or servants, which is intended to mitigate
the adverse effects of any breach of this Lease by Tenant, including, without
limitation, any action taken to maintain and preserve the Leased Premises on any
action taken to relet the Leased Premises or any portion thereof for the account
of Tenant and in the name of Tenant.
(c) In the event Tenant breaches this Lease and abandons the Leased
Premises, Landlord may terminate this Lease, but this Lease shall not terminate
unless Landlord gives Tenant written notice of termination. If Landlord does not
terminate this Lease by giving written notice of termination, Landlord may
enforce all its rights and remedies under this Lease, including the right and
remedies provided by California Civil Code Section 1951.4 ("lessor may continue
lease in effect after lessee's breach and abandonment and recover rent as it
becomes due, if lessee has right to sublet or assign, subject only to reasonable
limitations"), as in effect on the Effective Date of this Lease.
(d) In the event Landlord terminates this Lease, Landlord shall be
entitled, at Landlord's election, to the rights and remedies provided in
California Civil Code Section 1951.2, as in effect on the Effective Date of this
Lease. For purposes of computing damages pursuant to Section 1951.2, an interest
rate equal to the lesser of (1) Wells Primes Plus Two or (2) the maximum rate of
interest then not prohibited by law shall be used where permitted. Such damages
shall include, without limitation:
(i) The worth at the time of award of the amount by which the
unpaid rent for the balance of the term after the time of award exceeds the
amount of such rental loss that Tenant proves could be reasonably avoided,
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco, at the time of the award plus one percent (1%); and
(ii) Any other amount necessary to compensate Landlord for all
detriment proximately caused by Tenant's failure to perform Tenant's obligations
under this Lease, or which in the ordinary course of things would be likely to
result therefrom, including without limitation, the following: (i) expenses for
cleaning, repairing or restoring the Leased Premises, (ii) reasonable expenses
for altering, remodeling or otherwise improving the Leased Premises for the
purpose of reletting for the remainder of the Lease Term, including removal of
existing leasehold improvements and/or installation of additional leasehold
improvements (regardless of how the same is funded, including reduction of rent,
a direct payment or allowance to a new tenant, or otherwise), (iii) broker's
fees allocable to the remainder of the term of this Lease, advertising costs and
other expenses of reletting the Leased Premises; (iv) costs of carrying and
maintaining the Leased Premises, such as taxes, insurance premiums, utility
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charges and security precautions, (v) expenses incurred in removing, disposing
of and/or storing any of Tenant's personal property, inventory or trade fixtures
remaining therein; (vi) reasonable attorney's fees, expert witness fees, court
costs and other reasonable expenses incurred by Landlord (but not limited to
taxable costs) in retaking possession of the Leased Premises, establishing
damages hereunder, and releasing the Leased Premises; and (vii) any other
expenses, costs or damages otherwise incurred or suffered as a result of
Tenant's default.
12.3 LANDLORD'S DEFAULT AND TENANT'S REMEDIES. In the event Landlord fails to
perform its obligations under this Lease, Landlord shall nevertheless not be in
default under the terms of this Lease until such time as Tenant shall have first
given Landlord written notice specifying the nature of such failure to perform
its obligations, and then only after Landlord shall have had thirty (30) days
(or a shorter reasonable period in the case of an emergency) following its
receipt of such notice within which to perform such obligations; provided that,
if longer than thirty (30) days is reasonably required in order to perform such
obligations, Landlord shall have such longer period. In the event of Landlord's
default as above set forth, then, and only then, Tenant may then proceed in
equity or at law to compel Landlord to perform its obligations and/or to recover
damages proximately caused by such failure to perform (except as and to the
extent Tenant has waived its right to damages as provided in this Lease).
12.4 LIMITATION OF TENANT'S RECOURSE. Tenant's recourse shall be limited to
Landlord's interest in the Property or insurance proceeds from the damage or
destruction of the Property. In addition, if Landlord is a corporation, trust,
partnership, joint venture, limited liability company, unincorporated
association, or other form of business entity, Tenant agrees that (i) the
obligations of Landlord under this Lease shall not constitute personal
obligations of the officers, directors, trustees, partners, joint venturers,
members, owners, stockholders, or other principals of such business entity, and
(ii) Tenant shall have no recourse to the assets of such officers, directors,
trustees, partners, joint venturers, members, owners, stockholders or
principals. Additionally, if Landlord is a partnership or limited liability
company, then Tenant covenants and agrees:
(a) No partner or member of Landlord shall be sued or named as a party
in any suit or action brought by Tenant with respect to any alleged breach of
this Lease (except to the extent necessary to secure jurisdiction over the
partnership and then only for that sole purpose);
(b) No service of process shall be made against any partner or member of
Landlord except for the sole purpose of securing jurisdiction over the
partnership; and
(c) No writ of execution will ever be levied against the assets of any
partner or member of Landlord other than to the extent of his or her interest in
the assets of the partnership or limited liability company constituting
Landlord.
Tenant further agrees that each of the foregoing covenants and agreements shall
be enforceable by Landlord and by any partner or member of Landlord and shall be
applicable to any actual or alleged misrepresentation or nondisclosure made
regarding this Lease or the Leased Premises or any actual or alleged failure,
default or breach of any covenant or agreement either expressly or implicitly
contained in this Lease or imposed by statute or at common law.
12.5 TENANT'S WAIVER. Landlord and Tenant agree that the provisions of Paragraph
12.3 above are intended to supersede and replace the provisions of California
Civil Code Sections 1932(1), 1941 and 1942, and accordingly, Tenant hereby
waives the provisions of California Civil Code Sections 1932(1), 1941 and 1942
and/or any similar or successor law regarding Tenant's right to terminate this
Lease or to make repairs and deduct the expenses of such repairs from the rent
due under this Lease.
ARTICLE 13
GENERAL PROVISIONS
13.1 TAXES ON TENANT'S PROPERTY. Tenant shall pay before delinquency any and all
taxes, assessments, license fees, use fees, permit fees and public charges of
whatever nature or description levied, assessed or imposed against Tenant or
Landlord by a governmental agency arising out of, caused by reason of or based
upon Tenant's estate in this Lease, Tenant's ownership of property, improvements
made by Tenant to the Leased Premises or the Outside Areas, improvements made by
Landlord for Tenant's use within the Leased Premises or the Outside Areas,
Tenant's use (or estimated use) of public facilities or services or Tenant's
consumption (or estimated consumption) of public utilities, energy, water or
other resources (collectively, "Tenant's Interest"). Upon demand by Landlord,
Tenant shall furnish Landlord with satisfactory evidence of these payments. If
any such taxes, assessments, fees or public charges are levied against Landlord,
Landlord's property, the Building or the Property, or if the assessed value of
the Building or the Property is increased by the inclusion therein of a value
placed upon Tenant's Interest, regardless of the validity thereof, Landlord
shall have the right to require Tenant to pay such taxes, and if not paid and
satisfactory evidence of payment delivered to Landlord at least ten days prior
to delinquency, then Landlord shall have the right to pay such taxes on Tenant's
behalf and to invoice Tenant for the same. Tenant shall, within the earlier to
occur of (a) thirty (30) days of the date it receives an invoice from Landlord
setting forth the amount of such taxes, assessments, fees, or public charge so
levied, or (b) the due date of such invoice, pay to Landlord, as Additional
Rent, the amount set forth in such invoice. Failure by Tenant to pay the amount
so invoiced within such time period shall be conclusively deemed a default by
Tenant under this Lease. Tenant shall have the right to bring suit in any court
of competent jurisdiction to recover from the taxing authority the amount of any
such taxes, assessments, fees or public charges so paid.
13.2 HOLDING OVER. This Lease shall terminate without further notice on the
Lease Expiration Date (as set forth in Article 1). Any holding over by Tenant
after expiration of the Lease Term shall neither constitute a renewal nor
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extension of this Lease nor give Tenant any rights in or to the Leased Premises
except as expressly provided in this Paragraph. Any such holding over to which
Landlord has consented shall be construed to be a tenancy from month to month,
on the same terms and conditions herein specified insofar as applicable, except
that the Base Monthly Rent shall be increased to an amount equal to one hundred
fifty percent (150%) of the Base Monthly Rent payable during the last full month
immediately preceding such holding over.
13.3 SUBORDINATION TO MORTGAGES. This Lease is subject to and subordinate to all
ground leases, mortgages and deeds of trust which affect the Building or the
Property and which are of public record as of the Effective Date of this Lease,
and to all renewals, modifications, consolidations, replacements and extensions
thereof. However, if the lessor under any such ground lease or any lender
holding any such mortgage or deed of trust shall advise Landlord that it desires
or requires this Lease to be made prior and superior thereto, then, upon written
request of Landlord to Tenant, Tenant shall promptly execute, acknowledge and
deliver any and all customary or reasonable documents or instruments which
Landlord and such lessor or lender deems necessary or desirable to make this
Lease prior thereto. Tenant hereby consents to Landlord's ground leasing the
land underlying the Building or the Property and/or encumbering the Building or
the Property as security for future loans on such terms as Landlord shall
desire, all of which future ground leases, mortgages or deeds of trust shall be
subject to and subordinate to this Lease. However, if any lessor under any such
future ground lease or any lender holding such future mortgage or deed of trust
shall desire or require that this Lease be made subject to and subordinate to
such future ground lease, mortgage or deed of trust, then Tenant agrees, within
ten days after Landlord's written request therefor, to execute, acknowledge and
deliver to Landlord any and all documents or instruments reasonably requested by
Landlord or by such lessor or lender as may be necessary or proper to assure the
subordination of this Lease to such future ground lease, mortgage or deed of
trust, but only if such lessor or lender agrees to recognize Tenant's rights
under this Lease and agrees not to disturb Tenant's quiet possession of the
Leased Premises so long as Tenant is not in default under this Lease. If
Landlord assigns the Lease as security for a loan, Tenant agrees to execute such
documents as are reasonably requested by the lender and to provide reasonable
provisions in the Lease protecting such lender's security interest which are
customarily required by institutional lenders making loans secured by a deed of
trust. Landlord shall request a non-disturbance agreement from the holder of the
current deed of trust on the Property; provided, however, that failure to obtain
such non-disturbance agreement shall not be default under this Lease and shall
not entitle Tenant to any claim, offset or termination right.
13.4 TENANT'S ATTORNMENT UPON FORECLOSURE. Tenant shall, upon request, attorn
(i) to any purchaser of the Building or the Property at any foreclosure sale or
private sale conducted pursuant to any security instruments encumbering the
Building or the Property, (ii) to any grantee or transferee designated in any
deed given in lieu of foreclosure of any security interest encumbering the
Building or the Property, or (iii) to the lessor under an underlying ground
lease of the land underlying the Building or the Property, should such ground
lease be terminated; provided that such purchaser, grantee or lessor recognizes
Tenant's rights under this Lease.
13.5 MORTGAGEE PROTECTION. In the event of any default on the part of Landlord,
Tenant will give notice by registered mail to any Lender or lessor under any
underlying ground lease who shall have requested, in writing, to Tenant that it
be provided with such notice, and Tenant shall offer such Lender or lessor a
reasonable opportunity to cure the default, including time to obtain possession
of the Leased Premises by power of sale or judicial foreclosure or other
appropriate legal proceedings if reasonably necessary to effect a cure.
13.6 ESTOPPEL CERTIFICATE. Tenant will, following any request by Landlord,
promptly execute and deliver to Landlord an estoppel certificate in the form
attached as Exhibit C (i) certifying that this Lease is unmodified and in full
force and effect, or, if modified, stating the nature of such modification and
certifying that this Lease, as so modified, is in full force and effect, (ii)
stating the date to which the rent and other charges are paid in advance, if
any, (iii) acknowledging that there are not, to Tenant's knowledge, any uncured
defaults on the part of Landlord hereunder, or specifying such defaults if any
are claimed, and (iv) certifying such other information about this Lease as may
be reasonably requested by Landlord, its Lender or prospective lenders,
investors or purchasers of the Building or the Property. Tenant's failure to
execute and deliver such estoppel certificate within ten (10) days after
Landlord's written request therefor, at Landlord's option, shall be a material
default by Tenant under this Lease, and Landlord shall have all of the rights
and remedies available to Landlord as Landlord would otherwise have in the case
of any other material default by Tenant, including the right to terminate this
Lease and sue for damages proximately caused thereby, it being agreed and
understood by Tenant that Tenant's failure to so deliver such estoppel
certificate in a timely manner could result in Landlord being unable to perform
committed obligations to other third parties which were made by Landlord in
reliance upon this covenant of Tenant. Landlord and Tenant intend that any
statement delivered pursuant to this paragraph may be relied upon by any Lender
or purchaser or prospective Lender or purchaser of the Building, the Property,
or any interest in them.
13.7 TENANT'S FINANCIAL INFORMATION. Tenant shall, within ten business days
after Landlord's request therefor, deliver to Landlord a copy of Tenant's (and
any guarantor's) current financial statements (including a balance sheet, income
statement and statement of cash flow, all prepared in accordance with generally
accepted accounting principles) and any such other information reasonably
requested by Landlord regarding Tenant's financial condition. Landlord shall be
entitled to disclose such financial statements or other information to its
Lender, to any present or prospective principal of or investor in Landlord, or
to any prospective Lender or purchaser of the Building, the Property, or any
portion thereof or interest therein. Any such financial statement or other
information which is marked "confidential" or "company secrets" (or is otherwise
similarly marked by Tenant) shall be confidential and shall not be disclosed by
Landlord to any third party except as specifically provided in this paragraph,
unless the same becomes a part of the public domain without the fault of
Landlord.
13.8 TRANSFER BY LANDLORD. Landlord and its successors in interest shall have
the right to transfer their interest in the Building, the Property, or any
portion thereof at any time and to any person or entity. In the event of any
such transfer, the Landlord originally named herein (and in the case of any
subsequent transfer, the transferor), from the
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date of such transfer, (i) shall be automatically relieved, without any further
act by any person or entity, of all liability for the performance of the
obligations of the Landlord hereunder which may accrue after the date of such
transfer and (ii) shall be relieved of all liability for the performance of the
obligations of the Landlord hereunder which have accrued before the date of
transfer if its transferee agrees to assume and perform all such prior
obligations of the Landlord hereunder, and shall be relieved of liability for
return of the Security Deposit if the Security Deposit has been transferred to
such transferee in accordance with Section 3.7. Tenant shall attorn to any such
transferee. After the date of any such transfer, the term "Landlord" as used
herein shall mean the transferee of such interest in the Building or the
Property.
13.9 FORCE MAJEURE. The obligations of each of the parties under this Lease
(other than the obligations to pay money) shall be temporarily excused if such
party is prevented or delayed in performing such obligations by reason of any
strikes, lockouts or labor disputes; government restrictions, regulations,
controls, action or inaction; civil commotion; or extraordinary weather, fire or
other acts of God.
13.10 NOTICES. Any notice required or desired to be given by a party regarding
this Lease shall be in writing and shall be personally served, or in lieu of
personal service may be given by reputable overnight courier service, postage
prepaid, addressed to the other party as follows:
IF TO LANDLORD: Corporate Technology Centre Associates II LLC
c/o Menlo Equities LLC
525 University Avenue, Suite 100
Palo Alto, California 94301
Attention: Henry Bullock/Richard Holmstrom
with a copy to: Cooley Godward LLP
One Maritime Plaza, 20th Floor
San Francisco, California 94111
Attention: Paul Churchill
IF TO TENANT: Active Touch, Inc.
110 Rose Orchard Way
San Jose, California 95112
Attention: Chief Financial Officer
with a copy to: Pillsbury Madison & Sutro LLP
2550 Hanover Street
Palo Alto, California 94304
Attention: John S. Wesolowski
Any notice given in accordance with the foregoing shall be deemed received upon
actual receipt or refusal to accept delivery.
13.11 ATTORNEYS' FEES. In the event any party shall bring any action,
arbitration proceeding or legal proceeding alleging a breach of any provision of
this Lease, to recover rent, to terminate this Lease, or to enforce, protect,
determine or establish any term or covenant of this Lease or rights or duties
hereunder of either party, the prevailing party shall be entitled to recover
from the non-prevailing party as a part of such action or proceeding, or in a
separate action for that purpose brought within one year from the determination
of such proceeding, reasonable attorneys' fees, expert witness fees, court costs
and other reasonable expenses incurred by the prevailing party.
13.12 DEFINITIONS. Any term that is given a special meaning by any provision in
this Lease shall, unless otherwise specifically stated, have such meaning
wherever used in this Lease or in any Addenda or amendment hereto. In addition
to the terms defined in Article 1, the following terms shall have the following
meanings:
(a) REAL PROPERTY TAXES. The term "Real Property Tax" or "Real Property
Taxes" shall each mean Tenant's Project Percentage Share of (i) all taxes,
assessments, levies and other charges of any kind or nature whatsoever, general
and special, foreseen and unforeseen (including all instruments of principal and
interest required to pay any general or special assessments for public
improvements and any increases resulting from reassessments caused by any change
in ownership or new construction), now or hereafter imposed by any governmental
or quasi-governmental authority or special district having the direct or
indirect power to tax or levy assessments, which are levied or assessed for
whatever reason against the Property or any portion thereof, or Landlord's
interest herein, or the fixtures, equipment and other property of Landlord that
is an integral part of the Property and located thereon, or Landlord's business
of owning, leasing or managing the Property or the gross receipts, income or
rentals from the Property, (ii) all charges, levies or fees imposed by any
governmental authority against Landlord by reason of or based upon the use of or
number of parking spaces within the Property, the amount of public services or
public utilities used or consumed (e.g. water, gas, electricity, sewage or waste
water disposal) at the Property, the number of person employed by tenants of the
Property, the size (whether measured in area, volume, number of tenants or
whatever) or the value of the Property, or the type of use or uses conducted
within the Property, and all costs and fees (including attorneys' fees)
reasonably incurred by Landlord in contesting any Real Property Tax and in
negotiating with public authorities as to any Real Property Tax, and (iii) all
tax increases due to improvements made to the Leased Premises by Tenant or by
Landlord on behalf of Tenant. If, at any time during the Lease Term, the
taxation or assessment of the Property prevailing as of the Effective Date of
this Lease shall be altered so that in lieu of or in addition to any the Real
Property Tax described above there shall be levied, awarded or imposed (whether
by reason of a change in the method of taxation or assessment, creation of a new
tax or charge, or any other cause) an alternate, substitute, or additional use
or charge (i) on the value, size, use or occupancy of the
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Property or Landlord's interest therein or (ii) on or measured by the gross
receipts, income or rentals from the Property, or on Landlord's business of
owning, leasing or managing the Property or (iii) computed in any manner with
respect to the operation of the Property, then any such tax or charge, however
designated, shall be included within the meaning of the terms "Real Property
Tax" or "Real Property Taxes" for purposes of this Lease. If any Real Property
Tax is partly based upon property or rents unrelated to the Property, then only
that part of such Real Property Tax that is fairly allocable to the Property
shall be included within the meaning of the terms "Real Property Tax" or "Real
Property Taxes." Notwithstanding the foregoing, the terms "Real Property Tax" or
"Real Property Taxes" shall not include estate, inheritance, transfer, gift or
franchise taxes of Landlord or the federal or state income tax imposed on
Landlord's income from all sources.
(b) LANDLORD'S INSURANCE COSTS. The term "Landlord's Insurance Costs"
shall mean Tenant's Project Proportionate Share of the costs to Landlord to
carry and maintain the policies of fire and property damage insurance for the
Building and the Property and general liability and any other insurance required
or permitted to be carried by Landlord pursuant to Article 9, together with any
deductible amounts paid by Landlord upon the occurrence of any insured casualty
or loss.
(c) PROPERTY MAINTENANCE COSTS. The term "Property Maintenance Costs"
shall mean Tenant's Project Proportionate Share of all costs and expenses
(except Landlord's Insurance Costs, Real Property Taxes and Building Maintenance
Costs) paid or incurred by Landlord in protecting, operating, maintaining,
repairing and preserving the Property and all parts thereof, including without
limitation, (i) market rate professional management fees, (ii) the amortizing
portion of any costs incurred by Landlord in the making of any modifications,
alterations or improvements required by any governmental authority as set forth
in Article 6, which are so amortized during the Lease Term, and (iii) such other
reasonable costs as may be paid or incurred with respect to operating,
maintaining, and preserving the Property, such as repairing and resurfacing
paved areas, repairing and replacing structural parts of the Building, and
repairing and replacing, when necessary, electrical, plumbing, heating,
ventilating and air conditioning systems serving the Building, provided that the
cost of any capital improvement shall be amortized over the useful life of such
improvement and the amortizing portion of the cost shall be included in Property
Maintenance Costs.
(d) BUILDING MAINTENANCE COSTS. The term "Building Maintenance Costs"
shall mean Tenant's Building Proportionate Share of all capital expenditures
allocable to the Building and all other costs as may be incurred with respect to
operating, maintaining and preserving the Building, including, without
limitation, repair and resurfacing the exterior surfaces of the Building,
repairing and replacing structural parts of the Building, and repairing and
replacing, when necessary, electrical, plumbing, heating, ventilating and air
conditioning systems serving the Building, provided that the cost of any capital
improvement shall be amortized over the useful life of such improvement and the
amortizing portion of the cost shall be included in Building Maintenance Costs.
(e) PROPERTY OPERATING EXPENSES. The term "Property Operating Expenses"
shall mean and include all Real Property Taxes, plus all Landlord's Insurance
Costs, plus all Property Maintenance Costs and Building Maintenance Costs.
(f) LAW. The term "Law" shall mean any judicial decisions and any
statute, constitution, ordinance, resolution, regulation, rule, administrative
order, or other requirements of any municipal, county, state, federal, or other
governmental agency or authority having jurisdiction over the parties to this
Lease, the Leased Premises, the Building or the Property, or any of them, in
effect either at the Effective Date of this Lease or at any time during the
Lease Term, including, without limitation, any regulation, order, or policy of
any quasi-official entity or body (e.g. a board of fire examiners or a public
utility or special district).
(g) LENDER. The term "Lender" shall mean the holder of any promissory
note or other evidence of indebtedness secured by the Property or any portion
thereof.
(h) PRIVATE RESTRICTIONS. The term "Private Restrictions" shall mean (as
they may exist from time to time) any and all covenants, conditions and
restrictions, private agreements, easements, and any other recorded documents or
instruments affecting the use of the Property, the Building, the Leased
Premises, or the Outside Areas.
(i) RENT. The term "Rent" shall mean collectively Base Monthly Rent and
all Additional Rent.
13.13 GENERAL WAIVERS. One party's consent to or approval of any act by the
other party requiring the first party's consent or approval shall not be deemed
to waive or render unnecessary the first party's consent to or approval of any
subsequent similar act by the other party. No waiver of any provision hereof, or
any waiver of any breach of any provision hereof, shall be effective unless in
writing and signed by the waiving party. The receipt by Landlord of any rent or
payment with or without knowledge of the breach of any other provision hereof
shall not be deemed a waiver of any such breach. No waiver of any provision of
this Lease shall be deemed a continuing waiver unless such waiver specifically
states so in writing and is signed by both Landlord and Tenant. No delay or
omission in the exercise of any right or remedy accruing to either party upon
any breach by the other party under this Lease shall impair such right or remedy
or be construed as a waiver of any such breach theretofore or thereafter
occurring. The waiver by either party of any breach of any provision of this
Lease shall not be deemed to be a waiver of any subsequent breach of the same or
any other provisions herein contained.
13.14 MISCELLANEOUS. Should any provisions of this Lease prove to be invalid or
illegal, such invalidity or illegality shall in no way affect, impair or
invalidate any other provisions hereof, and such remaining provisions shall
remain in full force and effect. Time is of the essence with respect to the
performance of every provision of this Lease in which time of performance is a
factor. Any copy of this Lease which is executed by the parties shall be deemed
an original for all purposes. This Lease shall, subject to the provisions
regarding assignment, apply to and
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bind the respective heirs, successors, executors, administrators and assigns of
Landlord and Tenant. The term "party" shall mean Landlord or Tenant as the
context implies. If Tenant consists of more than one person or entity, then all
members of Tenant shall be jointly and severally liable hereunder. This Lease
shall be construed and enforced in accordance with the Laws of the State in
which the Leased Premises are located. The captions in this Lease are for
convenience only and shall not be construed in the construction or
interpretation of any provision hereof. When the context of this Lease requires,
the neuter gender includes the masculine, the feminine, a partnership,
corporation, limited liability company, joint venture, or other form of business
entity, and the singular includes the plural. The terms "must," "shall," "will,"
and "agree" are mandatory. The term "may" is permissive. When a party is
required to do something by this Lease, it shall do so at its sole cost and
expense without right of reimbursement from the other party unless specific
provision is made therefor. Where Landlord's consent is required hereunder, the
consent of any Lender shall also be required. Landlord and Tenant shall both be
deemed to have drafted this Lease, and the rule of construction that a document
is to be construed against the drafting party shall not be employed in the
construction or interpretation of this Lease. Where Tenant is obligated not to
perform any act or is not permitted to perform any act, Tenant is also obligated
to restrain any others reasonably within its control, including agents,
invitees, contractors, subcontractors and employees, from performing such act.
Landlord shall not become or be deemed a partner or a joint venturer with Tenant
by reason of any of the provisions of this Lease.
ARTICLE 14
CORPORATE AUTHORITY
BROKERS AND ENTIRE AGREEMENT
14.1 CORPORATE AUTHORITY. If Tenant is a corporation, each individual executing
this Lease on behalf of such corporation represents and warrants that Tenant is
validly formed and duly authorized and existing, that Tenant is qualified to do
business in the State in which the Leased Premises are located, that Tenant has
the full right and legal authority to enter into this Lease, and that he or she
is duly authorized to execute and deliver this Lease on behalf of Tenant in
accordance with its terms. Tenant shall, within thirty days after execution of
this Lease, deliver to Landlord a certified copy of the resolution of its board
of directors authorizing or ratifying the execution of this Lease and if Tenant
fails to do so, Landlord at its sole election may elect to terminate this Lease.
Tenant is not an employee benefit plan as defined in Section 3(3) of the
Employment Retirement Income Security Act of 1974, as amended, nor a plan as
defined in Section 4975(e)(1) of the Internal Revenue Code of 1986, as amended,
and Tenant's assets do not constitute "plan-assets" of one or more such plans
within the meaning of the Department of Labor Regulation Section 2510.3-101.
14.2 BROKERAGE COMMISSIONS. Tenant represents, warrants and agrees that it has
not had any dealings with any real estate broker(s), leasing agent(s), finder(s)
or salesmen, other than Tenant's Brokers (as named in Article 1) with respect to
the lease by it of the Leased Premises pursuant to this Lease, and that it will
indemnify, defend with competent counsel, and hold Landlord harmless from any
liability for the payment of any real estate brokerage commissions, leasing
commissions or finder's fees claimed by any other real estate broker(s), leasing
agent(s), finder(s), or salesmen to be earned or due and payable by reason of
Tenant's agreement or promise (implied or otherwise) to pay (or to have Landlord
pay) such a commission or finder's fee by reason of its leasing the Leased
Premises pursuant to this Lease. Landlord agrees and acknowledges that it has
the sole obligation and responsibility to pay its broker (Gregg Von Thaden and
Don Reimann of Colliers International) and Landlord will indemnify, defend with
competent counsel and hold Tenant harmless from any liability for the payment of
any real estate brokerage commissions, leasing commissions, or finder's fees
claimed by any other real estate broker(s), leasing agent(s), finder(s), or
salesmen to be earned or due and payable by reason of Landlord's agreement or
promise (implied or otherwise) to pay (or have Tenant pay) such a commission or
finder's fees by reason of the leasing of the Leased Premises pursuant to this
Lease.
14.3 ENTIRE AGREEMENT. This Lease and the Exhibits (as described in Article 1),
which Exhibits are by this reference incorporated herein, constitute the entire
agreement between the parties, and there are no other agreements, understandings
or representations between the parties relating to the lease by Landlord of the
Leased Premises to Tenant, except as expressed herein. No subsequent changes,
modifications or additions to this Lease shall be binding upon the parties
unless in writing and signed by both Landlord and Tenant.
14.4 LANDLORD'S REPRESENTATIONS. Tenant acknowledges that neither Landlord nor
any of its agents made any representations or warranties respecting the
Property, the Building or the Leased Premises, upon which Tenant relied in
entering into the Lease, which are not expressly set forth in this Lease. Tenant
further acknowledges that neither Landlord nor any of its agents made any
representations as to (i) whether the Leased Premises may be used for Tenant's
intended use under existing Law, or (ii) the suitability of the Leased Premises
for the conduct of Tenant's business, or (iii) the exact square footage of the
Leased Premises, and that Tenant relies solely upon its own investigations with
respect to such matters. Tenant expressly waives any and all claims for damage
by reason of any statement, representation, warranty, promise or other agreement
of Landlord or Landlord's agent(s), if any, not contained in this Lease or in
any Exhibit attached hereto.
ARTICLE 15
OPTIONS TO EXTEND
15.1 So long as Active Touch, Inc. is the Tenant hereunder and occupies the
entirety of the Leased Premises, and subject to the condition set forth in
clause (b) below, Tenant shall have one option to extend the term of this Lease
with respect to the entirety of the Premises, for a period of three (3) years
from the expiration of the Lease Term (the "Extension Period"), subject to the
following conditions:
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(a) The option to extend shall be exercised, if at all, by notice of
exercise given to Landlord by Tenant not more than twelve months nor less than
seven months prior to the expiration of the Lease Term;
(b) Anything herein to the contrary notwithstanding, if Tenant is in
default under any of the terms, covenants or conditions of this Lease, either at
the time Tenant exercises the extension option or on the commencement date of
the Extension Period, Landlord shall have, in addition to all of Landlord's
other rights and remedies provided in this Lease, the right to terminate such
option(s) to extend upon notice to Tenant.
(c) In the event the option is exercised in a timely fashion, the Lease
shall be extended for the term of the Extension Period upon all of the terms and
conditions of this Lease, provided that the Base Monthly Rent for the Extension
Period shall be ninety-five percent (95%) of the "Fair Market Rent" for the
Leased Premises, increased annually as set forth below. For purposes hereof,
"Fair Market Rent" shall mean the Base Monthly Rent determined pursuant to the
process described below. In no event, however, shall any adjustment of Base
Monthly Rent pursuant to this paragraph result in a decrease of the Base Monthly
Rent for the Leased Premises below the amount due from Tenant for the preceding
portion of the initial Lease Term for which Base Monthly Rent had been fixed. At
the end of the first 12-month period of the extension Period, Base Monthly Rent
shall be increased to reflect the change in the Consumer Price Index for the San
Francisco Metropolitan Area, All Items (the "CPI"), for the 12-month period
ending 11 months after the Lease Commencement Date, but in no event shall Base
Monthly Rent be increased less than 3% per annum compounded annually nor more
than 5% per annum compounded annually for such 12 month period. Base Monthly
Rent shall be so adjusted at the end of each subsequent 12-month period during
the Extension Period.
15.2 Within thirty (30) days after receipt of Tenant's notice of exercise,
Landlord shall notify Tenant in writing of Landlord's estimate of the Base
Monthly Rent for the Extension Period, based on the provisions of Paragraph 15.1
above. Within thirty (30) days after receipt of such notice from Landlord, and
unless Landlord and Tenant have otherwise agreed on the amount of the Base
Monthly Rent for the Extension Period, Tenant shall have the right either to (i)
accept Landlord's statement of Base Monthly Rent as the Base Monthly Rent for
the Extension Period; or (ii) elect to arbitrate Landlord's estimate of Fair
Market Rent, such arbitration to be conducted pursuant to the provisions hereof.
Failure on the part of Tenant to require arbitration of Fair Market Rent within
such 30-day period shall constitute acceptance of the Base Monthly Rent for the
Extension Period as calculated by Landlord. If Tenant elects arbitration, the
arbitration shall be concluded within 90 days after the date of Tenant's
election, subject to extension for an additional 30-day period if a third
arbitrator is required and does not act in a timely manner. To the extent that
arbitration has not been completed prior to the expiration of any preceding
period for which Base Monthly Rent has been determined, Tenant shall pay Base
Monthly Rent at the rate calculated by Landlord, with the potential for an
adjustment to be made once Fair Market Rent is ultimately determined by
arbitration.
15.3 In the event of arbitration, the judgment or the award rendered in any such
arbitration may be entered in any court having jurisdiction and shall be final
and binding between the parties. The arbitration shall be conducted and
determined in the City and County of San Francisco in accordance with the then
prevailing rules of the American Arbitration Association or its successor for
arbitration of commercial disputes except to the extent that the procedures
mandated by such rules shall be modified as follows:
(a) Tenant shall make demand for arbitration in writing within thirty
(30) days after service of Landlord's determination of Fair Market Rent given
under Paragraph 15.2 above, specifying therein the name and address of the
person to act as the arbitrator on its behalf. The arbitrator shall be qualified
as a real estate appraiser familiar with the Fair Market Rent of similar
industrial, research and development, or office space in the Silicon Valley area
who would qualify as an expert witness over objection to give opinion testimony
addressed to the issue in a court of competent jurisdiction. Failure on the part
of Tenant to make a proper demand in a timely manner for such arbitration shall
constitute a waiver of the right thereto. Within fifteen (15) days after the
service of the demand for arbitration, Landlord shall give notice to Tenant,
specifying the name and address of the person designated by Landlord to act as
arbitrator on its behalf who shall be similarly qualified. If Landlord fails to
notify Tenant of the appointment of its arbitrator, within or by the time above
specified, then the arbitrator appointed by Tenant shall be the arbitrator to
determine the issue.
(b) In the event that two arbitrators are chosen pursuant to Paragraph
15.3(a) above, the arbitrators so chosen shall, within fifteen (15) days after
the second arbitrator is appointed determine the Fair Market Rent. If the two
arbitrators shall be unable to agree upon a determination of Fair Market Rent
within such fifteen (15) -day period, they, themselves, shall appoint a third
arbitrator, who shall be a competent and impartial person with qualifications
similar to those required of the first two arbitrators pursuant to Paragraph
15.3(a). In the event they are unable to agree upon such appointment within
seven (7) days after expiration of such 15-day period, the third arbitrator
shall be selected by the parties themselves, if they can agree thereon, within a
further period of fifteen (15) days. If the parties do not so agree, then either
party, on behalf of both, may request appointment of such a qualified person by
the then Chief Judge of the United States District Court having jurisdiction
over the County of Santa Clara, acting in his private and not in his official
capacity, and the other party shall not raise any question as to such Judge's
full power and jurisdiction to entertain the application for and make the
appointment. The three arbitrators shall decide the dispute if it has not
previously been resolved by following the procedure set forth below.
(c) Where an issue cannot be resolved by agreement between the two
arbitrators selected by Landlord and Tenant or settlement between the parties
during the course of arbitration, the issue shall be resolved by the three (3)
arbitrators within fifteen (15) days of the appointment of the third arbitrator
in accordance with the following procedure. The arbitrator selected by each of
the parties shall state in writing his determination of the Fair Market Rent
supported by the reasons therefor with counterpart copies to each party. The
arbitrators shall arrange for a simultaneous exchange of such proposed
resolutions. The role of the third arbitrator shall be to select which of the
24.
<PAGE> 29
two (2) proposed resolutions most closely approximates his determination of Fair
Market Rent. The third arbitrator shall have no right to propose a middle ground
or any modification of either of the two proposed resolutions. The resolution he
chooses as most closely approximating his determination shall constitute the
decision of the arbitrators and be final and binding upon the parties.
(d) In the event of a failure, refusal or inability of any arbitrator to
act, his successor shall be appointed by him, but in the case of the third
arbitrator, his successor shall be appointed in the same manner as provided for
appointment of the third arbitrator. The arbitrators shall decide the issue
within fifteen (15) days after the appointment of the third arbitrator. Any
decision in which the arbitrator appointed by Landlord and the arbitrator
appointed by Tenant concur shall be binding and conclusive upon the parties.
Each party shall pay the fee and expenses of its respective arbitrator and both
shall share the fee and expenses of the third arbitrator, if any, and the
attorneys' fees and expenses of counsel for the respective parties and of
witnesses shall be paid by the respective party engaging such counsel or calling
such witnesses.
(e) The arbitrators shall have the right to consult experts and
competent authorities to obtain factual information or evidence pertaining to a
determination of Fair Market Rent, but any such consultation shall be made in
the presence of both parties with full right on their part to cross-examine. The
arbitrators shall render their decision and award in writing with counterpart
copies to each party. The arbitrators shall have no power to modify the
provisions of this Lease.
ARTICLE 16
TELEPHONE SERVICE
Notwithstanding any other provision of this Lease to the contrary:
(a) So long as the entirety of the Building is leased to Tenant:
(i) Landlord shall have no responsibility for providing to
Tenant any telephone equipment, including wiring, within the Leased Premises or
for providing telephone service or connections from the utility to the Leased
Premises; and
(ii) Landlord makes no warranty as to the quality, continuity or
availability of the telecommunications services in the Building, and Tenant
hereby waives any claim against Landlord for any actual or consequential damages
(including damages for loss of business) in the event Tenant's
telecommunications services in any way are interrupted, damaged or rendered less
effective, except to the extent caused by the grossly negligent or willful act
or omission by Landlord, its agents or employees. Tenant accepts the telephone
equipment (including, without limitation, the INC, as defined below) in its
"AS-IS" condition, and Tenant shall be solely responsible for contracting with a
reliable third party vendor to assume responsibility for the maintenance and
repair thereof (which contract shall contain provisions requiring such vendor to
inspect the INC periodically (the frequency of such inspections to be determined
by such vendor based on its experience and professional judgment), and requiring
such vendor to meet local and federal requirements for telecommunications
material and workmanship). Landlord shall not be liable to Tenant and Tenant
waives all claims against Landlord whatsoever, whether for personal injury,
property damage, loss of use of the Leased Premises, or otherwise, due to the
interruption or failure of telephone services to the Leased Premises. Tenant
hereby holds Landlord harmless and agrees to indemnify, protect and defend
Landlord from and against any liability for any damage, loss or expense due to
any failure or interruption of telephone service to the Leased Premises for any
reason.
(b) At such time as the entirety of the Leased Premise is no longer
leased to Tenant, Landlord shall in its sole discretion have the right, by
written notice to Tenant, to elect to assume limited responsibility for INC, as
provided below, and upon such assumption of responsibility by Landlord, this
subparagraph (b) shall apply prospectively.
(i) Landlord shall provide Tenant access to such quantity of
pairs in the Building intra-building network cable ("INC") as is determined to
be available by Landlord in its reasonable discretion. Tenant's access to the
INC shall be solely by arrangements made by Tenant, as Tenant may elect,
directly with Pacific Bell or Landlord (or such vendor as Landlord may
designate), and Tenant shall pay all reasonable charges as may be imposed in
connection therewith. Pacific Bell's charges shall be deemed to be reasonable.
Subject to the foregoing, Landlord shall have no responsibility for providing to
Tenant any telephone equipment, including wiring, within the Leased Premises or
for providing telephone service or connections from the utility to the Leased
Premises, except as required by law.
(ii) Tenant shall not alter, modify, add to or disturb any
telephone wiring in the Leased Premises or elsewhere in the Building without the
Landlord's prior written consent, which shall not be unreasonably withheld.
Tenant shall be liable to Landlord for any damage to the telephone wiring in the
Building due to the act, negligent or otherwise, of Tenant or any employee,
contractor or other agent of Tenant. Tenant shall have no access to the
telephone closets within the Building, except in the manner and under procedures
established by Landlord. Tenant shall promptly notify Landlord of any actual or
suspected failure of telephone service to the Leased Premises.
(iii) All costs incurred by Landlord for the installation,
maintenance, repair and replacement of telephone wiring in the Building shall be
a Property Maintenance Cost.
25.
<PAGE> 30
(iv) Landlord makes no warranty as to the quality, continuity or
availability of the telecommunications services in the Building, and Tenant
hereby waives any claim against Landlord for any actual or consequential damages
(including damages for loss of business) in the event Tenant's
telecommunications services in any way are interrupted, damaged or rendered less
effective, except to the extent caused by the grossly negligent or willful act
or omission by Landlord, its agents or employees. Tenant acknowledges that
Landlord meets its duty of care to Tenant with respect to the Building INC by
contracting with a reliable third party vendor to assume responsibility for the
maintenance and repair thereof (which contract shall contain provisions
requiring such vendor to inspect the INC periodically (the frequency of such
inspections to be determined by such vendor based on its experience and
professional judgment), and requiring such vendor to meet local and federal
requirements for telecommunications material and workmanship). Subject to the
foregoing, Landlord shall not be liable to Tenant and Tenant waives all claims
against Landlord whatsoever, whether for personal injury, property damage, loss
of use of the Leased Premises, or otherwise, due to the interruption or failure
of telephone services to the Leased Premises. Tenant hereby holds Landlord
harmless and agrees to indemnify, protect and defend Landlord from and against
any liability for any damage, loss or expense due to any failure or interruption
of telephone service to the Leased Premises for any reason.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of
the respective dates below set forth with the intent to be legally bound thereby
as of the Effective Date of this Lease first above set forth.
LANDLORD:
CORPORATE TECHNOLOGY CENTRE ASSOCIATES II LLC, a
California limited liability company
By: CORPORATE TECHNOLOGY CENTRE PARTNERS II
LLC, a California limited liability
company, its Managing Member
By: Menlo Equities LLC, a California limited
liability company, its Managing Member
By: Diamant Investments LLC
Dated: 7/2/99 By:
----------------------------------
, Member
------------------------
TENANT:
ACTIVE TOUCH, INC., a California corporation
By: /s/ Subrah S. Iyar
----------------------------------------------
Title: CEO
Dated: 7/1/99 By: /s/ Tom Colby
----------------------------------------------
Title: Vice President Business Operations
26.
<PAGE> 31
EXHIBIT A
SITE PLAN
1.
<PAGE> 32
EXHIBIT B
WORK LETTER
THIS WORK LETTER, dated June 30, 1999, is entered into by and between
CORPORATE TECHNOLOGY CENTRE ASSOCIATES II LLC, a California limited liability
company ("Landlord") and ACTIVE TOUCH, INC., a California corporation
("Tenant"). On or about the date hereof, Landlord and Tenant entered into that
certain Lease (the "Lease") for certain premises (the "Leased Premises")
commonly known as 110 Rose Orchard Way, San Jose, California. This Work Letter
sets forth the agreement of Landlord and Tenant with respect to the improvements
to be constructed in the Leased Premises. All defined terms used herein shall
have the meaning set forth in the Lease, unless otherwise defined in this Work
Letter.
1. CONSTRUCTION OF TENANT IMPROVEMENTS. Landlord shall, through its general
contractor, Applied Construction Technology, Inc. (the "Contractor"), furnish
and install within the Leased Premises, substantially in accordance with the
plans and specifications to be approved by Landlord and Tenant pursuant to
paragraph 2 below, certain items of general construction (the "Tenant
Improvements"). The quantities, character and manner of installation of all of
the Tenant Improvements shall be subject to the limitations imposed by any
applicable governmental regulations relating to conservation of energy and by
applicable building codes and regulations. In addition, unless otherwise agreed
by Landlord in writing, Tenant agrees that the Tenant Improvements shall not
require Landlord to perform work which would (i) require changes to structural
components of the Building or the exterior design of the Building; (ii) require
any material modification to the Building's mechanical or electrical systems;
(iii) be incompatible with the Building plans filed with the City of San Jose;
or (iv) delay the completion of the Leased Premises beyond the Intended
Commencement Date. Landlord shall use commercially reasonable efforts to
promptly obtain all necessary governmental approvals and permits to construct
the Tenant Improvements.
2. SPACE PLANNING.
(a) Landlord and Tenant acknowledge and agree that Tenant has had
prepared for Landlord's approval comprehensive space planning
documents (once approved by Landlord, the "Space Planning
Documents"). Tenant agrees that such space planning documents are
or, after revisions requested by Landlord shall be, sufficient to
enable Landlord's architect and engineers to prepare the Working
Drawings (as defined below).
(b) All planning and interior design services relating to furniture and
equipment, such as selection of colors, finishes, fixtures,
furnishings or floor coverings, will be included in the cost of the
Tenant Improvements, shall be subject to prior written approval of
Landlord (which will not be unreasonably withheld), and shall be
timely delivered so as not to impede the design and construction of
the Tenant Improvements.
(c) Upon execution of the Lease and this Work Letter by Tenant and
receipt by Landlord of the Space Planning Documents, Landlord shall
be authorized to cause its architect and engineers to prepare the
Working Drawings.
3. APPROVAL OF WORKING DRAWINGS.
(a) Landlord and Tenant acknowledge that Landlord shall retain an
architect and engineers to prepare all architectural and engineering
plans and specifications required for the construction of the Tenant
Improvements in conformance with the base building and tenant
improvement standard specifications of the Building (the "Working
Drawings"), and to prepare drawings and specifications for Changes
(as defined below), if any, requested or required pursuant to
paragraph 5 below.
(b) Landlord shall submit the completed Working Drawings to Tenant for
Tenant's approval. Tenant will provide written approval of the
Working Drawings within five days after such submission. If Tenant
disapproves any part of the submission, the disapproval shall
include written instructions adequate for Landlord's architect and
engineers to revise the Working Drawings. Such revisions shall be
subject to Landlord's approval, which shall not be unreasonably
withheld. Tenant will finally approve the revised Working Drawings
within two days after submission thereof to Tenant. If Tenant's
instructions necessitate (i) revisions to the Working Drawings (as
originally submitted) which do not substantially conform with the
Space Planning Documents, or (ii) a substantial change of scope
relative to the Space Planning Documents, the costs incurred by
Landlord as a result of such instructions (including, without
limitation, the cost of revising the Working Drawings) shall be
promptly borne and paid by Tenant upon demand by Landlord.
(c) If Tenant fails to approve the Working Drawings or the revised
Working Drawings within the applicable periods set forth in
subparagraph 3(b) above, then (A) Landlord shall not be obligated to
commence construction of the Tenant Improvements, (B) Tenant shall
be responsible for any resulting delay, and the cost of such delay,
in Landlord's completion of the Tenant Improvements and delivery of
the Leased Premises, and (C) any such delay shall be deemed a Tenant
Delay (as defined below).
1.
<PAGE> 33
(d) Upon Tenant's approval of the Working Drawings, Landlord shall be
authorized to cause the Contractor to proceed with the construction
of the Tenant Improvements in accordance with the Working Drawings.
4. COST OF TENANT IMPROVEMENTS. Unless specified otherwise herein, Landlord
shall bear and pay the cost of the Tenant Improvements (which cost shall
include, without limitation, the costs of construction, the cost of permits and
permit expediting, and all architectural and engineering services obtained by
Landlord in connection with the Tenant Improvements, the Contractor's fees,
Landlord's fee for construction administration (up to $2,000 per month) and any
Property Maintenance Costs from the date of this Work Letter until the Lease
Commencement Date) up to a maximum of $483,840.00 (the "Tenant Improvement
Allowance"). The Tenant Improvement Allowance shall be utilized only for
building improvements to the Building, and not for signage, furniture costs, any
third party consulting or contracting fees (other than third party space
planning consultant fees up to $25,000), any telecom/cabling costs, or any other
purpose. Tenant shall bear and pay the cost of the Tenant Improvements
(including but not limited to all of the foregoing fees and costs) in excess of
the Tenant Improvement Allowance, if any. The cost of the Tenant Improvements
shall exclude the cost of furniture, fixtures and inventory and other items of
Tenant's Work (as defined below). Landlord shall provide to Tenant, at Tenant's
request and at Tenant's expense, a complete accounting of all amounts included
as Tenant Improvement costs, and Tenant shall have the right to audit such
account at its sole cost and expense, within 30 days after substantial
completion of the Tenant Improvements. In the event the entire Tenant
Improvement Allowance is not applied to Tenant Improvement Costs or Property
Maintenance Costs as provided herein, up to $282,340.00 of such Tenant
Improvement Allowance not applied shall be amortized by Landlord over seven (7)
years at an interest rate of ten percent (10%) per annum, and the amortizing
amount for each month during such seven (7) year period shall be used to reduce,
on a monthly basis, the Base Monthly Rent paid by Tenant over the Lease Term. In
the event of such reduction in Base Monthly Rent, Landlord and Tenant agree to
execute an amendment to the Lease setting forth the new Base Monthly Rent.
5. CHANGES.
(a) Any request by Tenant for a change in the Tenant Improvements after
approval of the Working Drawings (a "Change") shall be accompanied
by all information necessary to clearly identify and explain the
proposed Change. As soon as practicable after receipt of such an
Estimate Request form, Landlord shall notify Tenant of the estimated
cost of such Change as well as the estimated increase in
construction time caused by the Change, if any. Tenant shall approve
in writing such estimates within two days after receipt of
Landlord's notice. Upon receipt of such written request, Landlord
shall be authorized to cause the Contractor to proceed with the
implementation of the requested Change.
(b) The increased cost and time, as determined by Landlord, of all
Changes, including the cost of architectural and engineering
services required to revise the Working Drawings to reflect such
Changes, the Contractor's overhead and fee, and Landlord's fee for
construction administration services (up to $2,000 per month), shall
be treated as costs of the Tenant Improvements, and shall be as
determined by Landlord in good faith upon completion of the Tenant
Improvements, subject only to Landlord's furnishing to Tenant
appropriate back-up information from the Contractor concerning the
increased costs and increased construction time.
6. TENANT'S WORK. Landlord and Tenant acknowledge and agree that certain work
required for Tenant's occupancy of the Leased Premises, including but not
limited to the procurement and installation of furniture, fixtures, equipment,
artwork and interior signage are beyond the scope of the Tenant Improvements and
shall be performed by Tenant or its contractors at Tenant's sole cost and
expense. All such work ("Tenant's Work") shall be subject to Landlord's prior
written approval. Tenant shall adopt a construction schedule for Tenant's Work
in conformance with the Contractor's schedule, and shall perform Tenant's Work
in such a way as not to hinder or delay the operations of Landlord or the
Contractor in the Building. Any costs incurred by Landlord as a result of any
interference with Landlord's operations by Tenant or its contractors shall be
promptly paid by Tenant to Landlord upon demand. Landlord shall make all
reasonable efforts to notify Tenant of any such interference of which Landlord
has actual knowledge, but failure to provide such notice shall in no way limit
Landlord's right to demand payment for such costs. Tenant's contractors shall be
subject to Landlord's prior written approval, and to the administrative
supervision of the Contractor. Tenant's Work shall comply with all of the
following requirements:
(a) Tenant's Work shall not proceed until Landlord has approved in
writing: (i) Tenant's contractors, (ii) proof of the amount and
coverage of public liability and property damage insurance carried
by Tenant's contractors in the form of an endorsed insurance
certificate naming Landlord, the Contractor, and the agents of
Landlord and the Contractor as additional insureds, in an amount not
less than two million dollars, and (iii) complete and detailed plans
and specifications for Tenant's Work.
(b) Tenant's Work shall be performed in conformity with a valid permit
when required, a copy of which shall be furnished to Landlord before
such work is commenced. In any event, all Tenant's Work shall comply
with all applicable laws, codes and ordinances of any governmental
entity having jurisdiction over the Building. Landlord shall have no
responsibility for Tenant's failure to comply with such applicable
laws. Any and all delay in obtaining a certificate of occupancy due
to Tenant's vendors is the responsibility of Tenant and shall be a
Tenant Delay.
2.
<PAGE> 34
(c) In connection with Tenant's Work (e.g., delivering or installing
furniture or equipment to the second floor of the Leased Premises),
Tenant or its contractors shall arrange for any necessary hoisting
or elevator service with Landlord and shall pay such reasonable
costs for such services as may be charged by Landlord.
(d) Tenant shall promptly pay Landlord upon demand for any extra expense
incurred by Landlord by reason of faulty work done by Tenant or its
contractors, by reason of damage to existing work caused by Tenant
or its contractors, or by reason of inadequate cleanup by Tenant or
its contractors.
7. COMPLETION; TENANT DELAY.
(a) Upon the earlier to occur of (i) Landlord's delivery to Tenant of a
certificate of occupancy issued by the City of San Jose for the
Leased Premises, (ii) Tenant's occupancy of all or part of the
Leased Premises for purposes of conducting business therein, (iii)
the date that Landlord's architect furnishes a certificate of
substantial completion confirming that the Tenant Improvements have
been substantially completed, subject to minor details of
construction, decoration or mechanical adjustment which do not
unreasonably affect Tenant's ability to do business in the Leased
Premises, or (iv) the date upon which Tenant opens for business in
the Leased Premises, the Tenant Improvements shall be deemed
complete and possession of the Leased Premises shall be deemed
delivered to Tenant for all purposes under the Lease.
(b) If Landlord shall be delayed in substantially completing the Tenant
Improvements as a result of:
(i) Tenant's failure to furnish the information, instructions and
plans required in paragraph 3 or approve the Working Drawings, within the
applicable time periods specified in paragraph 3; or
(ii) Any changes in the scope of the Tenant Improvements from
that set forth in the Space Planning Documents, or any Changes to the Working
Drawings requested by Tenant after approval thereof pursuant to paragraph 5
(including without limitation Tenant Changes which are requested but not
subsequently approved by Tenant pursuant to paragraph 5); or
(iii) Any interruption or interference in Landlord's construction
of the Tenant Improvements caused by Tenant, its contractors or its vendors; or
(iv) Tenant's failure to timely pay any amounts which Tenant is
obligated to pay under this Work Letter; or
(v) Any other act, neglect, failure or omission of Tenant, its
agents, employees or contractors (items (i) through (v) above being collectively
referred to as "Tenant Delays");
then the date upon which the payment of rental under the Lease, shall commence
shall be advanced by the cumulative duration of such Tenant Delays.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Work Letter
as of the respective dates set forth below.
LANDLORD:
CORPORATE TECHNOLOGY CENTRE ASSOCIATES II LLC, a
California limited liability company
By: CORPORATE TECHNOLOGY CENTRE PARTNERS II
LLC, a California limited liability
company, its Managing Member
By: Menlo Equities LLC, a California limited
liability company, its Managing Member
By: Diamant Investments LLC
Dated: 7/2/99 By:
----------------------------------
, Member
----------------------
TENANT:
ACTIVE TOUCH, INC., a California corporation
By: /s/ Subrah S. Iyar
-------------------------------------------------
Title: CEO
3.
<PAGE> 35
Dated: 7/1/99 By: /s/ Tom Colby
-------------------------------------------------
Title: Vice President Business Operations
4.
<PAGE> 36
EXHIBIT C
FORM OF TENANT ESTOPPEL CERTIFICATE
__________________, 19____
- --------------------------
- --------------------------
- --------------------------
- --------------------------
Re 110 Rose Orchard Way
San Jose, California
Ladies and Gentlemen:
Reference is made to that certain Lease, dated as of _______________, 19___,
between CORPORATE TECHNOLOGY CENTRE ASSOCIATES II LLC, a California limited
liability company ("Landlord"), and the undersigned (herein referred to as the
"Lease"). A copy of the Lease [and all amendment thereto] is[are] attached
hereto as EXHIBIT A. At the request of Landlord in connection with [____________
State reasons for request for estoppel certificate], the undersigned hereby
certifies to Landlord and to [_________ State names of other parties requiring
certification] and each of your respective successors and assigns as follows:
1. The undersigned is the tenant under the Lease.
2. The Lease is in full force and effect and has not been amended,
modified, supplemented or superseded except as indicated in Exhibit A.
3. There is no defense, offset, claim or counterclaim by or in favor of
the undersigned against Landlord under the Lease or against the obligations of
the undersigned under the Lease. The undersigned has no renewal, extension or
expansion option, no right of first offer or right of first refusal and no other
similar right to renew or extend the term of the Lease or expand the property
demised thereunder except as may be expressly set forth in the Lease.
4. The undersigned is not aware of any default now existing of the
undersigned or of Landlord under the Lease, nor of any event which with notice
or the passage of time or both would constitute a default of the undersigned or
of Landlord under the Lease.
5. The undersigned has not received notice of a prior transfer,
assignment, hypothecation or pledge by Landlord of any of Landlord's interest in
the Lease.
6. The monthly rent due under the Lease is $____________ and has been
paid through __________________, and all additional rent due and payable under
the Lease has been paid through _________________.
7. The term of the Lease commenced on __________________, and expires on
___________________, unless sooner terminated pursuant to the provisions of the
Lease. Landlord has performed all work required by the Lease for the
undersigned's initial occupancy of the demised property.
8. The undersigned has deposited the sum of $____________ with Landlord
as security for the performance of its obligations as tenant under the Lease,
and no portion of such deposit has been applied by Landlord to any obligation
under the Lease.
9. There is no free rent period pending, nor is Tenant entitled to any
Landlord's contribution.
The above certifications are made to Landlord and Lender knowing that Landlord
and Lender will rely thereon in accepting an assignment of the Lease.
Very truly yours,
ACTIVE TOUCH, INC., a California corporation
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
1.
<PAGE> 37
EXHIBIT D
FORM OF LEASE COMMENCEMENT DATE CERTIFICATE
This Lease Commencement Date Certificate is entered into by Landlord and Tenant
pursuant to the Work Letter attached as Exhibit B to the Lease.
1. (a) Landlord: Corporate Technology Centre Associates II LLC, a
California limited liability company
(b) Tenant: Active Touch, Inc., a California corporation
(c) Lease: Lease dated June __, 1999 between Landlord and Tenant.
(d) Leased Premises: 110 Rose Orchard Way, San Jose, California
2. CONFIRMATION OF LEASE COMMENCEMENT.
Landlord and Tenant confirm that the Lease Commencement Date is
____________ and the Expiration Date is ______________ and that Article 1 of the
Lease is amended accordingly.
Landlord and Tenant have executed this Lease Commencement Date
Certificate as of the dates set forth below.
LANDLORD:
CORPORATE TECHNOLOGY CENTRE ASSOCIATES II LLC, a
California limited liability company
By: CORPORATE TECHNOLOGY CENTRE PARTNERS II
LLC, a California limited liability
company, its Managing Member
By: Menlo Equities LLC, a California limited
liability company, its Managing Member
Dated: By:
--------------- ----------------------------------------
, Member
-----------------------------
TENANT:
ACTIVE TOUCH, INC., a California corporation
By:
------------------------------------------------
Title:
---------------------------------------------
Dated: By:
--------------- ------------------------------------------------
Title:
---------------------------------------------
1.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
WebEx, Inc.:
We consent to the use of our report included herein and to the reference to our
firm under the headings "Experts" and "Selected Financial Data" in the
prospectus.
/s/ KPMG LLP
Mountain View, California
March 30, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998 DEC-31-1999
<PERIOD-START> JAN-01-1997 JAN-01-1998 JAN-01-1999
<PERIOD-END> DEC-31-1997 DEC-31-1998 DEC-31-1999
<CASH> 58 5,522 13,621
<SECURITIES> 0 0 0
<RECEIVABLES> 118 223 2,759
<ALLOWANCES> 0 (22) (310)
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 181 5,759 17,438
<PP&E> 147 338 2,536
<DEPRECIATION> (58) (115) (369)
<TOTAL-ASSETS> 283 5,991 21,649
<CURRENT-LIABILITIES> 615 879 6,850
<BONDS> 0 0 0
0 0 0
0 7,105 29,108
<COMMON> 0 0 0
<OTHER-SE> (332) (1,993) (14,309)
<TOTAL-LIABILITY-AND-EQUITY> 283 5,991 21,649
<SALES> 0 0 0
<TOTAL-REVENUES> 1,289 1,987 2,607
<CGS> 0 0 0
<TOTAL-COSTS> 192 484 688
<OTHER-EXPENSES> 1,071 3,918 16,129
<LOSS-PROVISION> 0 22 288
<INTEREST-EXPENSE> 0 0 0
<INCOME-PRETAX> 32 (2,437) (14,498)
<INCOME-TAX> 6 0 0
<INCOME-CONTINUING> 26 (2,335) (14,371)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 28 (2,335) (14,371)
<EPS-BASIC> 0.00 (0.23) (1.34)
<EPS-DILUTED> 0.00 (0.23) (1.34)
</TABLE>
