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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST , 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CYBERMEDIA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
DELAWARE 7372 95-4347239
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
3000 OCEAN PARK BLVD., SUITE 2001
SANTA MONICA, CALIFORNIA 90405
(310) 581-4700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
UNNI S. WARRIER
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
CHAIRMAN OF THE BOARD
CYBERMEDIA, INC.
3000 OCEAN PARK BLVD., SUITE 2001
SANTA MONICA, CALIFORNIA 90405
(310) 581-4700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
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ARTHUR F. SCHNEIDERMAN EDWARD M. LEONARD
JUDITH M. O'BRIEN JOHN A. DENNISTON
WILSON SONSINI GOODRICH & ROSATI BROBECK, PHLEGER & HARRISON LLP
PROFESSIONAL CORPORATION TWO EMBARCADERO PLACE
650 PAGE MILL ROAD 2200 GENG ROAD
PALO ALTO, CALIFORNIA 94304 PALO ALTO, CA 94303
(415) 493-9300 (415) 424-0160
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. /X/
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CALCULATION OF REGISTRATION FEE
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AMOUNT TO PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED SHARE(1) PRICE(1) FEE
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Common Stock, $0.01 par value $ $37,950,000 $13,087
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(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(a).
(2) Includes shares which the Underwriters have the option to
purchase to cover over-allotments, if any.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS 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
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED SEPTEMBER , 1996
PROSPECTUS
SHARES
[LOGO]
COMMON STOCK
All of the shares of Common Stock offered hereby are being sold
by CyberMedia, Inc. (the "Company"). Prior to this offering, there has been no
public market for the Common Stock of the Company. It is currently estimated
that the initial public offering price will be between $ and
$ per share. See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price. The Company has
applied to have the Common Stock approved for quotation on the Nasdaq
National Market under the symbol CYBR.
------------------------
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 5.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) COMPANY (2)
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Per Share......................... $ $ $
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Total (3)......................... $ $ $
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(1) See "Underwriting" for indemnification arrangements with the several
Underwriters.
(2) Before deducting estimated expenses payable by the Company estimated at
$ .
(3) The Company has granted the Underwriters a 30-day option to purchase up to
additional shares of Common Stock solely to cover
over-allotments, if any. If all such shares are purchased, the total Price
to Public, Underwriting Discount and Proceeds to Company will be
$ , $ and $ , respectively. See "Underwriting."
------------------------
The shares of Common Stock are offered by the several Underwriters subject
to prior sale, receipt and acceptance by them and subject to the right of the
Underwriters to reject any order in whole or in part and certain other
conditions. It is expected that certificates for such shares will be ready for
delivery on or about , 1996, at the office of the agent of Hambrecht
& Quist LLC in New York, New York.
HAMBRECHT & QUIST
LEHMAN BROTHERS
WESSELS, ARNOLD & HENDERSON
, 1996
<PAGE> 3
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the Financial Statements and Notes thereto appearing elsewhere
in this Prospectus. The shares of Common Stock offered hereby include a high
degree of risk. Investors should carefully consider the information set forth
under the heading "Risk Factors."
THE COMPANY
CyberMedia is a leading provider of automatic service and support software
products for Windows-based personal computer ("PC") users. The Company's First
Aid products enable PC users to diagnose and resolve problems automatically
without relying on costly and increasingly scarce technical support resources.
To date, the Company has sold over one million units of its First Aid family of
products. The Company's latest product, Oil Change (released in beta version in
June 1996) is designed to offer PC users a one-stop solution for automatically
updating their software applications and device drivers over the Internet.
In today's typical Windows-based PC configuration, the integration of a
wide range of hardware and software components from different vendors has
resulted in an increase in both the number and types of system errors and
technical difficulties. Both PC users and software and hardware vendors share a
common need for the timely resolution of technical support problems. These
technical support problems are compounded by both the complexity of today's PC
environment and a decline in the average technical sophistication of PC users.
Dataquest estimates that approximately 200 million calls are expected to be
received at technical support centers nationwide in 1996, resulting in
expenditures of nearly $4 billion. In response to cost pressures and an often
unmanageable level of technical support calls, many software and hardware
vendors are scaling back or completely eliminating the technical support that
they once provided free of charge.
The Company has developed an innovative, vendor-neutral, automated approach
to technical support that enables the Company to deliver among the most
comprehensive and easy to use software support solutions available today for
Windows-based PC users. The Company's products are based on its scalable
ActiveHelp architecture that allows for the support of a broad range of PC
products and related problems and enables the Company's products to be regularly
and automatically updated through the Internet. The Company's objective is to
capitalize on the growing need for technical support by being first to market
with innovative products and product upgrades that leverage the Company's
proprietary technology and incorporate feedback from its extensive user base.
The Company's First Aid products utilize a knowledge base of general and
system-specific information supporting a wide range of software applications,
multimedia cards, modems, video cards and networks that, in aggregate, resolve
over 10,000 potential combinations of problems. The Company has introduced
several versions of First Aid, including First Aid 95 and First Aid 95 Deluxe in
September 1995 and March 1996, respectively, for the retail distribution
channels and First Aid 95 Deluxe, Network Version in June 1996 for the corporate
market. The First Aid title ranked in the top ten of all Windows 95 software
applications sold in the United States (by number of units) in each month from
November 1995 to June 1996 (PC Data).
The Company believes that the Internet is emerging as a medium for vendors
to quickly and cost-effectively disseminate software updates and patches to
correct problems or resolve compatibility issues associated with their products.
Despite the potential benefits of the Internet, few PC users have the time or
technical knowledge required to identify, locate, download and install the
updates and patches that apply to their PCs.
CyberMedia's Oil Change is designed to enable PC users to keep their
systems up-to-date, thereby enhancing overall system performance and avoiding
problems frequently encountered as a result of outdated software and device
drivers. The Company seeks to establish Oil Change as the de facto standard for
PC users to obtain updates and patches to third-party software applications and
device drivers over the Internet. The Company intends to launch the commercial
version of Oil Change during the fourth quarter of 1996 through both the retail
distribution channels and the Internet.
The Company sells its products to individual and corporate users primarily
through retail distribution channels and direct mail. The Company is expanding
the marketing and sale of its products through the Internet, internationally and
through strategic relationships.
3
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THE OFFERING
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Common Stock offered by the Company..................... shares
Common Stock to be outstanding after the offering....... shares (1)
Use of proceeds......................................... For working capital, repayment of
debt and other general corporate
purposes.
Proposed Nasdaq National Market symbol.................. CYBR
</TABLE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
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1991 1992 1993 1994 1995 1995 1996
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STATEMENT OF OPERATIONS DATA:
Net revenues.................. $ - $ 20 $ 55 $ 241 $ 4,797 $ 1,724 $13,949
Gross profit.................. - 20 41 135 2,694 1,306 9,061
Total operating expenses...... 19 352 772 1,230 5,987 1,336 11,265
Loss from operations.......... (19) (332) (731) (1,095) (3,293) (30) (2,204)
Net loss...................... $ (19) $ (333) $ (732) $(1,115) $(3,352) $ (57) $(2,229)
Net loss per share (2)........ $ $ $ $ $ $ $
Shares used in per share
calculation (2)............
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
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PRO FORMA
ACTUAL PRO FORMA (3) AS ADJUSTED (4)
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BALANCE SHEET DATA:
Cash and cash equivalents.............................. $ 569 $ 7,176 $
Working capital (deficit).............................. (2,339) 4,268
Total assets........................................... 7,088 13,695
Note payable, long-term................................ 400 400
Total stockholders' equity (deficiency)................ (2,095) 4,512
</TABLE>
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(1) Based on shares outstanding at June 30, 1996. Excludes (i) 1,513,016 shares
of Common Stock subject to options outstanding as of June 30, 1996 at a
weighted average exercise price of $1.51 per share and (ii) 277,459 shares
of Common Stock reserved for issuance under the Company's Amended 1993 Stock
Plan, 1996 Director Option Plan and 1996 Employee Stock Purchase Plan. In
August 1996, an additional 1,000,000 shares of Common Stock were authorized
and reserved for issuance under the Amended 1993 Stock Plan. See
"Management -- Director Compensation," "-- Employee Benefit Plans,"
"Description of Capital Stock" and Notes 8, 9, 11 and 15 of Notes to
Financial Statements.
(2) See Note 1 of Notes to Financial Statements for an explanation regarding per
share calculations.
(3) Reflects (i) the sale in July 1996 of 1,666,667 shares of Series C Preferred
Stock, convertible into approximately 833,334 shares of Common Stock, for
$5.0 million, (ii) the exercise of all outstanding warrants and (iii) the
conversion of each share of Preferred Stock into one-half share of Common
Stock upon the closing of this offering.
(4) As adjusted to reflect the sale of shares of Common Stock offered by
the Company at an assumed initial public offering price of $ per
share and the application of the estimated net proceeds therefrom. See "Use
of Proceeds" and "Capitalization."
------------------------
Unless otherwise indicated, all information in this Prospectus (a) reflects
the one-for-two reverse stock split of the Company's Common Stock effected in
August 1996 and the adjustment to the conversion ratio, such that upon the
closing of this offering, each outstanding share of Preferred Stock shall
automatically convert into one-half share of Common Stock, (b) gives effect to
the reincorporation of the Company from California to Delaware, which will occur
prior to this offering and (c) assumes no exercise of the Underwriters'
over-allotment option. See "Description of Capital Stock," "Underwriting" and
Notes 8 and 15 of Notes to Financial Statements.
4
<PAGE> 6
RISK FACTORS
The Common Stock offered hereby involves a high degree of risk. In addition
to the other information in this Prospectus, the following factors should be
considered carefully in evaluating an investment in the shares of Common Stock
offered by this Prospectus. The Prospectus contains forward-looking statements
that involve risks and uncertainties. The Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those set forth below and elsewhere in this
Prospectus.
Limited Operating History and History of Operating Losses. The Company has
only a limited operating history upon which to base an evaluation of its
business and prospects. The Company commenced operations in November 1991, and
introduced its first automatic service and support product, Win Win, in 1993.
The Company introduced the first Windows 95 compatible version of its First Aid
product line in September 1995. During 1996, both the Company's net revenues and
operating expenses, particularly sales and marketing expenditures, increased
rapidly compared to prior periods. From inception to June 30, 1996, the Company
generated net revenues of $19.1 million, of which $13.9 million, or 73%, was
generated in the six months ended June 30, 1996. The Company has incurred net
losses in each of the last five fiscal years and for the six months ended June
30, 1996, resulting in an accumulated deficit of $7.8 million at June 30, 1996.
There can be no assurance that the Company's net revenues will continue to
remain at or increase from the level experienced in the first six months of 1996
or that net revenues will not decline. The Company anticipates that in the
future it will make significant investments in its operations, particularly to
support sales activities, and that as a result, operating expenses will increase
significantly. If net revenues do not correspondingly increase, the Company is
likely to continue to incur net losses and its financial condition will be
materially adversely affected. The Company has not yet achieved profitability,
and there can be no assurance that the Company will achieve or sustain
profitability on a quarterly basis or annual basis. Furthermore, operating
results for future periods are subject to numerous uncertainties. The Company's
prospects must be considered in light of the risks encountered by companies with
limited operating histories, particularly companies in new and rapidly evolving
markets. In addition, the Company's future operating results will depend upon,
among other factors, the demand for the Company's software products, the level
of product and price competition, the Company's success in expanding its direct
and indirect distribution channels, the Company's success in attracting and
retaining motivated and qualified personnel, the ability of the Company to
develop and market new products and product upgrades and manage product
transitions, the ability of the Company to control costs, the growth of activity
on the Internet and the World Wide Web (the "Web"), and general economic
conditions. Many of these factors are beyond the Company's control. If the
Company is not successful in addressing such risks, the Company will be
materially and adversely affected. See "-- Potential Fluctuations in Quarterly
Results; Seasonality," "-- Product Concentration; Risks Associated With First
Aid Upgrades," "-- Developing Market" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
Potential Fluctuations in Quarterly Results; Seasonality. The Company's
quarterly operating results have fluctuated in the past and are expected to
fluctuate significantly in the future. These fluctuations may arise from a
number of factors, including the number and timing of new product introductions,
upgrades and product enhancements by the Company or its competitors, purchasing
patterns of distributors and customers, marketing and promotional programs,
pricing and other competitive pressures, order deferrals and product returns in
anticipation of new products or upgrades to existing products, the mix of
distribution channels through which the Company's products are sold, the
Company's decisions regarding hiring and other expenses, market acceptance of
the Company's products, market acceptance of commerce over the Internet,
technological limitations of the Internet, the developing nature of the market
for the Company's products, general economic conditions and other factors. The
Company generally ships products as orders are received and, accordingly, the
Company has historically operated with relatively little backlog. As a result,
quarterly revenues will depend predominantly on the volume and timing of orders
received during a particular quarter, both of which are difficult to forecast.
With the introduction of First Aid 95, the Company significantly increased its
level of operating expenses. The Company anticipates that its operating expenses
will continue to increase substantially in the future as a result of efforts to
expand its sales and marketing operations, including expanding its international
sales, to fund greater levels of product development, and to increase its
5
<PAGE> 7
administrative infrastructure. To the extent that such expenses precede or are
not subsequently followed by increased net revenues, the Company's business,
results of operations and financial condition will be materially adversely
affected. A relatively high percentage of the Company's expenses is fixed in the
short term and the Company is generally unable to adjust spending in a timely
manner to compensate for shortfalls in net revenues. In addition, the consumer
software industry in which the Company operates has seasonal elements. In recent
years, the consumer software industry has experienced relatively higher demand
for software products in the fourth quarter due to year-end holiday buying and
relatively lower demand in the summer months. If net revenues fall below the
Company's expectations, expenditure levels as a percentage of total net revenues
could be disproportionately high, and operating results would be immediately and
adversely affected. The Company believes that period-to-period comparisons of
its operating results are not meaningful and should not be relied upon as any
indication of future performance. Due to the foregoing factors, among others, it
is likely that the Company's future quarterly operating results from time to
time will not meet the expectations of securities analysts or investors, which
may have an adverse effect on the price of the Company's Common Stock. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Product Concentration; Risks Associated with First Aid Upgrades. During
1995 and the first half of 1996, over 90% of the Company's net revenues were
attributable to sales of its First Aid products. The Company anticipates that
sales of its First Aid products will account for substantially all of the
Company's net revenues during 1996, and a substantial majority of its net
revenues in 1997. There can be no assurance that net revenues from the First Aid
products will continue to grow at historical rates or be sustainable at current
levels. The Company's future financial performance will depend in large part on
the successful development, introduction and customer acceptance of new product
offerings and enhanced versions of the First Aid products. The Company is
currently upgrading its First Aid products to incorporate new features to
respond to evolving technical support and competitive developments. These
upgrades are scheduled to be released in the fourth quarter of 1996 under the
First Aid 97 title. Distributors may delay or cancel orders and return or reduce
current inventory levels of First Aid 95 products in anticipation of the release
of these upgrades. Furthermore, any failure or delays in releasing First Aid 97
upgrades as announced could increase the risk of such actions by distributors.
In addition, the Company recently introduced a new product, Oil Change, in beta
version. To date, Oil Change has not generated any net revenues and the Company
does not expect it to generate significant net revenues for at least the near
future. There can be no assurance that Oil Change will generate significant net
revenues at any time in the future. Any decline in the demand for First Aid
products, failure to achieve market acceptance of upgrades to such products or
failure of net revenues derived from such products to meet the Company's
expectations, whether as a result of competition, technological change or other
factors, would have a material adverse effect on the Company's business, results
of operations and financial condition. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations," "Business -- Products," and
"-- Technology."
Management of Growth; Dependence on Key Personnel. The Company's business
has grown rapidly during the past year and such growth has placed and, if
sustained, will continue to place, significant demands on the Company's
management and resources. Recently, the Company has significantly increased the
scale of its operations to support increased sales volumes and to address
critical infrastructure and other requirements. This increase included
substantial investments in sales and marketing to support sales activities and
the hiring of a number of new employees, which have resulted in higher operating
expenses. Between December 1, 1995 and July 31, 1996, the number of Company
employees increased from approximately 20 to approximately 104 and the Company
currently expects to hire many additional employees during 1996. The Company's
ability to manage any future growth, should it occur, will continue to depend
upon the successful expansion of its sales, marketing, research and development,
customer support and administrative infrastructure and the ongoing
implementation and improvement of a variety of internal management systems,
procedures and controls. There can be no assurance that the Company will be able
to attract, manage and retain additional personnel to support any future growth
or will not experience significant problems with respect to any infrastructure
expansion or the attempted implementation of systems, procedures and controls.
Any failure in one or more of these areas would have a material adverse effect
on the Company's business, results of operations and financial condition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
6
<PAGE> 8
The Company's future success also depends on its continuing ability to
attract and retain highly qualified technical personnel. Competition for such
personnel is intense and there can be no assurance that the Company will be able
to retain its key technical employees or that it will be able to attract and
retain additional highly qualified technical personnel in the future. Any
inability to attract and retain the necessary technical personnel could have a
material adverse effect on the Company's business, results of operations and
financial condition.
The Company is dependent upon certain of its executive officers. The
Company does not maintain any key person insurance policies on the lives of any
of the executive officers. The loss of or inability to retain these key
executive officers for any reason could have a material adverse effect upon the
Company's business, results of operations and financial condition. See
"Management."
Competition. The PC software industry is intensely competitive and
characterized by short product life cycles and frequent new product
introductions. The Company competes with software companies of varying sizes and
resources, including SystemSoft Corporation, Quarterdeck Corporation, Symantec
Corp. and others. The Company believes that a number of software companies will
be introducing automatic service and support software products in the near
future that will compete with the Company's products. The Company expects that
potential future competitors may include other software vendors, including
Internet software vendors. Many of the Company's existing and potential
competitors have substantially greater financial, technical and marketing
resources than the Company. Moreover, there are no proprietary barriers to entry
that could keep existing and potential competitors from developing similar
products or selling competing products in the Company's markets. To the extent
that the Company's competitors bundle their software products with leading
hardware, application software or operating system vendors, or if one or more of
the operating system vendors, such as Microsoft, developed its own technical
support software and incorporated such functionality into its products, the
Company's business, results of operation and financial condition could be
materially adversely affected. There can be no assurance that the Company will
be able to compete successfully with existing or potential competitors.
Increased competition may result in the loss of shelf space or a reduction in
demand or sell-through of the Company's products, any of which could have a
material adverse effect on the Company's business, results of operations and
financial condition.
Microsoft's position as a large, well-capitalized software company with a
dominant share of the market for PC operating system software could enable it to
develop products that compete effectively with those of the Company. In
particular, Microsoft is incorporating "Plug and Play" capabilities into future
versions of its operating systems. Plug and Play capabilities are designed to
allow PC users to add on any computer peripheral (such as a modem, video or
sound card) to a Windows-based system and enable that peripheral to work
immediately, without concern for software configuration errors or driver
conflicts. In addition, to the extent that Microsoft incorporates functionality
comparable, or perceived as comparable, to those offered by the Company into its
Windows products (or separately offers comparable products), sales of the
Company's products could be materially adversely affected. There can be no
assurance that any such action by Microsoft or others would not render the
Company's products noncompetitive or obsolete.
The Company's products also compete indirectly against alternative sources
of technical support, such as the technical support departments of hardware and
software vendors. Additionally, the Internet provides hardware and software
vendors with a new medium to offer technical support services. The Company
expects that many vendors will provide Internet-based technical support services
to support their existing and future products. The availability of these
technical support services could materially dilute the value of the Company's
products and have a material adverse effect on the Company's market position,
business, results of operations and financial condition. See
"Business -- Industry Background."
In addition, the Company may face increasing pricing pressures from current
and future competitors and, accordingly, there can be no assurance that
competitive pressures will not require the Company to reduce its prices. Any
material reduction in the price of the Company's products would negatively
affect the Company's business, results of operations and financial condition,
and would require the Company to increase unit sales in order to maintain
historic levels of net revenues. There can be no assurance that competitors will
not develop
7
<PAGE> 9
products that are superior to the Company's products or that achieve greater
market acceptance and thereby negatively affect sales of the Company's products.
See "Business -- Distribution and Marketing" and "-- Competition."
Dependence on Microsoft Windows. The Company's success is dependent on the
continued widespread use of Microsoft Windows ("Windows") operating systems for
personal computers. The Company's First Aid products automatically detect,
diagnose and resolve common software conflicts and configuration errors arising
in the Windows operating environment. Although Windows operating systems are
currently used by many personal computer users, other companies, including
International Business Machines Corporation and Apple Computer, Inc., have
developed or are developing other operating systems that compete, or will
compete, with Windows. In the event that any of these alternative operating
systems become widely accepted in the personal computer marketplace, demand for
the Company's products could be adversely affected, thereby materially adversely
affecting the Company's business, results of operation and financial condition.
In addition, Microsoft may introduce a new operating system to replace Windows
or could incorporate some or many of the key features of the Company's First Aid
products in new versions of its operating systems, thereby eliminating the need
for users to purchase the Company's products. The inability to adapt current
products or to develop new products for use with any new operating systems on a
timely basis would have a material adverse effect on the Company's business,
results of operation and financial condition.
In addition, the Company's ability to develop products based on Windows
operating systems and release these products immediately prior to, or at the
time of Microsoft's release of new and upgraded Windows products is
substantially dependent on its ability to gain pre-release access to, and to
develop expertise in, current and future versions of Windows. There can be no
assurance that the Company will be able to provide products that are compatible
with future Windows releases on a timely basis, with or without the cooperation
of Microsoft.
Developing Market. The Company's products address the new and rapidly
evolving category of automatic service and support software. The market for
automatic service and support software products has only recently begun to
develop and is characterized by an increasing number of existing and potential
market entrants who are in the process of introducing or developing automatic
service and support software. As is typical in the case of a new and rapidly
evolving market, the demand and market acceptance for recently introduced
products are subject to a high level of uncertainty and risk. It is difficult to
predict the future growth rate and size of this market. There can be no
assurance that the market for the Company's products will develop, that demand
for the Company's products or for automatic service and support software
products in general will increase or that the rate of growth of this demand will
be sustainable or will not decrease. The Company's ability to develop and market
successfully additional products depends substantially on the acceptance of
automatic service and support software by individual and corporate users as an
effective means of addressing their technical support requirements. If the
market fails to develop, develops more slowly than expected or becomes saturated
with competitors, or if the Company's products do not achieve or sustain market
acceptance, the Company's business, results of operations and financial
condition will be materially adversely affected. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations,"
"Business -- Industry Background" and "Business -- Products."
New Product Development and Technological Change. Substantially all of the
Company's net revenues have been derived, and substantially all of the Company's
future net revenues are expected to be derived, from the sale of its automatic
service and support software products. The market for automatic service and
support software products is characterized by rapid technological advances,
evolving industry standards in computer hardware and software technology and
frequent new product introductions and enhancements. The Company's products must
be continually updated to address the new and evolving technical support
requirements of third-party hardware and software. Failure to anticipate
technical difficulties that arise from use of these third-party products and
incorporate solutions to such difficulties into the Company's products would
have a material adverse effect on continued market acceptance of the Company's
products. The Company's ability to design, develop, test and support on a timely
basis new software products, updates and enhancements that respond to
technological developments and emerging industry standards is critical to the
Company's future success. The Company is currently upgrading its First Aid
products and expects these upgrades to be released in the fourth
8
<PAGE> 10
quarter of 1996. There can be no assurance that the Company will be successful
in such efforts or that the Company will not experience difficulties that could
delay or prevent the successful development, introduction and marketing of new
products and enhancements, or that its new products, upgrades and enhancements
will adequately meet the requirements of the marketplace and achieve market
acceptance. The introduction of new products, upgrades or enhanced versions of
existing products is subject to the risk of development delays due to resource
constraints, technological change and other reasons. If the Company is unable to
develop on a timely basis new software products, upgrades or enhancements to
existing products or if such new products, upgrades or enhancements do not
achieve market acceptance, the Company's business, results of operations and
financial condition would be materially adversely affected. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Business -- Products," " -- Technology" and " -- Product Development."
The Company currently employs software engineers in India on a
work-for-hire basis. These engineers are primarily responsible for updating the
Company's knowledge bases for current applications and upgrades. Certain of
these engineers are responsible for adapting the Company's First Aid products to
Windows NT. Any loss of the services of these engineers due to political or
economic instability or for any other reason could adversely affect the
Company's product development efforts and thereby could materially adversely
affect the Company's business, results of operations and financial condition.
See "Business -- Product Development."
Dependence on Distribution Channels. The Company currently sells its First
Aid products primarily through distributors for resale to the retail channel and
through direct mail. Sales to such distributors and sales through direct mail
accounted for approximately 60% and 40%, respectively, of the Company's net
revenues in the first six months of 1996. Sales from direct mail have
historically operated at lower profitability levels than sales from
distributors. There can be no assurance that the mix or relative profitability
of such sales will remain at current levels in the future. The Company is
evaluating the use of alternative distribution channels for its products and
began distributing a beta version of Oil Change through the Internet in June
1996.
Sales to a limited number of distributors have constituted and are expected
to continue to constitute a substantial portion of the Company's net revenues.
Sales to the Company's top three distributors, Navarre Corporation ("Navarre"),
Ingram Micro, Inc. ("Ingram Micro") and Micro Central, Inc. ("Micro Central"),
accounted for approximately 22%, 20% and 11%, respectively, of the Company's net
revenues in the six months ended June 30, 1996. The loss of, or reduction in,
orders from any of these major distributors could have a material adverse effect
on the Company's business, results of operations and financial condition.
Financial difficulties of a distributor could render the Company's associated
accounts receivable uncollectible, which could have a material adverse effect on
the Company's business, results of operation and financial condition. In
addition, any special distribution arrangements or product pricing arrangements
that the Company for strategic purposes may implement in one or more of its
distribution channels could materially adversely affect its margins.
The distribution channels through which consumer software products are sold
have been characterized by rapid change, including consolidations and financial
difficulties of certain distributors and retailers and the emergence of new
retailers such as general mass merchandisers. In addition, due to an increase in
the number of software applications, there are an increasing number of companies
competing for access to these channels. Retailers of the Company's products
typically have a limited amount of shelf space and promotional resources, and
there is intense competition for high quality and adequate levels of shelf space
and promotional support from the retailers. The Company believes this
competition for shelf space will increase in the near term as competitors
introduce new automatic service and support software. There can be no assurance
that retailers will continue to purchase the Company's products or provide the
Company's products with adequate levels of shelf space and promotional support,
the lack of which would have a material adverse effect on the Company's
business, results of operations and financial condition. See
"Business -- Distribution and Marketing."
Risk of Product Returns. The Company's business includes a substantial risk
of product returns from distributors and retailers, either through the exercise
of contractual return rights or as a result of the Company's policy of assisting
customers in balancing and updating inventories. Individual end users may return
products within 60 days of the date of purchase for a full refund. Most
retailers and distributors also
9
<PAGE> 11
have the ability to return products to the Company for a full refund. In
addition, competitors' promotional or other activities could cause returns to
increase sharply at any time. Further, the rate of product returns could
increase if general mass merchandisers become a larger percentage of the
Company's business or other changes in the Company's distribution channel occur.
Large shipments in anticipation of unrealized demand can lead to overstocking by
the Company's distributors or retailers and result in substantial product
returns. In addition, the inventory transition resulting from the introduction
of product upgrades, including the currently planned introduction of First Aid
97 products, could result in an increased level of returns for prior versions.
Furthermore, the risk of product returns will increase if demand for the
Company's products declines.
Although the Company establishes reserves based on estimated future returns
of products, taking into account promotional activities, the timing of new
product introductions, distributor and retailer inventories of the Company's
products and other factors, there can be no assurance that actual levels of
returns will not significantly exceed amounts anticipated by the Company. In
addition, the Company provides price protection to its distributors in the event
the Company reduces its prices. Any material increase in the level of returns
could materially adversely affect the Company's business, results of operations
and financial condition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business -- Distribution and
Marketing."
Dependence on the Internet. The commercial viability of Oil Change and the
Company's ability to execute its strategy to leverage Oil Change as an
Internet-based platform for other products and services are dependent upon the
continued development and acceptance of the Internet as a delivery medium for
third-party software programs. In addition, the Company's future success may be
dependent upon continued growth in the use of the Internet in order to support
the distribution of products and future upgrades. The use of the Internet as a
distribution channel is new and unproven and represents a significant departure
from traditional distribution methods employed by software companies. Critical
issues concerning the commercial use of the Internet (including security,
reliability, cost, ease of use and access and speed) remain unresolved and may
affect the use of the Internet as a medium to distribute software. There can be
no assurance that the use of the Internet as a distribution channel will be
effective for either current or future products. The failure of the Internet to
be an effective distribution channel could have a material adverse effect on the
Company's business and prospects. The Company's future success depends, in part,
upon the future growth of the Internet for commercial transactions. There can be
no assurance that communication or commerce over the Internet will become
widespread and it is not known whether this market will develop to the extent
necessary for demand for the Company's products to emerge and become
sustainable. The Internet may not prove to be a viable commercial marketplace
for a number of reasons, including inadequate communications bandwidth and
secure payment mechanisms. To the extent that the Internet continues to
experience significant growth in the number of users and level of use, there can
be no assurance that the Internet infrastructure will continue to be able to
support the demands placed upon it. Moreover, the Internet could lose its
viability due to delays in the development or adoption of new standards and
protocols required to handle increased levels of Internet activity or due to
increased governmental regulation. Changes in or insufficient availability of
telecommunications services to support the Internet also could result in slower
response times which might adversely affect customers' ability or willingness to
access the Company's products or upgrades over the Internet. In addition, the
security and privacy concerns of existing and potential customers, as well as
concerns related to computer viruses, may inhibit the growth of the Internet
marketplace generally and the customer base for the Company's Oil Change product
in particular. The viability of Oil Change also depends upon the continuation of
the current practice of publishing new updates and patches to commonly used
software applications and device drivers on vendors' Web sites.
If use of the Internet does not continue to grow, if the Internet
infrastructure does not effectively support customer demand or if hardware and
software vendors do not continue to post updates and patches on the Internet,
the Company's business, results of operations and financial condition could be
materially adversely affected. If users fail to accept Oil Change as a technical
support solution, the Company may have to expend significant resources to
educate users and create demand for Oil Change. See "Business -- Products,"
"-- Technology" and "-- Distribution and Marketing."
10
<PAGE> 12
Limited Protection of Proprietary Rights. The Company's success is heavily
dependent upon its proprietary software. The Company relies primarily on a
combination of copyright, trademark and trade secret laws, employee
confidentiality and nondisclosure agreements and third-party nondisclosure
agreements and other methods of protection common in the industry to protect its
proprietary rights. The Company licenses its products primarily under "shrink
wrap" license agreements that are not signed by licensees and therefore may be
unenforceable under the laws of certain jurisdictions. In addition, the Company
has two United States patent applications pending and intends to seek
international and further United States patents on its technology. There can be
no assurance that patents will issue from the Company's pending applications or
that any claims allowed from the pending patent applications or those hereafter
filed will be of sufficient scope or strength, or be issued in all countries
where the Company's products can be sold, to provide meaningful protection or
any commercial advantage to the Company or that any patents which may be issued
to the Company will not be challenged and invalidated. In addition, existing
copyright laws provide only limited protection. Despite the Company's efforts to
protect its proprietary rights, unauthorized parties may attempt to copy or
otherwise obtain and use the Company's products or technology that the Company
considers proprietary, and third parties may develop similar technology
independently. Policing unauthorized use of the Company's products is difficult,
and while the Company is unable to determine the extent to which piracy of its
software products exists, software piracy can be expected to be a persistent
problem. There can be no assurance that the Company's means of protecting its
proprietary rights will be adequate. In addition, there can be no assurance that
the Company's competitors will not independently develop technologies and
products that are substantially equivalent or superior to those of the Company
without violating the Company's proprietary rights.
As the number of software products in the industry increases and the
functionality of these products increasingly overlaps, software developers may
become increasingly subject to infringement claims. From time to time, the
Company has received communications from third parties asserting that certain
products may infringe upon intellectual property rights of others. To date, no
such claim has resulted in litigation or the payment of any damages. However,
there can be no assurance that existing or future infringement claims against
the Company with respect to current or future products will not result in costly
litigation or require the Company to enter into royalty bearing licenses with
third parties or to discontinue use of certain portions of the Company's
technology if licenses are not available on acceptable terms.
While to date the Company's international sales have been insignificant,
the Company intends to devote substantial resources in an effort to expand the
international distribution of its products. The laws of some foreign countries
either do not protect the Company's proprietary rights or offer only limited
protection for those rights. The Company has not registered its copyrights in
any foreign countries. While in most foreign countries registration is not
required in order to receive copyright protection, the ability to bring an
enforcement action and obtain certain remedies depends on compliance with that
country's copyright laws. Consequently, the Company's failure to register its
copyrights abroad may make enforcement of these rights more difficult or reduce
the available remedies in any enforcement action. In addition, the Company has
not to date pursued foreign registration of its trademarks due to the
significant costs involved and, as a result, the Company may not be able to
prevent a third party from using its trademarks in many foreign jurisdictions.
See "Business -- Proprietary Rights."
System Interruption and Security Risks. The Company's ability to provide
product functionality through the Internet is dependent on its ability to
protect its system from interruption, whether by damage from fire, earthquake,
power loss, telecommunications failure, unauthorized entry or other events
beyond the Company's control. Most of the Company's computer equipment,
including its processing equipment, is currently located at a single site. While
the Company believes that its existing and planned precautions of redundant
systems, regular data backups and other procedures are adequate to prevent any
significant system outage or data loss, there can be no assurance that
unanticipated problems will not cause such a failure or loss. Despite the
implementation of security measures, the Company's infrastructure may also be
vulnerable to computer viruses, hackers or similar disruptive problems caused by
its customers, employees or other Internet users. Any damage or failure that
causes interruptions in the Company's operations could have a material adverse
effect on the Company's business, results of operations and financial condition.
Computer break-ins and other
11
<PAGE> 13
disruptions could jeopardize the security of information stored in and
transmitted through the computer systems of the individuals and businesses
utilizing the Company's products, which could result in significant liability to
the Company and also may deter customers and potential customers from using the
Company's services. Persistent problems continue to affect public and private
data networks. For example, in a number of networks, hackers have bypassed
network security and misappropriated confidential information.
Product Liability. Although the Company attempts to incorporate support for
most software conflicts and configuration errors in the Windows environment,
there can be no assurance that the Company's products will resolve any specific
problems encountered by a PC user. Furthermore, as a result of their complexity,
the Company's software products may contain undetected errors or failures, when
they are first introduced and as new versions are released. There can be no
assurance that, despite testing by the Company and testing and use by current
and potential customers, errors will not be found in new products after
commencement of commercial shipments or thereafter. The occurrence of any such
errors could result in the loss of, or a delay in, market acceptance of the
Company's products, which would have a material adverse effect on the Company's
business, results of operations and financial condition. The Company's license
agreements with its customers typically contain provisions designed to limit the
Company's exposure to potential product liability claims. It is possible,
however, that the limitation of liability provisions contained in the Company's
license agreement may not be effective under the laws of certain jurisdictions.
Although the Company has not experienced any product liability claims to date,
the sale and support of the Company's products may entail the risk of such
claims. While the Company has obtained insurance against product liability
risks, there can be no assurance that such insurance will provide adequate
coverage. A product liability claim brought against the Company could have a
material adverse effect on the Company's business, results of operations and
financial condition.
Risks Associated With Global Operations. Since its inception, the Company
has derived less than 5% of its total net revenues in each year from sales to
customers outside of the United States. The Company is expanding its sales
operations outside of the United States which will require significant
management attention and financial resources. The Company's ability to expand
its products internationally is dependent on the successful development of
localized versions of the Company's products, acceptance of such products and
the acceptance of the Internet internationally. The Company expects to commit
significant resources to customizing its products for selected international
markets and to developing international sales and support channels. The
Company's First Aid products rely on a knowledge base that contains detailed
information based on specific English language versions of third-party hardware
and software applications. This knowledge base must be recreated for each
foreign language version that is developed to support foreign releases of such
products, many of which have been modified from their United States releases.
There can be no assurance that this task can be completed in a timely or
cost-effective manner or that enough products can be supported to ensure
customer acceptance. The Company believes that successful execution of a global
strategy is critical to maintaining its current market position and competitive
advantage. Failure to successfully expand its products to international markets
could cause the Company to lose business to global competitors or prevent the
development of strategic relationships with global hardware and software
vendors. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business -- Distribution and Marketing."
International operations are subject to a number of risks, including costs
of customizing products for foreign countries, dependence on independent
resellers, multiple and conflicting regulations regarding communications, use of
data and control of Internet access, longer payment cycles, unexpected changes
in regulatory requirements, import and export restrictions and tariffs,
difficulties in staffing and managing foreign operations, greater difficulty or
delay in accounts receivable collection, potentially adverse tax consequences,
the burdens of complying with a variety of foreign laws, the impact of possible
recessionary environments in economies outside the United States and political
and economic instability. Furthermore, the Company's export sales are currently
denominated predominantly in United States dollars. An increase in the value of
the United States dollar relative to foreign currencies could make the Company's
products more expensive and, therefore, potentially less competitive in foreign
markets. If the Company increases its international sales, its net revenues may
also be affected to a greater extent by seasonal fluctuations resulting from
lower sales that typically occur during the summer months in Europe and other
parts of the world. See "Management's
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<PAGE> 14
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business -- Distribution and Marketing."
Reliance on Outside Resources. The Company relies upon independent
contractors to perform a number of tasks, including product duplication and
packaging, reproduction of manuals and brochures and order fulfillment. The
Company depends on these outside parties to perform such functions to the
Company's specifications and quality standards. The Company currently does not
have long-term agreements with any of these outside parties. The Company also
employs software engineers in India on a work-for-hire basis to assist in its
product development efforts. Although the Company believes that alternative
resources exist or can be obtained, a disruption of the Company's relationship
with any of these outside parties or the failure of these outside parties to
continue to provide quality supplies and services on a timely basis could
materially adversely affect the Company's business, results of operations and
financial condition. See "Business -- Product Development" and "-- Operations."
Litigation. From time to time, the Company may be involved in litigation
relating to claims arising out of its products or operations in the normal
course of business. In July 1996, the Company filed a lawsuit in the U.S.
District Court, Northern District of California against Vertisoft Systems, Inc.
("Vertisoft"), a wholly-owned subsidiary of Quarterdeck Corp., alleging that
Vertisoft's packaging materials included false and misleading statements about
the Company that constituted unfair competition and false advertising. Vertisoft
has filed counterclaims against the Company alleging that the Company's
packaging materials included false and misleading statements. Pending trial, the
Court has granted a preliminary injunction in favor of the Company and against
Vertisoft which prevents Vertisoft from shipping products with existing
packaging unless certain statements are "stickered" over. The Court has also
denied Vertisoft's request for a preliminary injunction to stop the Company from
shipping its First Aid 95 and First Aid 95 Deluxe products, or even to require a
form of "sticker" be placed on the Company's products. The Court's rejection of
Vertisoft's request does not preclude Vertisoft from filing other or additional
motions in the suit, including requests for injunctive relief or damages. See
"Business -- Legal Proceedings."
Control by Existing Management. Following this offering, the current
executive officers and directors of the Company and their affiliates will
beneficially own approximately % of the Company's outstanding Common Stock.
Accordingly, the current officers and directors of the Company will continue to
have the ability to significantly influence the outcome of elections of the
Company's directors and other matters presented to a vote of stockholders. See
"Principal Stockholders."
Shares Eligible For Future Sale. 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 following this offering could adversely
affect the market price for the Company's Common Stock. Such sales could also
make it more difficult for the Company to sell its equity or equity-related
securities in the future at a time and price that the Company deems appropriate.
Upon completion of this offering, the Company will have approximately
shares of Common Stock outstanding. The shares offered
hereby will be immediately tradeable without restriction. As a result of lock-up
agreements between certain shareholders and the Representatives of the
Underwriters, the remaining shares will not be available for immediate
sale in the public market until 181 days after the effectiveness of this
offering, subject in some cases to the volume and other restrictions of Rule 144
and Rule 701 under the Securities Act of 1933, as amended (the "Securities
Act"). However, Hambrecht & Quist LLC may, in its sole discretion and at any
time without notice, release all or any portion of the securities subject to
lock-up agreements. Shares eligible to be sold by affiliates pursuant to Rule
144 are subject to volume and other restrictions. Shortly after the
effectiveness of this offering, the Company intends to register approximately
shares of the Company's Common Stock reserved for issuance under its
stock option and stock purchase plans or currently subject to outstanding
options. See "Shares Eligible for Future Sale."
Anti-takeover Provisions. Immediately after the closing of this offering,
the Company's Board of Directors will have the authority to issue up to
2,000,000 shares of Preferred Stock and to determine the price, rights,
preferences, privileges and restrictions, including voting rights, of those
shares without any further vote or action by the stockholders. The rights of the
holders of Common Stock will be subject to, and may be
13
<PAGE> 15
adversely affected by, the rights of holders of any Preferred Stock that may be
issued in the future. The issuance of Preferred Stock may delay, defer or
prevent a change in control of the Company. The Company has no present plans to
issue shares of Preferred Stock. In addition, Section 203 of the Delaware
General Corporation Law, to which the Company is subject, restricts certain
business combinations with any "interested stockholder" as defined by such
statute. The statute may delay, defer or prevent a change in control of the
Company. See "Description of Capital Stock."
No Prior Market For Common Stock. Prior to this offering, there has been no
public market for the Company's Common Stock, and there can be no assurance that
an active public market will develop or be sustained after this offering or that
investors will be able to sell the Common Stock should they desire to do so. The
initial public offering price will be determined by negotiations among the
Company and the Representatives of the Underwriters and may bear no relationship
to the price at which the Common Stock will trade upon completion of this
offering. See "Underwriting" for a discussion of the factors to be considered in
determining the initial public offering price.
Volatility of Stock Price. The market price of the shares of Common Stock
is likely to be highly volatile and could be subject to wide fluctuations in
response to factors such as actual or anticipated variations in the Company's
operating results, announcements of technological innovations, new products or
new contracts by the Company or its competitors, developments with respect to
patents, copyrights or proprietary rights, changes in financial estimates by
securities analysts, conditions and trends in the software and other technology
industries, adoption of new accounting standards affecting the software
industry, general market conditions and other factors. Further, the stock market
has experienced extreme price and volume fluctuations that have particularly
affected the market prices of equity securities of many high technology
companies and that often have been unrelated or disproportionate to the
operating performance of such companies. Declines in market prices generally may
adversely affect the market price of the Company's Common Stock. In the past,
following periods of volatility in the market price of a company's securities,
securities class action litigation has often been instituted against such
company. Such litigation, if instituted, could result in substantial costs and a
diversion of management attention and resources, which would have a material
adverse effect on the Company's business, results of operations and financial
condition. These market fluctuations, as well as general economic, political and
market conditions such as recessions or international currency fluctuations, may
adversely affect the market price of the Common Stock.
Dilution. Purchasers of the Common Stock in this offering will suffer
immediate and substantial dilution of $ per share in the net tangible
book value of the Common Stock from the initial public offering price. To the
extent that outstanding options to purchase the Company's Common Stock are
exercised, there may be further dilution. See "Dilution."
14
<PAGE> 16
THE COMPANY
The Company was incorporated in California in November 1991 and will
reincorporate in Delaware prior to this offering. As used in this Prospectus,
unless the context otherwise requires, the terms "CyberMedia" and the "Company"
refer to CyberMedia, Inc., a Delaware corporation and its predecessor
CyberMedia, Inc., a California corporation. The Company's executive offices are
located at 3000 Ocean Park Boulevard, Suite 2001, Santa Monica, California
90405, its telephone number at that location is (310) 581-4700 and its Web site
is located at http://www.cybermedia.com. Information contained in the Company's
Web site shall not be deemed to be part of this Prospectus.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of
Common Stock being offered hereby at the assumed initial public offering price
of $ per share are estimated to be $ ($ if the
Underwriters' over-allotment option is exercised in full), after deducting
estimated underwriting discounts and commissions and estimated offering
expenses. The Company intends to use the net proceeds from this offering for
working capital and other general corporate purposes, including sales and
marketing activities and for the expansion of product development. In addition
the Company plans to use approximately $450,000 of the net proceeds from this
offering to pay the outstanding principal amount of the note payable to the
Industrial Credit and Investment Corporation of India Limited ("ICICI"), plus
accrued interest thereon. The ICICI note bears interest at the rate of prime
plus 2.25%, with principal payable in equal quarterly installments of $50,000
from January 1997 through April 1999. At June 30, 1996, the outstanding balance
of the note was $450,000. The Company may also use a portion of the net proceeds
of the offering to acquire or invest in complementary businesses and products,
or to obtain the right to use complementary technologies. Currently, there are
no agreements or understandings with respect to any such acquisitions or
investments and there can be no assurance that any such acquisitions or
investments will be made. Pending the use of the net proceeds for the above
purposes, the Company intends to invest such funds in investment-grade financial
obligations, including short-term, interest-bearing money market funds and
certificates of deposit.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its Common
Stock and does not anticipate paying any cash dividends in the foreseeable
future. The Company currently intends to retain its earnings, if any, for use in
the operation of its business. In addition, an existing loan agreement prohibits
the Company from paying cash dividends on its capital stock without the lender's
written consent. See Note 8 of Notes to Financial Statements.
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<PAGE> 17
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1996 (i) on a historical basis, (ii) on a pro forma basis as described in
footnote (1) below and (iii) as adjusted to give effect to the sale by the
Company of shares of Common Stock offered hereby at an assumed initial
public offering price of $ per share and the application of the net
proceeds therefrom. See "Use of Proceeds." This table should be read in
conjunction with the Financial Statements and related Notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1996
--------------------------------------------
PRO FORMA
ACTUAL PRO FORMA (1) AS ADJUSTED (1)(2)
------- ------------- ------------------
(IN THOUSANDS)
<S> <C> <C> <C>
Note payable, long-term................................ $ 400 $ 400 $
------- ------- -------
Stockholders' equity (deficiency):
Preferred Stock; $0.01 par value, issuable in series;
12,835,654 shares authorized, 9,331,087 shares
issued and outstanding, actual; 2,000,000 shares
authorized, none issued and outstanding, pro forma
and pro forma as adjusted......................... 94 --
Common Stock; $0.01 par value; 10,833,334 shares
authorized; 2,484,025 shares issued and
outstanding, actual; 50,000,000 shares authorized,
8,965,782 shares issued and outstanding, pro
forma; shares issued and outstanding,
pro forma as adjusted (2)......................... 25 90
Additional paid-in capital........................... 5,566 12,202
Accumulated deficit.................................. (7,780) (7,780)
------- ------- -------
Total stockholders' equity (deficiency)........... (2,095) 4,512
------- ------- -------
Total capitalization......................... $(1,695) $ 4,912 $
======= ======= =======
</TABLE>
- ---------------
(1) Reflects (i) the sale in July 1996 of 1,666,667 shares of Series C Preferred
Stock, convertible into approximately 833,334 shares of Common Stock, for
$5.0 million, (ii) the exercise of all outstanding warrants, (iii) the
conversion of each share of Preferred Stock into one-half share of Common
Stock upon closing of this offering and (iv) the change in the number of
authorized shares of Preferred Stock from 12,835,654 shares to 2,000,000
shares.
(2) Excludes as of June 30, 1996 (i) 1,513,016 shares of Common Stock issuable
upon the exercise of stock options outstanding at a weighted average
exercise price of $1.51 per share and (ii) an aggregate of 277,459
additional shares of Common Stock reserved for issuance and available for
grant under the Company's Amended 1993 Stock Plan, 1996 Director Option Plan
and 1996 Employee Stock Purchase Plan. In August 1996, an additional
1,000,000 shares of Common Stock were authorized and reserved for issuance
under the Amended 1993 Stock Plan. See "Management -- Director
Compensation," "-- Employee Benefit Plans," "Description of Capital Stock"
and Notes 8, 9, 11 and 15 of Notes to Financial Statements.
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<PAGE> 18
DILUTION
The pro forma net tangible book value of the Company's Common Stock as of
June 30, 1996 was $4,512,000 or approximately $0.50 per share. Pro forma net
tangible book value per share represents the amount of the Company's
stockholders' equity, less intangible assets, divided by 8,965,782 shares of
Common Stock outstanding as of June 30, 1996 after giving effect to (i) the sale
in July 1996 of 1,666,667 shares of Series C Preferred Stock (see Note 15 of
Notes to Financial Statements), (ii) the exercise of all outstanding warrants
and (iii) the conversion of each share of Preferred Stock into one-half share of
Common Stock upon closing of this offering.
Net tangible book value dilution per share represents the difference
between the amount per share paid by purchasers of shares of Common Stock in the
offering made hereby and the pro forma net tangible book value per share of
Common Stock immediately after completion of the offering. After giving effect
to the sale by the Company of shares of Common Stock in this offering
at an assumed initial public offering price of $ per share, after
deduction of estimated underwriting discounts and commissions and offering
expenses, the pro forma net tangible book value of the Company as of June 30,
1996 would have been $ or $ per share. This represents an
immediate increase in net tangible book value of $ per share to
existing stockholders and an immediate dilution in net tangible book value of
$ per share to purchasers of Common Stock in this offering, as
illustrated in the following table:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.............................. $
Pro forma net tangible book value per share at June 30, 1996............... $0.50
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 sets forth on a pro forma basis as of June 30, 1996 the
number of shares purchased from the Company, the total consideration paid and
the average price per share paid by the existing stockholders and by new
investors:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------- --------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders..................... 8,965,782 % $12,292,000 % $1.37
New investors.............................
--------- ----- ----------- -----
Total........................... 100.0% $ 100.0%
========= ===== =========== =====
</TABLE>
The foregoing assumes no exercise of outstanding stock options. As of June
30, 1996, there were (i) 1,513,016 shares of Common Stock issuable upon exercise
of outstanding stock options at a weighted average exercise price of $1.51 per
share and (ii) an aggregate of 277,459 additional shares of Common Stock
reserved for issuance and available for grant under the Company's Amended 1993
Stock Plan, 1996 Director Option Plan and 1996 Employee Stock Purchase Plan. In
August 1996, an additional 1,000,000 shares of Common Stock were authorized and
reserved for issuance under the Amended 1993 Stock Plan. To the extent that
outstanding options are exercised, there will be further dilution to new
investors. See "Capitalization," "Management -- Director Compensation,"
"-- Employee Benefit Plans," "Description of Capital Stock" and Notes 8, 9, 11
and 15 of Notes to Financial Statements.
17
<PAGE> 19
SELECTED FINANCIAL DATA
The selected financial data presented below for, and as of the end of each
of the years in the three-year period ended December 31, 1995, are derived from
the financial statements of the Company, which financial statements have been
audited by KPMG Peat Marwick LLP, independent certified public accountants. The
financial statements as of December 31, 1994 and 1995, and for each of the years
in the three-year period ended December 31, 1995, and the auditor's report
thereon, are included elsewhere in this Prospectus. Balance sheet data as of
December 31, 1993 is derived from audited financial statements not included
herein. The statements of operations data for the years ended December 31, 1991
and 1992 and the balance sheet data as of December 31, 1991 and 1992 have been
derived from the unaudited financial statements of the Company, which are not
included in this Prospectus. The selected financial data for the six months
ended June 30, 1995 and 1996 are unaudited but have been prepared on the same
basis as the audited financial statements and, in the opinion of management,
contain all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the results of operations for such periods.
The results of operations for the six months ended June 30, 1996 are not
necessarily indicative of results to be expected for the year or for any future
period. The selected financial data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Financial Statements and Notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------- -------------------
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net revenues............................. $ -- $ 20 $ 55 $ 241 $ 4,797 $ 1,724 $13,949
Cost of revenues......................... -- -- 14 106 2,103 418 4,888
------- ------- ------- ------- ------- ------- -------
Gross profit........................... -- 20 41 135 2,694 1,306 9,061
Operating expenses:
Research and development............... -- 250 468 544 964 455 1,143
Sales and marketing.................... -- 27 220 439 4,036 678 8,609
General and administrative............. 19 75 84 247 987 203 1,513
------- ------- ------- ------- ------- ------- -------
Total operating expenses............. 19 352 772 1,230 5,987 1,336 11,265
------- ------- ------- ------- ------- ------- -------
Loss from operations................. (19) (332) (731) (1,095) (3,293) (30) (2,204)
Interest, net............................ -- (1) -- (19) (58) (27) (25)
------- ------- ------- ------- ------- ------- -------
Loss before income taxes............. (19) (333) (731) (1,114) (3,351) (57) (2,229)
Income tax expense....................... -- -- 1 1 1 -- --
------- ------- ------- ------- ------- ------- -------
Net loss............................. $ (19) $ (333) $ (732) $(1,115) $(3,352) $ (57) $(2,229)
======= ======= ======= ======= ======= ======= =======
Net loss per share (1)................... $ $ $ $ $ $ $
======= ======= ======= ======= ======= ======= =======
Shares used in per share calculation
(1)....................................
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
------------------------------------------------------- JUNE 30, JUNE 30,
1991 1992 1993 1994 1995 1996 1996 (2)
------- ------- ------- ------- ------- -------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.............. $ 21 $ 148 $ 14 $ 102 $ 2,050 $ 569 $ 7,176
Working capital (deficit).............. (19) 94 (333) (671) 434 (2,339) 4,268
Total assets........................... 54 178 25 189 3,855 7,088 13,695
Note payable, long-term................ -- -- -- 500 500 400 400
Total stockholders' equity
(deficiency)......................... 6 120 (610) (1,155) 7 (2,095) 4,512
</TABLE>
- ---------------
(1) See Note 1 of Notes to Financial Statements for per share calculations.
(2) Reflects (i) the sale in July 1996 of 1,666,667 shares of Series C Preferred
Stock (see Note 15 of Notes to Financial Statements), (ii) the exercise of
all outstanding warrants and (iii) the conversion of each share of Preferred
Stock into one-half share of Common Stock upon the closing of this offering.
18
<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
CyberMedia is a leading provider of software products that provide
automatic service and support to PC users in the Windows environment. The
Company commenced operations in November 1991 and introduced its first automatic
service and support product, Win Win, in 1993. The Company introduced the first
Windows 95 compatible version of its First Aid product line in September 1995.
During 1995 and the first half of 1996, over 90% of the Company's net revenues
were attributable to sales of its First Aid products. Any decline in the demand
for First Aid products, failure to achieve market acceptance of upgrades to such
products or failure of net revenues derived from such products to meet the
Company's expectations, whether as a result of competition, technological change
or other factors, would have a material adverse effect on the Company's
business, results of operations and financial condition. See "Risk
Factors -- Product Concentration; Risks Associated with First Aid Upgrades."
The Company also has a number of new product development efforts under way,
including an upgrade of its First Aid 95 products scheduled for release in the
fourth quarter of 1996, and a portion of future revenues is dependent on the
success of these activities. In June 1996, the Company introduced the beta
version of Oil Change, a product that automatically updates many software
applications and device drivers over the Internet. To date, Oil Change has not
generated any revenues, and the Company does not expect it to generate
significant net revenues for at least the near future.
The Company has a limited operating history upon which to base an
evaluation of its business and prospects. From inception to June 30, 1996, the
Company generated net sales of approximately $19.1 million, of which $13.9
million, or 73% of such amount, was generated in the six months ended June 30,
1996. The Company has incurred net losses in each of the last five fiscal years
as well as in the six months ended June 30, 1996. At June 30, 1996, the Company
had an accumulated deficit of $7.8 million. With the introduction of First Aid
95, the Company began focusing on building its product line and establishing
brand name awareness of its products, which has resulted in significantly
increased operating expenses. The Company anticipates that its operating
expenses will continue to increase significantly in the future as a result of
efforts to expand its sales and marketing operations, including international
sales, to fund greater levels of product development and to increase its
administrative infrastructure. In addition, during 1996, the Company's net
revenues and operating expenses increased rapidly as compared to prior periods.
There can be no assurance that the Company's net revenues will continue to
remain at or increase from the levels experienced in the first half of 1996 or
that net revenues will not decline. The Company's prospects must be considered
in light of the risks encountered by companies with limited operating histories,
particularly companies in new and rapidly evolving markets. Future operating
results will depend upon many factors, including the demand for the Company's
software products, the level of product and price competition, the Company's
success in expanding its direct and indirect distribution channels, the
Company's success in attracting and retaining motivated and qualified personnel,
the growth of activity on the Internet and the Web, the ability of the Company
to develop and market new products and to control costs and general economic
conditions. Many of these factors are beyond the Company's control. There can be
no assurance that the Company will be successful in addressing such risks. See
"Risk Factors -- Limited Operating History and History of Operating Losses" and
"-- Potential Fluctuations in Quarterly Results; Seasonality."
The Company sells its First Aid products primarily to distributors for
resale to the retail channel as well as directly to consumers through direct
mail. In addition, the Company sells its products through software catalogs
throughout the U.S. and Canada. Sales to the Company's top three distributors,
Navarre, Ingram Micro and Micro Central, accounted for approximately 22%, 20%
and 11%, respectively, of the Company's net revenues in the six months ended
June 30, 1996 and 9%, 16% and 19%, respectively, of net revenues in 1995. Net
revenues from direct mail sales in 1995 and the first six months of 1996
represented approximately 40% of net revenues in each of these periods, with the
balance of net revenues attributable to sales through distributors. Net revenues
in prior periods were primarily attributable to sales through distributors.
Sales from direct mail have historically operated at lower profitability levels
than sales from distributors. There can be no assurance that the mix of sales or
the relative profitability by distribution channel will remain at current levels
in the future.
19
<PAGE> 21
The Company monitors the levels of purchases and returns on a customer by
customer basis and, to date, returns have been within management's expectations.
Sales are made subject to rights of return and reserves are established at time
of shipment for future return of product based on product history, analysis of
retail sell-through and other factors. In addition, the Company may allow
certain concessions, such as price protection, to maintain its relationship with
retailers and distributors and its access to distribution channels. See Note 10
of Notes to Financial Statements.
Revenues are recognized upon the shipment of products to distributors,
resellers and end users. With the introduction of First Aid 95 in September
1995, CyberMedia implemented a policy of offering customers updates to its First
Aid products over the Internet at no additional cost. Given this policy and
because updates are a fundamental and integral part of its First Aid products,
the Company defers a portion of all First Aid 95 and First Aid 95 Deluxe revenue
ratably over estimated update periods, generally one year from the date of sale.
At June 30, 1996 the Company's balance sheet included $3.1 million of unearned
revenues to reflect future support commitments and other unspecified
enhancements to First Aid products.
In accordance with Statement of Financial Accounting Standards No. 86, the
Company is required to capitalize eligible computer software development costs
upon the achievement of technological feasibility, subject to net realizable
value considerations. To date, the Company has charged all such costs to product
development expenses because such costs have not been material.
RESULTS OF OPERATIONS
The following table sets forth, as a percentage of net revenues, statement
of operations data for the periods indicated:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------- ----------------
1993 1994 1995 1995 1996
--------- ------ ------ ----- ------
<S> <C> <C> <C> <C> <C>
Net revenues................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues............................. 25.5 44.0 43.8 24.2 35.0
-------- ------ ------ ------ ------
Gross profit............................... 74.5 56.0 56.2 75.8 65.0
Operating expenses:
Research and development................... 850.9 225.7 20.1 26.4 8.2
Sales and marketing........................ 400.0 182.2 84.1 39.3 61.7
General and administrative................. 152.7 102.5 20.6 11.8 10.9
-------- ------ ------ ------ ------
Total operating expenses................ 1,403.6 510.4 124.8 77.5 80.8
-------- ------ ------ ------ ------
Loss from operations.................... (1,329.1) (454.4) (68.6) (1.7) (15.8)
Interest, net................................ -- (7.9) (1.2) (1.6) (0.2)
-------- ------ ------ ------ ------
Loss before income taxes................ (1,329.1) (462.3) (69.8) (3.3) (16.0)
Income tax expense........................... 1.8 0.4 -- -- --
-------- ------ ------ ------ ------
Net loss................................ (1,330.9)% (462.7)% (69.8)% (3.3)% (16.0)%
======== ====== ====== ====== ======
</TABLE>
Net Revenues. Net revenues were $55,000, $241,000 and $4.8 million in 1993,
1994 and 1995, respectively. For the six months ended June 30, 1996, net
revenues increased to $13.9 million from $1.7 million for the six months ended
June 30, 1995. The Company's net revenues consist of license fees for its
software products, less provision for returns. Substantially all of the
Company's net revenues have been derived from domestic sales in the United
States, with international sales representing less than 5% of net revenues in
each of these periods and less than 3% of net revenues in the first half of
1996. The Company sells its products primarily to distributors for resale to
retailers as well as directly to consumers through direct mail and through
software catalogs. The growth in net revenues in 1994 was primarily attributable
to the introduction of First Aid, as well as to the initiation of sales to major
software distributors. The growth in net revenues in 1995 was largely
attributable to the introduction of First Aid 95, the expansion of the Company's
retail distribution channels and direct mail marketing activities and increased
unit volume as a result of the market's growing awareness and acceptance of
First Aid 95. The growth in net revenues in the first six months of 1996 was
largely attributable to increased market acceptance of First Aid 95 and the
introduction of First Aid 95 Deluxe in March 1996. The Company does not believe
that the historical growth rates of its net revenues will be sustainable or are
indicative of future results. See "Risk Factors -- Dependence on the Internet,"
"-- Dependence on Distribution Channels," "-- Risk of Product Returns" and
"-- Risks Associated with Global Operations."
20
<PAGE> 22
Cost of Revenues. Cost of revenues was $14,000, $106,000 and $2.1 million
in 1993, 1994 and 1995, respectively. For the six months ended June 30, 1996,
cost of revenues increased to $4.9 million from $418,000 for the six months
ended June 30, 1995. Cost of revenues consists primarily of the cost of product
media, product duplication, documentation and order fulfillment and royalties
paid to Industrial Credit and Investment Corporation of India Limited ("ICICI")
in conjunction with a grant associated with early stage financing of the
Company. Royalties accrued at the rate of 5% of net revenues up to a lifetime
total of $477,000 and the amounts of accrued royalties were $13,000, $276,000
and $188,000 in 1994, 1995 and for the six months ended June 30, 1996,
respectively. Royalties payable to ICICI were fully accrued at March 31, 1996.
These royalties payable, together with the original grant of $318,000, are
reflected on the Company's balance sheet at June 30, 1996 as the $795,000 grant
payable. The increases in cost of revenues were due primarily to increased unit
shipments of the Company's products. See " -- Liquidity and Capital Resources."
Gross Margin. Gross margins were 75%, 56% and 56% in 1993, 1994 and 1995,
respectively, and 76% and 65% for the six months ended June 30, 1995 and June
30, 1996, respectively. Gross margins in the third and fourth quarters of 1995
and the first half of 1996 were negatively affected by the deferral of a portion
of First Aid 95 and First Aid 95 Deluxe net revenues pursuant to the Company's
revenue recognition policy, without a deferral of associated costs. Gross margin
in the first half of 1996 was also negatively affected by an increase in the
percentage of net revenues represented by direct sales, which generated a lower
gross margin than sales through distributors during the period.
Research and Development. Research and development expenses increased by
16% from $468,000 in 1993 to $544,000 in 1994 and by 77% to $964,000 in 1995,
representing 851%, 226% and 20% of net revenues in these years, respectively.
Research and development expenses increased from $455,000 for the six months
ended June 30, 1995 to $1.1 million for the six months ended June 30, 1996,
representing 26% and 8% of net revenues in these periods, respectively. Research
and development expenses consist primarily of personnel costs and, to a lesser
extent, payment to third parties for contract services required to conduct the
Company's development efforts. The increase in research and development expenses
in each of these periods was primarily attributable to an increase in personnel
as the Company increased its product development efforts to accelerate the
timing of new product introductions and upgrades. The Company believes that
significant investments in product development are required to remain
competitive. As a consequence, the Company anticipates that it will continue to
devote substantial resources to research and development.
Sales and Marketing. Sales and marketing expenses grew from $220,000 in
1993 to $439,000 in 1994 and to $4.0 million in 1995, representing 400%, 182%
and 84% of net revenues in these years, respectively. Sales and marketing
expenses increased from $678,000 for the six months ended June 30, 1995 to $8.6
million for the six months ended June 30, 1996, representing 39% and 62% of net
revenues for these periods, respectively. Sales and marketing expenses consist
primarily of costs of all sales and marketing personnel, sales commissions,
co-op and other advertising costs, postage and printing costs associated with
direct mail sales, package design costs, trade shows and promotional materials.
The increases in the dollar amount of sales and marketing expenses in each of
these periods were due primarily to increases in direct mail marketing, costs
associated with new product introductions, increased co-op advertising and
increases in the number of sales and marketing personnel employed to address new
sales opportunities and to support the introduction of new products. The Company
expects that sales and marketing expenditures will increase in absolute dollars
in the future as it invests in expanding its third-party distribution channels,
introduces new products and expands its operations outside the United States.
General and Administrative. General and administrative expenses increased
from $84,000 in 1993 to $247,000 in 1994 and to $1.0 million in 1995,
representing 153%, 103% and 21% of net revenues in these years, respectively.
General and administrative expenses increased from $203,000 for the six months
ended June 30, 1995 to $1.5 million for the six months ended June 30, 1996,
representing 12% and 11% of net revenues for these periods, respectively.
General and administrative expenses consist primarily of personnel costs for
finance, administration, operations and general management, as well as legal,
accounting and facilities expenses. The increase in the dollar amount of general
and administrative expenses during these periods was due principally to growth
in the infrastructure of the Company's finance, administrative and operations
groups in order to support the Company's expanded operations. The decrease in
general and administrative expenses as a percentage of net revenues during these
periods was due primarily to the growth in net revenues. The Company expects
that its general and
21
<PAGE> 23
administrative expenses will increase in absolute dollars in the future as it
expands its staffing, information systems and infrastructure and takes on
additional responsibilities related to being a publicly traded company.
Interest, Net. Interest, net was $0, $19,000 and $58,000 in 1993, 1994 and
1995, respectively. For the six months ended June 30, 1996, interest, net
decreased from $27,000 for the six months ended June 30, 1995 to $25,000.
Interest, net consists of interest income and interest expense.
Income Tax Expense. Due to the losses before income taxes for each of the
years ended December 31, 1993, 1994 and 1995, the Company recorded minimum state
franchise tax. The Company had federal and state net operating loss
carry-forwards of approximately $3.8 million at December 31, 1995 and
approximately $2.8 million at June 30, 1996 to offset future taxable income.
These loss carry-forwards expire at various dates beginning in the year 2006 and
are subject to certain limitations as prescribed by Section 382 of the Internal
Revenue Code of 1986, as amended. Due to the losses in the six months ended June
30, 1995 and 1996, the Company recorded no income tax expense during these
periods.
QUARTERLY RESULTS OF OPERATIONS
The following table presents unaudited quarterly results of operations data
for each of the Company's last six fiscal quarters, as well as the percentage of
the Company's net revenues represented by each item. The unaudited financial
statements have been prepared on the same basis as the audited financial
statements appearing elsewhere in the Prospectus and in management's opinion
include all necessary adjustments (consisting only of normal recurring
adjustments) to present fairly the unaudited quarterly results when read in
conjunction with the audited Financial Statements of the Company and the Notes
thereto appearing elsewhere in this Prospectus. In view of the Company's recent
growth and other factors, the Company believes that quarter-to-quarter
comparisons of its financial results are not necessarily meaningful and should
not be relied upon as an indication of future performance. See "Risk
Factors -- Potential Fluctuations in Quarterly Results; Seasonality."
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30,
1995 1995 1995 1995 1996 1996
--------- -------- --------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Net revenues.................................. $ 712 $1,012 $ 1,046 $2,027 $6,058 $7,891
Cost of revenues.............................. 193 225 356 1,329 2,101 2,787
---- ------ ------ ------- ------- -------
Gross profit................................ 519 787 690 698 3,957 5,104
---- ------ ------ ------- ------- -------
Operating expenses:
Research and development.................... 235 220 240 269 474 669
Sales and marketing......................... 151 527 1,003 2,355 3,879 4,730
General and administrative.................. 83 120 172 612 611 902
---- ------ ------ ------- ------- -------
Total operating expenses.................. 469 867 1,415 3,236 4,964 6,301
---- ------ ------ ------- ------- -------
Income (loss) from operations............. 50 (80) (725) (2,538 ) (1,007) (1,197 )
Interest, net................................. (13) (14) (14) (17 ) (10) (15 )
---- ------ ------ ------- ------- -------
Income (loss) before income taxes......... 37 (94) (739) (2,555 ) (1,017) (1,212 )
Income tax expense............................ -- -- -- (1 ) -- --
---- ------ ------ ------- ------- -------
Net income (loss)......................... $ 37 $ (94) $ (739) $(2,556 ) $(1,017) $(1,212 )
==== ====== ====== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
AS A PERCENTAGE OF NET REVENUES
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net revenues.................................. 100.0% 100.0% 100.0% 100.0 % 100.0% 100.0 %
Cost of revenues.............................. 27.1 22.2 34.0 65.6 34.7 35.3
--------- -------- --------- -------- --------- --------
Gross profit................................ 72.9 77.8 66.0 34.4 65.3 64.7
--------- -------- --------- -------- --------- --------
Operating expenses:
Research and development.................... 33.0 21.7 22.9 13.3 7.8 8.5
Sales and marketing......................... 21.2 52.1 95.9 116.2 64.0 59.9
General and administrative.................. 11.7 11.9 16.4 30.2 10.1 11.4
--------- -------- --------- -------- --------- --------
Total operating expenses.................. 65.9 85.7 135.2 159.7 81.9 79.8
--------- -------- --------- -------- --------- --------
Income (loss) from operations............. 7.0 (7.9) (69.2) (125.3 ) (16.6) (15.1 )
Interest, net................................. (1.8) (1.4) (1.3) (0.8 ) (0.2) (0.2 )
--------- -------- --------- -------- --------- --------
Income (loss) before income taxes......... 5.2 (9.3) (70.5) (126.1 ) (16.8) (15.3 )
Income tax expense............................ -- -- -- -- -- --
--------- -------- --------- -------- --------- --------
Net income (loss)......................... 5.2% (9.3)% (70.5)% (126.1 )% (16.8)% (15.3 )%
========= ======= ======== ======= ========= =======
</TABLE>
22
<PAGE> 24
The Company's quarterly operating results have fluctuated in the past and
are expected to fluctuate significantly in the future. These fluctuations may
arise from a number of factors, including the number and timing of new product
introductions, upgrades and product enhancements by the Company or its
competitors, purchasing patterns of distributors and customers, marketing and
promotional programs, pricing and other competitive pressures, order deferrals
and product returns in anticipation of new products or upgrades to existing
products, the mix of distribution channels through which the Company's products
are sold, the Company's decisions regarding hiring and other expenses, market
acceptance of the Company's products, market acceptance of commerce over the
Internet, technological limitations of the Internet, the developing nature of
the market for the Company's products, general economic conditions and other
factors. In addition, the consumer software industry in which the Company
operates has seasonal elements. In recent years, the consumer software industry
has experienced relatively higher demand for software products in the fourth
quarter due to year-end holiday buying and relatively lower demand in the summer
months. These seasonal elements, together with the other factors that affect
quarterly results, can cause net revenues and net income to vary. The Company's
business may be affected by these seasonal elements in the future.
The Company operates with little order backlog and historically
substantially all of its revenues in each quarter result from orders received in
that quarter. However, with the introduction of First Aid 95 in September 1995,
the Company implemented a policy of deferring a portion of the revenue
associated with its First Aid 95 products, and recognizing such revenue ratably.
At June 30, 1996, the Company's balance sheet included $3.1 million in unearned
revenues to reflect future support commitments and other unspecified
enhancements to First Aid products which will be recognized ratably over
estimated update periods, generally one year from the date of sale. Quarterly
revenues will continue to depend predominately on the volume of orders received
in a particular quarter, which is difficult to forecast.
Net revenues increased from the quarter ended September 30, 1995 to the
quarter ended December 31, 1995 due primarily to the introduction of First Aid
95 in September 1995. Net revenues continued to increase in the quarters ended
March 31, 1996 and June 30, 1996 as a result of sales of increasing unit volumes
of First Aid 95 and the introduction of First Aid 95 Deluxe in March 1996. The
substantial increases in cost of revenues and operating expenses in the fourth
quarter of 1995 and the resulting increase in the net losses reported for that
quarter were primarily attributable to expenditures related to the product
launch of First Aid 95, including manufacturing start-up costs, increased
product return reserves, increased sales and marketing expenses, the
implementation of a direct mail campaign as well as increased general and
administrative expenses required to establish the Company's finance,
administrative and operations groups to provide an adequate infrastructure to
support growth. In addition, the Company's operating results in the fourth
quarter of 1995 were affected by the implementation of the Company's revenue
recognition policy under which a portion of the Company's revenue for First Aid
95 was deferred. The substantial increase in cost of revenues and operating
expenses in the first two quarters of 1996 was primarily attributable to
increased sales and marketing expenses, including costs associated with direct
mail, expenses for the product launch of First Aid 95 Deluxe and increased
staffing levels, particularly in research and development. Beginning in the
second quarter of 1996, the Company has been engaged in an advertising campaign
using print and radio to increase end-user awareness and stimulate purchases.
The Company intends to continue to invest in its use of such advertising to
promote its products for the foreseeable future. See "Risk Factors -- Management
of Growth; Dependence on Key Personnel" and "Business -- Employees."
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has financed its operations primarily through
private sales of Preferred Stock totaling $10.5 million, borrowings totaling
$1.8 million and a grant of $318,000 administered by the ICICI. In 1993, 1994,
1995 and the first half of 1996, the Company used $651,000, $795,000, $2.5
million and $2.2 million of cash, respectively, in operating activities. In
1993, 1994, 1995 and the first half of 1996, the Company used net cash in
operating activities primarily to fund net losses and increases in accounts
receivable associated with increased net revenues, partially offset by increases
in accounts payable, accrued expenses and unearned revenues.
23
<PAGE> 25
In 1993, 1994, 1995 and the first half of 1996, the Company's investing
activities consisted of purchases of furniture, fixtures and equipment,
primarily personal computers and accessories in the amount of $2,000, $13,000,
$67,000 and $608,000, respectively. The Company expects that its capital
expenditures will increase as the Company's employee base continues to grow. At
June 30, 1996, the Company had no material commitments for capital expenditures.
To date, the Company has not invested in derivative securities or any other
financial instruments that involve a high level of complexity or risk.
Management expects that in the future cash in excess of current requirements
will be invested in short-term, interest-bearing, investment grade securities.
At June 30, 1996, the Company had $569,000 in cash and cash equivalents and
a working capital deficit of $2.3 million. The Company also had available a $3.0
million revolving line of credit secured by the assets of the Company which
expires in April 1997 and a $250,000 collateralized equipment purchase facility
which expires in November 1996. Borrowings under the credit facility are limited
to the lesser of $3.0 million or a percentage of eligible accounts receivable,
as defined in the credit agreement. See Note 6 of Notes to Financial Statements.
On July 3, 1996, the Company raised approximately $5.0 million through the
issuance of 1,666,667 shares of Series C Preferred Stock convertible into
approximately 833,334 shares of Common Stock. The proceeds from the Series C
Preferred Stock are not included in the Company's Balance Sheet at June 30,
1996. The Company used a portion of the proceeds from this offering to pay down
the $1.3 million outstanding under its revolving line of credit.
The Company believes that the net proceeds from the sale of the Common
Stock offered by the Company hereby, together with its current cash balances,
cash available under its line of credit and cash flows from operations, if any,
will be sufficient to meet its working capital and capital expenditure
requirements for at least the next 12 months. Although operating activities may
provide cash in certain periods, to the extent the Company experiences growth in
the future, the Company anticipates that its operating and investing activities
may use cash. Consequently, any such future growth may require the Company to
obtain additional equity or debt financing, which may not be available on
attractive terms, or at all, or may be dilutive.
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (the "FASB") issued Statement of
Financial Accounting Standards No. 121 ("SFAS No. 121"), "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," in
March 1995 which is effective for fiscal years beginning after December 15,
1995. SFAS No. 121 establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles and goodwill related to
these assets and certain identifiable intangibles to be disposed of. Since the
Company's current policy is consistent with the provisions of SFAS No. 121, the
Company's management does not anticipate that the new pronouncement will impact
its Financial Statements.
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123").
SFAS No. 123 established a fair value-based method of accounting for
compensation cost related to stock options and other forms of stock-based
compensation plans. However, SFAS No. 123 allows an entity to continue to
measure compensation costs using the principles of Accounting Principles Board
Opinion 25 ("APB No. 25") if certain pro forma disclosures are made. SFAS No.
123 is effective for fiscal years beginning after December 15, 1995. While the
Company is still evaluating SFAS No. 123, it currently expects to elect to
continue to measure and to recognize costs under APB No. 25 and to comply with
the pro forma disclosure requirements of SFAS No. 123. If the Company makes this
election, SFAS No. 123 will have no impact on the Company's Financial
Statements.
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BUSINESS
CyberMedia is a leading provider of automatic service and support software
products for PC users in the Windows environment. The Company's products address
the growing technical support demands of PC users. Dataquest estimates that PC
users will make approximately 200 million calls for technical support in 1996.
The Company's products are designed to enable PC users to diagnose and resolve
problems automatically without relying on costly technical support resources.
The Company's products are based on the Company's scalable ActiveHelp
architecture that allows for the support of a broad range of PC products and
related problems and enables the Company's products to be regularly and
automatically updated through the Internet.
CyberMedia is recognized for its successful First Aid family of products
which has sold over one million units to date. The Company's First Aid products
automatically detect, diagnose and resolve common software conflicts and
configuration errors encountered by users in the Windows environment. The
Company has introduced several versions of First Aid, including First Aid 95 and
First Aid 95 Deluxe in September 1995 and March 1996, respectively, for the
retail distribution channels and First Aid 95 Deluxe, Network Version in June
1996 for the corporate market. The First Aid title ranked in the top ten of all
Windows 95 software applications sold in the United States (by number of units)
in each month from November 1995 through June 1996 (PC Data).
CyberMedia's Oil Change, released in beta version in June 1996, is designed
to enable PC users to keep their systems up-to-date, thereby enhancing overall
system performance and avoiding problems frequently encountered as a result of
outdated software and device drivers. Oil Change will provide a one-stop
solution for PC users to locate easily many of the most recent software updates
and patches applicable to their systems and download and install them
automatically via the Internet. The Company intends to launch the commercial
version of Oil Change during the fourth quarter of 1996 through both the retail
distribution channels and the Internet.
The Company sells its products to individual and corporate users primarily
through a combination of retail distribution channels and direct mail. The
Company is expanding the marketing and sale of its products through the
Internet, internationally and through strategic relationships.
INDUSTRY BACKGROUND
The PC industry has grown rapidly during the last decade, with Microsoft
Windows emerging as the dominant operating system. As a result of technological
advances and increased functionality, combined with price decreases for entry
level systems, the PC has become a mass market consumer electronics product,
resulting in a greatly expanded installed base in homes and businesses.
According to International Data Corporation, the worldwide installed base of PCs
at the end of 1995 had grown to approximately 225 million units. The mass market
appeal of PCs has resulted in an average PC user today who is less
technologically sophisticated than the average PC user of the early 1990s. As
evidence of this trend, Dataquest estimates that between mid-1995 and March 1996
approximately 58% of PCs sold in the United States were purchased by first-time
users.
At the same time that PCs have become more widely adopted, the hardware and
software content of the average PC has become more complex, largely due to the
open environment of the Intel PC-compatible platform. Many PCs today incorporate
high speed processors, hard disk drives, high resolution monitors, sound cards,
graphics boards, CD-ROM drives and other peripherals, which together provide
significantly enhanced processing, storage and multimedia capabilities. The
widespread availability of these increasingly powerful computers has in turn
driven demand for increasingly complex software operating systems and
applications that can take advantage of these enhanced hardware capabilities.
In today's typical Windows-based PC configuration, the integration of a
wide range of hardware and software components from different vendors has
resulted in an increase in both the number and types of system errors and
technical difficulties. The Company believes that a significant portion of
problems commonly encountered by PC users are configuration errors and software
conflicts that occur when users add
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new software applications or devices to their computers. One typical problem
affects Dynamic Link Library ("DLL") files and subroutines, which perform
important printing, spell checking and other widely used functions. When a new
software program is installed, these files are sometimes moved without the
user's knowledge, thereby causing existing applications to no longer function
properly. Other problems can occur for a variety of reasons, including
incorrectly removing applications and accidentally deleting shared files. The
likelihood of such problems is increased in a multimedia environment where
changes in system configurations occur frequently due to the addition of new
games, sound cards, CD-ROM drives and video cards. The complexities introduced
by the accelerating adoption of the Internet has created additional
difficulties, including modem and network configuration problems. Even
experienced PC users can encounter difficulty installing and using new devices
and software because the existing system often must be reconfigured in order to
eliminate the resulting internal conflicts. Additionally, a large number of PC
technical problems are related to new versions of software that are incompatible
with software and device drivers that are already installed on the PC.
Due to the dramatic increase in the complexity of today's PC environment
and the growth in the number of PC users, approximately 200 million calls are
expected to be received at technical support centers nationwide in 1996,
resulting in expenditures of nearly $4 billion (Dataquest). At the same time, in
response to cost pressures in a competitive environment and an often
unmanageable level of technical support calls, many software and hardware
vendors are scaling back or completely eliminating the technical support that
they once provided free of charge with their products. Many vendors now offer
fee-based technical support services, such as 900 telephone numbers and
per-incident support plans. However, customers who select such services often
obtain busy signals or encounter lengthy delays before receiving assistance,
resulting in widespread dissatisfaction among users. Further, such support is
typically vendor-specific and is not designed to resolve compatibility issues or
conflicts between products from multiple vendors.
PC software and hardware vendors have typically released updated software
and device drivers to correct bugs discovered since the latest product release,
improve existing features, ensure compatibility with new devices or add new
features. These updates and "patches" have traditionally been provided free of
charge to users who request them and are distributed via the mail or posted to a
vendor's bulletin board. However, most vendors have been unwilling to incur the
costs of tracking, notifying and shipping product to all users who require such
updates or patches. As a result, PC users are frequently unaware of the
existence or location of vendor-provided updates and patches that can
significantly enhance the performance of their systems.
The Internet is emerging as a medium for vendors to quickly and
cost-effectively distribute software updates and patches. Today, many types of
software updates, from the Windows 95 Service Pack to new hardware device
drivers and bug fixes, are available free over the Internet from a wide range of
vendors. The accessibility of the Internet is enabling new releases of software
to be made available with such rapidity that software is becoming almost
"versionless." However, despite the potential benefits of the Internet as a
distribution medium, to date there is no central, vendor-neutral source for
locating software updates and patches. PC users must still manually log-on to
each vendor's Web site and check for new updates or patches. Few PC users have
the time or technical knowledge required to identify, locate, download and
install the updates and patches that apply to their PCs.
PC users and software and hardware vendors share a common need for the
timely resolution of technical support problems. PC users need a readily
accessible, vendor-neutral, easy-to-use solution that automatically identifies
and fixes their most commonly experienced problems. Software and hardware
vendors need to reduce their technical support burden and costs and to find
channels to rapidly and cost-effectively disseminate updates and patches.
THE CYBERMEDIA SOLUTION
The CyberMedia solution provides automatic service and support for PC users
and reduces support costs for software and hardware vendors. The Company has
developed an innovative, vendor-neutral, automated approach to technical support
that enables the Company to deliver among the most comprehensive and easy-to-use
software support solutions available today for Windows-based PC users. The
Company's products are
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based on its scalable ActiveHelp architecture that allows for the support of a
broad range of PC products and related problems and enables the Company's
products to be regularly and automatically updated through the Internet.
CyberMedia's First Aid products automatically detect, diagnose and resolve
common software conflicts and configuration errors arising in the Windows
environment. The First Aid products are designed to reduce the need for
time-consuming technical support calls. The First Aid products employ a
rule-based engine to compare a PC's current configuration with a set of rules
determining how each application or device should be configured under ideal
conditions. The First Aid products access the Company's HelpCentral knowledge
base of general and system-specific information supporting a wide range of
software applications, multimedia cards, modems, video cards and networks that,
in the aggregate, resolve over 10,000 potential combinations of problems. This
knowledge base is regularly updated by the Company and is accessible to First
Aid users over the Internet.
CyberMedia's Oil Change, released in beta version in June 1996, is designed
to enable PC users to keep their systems up-to-date, thereby enhancing overall
system performance and avoiding problems frequently encountered as a result of
outdated software and device drivers. Oil Change will provide a one-stop
solution for PC users to locate easily many of the most recent software updates
and patches applicable to their systems and download and install them
automatically via the Internet. Oil Change develops a profile of installed
software applications and device drivers on a user's PC and compares this
profile with the Company's HelpCentral knowledge base of information on updates
and patches available at vendor Web sites. Upon the user's request, Oil Change
retrieves and installs the selected updates and patches. As of August 5, 1996,
the Company's HelpCentral knowledge base contained information on over 225
updates and patches from approximately 90 vendors, including Microsoft,
Hewlett-Packard Company ("Hewlett-Packard") and Creative Labs, Inc. ("Creative
Labs").
THE CYBERMEDIA STRATEGY
The Company's objective is to be the leading provider of automatic service
and support software products. Key elements of the Company's business strategy
include:
Maintain Market Leadership in Automatic Service and Support Software. With
the broad market acceptance of its First Aid products, the Company is widely
recognized as a leader in providing automatic service and support for PC users.
The Company seeks to maintain its leadership by being first to market with
innovative products and product upgrades that leverage the Company's proprietary
technology and incorporate feedback from its extensive user base.
Offer Comprehensive, Scalable Solutions. The Company's goal is to offer
comprehensive products that address most common technical support problems faced
by PC users and that are regularly updated to support their evolving needs.
These products are designed to enable PC users to diagnose and resolve problems
automatically without relying on costly technical support resources. The Company
maintains and regularly updates comprehensive knowledge bases of information on
a wide range of PC hardware and software products and related technical support
problems and on available updates and patches for commonly used software
applications and device drivers. These knowledge bases are easily accessible to
users of CyberMedia's products at the Company's Internet site.
Leverage the Internet. The Company believes that the Internet represents an
efficient medium for the delivery of automatic service and support and seeks to
develop products that can be continually updated and delivered over this medium.
The Company seeks to establish Oil Change as the defacto standard for PC users
to obtain updates and patches to third-party software applications and device
drivers over the Internet. The Company's open architecture approach enables it
to easily and rapidly incorporate support for new updates, patches and other
technical support information as they become available on vendor Web sites. The
Company is exploring potential revenue opportunities using the unique
information and access provided through the Oil Change platform, including the
sale of new full product releases of third-party software and ancillary products
and targeted advertising.
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<PAGE> 29
Pursue Strategic Alliances. The Company intends to pursue strategic
alliances with third-party hardware and software vendors to enhance the
functionality and increase the distribution of its automatic service and support
products. The Company is pursuing OEM relationships with leading PC and
peripherals vendors, operating systems software companies and other software
vendors to bundle full and limited versions of its products. The Company has
also established a Medallion Partnership program for its Oil Change product to
encourage hardware and software vendors to communicate information about new
updates and patches to the Company as soon as they become available. The Company
also intends to provide third-party hardware and software vendors with
CyberScript, its powerful scripting language under commercial development, to
enable them to incorporate technical support information on new products
directly into the Company's HelpCentral knowledge bases. The Company believes
that these relationships will increase brand recognition of its products, expand
its customer base and provide early access to leading edge software, multimedia
and Internet/on-line technologies.
Promote Brand Awareness. The Company believes that brand awareness is a key
factor in software purchase decisions and, to that end, the Company strives to
develop products that achieve strong customer appeal, customer loyalty and long
life cycles. The Company seeks to reinforce and strengthen CyberMedia, First Aid
and Oil Change as leading brand names in automatic service and support by
increasing its level of public relations, advertising and direct marketing
activities and by establishing strategic relationships with hardware and
software vendors.
Expand International Presence. The Company intends to invest significant
resources to adapt its automatic service and support products to international
markets and expand its sales and marketing efforts overseas. The Company
currently sells its products internationally through authorized distributors in
the United Kingdom and Australia and is developing localized versions of First
Aid 95 Deluxe for the French, German and Japanese markets. The Company expects
to introduce the French and German versions of First Aid 95 Deluxe in the fourth
quarter of 1996 and the Japanese version in 1997.
PRODUCTS
The Company's products are designed to enable PC users to diagnose and
resolve problems automatically without relying on costly technical support
resources. The Company's scalable ActiveHelp architecture allows the Company's
products to support a broad range of PC products and related problems and to be
regularly and automatically updated through the Internet. The Company's products
also protect system integrity by creating a backup of all changes to critical
configuration files, enabling a user to restore their PC to a prior
configuration if desired. Each of the Company's products includes a 60-day
unconditional money-back guarantee. CyberMedia has developed the following
ActiveHelp products:
ACTIVEHELP PRODUCTS
<TABLE>
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------
SUGGESTED
PRODUCT DATE INTRODUCED STREET PRICE* DESCRIPTION
------------------------------------------------
---------------------------------------------------------------------------------------------------------------
First Aid 95 Ver 2.0 - Sep. 95 $39.95 Automated technical support for configuration
errors and software conflicts occurring on
Windows-based PCs
---------------------------------------------------------------------------------------------------------------
First Aid 95 Deluxe Ver 3.0 - Mar. 96 $59.95 Incorporates the core features of First Aid 95
and PC911 with the ability to obtain automatic
updates through the Internet
---------------------------------------------------------------------------------------------------------------
First Aid 95 Deluxe, Ver 3.0 - Jun. 96 $32 per user** First Aid 95 Deluxe designed for corporate
Network Version local area networks
---------------------------------------------------------------------------------------------------------------
PC911 Ver 1.0 - Sep. 94 $19.95 Automatically backs up all important
configuration files and parameters on a PC and
creates and updates an emergency disk
---------------------------------------------------------------------------------------------------------------
Tech Support Ver 1.0 - Jun. 96 $19.95 Reference book and CD-ROM with contact
Yellow Pages information for 2,000 software and hardware
vendors
---------------------------------------------------------------------------------------------------------------
Oil Change Beta - Jun. 96 TBA Automatically downloads and installs updates
and patches to commonly used software
applications and device drivers via the
Internet
---------------------------------------------------------------------------------------------------------------
</TABLE>
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- ---------------
* Actual prices vary depending on local conditions, the distribution channel
and other factors.
** Based on a ten-user site license.
First Aid
The Company is recognized for its First Aid family of products with over
one million units sold to date. The First Aid family of products is designed to
detect, diagnose and resolve a wide range of software conflicts and
configuration problems associated with Windows-based PCs, using the Company's
knowledge base of product and vendor-specific technical support information.
This knowledge base, which is installed locally on a PC when First Aid is
installed, can be updated as needed by connecting to CyberMedia's HelpCentral
Internet site, which houses a regularly updated knowledge base.
In 1994, 1995 and the first half of 1996, virtually all of the Company's
sales have been from the First Aid family, which includes First Aid, First Aid
95, First Aid 95 Deluxe and PC911. The First Aid title has ranked in the top ten
of all Windows 95 software applications sold in the United States (by number of
units) in each month from November 1995 through June 1996 (PC Data). First Aid
products are currently available for Windows 3.1, Windows 95 and Windows for
Workgroups 3.11.
[Diagram of First Aid]
First Aid 95. The Company's flagship product, First Aid 95, has won
numerous awards, including the Windows Sources Stellar Award (December 1995) and
the PC Pro 4 Stars Award. Key features of First Aid 95 include the following:
- Fixes configuration and setup problems with Windows applications by
ensuring that all DLL files required by an application at startup are
present in the correct directories. Locates and copies misplaced DLLs to
the correct directories when needed.
- Performs thorough feature-by-feature checks on many popular
applications. Detects and fixes problems caused by misplaced DLLs and
invalid entries in Windows configuration files.
- Detects setup problems with many popular multimedia cards and CD-ROM
drives. Corrects problems by installing proper drivers and modifying
configuration files as needed.
- Identifies and resolves many setup problems with modems, on-line access
services and local area networks.
- Intercepts most General Protection Faults and other crashes. Returns
users to their original application where they can save their work.
Enables users to save their work that may have been lost otherwise.
- Verifies whether disk caches, memory buffers and other parameters on a
PC have been set for optimal performance. Makes recommendations that can
help boost PC performance.
- Allows users to recover hard disk space by removing and archiving
infrequently used features in many popular applications.
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<PAGE> 31
First Aid 95 Deluxe. Released in March 1996, First Aid 95 Deluxe is an
enhanced version of First Aid 95. First Aid 95 Deluxe includes all the features
of First Aid 95 and adds the following functions:
- Automatically monitors changes in a PC's configuration files and
maintains a history of the last 50 changes. Enables users to restore the
PC to a prior working configuration if the PC fails to work properly.
- Creates an emergency disk that backs up all critical files and
parameters. The emergency disk can be used to reboot and restore a PC's
setup files in the event of a catastrophic failure that wipes these out.
- Enables users to update the First Aid knowledge base on their PCs
through automatic downloads from HelpCentral, an up-to-date knowledge
base residing on the Company's Internet server.
- Provides contact information for over 2,000 hardware and software
vendors, including direct "hot-links" to their Web sites.
The Company has implemented a marketing program to allow registered users
of First Aid 95 to upgrade to First Aid 95 Deluxe for $19.95 (plus shipping and
handling).
First Aid 95 Deluxe, Network Version. First Aid 95 Deluxe, Network Version
is specifically designed for use in Windows-based network environments. The
Network Version is designed to minimize internal support costs in an
organization by enabling PC users to fix many common problems without the
intervention of technical support professionals. The Network Version is
currently available on Windows 3.1, Windows 95 and Windows for Workgroups 3.11
and the Company expects to release a Windows NT version in the fourth quarter of
1996. The Network Version incorporates the following additional capabilities to
the stand-alone version of First Aid 95 Deluxe:
- Enables network administrators to install First Aid 95 Deluxe directly
from a network server.
- Automatically notifies network administrators of problems on users' PCs.
- Enables administrators to set preferences and security levels.
PC911. PC911 helps users recover from problems caused by changes in
configuration files resulting from the installation or removal of hardware and
software. Upon startup, PC911 automatically detects and logs any changes it
finds in the PC's configuration files. In the event of problems following
installation or removal of hardware or software, users can use PC911 to restore
a prior working setup, or review all changes that occurred since installation or
removal. Many critical configuration files and parameters, if lost or corrupted,
can also prevent a PC from booting up. PC911 also creates an emergency disk that
backs up all such files and parameters, enabling them to be restored in case of
catastrophic failure.
PC911 was first introduced in September 1994. In order to promote the First
Aid brand name, the Company has incorporated the main features of PC911 into
First Aid 95 Deluxe and discontinued sales of PC911 through the retail
distribution channels. At present, PC911 is sold only through direct mail and
third-party catalogs.
Tech Support Yellow Pages
Tech Support Yellow Pages is an easy-to-use reference book and CD-ROM that
allows users to access contact information for over 2,000 hardware and software
vendors. Users can receive updates to the Tech Support Yellow Pages CD-ROM via
downloads from the Company's HelpCentral. The CD-ROM provides users with
Internet access with "hot links" to connect directly to any vendor Web site.
Oil Change
Oil Change is an Internet-based software product under development that is
designed to provide a one-stop solution for PC users to locate easily the most
recent software updates and patches applicable to their systems and download and
install them automatically via the Internet. Oil Change is designed to enable PC
users to keep their systems up-to-date, thereby enhancing overall system
performance and avoiding problems frequently encountered as a result of outdated
software and device drivers.
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<PAGE> 32
Oil Change examines a user's PC and develops a profile of the installed
software applications and hardware device drivers. Oil Change then connects to
CyberMedia's HelpCentral server through the Internet to compare this profile
with the Company's regularly updated central knowledge base of information on
updates and patches available at various vendor Web sites. Oil Change offers the
user a list of available updates and patches and the problems that these updates
and patches are intended to resolve. Upon the user's request, Oil Change
retrieves and installs selected updates and patches. The Company is designing
Oil Change with the ability to automatically notify users when new upgrades or
patches of software running on their systems become available.
The Company intends to provide Oil Change support initially for many of the
best selling software applications and device drivers. The Company has also
established a Medallion Partnership program to encourage hardware and software
vendors to communicate information about new updates and patches to the Company
as soon as they become available. As of August 5, 1996, the Company's
HelpCentral knowledge base contained information on over 225 updates and patches
from approximately 90 vendors, including Microsoft, Hewlett-Packard and Creative
Labs.
[Oil Change Graphic]
Oil Change was released in a beta version in June 1996 and made available
free of charge through the CyberMedia Web site at www.cybermedia.com. The
Company intends to launch the commercial version of Oil Change during the fourth
quarter of 1996 through both the retail distribution channels and the Internet.
The initial version of Oil Change is designed to run on the Windows 95 platform.
The street price for Oil Change is expected to be approximately $40 for a
one-year subscription, which includes an initial setup fee.
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<PAGE> 33
TECHNOLOGY
The Company's proprietary ActiveHelp technology consists of three
components, Agents, HelpCentral and CyberScript, which together provide an open,
scalable architecture for developing and continually updating the Company's
automatic service and support software products. The Company's ActiveHelp
architecture is illustrated below.
[Diagram of the Architecture]
Each of the Company's products incorporates Agents, client-level software
that detects and solves problems locally at the user's PC. These Agents connect
to CyberMedia's HelpCentral server through the Internet to access centralized
knowledge bases of up-to-date technical support information. Information on
HelpCentral is inputted and continually updated using CyberScript, the Company's
powerful proprietary scripting language. CyberScript enables technical support
information to be easily defined and added to HelpCentral in a standardized
format.
The technology components of CyberMedia's principal product lines, First
Aid and Oil Change, are described below.
First Aid
Agent. The First Aid Agent's primary function is to detect and solve
software conflicts and configuration problems locally at the user's PC. The
Agent can be activated directly by the user or set to run in the background to
be activated automatically upon the occurrence of certain events such as General
Protection Faults or system crashes. Once activated, the First Aid Agent gathers
data from the PC and then utilizes a rule-based diagnostic engine to compare a
PC's current configuration with a set of rules determining how each application
or device should be configured under ideal conditions. The First Aid Agent
includes a local version of the Company's HelpCentral knowledge base of systems,
software and hardware-related configuration information. If a problem cannot be
resolved locally, the First Aid Agent can connect to CyberMedia's HelpCentral
server through the Internet to update the local knowledge base with the
Company's up-to-date central knowledge base. Once a problem has been diagnosed,
the Agent displays the likely cause and proposed solution and presents the user
with an "AutoFix" button. If the user selects this option, the Agent will then
automatically implement the solution.
HelpCentral. To support the First Aid Agent, CyberMedia's HelpCentral
knowledge base maintains up-to-date general and system-specific information
supporting a wide range of software applications, multimedia cards, modems,
video cards, and networks that, in the aggregate, resolve over 10,000 potential
combinations of problems. Hardware and software products are described in terms
of the configuration required for them to function properly. For example, a
software application is described in terms of the program files and DLLs that it
requires, and a multimedia card is described by the drivers and configuration
entries it requires. Vendor-specific information is also maintained on the
HelpCentral knowledge base, including addresses, telephone numbers and Web
addresses for over 2,000 hardware and software vendors. The information
maintained at
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<PAGE> 34
HelpCentral is currently updated on a regular basis to support new products and
changes in vendor information.
Oil Change
Agent. The Oil Change Agent scans a user's PC to determine the installed
software applications and device drivers and builds a profile of every software
file, its location and current revision level. Once the profile has been
developed, the Oil Change Agent contacts CyberMedia's HelpCentral server through
the Internet to compare this profile with the Company's regularly updated
knowledge base of information on updates and patches available at various vendor
Web sites. The Agent displays all newer updates or patches and downloads those
that the user selects directly from the vendor's Web site. The Agent then
unpacks and installs the downloaded updates and patches. To ensure safety, the
Agent creates a backup of all changes, enabling a user to restore to the prior
configuration if desired.
HelpCentral. To support the Oil Change Agent, HelpCentral maintains
up-to-date information on new updates and patches for commonly used software
applications and device drivers. Information provided for each update and patch
is described in terms of their on-line location, the revision levels they
represent and their installation instructions. The information maintained at
HelpCentral is updated regularly by Company programmers who monitor new postings
of upgrades and patches on the Internet. The Company's Medallion Partners also
communicate information about new updates and patches to the Company via the
Internet as soon as they become available at their Web sites. The information is
then authenticated by the Company and added to the HelpCentral knowledge base.
As of August 5, 1996, the Company's HelpCentral knowledge base contained
information on over 225 updates and patches from approximately 90 vendors,
including Microsoft, Hewlett-Packard and Creative Labs.
CyberScript. A key component of CyberMedia's technology is CyberScript, a
powerful proprietary scripting language that enables product-specific knowledge
and other technical support information to be defined and added to HelpCentral
in a standardized format. In the future, the Company intends to publish the
specifications for CyberScript and make it available to third-party hardware and
software vendors to enable them to incorporate technical support information on
new products directly into the Company's HelpCentral knowledge bases. The
Company intends to develop easy-to-use interfaces and other development tools
for CyberScript so that it can be used by third parties with only minimal
training.
DISTRIBUTION AND MARKETING
Distribution
The Company sells its products to individual and corporate users primarily
through a combination of retail distribution channels and direct mail. The
Company is expanding the marketing and sale of its products through the
Internet, internationally and through certain strategic partners.
Domestic. The Company's principal domestic channels of distribution are
through software distributors for resale to the retail sales channel and through
direct mail. In addition, the Company's products can be ordered through the
Company's Web site. Sales to the Company's top three distributors, Navarre,
Ingram Micro and Micro Central, accounted for approximately 22%, 20% and 11%,
respectively, of the Company's net revenues in the six months ended June 30,
1996, and 9%, 16% and 19%, respectively, of net revenues in 1995. The Company's
products are currently available at more than 9,000 locations through major
retailers, including CompUSA Inc., Sam's Club, Micro Center, Egghead Software,
Computer City, Fry's Electronics, Inc., Office Depot, Inc., Best Buy and Price
Costco Inc.
The Company maintains a stock balancing policy that allows distributors and
retailers to return products for credit. In addition, the Company provides price
protection to its distributors in the event the Company reduces its prices. The
Company establishes reserves, including reserves under the Company's stock
balancing policy, based on estimated future returns of products, taking into
account promotional activities, the timing of new product introductions,
distributor and retailer inventories of the Company's products and other
factors. Product returns or obligations resulting from the Company's price
protection policy that exceed the
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<PAGE> 35
Company's reserves could adversely affect the Company's business, results of
operations and financial condition.
During 1995 and the first half of 1996, direct sales accounted for
approximately 40% of net revenues. Sales through direct mail are outsourced to
third-party mailing and fulfillment houses. The Company sells First Aid 95
Deluxe, Network Version through a limited direct sales organization comprised of
telesales, catalog and sales representatives to corporate customers.
International. Internationally, the Company markets its products through
authorized distributors in the United Kingdom and Australia who resell to retail
stores and through retailers. To date, international sales have accounted for
less than 5% of the Company's net revenues. The Company is developing localized
versions of First Aid 95 Deluxe for the French, German and Japanese markets. The
Company expects to introduce the French and German versions of First Aid 95
Deluxe in the fourth quarter of 1996 and the Japanese version in 1997.
Marketing
The Company's marketing strategy in retail distribution channels has
typically focused on high impact product packaging, end-caps and rebate coupons.
In addition, the Company seeks to increase market share and brand recognition
through public relations activities involving introducing its products to local
user groups and obtaining press coverage in regional and national trade and
technical publications. From time to time, the Company utilizes aggressive
direct mail campaigns targeted specifically at Windows-based PC users. Beginning
in the second quarter of 1996, the Company has been engaged in an advertising
campaign using print and radio to increase end-user awareness and stimulate
purchases. The Company intends to continue to invest in its use of such
advertising to promote its products for the foreseeable future.
CyberMedia's marketing activities also include participation in trade and
computer shows and cooperative advertising programs directly with certain
distributors and retailers, whereby the Company receives marketing opportunities
through advertisements, brochures, and catalogs initially paid for by the
distributors. The Company provides for expenses related to these programs in
amounts established in the individual distributor agreements or in modifications
thereto. Additionally, the Company from time to time offers rebates to end users
who purchase the Company's products.
The Company's sales and marketing force as of July 31, 1996 consisted of 34
people, all of whom receive salaries, commissions, and/or incentive bonus
compensation. The Company's in-house marketing department coordinates most of
the design and development of the Company's product packaging, advertisements
and promotional items.
Strategic Alliances
CyberMedia seeks to establish strategic alliances with third-party hardware
and software vendors to enhance the functionality and increase the distribution
of its automatic service and support products. The Company is pursuing OEM
relationships with leading PC and peripherals vendors, operating systems
software companies and other software vendors to bundle full and limited
versions of its products. The Company recently entered into an OEM relationship
with Diamond Multimedia Systems, Inc. to provide a limited version of First Aid
95 Deluxe for bundling with all of its products and a license agreement with NEC
Technologies, Inc. to provide a full version of First Aid 95 Deluxe for bundling
with certain of its products. The Company has also established a Medallion
Partnership program for its Oil Change product to encourage hardware and
software vendors to communicate information about new updates and patches to the
Company as soon as they become available. The Company also intends to make
CyberScript available to third-party hardware and software vendors to enable
them to incorporate technical support information on new products directly into
the Company's HelpCentral knowledge bases. The Company believes that these
relationships will increase brand recognition of its products, expand its
customer base and provide early access to leading edge software, multimedia and
Internet/on-line technologies.
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<PAGE> 36
TECHNICAL SUPPORT
The Company provides free telephone support to purchasers of its software
products during its regular business hours. End users are able to consult
directly with software support personnel with respect to software use, hardware
problems and peripheral needs or receive on-line support. The Company provides a
substantial amount of its technical support through on-line forums, such as
America Online, Inc. and CompuServe. In addition, the Company plans to offer its
corporate clients a variety of fee-based options providing a range of service
levels designed to meet their technical support requirements. In Europe,
technical support is provided through third parties. As of July 31, 1996, the
Company had 17 professionals in technical support.
PRODUCT DEVELOPMENT
The Company believes that significant investment in product development is
required in order to remain competitive, accelerate the rate of product
introductions, incorporate new technologies, and sustain and improve the quality
of its products. In addition to engineering and quality assurance, the Company's
product development activities include the identification and validation of a
product's potential commercial success, as well as the incorporation of new
technologies in new products. The Company seeks to gain pre-release access to
and develop expertise in current and future versions of Windows and other
leading hardware and software products in order to develop and release such
products on a timely basis. The Company incorporates market research into the
design and development of its products to anticipate the evolving technical
support needs of PC users. In addition, the Company works closely with hardware
and software manufacturers to identify their technical support requirements and
to incorporate this feedback into the development of the Company's products.
These efforts are critical in enabling the Company to be competitive, improve
quality and consistency, update its current products and bring new products to
market quickly.
The Company's principal current product development efforts include: (i)
developing new releases of its First Aid product line, including First Aid 97
scheduled for release in the fourth quarter of 1996, (ii) enhancing its
HelpCentral knowledge bases to provide support for new third-party products and
updates and patches to current applications, (iii) completing the commercial
development of Oil Change, (iv) broadening the appeal of First Aid products in
the corporate and international markets by providing support for the Windows NT
operating system and developing localized products for international markets,
(v) developing additional products that address evolving automatic service and
support requirements, and (vi) developing CyberScript for use by third parties
to incorporate information about their products into the Company's knowledge
base.
The Company utilizes work-for-hire software engineers in India to update
its knowledge bases to support new third-party products, updates and patches and
to develop a Windows NT version of its First Aid 95 Deluxe, Network Version. The
Company has exclusive ownership of all products developed by such engineers and
has no royalty obligations to these engineers.
Research and development expenses during 1993, 1994, 1995 and the first
half of 1996 were approximately $468,000, $544,000, $964,000 and $1.1 million,
respectively. As of July 31, 1996, the Company had 30 full-time employees in
research and development. See "Risk Factors -- New Product Development and
Technological Change."
COMPETITION
The PC software industry is intensely competitive and characterized by
short product life cycles and new product introductions. The Company competes
with software companies of varying sizes and resources, including SystemSoft
Corporation, Quarterdeck Corporation, Symantec Corp. and others. The Company
believes that a number of software companies will be introducing automatic
service and support software products in the near future that will compete with
the Company's products. The Company expects that potential future competitors
may include other software vendors, including Internet software vendors. Many of
the Company's existing and potential competitors have substantially greater
financial, technical and marketing resources than the Company. Moreover, there
are no proprietary barriers to entry that could keep existing and potential
competitors from developing similar products or selling competing products in
the Company's
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<PAGE> 37
markets. To the extent that the Company's competitors bundle their software
products with leading hardware, application software or operating system
vendors, or if one or more of the operating system vendors, such as Microsoft,
developed its own technical support software and incorporated such functionality
into its products, the Company's business, results of operation and financial
condition could be materially adversely affected. There can be no assurance that
the Company will be able to compete successfully with existing or potential
competitors. Increased competition may result in the loss of shelf space or a
reduction in demand or sell-through of the Company's products, any of which
could have a material adverse effect on the Company's business, results of
operations and financial condition.
Microsoft's position as a large, well-capitalized software company with a
dominant share of the market for PC operating system software could enable it to
develop products that compete effectively with those of the Company. In
particular, Microsoft is incorporating "Plug and Play" capabilities into future
versions of its operating systems. Plug and Play capabilities are designed to
allow PC users to add on any computer peripheral (such as a modem, video or
sound card) to a Windows-based system and enable that peripheral to work
immediately, without concern for software configuration errors or driver
conflicts. In addition, to the extent that Microsoft incorporates functionality
comparable, or perceived as comparable, to those offered by the Company into its
Windows products (or separately offers comparable products), sales of the
Company's products could be materially adversely affected. There can be no
assurance that any such action by Microsoft or others would not render the
Company's products noncompetitive or obsolete.
The Company's products also compete indirectly against alternative sources
of technical support, such as the technical support departments of hardware and
software vendors. Additionally, the Internet provides hardware and software
vendors with a new medium to offer technical support services. The Company
expects that many vendors will provide Internet-based technical support services
to support their existing and future products. The availability of these
technical support services could materially dilute the value of the Company's
products and have a material adverse effect on the Company's market position,
business, results of operations and financial condition. See "-- Industry
Background."
In addition, the Company may face increasing pricing pressures from current
and future competitors and, accordingly, there can be no assurance that
competitive pressures will not require the Company to reduce its prices. Any
material reduction in the price of the Company's products would negatively
affect the Company's business, results of operations and financial condition,
and would require the Company to increase unit sales in order to maintain
historic levels of net revenues.
The Company believes that the principal competitive factors in the software
industry are product features and quality, reliability, ease of use, brand name
recognition, access to distribution channels and price. Although the Company
believes it competes favorably with respect to these factors, there can be no
assurance that the Company will continue to do so. See "Risk
Factors -- Competition."
PROPRIETARY RIGHTS
The Company's success is heavily dependent upon its proprietary software.
The Company relies primarily on a combination of copyright, trademark and trade
secret laws, employee confidentiality and nondisclosure agreements and
third-party nondisclosure agreements and other methods of protection common in
the industry to protect its proprietary rights. The Company licenses its
products primarily under "shrink wrap" license agreements that are not signed by
licensees and therefore may be unenforceable under the laws of certain
jurisdictions. In addition, the Company has two United States patent
applications pending and intends to seek international and further United States
patents on its technology. There can be no assurance that patents will issue
from the Company's pending applications or that any claims allowed from the
pending patent applications or those hereafter filed will be of sufficient scope
or strength, or be issued in all countries where the Company's products can be
sold, to provide meaningful protection or any commercial advantage to the
Company or that any patents which may be issued to the Company will not be
challenged and invalidated. In addition, existing copyright laws provide only
limited protection. Despite the Company's efforts to protect its proprietary
rights, unauthorized parties may attempt to copy or otherwise obtain and use the
Company's products or technology that the Company considers proprietary, and
third parties may develop similar
36
<PAGE> 38
technology independently. Policing unauthorized use of the Company's products is
difficult, and while the Company is unable to determine the extent to which
piracy of its software products exists, software piracy can be expected to be a
persistent problem. There can be no assurance that the Company's means of
protecting its proprietary rights will be adequate. In addition, there can be no
assurance that the Company's competitors will not independently develop
technologies and products that are substantially equivalent or superior to those
of the Company without violating the Company's proprietary rights.
As the number of software products in the industry increases and the
functionality of these products increasingly overlaps, software developers may
become increasingly subject to infringement claims. From time to time, the
Company has received communications from third parties asserting that certain
products may infringe upon intellectual property rights of others. To date, no
such claim has resulted in litigation or the payment of any damages. However,
there can be no assurance that existing or future infringement claims against
the Company with respect to current or future products will not result in costly
litigation or require the Company to enter into royalty bearing licenses with
third parties or to discontinue use of certain portions of the Company's
technology if licenses are not available on acceptable terms.
While to date the Company's international sales have been insignificant,
the Company intends to devote substantial resources in an effort to expand the
international distribution of its products. The laws of some foreign countries
either do not protect the Company's proprietary rights or offer only limited
protection for those rights. The Company has not registered its copyrights in
any foreign countries. While in most foreign countries registration is not
required in order to receive copyright protection, the ability to bring an
enforcement action and obtain certain remedies depends on compliance with that
country's copyright laws. Consequently, the Company's failure to register its
copyrights abroad may make enforcement of these rights more difficult or reduce
the available remedies in any enforcement action. In addition, the Company has
not to date pursued foreign registration of its trademarks due to the
significant costs involved and, as a result, the Company may not be able to
prevent a third party from using its trademarks in many foreign jurisdictions.
OPERATIONS
The production of the Company's software products includes diskette
duplication, purchased component assembly, printing of user manuals and final
packaging. The Company contracts with outside parties to perform these functions
to the Company's specifications and quality standards. The Company currently
does not have long-term agreements with any of these parties. Although the
Company believes that alternative resources exist or can be obtained, a
disruption of the Company's relationship with any of these outside parties could
adversely affect the Company's business, results of operations and financial
condition until replacement sources are established. In addition, any material
changes in product and service quality and pricing or failure to adhere to the
Company's specifications by these outside parties could adversely affect the
Company's business, results of operations and financial condition. The Company
has attempted to mitigate the risk of any such disruption by maintaining certain
levels of "safety stock" inventories and the limited use of second source
vendors. In the past, the Company has experienced material difficulties and
delays in the manufacture and assembly of its products. There can be no
assurance that the Company will not continue to experience such difficulties in
the future. As of July 31, 1996, the Company had a total of three employees in
operations. See "Risk Factors -- Reliance on Outside Resources."
BACKLOG
The Company normally ships products within one week after receipt of an
order. As a result, the Company has relatively little backlog at any time and
does not consider backlog to be a significant indicator of future performance.
EMPLOYEES
At July 31, 1996, the Company employed a total of 104 full-time employees,
including three in operations, 34 in sales and marketing, 17 in technical
support, 30 in research and development and 20 in finance and administration.
The Company also employs, from time to time, a number of temporary and part-
37
<PAGE> 39
time employees as well as consultants on a contract basis. The Company has
experienced rapid growth in the past year and intends to hire additional
personnel during the next twelve months in each of these areas. The Company's
future success will depend in part on its ability to attract, train, retain and
motivate highly qualified employees, who are in great demand. There can be no
assurance that the Company will be successful in attracting and retaining such
personnel. The Company's employees are not represented by a collective
bargaining organization, and the Company has never experienced a work stoppage
or strike. The Company considers its employee relations to be good. See "Risk
Factors -- Management of Growth; Dependence on Key Personnel."
FACILITIES
The Company leases approximately 16,000 square feet of office space in
Santa Monica, California. These facilities serve as the Company's headquarters
and include all Company functions except outside sales. The Company believes
that its facilities are adequate for its current needs and that suitable
additional or alternative space will be available in the future on commercially
reasonable terms as needed.
LEGAL PROCEEDINGS
From time to time, the Company may be involved in litigation relating to
claims arising out of its products or operations in the normal course of
business. In July 1996, the Company filed a lawsuit in the U.S. District Court,
Northern District of California against Vertisoft, a wholly-owned subsidiary of
Quarterdeck Corp. alleging that Vertisoft's packaging materials included false
and misleading statements about the Company that constituted unfair competition
and false advertising. Vertisoft has filed counterclaims against the Company
alleging that the Company's packaging materials included false and misleading
statements. Pending trial, the Court has granted a preliminary injunction in
favor of the Company and against Vertisoft which prevents Vertisoft from
shipping products with its existing packaging unless certain statements are
"stickered" over. The Court has also denied Vertisoft's request for a
preliminary injunction to stop the Company from shipping its First Aid 95 and
First Aid 95 Deluxe products, or even to require a form of "sticker" be placed
on the Company's products. The Court's rejection of Vertisoft's request does not
preclude Vertisoft from filing other or additional motions in the suit,
including requests for injunctive relief or damages.
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<PAGE> 40
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company as of August 27, 1996
are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------- --- --------------------------------------------
<S> <C> <C>
Unni S. Warrier 42 President, Chief Executive Officer and
Chairman of the Board
Leonard L. Backus 43 Vice President, International Sales
Jeffrey W. Beaumont 44 Vice President, Finance and Chief Financial
Officer
Srikanth Chari 44 Vice President, Marketing
Brad Kingsbury 32 Vice President, Engineering
Anne T. Lam 38 Vice President, Business Development
Paul Dali(1) 54 Director
Peter Morris(1) 40 Director
Suhas Patil(1) 52 Director
Ronald S. Posner(2) 53 Director
Kanwal Rekhi(2) 49 Director
James R. Tolonen(2) 47 Director
</TABLE>
- ---------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
Each director will hold office until the next Annual Meeting of
Stockholders and until his successor is elected and qualified or until his
earlier resignation or removal. Each officer serves at the discretion of the
Board of Directors (the "Board").
Mr. Warrier has served as President, Chief Executive Officer and Chairman
of the Board of the Company since co-founding the Company in November 1991. From
May 1989 to February 1991, he served as President and Chief Executive Officer of
NetLabs, Inc., a maker of UNIX network management products, which Mr. Warrier
co-founded. Mr. Warrier holds a B. Tech. in Physics from the Indian Institute of
Technology of Kanpur, India and a M. Tech. in Computer Science from the Indian
Institute of Technology of Madras, India.
Mr. Backus has served as Vice President, International Sales of the Company
since April 1996. Prior to joining the Company, from October 1995 to April 1996,
he served as a Principal for Technology Marketing Alliance, a consulting
company. Prior to that, Mr. Backus served as Vice President, International Sales
and Marketing, of MediaVision Technology, Inc., a computer hardware manufacturer
from July 1994 to October 1995, and as Director of International Sales of
MediaVision Technology, Inc. from February 1991 to July 1994. Mr. Backus holds a
B.S. in Electrical Engineering from the University of Washington and an M.S. in
Electrical Engineering from the University of Southern California.
Mr. Beaumont has served as Vice President, Finance and Chief Financial
Officer of the Company since December 1995. From June 1995 to December 1995, he
served as an independent consultant to various companies. Prior to joining the
Company, from October 1994 to June 1995, he served as Chief Financial Officer of
Blyth Holdings, Inc., a software development company. From August 1989 to
October 1994, Mr. Beaumont served as Chief Financial Officer at Davidson &
Associates, Inc., an educational software development company. Mr. Beaumont
holds a B.A. in History from Hamilton College and an M.B.A. from the University
of Michigan.
Dr. Chari has served as Vice President, Marketing since co-founding the
Company in November 1991. From November 1991 to August 1996, Dr. Chari also
served as a director of the Company. From July 1990 to October 1991, he served
as Director of Marketing for NetLabs, Inc. Dr. Chari holds a B. Tech. in
Electrical Engineering from the Indian Institute of Technology of Delhi, India,
an M.B.A. from the Indian Institute of Management of Ahmedabad, India and a
Ph.D. in Business from the University of California, Los Angeles.
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<PAGE> 41
Mr. Kingsbury has served as Vice President, Engineering of the Company
since April 1996. Prior to joining the Company, from July 1985 to April 1996, he
served in various positions at Symantec Corporation, a software utilities
company, most recently as Chief Technologist and General Manager of the
Anti-Virus Business Unit. Mr. Kingsbury holds a B.S. in Computer Science from
California State University, Northridge.
Ms. Lam has served as Vice President, Business Development since
co-founding the Company in November 1991. From November 1991 to August 1996, Ms.
Lam also served as a director of the Company. From May 1989 to October 1991, she
served as Director, Strategic Sales of NetLabs, Inc, a company which she
co-founded. Ms. Lam holds a B.S. and an M.S. in Computer Science from the
University of California, Los Angeles.
Mr. Dali has served as a director of the Company since September 1995.
Since December 1991, he has served as a general partner at Nazem & Company, a
venture capital investment firm. Prior to this, he served as Chief Executive
Officer of Regis McKenna, Inc., a marketing consulting company, and as General
Manager of Apple Computer, Inc. Mr. Dali holds a B.S. in Finance from California
State University, Northridge.
Mr. Morris has served as a director of the Company since September 1995.
Since January 1993, he has served as a partner at New Enterprise Associates, a
venture capital firm. From January 1991 to December 1992, he served as an
Associate at New Enterprise Associates. From February 1990 to December 1990, he
served as General Manager at Telebit, a communications company. Mr. Morris holds
a B.S. in Electrical Engineering and an M.B.A. from Stanford University.
Dr. Patil has served as a director of the Company since September 1995.
Since February 1984, he has served as Chairman of the Board of Cirrus Logic,
Inc., a manufacturer of advanced integrated circuits for personal computing,
communications, industrial and consumer markets, which Dr. Patil founded. Dr.
Patil holds a B. Tech and an M.S. in Electronics and Electrical Communication
from the Indian Institute of Technology of Kharagpur, India and a Sc.D. in
Electrical Engineering from Massachusetts Institute of Technology.
Mr. Posner has served as a director of the Company since September 1995.
Since January 1996, he has served as Chairman of the Board of Graphix Zone,
Inc., a CD-ROM publishing company, and was a co-founder and Chairman of the
Board of StarPress, Inc., a CD-ROM publishing company that merged with Graphix
Zone, Inc. in July 1996. Mr. Posner was also Chairman of the Board and Chief
Executive Officer of WordStar International, Inc., a PC software company, and
President and Chief Executive Officer of Norton Utilities, Inc., a software
utilities company. Mr. Posner holds a B.S. in Mathematics from Renssalaer
Polytechnic Institute and an M.B.A. from Harvard University.
Mr. Rekhi has served as a director of the Company since September 1995.
From June 1989 to January 1995, Mr. Rekhi served as an Executive Vice President
and Chief Technology Officer of Novell, Inc., ("Novell") a local area network
and software company. Mr. Rekhi also served as a director of Novell from June
1989 to September 1995. Mr. Rekhi currently serves as a director of Castelle,
Inc., a communications company, and Gupta, Inc., a database software company.
Mr. Rekhi holds a B. Tech. from the Indian Institute of Technology of Bombay,
India and an M.S. in Electrical Engineering from Michigan Technological
University.
Mr. Tolonen has served as a director of the Company since August 1996.
Since June 1989 he has served as an Executive Vice President and Chief Financial
Officer of Novell. Mr. Tolonen also served as Chief Financial Officer of
Excelan, Inc., a networking company, from July 1983 through June 1989 before it
was acquired by Novell. Mr. Tolonen is a Certified Public Accountant and holds
both a B.S. in Mechanical Engineering and an M.B.A., from the University of
Michigan. Mr. Tolonen is currently the Chair of the Issuer Affairs Committee of
the Nasdaq.
BOARD COMMITTEES
The Board of Directors has a Compensation Committee, consisting of Messrs.
Dali, Morris and Patil and an Audit Committee, consisting of Messrs. Posner,
Rekhi and Tolonen. The Compensation Committee makes recommendations to the Board
concerning salaries and incentive compensation for the Company's officers and
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<PAGE> 42
employees and administers the Company's Amended 1993 Stock Plan and 1996
Employee Stock Purchase Plan. The Audit Committee reviews the results and scope
of the audit and other accounting related services and reviews and evaluates the
Company's internal control functions.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the members of the Compensation Committee of the Board is an
officer or employee of the Company. No interlocking relationship exists between
the Company's Board or Compensation Committee and the Board of Directors or
compensation committee of any other company, nor has such an interlocking
relationship existed in the past.
The Company has entered into indemnification agreements with each of its
directors and officers. Such agreements require the Company to indemnify such
individuals to the fullest extent permitted by law. See
"Management -- Limitation of Liability and Indemnification Matters."
DIRECTOR COMPENSATION
The Company reimburses its directors for the out-of-pocket expenses
incurred in the performance of their duties as directors of the Company. The
Company does not currently pay fees to its directors for attendance at board
meetings. In October 1995, Messrs. Rekhi, Patil and Posner each received, in
recognition for their services to the Company as consultants, a nonstatutory
option exercisable to purchase 75,000 shares of the Company's Common Stock at an
exercise price of $0.14 per share. These options have a term of ten years and
vest over four years from the date of grant, assuming continued service by such
individuals as consultants of the Company. During the six months ended June 30,
1996, each of Messrs. Rekhi, Patil and Posner have exercised such options in
full, subject to the Company's right of repurchase which lapses over four years
from the date of the original option grants. In August 1996, in recognition of
his services to the Company as a consultant, Mr. Tolonen received a nonstatutory
option exercisable to purchase 75,000 shares of the Company's Common Stock at an
exercise price of $6.00 per share. This option has a term of ten years and vests
over four years from the date of grant, assuming continued service by Mr.
Tolonen as a consultant to the Company. See "-- Employee Benefit
Plans -- Amended 1993 Stock Plan" and "Certain Transactions."
1996 Director Option Plan. The Company's 1996 Director Option Plan (the
"Director Plan") provides for the automatic and nondiscretionary grant of
nonstatutory stock options to nonemployee directors of the Company who are first
elected to the Board after the adoption of the Director Plan ("Outside
Directors"). The Director Plan was approved by the Board in June 1996 and
stockholders in August 1996. A total of 50,000 shares of Common Stock are
reserved for issuance thereunder. Each Outside Director will automatically be
granted an option to purchase 5,000 shares on the date on which such person
first becomes an Outside Director ("First Option") at the fair market value of
the Company's Common Stock on the date of grant. Each First Option will become
exercisable as to one-fourth ( 1/4) of the shares subject to the option on the
first anniversary of the date of grant and as to one-forty-eighth ( 1/48) of the
shares subject to the option each month thereafter, subject to continued service
as an Outside Director. In addition, each Outside Director will be automatically
granted an option to purchase 5,000 shares on December 1 of each year beginning
in 1997, provided he or she has served on the Board for at least six months
("Subsequent Option"). Each Subsequent Option shall have an exercise price equal
to the fair market value of the Company's Common Stock as of the date of grant
and shall become exercisable as to one-fourth ( 1/4) of the shares subject to
the Subsequent Option three years and one month after the date of grant and as
to one-forty-eighth ( 1/48) of the shares on the last day of each month
thereafter, subject to continued service as an Outside Director.
In the event of the merger of the Company with or into another corporation
or sale of substantially all of the assets of the Company, each option shall
immediately become fully exercisable.
Options granted under the Director Plan have a term of ten years unless
terminated sooner upon termination of the optionee's status as a director or
otherwise pursuant to the Director Plan. Such options may not be transferred
other than by will or the laws of descent and are exercisable during the
lifetime of an Outside Director only by such Outside Director. Unless terminated
sooner, the Director Plan will terminate in
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<PAGE> 43
2006. The Board has the right to amend or terminate the Director Plan, provided
no such action may impair the rights of any optionee without the optionee's
consent.
EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation awarded, earned
or paid for services rendered to the Company in all capacities during the fiscal
year ended December 31, 1995 by the Company's Chief Executive Officer and each
of the Company's other executive officers whose total annual compensation
exceeded $100,000 (collectively, the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION SECURITIES
-------------------- UNDERLYING
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS
- ------------------------------------------------------------ -------- ----- ----------
<S> <C> <C> <C>
Unni S. Warrier............................................. $123,461 $500 79,550
President, Chief Executive Officer and Chairman of the
Board
Srikanth Chari.............................................. 104,654 500 42,775
Vice President, Marketing
Anne T. Lam................................................. 104,654 500 41,650
Vice President, Business Development
</TABLE>
The following table sets forth certain information concerning grants of
stock options to each of the Named Executive Officers during fiscal 1995. No
stock appreciation rights were granted to these individuals during such year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
INDIVIDUAL GRANTS (1) AT ASSUMED ANNUAL
-------------------------------------------------------- RATES OF STOCK
NUMBER OF % OF TOTAL PRICE APPRECIATION
SHARES OPTIONS FOR OPTION TERM
UNDERLYING GRANTED TO EXERCISE (2)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ------------------
NAME GRANTED FISCAL YEAR SHARE (3) DATE (3) 5% 10%
- ----------------------------- ---------- -------------- ------------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Unni S. Warrier.............. 79,550 9.5% $0.14 12/06/05 $7,004 $17,750
Srikanth Chari............... 42,775 5.1 0.14 12/06/05 3,678 9,321
Anne T. Lam.................. 41,650 5.0 0.14 12/06/05 3,667 9,293
</TABLE>
- ---------------
(1) The stock options granted to the Named Executive Officers in fiscal year
1995 were fully vested and exercisable on the date of grant.
(2) The potential realizable value is based on the term of the option at the
time of grant (ten years). Assumed stock price appreciation of five percent
and ten percent is used pursuant to the rules promulgated by the Securities
and Exchange Commission (the "Commission") and does not represent the
Company's estimate or projection of future Common Stock prices. The
potential realizable value is calculated by assuming that the deemed fair
value of the Company's Common Stock for financial statement presentation
purposes on the date of grant appreciates at the indicated rate for the
entire term of the option and that the option is exercised at the exercise
price and sold on the last day of its term at the appreciated price.
(3) All options are granted at an exercise price equal to the fair market value
of the Company's Common Stock, as determined by the Board on the date of
grant, and have a term of 10 years.
The above table does not reflect options granted in January 1996 as
follows: Messrs. Warrier and Chari and Ms. Lam were granted options to purchase
150,050, 100,050 and 90,050 shares of Common Stock, respectively, at an exercise
price of $1.20 per share.
42
<PAGE> 44
OPTION EXERCISES AND FISCAL YEAR-END VALUES
No named officer exercised a stock option during 1995. The following table
sets forth certain information with respect to the stock options held by each of
the Named Executive Officers as of December 31, 1995.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1995 DECEMBER 31, 1995
----------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Unni S. Warrier............................ 292,050 -- $ --
Srikanth Chari............................. 142,775 -- --
Anne T. Lam................................ 166,650 -- --
</TABLE>
- ---------------
(1) Based upon an assumed initial public offering price of $ per share
less the exercise price of the option.
EMPLOYMENT CONTRACTS AND CHANGE OF CONTROL ARRANGEMENTS
The Company has entered into employment agreements with each of its
founders, including Srikanth Chari, Anne T. Lam and Unni S. Warrier with the
following terms: (i) in the event any founder is terminated without cause on or
after the date six months from September 29, 1995, the Closing of the Series B
Preferred Stock financing (the "Series B Closing") and prior to twelve months
from the date of the Series B Closing, the Company shall continue to pay such
founder's salary and provide benefits to such founder for a period of eighteen
months from the effective date of termination; (ii) in the event any founder is
terminated without cause on or after the date one year from the Series B Closing
and prior to eighteen months from the Series B Closing, the Company shall
continue to pay such founder's salary and provide benefits for a period of
twelve months from the date of termination; and (iii) in the event any founder
is terminated without cause on or after the date eighteen months from the Series
B Closing, the Company shall continue to pay such founder's salary and provide
benefits for a period of six months from the date of termination. All options to
purchase stock held by such founder shall continue to vest for one year from the
date of a termination under (i) or (ii) above and for six months from the date
of termination under (iii) above. In addition, the Company has entered into an
agreement with each of Mr. Chari and Ms. Lam that provides for the immediate
vesting of all of such individual's outstanding options in the event that the
Company terminates such individual without cause.
The 1996 Director Plan provides for accelerated vesting of all outstanding
options granted to directors thereunder upon a change in control in certain
circumstances. No options have been granted under the 1996 Director Plan prior
to this offering. See "-- Director Compensation -- 1996 Director Option Plan."
EMPLOYEE BENEFIT PLANS
Amended 1993 Stock Plan. The Company's 1993 Stock Plan was adopted by the
Board in February 1993 and approved by the Company's stockholders in June 1993.
The 1993 Stock Plan was amended by the Board in June 1996 and approved by the
Company's stockholders in August 1996 (the "Amended 1993 Plan"). As of June 30,
1996, options to purchase an aggregate of 1,513,016 shares were outstanding
under the Company's Amended 1993 Plan at a weighted average exercise price of
$1.51 per share and 127,459 were reserved for future issuance. The aggregate
maximum number of shares that may be issued under the Amended 1993 Plan is
3,902,000 shares of Common Stock, which number includes an additional 1,000,000
shares authorized and reserved for issuance under the Amended 1993 Plan in
August 1996. Additionally, contingent and effective upon the closing of this
offering, the Board and stockholders have approved an amendment to the Amended
1993 Plan that provides for an annual increase in the maximum aggregate number
of shares of Common Stock which may be optioned and sold under the Amended 1993
Plan to the lesser of (i) 500,000 shares of Common Stock; (ii) six percent of
the shares of Common Stock outstanding on such date or (iii) an amount
determined by the Board. The Amended 1993 Plan provides for (i) the granting to
employees (including officers and employee directors) of "incentive stock
options" within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), (ii) the granting to employees and consultants of
nonstatutory stock options and (iii) the granting of restricted stock purchase
rights ("SPRs") to employees and consultants.
43
<PAGE> 45
The Amended 1993 Plan may be administered by the Board or a committee of
the Board (the "Administrator") and is currently administered by the Company's
Compensation Committee. Generally, options granted under the Amended 1993 Plan
become exercisable, assuming continued service with the Company, with respect to
one-fourth ( 1/4) of the shares covered by the option twelve months after the
date of grant and thereafter vest and become exercisable at a rate of
one-forty-eighth ( 1/48) of the shares subject to the option each month, with
the option being fully exercisable four years after the date of the grant. Each
option is fully exercisable upon grant subject to the Company's right to
repurchase the shares received upon exercise. This repurchase right lapses over
the same term as the option would have vested. To the extent that the aggregate
fair market value of the shares with respect to which options designated as
incentive stock options are exercisable for the first time by any optionee
during any calendar year exceeds $100,000, such excess options shall be treated
as nonstatutory stock options. The Administrator determines the terms of options
and SPRs granted under the Amended 1993 Plan, including the number of shares
subject to the option or SPR, exercise price, term and the rate at which the
options become exercisable. The exercise price of all incentive stock options or
SPRs granted under the Amended 1993 Plan must be at least equal to the fair
market value of the Common Stock of the Company on the date of grant. The
exercise price of any incentive stock option or SPR granted to an optionee who
owns stock representing more than 10% of the voting power of all classes of
stock of the Company must equal at least 110% of the fair market value of the
Common Stock on the date of grant. With respect to any participant who owns
stock possessing more than 10% of the voting power of all classes of stock of
the Company, the term of an incentive stock option is limited to five years or
less. The term of all other options may not exceed ten years. In the case of
SPRs, unless the Administrator determines otherwise, the Company has a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment with the Company for any reason (including death or
disability). The aforementioned repurchase option lapses at a rate determined by
the Administrator. The purchase price for shares so repurchased by the Company
is the original price paid by the purchaser and may be paid by cancellation of
any indebtedness of the purchaser to the Company. The exercise price may be paid
in such consideration as determined by the Administrator, including cash and
promissory notes. If not terminated earlier, the Amended 1993 Plan will
terminate in 2003. Subject to certain limitations, the Board has the authority
to amend or terminate the Amended 1993 Plan as long as such action does not
adversely affect any outstanding option.
In the event of a proposed sale of all or substantially all of the
Company's assets, or a merger of the Company with or into another corporation,
each option and SPR may be assumed or an equivalent option or right substituted
by the successor corporation. In the absence of assumption or substitution of
such options or SPRs, an optionee will have the right to exercise such option or
SPR as to all of the shares of stock covered by the option or SPR, including
shares as to which the option would not otherwise be exercisable.
1996 Employee Stock Purchase Plan. The Company's 1996 Employee Stock
Purchase Plan (the "Purchase Plan") was adopted by the Board in June 1996 and
approved by the Company's stockholders in August 1996. A total of 100,000 shares
of Common Stock are reserved for issuance under the Purchase Plan. The Purchase
Plan is intended to qualify as an employee stock purchase plan under Section 423
of the Internal Revenue Code of 1986, as amended, and is administered by the
Board or by a committee appointed by the Board. Employees (including officers
and employee directors of the Company) are eligible to participate if they are
employed by the Company (or a subsidiary of the Company designated by the Board)
for at least 20 hours per week, and for more than five months per calendar year.
The Purchase Plan permits eligible employees to purchase Common Stock through
payroll deductions, which may not exceed 10% of an employee's compensation. No
employee may purchase more than $25,000 worth of stock in any calendar year. The
Purchase Plan is divided into 24-month offering periods, each of which contains
four, six month purchase periods. The Purchase Plan is implemented through
consecutive, overlapping offering periods, with new exercise periods within each
offering period commencing on the first trading day on or after July 31 and
January 31 of each year. The initial offering period under the Purchase Plan
will begin on the effective date of this offering and end on August 31, 1998.
Subsequent offering periods will begin on the first trading day following
termination of an exercise period within a prior offering period and shall
terminate 24 months later. Each participant will be granted an option on the
first day of each offering period and such option will be automatically
exercised on the last day of each six month exercise period within such offering
period. The
44
<PAGE> 46
price of shares purchased under the Purchase Plan is 85% of the lower of the
fair market value of the Common Stock of the Company at (i) the beginning of the
offering period or (ii) the end of the applicable six month exercise period.
Employees may end their participation in the offering at any time during the
offering period, and participation ends automatically on termination of
employment with the Company. In the event of a merger of the Company with or
into another corporation, each option under the Purchase Plan shall be assumed
or an equivalent option shall be substituted by the surviving entity, unless the
Board determines, in lieu of such assumption or substitution, to shorten the
offering period in progress and set a new option exercise date. If the Board
shortens the offering period then in progress, each participant shall be
notified at least ten business days prior to the new exercise date, and unless
such participant ends his or her participation, the option will be exercised
automatically on the new exercise date. The Purchase Plan will terminate in
2006, unless sooner terminated by the Board.
401(k). The Company sponsors a 401(k) Plan under which eligible employees
may contribute, on a pre-tax basis, up to 15% of the employee's total annual
income from the Company, excluding bonuses, subject to certain IRS limitations.
The Company may make discretionary contributions to the Plan. All full-time
employees who have attained age 18 are eligible to participate in the Plan. All
contributions are allocated to the employee's individual account and, at the
employee's election, are invested in one or more investment funds available
under the Plan. Employee contributions are fully vested and nonforfeitable.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company intends to reincorporate in the State of Delaware immediately
prior to the effectiveness of this Prospectus. The Company decided to
reincorporate in the State of Delaware, in part, to take advantage of certain
provisions in the Delaware General Corporation Law (the "Delaware Code")
relating to limitations on liability of corporate officers and directors. The
Company believes that its reincorporation in Delaware, the provisions of its
Amended and Restated Certificate of Incorporation, Bylaws and the separate
indemnification agreements outlined below are all necessary to attract and
retain qualified persons as directors and officers.
At the time of reincorporation, the Company's Amended and Restated
Certificate of Incorporation will limit 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 for liability (i) for any breach
of their duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (iii) for unlawful payments of dividends or unlawful
stock repurchases or redemptions as provided in Section 174 of the Delaware
Code, or (iv) for any transaction from which the director derived an improper
personal benefit.
At the time of reincorporation, the Company's Bylaws will provide that the
Company shall indemnify its directors and executive officers and may indemnify
its other officers, employees and agents to the fullest extent permitted by law.
The Company's Bylaws also permit the Company to secure insurance on behalf of
any officer, director, employee or agent for any liability arising out of his or
her actions in such capacity, regardless of whether the Bylaws would permit
indemnification.
In addition to indemnification provided for in the Company's Bylaws, the
Company will also enter into indemnification agreements with its directors and
officers. These agreements may require the Company, among other things, to
indemnify the Company's directors and officers for certain expenses (including
attorneys' fees), judgments, fines and settlement amounts incurred by any such
person in any action or proceeding, including any action by or in the right of
the Company, arising out of such person's services as a director or officer of
the Company, any subsidiary of the Company or any other company or enterprise to
which the person provides services at the request of the Company. The Company
believes that these provisions and agreements are necessary to attract and
retain qualified directors and officers.
The Company has obtained an insurance policy providing directors' and
officers' liability coverage. At present, there is no pending litigation or
proceeding involving any director, officer, employee or agent of the Company
where indemnification will be required or permitted. The Company is not aware of
any threatened litigation or proceeding that might result in a claim for such
indemnification.
45
<PAGE> 47
CERTAIN TRANSACTIONS
Since its inception, the Company has issued, in private placement
transactions, shares of Preferred Stock as follows: 2,959,658 shares of Series A
Preferred Stock at $0.35 per share, 6,371,429 shares of Series B Preferred Stock
at $0.70 per share and 1,666,667 shares of Series C Preferred Stock at $3.00 per
share. In addition, the Company issued to the purchasers of the Series A
Preferred Stock warrants to purchase an aggregate of 1,766,471 shares of Series
A Preferred Stock at a weighted average exercise price of $0.35 and $0.45 per
share during 1994 and 1995, respectively. The holders of Common Stock into which
such shares of Preferred Stock are convertible are entitled to certain
registration rights with respect to such Common Stock. See "Description of
Capital Stock -- Registration Rights." Each share of the Company's Preferred
Stock automatically converts into one-half share of Common Stock upon the
closing of this offering. The following table sets forth the series of Preferred
Stock and number of shares purchased by the Company's executive officers,
directors, five percent stockholders and their respective affiliates:
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS, WARRANTS TO
DIRECTORS AND SERIES A PURCHASE SERIES A SERIES B SERIES C TOTAL
5% STOCKHOLDERS PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK CONSIDERATION
- --------------------------- --------------- ----------------- --------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Unni S. Warrier............ 28,571 47,619 -- 31,000 $ 119,667
Anne T. Lam................ 28,571 47,619 -- 45,255 162,432
Srikanth Chari(1).......... 12,000 47,619 -- 28,000 104,867
Brad Kingsbury............. -- -- -- 33,333 99,999
Leonard L. Backus.......... -- -- -- -- --
Jeffrey W. Beaumont........ -- -- -- -- --
Suhas Patil................ 1,400,093 1,207,714 1,000,000 33,333 1,429,202
Kanwal Rekhi(2)............ 142,857 -- 122,857 167,745 639,235
Paul Dali(3)............... -- -- 1,428,571 118,190 1,354,570
Ronald S. Posner........... -- -- 357,143 37,255 361,765
Peter Morris............... -- -- -- 8,333 24,999
James R. Tolonen........... -- -- -- -- --
Entities affiliated with
Draper Associates(4)..... -- -- 1,071,428 63,644 940,932
Entities affiliated with
New Enterprise
Associates(5)............ -- -- 1,800,000 140,254 1,680,762
Entities affiliated with
Nazem & Company IV,
L.P.(3).................. -- -- 1,428,571 118,190 1,354,570
</TABLE>
- ---------------
(1) Includes 12,000 shares purchased by Srikanth Chari and Padma Chari, Trustees
of the Chari Family Trust U/D/T dated June 10, 1996.
(2) Includes 75,671 shares purchased by Kanwal Rekhi, Ann Holt Rekhi and
Navinder Jain, Trustees of the Benjamin Rekhi Trust dated 12/15/89, 75,672
shares purchased by Kanwal Rekhi, Ann Holt Rekhi and Navindera Jain,
Trustees of the Raj-Ann Kaur Rekhi Trust dated 12/15/89 and 155,615 shares
purchased by Kanwal Rekhi as Trustee of the Rekhi Family Trust dated
12/15/89.
(3) Includes 1,546,761 shares purchased by Nazem & Company IV, L.P. Mr. Dali is
a director of the Company and a general partner of Nazem & Company IV, L.P.
Mr. Dali disclaims beneficial ownership of such shares except to the extent
of his pecuniary interest therein.
(4) Includes 567,536 shares purchased by Draper Associates II, L.P., 31,822
shares purchased by Draper International India, L.P. and 535,714 shares held
by Draper International Holdings, L.P.
(5) Includes 14,286 shares and 1,925,968 shares purchased by NEA Ventures 1995,
L.P. and New Enterprise Associates VI, Limited Partnership, respectively.
Mr. Morris is a director of the Company and is a partner at New Enterprise
Associates. Because Mr. Morris does not have voting or dispository control
over such shares, other than the 8,333 shares that Mr. Morris purchased, he
disclaims beneficial ownership over the shares of which he has no pecuniary
interest.
46
<PAGE> 48
In May 1992, the Company entered into a promissory note for $200,000 with
Suhas Patil, a director of the Company. In October 1994, pursuant to the Series
A Preferred Stock financing, Dr. Patil converted $175,000 of the note into
500,000 shares of Series A Preferred Stock. The balance of $25,000 was paid in
cash to Dr. Patil in February 1995.
In September 1993, the Company entered into a promissory note for $152,500
with Suhas Patil, a director of the Company, and a certain other Investor. In
February 1994, pursuant to the Company's Series A Preferred Stock financing, the
note and all accrued interest was converted into shares of Series A Preferred
Stock.
In June 1994, the Company obtained a $500,000 loan from the Industrial
Credit Development and Investment Corporation of India at an interest rate of
U.S. Prime Rate, plus 2.25%. The principal is payable to ICICI in ten quarterly
installments, which the Company will commence repayment as of January 1997. In
order to secure the loan, Dr. Patil was required to personally guarantee
$300,000 of the loan amount. The remaining $200,000 was personally guaranteed by
certain founders of the Company, including Messrs. Warrier and Chari and Ms.
Lam, (the "Founders"). In consideration for their personal guarantees, the
Company issued warrants to purchase up to an aggregate of 900,000 shares of the
Company's Series A Preferred Stock at an exercise price of $0.35 per share.
In June 1995, the Company borrowed $500,000 as a Bridge Loan from various
investors of the Company including Kanwal Rekhi, a director of the Company. The
Company issued Mr. Rekhi warrants to purchase 7,143 shares of Common Stock at
$1.40 per share in connection with this loan. This Bridge Loan was repaid in
full in September 1995.
In September 1995, Dr. Patil invested $700,000 in the Series B Preferred
Stock financing, $250,000 of which was represented by a series of loans to the
Company in order for the Company to meet then-existing financial requirements.
The Company and Dr. Patil agreed that these advances would be converted into
shares of Series B Preferred Stock. In consideration for the loans provided to
the Company, Dr. Patil received warrants to purchase 17,857 shares of the
Company's Common Stock at an exercise price of $1.40 per share.
In connection with the sale of the Series B Preferred Stock, the Founders,
the holders of the Series A Preferred Stock and holders of the Series B
Preferred Stock (the holders of Series A Preferred Stock and Series B Preferred
Stock are hereafter "Investors") entered into a Key Employees' Right of First
Refusal, Co-Sale and Voting Agreement (the "Voting Agreement"), pursuant to
which, among other things, the Company agreed to take all actions to (i) cause
the nomination of one person designated by Nazem & Company IV, L.P. ("Nazem")
(the "Nazem Director") and one person designated by New Enterprise Associates
VI, L.P. ("NEA") (the "NEA Director") for election as directors of the Company
for so long as the holders of Series B Preferred Stock hold at least 20% of the
outstanding shares of capital stock, (ii) cause the nomination of up to three
individuals designated by the holders of shares of Common Stock and Series A
Preferred Stock of the Company (the "Series A Directors") voting together as a
single class, on an as converted basis, one of whom will be the Chief Executive
Officer of the Company, and (iii) to cause the nomination of up to four
additional directors ("Additional Directors") each of which must be (A)
nominated by any one of such aforementioned directors, (B) approved by the
remainder of such aforementioned directors and (C) elected by the holders of a
majority of the shares of Common Stock, Series A Preferred Stock and Series B
Preferred Stock voting together as a single class, on an as converted basis. The
current NEA Director is Peter Morris, the current Nazem Director is Paul Dali,
the current Series A Director is Mr. Warrier and the current Additional
Directors are Messrs. Rekhi, Patil, Tolonen and Posner. The Company's
obligations to nominate a Nazem Director and NEA Director do not terminate upon
the effectiveness of this offering.
In the event a Founder proposes to sell or transfer to a third party any
Common Stock of the Company, then the Founder must first offer the Company the
right to purchase such securities at the same price and on the same terms and
conditions as the Founder has received from such third party for a period of 15
days during which the Founder cannot sell or transfer any Common Stock. Notice
of the Company's election to accept, in whole or in part, must be made in
writing by an officer of the Company prior to the expiration of the 15 day
period. If the Company does not elect to purchase all of such securities, the
Company shall give notice to the
47
<PAGE> 49
Investors and shall offer to sell to each Investor a portion of securities not
elected to be purchased by the Company on the same terms for a period of 20 days
("Investment Offer").
In addition, the Voting Agreement provides investors with the right to
participate in any sale or transfer by a Founder to a proposed transferee upon
the same terms and conditions as set forth in an Investment Offer, provided that
(i) the Founder proposes to sell more than 5% of the total shares of Common
Stock held by such Founder during any twelve-month period or (ii) such sale or
transfer would result in a proposed transferee acquiring more than 5% of the
total outstanding capital stock of the Company on a fully diluted and converted
basis. The Voting Agreement provides that in instances where Investors have the
right to participate in sales or transfer by a Founder, each Investor shall have
the right to sell up to that number of shares of Common Stock equal to the
product of (i) the amount of securities offered by the transferring Founder
multiplied by (ii) a fraction, the numerator of which is the number of shares of
Common Stock owned or entitled to be received upon conversion of any Preferred
Stock owned by each Investor at the time of such sale or transfer, and the
denominator of which is the total number of shares of Common Stock owned or
entitled to be received upon conversion of any Preferred Stock owned by the
Founder and the Investors as a group, at the time of such sale or transfer. See
"Risk Factors -- Control by Existing Stockholders" and " -- Anti-takeover
Provisions."
The Company has entered into employment agreements with each of its
founders, including Srikanth Chari, Anne T. Lam and Unni S. Warrier, with the
following terms: (i) in the event any founder is terminated without cause on or
after the date six months from September 29, 1995, the Closing of the Series B
Preferred Stock financing, (the "Series B Closing"), and prior to twelve months
from the date of the Series B Closing, the Company shall continue to pay such
founder's salary and provide benefits to such founder for a period of eighteen
months from the effective date of termination; (ii) in the event any founder is
terminated without cause on or after the date one year from the date of Closing
and prior to eighteen months from the date of Closing, the Company shall
continue to pay such founder's salary and provide benefits for a period of
twelve months from the date of termination; and (iii) in the event any founder
is terminated without cause on or after the date eighteen months from the date
of Closing, the Company shall continue to pay such founder's salary and provide
benefits for a period of six months from the date of termination. All options to
purchase stock held by such founder shall continue to vest for one year from the
date of a termination under (i) or (ii) above and for six months from the date
of termination under (iii) above. See "Management -- Employment Contracts and
Change of Control Arrangements."
In October 1995, each of Messrs. Rekhi, Patil and Posner received, in
recognition for their services to the Company as consultants, a nonstatutory
option exercisable to purchase 75,000 shares of the Company's Common Stock at an
exercise price of $0.14 per share. These options have a term of ten years and
vest over four years from the date of grant, assuming continued service by such
individuals as consultants of the Company. Each of Messrs. Rekhi, Patil and
Posner have exercised such options in full subject to the Company's right of
purchase which lapses over four years from the date of the original option
grants. In August 1996, in recognition of his services to the Company as a
consultant, Mr. Tolonen received a nonstatutory option exercisable to purchase
75,000 shares of the Company's Common Stock at an exercise price of $6.00 per
share. This option has a term of ten years and vests over four years from the
date of grant, assuming continued service by Mr. Tolonen as a consultant to the
Company. See "Management -- Director Compensation."
The Company has entered into indemnification agreements with each of its
directors and executive officers. These agreements require the Company to
indemnify such individuals to the fullest extent allowed by Delaware law for
certain liabilities to which they may be subject as a result of their
affiliation with the Company. See "Management -- Limitation of Liability and
Indemnification Matters."
The Company believes that all transactions set forth above were made on
terms no less favorable to the Company than would have been obtained from
unaffiliated third parties. The Company has adopted a policy whereby all future
transactions between the Company and its officers, directors and affiliates will
be on terms no less favorable to the Company than could be obtained from
unrelated third parties and will be approved by a majority of the disinterested
members of the Company's Board of Directors.
48
<PAGE> 50
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to
beneficial ownership of the Company's Common Stock as of June 30, 1996 and as
adjusted to reflect the sale of the shares of Common Stock offered hereby by (i)
each stockholder who is a beneficial owner of more than 5% of the Company's
Common Stock, (ii) each director, (iii) each executive officer (see
"Management -- Executive Compensation") and (iv) all executive officers and
directors as a group.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED(1)
---------------------
NUMBER OF BEFORE AFTER
BENEFICIAL OWNER SHARES BENEFICIALLY OWNED OFFERING OFFERING
- ---------------------------------------------------- ------------------------- -------- --------
<S> <C> <C> <C>
Suhas Patil(2)...................................... 1,945,570 21.7% %
c/o Cirrus Logic, Inc.
3100 West Warren Avenue
Fremont, CA 94538
New Enterprise Associates(3)........................ 970,127 10.8
2490 Sand Hill Road
Menlo Park, CA 94025
Paul Dali(4)........................................ 773,381 8.6
3000 Sand Hill Road
Menlo Park, CA 94025
Nazem & Company IV, L.P.(4)......................... 773,381 8.6
3000 Sand Hill Road
Menlo Park, CA 94025
Unni S. Warrier(5).................................. 695,695 7.8
c/o CyberMedia, Inc.
3000 Ocean Park Blvd.
Suite 2001
Santa Monica, CA 90405
Draper Entities(6).................................. 567,536 6.3
50 Fremont Street, Suite 3500
San Francisco, CA 94105
Anne T. Lam(7)...................................... 427,423 4.8
Kanwal Rekhi(8)..................................... 298,873 3.3
Srikanth Chari(9)................................... 294,635 3.3
Ronald S. Posner(10)................................ 272,199 3.0
Brad Kingsbury(11).................................. 16,667 *
Peter Morris(12).................................... 4,167 *
James R. Tolonen(13)................................ -- --
Jeffrey W. Beaumont(14)............................. -- --
Leonard L. Backus(15)............................... -- --
All Executive Officers and Directors as a Group (12
persons)(16)...................................... 4,728,610 52.7
</TABLE>
- ---------------
* Less than 1%.
(1) Unless otherwise indicated below, the persons and entities named in the
table have sole voting and sole investment power with respect to all shares
beneficially owned, subject to community property laws where applicable.
Shares of Common Stock subject to options or warrants that are currently
exercisable or exercisable within 60 days of June 30, 1996 are deemed to be
outstanding and to be beneficially owned by the person holding such options
or warrants for the purpose of computing the percentage ownership of such
person but are not treated as outstanding for the purpose of computing the
percentage ownership of any other person.
49
<PAGE> 51
(2) Includes 75,000 shares of Common Stock subject to the Company's repurchase
option which lapses over time. See "Management -- Director Compensation."
(3) Represents 14,286 shares and 1,925,968 shares held by NEA Ventures 1995,
L.P. and New Enterprise Associates VI, Limited Partnership, respectively.
Mr. Morris is a director of the Company and is a partner at New Enterprise
Associates. Because Mr. Morris does not have voting or dispositive control
over such shares, other than the 4,167 shares that Mr. Morris holds, he
disclaims beneficial ownership over the shares of which he has no pecuniary
interest.
(4) Represents 1,546,761 shares held of record by Nazem & Company IV, L.P. Mr.
Dali, a general partner of Nazem & Company IV, L.P., is a director of the
Company. Mr. Dali disclaims beneficial ownership of such shares except to
the extent of his pecuniary interest therein.
(5) Includes 50 shares subject to options that are currently exercisable or
exercisable within 60 days of June 30, 1996.
(6) Represents 567,536 shares held by Draper Associates II, L.P., 31,822 shares
held by Draper International India, L.P. and 535,714 shares held by Draper
International Holdings, L.P.
(7) Includes 50 shares subject to options that are currently exercisable or
exercisable within 60 days of June 30, 1996.
(8) Represents 75,671 shares held by Kanwal Rekhi, Ann Holt Rekhi and Navinder
Jain, Trustees of the Benjamin Rekhi Trust dated 12/15/89, 75,672 shares
held by Kanwal Rekhi, Ann Holt Rekhi and Navindera Jain, Trustees of the
Raj-Ann Kaur Rekhi Trust dated 12/15/89 and 141,058 shares held by Kanwal
Rekhi as Trustee of the Rekhi Family Trust dated 12/15/89 and 7,143 shares
held by Mr. Rekhi. Includes 75,000 shares subject to the Company's
repurchase option which lapses over time. See "Management -- Director
Compensation."
(9) Includes 256,775 shares held by Srikanth Chari and Padma Chari, Trustees of
the Chari Family Trust U/D/T dated June 10, 1996. Includes 50 shares
subject to options that are currently exercisable or exercisable within 60
days of June 30, 1996.
(10) Includes 75,000 shares subject to the Company's repurchase option which
lapses over time. See "Management -- Director Compensation."
(11) In April, 1996, Mr. Kingsbury was granted an option exercisable for 172,500
shares of Common Stock. None of such shares are subject to options that are
currently exercisable or exercisable within 60 days of June 30, 1996.
(12) Mr. Morris is a director of the Company and is a partner at New Enterprise
Associates. Because Mr. Morris does not have voting or dispositive control
over such shares, other than the 4,167 shares that Mr. Morris holds, he is
not deemed to beneficially own such shares except for his proportional
interest therein.
(13) Mr. Tolonen was elected to the Board in August 1996 and granted an option
exercisable for 75,000 shares of Common Stock. None of such shares are
subject to options that are currently exercisable or exercisable within 60
days of June 30, 1996.
(14) In December 1995, Mr. Beaumont was granted an option exercisable for 75,000
shares of Common Stock. None of such shares are subject to options that are
currently exercisable or exercisable within 60 days of June 30, 1996.
(15) In April 1996, Mr. Backus was granted an option exercisable for 50,000
shares of Common Stock. None of such shares are subject to options that are
currently exercisable or exercisable within 60 days of June 30, 1996.
(16) Includes the shares and options referenced in footnotes (2), (4), (5) and
(7) through (11).
DESCRIPTION OF CAPITAL STOCK
Upon the closing of the sale of the shares offered hereby, the authorized
capital stock of the Company will consist of 50,000,000 shares of Common Stock,
$0.01 par value, and 2,000,000 shares of Preferred Stock, $0.01 par value. As of
June 30, 1996, and assuming the sale of Series C Preferred Stock, the exercise
of all
50
<PAGE> 52
outstanding warrants and the conversion of each outstanding share of Preferred
Stock into one-half share of Common Stock upon the closing of this offering,
there were outstanding 8,965,782 shares of Common Stock held of record by
approximately 150 stockholders and options to purchase 1,513,016 shares of
Common Stock.
COMMON STOCK
The holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to preferences that may be
applicable to any outstanding Preferred Stock, the holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared from time
to time by the Board out of funds legally available therefor. See "Dividend
Policy." In the event of a liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities, subject to prior rights of Preferred
Stock, if any, then outstanding. The Common Stock has no preemptive or
conversion rights or other subscription rights. There are no redemption or
sinking fund provisions available to the Common Stock. All outstanding shares of
Common Stock are fully paid and non-assessable, and the shares of Common Stock
to be issued upon completion of this offering will be fully paid and
non-assessable.
PREFERRED STOCK
Upon the closing of this offering, the Company will be authorized to issue
2,000,000 shares of undesignated Preferred Stock. The Board of Directors will
have the right to issue the undesignated Preferred Stock in one or more series
and to determine the powers, preferences and rights and the qualifications,
limitations or restrictions granted to or imposed upon any wholly unissued
shares of undesignated Preferred Stock and to fix the number of shares
constituting any series and the designation of such series, without any further
vote or action by the Company's stockholders. The issuance of Preferred Stock
may have the effect of delaying or preventing a change in control of the Company
without further action by the stockholders and may adversely affect the market
price of, and the voting and other rights of the holders of Common Stock. Upon
the closing of this offering, the Company will have no shares of Preferred Stock
outstanding. At present, the Company has no plans to issue any shares of
Preferred Stock. See "Antitakeover Effects of Delaware Law."
WARRANTS
As of June 30, 1996, warrants to purchase 99,644 shares of Common Stock
were outstanding at prices ranging from $1.40 to $6.00 per share. In addition,
1,766,471 shares of Series A Preferred Stock were outstanding, at prices ranging
from $0.35 to $0.70 per share, respectively. These warrants will terminate if
not exercised upon the closing of the offering. The Company anticipates that all
of the warrants will be exercised prior to the closing of the offering. Certain
of the warrants provide that the warrant holder may exercise the warrant without
payment of cash by surrendering the warrants and receiving shares of Common
Stock or Preferred Stock, as appropriate, equal to the value of the warrants
surrendered.
In April 1996, in connection with obtaining its line of credit, the Company
issued to Imperial Bank a warrant (the "Bank Warrant") to purchase 50,000 shares
of the Company's Common Stock at an exercise price of $6.00 per share, which
warrant is exercisable for six years, expiring in April 2002. The Bank Warrant
provides that the holder may exercise the Bank Warrant without payment of cash
by surrendering the Bank Warrant at the time of exercise and receiving a number
of shares of Common Stock reduced by the fair market value of the warrants
surrendered at the time of exercise.
REGISTRATION RIGHTS
Pursuant to the Amended and Restated Registration Rights Agreement dated as
of July 3, 1996 among the Company and certain holders of its securities (the
"Rights Agreement"), the holders of 6,481,757 shares of Common Stock
("Registrable Securities") or their transferees are entitled to certain rights
with respect to the registration of such shares under the Securities Act of 1933
as amended (the "Securities Act"). Subject to certain limitations contained in
the Rights Agreement, the holders of at least 33% of the Registrable Securities
may require, on two occasions at least six months from the effective date of
this offering, that the Company use its best efforts to register the Registrable
Securities for public resale. If the Company registers any of its Common Stock
either for its own account or for the account of other security holders, the
holders of
51
<PAGE> 53
Registrable Securities are entitled to include their shares of Common Stock in
the registration. A holder's right to include shares in an underwritten
registration is subject to certain conditions, including the right of the
underwriters to limit the number of shares included in the offering. The holders
of Registrable Securities may also require the Company, on no more than one
occasion in any calendar year, to register all or a portion of their Registrable
Securities on Form S-3 under the Securities Act if use of such form is available
to the Company. All expenses other than underwriting discounts and commissions
incurred in connection with such registrations must be borne by the Company.
ANTITAKEOVER EFFECTS OF DELAWARE LAW
Upon the completion of the Company's reincorporation in the State of
Delaware prior to closing of this offering, the Company will be subject to
Section 203 of the Delaware General Corporation Law ("Section 203"), which,
subject to certain 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: (i) prior to such 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; (ii) 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 (a)
by persons who are directors and also officers and (b) by employee stock plans
in which employee participants do not have the right to determine
confidentiality whether shares held subject to the plan will be tendered in a
tender or exchange offer; or (iii) 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.
Section 203 defines business combination to include: (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii) any
sale, transfer, pledge or other disposition of 10% or more of the assets of the
corporation involving the interested stockholder; (iii) 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; (iv)
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 (v) 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. In
general, Section 203 defines an interested stockholder as any entity or person
beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.
The Company's Certificates of Incorporation continues to entitle
stockholders to use cumulative voting in the election of directors and to take
action by written consent.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is First National
Bank of Boston.
LISTING
The Company has applied for quotation of its Common Stock on the Nasdaq
National Market under the symbol "CYBR." The Company has not applied to list its
Common Stock on any other exchange or quotation system. See "Risk Factors -- No
Prior Market for Common Stock" and "-- Volatility of Stock Price."
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for the Common Stock of
the Company. Therefore, future sales of substantial amounts of Common Stock in
the public market could adversely affect market prices prevailing from time to
time. Furthermore, since only a limited number of shares will be available for
sale shortly after this offering because of certain contractual and legal
restrictions on resale (as described below),
52
<PAGE> 54
sales of substantial amounts of Common Stock of the Company in the public market
after the restrictions lapse could adversely affect the prevailing market price
and the ability of the Company to raise equity capital in the future.
Upon completion of this offering, the Company will have outstanding
shares of Common Stock (assuming no exercise of options outstanding under the
Amended 1993 Plan after June 30, 1996, and the conversion of all outstanding
shares of Series A, Series B, and Series C Preferred Stock into Common Stock and
the exercise of warrants to purchase shares of Common Stock). Of these
shares, the shares sold in this offering will be freely tradeable without
restriction under the Securities Act. The remaining shares of Common
Stock held by existing shareholders are "restricted" securities within the
meaning of Rule 144 under the Securities Act. Restricted securities may be sold
in the public market only if registered or if they qualify for an exemption from
registration under Rules 144, 144(k), 144A or 701 promulgated under the
Securities Act, which rules are summarized below.
All officers, directors and certain other holders of Common Stock have
entered into contractual "lock-up" agreements providing that they will not
offer, sell, contract to sell or grant any option to purchase or otherwise
dispose of Common Stock, or options to purchase Common Stock of the Company for
180 days after the effectiveness of this offering without the prior written
consent of the Representatives of the Underwriters. Pursuant to pre-existing
agreements, certain additional holders of Common Stock have agreed not to sell
such shares for at least 180 days after the effectiveness of this offering
without the prior written consent of the representatives of the Underwriters. As
a result of these contractual restrictions, notwithstanding possible earlier
eligibility for sale under the provisions of Rules 144, 144(k) and 701, shares
subject to lock-up agreements will not be saleable until the agreements expire.
Taking into account the lock-up agreements, the number of shares that will be
available for sale in the public market will be as follows: (i) shares of
Common Stock, in addition to the shares sold in this offering, will be
eligible for sale as of the effectiveness of this offering, (ii)
additional shares of Common Stock will be eligible for sale beginning 90 days
after the effectiveness of this offering and (iii) additional shares of
Common Stock will be eligible for sale beginning 181 days after the
effectiveness of this offering. The approximately remaining restricted
shares will not be eligible for sale pursuant to Rule 144 until the expiration
of their two-year holding periods.
Additionally, pursuant to Rules 144 and 701, beginning 90 days after the
effectiveness of this offering and beginning 181 days after the effectiveness of
this offering upon the expiration of contractual lock-up arrangements with the
Company, an aggregate of approximately shares and shares,
respectively, will be vested and eligible for sale upon the exercise of
outstanding stock options.
In general, under Rule 144 as currently in effect, an affiliate of the
Company, or person (or persons whose shares are aggregated) who has beneficially
owned restricted shares for at least two years but less than three years, will
be entitled to sell in any three-month period a number of shares that does not
exceed the greater of (i) 1% of the then outstanding shares of Common Stock
(approximately shares immediately after this offering) or (ii) the
average weekly trading volume during the four calendar weeks immediately
preceding the date on which notice of the sale is filed with the Commission.
Sales pursuant to Rule 144 are subject to certain requirements relating to
manner of sale, notice and availability of current public information about the
Company. A person (or person whose shares are aggregated) who is not deemed to
have been an affiliate of the Company at any time during the 90 days immediately
preceding the sale and who has beneficially owned his or her shares for at least
three years is entitled to sell such shares pursuant to Rule 144(k) without
regard to the limitations described above. Rule 144A under the Securities Act as
currently in effect permits the immediate sale of restricted shares to certain
qualified institutional buyers without regard to volume restrictions. In
general, under Rule 701 under the Securities Act as currently in effect, any
employee, consultant or advisor of the Company who purchases shares from the
Company in connection with a compensatory stock or option plan or other written
agreement related to compensation is eligible to resell such shares 90 days
after the effective date of this offering in reliance on Rule 144, but without
compliance with certain restrictions contained in Rule 144. Rule 701 is
available for shareholders of the Company as to all shares issued pursuant to
stock option exercises occurring on or after May 20, 1988 (the effective date of
the rule) of options granted prior to the offering.
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<PAGE> 55
The Company has agreed not to offer, pledge, sell, contract to sell, sell
any option or contract to purchase, purchase any option or contract to sell,
grant any option, right or warrant to purchase, or otherwise transfer or dispose
of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock, or enter into
any swap or similar agreement that transfers, in whole or in part, the economic
risk of ownership of the Common Stock, for a period of 181 days after the
effectiveness of this offering, without the prior written consent to Hambrecht &
Quist LLC, subject to certain limited exceptions.
At June 30, 1996, the Company had reserved (i) 2,902,000 shares of Common
Stock for issuance pursuant to the Amended 1993 Plan, 1,513,016 shares of which
were outstanding, (ii) 50,000 shares of Common Stock reserved for issuance
pursuant to the 1996 Director Plan, no shares of which were outstanding (the
"Option Plans") and (iii) 100,000 shares of Common Stock reserved for issuance
pursuant to the Purchase Plan. In August 1996, the Company increased the shares
reserved for issuance under the Amended 1993 Stock Plan to 3,902,000. The
Company intends to file a registration statement on Form S-8 under the
Securities Act shortly after the effectiveness of this offering to register
shares to be issued pursuant the Option Plans and Purchase Plan. Shares of
Common Stock issued under the Option Plans and Purchase Plan after the effective
date of such registration statement will be freely tradeable in the public
market, subject to lock-up agreements and subject in the case of sales by
affiliates to the amount, manner of sale, notice and public information
requirements of Rule 144. See "Underwriting."
There has been no prior market for the Common Stock and there is no
assurance a significant public market for the Common Stock will develop or be
sustained after the offering. Sales of substantial amounts of Common Stock in
the public market could adversely affect the market price of the Common Stock.
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<PAGE> 56
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, through their Representatives, Hambrecht & Quist LLC,
Lehman Brothers, and Wessels, Arnold & Henderson, L.L.C., have severally agreed
to purchase from the Company the following respective numbers of shares of
Common Stock:
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
------------------------------------------------------------- ----------------
<S> <C>
Hambrecht & Quist LLC........................................
Lehman Brothers..............................................
Wessels, Arnold & Henderson, L.L.C. .........................
------
Total........................................................
======
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, including the absence
of any material adverse change in the Company's business and the receipt of
certain certificates, opinions and letters from the Company and its counsel and
independent auditors. The nature of the Underwriters' obligation is such that
they are committed to purchase all shares of Common Stock offered hereby if any
of such shares are purchased.
The Underwriters propose to offer the shares of Common Stock directly to
the public at the initial public offering price set forth on the cover page of
this Prospectus and to certain dealers at such price less a concession not in
excess of $ per share. The Underwriters may allow and such dealers may
re-allow a concession not in excess of $ per share to certain other
dealers. The Underwriters have informed the Company that they do not intend to
confirm sales to any accounts over which they exercise discretionary authority.
After the initial public offering of the shares of Common Stock offered hereby,
the offering price and other selling terms may be changed by the Representatives
of the Underwriters.
The Company has granted to the Underwriters an option, exercisable no later
than 30 days after the date of this Prospectus, to purchase up to
additional shares of Common Stock at the initial public offering price, less the
underwriting discount, set forth on the cover page of this Prospectus. To the
extent the Underwriters exercise such option, each of the Underwriters will have
a firm commitment to purchase approximately the same percentage thereof which
the number of shares of Common Stock to be purchased by it shown in the table
above bears to the total number of shares of Common Stock offered hereby. The
Company will be obligated, pursuant to the option, to sell shares to the
Underwriters to the extent the option is exercised. The Underwriters may
exercise such option only to cover over-allotments made in connection with the
sale of Common Stock offered hereby.
The offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The Underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, and to contribute
to payments the Underwriters may be required to make in respect thereof.
The Company has agreed that it will not, without the prior written consent
of Hambrecht & Quist LLC, offer, sell or otherwise dispose of any shares of
Common Stock, options, rights or warrants to acquire shares of Common Stock, or
securities exchangeable for or convertible into shares of Common Stock during
the 180-day period commencing on the effectiveness of this offering, except that
the Company may grant
55
<PAGE> 57
additional options under its stock option plans, provided that, without the
Representatives' prior written consent, such additional options shall not be
exercisable during such period.
Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock will be determined
by negotiation among the Company and the Representatives. Among the factors to
be considered in determining the initial public offering price are prevailing
market and economic conditions, revenues and earnings of the Company, market
valuations of other companies engaged in activities similar to the Company,
estimates of the business potential and prospects of the Company, the present
state of the Company's business operations, the Company's management and other
factors deemed relevant. The estimated initial public offering price range set
forth on the cover of this Prospectus is subject to change as a result of market
conditions and other factors.
LEGAL MATTERS
The validity of the issuance of the Common Stock offered hereby will be
passed upon for the Company by Wilson Sonsini Goodrich & Rosati, Professional
Corporation ("WSGR"), Palo Alto, California. Certain legal matters in connection
with the offering will be passed upon for the Underwriters by Brobeck, Phleger &
Harrison LLP, Palo Alto, California. As of the date of this Prospectus, certain
members of WSGR and an investment partnership of which such persons are partners
beneficially own 25,343 shares of the Company's Common Stock. Arthur F.
Schneiderman, a member of WSGR, is Assistant Secretary of the Company.
EXPERTS
The financial statements of CyberMedia, Inc. as of December 31, 1994 and
1995, and for each of the years in the three-year period ended December 31,
1995, have been included herein and in the registration statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement, of which this Prospectus constitutes a
part, under the Securities Act with respect to the Common Stock offered hereby.
This Prospectus omits certain information set forth in the Registration
Statement and reference is made to the Registration Statement and the exhibits
and schedules thereto for further information with respect to the Company and
the Common Stock offered hereby. Statements contained herein concerning the
provisions of any documents are not necessarily complete, and in each instance
reference is made to the copy of such document filed as an exhibit to the
Registration Statement. Each such statement is qualified in all respects by such
reference. The Registration Statement, including exhibits and schedules thereto,
may be inspected by anyone without charge at the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's Regional Offices at 75 Park Place, Room 1400, New York, New York
10007 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such materials may be obtained from the
Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street N.W., Washington, D.C. 20549, and its principal reference
facilities in New York, New York and Chicago, Illinois, at a prescribed rate.
The Commission maintains a World Wide Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of the site is
http://www.sec.gov.
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<PAGE> 58
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.......................................................... F-1
Balance Sheets........................................................................ F-2
Statements of Operations.............................................................. F-3
Statements of Stockholders' Equity (Deficiency)....................................... F-4
Statements of Cash Flows.............................................................. F-5
Notes to Financial Statements......................................................... F-6
</TABLE>
57
<PAGE> 59
INDEPENDENT AUDITORS' REPORT
The Board of Directors
CyberMedia, Inc.:
We have audited the accompanying balance sheets of CyberMedia, Inc. as of
December 31, 1995 and 1994 and the related statements of operations,
stockholders' equity (deficiency) and cash flows for each of the years in the
three-year period ended December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of CyberMedia, Inc. as of
December 31, 1995 and 1994 and the results of its operations and its cash flows
for each of the years in the three-year period ended December 31, 1995 in
conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Long Beach, California
June 26, 1996, except for
Note 15, which is as of
August 14, 1996
F-1
<PAGE> 60
CYBERMEDIA, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------- JUNE 30,
1994 1995 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents......................... $ 102,000 $ 2,050,000 $ 569,000
Trade accounts receivable, net.................... 39,000 1,182,000 3,968,000
Inventory......................................... 5,000 412,000 1,235,000
Prepaid expenses.................................. 27,000 111,000 653,000
Other current assets.............................. -- 10,000 7,000
---------- ---------- ----------
Total current assets........................... 173,000 3,765,000 6,432,000
Furniture, fixtures and equipment, net.............. 16,000 90,000 656,000
---------- ---------- ----------
$ 189,000 $ 3,855,000 $ 7,088,000
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Current liabilities:
Accounts payable.................................. $ 258,000 $ 1,620,000 $ 2,947,000
Accrued expenses.................................. 230,000 419,000 596,000
Unearned revenues................................. -- 677,000 3,062,000
Grant payable..................................... 331,000 607,000 795,000
Notes payable to bank............................. -- -- 1,300,000
Note payable, current............................. -- -- 50,000
Other liabilities................................. 25,000 8,000 21,000
---------- ---------- ----------
Total current liabilities...................... 844,000 3,331,000 8,771,000
Note payable, long-term............................. 500,000 500,000 400,000
Other liabilities................................... -- 17,000 12,000
---------- ---------- ----------
Total liabilities.............................. 1,344,000 3,848,000 9,183,000
---------- ---------- ----------
Stockholders' equity (deficiency):
Series A Preferred Stock, $0.01 par value.
Authorized 4,726,129 shares; issued and
outstanding 2,816,801 shares in 1994, 2,959,658
shares in 1995, and 2,959,658 shares
(unaudited) in 1996............................ 28,000 30,000 30,000
Series B Preferred Stock, $0.01 par value.
Authorized 6,442,858 shares; issued and
outstanding 6,371,429 shares in 1995, 6,371,429
shares (unaudited) in 1996..................... -- 64,000 64,000
Series C Preferred Stock, $0.01 par value.
Authorized 1,666,667 (unaudited) shares in
1996, no shares issued and outstanding in
1996........................................... -- -- --
Common Stock, $0.01 par value. Authorized
10,000,000 shares in 1994 and 1995 and
10,833,334 shares (unaudited) in 1996; issued
and outstanding 1,172,500 shares in 1994,
1,222,500 shares in 1995 and 2,484,025 shares
(unaudited) in 1996............................ 12,000 13,000 25,000
Additional paid-in capital........................ 1,004,000 5,451,000 5,566,000
Accumulated deficit............................... (2,199,000) (5,551,000) (7,780,000)
---------- ---------- ----------
Stockholders' equity (deficiency).............. (1,155,000) 7,000 (2,095,000)
---------- ---------- ----------
Commitments and contingencies
$ 189,000 $ 3,855,000 $ 7,088,000
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE> 61
CYBERMEDIA, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------- ------------------------
1993 1994 1995 1995 1996
--------- ----------- ----------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues...................... $ 55,000 $ 241,000 $ 4,797,000 $1,724,000 $13,949,000
Cost of revenues.................. 14,000 106,000 2,103,000 418,000 4,888,000
--------- ----------- ----------- ---------- -----------
Gross profit................. 41,000 135,000 2,694,000 1,306,000 9,061,000
--------- ----------- ----------- ---------- -----------
Research and development.......... 468,000 544,000 964,000 455,000 1,143,000
Sales and marketing............... 220,000 439,000 4,036,000 678,000 8,609,000
General and administrative........ 84,000 247,000 987,000 203,000 1,513,000
--------- ----------- ----------- ---------- -----------
772,000 1,230,000 5,987,000 1,336,000 11,265,000
--------- ----------- ----------- ---------- -----------
Loss from operations......... (731,000) (1,095,000) (3,293,000) (30,000) (2,204,000)
--------- ----------- ----------- ---------- -----------
Interest income................... -- -- 22,000 -- 21,000
Interest expense.................. -- (19,000) (80,000) (27,000) (46,000)
--------- ----------- ----------- ---------- -----------
Loss before income taxes..... (731,000) (1,114,000) (3,351,000) (57,000) (2,229,000)
Income tax expense................ 1,000 1,000 1,000 -- --
--------- ----------- ----------- ---------- -----------
Net loss..................... $(732,000) $(1,115,000) $(3,352,000) $ (57,000) $(2,229,000)
Net loss per share
(See Note 1)............... $ $ $ $ $
--------- ----------- ----------- ---------- -----------
Weighted average common stock and
common stock equivalents
outstanding (See Note 1)........
========= =========== =========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 62
CYBERMEDIA, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
(SIX MONTHS ENDED JUNE 30, 1996 IS UNAUDITED)
<TABLE>
<CAPTION>
SERIES A SERIES B
PREFERRED STOCK PREFERRED STOCK COMMON STOCK STOCKHOLDERS'
------------------- ------------------- ------------------- ADDITIONAL ACCUMULATED EQUITY
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT PAID-IN CAPITAL DEFICIT (DEFICIENCY)
--------- ------- --------- ------- --------- ------- ---------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1992.......... 1,192,232 $12,000 -- $ -- 1,127,500 $11,000 $ 448,000 $ (352,000) $ 119,000
Issuance of
Common
Stock......... -- -- -- -- 45,000 1,000 2,000 -- 3,000
Net loss........ -- -- -- -- -- -- -- (732,000) (732,000)
--------- ------- --------- ------- --------- ------- ---------- ----------- -----------
Balance at
December 31,
1993.......... 1,192,232 12,000 -- -- 1,172,500 12,000 450,000 (1,084,000) (610,000)
Conversion of
notes payable
into Series A
Preferred
Stock......... 781,428 8,000 -- -- -- -- 267,000 -- 275,000
Issuance of
Series A
Preferred
Stock in
exchange for
cash.......... 843,141 8,000 -- -- -- -- 287,000 -- 295,000
Net loss........ -- -- -- -- -- -- -- (1,115,000) (1,115,000)
--------- ------- --------- ------- --------- ------- ---------- ----------- -----------
Balance at
December 31,
1994.......... 2,816,801 28,000 -- -- 1,172,500 12,000 1,004,000 (2,199,000) (1,155,000)
Issuance of
Series A
Preferred
Stock in
exchange for
cash.......... 142,857 2,000 -- -- -- -- 48,000 -- 50,000
Issuance of
Common Stock
upon exercise
of stock
options....... -- -- -- -- 50,000 1,000 2,000 -- 3,000
Conversion of
notes payable
into Series B
Preferred
Stock......... -- -- 635,714 6,000 -- -- 439,000 -- 445,000
Issuance of
Series B
Preferred
Stock in
exchange for
cash.......... -- -- 5,735,715 58,000 -- -- 3,958,000 -- 4,016,000
Net loss........ -- -- -- -- -- -- -- (3,352,000) (3,352,000)
--------- ------- --------- ------- --------- ------- ---------- ----------- -----------
Balance at
December 31,
1995.......... 2,959,658 30,000 6,371,429 64,000 1,222,500 13,000 5,451,000 (5,551,000) 7,000
Issuance of
Common Stock
upon exercise
of stock
options
(unaudited)... -- -- -- -- 1,261,525 12,000 115,000 -- 127,000
Net loss
(unaudited)... -- -- -- -- -- -- -- (2,229,000) (2,229,000)
--------- ------- --------- ------- --------- ------- ---------- ----------- -----------
Balance at June
30, 1996
(unaudited)... 2,959,658 $30,000 6,371,429 $64,000 2,484,025 $25,000 $5,566,000 $(7,780,000) $ (2,095,000)
========= ======= ========= ======= ========= ======= ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 63
CYBERMEDIA, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------- -----------------------
1993 1994 1995 1995 1996
--------- ----------- ----------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss................................................... $(732,000) $(1,115,000) $(3,352,000) $ (57,000) $(2,229,000)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation............................................. 5,000 9,000 19,000 27,000 42,000
Royalty expense.......................................... -- 13,000 276,000 40,000 188,000
Changes in assets and liabilities:
Trade accounts receivable, net......................... -- (39,000) (1,143,000) (642,000) (2,786,000)
Inventory.............................................. -- (5,000) (407,000) (17,000) (823,000)
Prepaid expenses....................................... 4,000 (27,000) (84,000) (71,000) (542,000)
Other current assets................................... -- -- (10,000) (10,000) 3,000
Accounts payable....................................... (10,000) 258,000 1,362,000 31,000 1,327,000
Accrued expenses....................................... 82,000 111,000 189,000 639,000 177,000
Unearned revenues...................................... -- -- 677,000 -- 2,385,000
Other liabilities...................................... -- -- (25,000) (25,000) 13,000
--------- ----------- ----------- --------- -----------
Net cash used in operating activities............... (651,000) (795,000) (2,498,000) (85,000) (2,245,000)
--------- ----------- ----------- --------- -----------
Cash flows used in investing activities - purchase of
furniture, fixtures and equipment.......................... (2,000) (13,000) (67,000) (32,000) (608,000)
--------- ----------- ----------- --------- -----------
Cash flows from financing activities:
Proceeds from the issuance of Series A Preferred Stock..... -- 295,000 50,000 50,000 --
Proceeds from the issuance of Series B Preferred Stock..... -- -- 4,016,000 -- --
Proceeds from notes to shareholders........................ 228,000 71,000 -- -- --
Payments of capital lease obligation....................... -- -- (1,000) -- (5,000)
Proceeds from the issuance of Common Stock................. 3,000 -- 3,000 -- 127,000
Proceeds from note payable................................. -- 500,000 445,000 -- --
Payment of note payable.................................... -- -- -- -- (50,000)
Proceeds from notes payable to bank........................ -- -- -- -- 1,300,000
Proceeds from the receipt of grant......................... 288,000 30,000 -- -- --
--------- ----------- ----------- --------- -----------
Net cash provided by financing activities........... 519,000 896,000 4,513,000 50,000 1,372,000
--------- ----------- ----------- --------- -----------
Net increase (decrease) in cash and cash
equivalents....................................... (134,000) 88,000 1,948,000 (67,000) (1,481,000)
Cash and cash equivalents at beginning of period............. 148,000 14,000 102,000 102,000 2,050,000
--------- ----------- ----------- --------- -----------
Cash and cash equivalents at end of period................... $ 14,000 $ 102,000 $ 2,050,000 $ 35,000 $ 569,000
========= =========== =========== ========= ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest............................................... $ -- $ -- $ 80,000 $ -- $ --
Income taxes........................................... $ -- $ 1,000 $ 1,000 $ -- $ --
Supplemental disclosure of noncash investing and financing
activities:
Conversion of notes payable to stockholders into Series A
Preferred Stock.......................................... $ -- $ 275,000 $ -- $ -- $ --
Conversion of notes payable into Series B Preferred
Stock.................................................... $ -- $ -- $ 445,000 $ -- $ --
Acquisition of equipment through capital lease
agreements............................................... $ -- $ -- $ 26,000 $ -- $ --
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 64
CYBERMEDIA, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION RELATING TO THE SIX MONTHS ENDED
JUNE 30, 1995 AND JUNE 30, 1996 IS UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
CyberMedia, Inc. (the "Company"), a California corporation, develops and
markets software products that provide automatic service and support to PC users
in the Windows environment. Products are principally sold to distributors and
directly to consumers. In addition, the Company's products are sold directly to
catalog companies throughout the United States and Canada. The Company also
markets its products internationally through distribution and licensing
agreements. The Company is in the process of reincorporating in the State of
Delaware.
Cash Equivalents
The Company considers all highly liquid investments having original
maturities of three months or less to be cash equivalents.
Inventory
Inventory, consisting principally of software packaging materials, is
stated at the lower of cost (first-in, first-out method) or market.
Unearned Revenues
The Company offers customers update rights for certain products at no
additional cost. As a result, ratable revenue recognition is appropriate for a
portion of the license fees for such products. Accordingly, unearned revenues on
the accompanying balance sheets represent Internet and other product updates and
other unspecified future support commitments which will be recognized ratably
over the estimated update periods.
Revenue Recognition
Revenues are generated from sales of software to distributors, resellers
and end-users and are recognized upon shipment of products, net of provisions
for estimated future returns, provided that no significant vendor obligations
remain and collection of accounts receivable is deemed to be probable. On sales
of products having remaining vendor obligations, a portion of related revenue is
deferred based upon the relative retail value of future obligations and
recognized ratably over the estimated period for which obligations exist,
generally one year from the date of sale.
The Company provides routine telephone customer support as an accommodation
to purchasers of its products for a limited time. Costs associated with such
post-sale customer support were immaterial.
Revenue Related Reserves
Reserves for sales returns and doubtful accounts are established based upon
historical experience and management's estimates as shipments are made. The
allowance for sales returns and doubtful accounts aggregated $12,000, $767,000
and $1,715,000 at December 31, 1994 and 1995 and June 30, 1996, respectively,
and is shown as a reduction of accounts receivable on the accompanying balance
sheets.
F-6
<PAGE> 65
CYBERMEDIA, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS ENDED
JUNE 30, 1995 AND JUNE 30, 1996 IS UNAUDITED)
Research and Development
Costs relating to designing, developing and testing new software products
are expensed as research and development as incurred. Although costs incurred
subsequent to establishing technological feasibility of software products are
permitted capitalization pursuant to Statement of Financial Accounting Standards
("SFAS") No. 86 (Accounting for the Costs of Computer Software to be Sold,
Leased or Otherwise Marketed), the Company has not capitalized any software
development costs since the impact to the financial statements for all periods
presented has been immaterial.
Depreciation and Amortization
Furniture, fixtures and equipment are stated at cost. Depreciation of
furniture, fixtures and equipment is calculated on the straight-line
depreciation method over the estimated useful lives as follows:
<TABLE>
<S> <C>
Computer equipment and software..... 3 years
Furniture, fixtures and equipment... 4 years
Assets under capital lease.......... Shorter of lease term or the
estimated useful life of asset
</TABLE>
Income Taxes
The Company accounts for income taxes using SFAS No. 109 (Accounting for
Income Taxes). SFAS No. 109 requires that deferred income taxes be recognized
for the tax consequences of temporary differences. This is achieved by applying
enacted statutory rates applicable to future years to differences between the
financial statement carrying amounts and the tax basis of existing assets and
liabilities.
Computation of Net Loss per Share
Net loss per share of Common Stock and Common Stock equivalents and the
weighted average number of shares of Common Stock and Common Stock equivalents
outstanding has not been included in the accompanying statements of operations.
Pursuant to the requirements of the Securities and Exchange Commission ("SEC"),
Common Stock, stock options, warrants and Preferred Stock issued by the Company
during the twelve months immediately preceding the initial public offering date
must be included in the calculation of the weighted average shares outstanding
for all periods presented using the treasury stock and if converted method based
on the estimated initial public offering price. As the Company has not yet
determined an estimated initial public offering price, the calculation of
weighted average shares, as prescribed by SEC regulations, is not possible.
Accordingly, the net loss per share is not determinable and is therefore not
reflected on the accompanying statements of operations.
Financial Instruments
The Financial Accounting Standards Board's SFAS No. 107 (Disclosures about
Fair Value of Financial Instruments) defines fair value of a financial
instrument as the amount at which the instrument could be exchanged in a current
transaction between willing parties. The Company's carrying value of accounts
receivable, accounts payable, accrued expenses, grant payable and notes payable
approximates fair value because the instrument has a short-term maturity or
because the applicable interest rates are comparable to current borrowing rates.
F-7
<PAGE> 66
CYBERMEDIA, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS ENDED
JUNE 30, 1995 AND JUNE 30, 1996 IS UNAUDITED)
Long-Lived Assets
In March 1995, SFAS No. 121 (Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of) was issued. This statement
provides guidelines for recognition of impairment losses related to long-term
assets and is effective for fiscal years beginning after December 15, 1995. The
Company's management does not believe that the adoption of this new standard
will have a material effect on the Company's financial statements.
Accounting for Stock Options
In October 1995, SFAS No. 123 (Accounting for Stock-Based Compensation) was
issued. This statement encourages, but does not require, a fair value based
method of accounting for employee stock options and will be effective for fiscal
years beginning after December 15, 1995. While the Company is still evaluating
SFAS No. 123, it currently expects to elect to continue to measure and to
recognize compensation costs under APB Opinion No. 25 (Accounting for Stock
Issued to Employees) and to comply with the pro forma disclosure requirements of
SFAS No. 123. If the Company makes this election, SFAS No. 123 will have no
impact on the Company's financial statements.
Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities to prepare these financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
(2) FURNITURE, FIXTURES AND EQUIPMENT
Furniture, fixtures and equipment, stated at cost, are summarized as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- JUNE 30, 1996
1994 1995 -------------
-------- -------- (UNAUDITED)
<S> <C> <C> <C>
Office furniture and equipment........... $ 4,000 $ 3,000 $ 243,000
Computer equipment....................... 37,000 131,000 499,000
-------- -------- --------
41,000 134,000 742,000
Less accumulated depreciation............ (25,000) (44,000) (86,000)
-------- -------- --------
$ 16,000 $ 90,000 $ 656,000
======== ======== ========
</TABLE>
Assets acquired under capitalized leases, which are principally included in
computer equipment above, at December 31, 1995 and June 30, 1996 aggregated
$26,000 for both periods. Accumulated depreciation related to these assets
aggregated $1,000 and $4,000 at December 31, 1995 and June 30, 1996,
respectively.
F-8
<PAGE> 67
CYBERMEDIA, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS ENDED
JUNE 30, 1995 AND JUNE 30, 1996 IS UNAUDITED)
(3) ACCRUED EXPENSES
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- JUNE 30, 1996
1994 1995 -------------
-------- -------- (UNAUDITED)
<S> <C> <C> <C>
Accrued compensation and related
expenses............................... $213,000 $268,000 $ 427,000
Other.................................... 17,000 151,000 169,000
-------- -------- --------
$230,000 $419,000 $ 596,000
======== ======== ========
</TABLE>
(4) GRANT PAYABLE
In August 1992, the Company received a grant under the Program for the
Advancement of Commercial Technology Provided by the United States Agency for
International Development and administered by the Industrial Credit and
Investment Corporation of India Limited ("ICICI"). As of December 31, 1994, the
Company had received $318,000 which had been allocated to the Company,
concurrent with the development of its products. Under the terms of the
agreement, the Company repays the grant at a rate of 250% of the amount of grant
received, or $795,000, through royalties based on 5% of product sales. The
Company incurred royalty expense related to this grant of $13,000 and $276,000
during the years ended December 31, 1994 and 1995, respectively, and $188,000
for the six months ended June 30, 1996. As of June 30, 1996, the Company's
maximum obligation of $795,000 has been fully accrued.
(5) NOTE PAYABLE
At December 31, 1994 and 1995 and June 30, 1996, the Company had a note
payable to ICICI, bearing interest at the U.S. prime rate plus 2.25% and payable
quarterly, with principal payable in equal quarterly installments of $50,000
from January 1997 through April 1999. To secure the loan, certain directors and
founders of the Company provided personal guarantees for the total loan amount.
In consideration for the personal guarantees, the guarantors received warrants
to purchase up to an aggregate of 900,000 shares of the Company's Series A
Preferred Stock at an exercise price of $0.35 per share.
Annual principal payments due subsequent to December 31, 1995 are as
follows:
<TABLE>
<S> <C>
Year ending December 31,
1996............................ $ --
1997............................ 200,000
1998............................ 200,000
1999............................ 100,000
--------
$500,000
========
</TABLE>
At December 31, 1994 and 1995, the Company was not in compliance with
certain financial loan covenants under the $500,000 note payable agreement. The
lender has waived compliance with these covenants through December 31, 1996.
During the six months ended June 30, 1996, the Company opted to make a
voluntary payment of $50,000. Accordingly, at June 30, 1996, the outstanding
balance of the note was $450,000.
F-9
<PAGE> 68
CYBERMEDIA, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS ENDED
JUNE 30, 1995 AND JUNE 30, 1996 IS UNAUDITED)
(6) NOTES PAYABLE TO BANK
During the year ended December 31, 1995, the Company obtained two credit
facilities consisting of a $1,500,000 collateralized revolving line of credit
bearing interest at the prime rate plus 1% and a $250,000 collateralized
equipment purchase facility bearing interest at the prime rate plus 2%. The
collateralized equipment purchase facility expires in November 1996. No amounts
had been drawn against these lines of credit as of December 31, 1995.
On April 29, 1996, the Company secured an increase in its revolving line of
credit from $1,500,000 to $3,000,000, as available, based on eligible accounts
receivable. The line of credit bears interest at the prime rate (8.25% per annum
at June 30, 1996) plus 1% and expires in April 1997. As of June 30, 1996, the
Company had outstanding borrowings of $1,300,000 on the revolving line of
credit. The line of credit is collateralized by all assets of the Company.
(7) INCOME TAXES
The provision for income taxes, all current, for the years ended December
31, 1993, 1994 and 1995 consists solely of the annual minimum California
franchise tax of approximately $1,000. No provision for income taxes for the six
months ended June 30, 1996 has been recorded.
The provision for income taxes differs from the expected tax benefit
computed by applying the federal corporate tax rate of 34% to loss before income
taxes principally due to the effect of net operating loss carryforwards.
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------- JUNE 30, 1996
1993 1994 1995 -------------
--------- --------- ----------- (UNAUDITED)
<S> <C> <C> <C> <C>
Deferred tax assets:
Accounts receivable.................. $ -- $ -- $ 307,000 $ 686,000
Accrued expenses..................... -- 90,000 32,000 84,000
Unearned revenues.................... -- -- 243,000 1,225,000
Grant payable........................ 115,000 132,000 127,000 --
Net operating losses................. 295,000 546,000 1,506,000 1,138,000
Other................................ -- 88,000 -- --
--------- --------- ----------- -----------
Total gross deferred tax assets... 410,000 856,000 2,215,000 3,133,000
Less valuation allowance.......... (410,000) (856,000) (2,215,000) (3,133,000)
--------- --------- ----------- -----------
Net deferred tax assets........... $ -- $ -- $ -- $ --
========= ========= =========== ===========
</TABLE>
The net change in the valuation allowance for the years ended December 31,
1993, 1994 and 1995 and for the six months ended June 30, 1996 was an increase
of $410,000, $446,000, $1,359,000 and $918,000, respectively. In assessing the
realizability of deferred tax assets, management considers whether it is more
likely than not that some portion or all of the 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 considers projected future taxable
income and tax planning strategies in making this assessment. Based on the level
of historical taxable income and projections for future taxable income over the
periods in which the level of deferred tax assets are deductible,
F-10
<PAGE> 69
CYBERMEDIA, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS ENDED
JUNE 30, 1995 AND JUNE 30, 1996 IS UNAUDITED)
management believes that it is not more likely than not that the Company will
realize the benefits of these deductible differences at December 31, 1995 and
June 30, 1996. Accordingly, a valuation allowance has been provided for the
total gross deferred tax assets.
The Company had available at December 31, 1995 and June 30, 1996
approximately $3,765,000 and $2,845,000, respectively, of net operating losses
to offset future taxable income that expire beginning in the year 2006. Use of
these net operating losses will be limited under rules governing changes in
ownership of the Company. These rules restrict the amount of the net operating
loss carryforwards which may be used in a particular year. The maximum amount of
net operating loss carryforwards which are available on an annual basis for use
subsequent to the year ended December 31, 1996 is approximately $214,000.
(8) STOCKHOLDERS' EQUITY (DEFICIENCY)
Preferred Stock
During 1994, the Company issued 843,141 shares of Series A Preferred Stock
for cash consideration and issued 781,428 shares of Series A Preferred Stock
upon conversion of certain notes payable.
During 1995, the Company issued 5,735,715 shares of Series B Preferred
Stock for cash consideration and issued 635,714 shares of Series B Preferred
Stock upon conversion of certain notes payable. The Company also issued 142,857
shares of Series A Preferred Stock for cash consideration in 1995.
Each share of Series A Preferred Stock and Series B Preferred Stock is
automatically converted into one-half share of Common Stock upon the earlier of
the affirmative vote of the holders of at least 66 2/3% of the outstanding
shares of the Preferred Stock, or immediately upon the closing of a firm
commitment underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, in which the aggregate gross
proceeds exceed $10,000,000 and the price per share is not less than $7.00 per
share. At June 30, 1996, the conversion of all Series A Preferred Stock and
Series B Preferred Stock shares would yield 1,479,829 and 3,185,715 shares of
Common Stock, respectively.
When, and if, declared by the Board of Directors, the holders of Series A
Preferred Stock and Series B Preferred Stock are entitled to receive dividends
at an annual rate of $0.028 per share and $0.056 per share, respectively. Such
dividends are not cumulative. No dividends were declared during the years ended
December 31, 1994 and 1995 or the six months ended June 30, 1996.
Preferred Stock has certain limited voting rights, is not callable by the
Company and has no redemption date.
In the event of any liquidation or dissolution of the Company, either
voluntary or involuntary, the holders of Preferred Stock are entitled to
receive, prior and in preference to any distribution of any of the assets of the
Company to the holders of Common Stock by reason of their ownership, an amount
per share equal to $0.35 for each outstanding share of Series A Preferred Stock
held by them and an amount per share equal to $0.70 for each outstanding share
of Series B Preferred Stock held by them, plus a further amount equal to any
dividends declared but unpaid on such shares. In the event the assets of the
Company are insufficient to provide for preferential payment, then all such
assets will be distributed ratably among the holders of the Preferred Stock in
proportion to the full preferential amount each such holder is otherwise
entitled to receive. After the payment to the holders of Preferred Stock of the
preferential amounts payable to them, the holders of Common Stock will be
entitled to receive pro rata the remaining assets of the Company.
On the closing of the Company's contemplated initial public offering all of
the 10,997,754(1) outstanding shares of Preferred Stock will be converted into
5,498,877 shares of Common Stock. The following table
F-11
<PAGE> 70
CYBERMEDIA, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS ENDED
JUNE 30, 1995 AND JUNE 30, 1996 IS UNAUDITED)
presents the Company's pro forma unaudited stockholders' equity as if all such
conversions had occurred at June 30, 1996 and all outstanding warrants had been
exercised and converted, as applicable, to Common Stock at June 30, 1996:
<TABLE>
<CAPTION>
JUNE 30, 1996 (1)
-----------------
<S> <C>
Pro Forma Stockholders' Equity:
Series A Preferred Stock, $0.01 par value
Authorized 4,726,129 shares........................ $ --
Series B Preferred Stock, $0.01 par value
Authorized 6,442,858 shares........................ --
Series C Preferred Stock, $0.01 par value
Authorized 1,666,667 shares........................ --
Common Stock, $0.01 par value. Authorized 10,833,334
shares; issued and outstanding 8,965,782 shares.... 90,000
Additional paid-in capital........................... 12,202,000
Accumulated deficit.................................. (7,780,000)
-----------
$ 4,512,000
===========
</TABLE>
- ---------------
(1) Gives effect to the July 3, 1996 sale of Series C Preferred Stock shares
(see note 15).
Common Stock
During the year ended December 31, 1993, the Company issued 45,000 shares
of Common Stock for cash consideration of $3,000.
During the year ended December 31, 1995, an option holder exercised stock
options to purchase 50,000 shares of Common Stock at an exercise price of $0.05
per share.
During the six months ended June 30, 1996, certain option holders exercised
stock options to purchase 1,261,525 shares of Common Stock at exercise prices
ranging from $0.08 to $0.14 per share.
In June 1996, the Board of Directors approved the increase in the
authorized number of shares of Common Stock from 10,000,000 to 10,833,334.
Dividends are payable when, and if, declared by the Board of Directors only
after payment of any unpaid dividends to holders of Preferred Stock.
Stock Warrants
The Company issued warrants for the purchase of 833,141 shares of Series A
Preferred Stock and 933,330 shares of Series A Preferred Stock at exercise
prices ranging from $0.35 to $0.70 per share during the years ended December 31,
1994 and 1995, respectively. No value was ascribed to the warrants because
management is of the opinion that the impact of any such value is negligible to
the accompanying financial statements. No warrants expired or were exercised in
the years ended December 31, 1994 and 1995 or during the six months ended June
30, 1996. Warrants for the purchase of 833,141 shares of Series A Preferred
Stock were outstanding as of December 31, 1994 and warrants for the purchase of
1,766,471 shares of Series A Preferred Stock were outstanding as of December 31,
1995 and June 30, 1996. The warrants expire on the earlier of five years from
the date of issue or the closing of an initial public offering if not exercised.
F-12
<PAGE> 71
CYBERMEDIA, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS ENDED
JUNE 30, 1995 AND JUNE 30, 1996 IS UNAUDITED)
The Company issued warrants for the purchase of 49,644 shares of Common
Stock at $1.40 per share during the year ended December 31, 1995 and issued
warrants for the purchase of 50,000 shares of Common Stock at an exercise price
of $6.00 per share during the six months ended June 30, 1996. The warrants for
the number of shares of Common Stock and the related exercise price are subject
to adjustments under certain circumstances as described more fully in the
warrant agreement. No value was ascribed to the warrants because management is
of the opinion that the impact of any such value is negligible to the
accompanying financial statements. Warrants for the purchase of 49,644 and
99,644 shares of Common Stock were outstanding as of December 31, 1995 and June
30, 1996, respectively. The warrants for the purchase of 49,644 shares of Common
Stock outstanding as of December 31, 1995 expire on the earlier of five years
from the date of issue or the closing of an initial public offering if not
exercised. The warrants for the purchase of 50,000 shares of Common Stock issued
during the six months ended June 30, 1996 expire in April 2002.
(9) STOCK OPTIONS
The Company has a 1992 Stock Plan and an Amended 1993 Stock Plan in which
various options have been issued which allow the option holder to purchase
shares of the Company's Common Stock at the fair market value at the date of
grant, as determined by the Company's Board of Directors. As of December 31,
1995, the Board of Directors had reserved 1,750,000 shares of Common Stock for
issuance under the Amended 1993 Stock Plan. As of June 30, 1996, the Board of
Directors approved the increase in the number of shares of Common Stock reserved
for issuance under the Amended 1993 Stock Plan to 2,902,000. Stock option
activity under the plans is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------- SIX MONTHS ENDED
1993 1994 1995 JUNE 30, 1996
---------------- ---------------- -------------- ----------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Balance at beginning of
period...................... 50,000 95,000 821,500 1,846,025
Granted..................... 45,000 726,500 1,074,525 1,031,715
Exercised................... -- -- (50,000) (1,261,525)
Canceled.................... -- -- -- (103,199)
------------- ------------- ----------- -----------
Balance at end of period...... 95,000 821,500 1,846,025 1,513,016
------------- ------------- ----------- -----------
Exercisable stock options..... 95,000 821,500 1,213,692 1,266,015
------------- ------------- ----------- -----------
Price range of options........ $ 0.05 and 0.08 $ 0.05 and 0.08 $ 0.05 - 0.14 $0.08 - 4.50
============= ============= =========== ===========
</TABLE>
Options granted vest immediately or over periods as determined by the
Company's Board of Directors, generally 4 years. During the six months ended
June 30, 1996, the Company issued Common Stock to certain directors who
exercised unvested options to purchase 206,250 shares of Common Stock, subject
to the terms of their respective stock option agreements. As defined more fully
in the stock option agreements, the Company retains the right to purchase such
stock at the original exercise price.
In June 1996, the Company's Board of Directors approved the 1996 Director
Option Plan. The Plan provides for the automatic and nondiscretionary grant of
nonstatutory stock options to nonemployee directors of the Company who are first
elected to the Board after the adoption of the Director Option Plan ("Outside
Directors"). A total of 50,000 shares of Common Stock have been reserved for
issuance under the Director Option Plan. Each Outside Director elected after the
adoption of the Plan will automatically be granted an option to purchase 5,000
shares on the date on which such person first becomes an Outside Director
("First Option") at the fair market value of the Company's Common Stock at the
date of grant. Each First Option granted vests ratably over specified periods,
approximately four years, subject to continued service as an Outside Director.
Thereafter, each Outside Director will be automatically granted an option to
purchase 5,000
F-13
<PAGE> 72
CYBERMEDIA, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS ENDED
JUNE 30, 1995 AND JUNE 30, 1996 IS UNAUDITED)
shares on December 1 of each year beginning in 1997, provided he or she shall
have served on the Board for at least six months ("Subsequent Option"). Each
Subsequent Option shall have an exercise price equal to the fair value of the
Company's Common Stock as of the date of grant and shall be exercisable ratably
over four years, beginning three years and one month from the date of grant,
subject to continued service as an Outside Director.
(10) SIGNIFICANT CUSTOMERS, CONCENTRATION OF CREDIT RISK AND OTHER
CONCENTRATIONS
Significant Customers
One customer accounted for 16% of net revenues for the year ended December
31, 1994, and three customers accounted for 19%, 16% and 9% of net revenues for
the year ended December 31, 1995, respectively. Five customers accounted for
14%, 14%, 13%, 12% and 11% of net revenues for the six months ended June 30,
1995, respectively, and three customers accounted for 22%, 20% and 11% of net
revenues for the six months ended June 30, 1996, respectively.
Concentration of Credit Risk
Certain financial instruments potentially subject the Company to credit
risk. These financial instruments consist primarily of trade receivables. The
Company sells to distributors, resellers and directly to end-users. The Company
performs ongoing credit evaluations of its customers and maintains reserves,
including reserves to estimate the potential for future product returns. The
Company's three major customers in 1995, each of whom accounted for more than
10% of net revenues, represented 41%, 26% and 21%, respectively, of trade
accounts receivable, net at December 31, 1995. The Company's three major
customers for the six months ended June 30, 1996 represented 32%, 28% and 13%,
respectively, of trade accounts receivable, net at June 30, 1996.
Other Concentrations
One product line constitutes over 90% of the Company's net revenues for the
years ended December 31, 1994 and 1995 and for the six months ended June 30,
1995 and 1996. Any technical difficulties or other factors affecting sales of
this product line could adversely affect operating results.
As of June 30, 1996, the Company received approximately 90% of its
fulfillment services from one fulfillment firm. A delay in product shipments
from this fulfillment company could result in a possible loss of sales, which
could adversely affect operating results.
(11) EMPLOYEE BENEFIT PLANS
On May 1, 1996, the Company adopted a 401(k) Plan. All full-time employees
who have reached age 18 and who have been employed for at least 30 days are
eligible to participate in the Plan. The Company may make discretionary
contributions to the Plan. As of June 30, 1996, the Company had not made any
contributions to the Plan.
On June 26, 1996, the Company's Board of Directors and stockholders
approved the 1996 Employee Stock Purchase Plan, which is intended to qualify
under Section 423 of the Internal Revenue Code. A total of 100,000 shares of
Common Stock have been reserved for issuance under the Employee Stock Purchase
Plan. Employees are entitled to participate if they satisfy certain criteria, as
defined, in the Employee Stock Purchase Plan agreement.
F-14
<PAGE> 73
CYBERMEDIA, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS ENDED
JUNE 30, 1995 AND JUNE 30, 1996 IS UNAUDITED)
(12) RELATED PARTY TRANSACTIONS
In connection with the sale of the Series B Preferred Stock, the Company's
founders and the holders of the Series A Preferred Stock and the Series B
Preferred Stock entered into a Key Employees' Right of First Refusal, Co-Sale
and Voting Agreement ("Voting Agreement"). Pursuant to the Voting Agreement, the
Company is obligated to designate certain directors. In addition, in the event a
Company founder proposes to sell or transfer any Common Stock, the founder must
first offer such securities to the Company at comparable terms and conditions.
If the Company does not elect to purchase all of such securities, the Company
must provide the holders of the Series A Preferred Stock and Series B Preferred
Stock with the right to purchase such securities at the same terms.
In October 1995, three of the Company's directors each received options to
purchase 75,000 shares of the Company's Common Stock. The options have an
exercise price equal to the fair market value of the stock at the date of grant
and vest over four years from the date of grant, subject to providing continued
consulting services to the Company. During the six months ended June 30, 1996,
each of the directors exercised such options, including the unvested options,
and such shares are subject to repurchase on the same four-year vesting
schedule. See Note 9.
In September 1995, a director of the Company advanced a series of loans to
the Company to meet then-existing financial requirements. The loans were
converted into Series B Preferred Stock in consideration for the loans to the
Company. The director received warrants to purchase 17,857 shares of the
Company's Common Stock at an exercise price of $1.40 which expire on the earlier
of five years from the date of issue or the closing of an initial public
offering.
(13) COMMITMENTS AND CONTINGENCIES
The Company leases office facilities under operating leases which expire on
July 9, 2000. Rent expense for the years ended December 31, 1993, 1994 and 1995
and for the six months ended June 30, 1995 and 1996 aggregated $72,000, $39,000,
$79,000, $27,000 and $214,000, respectively. Future minimum lease payments under
noncancelable operating leases as of December 31, 1995 are as follows:
<TABLE>
<S> <C>
Year ending December 31,
1996................................ $ 302,000
1997................................ 322,000
1998................................ 341,000
1999................................ 358,000
2000................................ 179,000
----------
Total minimum lease payments... $1,502,000
=========
</TABLE>
The Company has entered into employment agreements with Company founders
which include terms whereby the founders are to receive full payment of salary
and benefits for specified periods, as set forth more fully in the employment
agreements, in the event of early termination.
F-15
<PAGE> 74
CYBERMEDIA, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS ENDED
JUNE 30, 1995 AND JUNE 30, 1996 IS UNAUDITED)
(14) SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO
BEGINNING OF COSTS AND BALANCE AT END
DESCRIPTION PERIOD EXPENSES DELETIONS OF PERIOD
- ------------------------------------------- ------------ ---------- --------- --------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts
Year ended:
December 31, 1993..................... $ -- $ -- $ -- $ --
December 31, 1994..................... $ -- $ 3,000 $ -- $ 3,000
December 31, 1995..................... $ 3,000 $ 97,000 $ -- $ 100,000
Six months ended:
June 30, 1996
(unaudited)........................... $100,000 $ 100,000 $ -- $ 200,000
Reserve for sales returns
Year ended:
December 31, 1993..................... $ -- $ -- $ -- $ --
December 31, 1994..................... $ -- $ 9,000 $ -- $ 9,000
December 31, 1995..................... $ 9,000 $ 921,000 $(263,000)(1) $ 667,000
Six months ended:
June 30, 1996
(unaudited)........................... $667,000 $1,561,000 $(713,000)(1) $1,515,000
</TABLE>
- ---------------
(1) Actual product returns.
(15) SUBSEQUENT EVENTS
On July 3, 1996, the Company issued 1,666,667 shares of Series C Preferred
Stock at a price of $3.00 per share, convertible into approximately 833,333
shares of Common Stock. Each share of Series C Preferred Stock is automatically
converted into one-half of a share of Common Stock upon the earlier of the
affirmative vote of the holders of at least 66 2/3% of the outstanding shares of
the Preferred Stock, or immediately upon the closing of a firm commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, in which the aggregate gross proceeds exceed
$10,000,000 and the price per share is not less than $7.00.
On July 17, 1996, the Board of Directors approved a one-for-two reverse
stock split of the Company's Common Stock. Accordingly, all references to the
number of shares authorized, issued and outstanding and per share information
for all periods presented have been adjusted to give effect to the
aforementioned reverse stock split. The reverse stock split became effective on
August 14, 1996.
On July 23, 1996, the Company filed a lawsuit against a competitor which
alleged that the competitor's packaging materials include false and misleading
statements about the Company. The competitor has filed counterclaims against the
Company alleging the Company's packaging materials include false and misleading
statements. Pending trial, the U.S. District Court has granted a preliminary
injunction in favor of the Company and against the competitor. The Company
believes that it has meritorious defenses to such counterclaims and intends to
vigorously defend itself if suit is subsequently filed.
On August 13, 1996, the Company's Board of Directors approved the increase
in the number of shares of Common Stock reserved under the Amended 1993 Stock
Plan to 3,902,000.
The Company is in the process of reincorporating in the State of Delaware.
The Company anticipates that the reincorporation will result in an increase in
the number of shares of authorized Common Stock to 50,000,000.
F-16
<PAGE> 75
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY, ANY PERSON IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................ 3
Risk Factors.............................. 5
The Company............................... 15
Use of Proceeds........................... 15
Dividend Policy........................... 15
Capitalization............................ 16
Dilution.................................. 17
Selected Financial Data................... 18
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................. 19
Business.................................. 26
Management................................ 38
Certain Transactions...................... 45
Principal Stockholders.................... 48
Description of Capital Stock.............. 49
Shares Eligible for Future Sale........... 51
Underwriting.............................. 54
Legal Matters............................. 55
Experts................................... 55
Additional Information.................... 55
Index to Financial Statements............. 56
</TABLE>
------------------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
SHARES
[LOGO]
COMMON STOCK
--------------------
PROSPECTUS
--------------------
HAMBRECHT & QUIST
LEHMAN BROTHERS
WESSELS, ARNOLD & HENDERSON
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 76
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all costs and expenses, other than
underwriting discounts and commissions, payable by the Registrant in connection
with the sale of Common Stock being registered hereunder. All of the amounts are
estimates except the SEC registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
---------
<S> <C>
SEC Registration Fee.............................................. $ 13,087
NASD Filing Fee................................................... 4,295
Nasdaq National Market Application Fee............................ *
Legal Fees and Expenses........................................... *
Accounting Fees and Expenses...................................... *
Director and Officer Insurance.................................... *
Blue Sky Qualification Fees and Expenses.......................... 15,000
Printing and Engraving Fees and Expenses.......................... *
Transfer Agent and Registrant Fees................................ 10,000
Miscellaneous..................................................... *
Total........................................................... $ *
</TABLE>
- ---------------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Section 145 of the Delaware General Corporation Law, the
Registrant's Amended and Restated Certificate of Incorporation includes a
provision that eliminates the personal liability of its directors for monetary
damages for breach or alleged breach of their duty of care. In addition, as
permitted by Section 145 of the Delaware General Corporation Law, the Bylaws of
the Registrant provide that: (i) the Registrant is required to indemnify its
directors and executive officers and persons serving in such capacities in other
business enterprises (including, for example, subsidiaries of the Registrant) at
the Registrant's request, to the fullest extent permitted by Delaware law,
including in those circumstances in which indemnification would otherwise be
discretionary; (ii) the Registrant may, in its discretion, indemnify employees
and agents in those circumstances where indemnification is not required by law;
(iii) the Registrant is required to advance expenses, as incurred, to its
directors and executive officers in connection with defending a proceeding
(except that it is not required to advance expenses to a person against whom the
Registrant brings a claim for breach of the duty of loyalty, failure to act in
good faith, intentional misconduct, knowing violation of law or deriving an
improper personal benefit); (iv) the rights conferred in the Bylaws are not
exclusive, and the Registrant is authorized to enter into indemnification
agreements with its directors, executive officers and employees; and (v) the
Registrant may not retroactively amend the Bylaw provisions in a way that is
adverse to such directors, executive officers and employees.
The Registrant's policy is to enter into indemnification agreements with
each of its directors and executive officers that provide the maximum indemnity
allowed to directors and executive officers by Section 145 of the Delaware
General Corporation Law and the Bylaws, as well as certain additional procedural
protections. In addition, the indemnity agreements provide that directors and
executive officers will be indemnified to the fullest possible extent not
prohibited by law against all expenses (including attorney's fees) and
settlement amounts paid or incurred by them in any action or proceeding,
including any derivative action by or in the right of the Registrant, on account
of their services as directors or executive officers of the Registrant or as
directors or officers of any other Company or enterprise when they are serving
in such capacities at the request of the Registrant. The Company will not be
obligated pursuant to the indemnity
II-1
<PAGE> 77
agreements to indemnify or advance expenses to an indemnified party with respect
to proceedings or claims initiated by the indemnified party and not by way of
defense, except with respect to proceedings specifically authorized by the Board
of Directors or brought to enforce a right to indemnification under the
indemnity agreement, the Company's Bylaws or any statute or law. Under the
agreements, the Company is not obligated to indemnify the indemnified party (i)
for any expenses incurred by the indemnified party with respect to any
proceeding instituted by the indemnified party to enforce or interpret the
agreement, if a court of competent jurisdiction determines that each of the
material assertions made by the indemnified party in such proceeding was not
made in good faith or was frivolous; (ii) for any amounts paid in settlement of
a proceeding unless the Company consents to such settlement; (iii) with respect
to any proceeding brought by the Company against the indemnified party for
willful misconduct, unless a court determines that each of such claims was not
made in good faith or was frivolous; (iv) on account of any suit in which
judgment is rendered against the indemnified party for an accounting of profits
made from the purchase or sale by the indemnified party of securities of the
Company pursuant to the provisions of sec. 16(b) of the Securities Exchange Act
of 1934 and related laws; (v) on account of the indemnified party's conduct
which is finally adjudged to have been knowingly fraudulent or deliberately
dishonest, or to constitute willful misconduct or a knowing violation of the
law; (vi) on account of any conduct from which the indemnified party derived an
improper personal benefit; (vii) on account of conduct the indemnified party
believed to be contrary to the best interests of the Company or its
stockholders; (viii) on account of conduct that constituted a breach of the
indemnified party's duty of loyalty to the Company or its stockholders; or (ix)
if a final decision by a court having jurisdiction in the matter shall determine
that such indemnification is not lawful.
The indemnification provision in the Bylaws and the indemnification
agreements entered into between the Registrant and its directors and executive
officers, may be sufficiently broad to permit indemnification of the
Registrant's officers and directors for liabilities arising under the 1933 Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In the three years prior to the effective date of this Registration
Statement, the Registrant has issued and sold the following unregistered
securities:
1. Since June 30, 1993, the Registrant has sold and issued the
following unregistered shares of Preferred Stock:
(a) The Registrant has sold the following shares of Series A
Preferred Stock of the Company: (i) on December 9, 1992, the Registrant
sold an aggregate of 1,177,946 shares of Series A Preferred Stock for an
aggregate of $412,281.10; (ii) on February 28, 1994, the Registrant sold
an aggregate of 843,141 shares of Series A Preferred Stock for an
aggregate of $295,000; (iii) on December 21, 1994, the Registrant sold
an aggregate of 781,428 shares of Series A Preferred Stock for an
aggregate of $275,000 and (iv) on January 13, 1995, the Registrant sold
an aggregate of 142,857 shares of Series A Preferred Stock for an
aggregate of $50,000.
(b) On September 29, 1995, the Registrant sold 6,371,429 shares of
Series B Preferred Stock for an aggregate purchase price of $4,461,000.
(c) On July 3, 1996, the Registrant sold 1,666,667 shares of Series
C Preferred Stock for an aggregate purchase price of $5,000,001.
2. On various dates since February 15, 1993, the Registrant has
granted options to purchase 2,877,740 shares (net of repurchases) of its
Common Stock to employees, directors and consultants at a weighted average
exercise price of $0.84 per share pursuant to the Amended 1993 Stock Plan.
Additionally pursuant to its 1992 Stock Plan, the Registrant has granted
options to purchase 50,000 shares of its Common Stock to a consultant at a
weighted average exercise price of $0.05 per share.
3. On various dates since February 28, 1994, the Registrant has
granted warrants to purchase an aggregate of 99,644 shares of its Common
Stock and 1,766,471 shares of its Series A Preferred Stock to certain
investors at a weighted average exercise price of $3.71 per share and $0.45
per share, respectively.
II-2
<PAGE> 78
The issuances of the securities described in paragraphs 1 and 2 above were
deemed to be exempt from registration under the Securities Act in reliance on
Section 4(2) under the Securities Act 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 such Rule 701.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS
--------
<S> <C>
1.1* Form of Underwriting Agreement (draft dated , 1996).
3.1 Certificate of Incorporation of Registrant, as amended.
3.2* Form of Amended and Restated Certificate of Incorporation of Registrant
to be filed upon the closing of the offering made under the Registration
Statement.
3.3 Bylaws of Registrant.
3.5* Merger Agreement.
4.1* Form of Common Stock Certificate.
5.1* Opinion of Wilson, Sonsini, Goodrich & Rosati, Professional Corporation
10.1 Form of Indemnification Agreement with directors and officers.
10.2* Amended 1993 Stock Plan and form of agreements thereunder.
10.3 1996 Employee Stock Purchase Plan and form of agreement thereunder.
10.4 1996 Director Option Plan and form of agreements thereunder.
10.5 Form of Key Employees' Right of First Refusal, Co-Sale and Voting
Agreement dated September 29, 1995 by and among Registrant and certain
individuals and entities.
10.6 Form of Amended and Restated Registration Rights Agreement dated as of
June 26, 1996 by and among Registrant and certain individuals and
entities.
10.7 Sublease Agreement dated December 1995 between Century Southwest Cable
Television, Inc. and the Registrant.
10.8 Business Loan Agreement dated April 30, 1996 between Imperial Bank and
the Registrant.
10.9** Distribution Agreement dated February 28, 1996 between the Registrant and
Ingram Micro Inc.
10.10** Distribution Agreement dated March 1, 1996 between the Registrant and
Navarre Corporation
10.11** Distributor Contract dated March 20, 1996 between the Registrant and
Micro Central, Inc.
10.12 Form of Employment Agreements dated March 12, 1995 between the Registrant
and the Founders.
10.13 Loan Agreement dated June 22, 1994 between ICICI and the Registrant.
10.14* Form of Agreement dated August 26, 1996 between the Registrant and
certain executive officers.
11.1* Statement Regarding Computation of Per Share Earnings.
23.1 Consent of Independent Auditors.
23.2* Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (See page II-5).
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* To be supplied by amendment.
** Confidential treatment has been requested with respect to certain portions of
this exhibit. Omitted portions have been filed separately with the Securities
and Exchange Commission. To be supplied by amendment.
II-3
<PAGE> 79
- ---------------
* To be supplied by amendment.
** Confidential treatment has been requested with respect to certain portions of
this exhibit. Omitted portions have been filed separately with the Securities
and Exchange Commission.
(B) FINANCIAL STATEMENT SCHEDULES
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification by the Registrant for liabilities arising under
the 1933 Act may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions referenced in Item 14 of this
Registration Statement 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 1933 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 hereunder, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the 1933 Act, the
information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the 1933 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 1933 Act,
each post-effective amendment that contains a form of Prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 80
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement on Form S-1 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of Palo
Alto, State of California, on the 29th day of August 1996.
CYBERMEDIA, INC.
By: /s/ UNNI S., WARRIER
Unni S. Warrier
President, Chief Executive Officer
and Chairman of the Board
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints, jointly and severally, Unni S. Warrier
and Jeffrey W. Beaumont, and each one of them, individually and without the
other, his or her attorney-in-fact, each with the power of substitution, for him
in any and all capacities, to sign any and all amendments to this Registration
Statement (including post-effective amendments and any amendments or abbreviated
registration statements pursuant to Rule 462(b) increasing the amount of
securities for which registration is sought), and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby granting unto said attorneys-in-fact
and agents, and each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, in order to effectuate the same as fully to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that each
of said attorney-in-fact and agents or any of them, or his or their substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------------------- ---------------------------- ----------------
<S> <C> <C>
/s/ UNNI S. President, Chief Executive August 29,1996
WARRIER Officer and Director
Unni S. Warrier (Principal Executive
Officer)
/s/ JEFFREY W. Chief Financial Officer August 29, 1996
BEAUMONT (Principal Financial and
Jeffrey W. Beaumont Accounting Officer)
/s/ PAUL Director August 29, 1996
DALI
Paul Dali
PATIL /s/ SUHAS Director August 29, 1996
Suhas Patil
/s/ RONALD S. Director August 29, 1996
POSNER
Ronald S. Posner
/s/ KANWAL Director August 29, 1996
REKHI
Kanwal Rekhi
/s/ PETER Director August 29, 1996
MORRIS
Peter Morris
/s/ JAMES R. Director August 29, 1996
TOLONEN
James R. Tolonen
</TABLE>
II-5
<PAGE> 81
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. EXHIBIT PAGE NUMBER
----------- --------------------------------------------------------------------
<S> <C> <C>
1.1* Form of Underwriting Agreement (draft dated , 1996).....
3.1 Certificate of Incorporation of Registrant, as amended..............
3.2* Form of Amended and Restated Certificate of Incorporation of
Registrant to be filed upon the closing of the offering made under
the Registration Statement..........................................
3.3 Bylaws of Registrant................................................
3.5* Merger Agreement....................................................
4.1* Form of Common Stock Certificate....................................
5.1* Opinion of Wilson, Sonsini, Goodrich & Rosati, Professional
Corporation
10.1 Form of Indemnification Agreement with directors and officers.......
10.2* Amended 1993 Stock Plan and form of agreements thereunder...........
10.3 1996 Employee Stock Purchase Plan and form of agreement
thereunder..........................................................
10.4 1996 Director Option Plan and form of agreements thereunder.........
10.5 Form of Key Employees' Right of First Refusal, Co-Sale and Voting
Agreement dated September 29, 1995 by and among Registrant and
certain individuals and entities....................................
10.6 Form of Amended and Restated Registration Rights Agreement dated as
of June 26, 1996 by and among Registrant and certain individuals and
entities............................................................
10.7 Sublease Agreement dated December 1995 between Century Southwest
Cable Television, Inc. and the Registrant...........................
10.8 Business Loan Agreement dated April 30, 1996 between Imperial Bank
and the Registrant..................................................
10.9** Distribution Agreement dated February 28, 1996 between the
Registrant and Ingram Micro Inc.....................................
10.10** Distribution Agreement dated March 1, 1996 between the Registrant
and Navarre Corporation
10.11** Distributor Contract dated March 20, 1996 between the Registrant and
Micro Central, Inc..................................................
10.12 Form of Employment Agreements dated March 12, 1995 between the
Registrant and the Founders.........................................
10.13 Loan Agreement dated June 22, 1994 between ICICI and the
Registrant..........................................................
10.14* Form of Agreement dated August 26, 1996 between the Registrant and
certain executive officers..........................................
11.1* Statement Regarding Computation of Per Share Earnings...............
23.1 Consent of Independent Auditors.....................................
23.2* Consent of Counsel (included in Exhibit 5.1)........................
24.1 Power of Attorney (See page II-5)...................................
27.1 Financial Data Schedule.............................................
</TABLE>
- ---------------
* To be supplied by amendment.
** Confidential treatment has been requested with respect to certain portions of
this exhibit. Omitted portions have been filed separately with the Securities
and Exchange Commission. To be supplied by amendment.
<PAGE> 82
APPENDIX -- DESCRIPTION OF GRAPHICS
Page 29
The graphic reads "First Aid" across the bottom. At the left of the graphic is a
picture of a PC, with the screen showing a first aid cross and central
processing unit ("CPU") with an arrow to the World Wide Web (picture of
continents on a spider web). The caption under the PC reads "1. First Aid
detects, diagnoses and resolves over 10,000 potential combinations of problems
using a local knowledge base of general and system-specific information,
supporting a wide range of software applications, multimedia cards, modems,
video cards and networks." The caption under the World Wide Web reads "2. Users
can update this knowledge base as needed by connecting to a larger and regularly
updated knowledge base at CyberMedia's HelpCentral Internet site." There is an
arrow pointing from the World Wide Web to a CPU. The caption under the CPU reads
"3. The HelpCentral knowledge base is kept up-to-date by CyberMedia and through
partnerships with hardware and software vendors."
Page 31
The graphic reads "Oil Change" across the bottom. At the left of the graphic is
a picture of a PC, with an arrow pointing to the World Wide Web. The caption
under the PC reads "1. Oil Change examines a users PC and develops a profile of
applications and hardware device drivers." The caption under the World Wide Web
reads "2. Oil Change checks the knowledge base at CyberMedia's HelpCentral
Internet site to see what applicable updates or patches are available." There is
an arrow pointing from the World Wide Web to a CPU next to a PC. The caption
under the PC reads "3. Oil Change displays a list of available updates and
patches to the user and gives them the option to select the update they want."
The PC has an arrow pointing to a PC with a mouse. The caption under the PC
reads "4. Oil Change automatically retrieves and installs selected updates and
patches."
Page 32
The graphic reads "Technology" across the top. At the left of the graphic is a
PC with the heading "Agent" directly under the PC and a caption that reads "1.
Agents detect and solve a wide range of problems locally on a PC." There is an
arrow pointing from the PC to a World Wide Web with the heading "Internet"
directly under the Web and the caption "2. Agents use the Internet to access
HelpCentral, a centralized up-to-date knowledge base, to solve additional
problems." There is an arrow pointing from the World Wide Web to a CPU. The
heading above the CPU reads "CyberScript" and the heading below the CPU reads
"HelpCentral." The caption under the CPU reads "3. HelpCentral is kept
up-to-date through partnerships with CyberMedia and hardware and software
vendors using CyberScript, a powerful scripting language."
<PAGE> 1
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
CYBERMEDIA, INC.
FIRST. The name of this corporation is CyberMedia, Inc.
SECOND. The address of the corporation's registered office in the State
of Delaware is 1209 Orange Street, Wilmington, County of New Castle, Delaware
19801. The name of its registered agent at such address is The Corporation Trust
Company.
THIRD. The purpose of this corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH. This corporation is authorized to issue two classes of shares,
to be designated "Common Stock" and "Preferred Stock", respectively. The total
number of shares which this corporation is authorized to issue is 62,835,654
shares. The number of shares of Common Stock this corporation is authorized to
issue is 50,000,000 shares, with the par value of $0.01, and the number of
shares of Preferred Stock this corporation is authorized to issue is 12,835,654
shares, with the par value of $0.01.
1. Designation of Series.
There are hereby provided three series of Preferred Stock; one
series designated Series A Preferred Stock (the "Series A Preferred"), one
series designated Series B Preferred (the "Series B Preferred"), and one series
designated Series C Preferred ( the "Series C Preferred"), collectively, the
"Preferred Stock."
2. Number of Shares.
The number of shares constituting the Series A Preferred Stock
is fixed at 4,726,129 shares, the number of shares constituting the Series B
Preferred Stock is fixed at 6,371,429 shares and the number of shares
constituting the Series C Preferred Stock is 1,666,657.
3. Dividend Provisions.
Prior to the payment of any dividend to the holders of Common
Stock, the holders of Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock shall be entitled to receive dividends, out of any
assets legally available therefor (payable other than in Common Stock or other
securities and rights convertible into or entitling the holder thereof to
receive, directly or indirectly, additional shares of Common Stock of this
corporation), at the annual rate of $0.028 per share, $0.056
<PAGE> 2
and $0.24 per share, respectively. After payment of such dividends, any
additional dividends declared shall be distributed among all holders of Common
Stock. Such dividends shall be payable when, as and if declared by the Board of
Directors, and shall not be cumulative.
4. Liquidation Preference.
(a) Preference. In the event of any liquidation,
dissolution or winding up of this corporation, either voluntary or involuntary,
the holders of Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of any of the assets of this corporation to the
holders of Common Stock by reason of their ownership thereof, an amount per
share equal to $0.35 for each outstanding share of Series A Preferred Stock held
by them, an amount per share equal to $0.70 for each outstanding share of Series
B Preferred Stock held by them and an amount per share equal to $ 3.00 for each
outstanding share of Series C Preferred Stock, plus a further amount equal to
any dividends declared but unpaid on such shares.
If upon such liquidation, dissolution or winding up
of the corporation, the assets of the corporation are insufficient to provide
for the preferential payment described above, then all of such assets shall be
distributed ratably among the holders of the Preferred Stock in proportion to
the full preferential amount each such holder is otherwise entitled to receive.
After the payment or the setting apart of payment to
the holders of Preferred Stock of the preferential amounts payable to them, the
holders of Common Stock shall be entitled to receive pro rata the remaining
assets of the corporation.
(b) Consolidation or Mergers. A consolidation or
merger of the corporation with or into any other corporation or corporations, or
sale of all or substantially all of the assets of this corporation in which the
shareholders of this corporation immediately prior to the transaction possess
less than 50% of the voting power of the surviving entity (or its parent)
immediately after the transaction shall be deemed to be a liquidation,
dissolution or winding up within the meaning of this Section 4. Any securities
to be delivered to the holders of Preferred Stock and Common Stock upon
consolidation, merger or sale of substantially all the assets of the corporation
shall be valued as follows:
(1) if traded on a securities exchange, the
value shall be deemed to be the average of the closing prices of the securities
on such exchange over the 30-day period ending three (3) business days prior to
the closing;
(2) if actively traded over-the-counter, the
value shall be deemed to be the average of the closing prices over the 30-day
period ending three (3) business days prior to the closing; and
(3) if there is no active public market, the
value shall be the fair market value thereof as determined in good faith by the
corporation's board of directors.
2
<PAGE> 3
(c) Consent for Certain Repurchase. Each holder of an
outstanding share of Preferred Stock shall be deemed to have consented to
distributions made by the corporation in connection with the repurchase of
shares of Common Stock issued to or held by employees or consultants upon
termination of their employment or services pursuant to agreements providing for
the right of said repurchase between the corporation and such persons.
5. Conversion.
The holders of the Preferred Stock shall have conversion
rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Preferred Stock
shall be convertible without the payment of any additional consideration and, at
the option of the holder thereof, at any time after the date of issuance of such
share, at the office of the corporation or any transfer agent for the Preferred
Stock. Each share of Preferred Stock shall be convertible into the number of
fully paid and nonassessable shares of Common Stock which results from dividing
the Conversion Price (as hereinafter defined) per share in effect for each
series of Preferred Stock at the time of conversion into the per share
Conversion Value (as hereinafter defined) of such series. The initial Conversion
Price per share of Series A Preferred Stock shall be $0.35, the initial
Conversion Price per share of Series B Preferred Stock shall be $0.70 and the
initial Conversion Price per share of Series C Preferred shall be $3.00 per
share. The per share Conversion Value of the Series A Preferred Stock shall be
$0.35, the per share Conversion Value of the Series B Preferred Stock shall be
$0.70 and the Value of the Series C Preferred Stock shall be $3.00 (as the case
may be, the "Conversion Value"). The initial Conversion Price of Series A
Preferred Stock and the Series B Preferred Stock and Series C Preferred Stock
shall be subject to adjust ment from time to time as provided below (as so
adjusted and as the case may be, the "Conversion Price"). The number of shares
of Common Stock into which a share of Preferred Stock is convertible is
hereinafter referred to as the "Conversion Rate" of such series.
(b) Automatic Conversion. Each share of Preferred
Stock shall automatically be converted into shares of Common Stock at its then
effective Conversion Rate upon the earlier of (i) the affirmative vote of the
holders of at least sixty-six and two thirds percent (66 2/3%) of the
outstanding shares of the Preferred Stock, or (ii) immediately upon the closing
of a firm commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), other than a registration relating solely to a transaction
under Rule 145 under the Securities Act or to an employee benefit plan of the
corporation, covering the offer and sale of the corporation's securities in
which the aggregate gross proceeds to the corporation exceed $10,000,000 and the
price per share is not less than $3.50 (as adjusted to reflect stock dividends,
stock splits, combinations, subdivisions or recapitalizations).
(c) Mechanics of Conversion. Before any holder of
shares of Preferred Stock shall be entitled to convert the same into shares of
Common Stock, he shall surrender the certificate(s) therefor, duly endorsed, at
the office of the corporation or of any transfer agent for the Preferred Stock
and shall give written notice to the corporation at such office that he elects
to convert the same (except that no such written notice of election to convert
shall be necessary in the event of an automatic conversion pursuant to Section
5(b) hereof). The corporation shall, as soon as
3
<PAGE> 4
practicable thereafter, issue and deliver at such office to such holder of
shares of Preferred Stock certificate(s) for the number of shares of Common
Stock to which such holder shall be entitled. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date of such
surrender of the shares of Preferred Stock to be converted (except that in the
case of an automatic conversion pursuant to Section 5(b) hereof such conversion
shall be deemed to have been made (i) upon the effective time of the requisite
affirmative vote set forth in Section 5(b)(i), or (ii) immediately prior to the
closing of the offering referred to in Section 5(b)(ii)) and the person or
persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock on such date.
(d) Fractional Shares. In lieu of any fractional
shares to which the holder of Preferred Stock would otherwise be entitled, the
corporation shall pay cash equal to such fraction multi plied by the fair market
value of one share of such series of Preferred Stock as determined by the board
of directors of the corporation. Whether or not fractional shares are issuable
upon such conversion shall be determined on the basis of the total number of
shares of Preferred Stock of each holder at the time converting into Common
Stock and the number of shares of Common Stock issuable upon such aggregate
conversion.
(e) Adjustment of Conversion Price. The Conversion
Prices of each series of Preferred Stock shall be subject to adjustment from
time to time as follows:
(i) If the corporation shall issue any
shares of Common Stock other than "Excluded Stock" (as defined below) for a
consideration per share less than the Conversion Price for any series of
Preferred Stock in effect immediately prior to the issuance of such shares of
Common Stock (excluding stock dividends, subdivisions, stock splits,
combinations, dividends or recapitalizations which are covered by Sections
5(e)(iii), (iv), (v) and (vi)), the Conversion Price for such series of
Preferred Stock in effect after each such issuance shall thereafter (except as
provided in this Section 5(e)) be adjusted to a price equal to the quotient
obtained by dividing:
(A) an amount equal to the sum of
(x) the total number of
shares of Common Stock outstanding (including any shares of Common Stock
issuable upon conversion of the Preferred Stock, or deemed to have been issued
pursuant to subdivision (3) of this clause (i) and to clause (ii) below)
immediately prior to such issuance multiplied by the Conversion Price in effect
immediately prior to such issuance, plus
(y) the consideration
received by the corporation upon such issuance, by
(B) the total number of shares of
Common Stock outstanding (including any shares of Common Stock issuable upon
conversion of the Preferred Stock or deemed to have been issued pursuant to
subdivision (3) of this clause (i) and to clause (ii) below) immediately prior
to such issuance plus the additional shares of Common Stock issued in such
issuance (but not
4
<PAGE> 5
including any additional shares of Common Stock deemed to be issued as a result
of any adjustment in the Conversion Price resulting from such issuance).
For purposes of any adjustment of the
Conversion Price pursuant to this clause (i) the following provisions shall be
applicable:
(1) In the case of the issuance of
Common Stock for cash, the consideration shall be deemed to be the amount of
cash paid therefor after deducting any discounts or commissions paid or incurred
by the corporation in connection with the issuance and sale thereof.
(2) In the case of the issuance of
Common Stock for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair market value
thereof as determined by the board of directors of the corporation, in
accordance with generally accepted accounting treatment; provided, however, that
if, at the time of such determination, the corporation's Common Stock is traded
in the over-the-counter market or on a national or regional securities exchange,
such fair market value as determined by the board of directors of the
corporation shall not exceed the aggregate "Current Market Price" (as defined
below) of the shares of Common Stock being issued.
(3) In the case of the issuance of
(i) options to purchase or rights to subscribe for shares of Common Stock (other
than Excluded Stock), (ii) securities by their terms convertible into or
exchangeable for shares of Common Stock (other than Excluded Stock), or (iii)
options to purchase or rights to subscribe for such convertible or exchangeable
securities:
(A) the aggregate
maximum number of shares of Common Stock deliverable upon exercise of such
options to purchase or rights to subscribe for Common Stock shall be deemed to
have been issued at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the manner provided in
subdivisions (1) and (2) above), if any, received by the corporation upon the
issuance of such options or rights plus the minimum purchase price provided in
such options or rights for the Common Stock covered thereby;
(B) the aggregate
maximum number of shares of Common Stock deliverable upon conversion of or in
exchange for any such convertible or exchangeable securities or upon the
exercise of options to purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange thereof, shall be
deemed to have been issued at the time such securities were issued or such
options or rights were issued and for a consideration equal to the consideration
received by the corporation for any such securities and related options
5
<PAGE> 6
or rights (excluding any cash received on account of accrued interest or accrued
dividends), plus the minimum additional consideration, if any, to be received by
the corporation upon the conversion or exchange of such securities or the
exercise of any related options or rights (the consideration in each case to be
determined in the manner provided in subdivisions (1) and (2) above);
(C) on any change in the
number of shares of Common Stock deliverable upon exercise of any such options
or rights or conversion of or exchange for such convertible or exchangeable
securities, or on any change in the minimum purchase price of such options,
rights or securities, other than a change resulting from the anti-dilution
provisions of such options, rights or securities, the Conversion Price shall
forthwith be readjusted to such Conversion Price as would have obtained had the
adjustment made upon (x) the issuance of such options, rights or securities not
exercised, converted or exchanged prior to such change, as the case may be, been
made upon the basis of such change or (y) the options or rights related to such
securities not converted or exchanged prior to such change, as the case may be,
been made upon the basis of such change; and
(D) on the expiration of
any such options or rights, the termination of any such rights to convert or
exchange or the expiration of any options or rights related to such convertible
or exchangeable securities, the Conversion Price shall forthwith be readjusted
to such Conversion Price as would have obtained had the adjustment made upon the
issuance of such options, rights, convertible or exchangeable securities or
options or rights related to such convertible or exchangeable securities, as the
case may be, been made upon the basis of the issuance of only the number of
shares of Common Stock actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such convertible or exchangeable
securities or upon the exercise of the options or rights related to such
convertible or exchangeable securities, as the case may be.
(ii) "Excluded Stock" shall mean:
(A) all shares of Common Stock
issued and outstanding on the date this certificate is filed with the Delaware
Secretary of State, and all shares issued or issuable to officers, directors,
consultants or employees of the corporation pursuant to any plan or arrangement
approved by the board of directors of the corporation;
(B) all shares of Preferred Stock
issued and outstanding on the date this certificate is filed with the Delaware
Secretary of State, and the shares of Common Stock into which the shares of
Preferred Stock are convertible.
All outstanding shares of Excluded
Stock (including any shares issuable upon conversion of the Preferred Stock but
excluding shares reserved for issuance for option plans for which options have
not yet been granted) shall be deemed to be outstanding for all purposes of the
computations of Section 5(e)(i) above.
(iii) If the number of shares of Common
Stock outstanding at any time after the date hereof is increased by a stock
dividend payable in shares of Common Stock or by a subdivi sion or split-up of
shares of Common Stock, then, on the date such payment is made or such
6
<PAGE> 7
change is effective, the Conversion Price of each series of Preferred Stock
shall be appropriately decreased so that the number of shares of Common Stock
issuable on conversion of any shares of such series of Preferred Stock shall be
increased in proportion to such increase of outstanding shares.
(iv) If the number of shares of Common Stock
outstanding at any time after the date hereof is decreased by a combination of
the outstanding shares of Common Stock, then, on the effective date of such
combination, the Conversion Price of each series of Preferred Stock shall be
appropriately increased so that the number of shares of Common Stock issuable on
conversion of any shares of such series of Preferred Stock shall be decreased in
proportion to such decrease in outstanding shares.
(v) In case the corporation shall declare a
cash dividend upon its Common Stock payable otherwise than out of retained
earnings or shall distribute to holders of its Common Stock shares of its
capital stock (other than Common Stock), stock or other securities of other
persons, evidences of indebtedness issued by the corporation or other persons,
assets (excluding cash dividends) or options or rights (excluding options to
purchase and rights to subscribe for Common Stock or other securities of the
corporation convertible into or exchangeable for Common Stock), then, in each
such case, the holders of shares of Preferred Stock shall, concurrent with the
distribution to holders of Common Stock, receive a like distribution based upon
the number of shares of Common Stock into which each series of Preferred Stock
is convertible.
(vi) In case, at any time after the date
hereof, of any capital reorganization, or any reclassification of the stock of
the corporation (other than as a result of a stock dividend or subdivision,
split-up or combination of shares), or the consolidation or merger of the
corporation with or into another person (other than a consolidation or merger in
which the corporation is the continuing entity and which does not result in any
change in the Common Stock) or of the sale or other disposition of all or
substantially all the properties and assets of the corporation, the shares of
Preferred Stock shall, after such reorganization, reclassification,
consolidation, merger, sale or other disposition, be convertible into the kind
and number of shares of stock or other securities or property of the corporation
or otherwise to which such holder would have been entitled if immediately prior
to such reorganization, reclassification, consolidation, merger, sale or other
disposition he had converted his shares of Preferred Stock into Common Stock.
The provisions of this clause (vi) shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers, sales or other
dispositions.
(vii) All calculations under this Section 5
shall be made to the nearest cent or to the nearest one hundredth (1/100) of a
share, as the case may be.
(viii) For the purpose of any computation
pursuant to this Section 5(e), the "Current Market Price" at any date of one
share of Common Stock, shall be deemed to be the average of the highest reported
bid and the lowest reported offer prices on the preceding business day as
furnished by the National Quotation Bureau, Incorporated (or equivalent
recognized source of quotations); provided, however, that if the Common Stock is
not traded in such manner that the
7
<PAGE> 8
quotations referred to in this clause (ix) are available for the period required
hereunder, Current Market Price shall be determined in good faith by the board
of directors of the corporation.
(f) Minimal Adjustments. No adjustment in the
Conversion Price need be made if such adjustment would result in a change in the
Conversion Price of less than $0.01. Any adjustment of less than $0.01 which is
not made shall be carried forward and shall be made at the time of and together
with any subsequent adjustment which, on a cumulative basis, amounts to an
adjustment of $0.01 or more in the Conversion Price.
(g) No Impairment. The corporation will not through
any reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 5 and in the
taking of all such action as may be necessary or appropriate in order to protect
the Conversion Rights of the holders of Preferred Stock against impairment.
(h) Certificate as to Adjustments. Upon the
occurrence of each adjustment or readjustment of the Conversion Rate pursuant to
this Section 5, the corporation at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The corporation shall, upon written request
at any time of any holder of Preferred Stock, furnish or cause to be furnished
to such holder a like certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Rate of such series at the time in effect,
and (iii) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversions of such
holder's shares of Preferred Stock.
(i) Notices of Record Date. In the event of any
taking by the corporation of a record of the holders of any class of securities
for the purpose of determining the holders thereof who are entitled to receive
any dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property or to receive any other right, the corporation
shall mail to each holder of Preferred Stock at least ten (10) days prior to
such record date, a notice specifying the date on which any such record is to be
taken for the purpose of such dividend or distribution or right, and the amount
and character of such dividend, distribution or right.
(j) 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 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 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 Preferred Stock, the
corporation will take such corporate action as may, in the opinion of its
counsel, be
8
<PAGE> 9
necessary to increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purpose.
(k) Notices. Any notice required by the provisions of
this Section 5 to be given to the holder of shares of Preferred Stock shall be
deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of the
corporation.
6. Voting Rights.
(a) The holder of each share of Preferred Stock shall
be entitled to notice of any shareholders' meeting in accordance with the bylaws
of the corporation and shall vote with holders of the Common Stock upon the
election of directors and upon any other matter submitted to a vote of
shareholders, except those matters required by law to be submitted to a class
vote and except as otherwise set forth herein. Subject to Section 8, the holder
of each share of Preferred Stock shall be entitled to that number of votes equal
to the number of shares of Common Stock into which each share of Preferred Stock
could be converted on the record date for the vote or consent of shareholders.
Fractional votes shall not, however, be permitted and any fractional voting
rights resulting from the above formula (after aggregating all shares of
Preferred Stock held by each holder) shall be disregarded.
(b) So long as the holders of the Series B Preferred
Stock hold 20% of the outstanding capital stock of the Company on an
as-converted basis, the holders of shares of Series B Preferred Stock shall be
entitled, voting together as a class to elect two (2) members of the
corporation's board of directors, and to remove from office such directors and
to fill any vacancy caused by the resignation, death or removal of such
directors. The holders of shares of Common Stock and Series A Preferred Stock,
voting together as a class on an as-if-converted to Common Stock basis shall be
entitled to elect three (3) members of the corporation's board of directors, and
to remove from office such directors and to fill any vacancy caused by the
resignation, death or removal of such directors. The holders of shares of Common
Stock, Series A Preferred Stock , Series B Preferred Stock and Series C
Preferred Stock shall be entitled, voting together as a class, to elect the
remaining members of the corporation's board of directors and to remove from
office such remaining directors and to fill any vacancy caused by the
resignation, death or removal of such remaining directors.
7. Redemption.
(a) On each of September 15, 2000, September 15, 2001
and September 15, 2002, within thirty (30) days following the receipt by the
corporation of the written request of the holders of not less than a majority of
the then outstanding Series B Preferred Stock and Series C Preferred Stock, the
corporation shall redeem an amount equal to up to one-third of the issued,
outstanding, and unconverted shares of Series B Preferred Stock and Series C
Preferred Stock held by such holder as of the date on which redemption is first
requested, including any shares not redeemed in a prior year, (or, if less, the
maximum amount the corporation may lawfully redeem) by paying in cash or
cancellation of indebtedness to the corporation therefor a sum per share of
Series B
9
<PAGE> 10
Preferred Stock (as adjusted for any stock split or combination of or dividend
payable in Series B Preferred Stock) equal to $0.70, and a sum per share of
Series C Preferred Stock (as adjusted for any combination of or dividend payable
in Series C Preferred Stock) equal to $3.00; together with all declared, but
unpaid, dividends with respect to such share to the date of the redemption
request.
(i) In the event of any redemption of only a
part of the Series B Preferred Stock requested to be redeemed, the corporation
shall effect such redemption pro rata according to the number of shares held by
each holder making a request for redemption.
(ii) At least twenty (20) but no more than
sixty (60) days prior to the date fixed for any redemption of Series B Preferred
Stock and Series C Preferred Stock (the "Redemption Date"), written notice (the
"Redemption Notice") shall be mailed, first class postage prepaid, to each
holder of record (at the close of business on the business day preceding the day
on which notice is given) of the Series B Preferred Stock and Series C Preferred
Stock to be redeemed, at the address last shown on the records of the
corporation for such holder or given by the holder to the corporation for the
purpose of notice, or, if no such address appears or is given, at the place
where the principal executive office of the corporation is located, notifying
such holder of the redemption to be effected, specifying the number of shares to
be redeemed from such holder, the Redemption Date, the price per share to be
paid (the "Redemption Price"), the place at which payment may be obtained and
the date on which such holder's rights as a holder of such shares terminate and
calling upon such holder to surrender to the corporation, in the manner and at
the place designated, his certificate or certificates representing the shares to
be redeemed. Except as provided in Section 7(b)(iii), on or after the Redemption
Date, each holder of Series B Preferred Stock and Series C Preferred Stock to be
redeemed shall surrender to the corporation the certificate or certificates
representing such shares, in the manner and at the place designated in the
Redemption Notice, and thereupon the Redemption Price of such shares shall be
payable to the order of the person whose name appears on such certificate or
certificates as the owner thereof and each surrendered certificate shall be
canceled. In the event less than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares.
(iii) From and after the Redemption Date,
unless there shall have been a default in payment of the Redemption Price, all
rights of the holders of such shares as holders of Series B Preferred Stock and
Series C Preferred Stock (except the right to receive the Redemption Price
without interest subsequent to the Redemption Date upon surrender of their
certificate or certificates) shall cease with respect to such shares, and such
shares shall not thereafter be transferred on the books of the corporation or be
deemed to be outstanding for any purpose whatsoever. Subject to the rights of
series of Preferred Stock which may from time to time come into existence, if
the funds of the corporation legally available for redemption of shares of
Series B Preferred Stock and Series C Preferred Stock on any Redemption Date are
insufficient to redeem the total number of shares of Series B Preferred Stock
and Series C Preferred Stock to be redeemed on such date, those funds which are
legally available will be used to redeem the maximum possible number of such
shares ratably among the holders of such shares to be redeemed. The shares of
Series B Preferred Stock and Series C Preferred Stock not
10
<PAGE> 11
redeemed shall remain outstanding and entitled to all the powers, preferences
and rights provided herein. Subject to the rights of any series of Preferred
Stock which may from time to time come into existence, at any time thereafter
when additional funds of the corporation are legally available for the
redemption of shares of Series B Preferred Stock, such funds will immediately be
used to redeem the balance of the shares which the corporation has become
obligated to redeem on any Redemption Date but which it has not redeemed.
8. Protective Provisions. So long as shares of Series A
Preferred Stock, Series B Preferred Stock or Series C Preferred are outstanding,
this corporation shall not, without first obtaining the approval (by vote or
written consent, as provided by law) of the holders of more than fifty percent
(50%) of the then outstanding shares of Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock voting together as a class:
(a) authorize a liquidation, dissolution, winding-up,
recapitalization or reorganization of the corporation, or a sale, lease or
transfer of all or substantially all of the assets of the corporation or a
merger or consolidation of the corporation if, as a result of such merger or
consolidation, the shareholders of the corporation shall own less than 50% of
the voting securities of the surviving corporation; or
(b) amend this corporation's Articles of
Incorporation or Bylaws; or
(c) pay or declare any dividend or distribution on
any shares of Common Stock or Preferred Stock or apply any of its assets to the
redemption, retirement, purchase or other acquisition (or pay into or set aside
for payment into a sinking fund for such purpose) directly, or indirectly
through as subsidiary or otherwise, of any shares of Common Stock or Preferred
Stock; provided, however, that this restriction shall not apply to (i)
redemption of shares of Series B Preferred Stock and Series C Preferred Stock as
set forth in Section 7 hereof; or (ii) the repurchase of shares of Common Stock
from directors or employees of, and consultants to, the corporation or any
subsidiary pursuant to agreements approved by the Board of Directors or pursuant
to the Bylaws of the corporation, under which the corporation has the right to
repurchase such shares upon the occurrence of certain events, including
termination of employment or services; or
(d) authorize or issue, or obligate itself to issue,
any other equity security senior to or on a parity with the Preferred Stock as
to dividend or redemption rights, liquidation preferences, conversion rights,
voting rights or otherwise, or create any obligation or security convertible
into or exchangeable for, or having any option rights to purchase, any such
equity security which is senior to or on a parity with the Preferred Stock, or
which would adversely alter or change the preferences, rights, privileges or
powers of or the restrictions provided for the benefit of the Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock; or
(e) increase the shares of Common Stock subject to
the corporation's option plan.
11
<PAGE> 12
9. Reissuance of Preferred Stock. In the event any shares of
Preferred Stock shall be converted, redeemed, or purchased by the corporation,
the shares so converted, redeemed or purchased shall be canceled and shall not
be reissuable by the corporation.
FIFTH. The name and mailing address of the incorporator are:
Kelly Miller
Wilson, Sonsini, Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, CA 94304-1050
SIXTH. The Board of Directors, by vote of a majority of the whole
Board, shall have the power to adopt, amend or repeal the bylaws of the
corporation, but any bylaw adopted by the Board may be amended or repealed by
the stockholders.
SEVENTH. Meetings of stockholders may be held within or without the
State of Delaware, as the bylaws may provide. The books of the corporation may
be kept outside the State of Delaware at such place or places as may be
designated from time to time by the Board of Directors or in the bylaws of the
corporation. Elections of directors need not be by written ballot except and to
the extent provided in the bylaws of the corporation.
EIGHTH. At all elections of directors of the corporation, each holder
of stock or of any class or series of stock shall be entitled to as many votes
as shall equal the number of votes which such stockholder would be entitled to
cast for the election of directors with respect to his or her shares of stock
multiplied by the number of directors to be elected, and may cast all of such
votes for, or for any two or more of them as such stockholder may see fit.
NINTH. 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 to the extent such exemption from liability or
limitation thereof is not permitted under the Delaware General Corporation Law
as the same exists or may hereafter be amended. If the Delaware General
Corporation Law is amended after approval by the stockholders of this Article
NINTH to authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended. Any repeal or modification of this
Article NINTH shall not adversely affect any right or protection of a director
of the corporation existing hereunder with respect to any act or omission
occurring prior to such repeal or modification.
The undersigned incorporator hereby acknowledges that the foregoing
Certificate of Incorporation is the act and deed of such incorporator and that
the facts stated therein are true.
/s/ Kelly Miller
----------------------------------
Kelly Miller, Incorporator
12
<PAGE> 13
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CYBERMEDIA, INC.
Unnikrishnan Warrier and Anne T. Lam each hereby certifies that:
(1) They are the President and Secretary, respectively, of Cybermedia,
Inc., a Delaware corporation, the original Certificate of Incorporation of which
was filed with the Secretary of State of the State of Delaware on June 25, 1996.
(2) The first three paragraphs of Article FOURTH of the Certificate of
Incorporation of this Corporation are amended to read in their entirety as
follows:
"FOURTH. This corporation is authorized to issue two classes of shares,
to be designated "Common Stock" and "Preferred Stock", respectively. The total
number of shares which this corporation is authorized to issue is 62,835,654
shares. The number of shares of Common Stock this corporation is authorized to
issue is 50,000,000 shares, with the par value of $0.01, and the number of
shares of Preferred Stock this corporation is authorized to issue is 12,835,654
shares, with the par value of $0.01. Upon the effective date of this Amendment,
every two shares of Common Stock is hereby split and converted into one share of
Common Stock.
1. Designation of Series.
There are hereby provided three series of Preferred Stock; one
series designated Series A Preferred Stock (the "Series A Preferred"), one
series designated Series B Preferred (the "Series B Preferred"), and one series
designated Series C Preferred ( the "Series C Preferred"), collectively, the
"Preferred Stock."
2. Number of Shares.
The number of shares constituting the Series A Preferred Stock
is fixed at 4,726,129 shares, the number of shares constituting the Series B
Preferred Stock is fixed at 6,371,429 shares and the number of shares
constituting the Series C Preferred Stock is 1,666,667. "
<PAGE> 14
(3) This Certificate of Amendment of Certificate of Incorporation has
been duly adopted by the Board of Directors of this Corporation in accordance
with Section 242 of the General Corporation Law of the State of Delaware.
(4) This Certificate of Amendment of Certificate of Incorporation has
been duly approved, in accordance with Sections 242 and 228 of the General
Corporation Law of the State of Delaware, by the written consent of the holder
of all the outstanding stock entitled to vote thereon, and all of the
outstanding stock of each class entitled to vote thereon as a class.
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Amendment of Certificate of Incorporation on this _____ day of August, 1996.
/s/ Unnikrishnan Warrier
-------------------------------------
Unnikrishnan Warrier, President
/s/ Anne T. Lam
-------------------------------------
Anne T. Lam, Secretary
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<PAGE> 1
EXHIBIT 3.3
BYLAWS
OF
CYBERMEDIA, INC.
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
ARTICLE I - STOCKHOLDERS..................................................................1
1.1 ANNUAL MEETINGS.........................................................1
1.2 SPECIAL MEETINGS........................................................1
1.3 NOTICE OF MEETINGS......................................................1
1.4 ADJOURNMENTS............................................................1
1.5 QUORUM..................................................................2
1.6 ORGANIZATION............................................................2
1.7 VOTING; PROXIES.........................................................2
1.8 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD.................3
1.9 LIST OF STOCKHOLDERS ENTITLED TO VOTE...................................3
1.10 ACTION BY CONSENT OF STOCKHOLDERS.......................................4
ARTICLE II - BOARD OF DIRECTORS...........................................................4
2.1 NUMBER; QUALIFICATIONS..................................................4
2.2 ELECTION; RESIGNATION; REMOVAL; VACANCIES...............................4
2.3 REGULAR MEETINGS........................................................5
2.4 SPECIAL MEETINGS........................................................5
2.5 TELEPHONIC MEETINGS PERMITTED...........................................5
2.6 QUORUM; VOTE REQUIRED FOR ACTION........................................5
2.7 ORGANIZATION............................................................5
2.8 INFORMAL ACTION BY DIRECTORS............................................5
ARTICLE III - COMMITTEES..................................................................6
3.1 COMMITTEES..............................................................6
3.2 COMMITTEE RULES.........................................................6
ARTICLE IV - OFFICERS.....................................................................6
4.1 EXECUTIVE OFFICERS; ELECTION; QUALIFICATION; TERM OF
OFFICE; RESIGNATION; REMOVAL; VACANCIES.................................6
4.2 POWERS AND DUTIES OF EXECUTIVE OFFICERS.................................7
ARTICLE V - STOCK.........................................................................7
5.1 CERTIFICATES............................................................7
5.2 LOST, STOLEN OR DESTROYED STOCK CERTIFICATES; ISSUANCE OF
NEW CERTIFICATES........................................................7
</TABLE>
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<PAGE> 3
<TABLE>
<CAPTION>
TABLE OF CONTENTS
(continued)
Page
----
<S> <C>
ARTICLE VI - INDEMNIFICATION..........................................................................................8
6.1 THIRD PARTY ACTIONS.................................................................................8
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION.......................................................8
6.3 SUCCESSFUL DEFENSE..................................................................................8
6.4 DETERMINATION OF CONDUCT............................................................................9
6.5 PAYMENT OF EXPENSES IN ADVANCE......................................................................9
6.6 INDEMNITY NOT EXCLUSIVE.............................................................................9
6.7 INSURANCE INDEMNIFICATION...........................................................................9
6.8 THE CORPORATION.....................................................................................9
6.9 EMPLOYEE BENEFIT PLANS.............................................................................10
6.10 INDEMNITY FUND.....................................................................................10
6.11 INDEMNIFICATION OF OTHER PERSONS...................................................................10
6.12 SAVINGS CLAUSE.....................................................................................10
6.13 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT
OF EXPENSES........................................................................................11
ARTICLE VII - MISCELLANEOUS..........................................................................................11
7.1 FISCAL YEAR........................................................................................11
7.2 SEAL...............................................................................................11
7.3 WAIVER OF NOTICE OF MEETINGS OF STOCKHOLDERS,
DIRECTORS AND COMMITTEES...........................................................................11
7.4 INTERESTED DIRECTORS; QUORUM.......................................................................11
7.5 FORM OF RECORDS....................................................................................12
7.6 AMENDMENT OF BYLAWS................................................................................12
</TABLE>
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<PAGE> 4
BYLAWS
OF
CYBERMEDIA, INC.
ARTICLE I
STOCKHOLDERS
1.1 ANNUAL MEETINGS
An annual meeting of stockholders shall be held for the election of
directors at such date, time and place, either within or without the state of
Delaware, as may be designated by resolution of the Board of Directors from time
to time. Any other proper business may be transacted at the annual meeting.
1.2 SPECIAL MEETINGS
Special meetings of stockholders for any purpose or purposes may be
called at any time by the Board of Directors, or by a committee of the Board of
Directors which has been duly designated by the Board of Directors and whose
powers and authority, as expressly provided in a resolution of the Board of
Directors, include the power to call such meetings.
1.3 NOTICE OF MEETINGS
Whenever stockholders are required or permitted to take any action at a
meeting, a written notice of the meeting shall be given which shall state the
place, date and hour of the meeting, and, in the case of a special meeting, the
purpose or purposes for which the meeting is called. Unless otherwise provided
by law, the certificate of incorporation or these by-laws, the written notice of
any meeting shall be given not less than ten nor more than sixty days before the
date of the meeting to each stockholder entitled to vote at such meeting. If
mailed, such notice shall be deemed to be given when deposited in the mail,
postage prepaid, directed to the stockholder at his address as it appears on the
records of the corporation.
1.4 ADJOURNMENTS
Any meeting of stockholders, annual or special, may adjourn from time
to time to reconvene at the same or some other place, and notice need not be
given of any such adjourned meeting if the time and place thereof are announced
at the meeting at which the adjournment is taken. At the adjourned meeting the
corporation may transact any business which might have been transacted at the
original meeting. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the meeting.
<PAGE> 5
1.5 QUORUM
Except as otherwise provided by law, the certificate of incorporation
or these by-laws, at each meeting of stockholders the presence in person or by
proxy of the holders of shares of stock having a majority of the votes which
could be cast by the holders of all outstanding shares of stock entitled to vote
at the meeting shall be necessary and sufficient to constitute a quorum. In the
absence of a quorum, the stockholders so present may, by majority vote, adjourn
the meeting from time to time in the manner provided in Section 1.4 of these
by-laws until a quorum shall attend. Shares of its own stock belonging to the
corporation or to another corporation, if a majority of the shares entitled to
vote in the election of directors of such other corporation is held, directly or
indirectly, by the corporation, shall neither be entitled to vote nor be counted
for quorum purposes; provided, however, that the foregoing shall not limit the
right of the corporation to vote stock, including but not limited to its own
stock, held by it in a fiduciary capacity.
1.6 ORGANIZATION
Meetings of stockholders shall be presided over by the Chairman of the
Board, if any, or in his absence by the Vice Chairman of the Board, if any, or
in his absence by the President, or in his absence by a Vice President, or in
the absence of the foregoing persons by a chairman designated by the Board of
Directors, or in the absence of such designation by a chairman chosen at the
meeting. The Secretary shall act as secretary of the meeting, but in his absence
the chairman of the meeting may appoint any person to act as secretary of the
meeting.
1.7 VOTING; PROXIES
Except as otherwise provided by the certificate of incorporation, each
stockholder entitled to vote at any meeting of stockholders shall be entitled to
one vote for each share of stock held by him which has voting power upon the
matter in question. Each stockholder entitled to vote at a meeting of
stockholders may authorize another person or persons to act for him by proxy,
but no such proxy shall be voted or acted upon after three years from its date,
unless the proxy provides for a longer period. A duly executed proxy shall be
irrevocable if it states that it is irrevocable and if, and only as long as, it
is coupled with an interest sufficient in law to support an irrevocable power. A
stockholder may revoke any proxy which is not irrevocable by attending the
meeting and voting in person or by filing an instrument in writing revoking the
proxy or another duly executed proxy bearing a later date with the Secretary of
the corporation. Voting at meetings of stockholders need not be by written
ballot and need not be conducted by inspectors of election unless so determined
by the holders of shares of stock having a majority of the votes which could be
cast by the holders of all outstanding shares of stock entitled to vote thereon
which are present in person or by proxy at such meeting.
At a stockholders' meeting at which directors are to be elected, a
stockholder shall be entitled to cumulate votes (i.e., cast for any candidate a
number of votes greater than the number of votes which such stockholder normally
is entitled to cast) if the candidates' names have been placed in nomination
prior to commencement of the voting and the stockholder has given notice prior
to commencement of the voting of the stockholders' intention to cumulate votes.
If any stockholder has given such a notice, then every stockholder entitled to
vote may cumulate votes for candidates in
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<PAGE> 6
nomination either (i) by giving one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of votes to which the
stockholder's shares are normally entitled or (ii) by distributing the
stockholder's votes on the same principle among any or all of the candidates, as
the stockholder thinks fit. The candidates receiving the highest number of
affirmative votes, up to the number of directors to be elected, shall be
elected; votes against any candidate and votes withheld shall have no legal
effect.
1.8 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD
In order that the corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or to express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is adopted
by the Board of Directors and which record date: (1) in the case of
determination of stockholders entitled to vote at any meeting of stockholders or
adjournment thereof, shall, unless otherwise required by law, not be more than
sixty nor less than ten days before the date of such meeting; (2) in the case of
determination of stockholders entitled to express consent to corporate action in
writing without a meeting, shall not be more than ten days from the date upon
which the resolution fixing the record date is adopted by the Board of
Directors; and (3) in the case of any other action, shall not be more than sixty
days prior to such other action. If no record date is fixed: (1) the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held; (2) the record date
for determining stockholders entitled to express consent to corporate action in
writing without a meeting when no prior action of the Board of Directors is
required by law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
corporation in accordance with applicable law, or, if prior action by the Board
of Directors is required by law, shall be at the close of business on the day on
which the Board of Directors adopts the resolution taking such prior action; and
(3) the record date for determining stockholders for any other purpose shall be
at the close of business on the day on which the Board of Directors adopts the
resolution relating thereto. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
1.9 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The Secretary shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list
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<PAGE> 7
shall also be produced and kept at the time and place of the meeting during the
whole time thereof and may be inspected by any stockholder who is present. Upon
the willful neglect or refusal of the directors to produce such a list at any
meeting for the election of directors, they shall be ineligible for election to
any office at such meeting. The stock ledger shall be the only evidence as to
who are the stockholders entitled to examine the stock ledger, the list of
stockholders or the books of the corporation, or to vote in person or by proxy
at any meeting of stockholders.
1.10 ACTION BY CONSENT OF STOCKHOLDERS
Unless otherwise restricted by the certificate of incorporation, any
action required or permitted to be taken at any annual or special meeting of the
stockholders may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have not
consented in writing.
ARTICLE II
BOARD OF DIRECTORS
2.1 NUMBER; QUALIFICATIONS
The Board of Directors shall consist of one or more members, the number
thereof to be determined from time to time by resolution of the Board of
Directors. Directors need not be stockholders.
2.2 ELECTION; RESIGNATION; REMOVAL; VACANCIES
The Board of Directors shall initially consist of the persons named as
directors in the certificate of incorporation, and each director so elected
shall hold office until the first annual meeting of stockholders or until his
successor is elected and qualified. At the first annual meeting of stockholders
and at each annual meeting thereafter, the stockholders shall elect directors
each of whom shall hold office for a term of one year or until his successor is
elected and qualified. Any director may resign at any time upon written notice
to the corporation. Any newly created directorship or any vacancy occurring in
the Board of Directors for any cause may be filled by a majority of the
remaining members of the Board of Directors, although such majority is less than
a quorum, or by a plurality of the votes cast at a meeting of stockholders, and
each director so elected shall hold office until the expiration of the term of
office of the director whom he has replaced or until his successor is elected
and qualified.
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<PAGE> 8
2.3 REGULAR MEETINGS
Regular meetings of the Board of Directors may be held at such places
within or without the State of Delaware and at such times as the Board of
Directors may from time to time determine, and if so determined notices thereof
need not be given.
2.4 SPECIAL MEETINGS
Special meetings of the Board of Directors may be held at any time or
place within or without the State of Delaware whenever called by the President,
any Vice President, the Secretary, or by any member of the Board of Directors.
Notice of a special meeting of the Board of Directors shall be given by the
person or persons calling the meeting at least twenty-four hours before the
special meeting.
2.5 TELEPHONIC MEETINGS PERMITTED
Members of the Board of Directors, or any committee designated by the
Board of Directors, may participate in a meeting thereof by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to this by-law shall constitute presence in person at such meeting.
2.6 QUORUM; VOTE REQUIRED FOR ACTION
At all meetings of the Board of Directors a majority of the whole Board
of Directors shall constitute a quorum for the transaction of business. Except
in cases in which the certificate of incorporation or these by-laws otherwise
provide, the vote of a majority of the directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors.
2.7 ORGANIZATION
Meetings of the Board of Directors shall be presided over by the
Chairman of the Board, if any, or in his absence by the Vice Chairman of the
Board, if any, or in his absence by the President, or in their absence by a
chairman chosen at the meeting. The Secretary shall act as secretary of the
meeting, but in his absence the chairman of the meeting may appoint any person
to act as secretary of the meeting.
2.8 INFORMAL ACTION BY DIRECTORS
Unless otherwise restricted by the certificate of incorporation or
these by-laws, any action required or permitted to be taken at any meeting of
the Board of Directors, or of any committee thereof, may be taken without a
meeting if all members of the Board of Directors or such 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 of Directors or such committee.
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<PAGE> 9
ARTICLE III
COMMITTEES
3.1 COMMITTEES
The Board of Directors may, by resolution passed by a majority of the
whole Board of Directors, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The Board of
Directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of a member of the committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in place of any
such absent or disqualified member. Any such committee, to the extent permitted
by law and to the extent provided in the resolution of the Board of Directors,
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the corporation, and
may authorize the seal of the corporation to be affixed to all papers which may
require it.
3.2 COMMITTEE RULES
Unless the Board of Directors otherwise provides, each committee
designated by the Board of Directors may make, alter and repeal rules for the
conduct of its business. In the absence of such rules each committee shall
conduct its business in the same manner as the Board of Directors conducts its
business pursuant to Article III of these by-laws.
ARTICLE IV
OFFICERS
4.1 EXECUTIVE OFFICERS; ELECTION; QUALIFICATIONS; TERM OF OFFICE;
RESIGNATION; REMOVAL; VACANCIES
The Board of Directors shall elect a President and Secretary, and it
may, if it so determines, choose a Chairman of the Board and a Vice Chairman of
the Board from among its members. The Board of Directors may also choose one or
more Vice Presidents, one or more Assistant Secretaries, a Treasurer and one or
more Assistant Treasurers. Each such officer shall hold office until the first
meeting of the Board of Directors after the annual meeting of stockholders next
succeeding his election, and until his successor is elected and qualified or
until his earlier resignation or removal. Any officer may resign at any time
upon written notice to the corporation. The Board of Directors may remove any
officer with or without cause at any time, but such removal shall be without
prejudice to the contractual rights of such officer, if any, with the
corporation. Any number of offices may be held by the same person. Any vacancy
occurring in any office of the corporation by death,
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resignation, removal or otherwise may be filled for the unexpired portion of the
term by the Board of Directors at any regular or special meeting.
4.2 POWERS AND DUTIES OF EXECUTIVE OFFICERS
The officers of the corporation shall have such powers and duties in
the management of the corporation as may be prescribed by the Board of Directors
and, to the extent not so provided, as generally pertain to their respective
offices, subject to the control of the Board of Directors. The Board of
Directors may require any officer, agent or employee to give security for the
faithful performance of his duties.
ARTICLE V
STOCK
5.1 CERTIFICATES
Every holder of stock shall be entitled to have a certificate signed by
or in the name of the corporation by the Chairman or Vice Chairman of the Board
of Directors, if any, or the President or Vice President, and by the Treasurer
or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the
corporation, certifying the number of shares owned by him in the corporation.
Any of or all 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 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.
5.2 LOST, STOLEN OR DESTROYED STOCK CERTIFICATES; ISSUANCE OF
NEW CERTIFICATES
The corporation may issued a new certificate of stock in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate.
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ARTICLE VI
INDEMNIFICATION
6.1 THIRD PARTY ACTIONS
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director or officer of the corporation, or that such
director or officer 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 (collectively "Agent"), against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement (if
such settlement is approved in advance by the Company, which approval shall not
be unreasonably withheld) actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his 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 he
reasonably believed to be in or not opposed to the best interest of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his 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 he is or was an Agent (as defined in Section 6.1)
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if he
acted in good faith and in manner he 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 to the corporation unless and only to the
extent that the Delaware Court of Chancery or the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Delaware
Court of Chancery or such other court shall deem proper.
6.3 SUCCESSFUL DEFENSE
To the extent that an Agent of the corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in Sections 6.1 and 6.2, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
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6.4 DETERMINATION OF CONDUCT
Any indemnification under Sections 6.1 and 6.2 (unless ordered by a
court) shall be made by the corporation only as authorized in the specific case
upon a determination that the indemnification of the Agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
Sections 6.1 and 6.2. Such determination shall be made (1) by the Board of
Directors or an executive committee by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding, or (2) or if
such quorum is not obtainable or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or (3)
by the stockholders.
6.5 PAYMENT OF EXPENSES IN ADVANCE
Expenses incurred in defending a civil or criminal action, suit or
proceeding shall be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay such amount if it
shall ultimately be determined that he is not entitled to be indemnified by the
corporation as authorized in this Article VI.
6.6 INDEMNITY NOT EXCLUSIVE
The indemnification and advancement of expenses provided or granted
pursuant to the other subsections of this section shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
6.7 INSURANCE INDEMNIFICATION
The corporation shall have the power to purchase and maintain insurance
on behalf of any person who is or was an Agent of the corporation, or is or was
serving at the request of the corpora tion, as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of this Article VI.
6.8 THE CORPORATION
For purposes of this Article VI, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors and officers, so that any person who is or
was a director or Agent of such constituent corporation, or is or was serving at
the request of such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under and subject to the
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provisions of this Article VI (including, without limitation the provisions of
Section 6.4) with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
6.9 EMPLOYEE BENEFIT PLANS
For purposes of this Article VI, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this Article
VI.
6.10 INDEMNITY FUND
Upon resolution passed by the Board, the corporation may establish a
trust or other designated account, grant a security interest or use other means
(including, without limitation, a letter of credit), to ensure the payment of
certain of its obligations arising under this Article VI and/or agreements which
may be entered into between the corporation and its officers and directors from
time to time.
6.11 INDEMNIFICATION OF OTHER PERSONS
The provisions of this Article VI shall not be deemed to preclude the
indemnification of any person who is not an Agent (as defined in Section 6.1),
but whom the corporation has the power or obligation to indemnify under the
provisions of the General Corporation Law of the State of Delaware or otherwise.
The corporation may, in its sole discretion, indemnify an employee, trustee or
other agent as permitted by the General Corporation Law of the State of
Delaware. The corporation shall indemnify an employee, trustee or other agent
where required by law.
6.12 SAVINGS CLAUSE
If this Article or any portion thereof shall be invalidated on any
ground by any court of competent jurisdiction, then the corporation shall
nevertheless indemnify each Agent against expenses (including attorney's fees),
judgments, fines and amounts paid in settlement with respect to any action,
suit, proceeding or investigation, whether civil, criminal or administrative,
and whether internal or external, including a grand jury proceeding and an
action or suit brought by or in the right of the corporation, to the full extent
permitted by any applicable portion of this Article that shall not have been
invalidated, or by any other applicable law.
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6.13 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF
EXPENSES
The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article VI shall, unless otherwise prided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
ARTICLE VII
MISCELLANEOUS
7.1 FISCAL YEAR
The fiscal year of the corporation shall be determined by resolution of
the Board of Directors.
7.2 SEAL
The corporate seal shall have the name of the corporation inscribed
thereon and shall be in such form as may be approved from time to time by the
Board of Directors.
7.3 WAIVER OF NOTICE OF MEETINGS OF STOCKHOLDERS, DIRECTORS AND
COMMITTEES
Any written waiver of notice, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of any regular or special meeting
of the stockholders, directors, or members of a committee of directors need be
specified in any written waiver of notice.
7.4 INTERESTED DIRECTORS; QUORUM
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 officers, or have a financial interest,
shall be void or voidable solely for this reason, or solely because the director
or officer is present at or participates in the meeting of the Board of
Directors or committee thereof which authorizes the contract or transaction, or
solely because his or their votes are counted for such purpose, if: (1) the
material facts as to his relationship or interest and as to the contract or
transaction are disclosed or are known to the Board of Directors or the
committee, and the Board of Directors 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
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quorum: or (2) the material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or (3) the contract or
transaction is fair as to the corporation as of the time it is authorized,
approved or ratified, by the Board of Directors, a committee thereof, or the
stockholders. 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.
7.5 FORM OF RECORDS
Any records maintained by the corporation in the regular course of its
business, including its stock ledger, books of account, and minute books, may be
kept on, or be in the form of, punch cards, magnetic tape, photographs,
microphotographs, or any other information storage device, provided that the
records so kept can be converted into clearly legible form within a reasonable
time. The corporation shall so convert any records so kept upon the request of
any person entitled to inspect the same.
7.6 AMENDMENT OF BY-LAWS
These by-laws may be altered or repealed, and new by-laws made, by the
Board of Directors, but the stockholders may make additional by-laws and may
alter and repeal any by-laws whether adopted by them or otherwise.
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CERTIFICATE OF ADOPTION OF BYLAWS
OF
CYBERMEDIA, INC.
Adoption by Incorporator
The undersigned person appointed in the Certificate of Incorporation to
act as the Incorporator of CyberMedia, Inc. hereby adopts the foregoing bylaws,
comprising twelve (12) pages, as the Bylaws of the corporation.
Executed this 25th day of June, 1996.
/s/ Kelly Miller
-------------------------------
Kelly Miller, Incorporator
Certificate by Secretary of Adoption by Incorporator
The undersigned hereby certifies that she is the duly elected,
qualified, and acting Secretary of CyberMedia, Inc. and that the foregoing
Bylaws, comprising twelve (12) pages, were adopted as the Bylaws of the
corporation on June 25, 1996, by the person appointed in the Certificate of
Incorporation to act as the Incorporator of the corporation.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand and
affixed the corporate seal this June 25, 1996.
/s/ Art Schneiderman
-------------------------------
Art Schneiderman, Assistant Secretary
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<PAGE> 17
CERTIFICATE OF ADOPTION OF BYLAWS
OF
CYBERMEDIA, INC.
Certificate by Secretary of Adoption by Stockholders' Vote
The undersigned hereby certifies that she is the duly elected,
qualified, and acting Secretary of CyberMedia, Inc. and that the foregoing
Bylaws, comprising 12 pages, excluding this page, were submitted to the
stockholders at their first meeting held on _______________, 19__, and recorded
in the minutes thereof and were ratified by the vote of stockholders entitled to
exercise the majority of the voting power of the corporation.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand and
affixed the corporate seal this 25th day of June 1996.
/s/ Art Schneiderman
--------------------------------
Art Schneiderman
Assistant Secretary
<PAGE> 1
EXHIBIT 10.1
CYBERMEDIA, INC.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("AGREEMENT") is entered into as of the
___ day of __________, 1996 by and between CyberMedia, Inc., a Delaware
corporation (the "COMPANY") and [__________________] ("INDEMNITEE").
RECITALS
A. The Company and Indemnitee recognize the continued difficulty in
obtaining liability insur ance for its directors, officers, employees, agents
and fiduciaries, the significant increases in the cost of such insurance and the
general reductions in the coverage of such insurance.
B. The Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting directors, officers,
employees, agents and fiduciaries to expensive litigation risks at the same time
as the availability and coverage of liability insurance has been severely
limited.
C. Indemnitee does not regard the current protection available as
adequate under the present circumstances, and Indemnitee and other directors,
officers, employees, agents and fiduciaries of the Company may not be willing to
continue to serve in such capacities without additional protection.
D. The Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve the Company and, in part, in
order to induce Indemnitee to continue to provide services to the Company,
wishes to provide for the indemnification and advancing of expenses to
Indemnitees to the maximum extent permitted by law.
E. In view of the considerations set forth above, the Company desires
that Indemnitee be indemnified by the Company as set forth herein.
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. Indemnification.
(a) Indemnification of Expenses. The Company shall indemnify
to the fullest extent permitted by law if Indemnitee was or is or becomes a
party to or witness or other participant in, or are threatened to be made a
party to or witness or other participant in, any threatened, pending or
completed action, suit, proceeding or alternative dispute resolution mechanism,
or any hearing, inquiry or investigation that Indemnitee in good faith believe
might lead to the institution of any such action, suit, proceeding or
alternative dispute resolution mechanism, whether civil, criminal,
administrative, investigative or other (hereinafter a "CLAIM") by reason of (or
arising in part out of) any event or occurrence related to the fact that
Indemnitee is or was a director, officer, employee, agent or fiduciary
<PAGE> 2
of the Company, or any subsidiary of the Company, or is or was serving at the
request of the Company as a director, officer, employee, agent or fiduciary of
another corporation, partnership, joint venture, trust or other enterprise, or
by reason of any action or inaction on the part of Indemnitee while serving in
such capacity (hereinafter an "INDEMNIFIABLE EVENT") against any and all
expenses (including attorneys' fees and all other costs, expenses and
obligations incurred in connection with investigating, defending, being a
witness in or participating in (including on appeal), or preparing to defend, be
a witness in or participate in, any such action, suit, proceeding, alternative
dispute resolution mechanism, hearing, inquiry or investigation), judgments,
fines, penalties and amounts paid in settlement (if such settlement is approved
in advance by the Company, which approval shall not be unreasonably withheld) of
such Claim and any federal, state, local or foreign taxes imposed on Indemnitees
as a result of the actual or deemed receipt of any payments under this Agreement
(collectively, hereinafter "EXPENSES"), including all interest, assessments and
other charges paid or payable in connection with or in respect of such Expenses.
Such payment of Expenses shall be made by the Company as soon as practicable but
in any event no later than twenty days after written demand by Indemnitees
therefor is presented to the Company.
(b) Reviewing Party. Notwithstanding the foregoing, (i) the
obligations of the Company under Section 1(a) shall be subject to the condition
that the Reviewing Party (as described in Section 10(e) hereof) shall not have
determined (in a written opinion, in any case in which the Independent Legal
Counsel referred to in Section 1(c) hereof is involved) that Indemnitee would
not be permitted to be indemnified under applicable law, and (ii) the obligation
of the Company to make an advance payment of Expenses to Indemnitee pursuant to
Section 2(a) (an "EXPENSE ADVANCE") shall be subject to the condition that, if,
when and to the extent that the Reviewing Party determines that Indemnitee would
not be permitted to be so indemnified under applicable law, the Company shall be
entitled to be reimbursed by Indemnitee (who hereby agree to reimburse the
Company) for all such amounts theretofore paid; provided, however, that if
Indemnitee has commenced or thereafter commence legal proceedings in a court of
competent jurisdiction to secure a determination that Indemnitee should be
indemnified under applicable law, any determination made by the Reviewing Party
that Indemnitee would not be permitted to be indemnified under applicable law
shall not be binding and Indemnitee shall not be required to reimburse the
Company for any Expense Advance until a final judicial determination is made
with respect thereto (as to which all rights of appeal therefrom have been
exhausted or lapsed). The Indemnitee's obligation to reimburse the Company for
any Expense Advance shall be unsecured and no interest shall be charged thereon.
If there has not been a Change in Control (as defined in Section 10(c) hereof),
the Reviewing Party shall be selected by the Board of Directors, and if there
has been such a Change in Control (other than a Change in Control which has been
approved by a majority of the Company's Board of Directors who were directors
immediately prior to such Change in Control), the Reviewing Party shall be the
Independent Legal Counsel referred to in Section 1(c) hereof. If there has been
no determination by the Reviewing Party or if the Reviewing Party determines
that Indemnitee substantively would not be permitted to be indemnified in whole
or in part under applicable law, Indemnitee shall have the right to commence
litigation seeking an initial determination by the court or challenging any such
determination by the Reviewing Party or any aspect thereof, including the legal
or factual bases therefor, and the Company hereby consents to service of process
and to appear in any such proceeding. Any determination by the Reviewing Party
otherwise shall be conclusive and binding on the Company and Indemnitee.
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(c) Change in Control. The Company agrees that if there is a
Change in Control of the Company (other than a Change in Control which has been
approved by a majority of the Company's Board of Directors who were directors
immediately prior to such Change in Control) then, with respect to all matters
thereafter arising concerning the rights of Indemnitees to payments of Expenses
and Expense Advances under this Agreement or any other agreement or under the
Company's Certificate of Incorporation or Bylaws as now or hereafter in effect,
Independent Legal Counsel (as defined in Section 10(d) hereof) shall be selected
by Indemnitees and approved by the Company (which approval shall not be
unreasonably withheld). Such counsel, among other things, shall render its
written opinion to the Company and Indemnitee as to whether and to what extent
Indemnitee would be permitted to be indemnified under applicable law and the
Company agrees to abide by such opinion. The Company agrees to pay the
reasonable fees of the Independent Legal Counsel referred to above and to fully
indemnify such counsel against any and all expenses (including attorneys' fees),
claims, liabilities and damages arising out of or relating to this Agreement or
its engagement pursuant hereto.
(d) Mandatory Payment of Expenses. Notwithstanding any other
provision of this Agreement other than Section 9 hereof, to the extent that
Indemnitee has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, in defense of any
action, suit, proceeding, inquiry or investigation referred to in Section (1)(a)
hereof or in the defense of any claim, issue or matter therein, Indemnitee shall
be indemnified against all Expenses incurred by Indemnitee in connection
therewith.
2. Expenses; Indemnification Procedure.
(a) Advancement of Expenses. The Company shall advance all
Expenses incurred by Indemnitee. The advances to be made hereunder shall be paid
by the Company to Indemnitee as soon as practicable but in any event no later
than twenty days after written demand by Indemnitee therefor to the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
condition precedent to Indemnitee's right to be indemnified under this
Agreement, give the Company notice in writing as soon as practicable of any
Claim made against Indemnitee for which indemnification will or could be sought
under this Agreement. Notice to the Company shall be directed to the Chief
Executive Officer of the Company at the address shown on the signature page of
this Agreement (or such other address as the Company shall designate in writing
to Indemnitee). In addition, Indemnitee shall give the Company such information
and cooperation as it may reasonably require and as shall be within Indemnitee's
power.
(c) No Presumptions; Burden of Proof. For purposes of this
Agreement, the termination of any Claim by judgment, order, settlement (whether
with or without court approval) or conviction, or upon a plea of nolo
contendere, or its equivalent, shall not create a presumption that Indemnitee
did not meet any particular standard of conduct or have any particular belief or
that a court has determined that indemnification is not permitted by applicable
law. In addition, neither the failure of the Reviewing Party to have made a
determination as to whether Indemnitee has met any particular standard of
conduct or had any particular belief, nor an actual determination by the
Reviewing Party that Indemnitee has not met such standard of conduct or did not
have such belief, prior to the commencement
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of legal proceedings by Indemnitee to secure a judicial determination that
Indemnitee should be indemnified under applicable law, shall be a defense to
Indemnitee's claim or create a presumption that Indemnitee has not met any
particular standard of conduct or did not have any particular belief. In
connection with any determination by the Reviewing Party or otherwise as to
whether Indemnitee is entitled to be indemnified hereunder, the burden of proof
shall be on the Company to establish that Indemnitee is not so entitled.
(d) Notice to Insurers. If, at the time of the receipt by the
Company of a notice of a Claim pursuant to Section 2(b) hereof, the Company has
liability insurance in effect which may cover such Claim, the Company shall give
prompt notice of the commencement of such Claim to the insurers in accordance
with the procedures set forth in the respective policies. The Company shall
thereafter take all necessary or desirable action to cause such insurers to pay,
on behalf of Indemnitee, all amounts payable as a result of such action, suit,
proceeding, inquiry or investigation in accordance with the terms of such
policies.
(e) Selection of Counsel. In the event the Company shall be
obligated hereunder to pay the Expenses of any Claim, the Company shall be
entitled to assume the defense of such Claim with counsel approved by
Indemnitee, which approval shall not be unreasonably withheld, upon the delivery
to Indemnitee of written notice of its election so to do. After delivery of such
notice, approval of such counsel by Indemnitee and the retention of such counsel
by the Company, the Company will not be liable to Indemnitee under this
Agreement for any fees of counsel subsequently incurred by Indemnitee with
respect to the same Claim; provided that, (i) Indemnitee shall have the right to
employ Indemnitee's counsel in any such Claim at Indemnitee's expense and (ii)
if (A) the employment of counsel by Indemnitee has been previously authorized by
the Company, (B) Indemnitee shall have reasonably concluded that there is a
conflict of interest between the Company and Indemnitee in the conduct of any
such defense, or (C) the Company shall not continue to retain such counsel to
defend such Claim, then the fees and expenses of Indemnitee's counsel shall be
at the expense of the Company. The Company shall have the right to conduct such
defense as it sees fit in its sole discretion, including the right to settle any
claim against Indemnitee without the consent of the Indemnitee.
3. Additional Indemnification Rights; Nonexclusivity.
(a) Scope. The Company hereby agrees to indemnify Indemnitee
to the fullest extent permitted by law, notwithstanding that such
indemnification is not specifically authorized by the other provisions of this
Agreement, the Company's Certificate of Incorporation, the Company's Bylaws or
by statute. In the event of any change after the date of this Agreement in any
applicable law, statute or rule which expands the right of a Delaware
corporation to indemnify a member of its Board of Directors or an officer,
employee, agent or fiduciary, it is the intent of the parties hereto that
Indemnitee shall enjoy by this Agreement the greater benefits afforded by such
change. In the event of any change in any applicable law, statute or rule which
narrows the right of a Delaware corporation to indemnify a member of its Board
of Directors or an officer, employee, agent or fiduciary, such change, to the
extent not otherwise required by such law, statute or rule to be applied to this
Agreement, shall have no effect on this Agreement or the parties' rights and
obligations hereunder except as set forth in Section 8(a) hereof.
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(b) Nonexclusivity. The indemnification provided by this
Agreement shall be in addition to any rights to which Indemnitee may be entitled
under the Company's Certificate of Incorpora tion, its Bylaws, any agreement,
any vote of stockholders or disinterested directors, the General Corporation Law
of the State of Delaware, or otherwise. The indemnification provided under this
Agreement shall continue as to Indemnitee for any action Indemnitee took or did
not take while serving in an indemnified capacity even though Indemnitee may
have ceased to serve in such capacity.
4. No Duplication of Payments. The Company shall not be liable under
this Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, Certificate of Incorporation, Bylaw or otherwise)
of the amounts otherwise indemnifiable hereunder.
5. Partial Indemnification. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of Expenses incurred in connection with any Claim, but not, however, for
all of the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion of such Expenses to which Indemnitee is entitled.
6. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge
that in certain instances, Federal law or applicable public policy may prohibit
the Company from indemnifying its direc tors, officers, employees, agents or
fiduciaries under this Agreement or otherwise. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the Securities and Exchange Commission to submit the question of
indemnification to a court in certain circumstances for a determination of the
Company's right under public policy to indemnify Indemnitee.
7. Liability Insurance. The Company shall, from time to time, make the
good faith determination whether or not it is practicable for the Company to
obtain and maintain a policy or policies of insurance with reputable insurance
companies providing the officers and directors of the Company with coverage for
losses from wrongful acts, or to ensure the Company's performance of its
indemnification obligations under this Agreement. Among other considerations,
the Company will weigh the costs of obtaining such insurance coverage against
the protection afforded by such coverage. In all policies of directors' and
officers' liability insurance, Indemnitee shall be named as an insured in such a
manner as to provide Indemnitee the same rights and benefits as are accorded to
the most favorably insured of the Company's directors, if Indemnitee is a
director; or of the Company's officers, if Indemnitee is not a director of the
Company but is an officer; or of the Company's key employees, if Indemnitee is
not an officer or director but is a key employee. Notwithstanding the foregoing,
the Company shall have no obligation to obtain or maintain such insurance if the
Company determines in good faith that such insurance is not reasonably
available, if the premium costs for such insurance are disproportionate to the
amount of coverage provided, if the coverage provided by such insurance is
limited by exclusions so as to provide an insufficient benefit, or if Indemnitee
is covered by similar insurance maintained by a subsidiary or parent of the
Company.
8. Exceptions. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
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<PAGE> 6
(a) Excluded Action or Omissions. To indemnify Indemnitee for
Expenses resulting from acts, omissions or transactions for which Indemnitee is
prohibited from receiving indemnification under this Agreement or applicable
law;
(b) Claims Initiated by Indemnitee. To indemnify or advance
expenses to Indemnitee with respect to Claims initiated or brought voluntarily
by Indemnitee and not by way of defense, except (i) with respect to actions or
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other agreement or insurance policy or under the Company's
Certificate of Incorporation or Bylaws now or hereafter in effect relating to
Claims for Indemnifiable Events, (ii) in specific cases if the Board of
Directors has approved the initiation or bringing of such Claim, or (iii) as
otherwise required under Section 145 of the Delaware General Corporation Law,
regardless of whether Indemnitee ultimately is determined to be entitled to such
indemnification, advance expense payment or insurance recovery, as the case may
be;
(c) Lack of Good Faith. To indemnify Indemnitee for any
expenses incurred by Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by Indemnitee
in such proceeding was not made in good faith or was frivolous; or
(d) Claims Under Section 16(b). To indemnify Indemnitee for
expenses and the payment of profits arising from the purchase and sale by
Indemnitee of securities in violation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any similar successor statute.
9. Period of Limitations. No legal action shall be brought and no
cause of action shall be asserted by or in the right of the Company against
Indemnitee, Indemnitee's estate, spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, and any claim or cause of action of the Company shall be
extinguished and deemed released unless asserted by the timely filing of a legal
action within such two-year period; provided, however, that if any shorter
period of limitations is otherwise applicable to any such cause of action, such
shorter period shall govern.
10. Construction of Certain Phrases.
(a) For purposes of this Agreement, references to the
"Company" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a consti tuent) absorbed
in a consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
employees, agents or fiduciaries, so that if Indemnitee is or was a director,
officer, employee, agent or fiduciary of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee, agent or fiduciary of another corporation, partnership, joint
venture, employee benefit plan, trust or other enterprise, Indemnitee shall
stand in the same position under the provisions of this Agreement with respect
to the resulting or surviving corporation as Indemnitee would have with respect
to such constituent corporation if its separate existence had continued.
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(b) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on Indemnitee with respect to an employee
benefit plan; and references to "serving at the request of the Company" shall
include any service as a director, officer, employee, agent or fiduciary of the
Company which imposes duties on, or involves services by, such director,
officer, employee, agent or fiduciary with respect to an employee benefit plan,
its participants or its beneficiaries; and if Indemnitee acted in good faith and
in a manner Indemnitee reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan, Indemnitee shall be
deemed to have acted in a manner "not opposed to the best interests of the
Company" as referred to in this Agreement.
(c) For purposes of this Agreement a "Change in Control" shall
be deemed to have occurred if, on or after the date of this Agreement, (i) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended), other than a trustee or other fiduciary
holding securities under an employee benefit plan of the Company acting in such
capacity or a corporation owned directly or indirectly by the stockholders of
the Company in substantially the same proportions as their ownership of stock of
the Company, becomes the "beneficial owner" (as defined in Rule 13d-3 under said
Act), directly or indirectly, of securities of the Company representing more
than 50% of the total voting power represented by the Company's then outstanding
Voting Securities, (ii) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board of Directors of the
Company and any new director whose election by the Board of Directors or
nomination for election by the Company's stockholders was approved by a vote of
at least two thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof, or (iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation other than a merger or
consolidation which would result in the Voting Securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into Voting Securities of the
surviving entity) at least 80% of the total voting power represented by the
Voting Securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders of the
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of (in one transaction or a series of
related transactions) all or substantially all of the Company's assets.
(d) For purposes of this Agreement, "Independent Legal
Counsel" shall mean an attorney or firm of attorneys, selected in accordance
with the provisions of Section 1(c) hereof, who shall not have otherwise
performed services for the Company or Indemnitees within the last three years
(other than with respect to matters concerning the rights of Indemnitees under
this Agreement, or of other indemnitees under similar indemnity agreements).
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<PAGE> 8
(e) For purposes of this Agreement, a "Reviewing Party" shall
mean any appropriate person or body consisting of a member or members of the
Company's Board of Directors or any other person or body appointed by the Board
of Directors who is not a party to the particular Claim for which Indemnitee are
seeking indemnification, or Independent Legal Counsel.
(f) For purposes of this Agreement, "Voting Securities" shall
mean any securities of the Company that vote generally in the election of
directors.
11. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. Binding Effect; Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors, assigns, including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of the Company, spouses, heirs,
and personal and legal representatives. The Company shall require and cause any
successor (whether direct or indirect by purchase, merger, consolidation or
otherwise) to all, substantially all, or a substantial part, of the business
and/or assets of the Company, by written agreement in form and substance
satisfactory to Indemnitee, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform if no such succession had taken place. This Agreement shall
continue in effect with respect to Claims relating to Indemnifiable Events
regardless of whether Indemnitee continues to serve as a director, officer,
employee, agent or fiduciary of the Company or of any other enterprise at the
Company's request.
13. Attorneys' Fees. In the event that any action is instituted by
Indemnitee under this Agreement or under any liability insurance policies
maintained by the Company to enforce or interpret any of the terms hereof or
thereof, Indemnitee shall be entitled to be paid all Expenses incurred by
Indemnitee with respect to such action, regardless of whether Indemnitee is
ultimately successful in such action, and shall be entitled to the advancement
of Expenses with respect to such action, unless, as a part of such action, a
court of competent jurisdiction over such action determines that each of the
material assertions made by Indemnitee as a basis for such action was not made
in good faith or was frivolous. In the event of an action instituted by or in
the name of the Company under this Agreement to enforce or interpret any of the
terms of this Agreement, Indemnitee shall be entitled to be paid all Expenses
incurred by Indemnitee in defense of such action (including costs and expenses
incurred with respect to Indemnitee's counterclaims and cross-claims made in
such action), and shall be entitled to the advancement of Expenses with respect
to such action, unless, as a part of such action, a court having jurisdiction
over such action determines that each of Indemnitee's material defenses to such
action was made in bad faith or was frivolous.
14. Notice. All notices and other communications required or permitted
hereunder shall be in writing, shall be effective when given, and shall in any
event be deemed to be given (a) five (5) days after deposit with the U.S. Postal
Service or other applicable postal service, if delivered by first class mail,
postage prepaid, (b) upon delivery, if delivered by hand, (c) one business day
after the business day of deposit with Federal Express or similar overnight
courier, freight prepaid, or (d) one day after the
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<PAGE> 9
business day of delivery by facsimile transmission, if delivered by facsimile
transmission, with copy by first class mail, postage prepaid, and shall be
addressed if to Indemnitee, at the Indemnitee's address as set forth beneath
Indemnitee's signature to this Agreement and if to the Company at the address of
its principal corporate offices (attention: Secretary) or at such other address
as such party may designate by ten days' advance written notice to the other
party hereto.
15. Consent to Jurisdiction. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be commenced, prosecuted and continued only in the Court of
Chancery of the State of Delaware in and for New Castle County, which shall be
the exclusive and only proper forum for adjudicating such a claim.
16. Severability. The provisions of this Agreement shall be severable
in the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
Furthermore, to the fullest extent possible, the provisions of this Agreement
(including, without limitations, each portion of this Agreement containing any
provision held to be invalid, void or otherwise unenforceable, that is not
itself invalid, void or unenforceable) shall be construed so as to give effect
to the intent manifested by the provision held invalid, illegal or
unenforceable.
17. Choice of Law. This Agreement shall be governed by and its
provisions 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 the State of Delaware, without regard to the
conflict of laws principles thereof.
18. Subrogation. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
19. Amendment and Termination. No amendment, modification, termination
or cancellation of this Agreement shall be effective unless it is in writing
signed by both the parties hereto. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provisions
hereof (whether or not similar) nor shall such waiver constitute a continuing
waiver.
20. Integration and Entire Agreement. This Agreement sets forth the
entire understanding between the parties hereto and supersedes and merges all
previous written and oral negotiations, commitments, understandings and
agreements relating to the subject matter hereof between the parties hereto.
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21. No Construction as Employment Agreement. Nothing contained in this
Agreement shall be construed as giving Indemnitee any right to be retained in
the employ of the Company or any of its subsidiaries.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
CYBERMEDIA, INC.
a Delaware corporation
By:
---------------------------------------
Unnikrishnan Warrier, President
Address: 3000 Ocean Park Boulevard
Santa Monica, California 90405
AGREED TO AND ACCEPTED BY:
- ----------------------------------
Address:
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EXHIBIT 10.3
CYBERMEDIA, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1996 Employee Stock
Purchase Plan of CyberMedia, Inc.
1. Purpose. The purpose of the Plan is to provide employees of the Company
and its Designated Subsidiaries with an opportunity to purchase Common Stock of
the Company through accumulated payroll deductions. It is the intention of the
company to have the Plan qualify as an "Employee Stock Purchase Plan" under
Section 423 of the Internal Revenue Code of 1986, as amended. The provisions of
the Plan, accordingly, shall be construed so as to extend and limit
participation in a manner consistent with the requirements of that section of
the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the Common Stock of the Company.
(d) "Company" shall mean CyberMedia, Inc., a California corporation,
and any Designated Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time gross earnings,
overtime and shift premiums, sales commissions, incentive compensation, bonuses,
but shall exclude other compensation.
(f) "Designated Subsidiaries" shall mean the Subsidiaries which have
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee of the
Company for tax purposes whose customary employment with the Company is at least
twenty (20) hours per week and more than five (5) months in any calendar year.
For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.
(h) "Enrollment Date" shall mean the first day of each Offering
Period.
(i) "Exercise Date" shall mean the last day of each Purchase Period.
(j) "Fair Market Value" shall mean, as of any date, the value of
Common Stock determined as follows:
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(1) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, its Fair Market Value shall be the
closing sale price for the Common Stock (or the mean of the closing bid and
asked prices, if no sales were reported), as quoted on such exchange (or the
exchange with the greatest volume of trading in Common Stock) or system on the
date of such determination (or the last Trading Day prior to the date of
determination, if the date of determination is not a Trading Day), as reported
in The Wall Street Journal or such other source as the Board deems reliable, or;
(2) If the Common Stock is quoted on the NASDAQ System (but
not on the Nasdaq National Market thereof) or is regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean of the closing bid and asked prices for the
Common Stock on the date of such determination (or the last Trading Day prior to
the date of determination, if the date of determination is not a Trading Day),
as reported in The Wall Street Journal or such other source as the Board deems
reliable, or;
(3) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board.
(4) For purposes of the Enrollment Date under the first
Offering Period under the Plan, the Fair Market Value shall be the initial price
to the public as set forth in the final Prospectus included within the
Registration Statement on Form S-1 filed with the Securities and Exchange
Commission for the initial public offering of the Company's Common Stock.
(k) "Exercise Periods" shall mean the periods of approximately six
(6) months during which an option granted pursuant to the Plan may be exercised,
which shall commence each year on January 31st (the "First Offering Date") or
July 31st (the "Second Offering Date") and shall terminate on the last Trading
Day of the periods ending six months later; provided, however, that the first
Exercise Period shall begin on the effective date of the Company's initial
public offering and shall end on the next First Offering or Second Offering Date
which is at least six months following such initial public offering. The
duration of Offering Periods may be changed pursuant to Section 4 of this Plan.
(l) "Plan" shall mean this 1996 Employee Stock Purchase Plan.
(m) "Purchase Price" shall mean an amount equal to 85% of the Fair
Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower.
(n) "Purchase Period" shall mean the approximately six month period
commencing after one Exercise Date and ending with the next Exercise Date,
except that the first Purchase Period of any Offering Period shall commence on
the Enrollment Date and end with the next Exercise Date.
(o) "Reserves" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
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(p) "Subsidiary" shall mean a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national stock exchanges
and the NASDAQ System are open for trading.
3. Eligibility.
(a) Any Employee (as defined in Section 2(g)), who shall be employed
by the Company on a given Enrollment Date shall be eligible to participate in
the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary.
4. Offering Periods. The Plan shall be implemented by consecutive,
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after the first day of the First Offering Date and the first
day of the Second Offering Date each year, or on such other date as the Board
shall determine, and continuing thereafter until terminated in accordance with
Section 19 hereof; provided, however, that the first Offering Period shall begin
on the effective date of the Company's initial public offering and shall end on
the last day of the First Offering Date or Second Offering Date occurring
provided, however, that it such Offering Period would exceed twenty-seven (27)
months, the first Offering Period shall end on the First offering Date or Second
offering Date occurring prior to the date which is twenty-four (24) months
following the Company's initial public offering at least twenty-four (24) months
after such initial public offering. The Board shall have the power to change the
duration of Offering Periods (including the commencement dates thereof) with
respect to future offerings without stockholder approval if such change is
announced at least fifteen (15) days prior to the scheduled beginning of the
first Offering Period to be affected thereafter.
5. Participation.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the office designated by the
Company to receive such agreements prior to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
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(c) An eligible Employee may participate in an Offering Period only
if, as of the Enrollment Date of such Offering Period, such Employee is not
participating in any prior Offering Period which is continuing at the time of
such proposed enrollment.
6. Payroll Deductions.
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during an Offering Period in an amount not exceeding five percent (5%) of the
Compensation which he or she receives on each pay day during the Offering
Period.
(b) All payroll deductions made for a participant shall be credited
to his or her account under the Plan and shall be withheld in whole percentages
only. A participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the
Plan as provided in Section 10 hereof, and may increase or decrease the rate of
his or her payroll deductions during the Offering Period but not more frequently
than one (1) time each month. A participant's subscription agreement shall
remain in effect for successive Offering Periods unless terminated as provided
in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)98) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to 0% at such time during any Purchase
Period which is scheduled to end during the current calendar year (the "Current
Purchase Period") that the aggregate of all payroll deductions which were
previously used to purchase stock under the Plan in a prior Purchase Period
which ended during that calendar year plus all payroll deductions accumulated
with respect to the Current Purchase Period equal $21,250. Payroll deductions
shall recommence at the rate provided in such participant's subscription
agreement at the beginning of the first Purchase Period which is scheduled to
end in the following calendar year, unless terminated by the participant as
provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at
the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period,
each eligible Employee participating in such Offering Period shall be granted
an option to purchase on each Exercise Date of such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the participant's account as of the
Exercise Date by the applicable Purchase Price. In no event shall an Employee be
permitted to purchase during each Purchase Period more than a number of shares
determined by dividing $25,000 by the Fair Market Value of a share of the Common
Stock on
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the Enrollment Date. All such purchases shall be subject to the limitations set
forth in Sections 3(b) and 12 hereof. Exercise of the option shall occur as
provided in Section 8 hereof, unless the participant has withdrawn pursuant to
Section 10 hereof. The option shall expire on the last day of the Offering
Period.
8. Exercise of Option. Unless a participant withdraws from the Plan as
provided in Section 10 hereof, his or her option for the purchase of shares
shall be exercised automatically on each Exercise Date of the Offering Period,
and the maximum number of full shares subject to option shall be purchased for
such participant at the applicable Purchase Price with the accumulated payroll
deductions in his or her account. No fractional shares shall be purchased; any
payroll deductions accumulated in a participant's account which are not
sufficient to purchase a full share shall be retained in the participant's
account for the subsequent Exercise Date in such Offering Period, unless the
Offering Period has been oversubscribed or has terminated with such Exercise
Date, in which event, any monies left over in a participant's account shall be
returned to the participant. During a participant's lifetime, a participant's
option to purchase shares hereunder is exercisable only by him or her.
9. Delivery. As promptly as practicable after each Exercise Date on
which a purchase of shares occurs, either the Company shall arrange the
delivery to each participant of a certificate representing the shares purchased
upon exercise of his or her option, or the shares shall be credited to an
account in the participant's name with a brokerage firm selected by the Company
to hold the shares in its street name.
10. Withdrawal.
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
the form of Exhibit B to this Plan. All of the participant's payroll deductions
credited to his or her account shall be paid to such participant within two
weeks after receipt of written notice of withdrawal. Such participant's option
for the Offering Period shall be automatically terminated, and no further
payroll deductions for the purchase of shares shall be made during the Offering
Period. If a participant withdraws from an Offering Period, payroll deductions
shall not resume at the beginning of the succeeding Offering Period unless the
participant delivers to the Company a new subscription agreement.
(b) Upon a participant's ceasing to be an Employee (as defined in
Section 2(g) hereof) for any reason, he or she shall be deemed to have elected
to withdraw from the Plan and the payroll deductions credited to such
participant's account during the Offering Period but not yet used to exercise
the option shall be returned to such participant or, in the case of his or her
death, to the person or persons entitled thereto under Section 14 hereof, and
such participant's option shall be automatically terminated. The preceding
sentence notwithstanding, a participant who receives payment in lieu of notice
of termination of employment shall be treated as continuing to be an Employee
for the participant's customary number of hours per week of employment during
the period in which the participant is subject to such payment in lieu of
notice.
(c) A participant's withdrawal from an Offering Period shall not
have any effect upon his or her eligibility to participate in any similar plan
which may hereafter be adopted by the Company or in
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succeeding Offering Periods which commence after the termination of the Offering
Period from which the participant withdraws.
11. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
12. Stock.
(a) The maximum number of shares of the Company's Common Stock which
shall be made available for sale under the Plan shall be two hundred thousand
(200,000) shares, subject to adjustment upon changes in capitalization of the
Company as provided in Section 18 hereof. If on a given Exercise Date the number
of shares with respect to which options are to be exercised exceeds the number
of shares then available under the Plan, the Company shall make a pro rata
allocation of the shares remaining available for purchase in as uniform a manner
as shall be practicable and as it shall determine to be equitable.
(b) The participant shall have no interest or voting right in shares
covered by his or her option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant and
his or her spouse.
13. Administration.
(a) Administrative Body. The Plan shall be administered by the Board
or a committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
(b) Rule 16b-3 Limitations. Notwithstanding the provisions of
Subsection (a) of this Section 13, in the event that Rule 16b-3 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
any successor provision ("Rule 16b-3") provides specific requirements for the
administrators of plans of this type, the Plan shall be administered only by
such a body and in such a manner as shall comply with the applicable
requirements of Rule 16b-3. Unless permitted by Rule 16b-3, no discretion
concerning decisions regarding the Plan shall be afforded to any committee or
person that is not "disinterested" as that term is used in Rule 16b-3.
14. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent to an
Exercise Date on which the option is exercised but prior to delivery to such
participant of such shares and cash. In addition, a participant may file a
written designation of a beneficiary who is to receive any cash from the
participant's account under the Plan in the event of such participant's death
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<PAGE> 7
prior to exercise of the option. If a participant is married and the designated
beneficiary is not the spouse, spousal consent shall be required for such
designation to be effective.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.
15. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 14 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
16. Use of Funds. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
17. Reports. Individual accounts shall be maintained for each
participant in the Plan. Statements of account shall be given to participating
Employees at least annually, which statements shall set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.
18. Adjustments Upon Changes in Capitalization.
(a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the Reserves as well as the price per share of
Common Stock covered by each option under the Plan which has not yet been
exercised shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration". Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an option.
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<PAGE> 8
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Period shall terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Board.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each option under the Plan shall be assumed or
an equivalent option shall be substituted by such successor corporation or a
parent or subsidiary of such successor corporation, unless the Board determines,
in the exercise of its sole discretion and in lieu of such assumption or
substitution, to shorten the Offering Period then in progress by setting a new
Exercise Date (the "New Exercise Date") or to cancel each outstanding right to
purchase and refund all sums collected from participants during the Offering
Period then in progress. If the Board shortens the Offering Period then in
progress in lieu of assumption or substitution in the event of a merger or sale
of assets, the Board shall notify each participant in writing, at least ten (10)
business days prior to the New Exercise Date, that the Exercise Date for his or
her option has been changed to the New Exercise Date and that his or her option
shall be exercised automatically on the New Exercise Date, unless prior to such
date he has withdrawn from the Offering Period as provided in Section 10 hereof.
For purposes of this paragraph, an option granted under the Plan shall be deemed
to be assumed if, following the sale of assets or merger, the option confers the
right to purchase or receive, for each share of option stock subject to the
option immediately prior to the sale of assets or merger, the consideration
(whether stock, cash or other securities or property) received in the sale of
assets or merger by holders of Common Stock for each share of Common Stock held
on the effective date of the transaction (and if such holders were offered a
choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding shares of Common Stock); provided, however, that if
such consideration received in the sale of assets or merger was not solely
common stock of the successor corporation or its parent (as defined in Section
424(e) of the Code), the Board may, with the consent of the successor
corporation, provide for the consideration to be received upon exercise of the
option to be solely common stock of the successor corporation or its parent
equal in fair market value to the per share consideration received by holders of
Common Stock and the sale of assets or merger.
The Board may, if it so determines in the exercise of its sole discretion,
also make provision for adjusting the Reserves, as well as the price per share
of Common Stock covered by each outstanding option, in the event the Company
effects one or more reorganizations, recapitalizations, rights offerings or
other increases or reductions of shares of its outstanding Common Stock, and in
the event of the Company being consolidated with or merged into any other
corporation.
19. Amendment or Termination.
(a) The Board of Directors of the Company may at any time and for
any reason terminate or amend the Plan. Except as provided in Section 18 hereof,
no such termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board of Directors on any Exercise Date
if the Board determines that the termination of the Plan is in the best
interests of the Company and its stockholders. Except as provided in Section 18
hereof, no amendment may make any change in any option theretofore granted which
adversely affects the rights of any participant. To the extent necessary to
comply with Rule 16b-3 or under Section 423 of the Code (or any successor rule
or
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<PAGE> 9
provision or any other applicable law or regulation), the Company shall obtain
stockholder approval in such a manner and to such a degree as required.
(b) Without stockholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the length of Offering
Periods, limit the frequency and/or number of changes permitted in the amount
withheld during an Offering Period, establish the exchange ratio applicable to
amounts withheld in a currency other than U.S. dollars, permit payroll
withholding in excess of the amount designated by a participant in order to
adjust for delays or mistakes in the Company's processing of properly completed
withholding elections, establish reasonable waiting and adjustment periods
and/or accounting and crediting procedures to ensure that amounts applied toward
the purchase of Common Stock for each participant properly correspond with
amounts withheld from the participant's Compensation, and establish such other
limitations or procedures as the Board (or its committee) determines in its sole
discretion advisable which are consistent with the Plan.
20. Notices. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the shares are being purchased only for investment and without any
present intention to sell or distribute such shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
22. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 19 hereof.
23. Automatic Transfer to Low Price Offering Period. To the extent
permitted by Rule 16b-3 of the Exchange Act, if the Fair Market Value of the
Common Stock on any Exercise Date in an Offering Period is lower than the Fair
Market Value of the Common Stock on the Enrollment Date of such Offering Period,
then all participants in such Offering Period shall be automatically withdrawn
from such Offering Period immediately after the exercise of their option on the
Exercise Date and automatically re-enrolled in the immediately following
Offering Period as of the first day thereof.
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<PAGE> 10
EXHIBIT A
CYBERMEDIA INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: __________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. _____________________________________ hereby elects to participate in
the CyberMedia, Inc. 1996 Employee Stock Purchase Plan (the "Purchase
Plan") and subscribes to purchase shares of the Company' s Common Stock
in accordance with this Subscription Agreement and the Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount
of ____% of my Compensation (not to exceed 5%) on each payday during
the Offering Period in accordance with the Purchase Plan. The first
deduction shall occur on the payday following the first complete pay
period after the effective date of the Company's initial public
offering. (Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Purchase Plan. I understand that if I
do not withdraw from an Offering Period, any accumulated payroll
deductions shall be used to automatically exercise my option.
4. I have received a copy of the complete Purchase Plan. I understand that
my participation in the Purchase Plan is in all respects subject to the
terms of thereof. I understand that the grant of the option by the
Company under this Subscription Agreement is subject to obtaining
stockholder approval of the Purchase Plan.
5. Shares purchased for me under the Purchase Plan should be issued in the
name(s) of (Employee or Employee and Spouse Only):
6. I understand that if I dispose of any shares received by me pursuant to
the Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares), I shall be
treated for federal income tax purposes as having received ordinary
income at the time of such disposition in an amount equal to the excess
of the fair market value of the shares at the time such shares were
purchased by me over the price which I paid for the shares. I hereby
agree to notify the Company in writing within 30 days after the date of
any disposition of shares and I will make adequate provision for
Federal, state or other tax withholding obligations, if any, which
arise upon the disposition of the Common Stock. The Company may, but
shall not be obligated to, withhold from my compensation the amount
necessary to meet any applicable withholding obligation including any
withholding necessary to make available to the Company any tax
deductions or benefits attributable to sale or early disposition of
Common Stock by me. If I dispose of such shares at any time after the
expiration of the 2-year holding period, I understand that I will be
treated for federal income tax purposes as having received income only
at the time of such disposition, and that such income will be taxed as
ordinary income only to the extent of an amount equal to the lesser of
(1) the excess of the fair market value of the shares at the time of
such disposition over the purchase price which I paid for the shares,
or (2) 15% of the fair market value of the shares on the first day of
the Offering Period. The remainder of the gain, if any, recognized on
such disposition will be taxed as capital gain.
7. I hereby agree to be bound by the terms of the Purchase Plan. The
effectiveness of this Subscription Agreement is dependent upon my
eligibility to participate in the 1996 Purchase Plan.
8. I hereby authorize the Company to terminate my participation in any
Offering Period as of the last day of any Purchase Period and enroll me
in a new Offering Period at the same payroll deduction rate as
authorized above, if the option price as determined in accordance with
Section 7 of the Purchase Plan for such new Offering Period is lower
than the option price calculated on the first date of the Offering
Period in which my participation is to be terminated.
<PAGE> 11
9. Share Handling Instructions:
Broker Related Transactions:
/ / Sell my shares in a Same-Day-Sale transaction on the first business
day following the end of the Purchase Period. (Select a Stock
Broker below.)
/ / Deposit my shares into my brokerage account. (Select a Stock Broker
below.)
/ / _________________ / / Other: Name: _________________________
/ / _________________ Address: _______________________
Address: _______________________
Ph. No.: _______________________
Non-Broker Transaction:
/ / Send a certificate for all shares purchased directly to me.
10. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Purchase Plan (optional):
NAME: (Please print)_____________________________________________
(First) (Middle) (Last)
_________________________________ _________________________________
Relationship _________________________________
(Address)
NAME: (Please print) __________________________________________________
(First) (Middle) (Last)
_________________________________ _________________________________
Relationship _____________________________________
(Address)
Employee's Social
Security Number: ___________________________________
Employee's Address: __________________________________
__________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated: ___________________ __________________________________
Signature of Employee
_________________________________
Spouse's Signature (If beneficiary
other than spouse)
<PAGE> 12
EXHIBIT B
CYBERMEDIA, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the CyberMedia, Inc.
1996 Employee Stock Purchase Plan which began on ___________ 19____ (the
"Enrollment Date") hereby notifies the Company that he or she hereby withdraws
from the Offering Period. He or she hereby directs the Company to pay to the
undersigned as promptly as practicable all the payroll deductions credited to
his or her account with respect to such Offering Period. The undersigned
understands and agrees that his or her option for such Offering Period shall be
automatically terminated. The undersigned understands further that no further
payroll deductions shall be made for the purchase of shares in the current
Offering Period and the undersigned shall be eligible to participate in
succeeding Offering Periods only by delivering to the Company a new Subscription
Agreement.
Name and Address of Participant:
-------------------------------
-------------------------------
-------------------------------
Signature:
-------------------------------
Date:
------------------------
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<PAGE> 1
EXHIBIT 10.4
CYBERMEDIA, INC.
1996 DIRECTOR OPTION PLAN
1. Purposes of the Plan. The purposes of this 1996 Director
Option Plan are to attract and retain the best available personnel for service
as Outside Directors (as defined herein) of the Company, to provide additional
incentive to the Outside Directors of the Company to serve as Directors, and to
encourage their continued service on the Board.
All options granted hereunder shall be nonstatutory stock
options.
2. Definitions. As used herein, the following definitions shall
apply:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as
amended.
(c) "Common Stock" means the common stock of the Company.
(d) "Company" means CyberMedia, Inc., a California
corporation.
(e) "Director" means a member of the Board.
(f) "Employee" means any person, including officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a Director's fee by the Company shall not be sufficient in and of
itself to constitute "employment" by the Company.
(g) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(h) "Fair Market Value" means, as of any date, the value
of Common Stock determined as follows:
(i) If the Common Stock is listed on any
established stock exchange or a national market system, including without
limitation the Nasdaq National Market of the National Association of Securities
Dealers, Inc. Automated Quotation ("NASDAQ") System, the Fair Market Value of a
Share of Common Stock shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such system or exchange (or
the exchange with the greatest volume of trading in Common Stock) on the date of
determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ
System (but not on the National Market thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the date of determination, as
reported in The Wall Street Journal or such other source as the Board deems
reliable, or;
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<PAGE> 2
(iii) In the absence of an established market for
the Common Stock, the Fair Market Value thereof shall be determined in good
faith by the Board.
(iv) For purposes of Options granted on the
effective date of this Plan, the Fair Market Value shall be the initial price to
the public as set forth in the final prospectus included within the Registration
Statement filed with the Securities and Exchange Commission under the Securities
Act of 1933, as amended for the initial public offering of the Company's Common
Stock.
(i) "Inside Director" means a Director who is an
Employee.
(j) "Option" means a stock option granted pursuant to the
Plan.
(k) "Optioned Stock" means the Common Stock subject to an
Option.
(l) "Optionee" means a Director who holds an Option.
(m) "Outside Director" means a Director who is not an
Employee and is first elected to the Board after the adoption of this Plan.
(n) "Parent" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(o) "Plan" means this 1996 Director Option Plan.
(p) "Share" means a share of the Common Stock, as
adjusted in accordance with Section 10 of the Plan.
(q) "Subsidiary" means a "subsidiary corporation,"
whether now or hereafter existing, as defined in Section 424(f) of the Internal
Revenue Code of 1986.
3. Stock Subject to the Plan. Subject to the provisions of
Section 10 of the Plan, the maximum aggregate number of Shares which may be
optioned and sold under the Plan is 100,000 Shares of Common Stock (the "Pool").
The Shares may be authorized, but unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having
been exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
4. Administration and Grants of Options under the Plan.
(a) Procedure for Grants. The provisions set forth in
this Section 4(a) shall not be amended more than once every six months, other
than to comport with changes in the Code, the
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<PAGE> 3
Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder. All grants of Options to Outside Directors under this Plan shall be
automatic and nondiscretionary and shall be made strictly in accordance with the
following provisions:
(i) No person shall have any discretion to
select which Outside Directors shall be granted Options or to determine the
number of Shares to be covered by Options granted to Outside Directors.
(ii) Each Outside Director shall be automatically
granted an Option to purchase 10,000 Shares (the "First Option") on the date on
which the later of the following events occurs: (A) the effective date of this
Plan, as determined in accordance with Section 6 hereof, or (B) the date on
which such person first becomes an Outside Director, whether through election by
the shareholders of the Company or appointment by the Board to fill a vacancy;
provided, however, that an Inside Director who ceases to be an Inside Director
but who remains a Director shall not receive a First Option.
(iii) Each Outside Director shall be automatically
granted an Option to purchase 10,000 Shares (a "Subsequent Option") on December
1 of each year provided he or she is then an Outside Director, and if as of such
date, he or she shall have served on the Board for at least the preceding six
(6) months.
(iv) Notwithstanding the provisions of
subsections (ii) and (iii) hereof, any exercise of an Option granted before the
Company has obtained shareholder approval of the Plan in accordance with Section
16 hereof shall be conditioned upon obtaining such shareholder approval of the
Plan in accordance with Section 16 hereof.
(v) The terms of a First Option granted
hereunder shall be as follows:
(A) the term of the First Option shall
be ten (10) years.
(B) the First Option shall be
exercisable only while the Outside Director remains a Director of the Company,
except as set forth in Sections 8 and 10 hereof.
(C) the exercise price per Share shall
be 100% of the Fair Market Value per Share on the date of grant of the First
Option. In the event that the date of grant of the First Option is not a trading
day, the exercise price per Share shall be the Fair Market Value on the next
trading day immediately following the date of grant of the First Option.
(D) subject to Section 10 hereof, the
First Option shall become exercisable as to twenty-five percent (25%) of the
Shares subject to the First Option one year after its date of grant and as to
1/48th of the shares each month thereafter, provided that the Optionee continues
to serve as a Director on such dates.
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<PAGE> 4
(vi) The terms of a Subsequent Option granted
hereunder shall be as follows:
(A) the term of the Subsequent Option
shall be ten (10) years.
(B) the Subsequent Option shall be
exercisable only while the Outside Director remains a Director of the Company,
except as set forth in Sections 8 and 10 hereof.
(C) the exercise price per Share shall
be 100% of the Fair Market Value per Share on the date of grant of the
Subsequent Option. In the event that the date of grant of the Subsequent Option
is not a trading day, the exercise price per Share shall be the Fair Market
Value on the next trading day immediately following the date of grant of the
Subsequent Option.
(D) subject to Section 10 hereof, the
Subsequent Option shall become exercisable as to one-fourth (1/4th) of the
Shares subject to the Subsequent Option three (3) years and one month after its
date of grant and as to one forty-eighth (1/48th) of the shares on the last day
of each month thereafter, provided that the Optionee continues to serve as a
Director on such dates.
(vii) In the event that any Option granted under
the Plan would cause the number of Shares subject to outstanding Options plus
the number of Shares previously purchased under Options to exceed the Pool, then
the remaining Shares available for Option grant shall be granted under Options
to the Outside Directors on a pro rata basis. No further grants shall be made
until such time, if any, as additional Shares become available for grant under
the Plan through action of the Board or the shareholders to increase the number
of Shares which may be issued under the Plan or through cancellation or
expiration of Options previously granted hereunder.
5. Eligibility. Options may be granted only to Outside Directors.
All Options shall be automatically granted in accordance with the terms set
forth in Section 4 hereof.
The Plan shall not confer upon any Optionee any right with
respect to continuation of service as a Director or nomination to serve as a
Director, nor shall it interfere in any way with any rights which the Director
or the Company may have to terminate the Director's relationship with the
Company at any time.
6. Term of Plan. The Plan shall become effective upon the
effective date of the first Registration Statement filed by the Company under
the Securities Act of 1933, as amended. It shall continue in effect for a term
of ten (10) years unless sooner terminated under Section 11 of the Plan.
7. Form of Consideration. The consideration to be paid for the
Shares to be issued upon exercise of an Option, including the method of payment,
shall consist of (i) cash, (ii) check, (iii) other shares which (x) in the case
of Shares acquired upon exercise of an Option, have been owned by the Optionee
for more than six (6) months on the date of surrender, and (y) have a Fair
Market Value on the date of surrender equal to the aggregate exercise price of
the Shares as to which said Option shall
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<PAGE> 5
be exercised, (iv) delivery of a properly executed exercise notice together with
such other documentation as the Company and the broker, if applicable, shall
require to effect an exercise of the Option and delivery to the Company of the
sale or loan proceeds required to pay the exercise price, or (v) any combination
of the foregoing methods of payment.
8. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable at such times as are set forth in
Section 4 hereof; provided, however, that no Options shall be exercisable until
shareholder approval of the Plan in accordance with Section 16 hereof has been
obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with the terms of
the Option by the person entitled to exercise the Option and full payment for
the Shares with respect to which the Option is exercised has been received by
the Company. Full payment may consist of any consideration and method of payment
allowable under Section 7 of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
A share certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date the stock certificate is issued, except as provided in Section 10 of
the Plan.
Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Rule 16b-3. Options granted to Outside Directors must
comply with the applicable provisions of Rule 16b-3 promulgated under the
Exchange Act or any successor thereto and shall contain such additional
conditions or restrictions as may be required thereunder to qualify Plan
transactions, and other transactions by Outside Directors that otherwise could
be matched with Plan transactions, for the maximum exemption from Section 16 of
the Exchange Act.
(c) Termination of Continuous Status as a Director.
Subject to Section 10 hereof, in the event an Optionee's status as a Director
terminates (other than upon the Optionee's death or total and permanent
disability (as defined in Section 22(e)(3) of the Code)), the Optionee may
exercise his or her Option, but only within three (3) months following the date
of such termination, and only to the extent that the Optionee was entitled to
exercise it on the date of such termination (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was not
entitled to exercise an Option on the date of such termination, and to the
extent that the
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<PAGE> 6
Optionee does not exercise such Option (to the extent otherwise so entitled)
within the time specified herein, the Option shall terminate.
(d) Disability of Optionee. In the event Optionee's
status as a Director terminates as a result of total and permanent disability
(as defined in Section 22(e)(3) of the Code), the Optionee may exercise his or
her Option, but only within twelve (12) months following the date of such ter
mination, and only to the extent that the Optionee was entitled to exercise it
on the date of such termination (but in no event later than the expiration of
its ten (10) year term). To the extent that the Optionee was not entitled to
exercise an Option on the date of termination, or if he or she does not exercise
such Option (to the extent otherwise so entitled) within the time specified
herein, the Option shall terminate.
(e) Death of Optionee. In the event of an Optionee's
death, the Optionee's estate or a person who acquired the right to exercise the
Option by bequest or inheritance may exercise the Option, but only within twelve
(12) months following the date of death, and only to the extent that the
Optionee was entitled to exercise it on the date of death (but in no event later
than the expiration of its ten (10) year term). To the extent that the Optionee
was not entitled to exercise an Option on the date of death, and to the extent
that the Optionee's estate or a person who acquired the right to exercise such
Option does not exercise such Option (to the extent otherwise so entitled)
within the time specified herein, the Option shall terminate.
9. Non-Transferability of Options. The Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution and may be exercised,
during the lifetime of the Optionee, only by the Optionee.
10. Adjustments Upon Changes in Capitalization, Dissolution,
Merger, Asset Sale or Change of Control.
(a) Changes in Capitalization. Subject to any required
action by the shareholders of the Company, the number of Shares covered by each
outstanding Option, the number of Shares which have been authorized for issuance
under the Plan but as to which no Options have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option, as well
as the price per Share covered by each such outstanding Option, and the number
of Shares issuable pursuant to the automatic grant provisions of Section 4
hereof shall be proportionately adjusted for any increase or decrease in the
number of issued Shares resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued Shares effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of Shares
subject to an Option.
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<PAGE> 7
(b) Dissolution or Liquidation. In the event of the
proposed dissolution or liquidation of the Company, to the extent that an Option
has not been previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the
Company with or into another corporation or the sale of substantially all of the
assets of the Company, the vesting of outstanding Options shall become fully
vested and exercisable, including as to Shares for which such Options would not
otherwise be exercisable. In such event the Board shall notify the Optionee that
the Option shall be fully exercisable for a period of thirty (30) days from the
date of such notice, and upon the expiration of such period the Option shall
terminate.
11. Amendment and Termination of the Plan.
(a) Amendment and Termination. Except as set forth in
Section 4, the Board may at any time amend, alter, suspend, or discontinue the
Plan, but no amendment, alteration, suspension, or discontinuation shall be made
which would impair the rights of any Optionee under any grant theretofore made,
without his or her consent. In addition, to the extent necessary and desirable
to comply with Rule 16b-3 under the Exchange Act (or any other applicable law or
regulation), the Company shall obtain shareholder approval of any Plan amendment
in such a manner and to such a degree as required.
(b) Effect of Amendment or Termination. Any such
amendment or termination of the Plan shall not affect Options already granted
and such Options shall remain in full force and effect as if this Plan had not
been amended or terminated.
12. Time of Granting Options. The date of grant of an Option
shall, for all purposes, be the date determined in accordance with Section 4
hereof.
13. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated there
under, state securities laws, and the requirements of any stock exchange upon
which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful
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<PAGE> 8
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
14. Reservation of Shares. The Company, during the term of this
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
15. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
16. Shareholder Approval. Continuance of the Plan shall be subject
to approval by the shareholders of the Company at or prior to the first annual
meeting of shareholders held subsequent to the granting of an Option hereunder.
Such shareholder approval shall be obtained in the degree and manner required
under applicable state and federal law.
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<PAGE> 9
EXHIBIT 10.4
CYBERMEDIA, INC.
DIRECTOR OPTION AGREEMENT
(For Initial Options)
CyberMedia, Inc., a California corporation (the "Company"), has granted
to _______________ (the "Optionee"), an option to purchase a total of
_______________ shares of the Company's Common Stock (the "Optioned Stock"), at
the price determined as provided herein, and in all respects subject to the
terms, definitions and provisions of the Company's 1996 Director Option Plan
(the "Plan") adopted by the Company which is incorporated herein by reference.
The terms defined in the Plan shall have the same defined meanings herein.
I. Nature of the Option. This Option is a nonstatutory option and
is not intended to qualify for any special tax benefits to the Optionee.
II. Exercise Price. The exercise price is $___________ for each
share of Common Stock.
III. Exercise of Option. This Option shall be exercisable during
its term in accordance with the provisions of Section 8 of the Plan as follows:
A. Right to Exercise.
1. This Option shall become exercisable in
installments cumulatively with respect to 25% of the Optioned Stock on the first
anniversary date of the date of grant and as to the remaining shares ratably
each month over the ensuing four years, so that one hundred percent (100%) of
the Optioned Stock shall be exercisable four years after the date of grant;
provided, however, that in no event shall any Option be exercisable prior to the
date the stockholders of the Company approve the Plan.
2. This Option may not be exercised for a
fraction of a share.
3. In the event of Optionee's death, disability
or other termination of service as a Director, the exercisability of the Option
is governed by Section 8 of the Plan.
B. Method of Exercise. This Option shall be exercisable by written
notice which shall state the election to exercise the Option and the number of
Shares in respect of which the Option is being exercised. Such written notice,
in the form attached hereto as Exhibit A, shall be signed by the Optionee and
shall be delivered in person or by certified mail to the Secretary of the
Company. The written notice shall be accompanied by payment of the exercise
price.
<PAGE> 10
IV. Method of Payment. Payment of the exercise price shall be by
any of the following, or a combination thereof, at the election of the Optionee:
A. cash;
B. check; or
C. surrender of other shares which (x) in the case of
Shares acquired upon exercise of an Option, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised; or
D. delivery of a properly executed exercise notice
together with such other documentation as the Company and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price.
V. Restrictions on Exercise. This Option may not be exercised if
the issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulations, or if such issuance
would not comply with the requirements of any stock exchange upon which the
Shares may then be listed. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.
VI. Non-Transferability of Option. This Option may not be
transferred in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Optionee only by the
Optionee. The terms of this Option shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
VII. Term of Option. This Option may not be exercised more than ten
(10) years from the date of grant of this Option, and may be exercised during
such period only in accordance with the Plan and the terms of this Option.
VIII. Taxation Upon Exercise of Option. Optionee understands that,
upon exercise of this Option, he or she will recognize income for tax purposes
in an amount equal to the excess of the then Fair Market Value of the Shares
purchased over the exercise price paid for such Shares. Since the Optionee is
subject to Section 16(b) of the Securities Exchange Act of 1934, as amended,
under certain limited circumstances the measurement and timing of such income
(and the commencement of any capital gain holding period) may be deferred, and
the Optionee is advised to contact a tax advisor concerning the application of
Section 83 in general and the availability a Section 83(b) election in
particular in connection with the exercise of the Option. Upon a resale of such
Shares by the Optionee, any difference between the sale price and the Fair
Market Value of the Shares on the date
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<PAGE> 11
of exercise of the Option, to the extent not included in income as described
above, will be treated as capital gain or loss.
DATE OF GRANT: _____________
CYBERMEDIA, INC.
a California corporation
By: _________________________
Optionee acknowledges receipt of a copy of the Plan, a copy of which is
attached hereto, and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under the Plan.
Dated: _________________
______________________________
Optionee
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<PAGE> 12
EXHIBIT A
DIRECTOR OPTION EXERCISE NOTICE
(for Initial Option)
CyberMedia, Inc.
3000 Ocean Park Boulevard
Santa Monica, CA 90405
Attn: Chief Executive Officer
Gentlemen:
1. Exercise of Option. The undersigned ("Optionee") hereby elects
to exercise Optionee's option to purchase ___________ shares of the Common Stock
(the "Shares") of CyberMedia, Inc. (the "Company") under and pursuant to the
Company's 1996 Director Option Plan and the Director Option Agreement dated
_______________________ (the "Agreement").
2. Representations of Optionee. Optionee acknowledges that
Optionee has received, read and understood the Agreement.
3. Federal Restrictions on Transfer. Optionee understands that
the Shares must be held indefinitely unless they are registered under the
Securities Act of 1933, as amended (the "1933 Act"), or unless an exemption from
such registration is available, and that the certificate(s) representing the
Shares may bear a legend to that effect. Optionee understands that the Company
is under no obligation to register the Shares and that an exemption may not be
available or may not permit Optionee to transfer Shares in the amounts or at the
times proposed by Optionee.
4. Tax Consequences. Optionee understands that Optionee may
suffer adverse tax consequences as a result of Optionee's purchase or
disposition of the Shares. Optionee represents that Optionee has consulted with
any tax consultant(s) Optionee deems advisable in connection with the purchase
or disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
5. Delivery of Payment. Optionee herewith delivers to the Company
the aggregate purchase price for the Shares that Optionee has elected to
purchase and has made provision for the payment of any federal or state
withholding taxes required to be paid or withheld by the Company.
6. Entire Agreement. The Agreement is incorporated herein by
reference. This Exercise Notice and the Agreement constitute the entire
agreement of the parties and supersede in their entirety all prior undertakings
and agreements of the Company and Optionee with respect to the subject matter
hereof. This Exercise Notice and the Agreement are governed by California law
except for that body of law pertaining to conflict of laws.
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<PAGE> 13
Submitted by: Accepted by:
OPTIONEE: CYBERMEDIA, INC.
______________________________ By: _______________________________
Address: Its: ______________________________
Dated: _______________________ Dated: ____________________________
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<PAGE> 14
CYBERMEDIA, INC.
DIRECTOR OPTION AGREEMENT
(For Subsequent Option)
CyberMedia, Inc., a California corporation (the "Company"), has granted
to ______________________________________ (the "Optionee"), an option to
purchase a total of ________________ shares of the Company's Common Stock (the
"Optioned Stock"), at the price determined as provided herein, and in all
respects subject to the terms, definitions and provisions of the Company's 1996
Director Option Plan (the "Plan") adopted by the Company which is incorporated
herein by reference. The terms defined in the Plan shall have the same defined
meanings herein.
I. Nature of the Option. This Option is a nonstatutory option and
is not intended to qualify for any special tax benefits to the Optionee.
II. Exercise Price. The exercise price is $_______ for each share
of Common Stock.
III. Exercise of Option. This Option shall be exercisable during
its term in accordance with the provisions of Section 8 of the Plan as follows:
A. Right to Exercise.
1. This Option shall become exercisable as to 1/4th of
the Optioned Stock four years and one monthr after the date of grant and as to
one forty-eighth (1/48th) of the shares on the last day of each month
thereafter.
2. This Option may not be exercised for a fraction of a
share.
3. In the event of Optionee's death, disability or other
termination of service as a Director, the exercisability of the Option is
governed by Section 8 of the Plan.
B. Method of Exercise. This Option shall be exercisable by
written notice which shall state the election to exercise the Option and the
number of Shares in respect of which the Option is being exercised. Such written
notice, in the form attached hereto as Exhibit A, shall be signed by the
Optionee and shall be delivered in person or by certified mail to the Secretary
of the Company. The written notice shall be accompanied by payment of the
exercise price.
IV. Method of Payment. Payment of the exercise price shall be by any of
the following, or a combination thereof, at the election of the Optionee:
A. cash;
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<PAGE> 15
B. check; or
C. surrender of other shares which (x) in the case of
Shares acquired upon exercise of an Option, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised; or
D. delivery of a properly executed exercise notice
together with such other documentation as the Company and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price.
V. Restrictions on Exercise. This Option may not be exercised if
the issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulations, or if such issuance
would not comply with the requirements of any stock exchange upon which the
Shares may then be listed. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.
VI. Non-Transferability of Option. This Option may not be
transferred in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Optionee only by the
Optionee. The terms of this Option shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
VII. Term of Option. This Option may not be exercised more than ten
(10) years from the date of grant of this Option, and may be exercised during
such period only in accordance with the Plan and the terms of this Option.
VIII. Taxation Upon Exercise of Option. Optionee understands that,
upon exercise of this Option, he or she will recognize income for tax purposes
in an amount equal to the excess of the then Fair Market Value of the Shares
purchased over the exercise price paid for such Shares. Since the Optionee is
subject to Section 16(b) of the Securities Exchange Act of 1934, as amended,
under certain limited circumstances the measurement and timing of such income
(and the commencement of any capital gain holding period) may be deferred, and
the Optionee is advised to contact a tax advisor concerning the application of
Section 83 in general and the availability a Section 83(b) election in
particular in connection with the exercise of the Option. Upon a resale of such
Shares by the Optionee, any difference between the sale price and the Fair
Market Value of the Shares on the date
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<PAGE> 16
of exercise of the Option, to the extent not included in income as described
above, will be treated as capital gain or loss.
DATE OF GRANT: ______________
CyberMedia, Inc.,
a California corporation
By: ___________________________
Optionee acknowledges receipt of a copy of the Plan, a copy of which is
attached hereto, and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under the Plan.
Dated: _________________
__________________________
Optionee
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<PAGE> 17
EXHIBIT A
DIRECTOR OPTION EXERCISE NOTICE
(for Subsequent Option)
CyberMedia, Inc.
3000 Ocean Park Boulevard
Santa Monica, CA 90405
Gentlemen:
1. Exercise of Option. The undersigned ("Optionee") hereby elects
to exercise Optionee's option to purchase __________ shares of the Common Stock
(the "Shares") of CyberMedia, Inc. (the "Company") under and pursuant to the
Company's 1996 Director Option Plan and the Director Option Agreement dated
_______________ (the "Agreement").
2. Representations of Optionee. Optionee acknowledges that
Optionee has received, read and understood the Agreement.
3. Federal Restrictions on Transfer. Optionee understands that
the Shares must be held indefinitely unless they are registered under the
Securities Act of 1933, as amended (the "1933 Act"), or unless an exemption from
such registration is available, and that the certificate(s) representing the
Shares may bear a legend to that effect. Optionee understands that the Company
is under no obligation to register the Shares and that an exemption may not be
available or may not permit Optionee to transfer Shares in the amounts or at the
times proposed by Optionee.
4. Tax Consequences. Optionee understands that Optionee may
suffer adverse tax consequences as a result of Optionee's purchase or
disposition of the Shares. Optionee represents that Optionee has consulted with
any tax consultant(s) Optionee deems advisable in connection with the purchase
or disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
5. Delivery of Payment. Optionee herewith delivers to the Company
the aggregate purchase price for the Shares that Optionee has elected to
purchase and has made provision for the payment of any federal or state
withholding taxes required to be paid or withheld by the Company.
6. Entire Agreement. The Agreement is incorporated herein by
reference. This Exercise Notice and the Agreement constitute the entire
agreement of the parties and supersede in their entirety all prior undertakings
and agreements of the Company and Optionee with respect to the subject matter
hereof. This Exercise Notice and the Agreement are governed by California law
except for that body of law pertaining to conflict of laws.
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<PAGE> 18
Submitted by: Accepted by:
OPTIONEE: CYBERMEDIA, INC.
__________________________________ By:______________________________
Its:_____________________________
Address:
Dated:____________________________ Dated:___________________________
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<PAGE> 1
EXHIBIT 10.5
CYBERMEDIA, INC.
KEY EMPLOYEES' RIGHT OF FIRST REFUSAL,
CO-SALE AND VOTING AGREEMENT
This Key Employees' Right of First Refusal, Co-Sale and Voting
Agreement is made as of September 29, 1995 (the "Agreement") by and among
CyberMedia, Inc., a California corporation (the "Company"), each of the
individuals and entities listed on Exhibit A to this Agreement (the
"Investors"), and Unnikrishnan S. Warrier, Srikanth Chari, and Anne T. Lam
(collectively, the "Key Employees" and each individually a "Key Employee").
RECITALS
A. On September 29, 1995, the Company and certain Investors entered
into a Series B Preferred Stock Purchase Agreement, pursuant to which certain
Investors agreed to purchase up to 6,442,858 shares of the Company's Series B
Preferred Stock.
B. As a condition to such investment, and in connection with the
foregoing agreement, the Key Employees agreed to grant to the Company and the
Investors certain rights of first refusal, co-sale participation and voting, all
as detailed herein.
In consideration of the foregoing and the promises and covenants
contained herein, the parties agree as follows:
SECTION 1
Certain Definitions
As used in this Agreement the following terms shall have the following
respective meanings:
1.1 "Common Stock" shall mean the Common Stock of the Company.
1.2 "Conversion Shares" shall mean the shares of Common Stock issued or
issuable upon conversion of shares of Preferred Stock.
1.3 "Preferred Stock" shall mean the Company's Series A Preferred Stock
and Series B Preferred Stock.
1.4 "Common Stock" shall mean the Common Stock of the Company.
<PAGE> 2
1.5 "Conversion Shares" shall mean the Common Stock issued or issuable
upon conversion of the Preferred Stock.
1.6 "Shareholder" shall mean each holder of Common Stock, Series A
Preferred Stock and Series B Preferred Stock.
SECTION 2
Right of First Refusal
2.1 Company Right. If at any time, and from time to time, a Key
Employee (a "Seller") proposes to sell or transfer to a third party (a "Proposed
Transferee") any Common Stock of the Company held now or hereafter acquired by
such Key Employee (the "Offered Securities"), then the Seller shall first offer
to sell the Offered Securities to the Company at the same price and on the same
terms and conditions (subject to Section 2.7) in a writing promptly delivered to
the Company (the "Company Offer"), which Company Offer shall remain open and
irrevocable for a period of fifteen (15) days after delivery and during which
period the Seller shall not sell or transfer any Common Stock to a Proposed
Transferee (the "Company Offer Period"). The Company Offer shall describe in
reasonable detail the proposed sale or transfer including, without limitation,
the number of shares of Common Stock to be sold or transferred, the nature of
such sale or transfer, the consideration to be paid, the material terms and
conditions upon which the proposed sale or transfer is to be made and the
identity of the proposed purchaser or transferee. In the Company Offer, the
Seller shall certify that he believes in good faith that a binding agreement for
sale or transfer is obtainable on the terms set forth and include a copy of any
written proposal or letter of intent or other agreement relating to the proposed
sale or transfer.
2.2 Notice of Company Acceptance. Notice of the Company's election to
accept, in whole or in part, a Company Offer shall be made by a writing signed
by an officer of the Company specifying the portion of the Offered Securities
that the Company elects to purchase, delivered to the Seller prior to the
expiration of the Company Offer Period (the "Company Acceptance Notice").
2.3 Investor Right. If the Company does not elect to purchase all of
the Offered Securities, the Company shall give notice to the Investors in a
writing substantially similar to the Company Offer, and the Seller shall offer
to sell to each Investor before any sale or transfer would be made to a Proposed
Transferee (i) that portion of the Offered Securities not elected to be
purchased by the Company pursuant to Section 2.2 as the aggregate number of
shares of Common Stock and Conversion Shares held by or issuable to such
Investor bears to the total number of shares of Common Stock and Conversion
Shares held by or issuable to all the Investors (the "Basic Amount") and (ii)
such additional portion of the remaining Offered Securities as any Investor
indicates it will purchase should any of the Investors subscribe for less than
their Basic Amounts (the "Undersubscription Amount") and to which such Investor
is entitled under Section 2.4 below, at the same price and on the same terms and
conditions (subject to Section 2.7) as those set forth in the Company Offer (the
"Investor Offer"), which Investor Offer shall remain open and irrevocable for a
period of twenty (20) days and during which period the Seller shall not sell any
Shares of Common Stock to a Proposed Transferee (the "Investor Offer Period").
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<PAGE> 3
2.4 Notice of Investor Acceptance. Notice of an Investor's election to
accept the Investor Offer, in whole or in part, shall be evidenced by a writing
signed by such Investor, setting forth the amount that the Investor elects to
purchase (and, if such Investor elects to purchase more than its Basic Amount,
the Undersubscription Amount that such Investor elects to purchase, if any), and
delivered to the Seller prior to the end of the Investor Offer Period (the
"Acceptance Notice"). If the Basic Amounts subscribed for by the Investors are
less than the total amount of Securities the Investors are entitled to purchase
pursuant to Section 2.3, then each Investor specifying an Undersubscription
Amount in its Investor Acceptance shall be entitled to purchase the
Undersubscription Amount specified; provided, however, that should the
Undersubscription Amounts subscribed for exceed the difference between the total
amount of Offered Securities the Investors are entitled to purchase and the
Basic Amounts subscribed for (the "Available Undersubscription Amount"), each
Investor who has subscribed for any Undersubscription Amount shall be entitled
to purchase only that portion of the Available Undersubscription Amount as is
determined by multiplying such Available Undersubscription Amount by a fraction,
the numerator of which is the aggregate number of shares of Common Stock and
Conversion Shares held by or issuable to such Investor and the denominator of
which is the aggregate number of shares of Common Stock and Conversion Shares
held by or issuable to the Investors who have subscribed for an
Undersubscription Amount; provided further, however, that if, as a result of the
allocation of the Available Undersubscription Amount described above, any
Investor shall be allocated a number of shares greater than the number of shares
it has indicated it is willing to purchase, it shall not be required to purchase
such shares; rather such additional shares shall be reallocated in accordance
with the above formula among the other Investors who have subscribed for an
Undersubscription Amount. All amounts determined by the formula set forth in
this Section 2.4 shall be subject to rounding by the Board of Directors to the
extent it reasonably deems necessary.
2.5 Permitted Sales of Refused Securities. In the event that the amount
of the Offered Securities the Company and the Investors elect to purchase does
not equal the total amount of the Offered Securities, Seller shall have ninety
(90) days from the expiration of the Investor Offer Period to sell or transfer,
subject to Section 3 below, all or any part of the Offered Securities for which
a Company Acceptance Notice or an Investor Acceptance Notice has not been given
(the "Refused Securities") to the Proposed Transferee at the same price and on
the same terms as those set forth in the Company Offer.
2.6 Closing. Upon the closing of the sale or transfer to the Proposed
Transferee (the "Closing") of all or less than all the Refused Securities (and
any shares to be sold pursuant to Section 3 below), the Company and/or the
Investors shall purchase the amount of Offered Securities specified in each
respective Acceptance Notice upon the terms and conditions specified in the
Company Offer and, if applicable, the Investor Offer (subject to Section 2.7).
The consummation of such purchase shall be subject to the preparation, execution
and delivery of a purchase agreement reasonably satisfactory to the Company
and/or the Investors, as the case may be, and their respective counsel. In
addition, Seller shall promptly remit to each Investor that portion of the sale
proceeds to which each Investor is entitled by reason of its participation in
such sale or transfer pursuant to Section 3 below.
2.7 Non-Cash Consideration. If the consideration for the Offered
Securities set forth in the Company Offer and, if applicable, the Investor Offer
is other than cash, the Company and/or the Investors shall pay the Fair Market
Value of such shares. "Fair Market Value" shall mean (a) fair market value as
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<PAGE> 4
determined by mutual agreement of the Seller and the Company and/or the
Investors, or, in the event that such parties cannot reach mutual agreement as
to fair market value, (b) fair market value as determined by an investment
banking firm of national reputation reasonably acceptable to each of the Seller
and the Company and/or the Investors (expenses of such valuation to be shared
equally between the parties).
2.8 Further Sale. Any Offered Securities not purchased by the Company,
Investors or the Proposed Transferee in accordance with this Section 2 may not
be sold or otherwise disposed of until they are again offered to the Company and
the Investors in accordance with this Section 2.
SECTION 3
Investor Right of Co-Sale
3.1 Right to Participate. Subject to Sections 2.1 and 4, each Investor
shall have the right to participate in any sale or transfer to a Proposed
Transferee upon the same terms and conditions as set forth in the Investor
Offer, subject to the terms and conditions set forth in this Section 3; provided
that (i) the Seller proposes to sell more than 5% of the total shares of Common
Stock held by such Seller during any twelve-month period, or (ii) such sale or
transfer would result in a Proposed Transferee acquiring more than 5% of the
total outstanding capital stock of the Company on a fully diluted and converted
basis. An Investor shall exercise its right by delivering to the Seller, prior
to the expiration of the Investor Offer Period, (i) written notice of its
intention to participate, specifying the amount of shares Investor desires to
sell to the Proposed Transferee, and (ii) one or more certificates, duly
endorsed for transfer, representing either (a) the number of shares of Common
Stock that such Investor elects to sell or (b) that number of shares of
Preferred Stock which is at such time convertible into the number of shares of
Common Stock that such Investor elects to sell; provided, however, that if the
Proposed Transferee objects to the delivery of shares of Preferred Stock in lieu
of shares of Common Stock, such Investor shall convert such shares of Preferred
Stock into shares of Common Stock and deliver shares of Common Stock as provided
in subclause (a). The Company agrees to make any such conversion concurrent with
the actual transfer of such shares to the Proposed Transferee.
3.2 Qualified Participation. Each Investor shall have the right to sell
up to that number of shares of Common Stock equal to the product of (i) the
amount of Offered Securities multiplied by (ii) a fraction, the numerator of
which is the number of shares of Common Stock and Conversion Shares owned by
such Investor at the time of such sale or transfer, and the denominator of which
is the total number of shares of Common Stock and Conversion Shares owned by the
Seller and the Investors as a group, at the time of such sale or transfer. In
the event that Proposed Transferee desires to purchase a number of shares of
Common Stock different from the amount of the Offered Securities, the amount
that the Proposed Transferee desires to purchase shall be substituted for
Offered Securities in the above equation for the purpose of determining each
Investor's participation rights. In the event of Investor participation, the
amount of Refused Securities which Seller is entitled to sell on Seller's own
behalf pursuant to Section 2 hereof shall be reduced accordingly, and Seller
shall include such Investor shares in the sale at the Closing.
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<PAGE> 5
3.3 Restrictions Imposed by Transferee. To the extent that any Proposed
Transferee prohibits such assignment or otherwise refuses to purchase shares
from an Investor exercising its rights of co-sale hereunder, the Seller shall
not sell to the Proposed Transferee any Common Stock unless and until,
simultaneously with such sale or transfer, the Seller shall purchase such shares
from such Investor on the same terms and conditions specified in the Investor
Offer.
3.4 Non-Cash Consideration. To the extent that the consideration for
the Offered Securities set forth in the Investor Offer is other than cash, the
Investors shall pay the Fair Market Value of such shares.
3.5 Continuing Rights. The exercise or non-exercise of the right to
participate hereunder with respect to a particular sale or transfer by a Seller
shall not adversely affect an Investor's right to participate in subsequent
sales by the same or other Sellers pursuant to this Section 3.
SECTION 4
Additional Provisions
4.1 Invalid Transfers. Any sale, assignment or other transfer of Common
Stock by Seller contrary to the provisions of Sections 2 and 3 hereof shall be
null and void, and the transferee shall not be recognized by the Company as the
holder or owner of the Common Stock sold, assigned, or transferred for any
purpose (including, without limitation, voting or dividend rights), unless and
until the Seller has satisfied the requirements of Sections 2 and 3 with respect
to such sale or transfer. Seller shall provide the Company and the Investors
with written evidence that such requirements have been met or waived prior to
consummating any sale, assignment or other transfer of securities, and no Common
Stock shall be transferred on the books of the Company until such written
evidence has been received by the Company and the Investors.
4.2 Prohibited Transfers.
(a) Notwithstanding Section 4.1, in the event that a Seller
should sell or transfer any Common Stock in contravention of the first refusal
and co-sale rights of each Investor under this Agreement (a "Prohibited
Transfer"), each Investor, in addition to such other remedies as may be
available at law, in equity or hereunder, shall have the put option provided
below, and such Seller shall be bound by the applicable provisions of such
option.
(b) In the event of a Prohibited Transfer, each Investor shall
have the right to sell to such Seller the type and number of shares of Common
Stock equal to the number of shares each Investor would have been entitled to
transfer to the Proposed Transferee had the Prohibited Transfer been effected
pursuant to and in compliance with the terms hereof. Such sale or transfer shall
be made on the following terms and conditions:
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<PAGE> 6
(i) The price per share at which the shares are to be
sold to the Seller shall be equal to the price per share paid by the Proposed
Transferee to such Seller in such Prohibited Transfer.
(ii) Within ten (10) days after the date on which an
Investor received notice of the Prohibited Transfer or otherwise became aware of
the Prohibited Transfer, such Investor shall, if exercising the option created
hereby, deliver to the Seller the certificate or certificates representing
shares to be sold, each certificate to be properly endorsed for transfer.
(iii) Such Seller shall, upon receipt of the certificate
or certificates for the shares to be sold by an Investor, pursuant to this
Section 4.2(b), pay the aggregate purchase price therefor, in cash or such other
consideration as the Seller received in the Prohibited Transfer.
4.3 Permitted Transfers. Notwithstanding the foregoing, the provisions
of Sections 2 and 3 shall not apply to (i) any pledge of Seller's shares of
Common Stock made pursuant to a bona fide loan transaction with a financial
institution that creates a mere security interest, (ii) any transfer to a member
of the Seller's immediate family or to a trust established by the Seller for the
benefit of the seller or the Seller's immediate family (including, in each case,
transfer by bona fide gifts or inheritance), or (iii) any bona fide gift;
provided that in the event of any such permitted transfers, (A) the Seller shall
inform the Investors of such pledge, transfer or gift prior to effecting it and
(B) the pledgee, transferee or donee (as the case may be, a "Permitted
Transferee") shall furnish the Investors with a written agreement, in form and
substance reasonably satisfactory to the Company and the Investors, to be bound
by and comply with the terms of this Agreement. Such transferred shares of
Common Stock shall remain subject to the terms of this Agreement, and references
to a "Seller" hereunder shall be deemed thereafter to apply to and include the
permitted transferee of such shares.
4.4 Termination. The rights of each Investor under this Agreement shall
terminate upon (i) that point in time when such Investor no longer owns any
Securities, or (ii) the closing of an underwritten public offering pursuant to
an effective registration statement under the Securities Act of 1933, as
amended, covering the offer and sale of Common Stock for the account of the
Company to the public in which the aggregate gross proceeds to the Company
exceed $10,000,000 and the price per share is not less than $3.50 (as adjusted
to reflect stock dividends, stock splits, combination, subdivisions,
recapitalizations and the like).
4.5 Legends.
(a) Legend. Each certificate representing shares of the Common
Stock of the Company now or hereafter owned by the Key Employee or sold or
otherwise transferred to any Permitted Transferee shall be endorsed with the
following legend:
"THE SALE OR TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO THE TERMS AND CONDITIONS OF A RIGHT OF
FIRST REFUSAL, CO-SALE, AND VOTING AGREEMENT BY AND BETWEEN
THE INVESTOR, THE CORPORATION, AND CERTAIN HOLDERS OF
PREFERRED STOCK OF THE CORPORATION. COPIES OF SUCH AGREEMENT
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<PAGE> 7
MAY BE OBTAINED UPON WRITTEN REQUEST TO THE SECRETARY OF THE
CORPORATION."
(b) Legend Removal. The legend referred to in Section 4.5
shall be removed upon termination of this Agreement in accordance with the
provisions of Section 4.4 above.
SECTION 5
Right of First Refusal for Company Stock Sales
5.1 Grant of Right. The Company hereby grants to each Investor the
right of first refusal to purchase all or any part of such Investor's Pro Rata
Share (as hereinafter defined) of the New Securities (as defined in Section 5.2)
which the Company may, from time to time, propose to sell and issue. The
Investors may purchase said New Securities on the same terms and at the same
price at which the Company proposes to sell the New Securities. The Pro Rata
Share of each Investor, for purposes of this right of first refusal, is the
ratio of the total number of shares of Common Stock and Conversion Shares held
by or issuable to such Investor, to the total number of shares of Common Stock
and Conversion Shares outstanding immediately prior to the issuance of the New
Securities.
5.2 New Securities. "New Securities" shall mean any shares of capital
stock of the Company, whether now authorized or not, and any rights, options or
warrants to purchase said capital stock, and securities of any type whatsoever
that are, or may become, convertible into said capital stock; provided, however,
that "New Securities" does not include (i) securities offered pursuant to a
registration statement filed under the Securities Act, as hereinafter defined;
(ii) securities issued pursuant to the acquisition of another corporation of the
Company by a merger, purchase of substantially all of the assets or other
reorganization; (iii) all shares of Series A Preferred Stock outstanding; (iv)
securities issued pursuant to any convertible securities, options or warrants on
the date hereof; (v) the shares of Series B Preferred Stock purchased pursuant
to the Series B Stock Purchase Agreement of even date herewith; (vi) up to an
aggregate of 3,500,000 shares of Common Stock (or options therefor) hereafter
issued or issuable to officers, directors, employees or consultants of the
Company pursuant to any employee or consultant stock offering, plan or
arrangement approved by the Board of Directors of the Company; and (vii) capital
stock, options, warrants or other convertible securities issued in connection
with an equipment lease or other similar transaction which is approved by the
Board of Directors of the Company.
5.3 Notice. In the event the Company proposes to undertake an issuance
of New Securities, it shall give to the Investors written notice (the "Notice")
of its intention, describing the type of New Securities, number of shares, the
price, the terms upon which the Company proposes to issue the same, and a
statement as to the number of days from receipt of such Notice within which the
Investors must respond to such Notice. The Investors shall have thirty (30) days
from the date of such Notice to purchase any or all of the 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
and forwarding payment for such New Securities to the Company if immediate
payment is required by such terms, or in any event no later than thirty (30)
days after the date of receipt of the Notice.
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<PAGE> 8
5.4 Sale after Notice. In the event the Investors fail to exercise in
full the right of first refusal within said thirty (30) day period, the Company
shall have ninety (90) days thereafter to sell or enter into an agreement to
sell the New Securities respecting which the Investors' rights were not
exercised, at a price and upon general terms no more favorable than specified in
the Notice. In the event the Company has not sold the New Securities within said
ninety (90) day period, the Company shall not thereafter issue or sell any New
Securities without first offering such securities to the Investors in the manner
provided above.
SECTION 6
Election of Directors
6.1 Agreement to Elect Directors. Each party to this Agreement agrees
to take all actions necessary to cause the Board of Directors of the Company to
approve and appoint, or, as the case may be, to confirm and ratify the
appointment of, the designees described below: (i) so long as the holders of the
Series B Preferred Stock hold at least 20% of the outstanding capital stock of
the Company, up to two individuals designated thereby, one of which shall be
designated by Nazem and Company IV, L.P. and one of which shall be designated by
New Enterprise Associates VI, Limited Partnership; (ii) up to three individuals
designated by the holders of shares of Common Stock and Series A Preferred Stock
of the Company representing a majority of the votes that such shares of Common
Stock and Series A Preferred Stock is entitled to cast, one of whom shall be the
Chief Executive Officer of the Company; and (iii) up to four outside directors
nominated by any one of such aforementioned five directors and approved by the
remaining four of such aforementioned directors and designated by the holders of
shares of Common Stock, Series A Preferred Stock and Series B Preferred Stock
representing a majority of votes that such shares of Common Stock, Series A
Preferred Stock and Series B Preferred Stock is entitled to cast.
SECTION 7
Miscellaneous
7.1 Survival. The representations, warranties, covenants and agreements
made herein shall survive the closing of the transactions contemplated hereby.
7.2 Entire Agreement. This Agreement and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof.
7.3 Notice. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by registered or certified
mail, postage prepaid, or otherwise delivered by hand or by messenger, addressed
(a) if to an Investor, at Investor's address set forth on Exhibit A, or at such
other address as Investor shall have furnished to the Company in writing, (b) if
to a Key Employee,
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<PAGE> 9
at Key Employee's address set forth on Exhibit B or at such other address as Key
Employee shall have furnished to the Company in writing, and (c) if to the
Company, to the address set forth on Exhibit C and addressed to the attention of
the Corporate Secretary, or to such other address as the Company shall have
furnished to the Investors and the Key Employees. If notice is provided by mail,
notice shall be deemed to be given upon proper deposit in the mail (and if
outside the United States, sent by airmail).
7.4 Successors and Assigns. This Agreement and the rights and
obligations of the parties hereunder shall inure to the benefit of, and be
binding upon, their respective successors, assigns and legal representatives.
7.5 Amendments or Waivers. Neither this Agreement nor any term hereof
may be amended, waived, discharged or terminated other than by written
instrument signed by the party against whom enforcement of any such amendment,
waiver, or discharge or termination is sought; provided, however, that the
holders of a majority of the Common Stock and the Conversion Shares held by the
Investors voting together may waive, discharge, terminate, modify or amend on
behalf of all Investors, any provisions hereof.
7.6 Counterparts. This Agreement may be executed in any number of
counterparts, all of which together shall constitute one instrument, and each of
which may be executed by less than all of the parties to this Agreement.
7.7 Severability. In the event that any provision of this Agreement
becomes or declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this Agreement to any party.
7.8 Governing Law. The Agreement shall be governed by and construed in
accordance with the laws of the State of California as applied to the agreements
made and performed in California by residents of California.
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<PAGE> 10
The foregoing Key Employees' Right of First Refusal, Co-Sale and Voting
Agreement is hereby executed as of the date first above written.
CYBERMEDIA, INC..
By: __________________________
Title: _______________________
KEY EMPLOYEES
______________________________ ______________________________
Unnikrishnan S. Warrier Anne T. Lam
______________________________
Srikanth Chari
<PAGE> 1
Exhibit 10.6
================================================================================
CYBERMEDIA, INC.
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
(SERIES C PREFERRED STOCK FINANCING)
July 3, 1996
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Registration Rights ............................................. 1
1.1 Definitions ............................................. 1
1.2 Request for Registration ................................ 2
1.3 Company Registration .................................... 3
1.4 Form S-3 Registration ................................... 3
1.5 Obligations of the Company .............................. 5
1.6 Furnish Information ..................................... 6
1.7 Expenses of Registration ................................ 6
1.8 Underwriting Requirements ............................... 6
1.9 Delay of Registration ................................... 7
1.10 Indemnification ......................................... 7
1.11 Reports Under Securities Exchange Act of 1934 ........... 8
1.12 Assignment of Registration Rights ....................... 9
1.13 Limitations on Subsequent Registration Rights ........... 9
1.14 "Market Stand-Off" Agreement ............................ 10
1.15 Amendment of Registration Rights ........................ 10
1.16 Termination of Registration Rights ...................... 10
2. Termination of Prior Restated Rights Agreement .................. 10
3. Miscellaneous Provisions ........................................ 10
3.1 Notices ................................................. 10
3.2 Descriptive Headings .................................... 11
3.3 Governing Law ........................................... 11
3.4 Counterparts ............................................ 11
3.5 Expenses ................................................ 11
3.6 Successors and Assigns .................................. 11
3.7 Entire Agreement ........................................ 11
3.8 Separability; Severability .............................. 11
3.9 Stock Splits ............................................ 11
3.10 Facsimile Signatures .................................... 11
</TABLE>
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<PAGE> 3
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
This Amended and Restated Registration Rights Agreement (the
"Agreement") is made as of July 3, 1996 by and among CyberMedia, Inc. (the
"Company") and the undersigned investors listed on Exhibit A to this Agreement
(the "Investors").
WHEREAS, the Company intends to enter into a Series C Preferred Stock
Purchase Agreement of even date herewith, and, in connection with this
transaction, the Company wishes to amend and restate its Fourth Amended and
Restated Registration Rights Agreements dated September 29, 1995, among the
Company and certain investors (the "Prior Restated Rights Agreement").
NOW THEREFORE, the parties hereby agree as follows:
1. Registration Rights. The Company covenants and agrees as follows:
1.1 Definitions. For purposes of this Section 1:
(a) The term "Act" shall mean the Securities Act of
1933, as amended.
(b) The term "Form S-3" means such form under the Act
as in effect on the date hereof or any registration form under the Act
subsequently adopted by the Securities and Exchange Commission (the "SEC") which
permits inclusion or incorporation of substantial information by reference to
other documents filed by the Company with the SEC.
(c) The term "Holder" means any person owning or
having the right to acquire Registrable Securities or any assignee thereof in
accordance with Section 1.12 hereof; and
(d) The term "register", "registered," and
"registration" refer to a registration effected by preparing and filing a
registration statement or similar document in compli ance with the Act, and the
declaration or ordering of effectiveness of such registration statement or
document;
(e) The term "Registrable Securities" means (i) the
Common Stock issuable or issued upon conversion of Series A Preferred Stock
issued pursuant to the Series A Preferred Stock Purchase Agreement dated as of
December 9, 1992, (ii) the Common Stock issuable or issued upon conversion of
the Series A Preferred Stock issuable or issued pursuant to the Series A
Preferred Stock Purchase Agreement dated February 28, 1994, (iii) the Common
Stock issuable or issued upon conversion of the Series A Preferred Stock
issuable or issued upon exercise of warrants issued pursuant to the Series A
Preferred Stock Purchase Agreement dated February 28, 1994, (iv) the Common
Stock issuable or issued upon conversion of the Series A Preferred Stock
issuable or issued pursuant to the Series A Preferred Stock Purchase Agreement
dated December 21, 1994, (v) the Common Stock issuable or issued upon conversion
of the Series A Preferred Stock issuable or issued pursuant to the Series A
Preferred Stock Purchase Agreement dated January 13, 1995, (vi) the
<PAGE> 4
Common Stock issuable or issued upon conversion of Series B Preferred Stock
issued pursuant to Subordinated Convertible Promissory Notes dated June 7, 1995,
(vii) the Common Stock issuable or issued upon conversion of the Series A
Preferred Stock issuable or issued upon exercise of Warrants issued September
15, 1996, (viii) the Common Stock issuable or issued upon the conversion of
Series B Preferred Stock issued pursuant to the Series B Preferred Stock
Purchase Agreement dated September 29, 1995, (ix) the Common Stock issuable or
issued upon the conversion of Series C Preferred Stock issued pursuant to the
Series C Preferred Stock Purchase Agreement date July 3, 1996, and (x) any
Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of,
such Series A Preferred Stock, Series B Preferred Stock or Common Stock,
excluding in all cases, however, (A) any Registrable Securities sold by a person
in a transaction in which his rights under this Section 1 are not assigned, or
(B) any Registrable Securities sold to or through a broker or dealer or
underwriter in a public distribution or a public securities transaction.
(f) The number of shares of "Registrable Securities
then outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities.
1.2 Request for Registration.
(a) If the Company shall receive at any time after
December 31, 1997 a written request from the Holders of at least thirty-three
percent (33%) of the outstanding Registrable Securities (including securities
convertible into Registrable Securities) covering the registration of at least
thirty-three percent (33%) of the Registrable Securities (or any lesser number
of shares if the anticipated aggregate offering price, net of underwriting
discounts and commissions, would exceed $5,000,000), then the Company shall,
within ten (10) days of the receipt thereof, give written notice of such request
to all Holders and shall, subject to the limitations of Section 1.2(b), effect
as soon as practicable, and in any event within 90 days of the receipt of such
request, the registration under the Act of all Registrable Securities which the
Holders request to be registered within twenty (20) days of the mailing of such
written notice by the Company; provided, however, that the Company shall not be
obligated to take any action to effect any such registration, qualification or
compliance pursuant to this Section 1.2(a):
(i) During the period starting with the
date sixty (60) days prior to the Company's estimated date of filing of, and
ending on the date one hundred eighty (180) days immediately following the
effective date of, any registration statement pertaining to securities of the
Company (other than a registration of securities in a Rule 145 transaction or
with respect to an employee benefit plan), provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective;
(ii) After the Company has effected two
such registrations pursuant to this Section 1.2(a) and such registrations have
been declared or ordered effective;
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<PAGE> 5
(iii) If 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 it would be seriously detrimental
to the Company or its shareholders for a registration statement to be filed at
such time, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 1.2(a) shall be deferred for a period not
to exceed one hundred twenty (120) days from the date of receipt of written
request from the Holders; provided, however, that the Company may not utilize
this right more than once in any twelve-month period.
(b) If the Holders initiating the registration
request hereunder (the "Initiating Holders") intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 1.2 and the Company shall include such information in the written
notice referred to in Section 1.2(a). In such event, the right of any Holder to
include his Registrable Securities in such registration shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless otherwise mutually
agreed by a majority in interest of the Initiating Holders and such Holder) to
the extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with the Company as provided in
Section 1.5(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by a majority in
interest of the Initiating Holders. Notwithstanding any other provision of this
Section 1.2, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder; provided, however,
that any registration so limited shall not be deemed to be a registration for
purposes of Section 1.2(a)(ii).
1.3 Company Registration. If (but without any obligation to do
so) the Company proposes to register (including for this purpose a registration
effected by the Company for share holders other than the Holders) any of its
stock or other securities under the Act in connection with the public offering
of such securities solely for cash (other than a registration relating solely to
the sale of securities to participants in a Company stock plan, or a
registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities), the Company shall, at such
time, promptly give each Holder written notice of such registration. Upon the
written request of each Holder given within ten (10) days after mailing of
written notice by the Company, the Company shall, subject to the provisions of
Section 1.8, cause to be registered under the Act all of the Registrable
Securities that each such Holder has requested to be registered.
1.4 Form S-3 Registration. In case the Company shall receive
from any Holder or Holders a written request or requests that the Company effect
a registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder or
Holders, the Company will:
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<PAGE> 6
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders;
and
(b) as soon as practicable, effect such registration
and all such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Holder's or Holders' Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any other
Holder or Holders joining in such request as are specified in a written request
given within 15 days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this Section 1.4: (1) if
Form S-3 is not available for such offering by the Holders; (2) if the Holders,
together with the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the public (net of any
underwriters' discounts or commissions) of less than $1,000,000; (3) if the
Company shall furnish to the Holders a certificate signed by the President of
the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be seriously detrimental to the Company and its
shareholders for such Form S-3 Registration to be effected at such time, in
which event the Company shall have the right to defer the filing of the Form S-3
registration statement for a period of not more than 90 days after receipt of
the request of the Holder or Holders under this Section 1.4; provided, however,
that the Company shall not utilize this right more than once in any twelve (12)
month period; (4) if the Company has already effected two registrations on Form
S-3 for the Holders pursuant to this Section 1.4; or (5) in any particular
jurisdiction in which the Company would be required to qualify to do business or
to execute a general consent to service of process in effecting such
registration, qualification or compliance.
(c) If the Holders initiating the registration
request hereunder (the "Initiating Holders") intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as part of their request made pursuant to this
Section 1.4 and the Company shall include such information in the written notice
referred to in Section 1.4(a). In such event, the right of any Holder to include
his Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company as provided in Section
1.5(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by a majority in
interest of the Initiating Holders. Notwithstanding any other provision of this
Section 1.4, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder.
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<PAGE> 7
(d) Subject to the foregoing, the Company shall file
a registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt of
the request or requests of the Holders; provided, however, that the Company
shall not be required to effect more than one registration pursuant to this
Section 1.4 in any twelve-month period. Registrations effected pursuant to this
Section 1.4 shall not be counted as demands for registration or registrations
effected pursuant to Section 1.2 or 1.3, respectively.
1.5 Obligations of the Company. Whenever required under this
Section 1 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective, and, upon the request
of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for up to ninety (90)
days.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.
(c) Furnish to the Holders such numbers of copies of
a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement provided that such underwriting agreement
shall not provide for indemnification or contribution obligations on the part of
the holders greater than the obligations set forth in Section 1.10(b).
(f) Notify each Holder of Registrable Securities
covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material
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<PAGE> 8
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing.
(g) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 1, on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 1, if such securities
are being sold through underwriters, or, if such securities are not being sold
through underwriters, on the date that the registration statement with respect
to such securities becomes effective, an opinion, dated such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities.
1.6 Furnish Information. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Section 1
with respect to the Registrable Securities of any selling Holder that such
holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such Holder's
Registrable Securities.
1.7 Expenses of Registration. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Sec tions 1.2, 1.3 and 1.4,
including (without limitation) all registration, filing and qualification fees,
printers' and accounting fees, fees and disbursements of counsel for the
Company, and the reasonable fees and disbursements of one counsel for the
selling Holders shall be borne by the Company; provided, however, that the
Company shall not be required to pay for any expenses of any registration
proceeding begun pursuant to Section 1.2 if the registration request is
subsequently withdrawn at the request of the Holders of a majority of the
Registrable Securities to be registered (in which case all Participating Holders
shall bear such expenses), unless the Holders of a majority of the Registrable
Securities agree to forfeit their demand registration right pursuant to Section
1.2; provided further, however, that if at the time of such withdrawal, the
Holders have learned of a material adverse change in the condition, business, or
prospects of the Company from that known to the Holders at the time of their
request, then the Holders shall not be required to pay any of such expenses and
shall retain their rights pursuant to Section 1.2.
1.8 Underwriting Requirements. In connection with any offering
involving an underwriting of shares being issued by the Company, the Company
shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it, and then
only in such quantity as will not, in the opinion of the underwriters,
jeopardize the success of the offering by the Company; provided that such
underwriting agreement shall not provide for indem nification or contribution
obligations on the part of the Holders greater than the obligations set forth in
Section 1.10(b). If the total amount of securities, including Registrable
Securities, requested by shareholders to be included in such offering exceeds
the amount of securities sold other than by the Company that the underwriters
reasonably believe compatible with the success of the offering, then
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<PAGE> 9
the Company shall be required to include in the offering only that number of
such securities, including Registrable Securities, which the underwriters
believe will not jeopardize the success of the offering (the securities so
included to be allocated in the following priority: first, apportioned pro rata
among Holders of Registrable Securities, and second, apportioned pro rata among
any other selling shareholders, according to the total amount of securities
entitled to be included therein owned by each selling shareholder or in such
other proportions as shall mutually be agreed to by such selling shareholders)
but in no event shall any shares being sold by a Holder exercising a demand
registration right pursuant to Section 1.2 be excluded from such offering. For
purposes of apportionment, any selling shareholder which is a Holder of
Registrable Securities and which is a partnership or corporation, the partners,
retired partners and shareholders of such Holder, or the estates and family
members of any such partners and retired partners and any trusts for the benefit
of any of the foregoing persons shall be deemed to be a single "selling
shareholder", and any pro rata reduction with respect to such "selling
shareholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling shareholder", as defined in this sentence.
1.9 Delay of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.
1.10 Indemnification. In the event any Registrable Securities
are included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, any underwriter (as defined in the Act)
for such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Act or the Securities Exchange Act of 1934, amended
(the "1934 Act"), against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Act, the 1934 Act or other
federal or state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively a "Violation"): (i)
any untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the Act, the 1934
Act, any state securities law or any rule or regulation promulgated under the
Act, the 1934 Act or any state securities law; and the Company will pay to each
such Holder, underwriter or controlling person, as incurred, any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this Section 1.10(a) shall not apply
to amounts paid in settlement of any such loss, claim, damage, liability, or
action if such settlement is effected without the consent of the Company (which
consent shall not be unreasonably withheld), nor shall the Company be liable in
any such case for any such loss, claim, damage, liability, or action to the
extent that it arises out of or is based upon a Violation
-7-
<PAGE> 10
which occurs in reliance upon and in conformity with written information
furnished expressly for use in connection with such registration by any such
Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling
Holder will indemnify and hold harmless the Company, each of its directors, each
of its officers who has signed the registration statement, each person, if any,
who controls the Company within the meaning of the Act, any underwriter, any
other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any losses,
claims, damages, or liabilities (joint or several) to which any of the foregoing
persons may become subject, under the Act, the 1934 Act or other federal or
state law, insofar as such losses, claims, damages, or liabilities (or actions
in respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished by such Holder
expressly for use in connection with such registration; and each such Holder
will pay, as incurred, any legal or other expenses reasonably incurred by any
person intended to be indemnified pursuant to this Section 1.10(b), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this Section 1.10(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; provided, that, in no event shall any indemnity under this Sec tion
1.10(b) exceed the gross proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party
under this Section 1.10 of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 1.10,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if preju dicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 1.10, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
1.10.
(d) The obligations of the Company and Holders under
this Section 1.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.11 Reports Under Securities Exchange Act of 1934. With a
view to making available to the Holders the benefits of Rule 144 promulgated
under the Act and any other rule or
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<PAGE> 11
regulation of the SEC that may at any time permit a Holder to sell securities of
the Company to the public without registration or pursuant to a registration on
Form S-3, the Company agrees to:
(a) make and keep public information available, as
those terms are understood and defined in SEC Rule 144, at all times after
ninety (90) days after the effective date of the first registration statement
filed by the Company for the offering of its securities to the general public;
(b) take such action, including the voluntary
registration of its Common Stock under Section 12 of the 1934 Act, as is
necessary to enable the Holders to utilize Form S-3 for the sale of their
Registrable Securities, such action to be taken as soon as practicable after the
end of the fiscal year in which the first registration statement filed by the
Company for the offering of its securities to the general public is declared
effective;
(c) file with the SEC in a timely manner all reports
and other documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns
any Registrable Securities, forthwith upon request (i) a written statement by
the Company that it has complied with the reporting requirements of SEC Rule 144
(at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company) or the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
1.12 Assignment of Registration Rights. The rights to cause
the Company to register Registrable Securities pursuant to this Section 1 may be
assigned by a Holder to a transferee or assignee who acquires at least 100,000
shares of Registrable Securities, provided the Company is, within thirty (30)
days time after such transfer, furnished with written notice of the name and
address of such transferee or assignee and the securities with respect to which
such registration rights are being assigned; and provided, further, that such
assignment shall be effective only if immediately following such transfer the
further disposition of such securities by the transferee or assignee is
restricted under the Act. Notwithstanding the above, such rights may be assigned
by a Holder to a subsidiary, parent, limited partner, general partner, retired
partner or other affiliate of a Holder, or to Holder's trust for the benefit of
an individual Holder (the "Transferee") regardless of the number of shares
acquired by such Transferee.
1.13 Limitations on Subsequent Registration Rights. From and
after the date of this Agreement, the Company shall not, without the prior
written consent of the Holders of at least a majority of the outstanding
Registrable Securities, enter into any agreement with any holder or prospective
holder of any securities of the Company which would allow such holder or
prospective
-9-
<PAGE> 12
holder to include such securities in any registration filed under Section 1.2
hereof, unless under the terms of such agreement, such holder or prospective
holder may include such securities in any such registration only to the extent
that the inclusion of his securities will not reduce the amount of the
Registrable Securities of the Holders which is included.
1.14 "Market Stand-Off" Agreement. Each holder of securities
which are or at one time were Registrable Securities (or which are or were
convertible into Registrable Securities) hereby agrees that, during a period not
to exceed 180 days following the effective date of a registration statement of
the Company filed under the Act (other than a registration relating solely to a
transaction under Rule 145 under the Securities Act or to an employee benefit
plan of the corporation), it shall not, to the extent requested by the Company
and such underwriter, sell or otherwise transfer or dispose of (other than to
donee who agree to be similarly bound) any Common Stock of the Company held by
it at any time during such period except Common Stock included in such
registration; provided, however, that all officers and directors of the Company,
all shareholders holding more than 0.5% of the outstanding Capital Stock of the
Company, and all other persons with registration rights not pursuant to this
Agreement enter into similar agreements and provided further that such agreement
only applies to the Company's initial public offering.
In order to enforce the foregoing covenant, the
Company may impose stop- transfer instructions with respect to the Registrable
Securities of each Investor (and the shares or securities of every other person
subject to the foregoing restriction) until the end of such period.
1.15 Amendment of Registration Rights. Any provision of this
Section 1 may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
at least a majority of the Registrable Securities then outstanding. Any
amendment or waiver effected in accordance with this section shall be binding
upon each holder of any securities which are or at one time were Registrable
Securities (or which are or were convertible into Registrable Securities), each
future holder of all such securities, and the Company.
1.16 Termination of Registration Rights. No shareholder shall
be entitled to exercise any right provided for in this Section 1 after five (5)
years following the consummation of the sale of securities pursuant to a
registration statement filed by the Company under the Act in connec tion with
the initial firm commitment underwritten offering of its securities to the
general public.
2. Termination of Prior Restated Rights Agreement. The Prior Restated
Rights Agreement is hereby terminated and superseded in its entirety by this
Agreement. This termination shall be effective upon the execution of this
Agreement by the Company and the holders of more than 50% of the Registrable
Securities outstanding under the Prior Restated Rights Agreement.
3. Miscellaneous Provisions.
3.1 Notices. All notices and other communications required or
permitted hereunder shall be in writing and, except as otherwise noted herein,
shall be deemed effectively given upon personal delivery, delivery by nationally
recognized courier or upon deposit with the United
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<PAGE> 13
States Post Office, (by first class mail, postage prepaid) addressed: (a) if to
the Company, at 3000 Ocean Park Boulevard, Suite 2001, Santa Monica, California
90405 (or at such other address as the Company shall have furnished to the
Holders in writing) attention of President and (b) if to a Holder, at the latest
address of such person shown on the Company's records.
3.2 Descriptive Headings. The descriptive headings herein have
been inserted for convenience only and shall not be deemed to limit or otherwise
affect the construction of any provisions hereof.
3.3 Governing Law. This Agreement shall be governed by and
interpreted under the laws of the State of California as applied to agreements
among California residents, made and to be performed entirely within the State
of California.
3.4 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original and all of which shall constitute the same instrument, but only one of
which need be produced.
3.5 Expenses. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
3.6 Successors and Assigns. Except as otherwise expressly
provided in this Agreement, this Agreement shall benefit and bind the
successors, assigns, heirs, executors and administrators of the parties to this
Agreement.
3.7 Entire Agreement. This Agreement constitutes the full and
entire under standing and agreement between the parties with regard to the
subject matter of this Agreement.
3.8 Separability; Severability. Unless expressly provided in
this Agreement, the rights of each Investor under this Agreement are several
rights, not rights jointly held with any other Investors. Any invalidity,
illegality or limitation on the enforceability of this Agreement with respect to
any Investor shall not affect the validity, legality or enforceability of this
Agreement with respect to the other Investors. If any provision of this
Agreement is judicially determined to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not be
affected or impaired.
3.9 Stock Splits. All references to numbers of shares in this
Agreement shall be appropriately adjusted to reflect any stock dividend, split,
combination or other recapitalization of shares by the Company occurring after
the date of this Agreement.
3.10 Facsimile Signatures. Any signature page delivered by fax
machine or telecopy machine shall be binding to the same extent as an
originature signature page, with regard to any agreement subject to the terms
hereof or any amendment thereto. Any party who delivers such a signature page
agrees to later deliver an original counterpart to any party which requests it.
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<PAGE> 14
IN WITNESS WHEREOF, the parties have executed this Amended and Restated
Registration Rights Agreement on the day and year first set forth above.
CYBERMEDIA, INC.
By:__________________________
Unnikrishnan S. Warrier,
President
<PAGE> 15
The foregoing Amended and Restated Registration Rights Agreement is
hereby executed as of the date first above written.
Name of Investor Number and Class of Shares
- -------------------------------- -----------------------------
- --------------------------------
Print Name
- --------------------------------
Signature
<PAGE> 16
EXHIBIT A
SCHEDULE OF INVESTORS
<PAGE> 17
John Bartas
C. Gorden Bell
Giselle Bisson
Chi-Ching Chang
Gandhi Chargugundla
Srikanth Chari
Sriram Chari
Alice Chen
Yongwoo Cho
Eric Di Benedetto
Draper Associates II, L.P.
William H. Draper, III
Alex Eckelberry
Ram Paul Gupta
Satish Gupta
Michael L. Hackworth
Saurabh Jain
Ravi Kannan
Rhonda Karp
Ghalib Kassam
William Kelley
Anne T. Lam
Herlinda Leong Trust
Binh Ly
Farshad Meshkinpour
Nazem & Company IV, L.P.
New Enterprise Associates VI,
Limited Partnership
NEA Ventures 1995,
Limited Partnership
A.J. Patel
Ramesh Patil
Suhas Patil
Ron Posner
Roy Prasad
Art Puryear
T.M. Ravi
H. Ravindra
The Benjamin Rekhi Trust Dated December 15,
1989, Kanwalnain Singh Rekhi, Ann Holt
Rekhi and Navindera Jain as Trustees
The Raj-ann Kaur Rekhi Trust Dated
December 15, 1989, Kanwalnain Singh Rekhi,
Ann Holt Rekhi and Navindera Jain as Trustees
The Rekni Family Trust
Arthur F. Schneiderman
Sam Srinivasan
Thampy Thomas
Thorner Ventures
Mohan Trikha
Jonathan Tran
Mansour Vakili
R. Venkatraman
Larry Waggoner
Balachandran Wariyar
Unnikrishnan Warrier
WS Investment Company 92C
WS Investment Company 95A
<PAGE> 1
EXHIBIT 10.7
SUBLEASE AGREEMENT
This SUBLEASE AGREEMENT ("Sublease") is made and entered into on this
____ day of December, 1995 by and between Century Southwest Cable Television,
Inc. ("Sublandlord" or "Tenant") and CyberMedia Corporation ("Subtenant").
WHEREAS, Barclay Curci Investment Company, a California general
partnership, as landlord ("Landlord"), and Century Southwest Cable Television,
Inc., a Delaware corporation, as Tenant, entered into a lease dated March 22,
1995, whereby Landlord leased to Tenant a portion of the second and third floors
of the building located at 3000 Ocean Park Boulevard, Santa Monica, California
(the "Building"), as more particularly described in the Master Lease, upon the
terms and conditions contained therein. A copy of the Master Lease is attached
hereto as Exhibit "A" and made a part hereof. All capitalized terms used herein
shall have the same meaning ascribed to them in the Master Lease unless
otherwise defined herein.
WHEREAS, Sublandlord and Subtenant are desirous of entering into a
sublease of a portion of the second floor of the building shown cross-hatched in
black on the demising plan annexed hereto as Exhibit "B" and made a part hereof
("Sublease Premises"), on the terms and conditions hereafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto mutually
covenant and agree as follows:
1. Demise. Sublandlord hereby subleases and demises to Subtenant and
Subtenant hereby hires and subleases from Sublandlord the Sublease Premises
(which the parties stipulate contain 16,162 rentable square feet), on the second
floor of the Building, upon and subject to the terms, covenants, conditions
hereinafter set forth. Subtenant acknowledges that it has reviewed the Master
Lease (including the Parking License Agreement) and is familiar with the terms
and conditions thereof.
2. Sublease Term. The term of this Sublease ("Term") shall commence on
the later of (a) ten (10) days following approval of Landlord of fully executed
Sublease, or (b) January 1, 1996 ("Sublease Commencement Date") and ending,
unless sooner terminated as provided herein, on July 10, 2000 ("Sublease
Expiration Date").
3. Use. The Sublease Premises shall be used and occupied by Subtenant
for general office use and other legally permitted uses consistent with the
character of the Building and the Master Lease and for no other purpose.
4. Subrental.
(a) Base Rent. Beginning with the Sublease Commencement Date and
thereafter during the Term of this Sublease and ending on the Sublease
Expiration Date, Subtenant shall pay to Sublandlord rent based on the following
schedule:
$23,434.90 (=$1.45 PSF/RSF) for months 1-12
$25,051.10 (=$1.55 PSF/RSF) for months 13-24
$26,667.30 (=$1.65 PSF/RSF) for months 25-36
$28,283.50 (=$1.75 PSF/RSF) for months 37-48
$29,899.70 (=$1.85 PSF/RSF) for balance of Sublease Term.
Base Rent and additional rent shall hereinafter be collectively referred to as
"Rent".
(b) Prorations. If the Sublease Commencement Date is not the first
(1st) day of a month, or if the Sublease Expiration Date is not the last day of
a month, a prorated installment of monthly Base Rent based on a thirty (30) day
month shall be paid for the fractional month during which the obligation to pay
Rent commenced or terminated.
(c) Additional Rent. Beginning with the Sublease Commencement Date
and continuing to the Sublease Expiration Date, Subtenant shall pay to
Sublandlord as additional rent for this subletting all special or after-hours
cleaning, heating, ventilating, air conditioning, elevator and other Building
charges incurred at the request of, or on behalf of, Subtenant, or with respect
to the Sublease Premises and all other additional expenses, costs and charges
payable to Landlord in connection with Subtenant's use of the Sublease Premises.
<PAGE> 2
(d) Expenses. Beginning with the start of calendar year 1997 and
thereafter during the Term, Subtenant shall pay to Sublandlord as additional
rent for this subletting an amount equal to the increase, if any, in Expenses
which Sublandlord is required to pay under Article 6 of the Master Lease over
the amount of Expenses which Sublandlord is required to pay for calendar year
1996 under said Article 6; however, Subtenant's share of all Expenses that
exceed Landlord's 1996 Base Costs shall be 25.68 percent (25.68%) calculated
based upon the Sublease Premises of 16,162 RSF and the total Building Rentable
Area of 62.940 RSF.
(e) Payment of Rent. Except as otherwise expressly provided in this
Sublease, Rent shall be payable in lawful money without demand, and without
offset, counterclaim, or set-off, in monthly installments, in advance, on the
first day of each month and every month during the Term of the Sublease. All of
said Rent is to be paid to the Sublandlord at the address set forth below, or at
such other place or to such agent and at such place as Sublandlord may
designated by written notice to Subtenant. Any additional rent payable on
account of items which are not payable monthly by Sublandlord to Landlord under
the Master Lease is to be paid to Sublandlord as and when such items are payable
by Sublandlord to Landlord under the Master Lease unless a different time for
payment is elsewhere stated herein. Sublandlord agrees to provide Subtenant with
copies of any statements or invoices for any such items received by Sublandlord
from Landlord pursuant to the terms of the Master Lease.
5. Security Deposit and Financial Statements
(a) Security Deposit. Concurrently with the execution of this
Sublease, Subtenant shall deposit wit h Sublandlord the sum of $29,899.70
("Deposit"), which shall be held by Sublandlord as security for the full and
faithful performance by Subtenant of its covenants and obligations under this
Sublease. The Deposit is not an advance Rent deposit, an advance payment of any
other kind, or a measure of Sublandlord's damage in case of Subtenant's default.
If Subtenant defaults in the full and timely performance of any or all of
Subtenant's covenants and obligations set forth in this Sublease, then
Sublandlord may, from time to time, without waiving any other remedy available
to Sublandlord, use the Deposit, or any portion of it, to the extent necessary
to cure or remedy the default or to compensate Sublandlord for all or a part of
the damages sustained by Sublandlord resulting from Subtenant's default.
Subtenant shall immediately pay to Sublandlord within five (5) business days
following demand the amount so applied in order to restore the Deposit to its
original amount, and Subtenant's failure to immediately do so shall constitute a
default under this Sublease. If Subtenant is not in default with respect to the
covenants and obligations set forth in this Sublease at the expiration or
earlier termination of this Sublease, Sublandlord shall return the Deposit to
Subtenant within five (5) days after the expiration or earlier termination of
this Sublease. Sublandlord's obligations with respect to the Deposit are those
of a debtor and not a trustee. Sublandlord shall not be required to maintain the
Deposit separate and apart from Sublandlord's general or other funds and
Sublandlord may commingle the Deposit with any of Sublandlord's general or other
funds. Subtenant shall not at any time be entitled to interest on the Deposit.
(b) Financial Statements. Subtenant represents and warrants that the
Balance Sheet dated November 30, 1995 and the Statement of Operations for the
twelve-month period ending November 30, 1995 are, to the best of its knowledge,
true, correct and accurate.
6. Furniture. During the Term, Subtenant shall have the right to use,
at the Sublease Premises, the furniture currently at the Sublease Premises upon
the Sublease Commencement Date. Title to the furniture shall remain in
Sublandlord during the Sublease Term. Provided that this Sublease shall not have
been terminated early as a result of a default by Subtenant and further provided
that Subtenant shall not be in default on the Sublease Expiration Date, title to
the furniture shall automatically pass to Subtenant effective on the Sublease
Expiration Date. Sublandlord and Subtenant agree to accept as a General
Inventory of Furniture, Exhibit "C", to be included in this agreement and
attached hereto.
7. Expansion Right. For purposes of this Sublease, the term "Expansion
Space" shall refer to Suite(s) A, B and/or C within the 11,291 square-foot area
of the third floor of the Building as shown on Exhibit "D" hereto. In the event
that Subtenant desires to expand the Sublease Premises to include Suite(s) A, B
and/or C of the Expansion Space and that portion, or those portions, of the
Expansion Space desired has not been subleased by another party, and further
provided that Subtenant is not in default of this Sublease, Subtenant shall have
an option to expand the Sublease Premises to include Suite(s) A, B and/or C of
the Expansion Space under the same terms and conditions as are set forth in this
Sublease, and the rental amount per square foot for the Expansion Space shall be
the same as that in effect with respect to the original Sublease Premises at the
time of expansion. Any additional rent, expenses and the like payable by
Subtenant under the Sublease shall be increased in an amount proportionate to
the increase in the Sublease Premises.
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<PAGE> 3
Subtenant shall exercise its expansion option, if any, by providing notice to
Sublandlord at least thirty (30) days prior to the effective date of such
expansion.
8. Parking. Subtenant shall have the right during the Term, to use up
to sixty-four (64) unassigned automobile parking privileges in the parking
facilities of the Building as the type set forth in the Parking License
Agreement attached to the Master Lease ("Parking Agreement"). All such parking
privileges shall be at the rates and subject to the terms and conditions set
forth in the Parking Agreement, and Subtenant shall reimburse Sublandlord, upon
demand, for those amounts billed to Sublandlord by Landlord for said parking
privileges.
9. Incorporation of Terms of Master Lease.
(a) This Sublease is subject and subordinate to the Master Lease.
Subject to the modifications set forth in this Sublease, the terms of the Master
Lease are incorporated herein by reference, and shall, as between Sublandlord
and Subtenant (as if they were Landlord and Tenant, respectively, under the
Master Lease) constitute the terms of this Sublease except to the extent that
they are inapplicable to, inconsistent with, or modified by, the terms of this
Sublease. In the event of any inconsistencies between the terms and provisions
of the Master Lease and the terms and provisions of this Sublease, the terms and
provisions of this Sublease shall govern, except in any such instance where
having the Sublease govern would constitute or cause a breach or default under
the Master Lease. Subtenant acknowledges that it has reviewed the Master Lease
(including the Parking Agreement) and is familiar with the terms and conditions
thereof.
(b) For the purposes of incorporation herein, the terms of the
Master Lease are subject to the following additional modifications:
(i) In all provisions of the Master Lease (under the terms
thereof and without regard to modifications thereof for purposes of
incorporation into this Sublease) requiring the approval or consent of Landlord,
Subtenant shall be required to obtain, in addition to an approval or consent of
Landlord, the approval or consent of Sublandlord, which shall not unreasonably
be withheld (with notice of approval, consent or denial thereof not to be
unreasonably delayed).
(ii) In all provisions of the Master Lease requiring Tenant to
submit, exhibit to, supply or provide Landlord with evidence, certificates, or
any other matter or thing, Subtenant shall be required to submit, exhibit to,
supply or provide, as the case may be, the same to both Landlord and
Sublandlord. In any such instance, Sublandlord shall reasonably determine if
such evidence, certificate or other matter or thing shall be satisfactory.
(iii) Neither Sublandlord nor Subtenant shall have any
obligation to restore or rebuild any portion of the Sublease Premises after any
destruction or taking by eminent domain.
10. Subtenant's Obligations. Subtenant covenants and agrees that all
obligations of Sublandlord under the Master Lease shall be done or performed by
Subtenant with respect to the Sublease Premises, except as otherwise expressly
provided by this Sublease, and Subtenant's obligations shall run to Sublandlord
and Landlord as Sublandlord may determine to be appropriate or be required by
the respective interests of Sublandlord and Landlord. Subtenant agrees to
indemnify and hold harmless Sublandlord from and against any and all claims,
damages, losses, expenses and liabilities (including reasonable attorneys' fees)
incurred as a result of the non-performance, non-observance or non-payment of
any of Sublandlord's obligations under the Master Lease, which, as a result of
this Sublease, became an obligation of Subtenant. If Subtenant makes any payment
to Sublandlord pursuant to this indemnity, Subtenant shall be subrogated to the
rights of Sublandlord concerning said payment. Subtenant shall not do or permit
to be done any act or thing which is, or with notice or the passage of time
would be, a default under this Sublease or the Master Lease.
11. Sublandlord's Obligations.
(a) Sublandlord agrees that Subtenant shall be entitled to receive
all services and repairs to be provided by Landlord to Sublandlord under the
Master Lease. Subtenant shall look solely to Landlord for all such services and
shall not, under any circumstances, seek or require Sublandlord to perform any
of such services, nor shall Subtenant make any claim upon Sublandlord for any
damages which may arise by reason of Landlord's default under the Master Lease.
Subtenant does hereby waive any cause of action and any right to bring any
action against Sublandlord by reason of any act or omission of Landlord under
the Master Lease. Sublandlord covenants and agrees with Subtenant that
Sublandlord will pay all fixed rent and
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<PAGE> 4
additional rent payable by Sublandlord pursuant to the Master Lease to the
extent that failure to perform the same would adversely affect Subtenant's use
or occupancy of the Sublease Premises.
(b) In the event Landlord shall be in default of any covenant of or
shall fail to honor any obligation under the Master Lease or Parking License
Agreement, Subtenant shall have available to it, through the Sublandlord,
against Landlord, all of the remedies available (i) to Sublandlord under the
Master Lease in the event of a similar default on the part of the Landlord
hereunder, provided that Subtenant shall have first provided to Sublandlord
notice adequate pursuant to the Master Lease of such default or failure, or (ii)
at law.
12. Default by Subtenant. In the event Subtenant shall be in default of
any covenant of or shall fail to honor any obligation under this Sublease,
Sublandlord shall have available to it against Subtenant all of the remedies
available (a) to Landlord under the Master Lease in the event of a similar
default on the part of the Sublandlord hereunder or (b) at law.
13. Quiet Enjoyment. So long as Subtenant pays all of the Rent due
hereunder and performs all of Subtenant's other obligations hereunder,
Sublandlord shall do nothing to affect Subtenant's right to peaceable and
quietly have, hold and enjoy the Sublease Premises.
14. Notices. Anything contained in any provisions of this Sublease to
the contrary notwithstanding, Subtenant agrees, with respect to the Sublease
Premises, to comply with and remedy any default in this Sublease of the Master
Lease which is Subtenant's obligation to cure, within the period allowed to
Sublandlord under the Master Lease, even if such time period is shorter than the
period otherwise allowed therein due to the fact that notice of default from
Sublandlord to Subtenant is given after the corresponding notice of default from
Landlord to Sublandlord. Sublandlord agrees to forward to Subtenant, promptly
upon receipt thereof by Sublandlord, a copy of each notice of default received
by Sublandlord in its capacity as Tenant under the Master Lease. Subtenant
agrees to forward to Sublandlord, promptly upon receipt thereof, copies of any
notices received by Subtenant from Landlord or from any governmental
authorities. All notices, demands and requests shall be in writing and shall be
sent either by hand delivery by a nationally recognized overnight courier
service (e.g., Federal Express), or by certified U.S. mail, in either case
return receipt requested, to the address of the appropriate party. Notices,
demands and requests so sent shall be deemed given when the same are received.
Notices to Subtenant shall be sent to the attention of:
CyberMedia, Inc.
3000 Ocean Park Boulevard, Suite 2001
Santa Monica, California 90405
Attention: Controller
Notices to Sublandlord shall be sent to the attention of:
Century Southwest Cable Television, Inc.
c/o Century Communications Corp.
50 Locust Avenue
New Canaan, Connecticut 06840
Attention: Assistant Controller
with copy to:
Legal Department
c/o Century Communications Corp.
50 Locust Avenue
New Canaan, Connecticut 06840
15. Broker. Sublandlord and Subtenant represent and warrant to each
other that with the exception of Les Small & Company representing Subtenant and
Cushman & Wakefield of California, Inc. representing Sublandlord (collectively
"Brokers"), no brokers were involved in connection with the negotiation or
consummation of this Sublease. Sublandlord agrees to pay the commission of the
Brokers pursuant to the October 20, 1995 Exclusive Leasing Agreement between
Cushman & Wakefield of California, Inc. and Sublandlord. Each party agrees to
indemnify the other, and hold it harmless, from and against any and all claims,
damages, losses, expenses and liabilities (including reasonably attorneys' fees)
incurred by said party as a result of a breach of this representation and
warranty by the other party.
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<PAGE> 5
16. Condition of Premises. Subtenant acknowledges that it is subleasing
the Sublease Premises "as-is" and that Sublandlord is not making any
representation or warranty concerning the condition of the Sublease Premises and
that Sublandlord is not obligated to perform any work to prepare the Sublease
Premises for Subtenant's occupancy. Subtenant acknowledges that it is not
authorized to make or do any alterations or improvements in or to the Sublease
Premises except as permitted by the provisions of this Sublease and Master Lease
and that it must deliver the Sublease Premises to Sublandlord on the Sublease
Expiration Date in the condition required by the Master Lease, except that it
may leave the Tenant Improvements in place.
17. Consent of Landlord. This Sublease shall not be effective unless
and until Landlord executes the Consent of Landlord attached hereto.
18. Termination of the Master Lease. If for any reason the term of the
Master Lease shall terminate prior to the Sublease Expiration Date, this
Sublease shall automatically be terminated and Sublandlord shall not be liable
to Subtenant by reason thereof unless said termination shall have been caused by
the default of Sublandlord under the Master Lease and said Sublandlord default
was not caused or contributed to by a Subtenant default hereunder.
19. Assignment and Subletting.
(a) Independent of and in addition to any provisions of the Master
Lease, including without limitation the obligation to obtain Landlord's consent
to any assignment, it is understood and agreed that Subtenant shall have no
right to sublet the Sublease Premises or any portion thereof or any right or
privilege appurtenant thereto; provided, however that Subtenant shall have the
right to assign this Sublease or any interest therein, and to suffer or permit
any other person (other than agents, servants or associates of the Subtenant) to
occupy or use the Sublease Premises, only upon the prior written consent of
Sublandlord, which consent shall not be unreasonably withheld, and upon the
prior consent of Landlord. Any assignment by Subtenant without Sublandlord's and
Landlord's prior written consent shall be void and shall, at the option of
Sublandlord, terminate this Sublease.
(b) Subtenant shall advise Sublandlord by notice of (i) Subtenant's
intent to assign this Sublease, (ii) the name of the proposed assignee and
evidence reasonably satisfactory to Sublandlord that such proposed assignee is
comparable in reputation, stature and financial condition to tenants then
leasing comparable space in comparable buildings, and (iii) the terms of the
proposed assignment. Sublandlord shall within thirty (30) days after receipt of
such notice, and any additional information requested by Landlord concerning the
proposed assignee's financial responsibility, elect of the following:
(i) Consent to such proposed assignment; or
(ii) Refusal of such consent, which refusal shall be on
reasonable grounds.
(c) In the event that Sublandlord shall consent to an assignment
under the provisions of this section, Subtenant shall pay Sublandlord's and
Landlord's reasonable processing costs and reasonable attorneys' fees incurred
in giving such consent, not to exceed $1,000.00 (One Thousand Dollars).
Notwithstanding any permitted assignment, Subtenant shall at all times remain
directly, primarily and fully responsible and liable for all payment owed by
Subtenant under the Sublease and for compliance with all obligations under the
terms, provisions and covenants of the Sublease. If, for any proposed
assignment, Subtenant receives Rent (excluding any abated Rent) or other
consideration, either initially or over the term of the assignment, in excess of
the Rent required by this Sublease, after a deduction for (a) any brokerage
commission paid by Subtenant in connection therewith, and (b) any reasonable
attorneys' fees incurred by Subtenant in connection with preparing and
negotiating an assignment document, and (c) any other reasonable marketing costs
incurred by Subtenant for the purpose of effecting such assignment (such amount,
less deductions for (a), (b) and (c), referred to as "Profit"), Subtenant shall
pay to Sublandlord as Additional Rent, fifty percent (50%) of such Profit or
other consideration received by Subtenant within five (5) days after its receipt
by Subtenant or, in the event the assignee makes payment directly to
Sublandlord, Sublandlord shall refund fifty percent (50%) of the Profit to
Subtenant.
20. Limitation of Estate. Subtenant's estate shall in all respects be
limited to, and be construed in a fashion consistent with, the estate granted to
Sublandlord by Landlord. Subtenant shall stand in the place of Sublandlord and
shall defend, indemnify and hold harmless Sublandlord with respect to all
covenants, warranties, obligations, and payments made by Sublandlord under or
required of Sublandlord by the Master Lease with respect to the Subleased
Premises. In the event Sublandlord is prevented from performing any of its
obligations under this Sublease by a breach by Landlord of a term of the Master
Lease, then
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<PAGE> 6
Sublandlord's sole obligation in regard to its obligation under this Sublease
shall be to use reasonable efforts in diligently pursuing the correction or cure
by Landlord of Landlord's breach.
21. Entire Agreement. It is understood and acknowledged that with the
exception of the Master Lease, there are no oral or other agreements between
parties hereto affecting this Sublease and this Sublease supersedes and cancels
any and all previous negotiations, arrangements, brochures, letters of intent,
agreements and understandings, if any, between the parties hereto or displayed
by Sublandlord to Subtenant with respect to the subject matter thereof, and none
thereof shall be used to interpret or construe this Sublease. This Sublease, and
exhibits attached hereto, contain all of the terms, covenants, conditions,
warranties and agreements of the parties relating in any manner to the rental,
use and occupancy of the Sublease Premises and shall be considered to be the
only agreements between the parties hereto and their representatives and agents.
None of the terms, covenants, conditions or provisions of this Sublease can be
modified, deleted or added to except in a writing signed by the parties hereto.
All negotiations and oral agreements acceptable to both parties have been merged
into and are included herein and in the Master Lease. There are no other
representations or warranties between the parties, and all reliance with respect
to representations is based totally upon the representations and agreements
contained in this Sublease.
22. Severability. In the event that any provision of this Sublease is
invalid or unenforceable, the remainder of this Sublease shall not be affected.
and a suitable and equitable provision shall be substituted for the invalid or
unenforceable provision in order to carry out, as far as may be valid and
enforceable, the intent and purpose of such invalid or unenforceable provision.
IN WITNESS WHEREOF, the parties have entered into this Sublease as of
the date first written above.
SUBLANDLORD:
CENTURY SOUTHWEST CABLE TELEVISION, INC.
By: Illegible
____________________________________
Name:___________________________________
Its:____________________________________
SUBTENANT:
CYBERMEDIA CORPORATION
By: Illegible
____________________________________
Name:___________________________________
Its:____________________________________
Exhibit A Lease dated March 22, 1995 between Century Southwest Cable
Television, Inc., a Delaware corporation, and Barclay Curci
Investment Company, a California general partnership.
Exhibit B Plan of Sublease Premises.
Exhibit C General Inventory of Furniture.
Exhibit D Expansion Space.
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<PAGE> 7
EXHIBIT B
DESCRIPTION OF PREMISES
Suite 2001
3000 Ocean Park Boulevard ("R")
Santa Monica, California
<PAGE> 8
EXHIBIT "C"
GENERAL INVENTORY OF FURNITURE
Workstations assembled 36
Workstations unassembled (in training room) All
Office desks 16
Executive desk and bookcase 1 & 1
Round desks/conference 10
Large conference table 1
Small conference table 1
Rectangle tables (in training room) 11
Armchairs (swivel) (6 in the training room) 89
Chairs (nonswivel) (6 in the training room) 69
Conference chairs (in training room) 20
Credenza 17
Black shelving (almost in all offices) multiple
Filing cabinets (almost in all offices and workstations) multiple
<PAGE> 9
EXHIBIT D
DESCRIPTION OF PREMISES
A = 1,109 USF
B = 1,342 USF
C = 7,689 USF
Suite 3010
3000 Ocean Park Boulevard ("R")
Santa Monica, California
<PAGE> 10
CONSENT TO SUBLETTING
(Amendment)
THIS CONSENT TO SUBLETTING ("Consent") is made as of this 24th day of
May, 1996, by and among BARCLAY CURCI INVESTMENT COMPANY, a California general
partnership ("Landlord"), CENTURY SOUTHWEST CABLE TELEVISION, INC., a Delaware
corporation ("Tenant"), and CYBERMEDIA, INC., a California corporation
("Subtenant").
RECITALS
A. Landlord and Tenant entered into that certain Office Lease made as
of March 22, 1995 ("Master Lease"), wherein Landlord leased to Tenant certain
premises known as Suites 2001 and 3010 ("Premises") in that certain building
located at 3000 Ocean Park Boulevard in the City of Santa Monica, County of Los
Angeles, State of California ("Building"), in a project generally referred to as
Santa Monica Business Park ("Project"), and as more particularly described in
the Master Lease.
B. Tenant and Subtenant entered into that certain Sublease Agreement
dated December 19, 1995 ("Sublease"), wherein Tenant subleased to Subtenant (the
"Transaction") all, or a portion, of the Premises ("Subleased Premises") as more
particularly described in the Sublease.
C. By that certain Consent to Subletting dated February 23, 1996
("Original Consent") by and among Landlord, Tenant and Subtenant, Landlord
consented to the Transaction subject to each and every provision contained in
the Original Consent.
D. Tenant and Subtenant entered into that certain First Addendum to
Sublease effective January 15, 1996, and that certain undated Second Addendum to
Sublease (collectively, "Amendment"), true and correct copies of which are
attached to this Consent.
E. The effectiveness of the Amendment is subject to the consent of
Landlord.
F. Tenant and Subtenant desire to obtain the consent of Landlord to the
Transaction as modified by the Amendment.
NOW, THEREFORE, Landlord hereby reaffirms its consent to the
Transaction subject to and upon the following express terms and conditions, to
which Tenant and Subtenant hereby agree:
1. All initial capitalized terms used in this Consent shall have the
same meaning given such terms in the Master Lease, unless otherwise defined in
this Consent.
2. Tenant and Subtenant represent and warrant to Landlord that the
Amendment to which this Consent is attached (and which by this reference is
incorporated herein), is a true, correct and complete copy of the Amendment
executed by Tenant and Subtenant, that the Sublease has not otherwise been
modified or amended and that there exists no other agreements between Tenant and
Subtenant relating to the Sublease or the Subleased Premises or with respect to
the sale of any fixtures, furnishings, equipment or personal property located
upon the Subleased Premises.
<PAGE> 11
3. Subject to the provisions hereof, and with special reference to
Section 5 below, Landlord hereby acknowledges that the Sublease has been amended
by the Amendment and reaffirms its consent to Transaction contained in the
Original Consent.
4. Each of the parties hereby agrees and affirms that, except as
otherwise expressly provided in this Consent, all of the terms, covenants and
conditions contained in the Original Consent shall remain in full force and
effect.
5. This Consent shall not be effective and the Amendment shall not be
valid unless and until a fully-executed counterpart of this Consent and the
Amendment have been delivered to Landlord.
6. Both Tenant and Subtenant shall be entirely responsible for any and
all commissions, fees and costs for any brokers, finders, agents or other
persons with respect to the Sublease as amended. Tenant and Subtenant, jointly
and severally, shall indemnify, defend and hold Landlord harmless from and
against any claims for any such commissions, fees and costs, and for all costs,
expenses and liabilities incurred in connection with such claims, including
without limitation, attorneys' fees and costs.
7. The Sublease, the Amendment and/or this Consent shall not have the
effect of (a) operating as a consent to, or the approval or the ratification by
Landlord of, any of the provisions contained in the Sublease or the Amendment,
or (b) being construed to modify, waive, impair or affect (i) any of the
covenants, agreements, terms, provisions or conditions contained in the Master
Lease, (ii) any of Tenant's obligations under the Master Lease, or (iii) any
breach or default by Tenant in the performance or observance of its obligations
under the Master Lease, or (c) increasing Landlord's obligations or Tenant's
rights under the Master Lease.
8. Landlord shall not be bound by or in any way estopped by the
provisions of the Sublease or the Amendment.
9. Without limiting any provision contained herein, and notwithstanding
any provision to the contrary contained in the Sublease or the Amendment, the
parties acknowledge that this Consent is not, and shall not be construed as, the
consent to any work of improvement that the parties may desire to undertake upon
the Subleased Premises or the waiver of any provision regarding the restoration
of the Subleased Premises upon the expiration or earlier termination of the
Master Lease, and that all such matters shall be governed by the appropriate
provisions contained in the Master Lease.
10. This Consent is not, and shall not be construed as, the consent to,
or waiver of any right by Landlord, to approve any subsequent subletting or
amendments thereto, assignment or other transaction by Tenant or Subtenant.
Tenant and Subtenant warrant that the Amendment does not provide Subtenant with
the right to assign, mortgage, hypothecate or encumber the Subleased Premises or
Subtenant's interests therein or to sublet the Subleased Premises or any part
thereof, except as expressly permitted by the provisions of the Master Lease.
11. This Consent is not assignable by Tenant or Subtenant.
12. This Consent shall be construed in accordance with the laws of the
State of California, contains the entire agreement of the parties hereto with
respect to the subject matter hereof, and may not be modified or terminated
except in writing by all the parties hereto.
13. This Consent may be executed in counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
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<PAGE> 12
IN WITNESS WHEREOF, Landlord, Tenant and Subtenant have duly executed
this Consent or caused this Consent to be executed by their duly authorized
representatives as of the day and year first above written.
TENANT: CENTURY SOUTHWEST CABLE TELEVISION, INC.,
a Delaware corporation
By: Illegible
______________________________________
Name:____________________________________
Title:___________________________________
By:______________________________________
Name:____________________________________
Title:___________________________________
SUBTENANT: CYBERMEDIA, INC.,
a California corporation
By: Illegible
______________________________________
Name:____________________________________
Title:___________________________________
By:______________________________________
Name:____________________________________
Title:___________________________________
LANDLORD: BARCLAY CURCI INVESTMENT COMPANY,
a California general partnership
By: SC ENTERPRISES,
a California limited partnership,
a general partner
By: SHURL CURCI,
a general partner
By: Illegible
_____________________________
Roberta P. Irish,
his attorney-in-fact
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<PAGE> 13
SECOND ADDENDUM TO SUBLEASE
This SECOND ADDENDUM TO SUBLEASE AGREEMENT ("Second Addendum") modifies
that Sublease Agreement entered into on December 19,1995 by and between Century
Southwest Cable Television, Inc. ("Sublandlord" or "Tenant") and CyberMedia
Corporation ("Subtenant"), as amended by the First Addendum to Sublease between
Sublandlord and Subtenant effective January 15,1996 (the "Sublease Agreement")
as follows:
1. Subtenant and Sublandlord hereby agree that, in addition to the
Sublease Premises described in Paragraph 1 of the Sublease Agreement,
Sublandlord hereby subleases and demises to Subtenant and Subtenant
hereby hires and subleases from Sublandlord the Expansion Space, as
defined in this paragraph 1, which the parties stipulate contain 11,291
rentable square feet. The term "Expansion Space" shall refer to Suites
A, B and C within the 11,291 square foot area of the third floor of the
Building as shown on Exhibit "D" of the Sublease Agreement. Except as
otherwise provided herein, the term "Sublease Premises" as used in the
Sublease Agreement and this Second Addendum shall include the Expansion
Space.
2. Beginning with the effective date of this Second Addendum and
thereafter during the Term of the Sublease Agreement and ending on the
Sublease Expiration Date, Subtenant shall pay to Sublandlord, in
addition to the amounts set forth in the Sublease Agreement, a Base
Rent amount of $14,113.75 (= $1.25 PSF/RSF) per month for the Expansion
Space, and the term "Base Rent" as used in the Sublease Agreement shall
include this additional amount.
3. Paragraph 4(d) of the Sublease Agreement is hereby modified by
replacing the number "25.68" with the number "43.617" throughout the
paragraph and by replacing the number "16,162" with the number
"27,453."
4. Concurrently with the execution of this Second Addendum, Subtenant
shall deposit with Sublandlord the sum of $14,113.75. The term
"Deposit" as used in the Sublease Agreement shall include this
additional amount, for a total Deposit amount of $44,003.45.
5. Subtenant represents and warrants that the Balance Sheet dated March
31,1996 and the Statement of Operations for the three-month period
ending March 31, 1996 are, to the best of its knowledge, true, correct
and accurate.
6. Paragraph 7 of the Sublease Agreement is hereby deleted.
7. Notwithstanding anything to the contrary in the Sublease Agreement,
Sublandlord hereby reserves all of its rights with respect to any
default by Subtenant of the Sublease Agreement, and Subtenant and
Sublandlord agree that nothing contained in this Second Addendum shall
be construed as an admission by Sublandlord that Subtenant is not in
default of the Sublease Agreement.
8. Beginning with the effective date of this Second Addendum and
thereafter during the Term of the Sublease Agreement and ending on the
Sublease Expiration Date, Subtenant shall have the right to use,
subject to the terms and conditions of the Sublease Agreement, forty
(40) unassigned automobile parking spaces in addition to the parking
privileges set forth in paragraph 8 of the Sublease Agreement.
<PAGE> 14
9. Sublandlord and Subtenant represent and warrant to each other that,
with the exception of Cushman & Wakefield of California, Inc. ("C&W")
representing Sublandlord, no brokers were involved in connection with
the negotiation or consummation of this Second Addendum. Sublandlord
agrees to pay the commission of C&W pursuant to the October 20th, 1995
Exclusive Leasing Agreement between C&W and Sublandlord.
Notwithstanding anything to the contrary in the Sublease Agreement, the
October 20,1995 Exclusive Leasing Agreement as defined in the Sublease
Agreement, or any other agreement between Sublandlord and Subtenant or
between Sublandlord and any broker or between Subtenant and any broker,
Subtenant hereby agrees to indemnify and hold harmless Sublandlord and
C&W from and against any and all claims, damages, losses, expenses and
liabilities (including reasonable attorneys' fees) arising out of or
related to any breach by Subtenant of its representation and warranty
contained in this paragraph 9, including without limitation those
arising out of or related to any alleged representation of Subtenant at
any time by Les Small & Company and any of its employees and agents,
including without limitation, Seth Horowitz. Subtenant acknowledges and
agrees that this indemnity agreement of Subtenant is a material
inducement for Sublandlord to enter into this Second Addendum and that
any breach of this indemnity agreement shall be construed to be a
breach of a material term of the Sublease Agreement.
10. Notwithstanding anything to the contrary in the Sublease Agreement,
Subtenant agrees that Subtenant is leasing the Expansion Space "as is"
and that no furniture or fixtures are included in the Expansion Space.
11. This Second Addendum shall not be effective until the date on which
Sublandlord receives an acceptable Consent to this Second Addendum
which has been fully executed by Sublandlord, Subtenant and Landlord,
and this Second Addendum shall not be effective earlier than May 15,
1996.
12. All terms and conditions of the Sublease Agreement, as amended by the
First Addendum to Sublease, which are not expressly modified by this
Second Addendum, shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have entered into this Second Addendum
as of the date first written above.
SUBLANDLORD: CENTURY SOUTHWEST CABLE TELEVISION
By: Illegible
_______________________________________
Name:_____________________________________
Its_______________________________________
SUBTENANT: CYBERMEDlA CORPORATION
By: Illegible
_______________________________________
Name:_____________________________________
Its_______________________________________
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<PAGE> 15
OFFICE LEASE
This Lease is made as of this 22nd day of March, 1995 by and between
BARCLAY CURCI INVESTMENT COMPANY, a California general partnership ("Landlord"),
and CENTURY SOUTHWEST CABLE TELEVISION, INC., a Delaware corporation ("Tenant").
In consideration of the rents and covenants hereinafter set forth,
Landlord hereby leases to Tenant and Tenant hereby rents from Landlord the
following described Premises, upon the following terms and conditions:
<TABLE>
<S> <C>
1. FUNDAMENTAL LEASE PROVISIONS
1.1 PREMISES: Project: Santa Monica Business Park (Article 2)
Building: 3000 Ocean Park Boulevard ("R")
Suites: 2001 and 3010 Floors: Second and Third
City: Santa Monica
County: Los Angeles
State: California
1.2 FLOOR AREA: Rentable Area: 16,162 square feet on second floor and (Article 2)
11,291 square feet on the third floor for a total of
27,453 square feet.
Usable Area: 14,430 square feet on second floor and
10,081 square feet on the third floor for a total of
24,512 square feet.
1.3 TERM: Sixty (60) months. (Article 3)
</TABLE>
<TABLE>
<CAPTION>
1.4 BASIC RENT: Dollars Per Dollars Per
Months Rentable Square Foot Month
------ -------------------- -----
<S> <C> <C> <C> <C>
1-60 $1.70 $46,670.10 (Article 4)
</TABLE>
<TABLE>
<S> <C>
1.5 EXPENSES: Tenant shall pay Tenant's Share of all Expenses that (Article 6)
exceed Landlord's Base Year Costs together with other
items of Expense as set forth in Article 6. Tenant's Share
is 43.617%. The Base Year shall be the calendar year 1995.
1.6 AFTER-HOURS As of the Commencement Date, Tenant shall pay (Article 12)
CHARGES: After-Hours Charges for Air Conditioning at $25.00 per
hour per unit.
1.7 PREPAID Tenant shall pay the Basic Rent for the first month of the (Article 4)
RENT: term upon execution of this Lease.
1.8 SECURITY None. (Article 9)
DEPOSIT:
1.9 LANDLORD'S c/o TRANSPACIFIC DEVELOPMENT COMPANY (Article 37)
ADDRESS FOR 2377 Crenshaw Boulevard, Suite 300
NOTICES: Torrance, California 90501-3325
1.10 TENANT'S Century Southwest Cable Television, Inc. (Article 37)
ADDRESS FOR 2939 Nebraska
NOTICES: Santa Monica, CA 90404
Attention: Ms. Margaret Bellville
or, after the commencement of the term, to the Premises.
and
Legal Department
c/o Century Communications Corp.
50 Locust Avenue
New Canaan, CT 06840
</TABLE>
<PAGE> 16
<TABLE>
<S> <C>
1.11 BROKER: Transpacific Development Company; Julien J. Studley, (Section 39.3)
Inc.; Cushman & Wakefield.
1.12 GUARANTY: The performance of Tenant's
obligations under this Lease is guaranteed
by Century Communications Corp., a Texas
corporation, pursuant to a Guaranty
Agreement in the form attached hereto as
Exhibit G.
</TABLE>
2. PREMISES
2.1. The approximate location of the premises (the "Premises") leased
hereunder is shown on the drawing attached hereto as Exhibit A. The Premises
consist of that certain space situated in the building (the "Building")
described in Section 1.1 hereof. The total rentable area of the Building is
stipulated to be 62,940 square feet. As used in this Lease, the following terms
have the meanings indicated:
2.1.1. The term "gross area" or "gross square footage" means the
entire area being measured, including vertical elevator and ventilation shafts,
maintenance, telephone, mechanical and electrical rooms and closets, and all
other public areas measured from the exterior of exterior walls and from the
center line of interior demising walls;
2.1.2. The term "usable area" or "usable square footage" means the
entire floor area of tenant space being measured, excluding vertical shafts and
all public areas, measured from the exterior walls and the exterior of interior
corridor walls, and the center line of interior demising walls; and
2.1.3. The term "rentable area" or "rentable square footage" means
the entire area measured in the same way within exterior Building walls
including all common or public areas of the Building allocated proportionately
to each floor of the Building but excluding public stairwells and such vertical
shafts. As to the area leased by Tenant, the rentable area is stipulated to be
the usable area of the Premises increased by twelve percent (12%).
2.2. Landlord and Tenant have satisfied themselves that the "usable
area" and "rentable area" of the Premises and the "rentable area" of the
Building as specified in this Lease are accurate, and they agree to be bound for
all purposes of this Lease to use such usable area and rentable area as are
herein stipulated. Neither Landlord nor Tenant shall have any claims against the
other, or any defense to enforcement of this Lease, due to any subsequently
discovered variation between the usable area and the rentable area stipulated
herein and the actual usable area or rentable area of the Premises or the actual
rentable area of the Building.
2.3. The Premises are (or when constructed will be) a part of a
business/commercial complex consisting of the Building and other buildings,
landscaping, parking facilities and other improvements described as the
"Project" in Section 1.1 hereof and the underlying land. The Project is
generally shown on the drawing attached hereto as Exhibit A-1. Landlord may, in
its sole discretion, change the size, shape, location, number and extent of any
or all of the improvements in the Project without any liability to or consent of
Tenant, except that, unless required to comply with applicable legal
requirements, there shall be no material change in the interior of the Premises
or the access to the Premises or the location and quantity of parking facilities
serving the Premises. Landlord's voluntary changes to the Project shall not
materially increase Tenant's obligation to pay Expenses pursuant to Article 6.
Landlord shall use commercially reasonable efforts to provide Tenant with five
(5) business days prior notice (or shorter notice in case of emergency) of any
of the actions described in this Section 2.3, and in Sections 2.4 and 2.5 below,
to be taken by Landlord if such action will substantially interfere with
Tenant's ability to (i) conduct business in the Premises, (ii) gain access to
and from the parking facilities and adjacent streets, or (iii) use the parking
facilities. However, Tenant shall have no claim for damages in case of
Landlord's failure to give such notice. Landlord shall in all events act
reasonably to avoid or minimize material interference with Tenant's use due to
Landlord's actions under this Section 2.3 and Sections 2.4 and 2.5 below. Tenant
does not rely on the fact nor does Landlord represent that any specific tenant
or number of tenants shall occupy any space in the Project.
2.4. Landlord reserves the right to use the roof and exterior walls of
the Premises, and the area beneath, adjacent to and above the Premises, together
with the right (subject to Section 2.3 above) to install, use, maintain and
replace equipment, machinery, pipes, conduits and wiring through the Premises,
which serve other parts of the Project, in a manner and in locations which do
not unreasonably interfere with Tenant's use of the Premises. No light, air or
view easement is created by this Lease.
2.5. Tenant hereby acknowledges that the Project is being, or may be,
constructed or reconstructed in phases, and that by reason of construction or
reconstruction activities there may be temporary incidents
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<PAGE> 17
thereof such as dust, dirt, barricades, detours, equipment or material in the
Building or Common Areas. Tenant hereby agrees that so long as Landlord conducts
such activities in a reasonable manner (including reasonable efforts to avoid or
minimize interference with Tenant's use) Landlord shall not be liable for any
such incidents of construction or reconstruction.
2.6. Except as specifically provided in the "Construction Provisions"
describing the construction of leasehold improvements (if any), attached hereto
as Exhibit C, Tenant shall lease the Premises on an "As Is" basis and Landlord
shall have no obligation to improve, remodel, alter or otherwise modify the
Premises prior to Tenant's occupancy. Landlord shall deliver the "Base
Building," as that term is defined on the Construction Provisions, to Tenant on
the date which is the first business day following the full execution and
delivery of this Lease by Landlord and Tenant and Tenant's delivery of the
Guaranty Agreement, in the form attached as Exhibit Gateway to this Lease, fully
executed by the Guarantor named therein and in Section 1.12 above. If Landlord
does not deliver the Base Building by the date which is five (5) business days
after the delivery date established in the preceding sentence (the "Outside
Date"), then Tenant shall have the right to deliver a notice to Landlord (a
"Termination Notice") electing to terminate this Lease effective upon the date
occurring fifteen (15) business days following receipt by Landlord of the
Termination Notice (the "Effective Date"). If Landlord delivers the Base
Building after Tenant's delivery of a Termination Notice but before the
Effective Date, Tenant's Termination Notice shall be disregarded and this Lease
shall continue in full force and effect. Upon any termination as set forth in
this Section 2.6, Landlord and Tenant shall be relieved from any and all
liability to each other resulting hereunder except that Landlord shall return to
Tenant any prepaid rent. Tenant's right to terminate this Lease, as set forth in
this Section 2.6, shall be Tenant's sole and exclusive remedy at law or in
equity for the failure of the delivery of the Base Building to occur as set
forth above.
2.7. Landlord shall maintain and operate the Building in a manner
comparable to other first-class office buildings in Santa Monica.
3. TERM
3.1. Commencement Date. The term of this Lease shall be for the
duration set forth in Section 1.3 hereof. The term of this Lease shall commence
on the earlier to occur of (i) one hundred ten (110) days after the full
execution and delivery of this Lease and delivery of possession of the Premises,
or (ii) if the date Tenant (or any subtenant) occupies or commences using any
part of the Premises for the conduct of Tenant's business occurs before one
hundred ten (110) days after the full execution and delivery of this Lease and
delivery of possession of the Base Building, then on the date which represents
the midpoint between the date such beneficial use begins and one hundred ten
(110) days after the full execution and delivery of this Lease and delivery of
possession of the Premises. The date on which the term of this Lease commences
pursuant to the foregoing (the "Commencement Date") shall be confirmed by
Landlord and Tenant in the form set forth in Exhibit B attached hereto when the
same can be ascertained. Failure of Tenant to execute Exhibit B within ten (10)
days after written request from Landlord shall be a material default hereunder.
This Lease shall be a binding contractual agreement effective upon the date of
execution hereof by both Landlord and Tenant, notwithstanding the later
commencement of the term of this Lease; and Tenant's use and occupancy of the
Premises prior to the Commencement Date shall be subject to all terms and
conditions of this Lease, except that Tenant shall not be obligated to pay Rent
prior to the Commencement Date.
3.2. Duration of Term. Tenant has Options to Extend Term under Article
43 below. If the Lease is extended by virtue of an Option to Extend Term,
references herein to "term of this Lease" and words of similar import shall mean
the term specified in Section 1.3 (the "Initial Term"), together with any
Extended Term(s) under Article 43, unless otherwise expressly stated or required
by the context.
4. RENT AND EXPENSE PAYMENTS
4.1. General. The "Rent" or "Rental" hereunder is composed of "Basic
Rent" as set forth in Section 1.4 hereof and adjustments thereto as hereinafter
provided. The term "Expenses" hereunder means all costs, expenses, fees, charges
or other amounts described in Article 6. Tenant agrees to pay to Landlord all
Rent and Expenses required under this Lease, which shall be payable monthly to
Landlord (unless expressly provided otherwise), without deduction or offset
(except as herein expressly provided), in lawful money of the United States of
America at the office maintained by Landlord in the Project or at such other
place as Landlord may from time to time designate in writing. Notwithstanding
any contrary provisions of this Lease, all Expenses, late payment fees,
interest, "After-Hours Charges" parking fees payable under the "Parking License
Agreement" attached hereto, and all other sums of money or charges required to
be paid pursuant to this Lease shall be deemed "Additional Rent" for the
Premises; and in any notice to pay rent or quit the Premises, Landlord may
include and designate same as rent then past due and owing, if such is the case.
No acceptance by Landlord of partial payment of any sum due from Tenant shall be
deemed a waiver by Landlord of any of
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<PAGE> 18
its rights to the full amount due, nor shall any endorsement or statement on any
check or accompanying letter from Tenant be deemed an accord and satisfaction.
Any Rent payments or other sums received from Tenant or am other person shall be
conclusively presumed to have been paid on Tenant's behalf, unless Landlord has
been given prior written notice to the contrary by Tenant. Tenant agrees that
the acceptance by Landlord of any such payment shall not constitute a consent by
Landlord or a waiver of any of its rights under this Lease. In no event shall
the foregoing be construed as requiring Landlord to accept any Rent or other
sums from any person other than Tenant or an "Affiliate" of Tenant (as defined
in Section 28.12 hereof). If the term hereof begins or ends on a day other than
the last day of a month, then the Rent and Expenses for such month shall be
prorated based on the actual number of days in such month. All prorations of
Rent or Expenses under this Lease for fractional periods shall be based on the
actual number of days in such month or year in question.
4.2. Basic Rent. Tenant shall pay the "Basic Rent" set forth in Section
1.4 hereof on the first day of each month in advance, beginning on the
Commencement Date. Landlord may, but shall not be obligated to, send a bill or
statement for Rent to Tenant each month, but Tenant shall be obligated to pay
Rent on the first day of each month regardless of whether or not it receives a
bill or statement.
4.3. Prepaid Rent. Tenant shall pay prepaid Basic Rent for the first
month of the term concurrently with the execution of this Lease, as set forth in
Section 1.7 hereof. The prepaid Basic Rent shall be credited against the Basic
Rent due on the Commencement Date; and if the Commencement Date is a day other
than the first day of a calendar month, the unused portion of the prepaid Basic
Rent shall be credited against the Basic Rent for the second month of the term.
5. INTENTIONALLY OMITTED
6. EXPENSES
6.1. Tenant shall pay its share of "Expenses" on the first day of each
month during the term hereof or otherwise as set forth in this Article 6. The
monthly Expenses payable by Tenant hereunder consist of the amount by which
Tenant's Share of Expenses exceeds Landlord's Base Year Costs (as such terms are
hereinafter defined), calculated as follows: Total Expenses (estimated or
actual) multiplied by Tenant's Share minus Landlord's Base Year Costs, divided
by twelve (12) months.
6.2. Definitions. As used in this Lease, the following terms have the
meanings indicated:
6.2.1. "Landlord's Base Year Costs" means the annualized dollar
amount which results from multiplying the total Expenses incurred by Landlord
during the Base Year (including any adjustment thereto pursuant to Section 6.5.2
below) by Tenant's Share. Such amount constitutes the amount per year which
Landlord agrees to pay towards Expenses allocable to the Premises, without
reimbursement from Tenant. Landlord and Tenant intend that, insofar as is
commercially reasonable Landlord's Base Year Costs shall be calculated in a
manner which avoids unfairly overstating or understating the Expenses for the
Base Year. Accordingly, to the extent any item of Expenses is permitted to be
included, pursuant to the terms of this Lease, in the calculation of Landlord's
Base Year Costs, the amount of same shall be included therein or, if not so
included, such item shall be excluded in calculating the Expenses during any
"Subsequent Year," as defined in Section 6.2.6 below. Notwithstanding the
foregoing, if Landlord omits from the calculation of Landlord's Base Year Costs
an item of Expense properly includable therein, Landlord may include such item
in Expenses for Subsequent Years provided Landlord first grosses-up Landlord's
Base Year Costs to include the cost of such item during the Base Year.
Furthermore, nothing in this Section 6.2.1 shall be construed to require that
Landlord include in the calculation of Landlord's Base Year Costs any Expenses
which Landlord is not required to and does not incur during the Base Year.
Furthermore, notwithstanding anything to the contrary contained in this Lease,
the amount of that certain portion of Expenses attributable to any taxes
(collectively, the "Tax Expenses") for the Base Year (collectively, "Base
Taxes") shall be calculated exclusive of any reduction achieved pursuant to the
California Revenue and Taxation Code, Section 51 ("Proposition 8 reduction"). If
in any Subsequent Year (the "Adjustment Year") the amount of Tax Expenses
decreases below the amount of Base Taxes as a result of a Proposition 8
reduction, then for purposes of all ensuing Subsequent Years, including the
Adjustment Year, the Base taxes shall be decreased by an amount equal to the
decrease in Tax Expenses in the Adjustment Year. Conversely, if the Tax Expenses
thereafter decrease by a lesser amount during any Subsequent Year after the
Adjustment Year (the "Readjustment Year") as a result of Landlord's failure to
secure a Proposition 8 reduction which is greater than or equal to the
Proposition 8 reduction secured during the Adjustment Year, then for purposes of
all Subsequent Years, including the Readjustment Year, the Base Taxes shall only
be decreased by an amount equal to the decrease in Tax Expenses during such
Readjustment Year.
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<PAGE> 19
6.2.2. The term "Expenses" means all expenses, costs and fees paid
or incurred by Landlord during any calendar year during the term hereof in
connection with or attributable to the Building and Common Area (as described
hereinafter), including any parking facilities therein (reduced by the amount of
any rebates received by Landlord), for:
6.2.2.1. Electricity, water, gas, sewer, and all other
utility services to or for the Building or Common Area, including any utility
taxes, fees, charges or other similar impositions paid or incurred by Landlord
in connection therewith; and
6.2.2.2. Operation, maintenance, security services,
replacement for normal wear and tear, repair, restriping or resurfacing of
paving (provided that resurfacing of paved areas, as distinguished from
restriping, shall not occur more than once every five years as to the entire
Project or more than once each year as to more than twenty percent (20%) of the
paved areas of the Project), management (including costs of on-site offices and
personnel and a reasonable home-office overhead allocation), insurance
(including public liability and property damage, rent continuation, boiler and
machinery and extended coverage insurance and earthquake insurance, provided
that if Landlord materially changes the types or amounts or deductibles of
insurance coverage during any Subsequent Year, and such changes are not dictated
solely by requirements of lenders or prudent property management practices,
Landlord's Base Year Costs shall be increased to reflect the premium(s) Landlord
would have paid if such insurance had been in effect for the Base Year), and
cleaning of the Building and Common Area and all furnishings, fixtures and
equipment therein, but excluding the costs of special services rendered to
tenants (including Tenant) for which a separate charge is made, costs of leasing
and preparing space for new tenants in the Building, or costs borne solely by
Tenant under the Lease. The term "Expenses" includes the annual amortization of
costs which are capital in nature (including financing at the then prevailing
rate, if any) of any equipment, device or improvement which is required by a law
enacted after the date of this Lease or reasonably incurred as a labor saving
measure or to reduce Expenses (but only to the extent of the reasonably
anticipated reduction in Expenses) with respect to the Building and Common Area
where such costs are amortized over the useful life thereof and which do not
inure primarily to the benefit of any particular tenant; and
6.2.2.3. All real property taxes and personal property
taxes, licenses, charges and assessments which are levied, assessed, imposed or
collected by any governmental authority or improvement or assessment district
during any calendar year with respect to the Building or Common Area and the
land on which the same is located, and any improvements, fixtures, equipment and
other property of Landlord, real or personal, located in the Project and used in
connection with the operation or maintenance of the Building or Common Area
(computed on a cash basis or as if paid in permitted installments regardless of
whether actually so paid), as well as any tax which shall be levied or assessed
in addition to or in lieu of such taxes (it being acknowledged that because of
the passage of laws which limit increases in real property taxes, government
agencies may impose fees, charges, assessments or other levies in connection
with services previously furnished without charge or at a lesser charge and
which were previously paid for in whole or in part, directly or indirectly, by
real property taxes), any gross profits, rent or excise tax or other similar
tax, and any costs or expenses of contesting any such taxes, licenses, charges
or assessments. Notwithstanding anything to the contrary set forth in the Lease,
Expenses shall not include (i) any excess profits taxes, franchise taxes, gift
taxes, capital stock taxes, inheritance and succession taxes, estate taxes,
federal and state income taxes, and other taxes to the extent applicable to
Landlord's general or net income (as opposed to rents or receipts), (ii) taxes
on tenant improvements in any space in the Building or the Project based tip on
an assessed level in excess of the building standard (and, for purposes of this
Section 6.2.2.3 only, "building standard" shall mean an amount equal to $20.00
per usable square foot, increased on a cumulative compounded basis by five
percent (5%) per annum), (iii) penalties incurred as a result of Landlord's
negligence, inability or unwillingness to make payments of, and/or to file any
tax or informational returns with respect to, any taxes when due, (iv) any real
estate taxes directly payable by Tenant or any other tenant in the Building
(other than as reimbursement of Expenses) under the applicable provisions in
their respective leases, and (v) any entitlement fees, exactions or other costs
and expenses required as a condition to any development or voluntary
redevelopment of the Project (as distinguished from repair, reconstruction or
re-tenanting of existing improvements), including any initial payments or costs
made in connection with any child-care facilities, traffic demand management
programs, transportation impact mitigation fees, water and sewage conservation,
recycling, housing replacement and linkage fees, special assessment districts,
infrastructure and transportation assessments, art programs, or parking
requirements and programs. Nothing in the preceding clause (v) shall be
construed as limiting Landlord's right, as provided elsewhere in this Lease, to
include in Expenses cost items (whether similar or dissimilar to those listed in
clause (v)) which Landlord must incur to comply with applicable legal
requirements which apply without regard to the initial development or any
voluntary redevelopment of the Project.
6.2.3. Notwithstanding anything to the contrary in this Lease,
during the Initial Term only, Expenses shall exclude any increase in real
property taxes attributable to a "change in ownership" of the
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<PAGE> 20
Building, as defined in Title 18 of California Code of Regulations Section 462.
Furthermore, Expenses shall not include the following except to the extent
specifically permitted by a specific exception to the following:
6.2.3.1. Any payments under a ground lease or master lease
relating to the Project.
6.2.3.2. Costs of items which, under generally accepted
accounting principles consistently applied, are considered capital expenditures,
except for such capital expenditures as are permitted under Section 6.2.2.2
above.
6.2.3.3. Rentals for items (except when needed in
connection with normal repairs and maintenance of permanent systems) which if
purchased, rather than rented, would constitute a capital improvement which is
specifically excluded in Subsection 6.2.3.2 above (excluding, however, equipment
not affixed to the Building which is used in providing janitorial or similar
services).
6.2.3.4. Costs incurred by Landlord for the repair of
damage to the Building or any other part of the Project to the extent such costs
exceed, as to Tenant's Share, $25,000 for any one incident.
6.2.3.5. Costs, including permit, license and inspection
costs, incurred with respect to the installation of tenant or other occupant
improvements made for tenant or other occupants in the Building or incurred in
renovating or otherwise improving, decorating, painting or redecorating vacant
space for tenants or other occupants of the Building, except that the foregoing
shall not exclude any costs of repair, replacement or renovation of Common Area
where such costs otherwise are includable in Expenses.
6.2.3.6. Marketing costs including leasing commissions,
attorneys' fees in connection with the negotiation and preparation of letters,
deal memos, letters of intent, leases, subleases and/or assignments, space
planning costs, and other costs and expenses incurred in connection with lease,
sublease and/or assignment negotiations and transactions with present or
prospective tenants or other occupants of the Building.
6.2.3.7. Expenses in connection with services or other
benefits which are not offered to Tenant or for which Tenant is charged for
directly but which are provided to another tenant or occupant of the Building.
6.2.3.8. Costs incurred by Landlord due to the violation by
Landlord or any tenant of the terms and conditions of any lease or occupancy
agreement in the Project.
6.2.3.9. Interest, principal, points and fees on any debts
or amortization on any mortgage or mortgages or any other debt instrument
encumbering the Building or the Project, except that the foregoing shall not
operate to exclude from Expenses interest, principal or amortization of capital
expenditures authorized by this Lease.
6.2.3.10. Except for expenses in making repairs or keeping
permanent systems in operation while repairs are being made, rentals and other
related expenses incurred in leasing air conditioning systems, elevators or
other equipment ordinarily considered to be of a capital nature, except
equipment not affixed to the Building which is used in providing janitorial or
similar services.
6.2.3.11. Advertising and promotional expenditures.
6.2.3.12. Costs incurred in connection with upgrading the
Building to comply with laws in effect prior to the Commencement Data.
6.2.3.13. Tax penalties incurred as a result of Landlord's
negligence, inability to or unwillingness to make payments or to file any return
when due.
6.2.3.14. Costs arising from Landlord's charitable or
political contributions.
6.2.3.15. Costs for acquisition of sculpture, paintings or
other objects of art.
6.2.3.16. Costs incurred in connection with the original
development or construction of the Building or in connection with any major
change in the Building, such as adding or deleting floors.
6.2.3.17. Costs in excess of $25,000 per year of correcting
defects in or inadequacies of the design or construction of the Building.
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<PAGE> 21
6.2.3.18. Expenses resulting from the active negligence of
the Landlord, its agents, servants or employees or another tenant, except that
the foregoing shall not exclude from Expenses any premium increases for
insurance Landlord maintains.
6.2.3.19. Legal fees, space planners' fees, real estate
brokers, leasing commissions, and advertising expenses incurred in connection
with the leasing of the Building.
6.2.3.20. Any bad debt loss, rent toss, or reserves for bad
debts or rent loss.
6.2.3.21. Costs associated with the operation of the
business of the partnership or entity which constitutes the Landlord, as
distinguished from the costs of operation of the Building, including partnership
accounting and legal matters, costs of defending any lawsuits with any
mortgagees (except as the actions of Tenant or any other tenant may be in
issue), costs of selling, syndicating, financing, mortgaging or hypothecating
any of Landlord's interest in the Building.
6.2.3.22. Costs (including attorneys' fees and costs) in
connection with potential or actual claims, disputes, litigation or arbitration
pertaining to Landlord and/or the Building and/or the Project.
6.2.3.23. The wages and benefits of any employee who does
not devote substantially all of his or her time to the Building unless such
wages and benefits are prorated to reflect time spent on operating and managing
the Building vis-a-vis time spent on other matters.
6.2.3.24. Fines and penalties; provided; however, that
fines or penalties for violation of legal requirements may be included in
Expenses where Landlord reasonably determines that it is more economical to pay
such fine or penalty while Landlord contests in good faith the interpretation or
application of the particular legal requirement.
6.2.3.25. Costs in connection with any portion of the
Building devoted to retail operations, unless the space involved is included in
the 62,940 rentable square feet of the Building.
6.2.3.26. Costs arising from the presence of hazardous
materials or substances in or about the Building or the site including, but not
limited to, hazardous substances in the ground water or soil.
6.2.3.27. Costs of goods or services (including any
overhead and profit increment) furnished by Landlord or subsidiaries, partners
or affiliates of Landlord to the extent the same exceed the costs of such goods
or services rendered by unaffiliated third parties on a competitive basis, in
comparable buildings.
6.2.3.28. Landlord's general overhead and administrative
expenses other than costs of on-site management.
6.2.3.29. The cost of any item reimbursable by insurance or
condemnation proceeds or which would be reimbursable from insurance required to
be maintained by Landlord under this Lease (or similar insurance on parts of the
Project other than the Building).
6.2.3.30. Salaries of officers, executives or other
employees of Landlord, any affiliate of Landlord, or partners or affiliates of
such partners or affiliates, other than any personnel engaged in the management,
operation, maintenance, and repair of the Building (but not leasing or
marketing) and either (i) working in the Building management office, or (ii)
where such individuals hold a position which is generally considered to be
higher in rank than the position of the manager of the Building or the chief
engineer of the Building, they are to have a direct involvement with the Project
on a daily basis and their salaries are to be equitably allocated based on time
devoted to the Project.
6.2.3.31. All items and services for which Tenant or any
other tenant in the Project is required to reimburse Landlord (other than
through Tenant's Share or any other tenant's share of Expenses).
6.2.3.32. Advertising and promotional expenditures,
including but not limited to tenant newsletters (except that the cost of one
annual newsletter may be included in Expenses) and Project or Building
promotional gifts, events or parties for existing or future occupants, and the
costs of signs (other than the Building directory and the repair or replacement
of existing Building and Common Area signs) in or on the Project identifying the
owner of the Building or any other building in the Project or other tenants'
signs and any costs related to the celebration or acknowledgment of holidays.
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<PAGE> 22
6.2.3.33. Electric power or other utility costs for which
any tenant directly contracts with the local public service company.
6.2.3.34. The cost of any work or services performed for
any tenant (including Tenant) as such tenant's cost.
6.2.3.35. The cost of installing, operating and maintaining
any specialty service, observatory, broadcasting facilities, luncheon club,
museum, athletic or recreational club or child care facility.
6.2.3.36. The cost of furnishing and installing
non-Building standard replacement bulbs and ballasts in tenant spaces.
6.2.3.37. The cost of any parties, ceremonies or other
events for tenants or third parties which are not tenants of the Building,
whether conducted in the Building, Project or in any other location.
6.2.3.38. Reserves of any kind, including but not limited
to replacement reserves, and reserves for bad debts or lost rent or any similar
charge not involving the payment of money to third parties.
6.2.3.39. Rent (or imputed rent) for up to a 5,000 rentable
square foot management offices for the Project at a rental rate then being
charged for comparable premises in the Project, but in no event shall such
management office rent be increased by more than five percent (5%) per annum, on
a cumulative compounded basis, during the term of this Lease.
6.2.3.40. All assessments and premiums shall be paid by
Landlord in the maximum number of installments permitted by law and shall not be
included as Expenses except in the year in which the assessment or premium
installment is actually paid.
6.2.3.41. Payment of any management fee, whether paid to
Landlord or an outside managing agent, in excess of the product of (i) three
percent (3%) and (ii) gross revenues for the Building (adjusted in accordance
with Section 6.5.2 below); provided, however, that Landlord may increase the
percentage in the preceding clause (i) in any Subsequent Year so long as
Landlord also recalculates Landlord's Base Year Costs of management fees at the
same increased percentage.
6.2.3.42. Any costs expressly excluded from Expenses
elsewhere in this Lease.
6.2.3.43. Any costs, fees, dues, contributions or similar
expenses for industry associations or similar organizations: provided, however,
that Expenses may include the cost (exclusive of travel or lodging) of
attendance by an employee or agent of Landlord at three BOMA, IREM or similar
seminars in any given year.
6.2.3.44. The entertainment expenses and travel expenses of
Landlord, its employees, agents, partners and affiliates.
6.2.3.45. Costs of traffic studies, environmental impact
reports, transportation system management plans and reports, and traffic
mitigation measures which are applicable due to the development or redevelopment
of the Project (as distinguished from the repair, reconstruction or re-tenanting
of existing improvements in the Project, as permitted to be included in Expenses
under this Section 6.2.
6.2.3.46 Any costs recovered by Landlord to the extent the
same would unnecessarily duplicate an item of cost recovery contemplated by this
Lease.
6.2.3.47 Any profit made by Landlord in connection with
Landlord's collections of Operating Costs.
6.2.3.48 Any cost for which Landlord has been reimbursed or
receives a credit, refund or discount, provided if Landlord receives the same in
connection with any costs or expenditures previously included in Expenses for a
given year, Landlord shall immediately reimburse Tenant for any overpayment for
such year or, if such overpayment applies to the Base Year, Landlord shall make
a corresponding reduction in Landlord's Base Year Costs.
6.2.4. The term "Common Area" means that portion of the Project
other than the Building and other buildings for lease to tenants which is from
time to time designated and improved for nonexclusive,
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common use by more than one person. The general location of the Common Area is
shown on Exhibit A-1 attached hereto and incorporated by reference. The Common
Area includes parking facilities in the Project.
Any cost or expense included in Expenses which is attributable to
Common Area shall be prorated by Landlord to the Building based on the
proportion which the total rentable area of the Building bears to the total
rentable area of the Project from time to time devoted to office use, or as to
retail areas of the Project by such other fair and reasonable method of
allocation based on use or benefit as Landlord may determine, except that, with
regard to taxes, Landlord may use such allocation of taxes among the various
parcels in the Project as may have been used by the taxing authority.
6.2.5. The term "Base Year" means the calendar year specified at
Section 1.5.
6.2.6. The term "Subsequent Year" means the first full calendar
year following the Base Year and each calendar year, or part thereof, thereafter
occurring during the term of this Lease.
6.2.7. "Tenant's Share" is hereby agreed by Landlord and Tenant to
be the percentage set forth in Section 1.5 hereof.
6.3. Payment of Estimated Expenses. Tenant shall pay estimated Expenses
to Landlord as follows:
6.3.1. Landlord shall submit to Tenant, on or before March 31 of
the first Subsequent Year or as soon thereafter as Landlord has sufficient data,
a reasonably detailed statement showing the Expenses for the Base Year.
6.3.2. For each Subsequent Year, Landlord shall submit to Tenant,
prior to January 1 of such Subsequent Year or as soon thereafter as practicable,
a reasonably detailed statement showing the estimated Expenses for such
Subsequent Year, itemized on a line-item basis. The determination of estimated
Expenses hereunder shall be made by Landlord based upon Landlord's experience
with actual costs and projections. Tenant shall pay monthly to Landlord an
amount equal to the excess of (a) the sum of the total annual estimated Expenses
multiplied by Tenant's Share minus (b) Landlord's Base Year Costs, over (c)
twelve (12) months. If Landlord does not submit said statement to Tenant prior
to January 1 of any such Subsequent Year, Tenant shall continue to pay its share
of estimated Expenses at the then existing rate until such statement is
submitted, and, thereafter, at the monthly Rent payment date next following the
submittal of such statement, shall pay its share of estimated Expenses based on
the rate set forth in such statement together with any amounts based on such
rate which may have theretofore accrued from January 1 of such Subsequent Year.
Landlord may revise such estimated Expenses at the end of any calendar quarter,
and Tenant shall pay Tenant's Share of such revised estimated Expenses after
notice thereof as herein provided.
6.4. Payment of Actual Expenses. Actual Expenses shall be reconciled
against payments of estimated Expenses as follows:
6.4.1. On or before March 31 of the second Subsequent Year and
each Subsequent Year thereafter, or as soon thereafter as Landlord has
sufficient data (which data Landlord shall diligently gather), Landlord shall
submit to Tenant a reasonably detailed statement showing the actual Expenses
paid or incurred by Landlord during the previous calendar year. If Tenant's
Share of such actual Expenses is less than the amount of estimated Expenses for
such previous year theretofore paid by Tenant, then Landlord shall credit the
amount of such difference against the next installment of Basic Rent which may
thereafter be due from Tenant (or, at the end of the Lease Term, Landlord may
credit such difference against any amounts then owed to Landlord by Tenant and
refund the excess (if any) to Tenant); provided, however, that in no event shall
Tenant receive a credit as provided herein for any amount calculated to be less
than Landlord's Base Year Costs. If Tenant's Share of such actual Expenses is
more than the amount of the estimated Expenses for such previous year
theretofore paid by Tenant, then Tenant shall, within thirty (30) days following
the submittal of such statement to Tenant, pay to Landlord the full amount of
such difference.
6.4.2. The reconciliation of the Expenses paid by Tenant for the
calendar year in which this Lease terminates shall be made upon Landlord's
submittal to Tenant of the statement of actual Expenses for such calendar year.
The estimated and actual Expenses for such calendar year shall be prorated based
on the actual number of days in such calendar year that this Lease was in
effect, based on a 365-day year, and shall be compared. If pursuant to such
comparison it is determined that there has been an underpayment or an
overpayment by Tenant for such calendar year, Landlord shall refund the
overpayment to Tenant, or Tenant shall pay the amount calculated as owing to
Landlord, as the case may be, within thirty (30) days after the submittal of the
statement by Landlord. This provision shall survive the expiration or
termination of the Lease.
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If Landlord deems it advisable, Landlord may submit partial year statements
pursuant to this Section 6.4.2 in order to cause an earlier reconciliation of
Expenses for the calendar year in which this Lease terminates.
6.5. Other Expense Provisions.
6.5.1. Notwithstanding any provision of this Article 6 to the
contrary, if at any time during the term of this Lease any tenant, pursuant to
an express provision in its lease and with Landlord's approval, contracts for
certain Building or Common Area services to be provided directly to it and at
its expense, which services would normally be furnished by Landlord (e.g.,
janitorial, maintenance, utilities, etc.), then Landlord may make an equitable
adjustment in calculating Tenant's Share of Expenses to the end that the cost of
the remaining services provided by Landlord are shared proportionately by all
tenants receiving such services.
6.5.2. Notwithstanding anything to the contrary set forth herein,
if during the Base Year or any Subsequent Year less than ninety-five percent
(95%) of the rentable area in the Building is leased and occupied during the
entire year, all "Variable Components," as that term is defined in this Section
6.5.2, of Expenses for such year shall be grossed-up, employing sound accounting
and property management principles, to the amount such Variable Components would
have been in the event the Building had been ninety-five percent (95%) leased
and occupied during the entire year and the adjusted amount of the Variable
Components shall be used in determining Expenses for such year. "Variable
Components" shall be those components that vary based upon occupancy levels and
shall specifically exclude "Fixed Costs," as defined herein. For this purpose,
"Fixed Costs" means (i) all real property taxes and other taxes, charges and
assessments described in Section 6.2.2.3, (ii) premiums incurred by Landlord for
liability insurance and property damage insurance relating to Landlord's
ownership and/or operation of the Project and/or the Building, (iii) landscaping
costs relating to the Project and/or the Building, (iv) costs, including
janitorial and utility costs, relating to portions of the Common Areas located
outside the Building and the portions of the Common Areas located within the
Building, which Common Areas are not located on floors of the Building above the
lobby level of the Building, (v) overhead and administrative fees and expenses
(but not management fees, which vary based on occupancy), (vi) Building
management office rent, and (vii) exterior window washing costs.
6.5.3. The computation of Expenses pursuant to this Article 6 is
intended to constitute a formula for an agreed sharing of costs by tenants, and
may or may not constitute an exact reimbursement to Landlord for costs paid or
incurred by Landlord, and for Landlord's administration.
6.5.4. Any delay or failure of Landlord in computing or billing
for Expenses shall not constitute a waiver of, or in any way impair, the
obligation of Tenant to pay Expenses hereunder. However, Tenant shall not be
charged interest on unpaid Expenses which have accrued during such time that
Landlord has failed to submit a statement for such Expenses. Furthermore, with
the exception of real property taxes, Landlord shall not bill Tenant for
Expenses (other than real property taxes) more than one (1) year after
Landlord's delivery of the statement called for under Section 6.4.1 above.
6.5.5. Tenant's Right of Audit. Tenant shall have the right to
audit Landlord's records in accordance with the provisions of this Section
6.5.5.
6.5.5.1. Tenant shall give Landlord no less than thirty
(30) days' prior written notice of Tenant's intent to audit ("Audit Notice"),
which Audit Notice must be given to Landlord within one (1) year following the
date of Tenant's receipt of the statement called for under Section 6.4.1 which
Tenant potentially wishes to dispute (the "Disputed Statement"). Tenant may
conduct an audit no more than once in any calendar year. If as a result of
Tenant's audit, Tenant believes the Disputed Statement is incorrect, Tenant
shall give Landlord written notice of the alleged discrepancies. If Landlord and
Tenant are unable to resolve their difference within sixty (60) days, the matter
shall be submitted for determination pursuant to Section 6.5.5.2 below.
6.5.5.2. If the parties are unable to timely resolve a
dispute hereunder, the records relating to the Disputed Statement shall be
audited by an independent certified public accountant selected by Landlord and
approved by Tenant, such approval not to be unreasonably withheld or delayed.
The audit shall be conducted at the office where such records are maintained
during regular business hours. The auditor shall deliver a certified copy of the
audit to Landlord concurrently with the delivery of such audit to Tenant. No
records or copies of records in any form may be removed from the office where
such records are maintained.
6.5.5.3. Any audit conducted under Section 6.5.5.2 shall be
binding and conclusive on the parties. If such audit reveals that Landlord has
overcharged Tenant, then Landlord shall reimburse Tenant within thirty (30) days
after the later to occur of (a) Landlord's receipt of Tenant's written demand
therefor, or (b) Landlord's receipt of a certified auditor's report. If such
audit discloses that Tenant was
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undercharged, then notwithstanding any contrary provision contained in this
Article 6, Tenant shall pay to Landlord the difference within thirty (30) days
after written demand therefor from Landlord.
6.5.5.4. Tenant shall pay the costs and expenses of such
audit; however, if the audit shall disclose that the difference in Expenses is
in excess of three percent (3%) (favoring Landlord), and provided and so long as
Landlord has not disputed the auditor's report, then Landlord shall pay the
reasonable, usual and customary costs of such audit (exclusive, however, of
travel and lodging costs and attorneys' fees), up to a maximum of $3,000).
6.5.5.5. Tenant shall not be permitted to conduct an audit
at any time Tenant is in default of this Lease; provided, however, that Tenant's
audit rights shall not be suspended in case of only a material non-monetary
default which Tenant is then contesting by the prosecution or defense of
appropriate legal proceedings.
7. TAXES PAYABLE SOLELY BY TENANT
7.1. In addition to the Rental and Expenses to be paid by Tenant,
Tenant shall pay before delinquency and without notice or demand by Landlord any
and all taxes levied or assessed on and which become payable by Tenant during
the term of this Lease (excluding, however, state and federal personal or
corporate income taxes measured by the income of Landlord from all sources,
capital stock taxes, and estate and inheritance taxes), whether or not now
customary or within the contemplation of the parties hereto, which are based
upon, measured by or otherwise calculated with respect to: (i) the gross or net
Rent payable under this Lease, including, without limitation, any gross receipts
tax or any other gross income tax or excise tax levied by any taxing authority
with respect to the receipt of the Rental hereunder; (ii) the value of Tenant's
equipment, furniture, fixtures or other personal property located in the
Premises; (iii) the possession, lease, operation, management, maintenance,
alteration, repair, use or occupancy by Tenant of the Premises or any portion
thereof; (iv) the value of any improvements, alterations or additions made in or
to the Premises by or on behalf of Tenant, except for Building standard
improvements (which, for purposes of this Section 7.1 only, are improvements not
exceeding $20.00 per usable square foot) or (v) this transaction or any recorded
document to which Tenant is a party. Real property taxes on improvements which
are installed as part of Landlord's Work shall be deemed to be included in the
taxes described in Section 6.2.2.3 above, as to which Tenant shall pay Tenant's
Share. If it is not lawful for Tenant to reimburse Landlord for any such taxes
paid or incurred by Landlord, the Rent shall be revised so as to net Landlord
the same net Rent after imposition of such taxes as would have been payable
prior to the imposition of such taxes.
8. LATE PAYMENTS
8.1. If Tenant fails to pay Landlord when due any Rent, Expenses or
other sums owing to Landlord pursuant to the terms of this Lease, said late
payment shall bear interest at the Agreed Rate as herein provided and for each
such late payment that is not paid within five (5) days after the date the same
was due, Tenant shall pay to Landlord a service charge equal to five percent
(5%) of the overdue amount; provided, however, that on no more than one (1)
occasion during any twelve (12) month period, Landlord shall give Tenant a
notice of delinquency and a five (5) day grace period thereafter before imposing
such service charge. Tenant acknowledges and agrees that such late payment by
Tenant will cause Landlord to incur costs and expenses not contemplated by this
Lease, the exact amounts of which will be extremely difficult to ascertain. and
that such service charge represents a fair estimate of the costs and expenses
which Landlord would incur by reason of Tenant's late payment. Tenant further
agrees that such service charge shall neither constitute a waiver of Tenant's
default with respect to such overdue amount nor prevent Landlord from exercising
any other right or remedy available to Landlord.
9. INTENTIONALLY OMITTED
10. INTENTIONALLY OMITTED
11. USE
11.1. The Premises shall be used and occupied by Tenant for general
office purposes consistent with a first-class office building (and uses
incidental thereto as shown on the Plans to be approved by Landlord pursuant to
Exhibit C) and for no other purpose without the prior written consent of
Landlord, which Landlord may withhold in its sole discretion. Tenant
acknowledges that neither Landlord nor any agent of Landlord has made any
representation or warranty with respect to the Premises, the Building, or the
Project, with respect to the suitability thereof for the conduct of Tenant's
business. Tenant shall not do or permit anything to be done in or about the
Premises nor bring or keep anything therein which will in any way increase the
existing rate of
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or affect or cause a cancellation of any standard form fire or other policy of
insurance covering the Building, Common Area, or the Premises or any of its
contents, nor shall Tenant sell or permit to be kept, used or sold in or about
the Premises any article which may be prohibited by a standard form policy of
insurance; provided, however, that Landlord's approval of Tenant's Plans
pursuant to Exhibit C shall constitute Landlord's acknowledgment that Tenant's
office use as contemplated by the Plans will not affect the rate of Landlord's
insurance or be prohibited thereunder. Tenant shall promptly upon demand
reimburse Landlord for any additional premium charged for any such insurance by
reason of Tenant's failure to comply with the provisions of this Article 11.
Tenant agrees that it will use the Premises in such manner as not to interfere
with the rights of other tenants of the Building or Common Area. Tenant shall
neither use nor allow the Premises, Building or Common Area to be used for any
unlawful purpose, nor cause, maintain or permit any nuisance or waste in, on or
about any portion of the Project. Tenant will not place a load upon any floor
exceeding the floor load which such floor was designed to carry, and Landlord
reserves the right to prescribe the location of any safe or other heavy
equipment in the Premises. Tenant shall not use or allow anything to be done in
or about the Premises or the Project which will in any way conflict with any
law, ordinance or governmental regulation or requirement of any board of fire
underwriters or any duly constituted public authority now in force or hereafter
enacted or promulgated affecting the use or occupancy of the Premises, and shall
promptly comply with all such laws or requirements at its sole cost and expense.
The judgment of any court of competent jurisdiction or any admission by Tenant
that Tenant has violated any such law, statute, ordinance, rule, regulation or
requirement shall be conclusive of such fact as between Landlord and Tenant.
12. SERVICE AND UTILITIES
12.1. Landlord's Obligations. Landlord shall as a part of Expenses make
available to the Premises during the Building's normal business hours as set
forth in Rule 17 of the Rules and Regulations described in Article 36 hereof,
air conditioning, heating and ventilation as may be required for the comfortable
use of the Premises (or as otherwise specified in the Plans approved by Landlord
pursuant to Exhibit C), as well as elevator service, electric current for
lighting and power at up to five (5) kilowatt/hours per usable square foot of
the Premises' demand load on a continuous, annualized basis, and water for
lavatory and drinking purposes. "Building Standard" fixtures and equipment are
as described in Schedule A to Exhibit C attached hereto or, in absence thereof,
as installed in the typical common corridor. Landlord shall as a part of
Expenses replace Building Standard light bulbs, tubes and ballasts which need
replacing due to normal use. Landlord shall also as a part of Expenses provide,
twenty-four (24) hours per day, seven (7) days per week, throughout the Term,
including the period of occupancy by Tenant prior to the Commencement Date,
security for the Project, including the Building and the parking facilities in
accordance with Landlord's existing security services. Landlord's security
service shall provide Tenant, upon Tenant's request and subject to availability
(which Landlord need not guarantee) with an escort by Landlord's security
personnel to the vehicles of Tenant's employees located in the parking
facilities. Landlord shall also as a part of Expenses maintain and keep lighted
the common stairs, entries and toilet rooms in the Building and shall provide
trash removal and janitorial service five (5) days per week, excluding weekends
and the holidays listed in Rule 17 of the Rules and Regulations and window
washing at least twice per year as to the exterior and once per year as to the
interior (but excluding any Tenant-installed glass) in accordance with the
janitorial specifications attached as Exhibit H to this Lease. Except as
expressly provided in this Lease, Landlord shall not be in default hereunder or
liable for any damages directly or indirectly resulting from, nor shall the Rent
be abated or shall there be deemed a constructive or other eviction of Tenant by
reason of (i) the installation, use or interruption of use of any equipment in
connection with the furnishing of any of the foregoing utilities and services,
(ii) failure to furnish, or delay in furnishing, any such utilities or services
when such failure or delay is caused by acts of God, acts of government, labor
disturbances of any kind, or other conditions beyond the reasonable control of
Landlord, or by the making of repairs or improvements to the Premises or any
part of the Project, or (iii) governmental limitation, curtailment, rationing or
restriction on use of water, electricity or any other service or utility
whatsoever serving the Premises, Building or Common Area. Landlord shall be
entitled to cooperate with the energy conservation efforts of governmental
agencies or utility suppliers. The failure of Landlord to provide such services
if consistent with the foregoing shall not constitute a constructive or other
eviction of Tenant.
12.2. After-Hours Charges. During non-business hours Landlord shall as
a part of Expenses keep the public areas of the Building lighted and shall
provide elevator service with at least one (1) elevator, but shall not be
obligated to furnish heating, ventilation, lighting and/or air conditioning to
the Premises. If Tenant requires heating, ventilation, lighting and/or air
conditioning during non-business hours Tenant shall give Landlord at least
twenty-four (24) hours prior notice of such requirement or shall follow such
other procedure for activating the building energy management system as Landlord
may advise Tenant, and Tenant shall pay Landlord the "After-Hours Charges" for
such extra service at the rate set forth in Section 1.6 hereof. Such rates are
subject to increase from time to time based on the amount of increases in
Landlord's costs associated with providing such extra services. All payment
required for After-Hours Charges shall be deemed to be Additional Rent and
Landlord shall have the same remedies for a default in payment thereof as for a
default in payment
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of Rent. Landlord shall endeavor to accommodate Tenant's request for
non-business hours heating, ventilation, lighting or air conditioning made upon
less than twenty-four (24) hours notice.
12.3. Tenant's Services.
12.3.1. Tenant shall pay, prior to delinquency, for all telephone
charges and all other materials and services not expressly required to be paid
by Landlord, which may be furnished to or used in, on or about the Premises
during the term of this Lease. Tenant shall also pay, as Additional Rent, all
charges and fees required to be paid by Tenant by the Rules and Regulations
described in Article 36 of this Lease.
12.3.2. Tenant shall have the right, at Tenant's sole expense, to
install, maintain and replace a private heating, ventilation and air
conditioning system or systems (the "Tenant HVAC System") separate from the
Building HVAC system, in Tenant's computer rooms, user rooms and other areas
contained wholly within the Premises, provided that such Tenant HVAC System does
not materially interfere with the operation, maintenance, or replacement of the
Building HVAC system.
12.3.3. Tenant may, at its own expense, install its own security
system ("Tenant's Security") in the Premises; provided, however, that Tenant
shall coordinate the installation and operation of Tenant's Security with
Landlord to assure that Tenant's Security is compatible with Landlord's
security, and to the extent that Tenant's Security is not compatible with
Landlord's security, Tenant shall not be entitled to install or operate it.
Tenant shall be solely responsible for the monitoring and operation of Tenant's
Security system. Tenant shall have the right to refuse admission of persons to
the Premises, except for Landlord's representatives in the event of an emergency
or pursuant to Landlord's entry right set forth in this Lease.
12.4. Excess Utility Usage. Except as set forth in the Plans, Tenant
will not without the prior written consent of Landlord (which consent shall not
be unreasonably withheld, delayed or conditioned) use any apparatus or device in
the Premises which will materially increase the amount of cooling or ventilation
or electricity or water usually furnished or supplied for use of the Premises as
general office space; nor shall Tenant connect with electric current (except
through existing electrical outlets in the Premises) or water pipes, any
apparatus or device for the purpose of using electrical current or water, except
as may be provided in the Construction Provisions. Landlord shall make available
to the Premises initially demised by this Lease electric current for lighting
and power at up to eight (8) kilowatt/hours per usable square foot of the
Premises per year. If Tenant uses electricity at a rate in excess of five (5)
kilowatt/hours per usable square foot of the Premises per year, the cost to
Landlord of any such excess use of utility service by Tenant (without any profit
or mark-up) shall be paid by Tenant based on Landlord's reasonable estimates and
costs. If Tenant requires or uses ventilation, cooling, water or electric
current or any other resource in excess of that usually furnished or supplied
for use of the Premises as general office space, Landlord may cause a special
meter or other measuring device to be installed in or about the Premises to
measure the amount of water, electric current or other resource consumed by
Tenant. The cost of any such meter, and of the installation, maintenance and
repair thereof, shall be paid for by Tenant, and Tenant agrees to pay Landlord
promptly upon demand for all such water, electric current or other resource, as
shown by said meter, at the rates charged by the local public utility or other
supplier furnishing the same, plus any additional expense incurred by Landlord
in keeping account of the foregoing and administering the same. If any lights,
machines or equipment (including but not limited to computers) are used by
Tenant in the Premises which materially affect the temperature or otherwise
maintained by the heating, ventilation or air conditioning system, or generate
substantially more heat in the Premises than would be generated by Building
Standard lights or usual fractional horsepower office equipment, Landlord shall
have the right to install any machinery and equipment which Landlord deems
necessary to restore the temperature balance in any affected part of the
Building, including but not limited to modifications to the Building Standard
air conditioning equipment, and the cost thereof including the cost of
installation and any additional cost of operation and maintenance occasioned
thereby shall be paid by Tenant to Landlord upon demand. Any sums payable under
this Section 12.4 shall be considered Additional Rent, and Landlord shall have
the same remedies for a default in payment of such sum as for a default in the
payment of Rent.
12.5. When Tenant is required to pay Landlord for any service or
utility not provided as part of Expenses, Tenant shall pay Landlord's "Actual
Cost." "Actual Cost" shall be the actual costs paid or incurred by Landlord
(including administrative costs and profit margins to the same extent, on a
percentage basis, as are charged by Landlord as of the date of this Lease),
unless such actual costs paid or incurred cannot be readily ascertained, in
which event "Actual Cost" shall be the amount reasonably estimated by Landlord,
including, when applicable, depreciation pertaining to increased utilization of
certain equipment. Upon written request by Tenant from time to time, Landlord
shall, within ten (10) business days thereafter, disclose to Tenant in writing
the basis for any such estimate. In the event that such disclosure demonstrates
that Landlord's estimate of its Actual Cost was unreasonably calculated, then
Actual Cost shall be appropriately adjusted. In the case of any increase
resulting from such adjustment, Tenant shall pay Landlord the difference within
ten (10) days
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of Landlord's demand therefor. In the case of a decrease, Landlord shall pay to
Tenant the difference within ten (10) days of Tenant's demand therefor. In the
event that more than one tenant orders any extra service or utility, if any cost
item is applicable to more than one tenant, such cost shall be apportioned among
such tenants in accordance with the ratios of the rentable square footages of
their respective premises. Such Actual Cost, to the extent reimbursed to
Landlord by Tenant and/or other tenants, shall be netted out of Expenses to the
extent previously charged to Expenses or to the extent that the work was
performed by individuals whose salaries or charge for services are included in
Expenses.
12.6. Interruption of Services.
12.6.1. Notwithstanding anything to the contrary contained in this
Lease, if Tenant is prevented from using the Premises or any material portion
thereof (the "Affected Area") to conduct its normal business operations and
Tenant does not, in fact, use the Affected Area for a period of three (3)
consecutive business days or more, (i) due to any service (including but not
limited to passenger elevator service, janitorial service, HVAC, electricity or
water) (collectively, the "Essential Services") not being provided to the
Affected Area as required by the terms of this Lease, (ii) because of the
presence, in a form or concentration in violation of applicable law then in
effect, of "Hazardous Materials," as that term is defined in Section 45.6.1
below, regarded as unhealthful under applicable regulations then in effect in or
about the Premises (which Hazardous Materials were not brought onto the Premises
by Tenant or Tenant's employees, agents, licensees, or invitees), or (iii) due
to "Force Majeure," as that term is defined in Section 39.19 below, then Tenant
shall have the rights specified in Section 12.6.2 and, if applicable, Section
12.6.3.
12.6.2. Tenant shall promptly deliver to Landlord notice (the
"Cure Notice") of such condition and if Landlord fails to cure such condition
within two (2) business days after delivery to it of the Cure Notice, then Rent
applicable to the Affected Area (and to the extent parking passes rented by
Tenant pursuant to this Lease correspond to the Affected Area and are not used
by Tenant, then fees for such applicable parking passes shall be abated) from
the date which is three (3) full business days after delivery to Landlord of the
Cure Notice until the date when such failure is cured; provided, however, that
if Tenant has previously paid Rent, including parking fees to Landlord for a
period of time subsequent to the commencement of Tenant's right to abate Rent
hereunder, then Landlord shall, within ten (10) business days following the date
of such abatement, reimburse to Tenant the amount of such excess payments.
12.6.3. If any condition set forth in Section 12.6.1 shall not be
cured within one hundred eighty (180) days after Landlord's receipt of the Cure
Notice, then Tenant, upon written notice to Landlord (the "Services Termination
Notice") after the expiration of such one hundred eighty (180) day period (the
"Termination Cure Period"), may terminate this Lease as to the entire Premises,
which termination shall be deemed effective ten (10) business days after
Landlord's receipt of Tenant's Services Termination Notice unless Landlord cures
the condition giving rise thereto within such ten (10) business day period;
provided, however, that such Termination Cure Period shall be extended for each
day, up to a maximum of ninety (90) days, Landlord is delayed by Force Majeure,
from curing the event which gave rise to the Rent abatement pursuant to Section
12.6.1.
13. ENTRY BY LANDLORD
13.1. Landlord and its authorized representatives shall have the right
to enter the Premises upon reasonable prior notice during normal business hours
and at any time without notice in case of an emergency or to provide routine
janitorial and maintenance services (i) to determine whether the Premises are in
good condition and whether Tenant is complying with its obligations under this
Lease, (ii) to maintain or to make any repair or restoration to the Building
that Landlord has the right or obligation to perform, (iii) to install any
meters or other equipment which Landlord may have the right to install, (iv) to
serve, post or keep posted any notices required or allowed under the provisions
of this Lease, (v) to post "for sale" signs at any time during the term, (vi) to
show the Premises to prospective brokers, agents, buyers, tenants, or persons
interested in an exchange (except that showing of the Premises to prospective
tenants and their brokers shall be limited to the last nine (9) months of the
term), (vii) where necessary for performance of Landlord's maintenance and
repair obligations under this Lease, to shore the foundations, footings, and
walls of the Building and to erect scaffolding and protective barricades around
and about the Building or the Premises, but not so as to prevent entry into the
Premises, and (viii) to do any other act or thing necessary for the safety or
preservation of the Premises or the Building. Landlord shall have the right at
all times to have and retain a key with which to unlock all doors in, upon and
about the Premises excluding Tenant's vaults and safes, and Landlord shall have
the right to use any and all means which Landlord may deem proper to gain entry
in an emergency, and any entry to the Premises obtained by Landlord in
accordance with the foregoing shall not be construed or deemed to be a forcible
or unlawful entry into, or a detainer of, the Premises, or an eviction of Tenant
from the Premises or any portion thereof. Tenant hereby waives any claim for
damages for any inquiry or inconvenience to or
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interference with Tenant's business and any loss of occupancy or quiet enjoyment
of the Premises by reason of Landlord's exercise of its rights of entry in
accordance with this Article 13 (unless Landlord or Landlord's agents or
employees act negligently or wilfully, in which case the foregoing waiver shall
apply only to the extent that the loss, damage or interference is covered by
insurance Tenant maintains or is required by this Lease to maintain), and Tenant
shall not be entitled to an abatement or reduction of Rent or Expenses in
connection therewith, except as otherwise expressly provided in this Lease.
13.2. Notwithstanding any contrary provision of Section 13.1 above,
Tenant shall have the right to install its own locks in those portions of the
Premises which Tenant reasonably requires to be closed to access by persons
other than Tenant, all of which Tenant shall designate in writing to Landlord
upon the Commencement Date and thereafter if there should be any changes thereto
(herein collectively referred to as the "Secured Area"). Tenant shall be fully
responsible for janitorial service to the Secured Area (and the same shall not
be the obligation of Landlord ) comparable to janitorial services provided from
time to time in other premises in the Building. In the event of any emergency in
the Secured Area, Landlord, its agents, employees and contractors (or other
third parties, i.e., police or fire officials) shall have the right to gain
entrance into the Secured Area by any means deemed reasonably necessary under
the circumstances without liability therefor to Tenant (except in the case of
the negligence or willful misconduct by Landlord or its agents or employees, in
which case Landlord's liability shall be limited to any uninsured loss sustained
by Tenant), and Tenant shall be responsible for replacing any doors and
repairing any damage at Tenant's sole cost and expense. Tenant shall also be
solely responsible and shall reimburse Landlord, for any alterations made to
doors and door frames made to accommodate any lock that is not Building Standard
and shall pay to Landlord, upon the expiration or earlier termination of this
Lease, the cost of replacing any such doors and frames.
14. MAINTENANCE AND REPAIR
14.1. Landlord's Obligations. Landlord shall as part of Expenses
maintain or cause to be maintained in good order, condition and repair the
structural and common portions of the Building (including the Building's HVAC,
plumbing, electrical and mechanical systems, the Building's fire and life safety
systems and the Building's roof, slab flooring, exterior and bearing walls and
exterior glass) and all Common Areas in the Project (except to the extent of
damage to any of the foregoing caused by Tenant which shall be repaired by
Landlord at Tenant's expense). Landlord shall not, however, be responsible for
any maintenance or repair of plumbing systems installed within the Premises or
any improvements, alterations or additions constructed by or at the direction of
Tenant. Landlord shall not be liable, and neither Rent nor Expenses shall be
abated, for any failure by Landlord to maintain and repair areas which are being
used in connection with construction or reconstruction of improvements, or for
any failure to make any repairs or perform any maintenance, unless such failure
shall persist for an unreasonable time after written notice of the need thereof
is given to Landlord by Tenant in which case Tenant shall have the rights
specified in Sections 14.1.1 through 14.1.4 below. To the extent the provisions
of this Article 14 are in conflict with any statute nor or hereafter in effect
which would afford Tenant the right to make repairs at Landlord's expense or to
terminate this Lease, the provisions of this Article 14 shall govern.
14.1.1. If Tenant provides notice (the "Repair Notice") to
Landlord of an event or circumstance which pursuant to the terms of this Lease
requires Landlord to repair and/or maintain the Building or the Premises (a
"Required Action"), and Landlord fails to provide the Required Action within the
time period required by this Lease, or a reasonable period of time, if no
specific time period is specified in this Lease, after the receipt of the Repair
Notice (the "Notice Date"), or, in any event, does not commence the Required
Action within ten (10) days after the Notice Date and complete the Required
Action within thirty (30) days after the Notice Date (provided that if the
nature of the Required Action is such that the same cannot reasonably be
completed within a thirty (30) day period, Landlord's time period for completion
shall not be deemed to have expired if Landlord diligently commences such cure
within such period and thereafter diligently proceeds to rectify and complete
the Required Act, as soon as possible), and if Landlord's failure to commence or
complete the Required Action as herein provided materially, adversely affects
Tenant's use and enjoyment of the Premises, then Tenant may deliver a second
notice to Landlord specifying that Tenant intends to take the Required Action
(the "Second Notice"). If Landlord fails to complete the Required Action within
ten (10) days after receipt of the Second Notice, Tenant may then proceed to
take the Required Action as herein provided.
14.1.2. Notwithstanding Section 14.1.1, if there exists an
emergency such that the Premises or a portion thereof are rendered untenantable
and Tenant's personnel are forced to vacate the Premises or such portion thereof
and if Tenant gives Landlord written notice of such emergency (the "Emergency
Notice") and of Tenant's intention to take action with respect thereto (the
"Necessary Action") and the Necessary Action is also a Required Action involving
a material interruption in telephone, plumbing, electrical, or heating,
ventilation or air conditioning systems or services for the Premises, Tenant may
take the Necessary Action if Landlord does not commence the Necessary Action
within one (1) business day after the Emergency Notice
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(the "Emergency Cure Period") and thereafter use its best efforts and due
diligence to complete the Necessary Action as soon as possible.
14.1.3. If any Necessary Action will affect the systems and
equipment located within the Building (the "Building Systems"), the structural
integrity of the Building, or the exterior appearance of the Building, Tenant
shall use only those contractors used by Landlord in the Building for work on
the Building Systems, or its structure, and Landlord shall provide Tenant (when
available and upon Tenant's request) with notice identifying such contractors
and any changes to the list of such contractors, unless such contractors are
unwilling or unable to perform such work or the cost of such work is not
competitive, in which event Tenant may utilize the services of any other
qualified and reputable contractors which normally and regularly perform similar
work in comparable buildings except for any contractors who Landlord
specifically notifies Tenant in writing within five (5) business days of
Landlord's receipt of a Repair Notice or within one (1) business day of
Landlord's receipt of an Emergency Notice that Tenant may not use for such work
(which notice shall specify the commercially reasonable reasons for Landlord's
not allowing Tenant to use such contractor).
14.1.4. If any Required Action or Necessary Action is taken by
Tenant pursuant to the terms of this Section 14.1, then Landlord shall reimburse
Tenant for its reasonable and documented out-of-pocket costs and expenses in
taking the Required Action or Necessary Action within thirty (30) days after
receipt by Landlord of an invoice from Tenant which sets forth a reasonably
particularized breakdown of its costs and expenses in connection with taking the
Required Action or Necessary Action on behalf of Landlord (the "Repair
Invoice"). If Landlord does not promptly reimburse Tenant for the Repair
Invoice, and Tenant thereafter obtains a final judgment against Landlord for
such amount, then Tenant may deduct from the next Rent payable by Tenant under
this Lease, the judgment amount (which may include the amount set forth in the
Repair Invoice plus interest at the Agreed Rate and any award of attorneys' fees
provided herein). Notwithstanding the foregoing, Tenant shall not be permitted
to offset or deduct from Rent in any single calendar year an amount in excess of
one (1) month's Basic Rent.
14.2. Tenant's Obligations.
14.2.1. Tenant shall, at its sole cost and expense, except for
performance of Landlord's obligations as specified elsewhere in this Lease,
maintain the Premises including all improvements therein in good order,
condition and repair.
14.2.2. In connection with Tenant surrendering possession of the
Premises at the end of the Lease Term, Tenant agrees to repair any damage caused
by or in connection with the removal of any article of personal property,
business or trade fixtures, machinery, equipment, cabinetwork, furniture,
movable partitions or permanent improvements or additions, including without
limitation thereto, repairing the floor and patching and painting the walls
where required by Landlord to Landlord's reasonable satisfaction, all at
Tenant's sole cost and expense. Reasonable wear and tear shall be excepted from
Tenant's restoration obligations hereunder. Tenant shall indemnify, defend and
hold Landlord harmless against any loss, liability, cost or expense (including
reasonable attorneys' fees) resulting from delay by Tenant in so surrendering
the Premises. Tenant's obligation hereunder shall survive the expiration or
termination of this Lease.
14.2.3. If Tenant fails to maintain the Premises in good order,
condition and repair, Landlord may give Tenant notice to do such acts as are
reasonably required to so maintain the Premises. If Tenant thereafter fails to
promptly commence such work and diligently prosecute it to completion, then
Landlord shall have the right to do such acts and expend such funds at the
expense of Tenant as are reasonably required to perform such work; provided,
however, that Landlord shall exercise such right only where Tenant's failure to
act is material and Landlord has given Tenant reasonable prior notice of
Landlord's intention to perform such acts if Tenant fails to do so. Any amount
so expended by Landlord (together with a charge for Landlord's administration
and overhead equal to five percent (5%) thereof) shall be paid by Tenant
promptly after demand, with interest at the Agreed Rate from the date of such
work. Landlord shall have no liability to Tenant for any inconvenience or
interference with the use of such work. Landlord shall have no liability to
Tenant for any inconvenience or interference with the use of the Premises by
Tenant as a result of performing any such work.
14.3. Compliance with Law. Landlord and Tenant shall each do all acts
required to comply with all applicable laws, ordinances, and rules of any public
authority relating to their respective maintenance obligations as set forth
herein.
15. ALTERATIONS AND ADDITIONS
15.1. Tenant shall make no alterations, additions or improvements to
the Premises or any part thereof having a cost in excess of Forty Thousand
Dollars ($40,000) or which affects the exterior appearance of the
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Premises or the Building or any common portion of the Building or any portion of
the Common Area or the electrical, mechanical, plumbing or other systems in the
Building or any structural elements of the Building, without obtaining the prior
written consent of Landlord in each instance. Such consent may be granted or
withheld in Landlord's reasonable discretion. Tenant shall reimburse Landlord
for the reasonable cost of supervising any work for which Landlord's consent is
required hereunder. Landlord may impose as a condition to such consent such
requirements as Landlord may deem necessary in its reasonable discretion,
including without limitation the requirement that Landlord be furnished with
working drawings before work commences and that a bond be furnished (except that
Landlord will waive the requirement of a bond so long as Century Communications
Corp. is Guarantor and the then-Tenant is the entity initially named herein or
an Affiliate), and requirements relating to the manner in which the work is
done, the contractor by whom it is performed, and the times during which it is
accomplished. Upon written request of Landlord prior to the expiration or
earlier termination of the Lease, Tenant will remove at its expense any such
alterations, improvements or additions to the Premises; provided, however, that
if requested by Tenant at the time Tenant seeks Landlord's consent to
alterations, improvements or additions, Landlord shall notify Tenant whether
Landlord will require removal of such alterations, improvements or additions
upon expiration of the term or earlier termination of this Lease and, provided
further, that Tenant may, at any time within the last six (6) months of the
term, request that Landlord promptly designate which alterations, improvements
or additions Tenant is to remove (other than those as to which Landlord has made
a prior determination to require or waive removal). Landlord will not require
Tenant to remove the "Tenant Improvements" performed pursuant to the "Approved
Working Drawings" (as such terms are defined in the Construction Provisions
attached as Exhibit C to this Lease) or any Building standard floor covering or
paint. Any damage done to the Premises in connection with any such removal shall
be repaired at Tenant's sole cost and expense. Landlord may, in connection with
any such removal which reasonably might involve damaging the Premises, require
that such removal be performed by a bonded contractor or other person for which
a bond satisfactory to Landlord has been furnished covering the cost of
repairing the anticipated damage. Unless so removed, all such alterations,
additions or improvements shall at the expiration or earlier termination of the
Lease become the property of Landlord and remain upon the Premises. All such
improvements, alterations or additions must be done in a good and workmanlike
manner and diligently prosecuted to completion so that the Premises shall at all
times be a complete unit except during the period of work. Such improvements,
alterations or additions shall only be constructed by a contractor which is
bondable and which shall use union employees only, except that such contractor
may use non-union employees only if prior to the commencement of any work Tenant
obtains Landlord's written consent which Landlord may withhold unless it is
adequately protected against any and all loss or damage that may result from
labor problems or any work stoppage or interruption arising from the use of such
non-union employees. Tenant shall deliver to Landlord upon commencement of such
work a copy of the building permit with respect thereto. Upon completion of such
work, Tenant shall file for record in the office of the County Recorder where
the Project is located a Notice of Completion, as required or permitted by law.
All such work shall be performed and done strictly in accordance with the laws
and ordinances relating thereto and shall be performed so as not to obstruct the
access to the premises of any other tenant in the Building or Project. Tenant
agrees to carry insurance as required by Article 17 covering any improvements,
alterations or additions to the Premises made by Tenant under the provisions of
this Article 15, it being expressly agreed that none of such improvements,
additions or alterations shall be insured by Landlord under the insurance
Landlord may carry upon the Building, nor shall Landlord be required under any
provision for reconstruction to reinstall any such improvements, additions or
alterations. In addition, it is expressly agreed that if any tax is imposed, or
the amount of taxes on the Building or the Project is increased, by reason of
any such improvements, alterations or additions, Tenant shall be solely
responsible therefor under Article 7.
16. INDEMNITY
16.1. Indemnification by Tenant. Tenant shall indemnify, defend and
hold Landlord, its agents and employees, harmless from and against any and all
claims, liability, loss, cost or expense (including reasonable attorneys' fees
but excluding consequential damages unless otherwise specifically permitted by
this Lease) arising out of or in connection with (i) any injury or damage to any
person or property occurring in, on or about the Premises or any part thereof or
the Building or Common Area, to the extent such injury or damage is caused by
any negligent or intentional act or omission by Tenant, its agents, contractors,
employees or invitees or (ii) any breach or default in the performance of any
obligation on Tenant's part to be performed under this Lease. If any action or
proceeding is brought against Landlord by reason of any such claim, upon notice
from Landlord, Tenant shall defend the same at Tenant's expense by counsel
reasonably satisfactory to Landlord. Tenant, as a material part of the
consideration to Landlord, hereby assumes all risk of damage to property or
injury to persons in, upon or about the Premises from any cause except
Landlord's negligence or wrongful acts, and Tenant hereby waives all claims with
respect thereto against Landlord. The foregoing provisions shall survive the
termination of this Lease. The provisions of this Section 16.1 are subject to
the waiver contained in Section 17.7 below.
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16.2. Exemption of Landlord from Liability. If the Premises, the
Building, or the Common Area, or any part thereof, is damaged by fire or other
cause against which Tenant is required to carry insurance pursuant to this
Lease, Landlord shall not be liable to Tenant for any loss, cost or expense
arising out of or in connection with such damage. Tenant hereby releases
Landlord, its directors, officers, shareholders, partners, employees, agents and
representatives, from any liability, claim or action arising out of or in
connection with such damage. Furthermore, Tenant shall, pursuant to Article 17,
maintain insurance against loss, injury, or damage which may be sustained by the
person, goods, wares, merchandise or property of Tenant, its agents,
contractors, employees, invitees or customers, or any other person in or about
the Premises, caused by or resulting from fire, steam, electricity, gas, water,
or rain, which may leak or flow from or into any part of the Premises or the
Building, or from the breakage, leakage, obstruction or other defects of the
pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting
fixtures of the same, whether such damage or injury results from conditions
arising within the Premises or other portions of the Building, or from other
sources, and Landlord shall not be liable therefor, unless caused by Landlord's
negligence or wrongful act, and in that event only to the extent not covered by
the insurance which Tenant is required to carry pursuant to this Lease. Landlord
shall not be liable to Tenant for any damages arising out of or in connection
with any act or omission of any other tenant in the Project or for losses due to
theft or burglary or other wrongful acts of third parties. Nothing in this
Section 16.2 shall relieve Landlord of liability for its negligent or
intentional acts or the negligence or intentional acts of Landlord's agents or
employees, except (i) in no event shall Landlord be liable for consequential
damages and (ii) the foregoing shall be subject to the waiver contained in
Section 17.7 below.
16.3. Indemnification by Landlord. Landlord shall indemnify, defend and
hold Tenant, its agents and employees harmless from and against any and all
claims, liability, loss, cost, direct damages or expense (including reasonable
attorneys' fees but excluding consequential damages) arising out of or in
connection with (i) any injury or damage to any person or property occurring in,
on or about the Premises or any part thereof or the Building or Common Area, to
the extent such injury or damage is caused by any negligent or intentional act
or omission by Landlord, its agents, contractors, employees or invitees (but
excluding other tenants or occupants of the Building or Project) or (ii) any
breach or default in the performance of any obligation on Landlord's part to be
performed under this Lease. If any action or proceeding is brought against
Tenant by reason of any such claim, upon notice from Tenant, Landlord shall
defend the same at Landlord's expense by counsel reasonably satisfactory to
Tenant. The foregoing provisions shall survive the termination of this Lease.
The provisions of this Section 16.3 are subject to the waiver contained in
Section 17.7 below.
16.4. Landlord's Waiver. To the extent not prohibited by law, Tenant
and its Affiliates shall not be liable for, and are hereby released from any
responsibility for, any damage either to person or property or resulting from
the loss of use thereof, which damage is sustained by Landlord due to the
Premises or any part thereof, or any appurtenances thereof needing repair
(excluding any improvements, materials, or equipment installed or located in the
Building or the Project by Tenant), or due to the occurrence of any accident or
event in or about the Premises, or due to any act or neglect of any tenant or
occupant of the Project or of any other person, except to the extent (i) caused
by the negligence or willful misconduct of Tenant or Tenant's Affiliates,
agents, employees, subtenants or invitees or (ii) covered by insurance carried
by Tenant (or which Tenant is required to carry hereunder) or (iii) caused by
the failure of Tenant to timely and fully perform its obligations under this
Lease. The provisions of this Section 16.4 shall apply particularly, but not
exclusively, to damage caused by gas, electricity, steam, sewage, sewer gas or
odors, fire, water or by the bursting or leaking of pipes, faucets, sprinklers,
plumbing fixtures and windows.
17. INSURANCE
17.1. General. All insurance reasonably required to be carried by
Tenant hereunder shall be issued by responsible insurance companies acceptable
to Landlord and the holder of any deed of trust or mortgage secured by any
portion of the Premises (hereinafter referred to as a "Mortgagee"). All policies
of insurance provided for herein shall be issued by insurance companies with
general policyholder's rating of not less than A and a financing rating of not
less than Class X as rated in the most current available "Best Insurance
Reports". Each policy shall name Landlord and at Landlord's request any
Mortgagee and an agent of Landlord as an additional insured, as their respective
interests may appear. Tenant shall deliver certificates of such insurance to
Landlord, evidencing the existence and amounts of such insurance, within ten
(10) days after Landlord's request therefor. Failure to make such delivery shall
constitute a default by Tenant under this Lease. All policies of insurance
delivered to Landlord must contain a provision that the company writing said
policy will give Landlord thirty (30) days prior written notice of any
modification, cancellation or lapse or reduction in the amounts of insurance.
All public liability, property damage and other casualty insurance policies
shall be written as primary policies, not contributing with, and not in excess
of coverage which Landlord may carry. Tenant shall upon Landlord's request
furnish Landlord with certificates of any such policy at least thirty (30) days
prior to the expiration thereof. Tenant agrees that if Tenant does not procure
and maintain such insurance, Landlord may (but shall not be required to) upon
not less than three (3) business days prior notice to Tenant,
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obtain such insurance on Tenant's behalf and charge Tenant the premiums therefor
together with a ten percent (10%) handling charge, payable upon demand. Tenant
may carry such insurance under a blanket policy provided such blanket policy
expressly affords the coverage required by this Lease by a Landlord's protective
liability endorsement or otherwise and evidence thereof is furnished to Landlord
as required above.
17.2. Casualty Insurance. At all times during the term hereof, Tenant
shall maintain in effect policies of casualty insurance covering (i) all
improvements in, on or to the Premises (including any Building Standard
furnishings, and any alterations, additions or improvements as may be made by
Tenant, and (ii) trade fixtures, merchandise and other personal property from
time to time in, on or upon the Premises. Such policies shall include coverage
in an amount not less than one hundred percent (100%) of the actual replacement
cost thereof from time to time during the term of this Lease. Such policies
shall provide protection against any peril included within the classification
"Fire and Extended Coverage", against vandalism and malicious mischief, theft,
sprinkler leakage, earthquake sprinkler leakage, and against flood damage (and
including cost of demolition and debris removal). Replacement cost for purposes
hereof shall be determined by a duly licensed or otherwise certified or
accredited insurance appraiser selected by Tenant's independent insurance
carrier or otherwise by mutual agreement. The proceeds of such insurance shall
be used for the repair or replacement of the property so insured. Upon
termination of this Lease following a casualty as set forth in Article 18, the
proceeds under (i) above shall be paid to Landlord (except that Tenant shall be
entitled to receive (A) the value of any alterations, additions or improvements
made subsequent to the Commencement Date and paid for by Tenants, and (B) a
portion of the value of the Tenant Improvements based on the ratio that Tenant's
contribution to the "hard costs" of the Tenant Improvements bears to the total
"hard costs" of the Tenant Improvements, if the "hard costs" of the Tenant
Improvements exceed the Tenant Improvement Allowance (as defined in the
Construction Provisions attached as Exhibit C)), and the proceeds under (ii)
above shall be paid to Tenant.
17.3. Liability Insurance. Tenant shall at all times during the term
hereof obtain and continue in force bodily injury liability and property damage
liability insurance adequate to protect Landlord against liability for injury to
or death of any person in connection with the activities of Tenant in, on or
about the Premises or with the use, operation or condition of the Premises. Such
insurance at all times shall be in an amount of not less than Two Million
Dollars ($2,000,000) for injuries to persons in one (1) accident, not less
than One Million Dollars ($1,000,000) for injury to any one (1) person and not
less than Five Hundred Thousand Dollars ($500,000) with respect to damage to
property. The limits of such insurance do not necessarily limit the liability of
Tenant hereunder. All public liability and property damage policies shall
contain a provision that Landlord, although named as an insured, shall
nevertheless be entitled to recovery under said policies for any loss occasioned
to it, its partners, agents and employees by reason of the negligence of Tenant.
17.4. Workers' Compensation Insurance; Self Insurance. Tenant shall, at
all times during the term hereof, maintain in effect workers' compensation
insurance as required by applicable statutes. Subject to the limitations set
forth below, Tenant or an Affiliate (such entity or individual to be known as a
"Self Insuring Party") shall be entitled to self-insure its insurance
requirements set forth under this Lease, including Sections 17.2, 17.3 and 17.4
of this Article 17 and under the Construction Provisions. Any self-insurance
shall be deemed to contain all of the terms and conditions applicable to such
insurance as required in this Article 17, including, without limitation, a full
waiver of subrogation. If Tenant elects to so self-insure, then with respect to
any claims which may result from incidents occurring during the Term, such
self-insurance obligation shall survive the expiration or earlier termination of
this Lease to the same extent as the insurance required would survive. Before
Self-Insuring Party seeks to self-insure its insurance requirements under
Sections 17.3 or 17.4, the Self-Insuring Party shall demonstrate to Landlord's
reasonable satisfaction that: (i) the Self-Insuring Party has a minimum tangible
net worth (as determined from audited financial statements prepared in
accordance with generally accepted accounting principles applied on a consistent
basis) of not less than Fifty Million Dollars ($50,000,000); and (ii) that the
risk management program of the Self-Insuring Party employs at least the same
underwriting standards and reserve requirements as would be applicable if the
Self-Insuring Party were admitted as a licensed insurer in each jurisdiction
where the Self-Insuring Party insures its business activities (or the activities
of its Affiliates).
17.5. Adjustment. Every three (3) years during the term of this Lease,
or whenever Tenant materially improves or alters the Premises, whichever is
earlier, Landlord and Tenant shall mutually agree to increases in Tenant's
insurance policy limits for the insurance to be carried by Tenant as set forth
in this Article 17. If Landlord and Tenant cannot mutually agree upon the
amounts of said increases within thirty (30) days after notice from Landlord,
then the insurance policy limits set forth in this Article 17 shall be adjusted
upward by an accredited insurance appraiser approved by Landlord to reflect
increased replacement costs and increased limits of liability then prevailing
generally in the local real estate industry for comparable property.
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17.6. Landlord's Insurance. Landlord shall at all times from and after
substantial completion of the Premises maintain in effect as an item of Expense
a policy or policies of insurance covering the Common Area and the buildings in
the Project in an amount equal to one hundred percent (100%) of the actual
replacement cost thereof (exclusive of the cost of excavations, foundations and
footings) from time to time during the term of this Lease, providing protection
against rental loss and any peril generally included in the classification "Fire
and Extended Coverage" which may include insurance against sprinkler damage,
vandalism, malicious mischief, earthquake and third-party liability, and
including such coverages in such amounts as Landlord may designate. In addition,
Landlord shall during the term maintain in effect a policy or policies of bodily
injury liability and property damage insurance in minimum coverage amounts not
less than those specified for Tenant in Section 17.3 (as increased pursuant to
Section 17.5), or such greater amounts as Landlord may determine, with all costs
thereof included as an item of Expenses. Landlord's obligation to carry the
insurance provided for herein may be brought within the coverage of any
so-called blanket policy or policies of insurance carried and maintained by
Landlord, provided that the coverage afforded will not be reduced or diminished
by reason of the use of such blanket policy of insurance.
17.7. Waiver of Subrogation. Landlord and Tenant each hereby waives any
and all rights of recovery against the other or against the directors, officers,
shareholders, partners, employees, agents and representatives of the other, on
account of loss or damage of such waiving party or its property, or the property
of others under its control, to the extent that such loss or damage is insured
against under any fire and extended coverage insurance policy which either may
have been in force at the time of such loss or damage. Landlord and Tenant
shall, upon obtaining the policies of insurance required under this Lease, give
notice to their respective insurance carrier(s) that the foregoing mutual waiver
of subrogation is contained in this Lease. The waivers set forth herein shall be
required to the extent that same are available from each party's insurer without
additional premium, if an extra charge is incurred to obtain such waiver, it
shall be paid by the party in whose favor the waiver runs within fifteen (15)
days after written notice from the other party unless the party in whose favor
the waiver runs agrees that such waiver is unnecessary (in which case the
provisions of this Section 17.7 shall not bind the other party's insurers).
18. DAMAGE AND DESTRUCTION
18.1. Partial Damage -- Insured. If the Premises, Building or Common
Area are damaged by a risk covered under fire and extended coverage insurance
protecting Landlord, then Landlord shall restore such damage provided insurance
proceeds are available to Landlord to pay the greater of (i) eighty percent
(80%) of the cost of restoration or (ii) the cost of restoration in excess of
One Million Dollars ($1,000,000), and provided such restoration by Landlord can
be completed within six (6) months after the occurrence of such damage, in the
reasonable opinion of a registered architect or engineer appointed by Landlord.
In such event this Lease shall continue in full force and effect so long as the
Premises can be used by Tenant, except that Tenant shall be entitled to an
equitable reduction of Rent and Expenses while such restoration takes place,
such reduction to be based upon the extent to which the damage and the
restoration efforts directly and materially interfere with Tenant's use of the
Premises.
18.2. Partial Damage -- Uninsured. If the Premises, Building or Common
Area are damaged by a risk not covered by such insurance or the insurance
proceeds available to Landlord are less than the greater of (i) eighty percent
(80%) of the cost of restoration, or (ii) the cost of restoration in excess of
One Million Dollars ($1,000,000), or if the restoration cannot be completed
within six (6) months after the occurrence of such damage in the opinion of the
registered architect or engineer appointed by Landlord, then Landlord shall have
the option either to (i) repair or restore such damage, this Lease continuing in
full force and effect so long as the Premises can be used by Tenant, but the
Rent and Expenses to be equitably reduced as hereinabove provided, or (ii) give
notice to Tenant at any time within sixty (60) days after such damage
terminating this Lease as of a date to be specified in such notice, which date
shall be not less than thirty (30) nor more than sixty (60) days after giving
such notice. If such notice is given, this Lease shall expire and any interest
of Tenant in the Premises shall terminate on the date specified in such notice
and the Rent and Expenses, reduced by an equitable reduction (except as
hereinabove provided) based upon the extent, if any, to which such damage
directly and materially interfered with Tenant's use of the Premises, shall be
paid to the date of such termination, and Landlord agrees to refund to Tenant
any Rent or Expenses theretofore paid in advance for any period of time
subsequent to such termination date.
18.3. Total Destruction. If the Premises are totally destroyed (i.e.,
over eighty percent (80%) of the Premises is destroyed or if Tenant cannot use
the Premises without major restoration) or if in Landlord's judgment the
Premises cannot be restored as set forth above, then, notwithstanding the
availability of insurance proceeds, this Lease shall be terminated effective as
of the date of the damage.
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18.4. Landlord's Obligations. Landlord shall not be required to carry
insurance of any kind on Tenant's property and shall not in the absence of
Landlord's negligence or wrongful acts be required to repair any injury or
damage thereto by fire or other cause, or to make any restoration or replacement
of any paneling, decorations, partitions, ceilings, floor covering, office
fixtures or any other improvements or property installed in the Premises by or
at the direct or indirect expense of Tenant, and Tenant shall be solely
responsible for restoring or replacing same in the event of damage required to
be insured against by Tenant, and Tenant shall have no claim against Landlord
for any loss suffered by reason of any such damage, destruction, repair or
restoration. Notwithstanding anything to the contrary contained in this Article
18, Landlord shall have the option not to repair, reconstruct or restore the
Premises with respect to damage or destruction which cannot be repaired within
thirty (30) days after the date of the damage or destruction and occurs during
the last twelve (12) months of the term of this Lease or any extension thereof;
provided, however, that if Landlord exercises such option by written notice
delivered to Tenant within ten (10) days after the date of the damage or
destruction, this Lease shall be terminated upon such exercise, and provided
further that if Landlord does not exercise such option, Tenant likewise may
terminate this Lease by notice delivered within fifteen (15) days after the date
of the damage or destruction but before Landlord begins any repair work.
Landlord shall, within sixty (60) days after the date of any damage to the
Premises, notify Tenant whether the same constitutes a total destruction or
partial damage of the Premises and, in cases of partial damage, whether Landlord
will elect to repair such damage or terminate this Lease.
18.5. Waiver by Tenant. It is expressly agreed that this Article 18
shall govern the rights of Landlord and Tenant in the event of damage and
destruction and supersedes the provisions of any statutes with respect to any
damage or destruction of the Premises.
18.6. Termination by Tenant. If the Premises are materially damaged
(such that Tenant is unable to conduct business therein) or destroyed by a cause
other than the negligence or intentional misconduct of Tenant or its agents or
employees and the restoration thereof cannot be completed within six (6) months
after the commencement of work in the reasonable opinion of the registered
architect or engineer appointed by Landlord, Tenant shall have the right to
terminate this Lease by notice to Landlord within thirty (30) days after
Tenant's receipt of the opinion concerning time needed for restoration. Landlord
shall not be obligated to commence any repair or restoration work unless and
until Tenant waives this termination right in writing or in time for exercise
thereof elapses without notice of termination from Tenant.
19. CONDEMNATION
19.1. If all or a substantial part of the Premises, Building or Common
Area is taken or appropriated for public or quasi-public use by the right of
eminent domain or otherwise by a taking in the nature of inverse condemnation,
with or without litigation, or is transferred by agreement in lieu thereof (any
of the foregoing being referred to herein as a "taking"), either party hereto
may, by written notice given to the other within thirty (30) days after receipt
of notice of such taking, elect to terminate this Lease as of the date
possession is transferred pursuant to the taking; provided, however, that before
such party may terminate this Lease for a taking, such taking shall be of such
an extent and nature as to, in the reasonable judgment of such party,
economically frustrate its business therein, or to substantially handicap,
impede or impair its use thereof. No award for any partial or entire taking
shall be apportioned, and Tenant thereby assigns to Landlord any and all rights
of Tenant now or hereafter arising in or to the same or any part thereof;
provided, however, that Tenant may file a separate claim for an award and
nothing contained herein shall be deemed to give Landlord any interest in, or to
require Tenant to assign to Landlord, any award made to Tenant for the taking of
personal property belonging to Tenant or for Tenant's moving expenses or
interruption in Tenant's business. In the event of a taking which does not
result in a termination of this Lease, Rent and Expenses shall be equitably
reduced to the extent Tenant's business in or use of the Premises is
economically impaired as described above. No temporary taking of the Premises or
any part of the Project shall terminate this Lease, or give Tenant any right to
any abatement of Rent or Expenses hereunder, except that Rent and Expenses shall
be equitably reduced as described above during that portion of any temporary
taking lasting more than thirty (30) days. To the extent the provisions of this
Article 19 conflict with California Code of Civil Procedure Section 1265.130
allowing either party to petition the court to terminate this Lease for a
partial taking, the provisions of this Article 19 shall govern.
20. LIENS
20.1. Tenant shall keep the Premises, the Building and the Project free
from any liens arising out of work performed, materials furnished, or
obligations incurred by Tenant, and shall indemnify, hold harmless and defend
Landlord from any liens and encumbrances arising out of any work performed or
materials furnished by or at the direction of Tenant. Tenant shall give Landlord
at least ten (10) business days' prior written notice of the expected date of
commencement of work relating to alterations, improvements, or
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additions to the Premises and if requested by Landlord shall secure a completion
and indemnity bond for said work, satisfactory to Landlord, in an amount at
least equal to one and one-half (1 1/2) times the estimated cost of such work
(except that Landlord will waive the requirement of such bond provided Century
Communications Corp. is Guarantor and the then-Tenant is the entity initially
named herein or an Affiliate). Landlord shall have the right at all times to
keep posted on the Premises any notices permitted or required by law, or which
Landlord shall deem proper, for the protection of Landlord and the Premises, and
any other party having any interest therein, against mechanics' and
materialmen's liens. If any claim of lien is filed against the Premises or any
part of the Project or any similar action affecting title to such property is
commenced, the party receiving notice of such lien or action shall immediately
give the other party written notice thereof. If Tenant fails, within twenty (20)
days following the imposition of any lien, to cause such lien to be released of
record by payment or posting of a proper bond, Landlord shall have, in addition
to all other remedies provided herein and by law, the right (but not the
obligation) to cause the same to be released by such means as it shall deem
proper, including payment of the claim giving rise to such lien. All such sums
paid by Landlord and all costs and expenses reasonably incurred by it in
connection therewith (including reasonable attorneys' fees) shall be payable to
Landlord by Tenant on demand, with interest at the Agreed Rate from the date of
expenditure.
21. DEFAULTS BY TENANT
21.1. The occurrence of any one or more of the following events shall
constitute a material default and breach of this Lease by Tenant:
21.1.1. The failure by Tenant to make any payment of Rent or
Expenses or of any other sum required to be made by Tenant hereunder, as and
when due, where such failure continues for more than ten (10) days after written
notice of delinquency.
21.1.2. The failure by Tenant to observe or perform any of the
covenants, conditions or provisions of this Lease to be observed or performed by
Tenant, if such failure is not cured within twenty-five (25) days after written
notice thereof from Landlord to Tenant; provided, however, that if the nature of
Tenant's default is such that it cannot be cured solely by payment of money and
more than thirty (30) days are reasonably required for its cure, then Tenant
shall not be deemed to be in default if Tenant commences such cure within the
twenty-five (25) day period and thereafter diligently prosecutes such cure to
completion.
21.2. Any notice required or permitted by this Article 21 is intended
to satisfy to the maximum extent possible any and all notice requirements
imposed by law on Landlord. Landlord may serve a statutory notice to quit, a
statutory notice to pay rent or quit, or a statutory notice of default, as the
case may be, to effect the giving of any notice required by this Article 21.
22. LANDLORD'S REMEDIES
22.1. In the event of any material default or breach of this Lease by
Tenant, Landlord's obligations under this Lease shall be suspended and Landlord
may at any time thereafter, without limiting Landlord in the exercise of any
other right of remedy at law or in equity which Landlord may have (all remedies
provided herein being non-exclusive and cumulative), do any one or more of the
following:
22.1.1. Landlord shall have the remedy described in California
Civil Code Section 1951.4 (Landlord may continue the Lease in effect after
Tenant's breach and abandonment and recover Rent as it becomes due, as Tenant
has the right to sublet or assign, subject only to reasonable limitations).
Notwithstanding that Landlord fails to elect to terminate the Lease initially,
Landlord at any time thereafter may elect to terminate the Lease by virtue of
any uncured default by Tenant. In the event of any such termination, Landlord
shall be entitled to recover from Tenant any and all damages incurred by
Landlord by reason of Tenant's default (including, without limitation, the
damages described in Section 22.1.2 below), as well as all reasonable costs of
reletting, including commissions, reasonable attorneys' fees, restoration or
remodeling costs, and costs of advertising.
22.1.2. Landlord also shall have the remedy described in
California Civil Code Section 1951.2. Thus, Landlord may terminate Tenant's
right to possession by any lawful means, in which case this Lease shall
terminate and Tenant shall immediately surrender possession of the Premises to
Landlord. In such event, Landlord shall be entitled to recover from Tenant all
damages incurred by Landlord by reason of Tenant's default including (without
limitation) the following: (1) the worth at the time of award of any unpaid Rent
which had been earned at the time of such termination; plus (2) the worth at the
time of award of the amount by which the unpaid Rent which would have been
earned after termination until the time of award exceeds
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the amount of such Rent loss that Tenant proves could have been reasonably
avoided; plus (3) 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 Rent loss that Tenant proves could have been reasonably avoided;
plus (4) any other amount, and court costs, reasonably necessary to compensate
Landlord for all the detriment proximately caused by Tenant's default or which
in the ordinary course of things would be likely to result therefrom (including,
without limiting the generality of the foregoing, the amount of any commissions
and/or finder's fee for a replacement tenant); plus (5) at Landlord's election,
such other amounts in addition to or in lieu of the foregoing as may be
permitted from time to time by applicable law. As used in subparagraphs (1 ) and
(2) of this Section 22.1.2, the "worth at the time of award" is to be computed
by allowing interest at the then Agreed Rate (but in no event more than the
maximum rate of interest allowable under applicable usury law), and, as used in
subparagraph (3) of this Section 22.1.2, the "worth at the time of award" is to
be computed by discounting such amount at the discount rate of the U.S. Federal
Reserve Bank of San Francisco at the time of award, plus one percent (1%). The
term "Rent", as used in this Article 22, shall be deemed to be and to mean all
Rent, Expenses, parking fees and other monetary sums required to be paid by
Tenant pursuant to this Lease or as defined in Section 4.1 hereof. For the
purpose of determining the amount of "unpaid Rent which would have been earned
after termination" or the "unpaid Rent for the balance of the term" (as
referenced in subparagraphs (2) and (3) hereof), the amount of parking fees and
Expenses shall be deemed to increase annually for the balance of the term by an
amount equal to the average annual percentage increase in parking fees and
Expenses during the three (3) calendar years preceding the year in which the
Lease was terminated, or, if such termination shall occur prior to the
expiration of the third calendar year occurring during the term of this Lease,
then the amount of parking fees and Expenses shall be deemed to increase monthly
for the balance of the term by an amount equal to the average monthly percentage
increase in parking fees and Expenses during all of the calendar months
preceding the month in which the Lease was terminated.
22.1.3. Collect sublease rents (or appoint a receiver to collect
such rent) and otherwise perform Tenant's obligations at the Premises, it being
agreed, however, that neither the filing of a petition for the appointment of a
receiver for Tenant nor the appointment itself shall constitute an election by
Landlord to terminate this Lease.
22.1.4. Proceed to cure the default at Tenant's sole cost and
expense, without waiving or releasing Tenant from any obligation hereunder;
provided, however, that Landlord shall give Tenant at least five (5) days prior
written notice of Landlord's intent to exercise this remedy. If at any time
Landlord pays any sum or incurs any expense as a result of or in connection with
curing any default of Tenant (including any administrative fees provided for
herein and reasonable attorneys' fees), the amount thereof shall be immediately
due as of the date of such expenditure and, together with interest at the Agreed
Rate from the date of such expenditures, shall be paid by Tenant to Landlord
immediately upon Landlord's delivery of an invoice therefor, and Tenant hereby
covenants to pay any and all such sums.
22.1.5. If Tenant is not occupying the Premises, retain possession
of all of Tenant's fixtures, furniture, equipment, improvements, additions and
other personal property left in the Premises until Tenant's payment of
reasonable storage charges therefor or, at Landlord's option, at any time, to
require Tenant to forthwith remove same, and if not so removed to dispose of
same in the manner permitted by law for unclaimed personal property.
22.2. All covenants and agreements to be performed by Tenant under this
Lease shall be performed by Tenant at Tenant's sole cost and expense and without
any offset to or abatement of Rent or Expenses, except as otherwise expressly
provided in this Lease.
22.3. Notwithstanding anything to the contrary contained elsewhere in
this Lease but subject to the limitations set forth below, Tenant shall not be
liable under any circumstances, for injury or damage to, or interference with,
Landlord's business, including but not limited to loss of title to the Building,
Project or any portion thereof, loss of profits, loss of rents or other revenues
(excluding payments thereof which Tenant is otherwise obligated to make under
this Lease), loss of business opportunity, loss of goodwill or loss of use, in
each case however occurring. Nothing in this Section 22.3 shall be construed as
limiting or waiving Landlord's right to recover from damages of all types
(direct or indirect, and compensatory, special and consequential) arising from:
(i) Tenant's holding over in possession without Landlord's consent; (ii)
Tenant's failure to surrender the Premises in the condition required by this
Lease; and (iii) Tenant's default in its obligation to provide estoppel
certifications, subordination agreements and/or financial statements in
connection with any proposed sale, financing or refinancing of the Building or
the Project.
23. DEFAULTS BY LANDLORD
23.1. Landlord shall not be deemed to be in default in the performance
of any obligation under this Lease unless and until it has failed to perform
such obligation within thirty (30) days after receipt of written notice by
Tenant to Landlord specifying such failure; provided, however, that if the
nature of Landlord's default
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is such that more than thirty (30) days are required for its cure, then Landlord
shall not be deemed to be in default if it commences such cure within the thirty
(30) day period and thereafter diligently prosecutes such cure to completion.
Tenant agrees to give any Mortgagee a copy, by certified mail, of any notice of
default served upon Landlord, provided that prior to such notice Tenant has been
notified in writing (by way of Notice of Assignment of Rents and Leases, or
otherwise) of the address of such Mortgagee. Tenant further agrees that if
Landlord shall have failed to cure such default within the time provided for in
this Lease, then (except as otherwise provided in any subordination and/or
nondisturbance agreement then in effect between Tenant and a Mortgagee) any such
Mortgagee shall have an additional forty-five (45) days within which to cure
such default on the part of the Landlord or if such default cannot be cured
within that time, then such additional time as may be necessary if within that
forty-five (45) days the Mortgagee has commenced and is diligently pursuing the
remedies necessary to cure such default (including but not limited to
commencement of foreclosure proceedings and the appointment of a receiver, if
necessary, to effect such cure), in which event this Lease shall not be
terminated while such remedies are being so pursued. If Tenant recovers any
judgment against Landlord for a default by Landlord of this Lease, the judgment
shall be satisfied only out of the interest of Landlord in the Project or any
proceeds from the sale thereof, and neither Landlord nor any of its partners,
shareholders, officers, directors, employees or agents shall be personally
liable for any such default or for any deficiency.
24. COSTS OF SUIT
24.1. If either party brings action for relief against the other,
declaratory or otherwise, arising out of this Lease, including any suit by
Landlord for the recovery of Rent or possession of the Premises, the losing
party shall pay the successful party its reasonable costs incurred in connection
with and in preparation for said action, including its reasonable attorneys'
fees. If Landlord, without fault on Landlord's part, is made a party to any
action instituted by Tenant against a third party or by a third party against
Tenant or by or against any person holding under or using the Premises by
license of Tenant, or for the foreclosure of any lien for labor or material
furnished to or for Tenant or any such other person, or otherwise arising out of
or resulting from any act or omission of Tenant or of any such other person,
Tenant shall at its cost and at Landlord's option defend Landlord therefrom and
further, except to the extent Landlord is found separately liable for its own
negligence or wrongful acts, indemnify and hold Landlord harmless from any
judgment rendered in connection therewith and all costs and expenses (including
reasonable attorneys' fees) incurred by Landlord in connection with such action.
25. SURRENDER OF PREMISES; HOLDING OVER
25.1. Surrender. On expiration or termination of this Lease, Tenant
shall surrender to Landlord the Premises, and all Tenant's improvements thereto
and alterations thereof, broom clean and in good condition (except for ordinary
wear and tear, repairs which are the obligation of Landlord under the terms of
this Lease, destruction to the Premises covered by Article 18 of this Lease, and
for alterations that Tenant has the right to remove or is obligated to remove
under Article 15, so long as Tenant repairs any damage to the Premises under the
provisions of this Article 25 or Article 15), and shall remove all of its
personal property including any signs, notices and displays. Tenant shall
perform all restoration made reasonably necessary by the removal of any such
improvements or alterations or personal property, prior to the expiration of the
Lease term. If any such removal would damage the Building structure, Tenant
shall give Landlord prior written notice thereof and Landlord may elect to make
such removal at Tenant's expense or otherwise to require Tenant to post security
for such restoration. Landlord may retain or dispose of in any manner any such
improvements or alterations or personal property that Tenant does not remove
from the Premises on expiration or termination of the term as allowed or
required by this Lease and title to any such improvements or alterations or
personal property that Landlord so elects to retain or dispose of shall vest in
Landlord. Tenant waives all claims against Landlord for any damage or loss to
Tenant arising out of Landlord's retention or disposition of any such
improvements, alterations or personal property and shall be liable to Landlord
for Landlord's costs of storing, removing and disposing of any such
improvements, alterations or personal property which Tenant fails to remove from
the Premises. Tenant shall indemnify, defend and hold Landlord harmless from all
damages, loss, cost and expense (including reasonable attorneys' fees) arising
out of or in connection with Tenant's failure to surrender the Premises in
accordance with this Section 25.1.
25.2. Holding Over. If Tenant holds over after the term hereof, such
tenancy shall be at sufferance only, and not a renewal hereof or an extension
for any further term, and in such case Basic Rent shall be payable in the amount
of one hundred fifty percent (150%) of the Basic Rent in effect as of the last
month of the term hereof and at the time specified in this Lease, Tenant shall
continue to pay Tenant's Share of Expenses, and such tenancy shall be subject to
every other term, covenant and agreement contained herein other than any
provisions for rent concessions, Landlord's Work, or optional rights of Tenant
requiring Tenant to exercise same by written notice (such as options to extend
the term of the Lease). The foregoing shall not, however,
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be construed as a consent by Landlord to any holding over by Tenant and Landlord
reserves the right to require Tenant to surrender possession of the Premises
upon expiration or termination of this Lease.
26. SURRENDER OF LEASE
26.1. The voluntary or other surrender of this Lease by Tenant, or a
mutual cancellation thereof, shall not work as a merger. Such surrender or
cancellation shall, at the option of Landlord, terminate all or any existing
subleases or subtenancies, or may, at the option of Landlord, operate as an
assignment to it of any or all such subleases or subtenancies. The delivery of
keys to the Premises to Landlord or its agent shall not, of itself, constitute a
surrender and termination of this Lease.
27. TRANSFER OF LANDLORD'S INTEREST
27.1. If Landlord sells or transfers its interest in the Premises
(other than a transfer for security purposes) Landlord shall be released from
all obligations and liabilities accruing thereafter under this Lease, if
Landlord's successor has assumed in writing Landlord's obligations under this
Lease. (As to obligations and liabilities of Landlord which have accrued and
remain unperformed at the time of such sale or transfer, Tenant's rights shall
be as provided in Section 23.1.) Any Security Deposit, prepaid Rent or other
funds of Tenant in the hands of Landlord at the time of transfer shall be
delivered to such successor and Tenant agrees to attorn to the purchaser or
assignee, provided all Landlord's obligations hereunder are assumed in writing
by such successor. Notwithstanding the foregoing, Landlord's successor shall not
be liable to Tenant for any such funds of Tenant which Landlord does not deliver
to the successor.
28. ASSIGNMENT AND SUBLETTING
28.1. Landlord's Consent Required. Except as otherwise expressly
provided in Section 28.12 hereof, Tenant shall not sell, assign, mortgage,
pledge, hypothecate or encumber this Lease (any such act being referred to
herein as an "assignment"), and shall not sublet the Premises or any part
thereof, without the prior written consent of Landlord in each instance, which
consent shall not be unreasonably withheld, and any attempt to do so without
such consent shall be voidable by Landlord and, at Landlord's election, shall
constitute a material default under this Lease.
28.2. Tenant's Application. If Tenant desires at any time to assign
this Lease (which assignment shall in no event be for less than its entire
interest in this Lease) or to sublet the Premises or any portion thereof (other
than to an Affiliate as provided in Section 28.12), Tenant shall submit to
Landlord at least thirty (30) days prior to the proposed effective date of the
transaction ("Proposed Effective Date"), in writing, a notice of intent to
assign or sublease, setting forth: (i) the Proposed Effective Date, which shall
be no less than thirty (30) nor more than ninety (90) days after the sending of
such notice; (ii) the name of the proposed subtenant or assignee; (iii) the
nature of the proposed subtenant's or assignee's business to be carried on in
the Premises; and (iv) a description of the terms and provisions of the proposed
sublease or assignment. Such notice shall be accompanied by (i) such financial
information as Landlord may reasonably request concerning the proposed subtenant
of assignee, including recent financial statements and bank references; (ii) a
conformed or photostatic copy of the proposed sublease or assignment agreement;
and (iii) any fee required under Section 28.9.
28.3. Landlord's Option To Recapture. If the proposed assignee or
subtenant, or any person that directly or indirectly controls, is controlled by,
or is under common control with, the proposed assignee or subtenant, or any
person who controls the proposed assignee or subtenant, is then an occupant of a
part of the Building or the Project and the proposed assignment or sublease by
Tenant would create a vacancy elsewhere in the Project, then, in lieu of
granting consent thereto, Landlord may reasonably, at its option upon written
notice to Tenant given within thirty (30) days after its receipt of the
above-described notice from Tenant, elect to recapture the entire Premises in
case of a proposed assignment or to recapture such portion of the Premises as
Tenant proposes to sublease and upon such election by Landlord, this Lease shall
terminate as to the portion of the Premises recaptured. In the event a portion
of the Premises is recaptured, the rent payable under this Lease and Tenant's
Share shall be proportionately reduced based on the rentable square footage
retained by Tenant and the rentable square footage leased by Tenant hereunder
immediately prior to such recapture and termination, and Landlord and Tenant
shall thereupon execute an amendment of this Lease in accordance therewith. If
Landlord recaptures only a portion of the Premises, Landlord shall construct and
erect at its sole cost and expense such partitions as may be required to
separate the space retained by Tenant from the space recaptured by Landlord;
provided, however, that said partitions need only be finished in Building
Standard condition. Landlord may, at its option, lease the recaptured portion of
the Premises to the proposed assignee or subtenant without liability to Tenant.
If Landlord does not elect to recapture pursuant to this Section 28.3, Tenant
may thereafter enter into a valid sublease with respect to the Premises,
provided Landlord, pursuant to this Article 28, consents thereto, and provided
further that (i) the sublease is executed within ninety (90) days
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after notification to Landlord of such proposal, and (ii) the rental therefore
is not less than that stated in such notification. Any termination as provided
in this Section 28.3 shall be subject to the written consent of any Mortgagee of
Landlord. The effective date of any such termination shall be the Proposed
Effective Date so long as Tenant has complied with the provisions of Section
28.2 above, and otherwise shall be as specified in Landlord's notice of
termination.
28.4. Approval/Disapproval Standards. In the event that Tenant complies
with the provisions of Section 28.2, and Landlord does not exercise an option
provided to Landlord under Section 28.3, Landlord's consent to a proposed
assignment or sublease shall not be unreasonably withheld or delayed. Landlord's
failure to respond within fifteen (15) business days after receipt of all
information Tenant is required to supply under Section 28.2 shall be deemed to
constitute Landlord's consent to the assignment or sublease on the terms stated
in Tenant's notice under Section 28.2. In determining whether to grant or
withhold consent to a proposed assignment or sublease, Landlord may consider any
reasonable factor. Without limiting what may be construed as a reasonable
factor, it is hereby agreed that any one of the following factors will be
reasonable grounds for disapproval of a proposed assignment or sublease:
28.4.1. Tenant has not complied with the requirements set forth in
Section 28.2 above;
28.4.2. In the case of any assignment of this Lease or a sublease
of more than 10,000 square feet of rentable area, the proposed assignee or
subtenant does not, in Landlord's reasonable judgment, have sufficient financial
worth, considering the responsibility involved;
28.4.3. The proposed assignee or subtenant does not, in Landlord's
reasonable judgment, have as good a reputation as is generally found among other
tenants in the Project who are in compliance with the terms of their respective
leases;
28.4.4. Landlord has had prior material, negative leasing
experience with the proposed assignee or subtenant;
28.4.5. The use of the Premises by the proposed assignee or
subtenant will not comply with the use permitted by this Lease;
28.4.6. In Landlord's reasonable judgment, the proposed assignee
or subtenant is engaged in a business, and the Premises, or the relevant part
thereof, will be used in a manner that is not in keeping with the then current
standards of the Building, or that will violate any restrictive or exclusive
covenant as to use contained in any other lease of space in the Building or the
Project;
28.4.7. The use of the Premises by the proposed assignee or
subtenant will violate any applicable law, ordinance or regulation;
28.4.8. The proposed assignment or sublease fails to include all
of the terms and provisions required to be included therein pursuant to this
Article 28; or
28.4.9. Tenant is then in default of any obligation of Tenant
under this Lease, and such default continues after the giving of any required
notice beyond the applicable cure period.
28.5. Approval/Disapproval Procedure. Landlord shall approve or
disapprove the proposed assignment or sublease by written notice to Tenant. If
Landlord reasonably denies a request for consent to a proposed sublease or
assignment, Landlord shall not be liable to the proposed assignee or subtenant,
or to any broker or other person claiming a commission or similar compensation
in connection with the proposed assignment or sublease. If Landlord approves the
proposed assignment or sublease, Tenant shall, prior to the Proposed Effective
Date, submit to Landlord all executed originals of the assignment or sublease
agreement and, in the event of a sublease, Landlord's reasonable and customary
consent to subletting form executed by Tenant and sublessee for execution by
Landlord. Provided such assignment or sublease agreement is in accordance with
the terms approved by Landlord, Landlord shall execute each original as
described above and shall retain two originals for its file and return the
others to Tenant. No purported assignment or sublease shall be deemed effective
as against Landlord and no proposed assignee or subtenant shall take occupancy
unless such document is delivered to Landlord in accordance with the foregoing.
28.6. Required Provisions. Any and all assignment or sublease
agreements shall (i) contain such terms as are described in Tenant's notice
under Section 28.2 above or as otherwise agreed by Landlord; (ii) prohibit
further assignments or subleases except with the consent of both Landlord and
Tenant, (iii) impose the same obligations and conditions on the assignee or
sublessee as are imposed on Tenant by this Lease except
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as to Rent and term or as otherwise reasonably consented to by Landlord; (iv) be
expressly subject and subordinate to each and every provision of this Lease, (v)
have a term that expires on or before the expiration of the term of this Lease;
(vi) provide that if Landlord succeeds to sublessor's position, Landlord shall
not be liable to sublessee for advance rental payments, deposits or other
payments which have not been actually delivered to Landlord by the sublessor,
and (vii) provide that Tenant and/or the assignee or sublessee shall pay
Landlord the amount of any additional costs or expenses incurred by Landlord for
repairs, maintenance or otherwise as a result of any change in the nature of
occupancy caused by the assignment or sublease. Any and all sublease agreements
shall also provide that in the event of termination, re-entry, or dispossession
by Landlord under this Lease, Landlord may, at its option, take over all of the
right, title and interest of Tenant as sublessor under such sublease, and such
subtenant shall, at Landlord's option, attorn to Landlord pursuant to the then
executory provisions of the sublease, except that Landlord shall not: (i) be
liable for any previous act or omission of Tenant under the sublease; (ii) be
subject to any offset not expressly provided in the sublease that theretofore
accrued to the subtenant against Tenant; or (iii) be bound by any previous
modification of such sublease or by any previous prepayment of more than one (1)
month's fixed rent or any additional rent then due.
28.7. Payment of Additional Rent Upon Assignment or Sublease. If
Landlord shall give its consent to any assignment of this Lease or to any
sublease of the Premises, Tenant shall, in consideration therefor, pay to
Landlord, as additional Rent, the following:
28.7.1. In the case of an assignment, an amount equal to fifty
percent (50%) of all sums and other consideration paid to Tenant by the assignee
for, or by reason of, such assignment (including, without limiting the
generality of the foregoing, all sums paid for the sale of Tenant's leasehold
improvements); and
28.7.2. In the case of a sublease, fifty percent (50%) of any
rents, additional charges, or other consideration payable under the sublease by
the subtenant to Tenant that are in excess of the Rent and Tenant's Share of
Expenses accruing during the term of the sublease in respect of the subleased
space (at the rate per square foot payable by Tenant hereunder) pursuant to the
terms hereof (including, without limiting the generality of the foregoing, all
sums paid for the sale or rental of Tenant's leasehold improvements).
28.8. The sums payable under Section 28.7 shall be calculated after
first deducting Tenant's reasonable, out-of-pocket costs incurred with respect
to the assignment or the sublease, as the case may be, but specifically
excluding attorneys' fees; provided, however, that any tenant improvement
allowances, monetary concessions and brokerage commissions paid for by Tenant
shall be recaptured by Tenant on an amortized basis over the term of the
assignment or sublease. The sums payable under Section 28.7.1 above shall be
paid to Landlord upon the effective date of the assignment. The sums payable
under Section 28.7.2 above shall be paid to Landlord as and when payable by the
sublessee to Tenant. Within fifteen (15) days after written request therefor by
Landlord, Tenant shall at any time and from time to time furnish evidence to
Landlord of the amount of all such sums or other consideration received or
expected to be received.
28.9. Fees for Review. Simultaneously with the giving of the notice
described in Section 28.2 above, Tenant shall pay to Landlord or Landlord's
designee a non-refundable fee in the amount of Three Hundred Dollars ($300.00)
as reimbursement for expenses incurred by Landlord in connection with reviewing
each such transaction. In addition to such reimbursement, if Landlord retains
the services of an attorney to review the transaction, Tenant shall pay to
Landlord the reasonable attorneys' fees incurred by Landlord in connection
therewith not to exceed One Thousand Dollars ($1,000) in any single instance.
Tenant shall pay such attorneys' fees to Landlord within fifteen (15) days after
written request therefor.
28.10. No Release of Tenant. No consent by Landlord to any assignment
or subletting by Tenant shall relieve Tenant of any obligation to be performed
by Tenant under this Lease, whether occurring before or after such consent,
assignment or subletting, including Tenant's obligation to obtain Landlord's
express prior written consent to any other assignment or subletting. In no event
shall any permitted subtenant assign its sublease, further sublet all or any
portion of its sublet space, or otherwise suffer or permit the sublet space, or
any part thereof, to be used or occupied by others, except upon compliance with,
and subject to the provisions of this Article 28. The acceptance by Landlord of
payment from any person other than Tenant shall not be deemed to be a waiver by
Landlord of any provision of this Lease or to be a consent to any subsequent
assignment or sublease, or to be a release of Tenant from any obligation under
this Lease.
28.11. Assumption of Obligations. Each assignee of Tenant shall assume
the obligations of Tenant under this Lease and shall be and remain liable
jointly and severally with Tenant for the payment of the Rent and the
performance of all the terms, covenants, conditions and agreements herein
contained on Tenant's part to be performed for the term of this Lease. No
assignment shall be binding on Landlord unless the assignee or Tenant delivers
to Landlord a counterpart of the instrument of assignment in recordable form
which contains
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a covenant of assumption by the assignee satisfactory in substance and form to
Landlord, and consistent with the requirements of this Article 28. The failure
or refusal of the assignee to execute such instrument of assumption shall not
release or discharge the assignee from its liability to Landlord hereunder.
Landlord shall have no obligation whatsoever to perform any duty to or respond
to any request from any sublessee, it being the obligation of Tenant to
administer the terms of its subleases.
28.12. Corporate or Partnership Transfers. This Article shall not apply
to assignments or subleases to a corporation (i) into or with which Tenant is
merged or consolidated; (ii) to which substantially all of Tenant's assets or
stock are transferred, or (iii) that controls, is controlled by, or is under
common control with Tenant (the entities described in preceding clause (i), (ii)
and (iii) being herein collectively called "Affiliates"), provided that, in any
of such events:
28.12.1. Any such assignment or sublease shall be subject to all
of the terms and provisions of this Lease, and such assignee or sublessee shall
assume, in a written document reasonably satisfactory to Landlord and delivered
to Landlord promptly upon the assignment or sublease, all the obligations of
Tenant under this Lease;
28.12.2. Tenant and the Guarantor shall remain fully liable for
all obligations to be performed by Tenant under this Lease; and
28.12.3. Tenant shall pay to Landlord or Landlord's designee,
promptly on demand, a non-refundable fee in the amount of Three Hundred Dollars
($300.00) as reimbursement for expenses incurred by Landlord in connection with
reviewing such transaction.
28.13. Assignment of Sublease Rents. Tenant immediately and irrevocably
assigns to Landlord, as security for Tenant's obligations under this Lease, all
rent from any subletting of all or any part of the Premises, and Landlord, as
assignee and as attorney-in-fact for Tenant for purposes hereof, or a receiver
for Tenant appointed on Landlord's application, may collect such rents and apply
same toward Tenant's obligations under this Lease; except that, until the
occurrence of an act of default by Tenant, Tenant shall have the right and
license to collect such rents.
29. ATTORNMENT
29.1. If any proceeding is brought for default under any ground or
underlying lease to which this Lease is subject, or in the event of foreclosure
or the exercise of the power of sale under any mortgage or deed of trust made by
Landlord covering the Premises, Tenant shall attorn to the successor upon any
such foreclosure or sale and shall recognize that successor as Landlord under
this Lease, provided such successor expressly agrees in writing to be bound to
all future obligations by the terms of this Lease, and, if so requested, Tenant
shall enter into a new lease with that successor on the same terms and
conditions as are contained in this Lease (for the unexpired term of this Lease
then remaining).
30. SUBORDINATION
30.1. Without the necessity of any additional document being executed
by Tenant for the purpose of effecting a subordination, but subject to Section
30.2 below, this Lease shall be subject and subordinate at all times to: (i) all
ground or underlying leases which may now exist or hereafter be executed
affecting the Premises, and (ii) the lien of any first mortgage or first deed of
trust which may now exist or hereafter be executed in any amount for which the
Premises, such ground or underlying leases, or Landlord's interest or estate in
any of them, is specified as security. Notwithstanding the foregoing, Landlord
shall have the right to subordinate or cause to be subordinated any such ground
or underlying leases or any such liens to this Lease. If any ground or
underlying lease terminates for any reason, Tenant shall, notwithstanding any
subordination, attorn to and become tenant of the successor in interest to
Landlord at the option of such successor in interest. Tenant covenants and
agrees to execute and deliver, upon demand by Landlord and in such commercially
reasonable form as may be required by commercial lenders, any documents
evidencing the priority or subordination of this Lease with respect to any such
ground or underlying leases or the lien of any such first mortgage, or first
deed of trust, and specifically to execute, acknowledge and deliver to Landlord
from time to time within thirty (30) days after written request to do so a
subordination of lease, or a subordination of deed of trust, in substantially
the form set forth in Exhibit D or Exhibit D-1, respectively, attached hereto,
or such other form as may be commercially reasonable and customarily required by
commercial lenders and failure of Tenant to do so shall be a material default
hereunder.
30.2. Landlord shall undertake reasonable efforts to obtain a
non-disturbance, recognition and attornment agreement from its existing
Mortgagee in such Mortgagee's reasonable and customary form. If
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Landlord is unable to obtain such non-disturbance, recognition and attornment
agreement from its existing Mortgagee prior to the Commencement Date, then
Landlord and Tenant shall establish a blocked, interest- bearing account with a
banking institution licensed to do business in California and selected by
Landlord. Tenant shall timely deposit all payments of Rent into the blocked bank
account until whichever of the following events first occurs: (a) Landlord
obtains and delivers to Tenant a reasonable and customary form of
non-disturbance, recognition and attornment agreement signed by the Mortgagee
existing on the date of this Lease; (b) Landlord causes this Lease to achieve
priority over the deed of trust, mortgage or other interest held by the
Mortgagee existing on the date of this Lease; (c) the term of this Lease
expires; or (d) this Lease terminates prior to the scheduled expiration other
than as a result of foreclosure of the prior mortgage, deed of trust or other
interest held by the Mortgagee existing on the date of this Lease. Upon the
occurrence of any event described in the preceding clauses (a), (b), (c) or (d),
all Rent theretofore paid into the blocked bank account, together with interest
earned thereon, shall be released to Landlord, and Tenant shall thereafter pay
all Rent directly to Landlord. If this Lease terminates before the occurrence of
any of the events described in the preceding clauses (a), (b), (c) or (d), and
such termination results from the foreclosure of a mortgage, deed of trust or
other interest held by the Mortgagee existing on the date of this Lease, all
Rent theretofore paid into the blocked bank account, together with interest
thereon, shall be released to Tenant. Funds may not be withdrawn from the
blocked account by Landlord or Tenant except as provided in the preceding
sentence. In case of any failure or delay in Tenant's payment of Rent into the
blocked account, Landlord shall have all rights and remedies available where
Rent is payable directly to Landlord. Furthermore, as a condition to the
subordination of this Lease to any future mortgage, deed of trust or ground or
underlying lease, Landlord shall obtain from the mortgagee, beneficiary or
lessor a non-disturbance, recognition and attornment agreement in such form as
is then reasonably and customarily used by institutional lenders.
31. ESTOPPEL CERTIFICATE
31.1. Tenant shall from time to time within thirty (30) days after
prior written notice from Landlord execute, acknowledge and deliver to Landlord
a statement in writing in the form set forth in Exhibit E attached hereto, or
such other form as may be commercially reasonable and customarily required by
(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) and the date to which the
Rent and other charges are paid in advance, if any; (ii) acknowledging that
there are not, to Tenant's knowledge, any uncured defaults on the part of
Landlord hereunder (or specifying such defaults if they are claimed); and (iii)
containing such other information and matters as are reasonably set forth in
such form. Any such statement may be conclusively relied upon by any prospective
purchaser or encumbrancer of the Premises. Tenant's failure to deliver such
statement within such time shall be conclusive upon Tenant that this Lease is in
full force and effect, without modification except as may be represented by
Landlord, that there are no uncured defaults in Landlord's performance, and that
not more than one (1) month's Rent has been paid in advance. Failure of Tenant
to so deliver such statement shall be a material default hereunder.
31.2. In connection with any sale of all or substantially all of the
assets or stock of Tenant, Landlord shall within thirty (30) days after written
request execute, acknowledge and deliver to Tenant a statement in writing: (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); and (ii) acknowledging that
there are not, to Landlord's knowledge, any defaults by Tenant hereunder (or
specifying such defaults if they are claimed). Any such statement may be
conclusively relied upon by any bona fide purchaser of all or substantially all
of Tenant's stock or assets.
32. INTENTIONALLY DELETED
33. QUIET ENJOYMENT
33.1. So long as Tenant pays all Rent and other sums due under this
Lease, performs its covenants and obligations under this Lease and recognizes
any successor to Landlord in accordance with the terms of this Lease, Tenant
shall lawfully and quietly have, hold and enjoy the Premises without hindrance
or molestation by Landlord or anyone claiming by, through or under Landlord,
subject, however, to all the provisions of this Lease.
34. WAIVER OF REDEMPTION BY TENANT
34.1. Tenant hereby waives for Tenant and for all those claiming under
Tenant all right now or hereafter existing to redeem by order or judgment of any
court or by any legal process or writ, Tenant's right of occupancy of the
Premises after any termination of this Lease.
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35. WAIVER OF LANDLORD, TENANT'S PROPERTY
35.1. Landlord shall, within thirty (30) days after written request
from Tenant, execute and deliver to Tenant any statement in form reasonably
acceptable to Landlord as may be required by any supplier, lessor, installment
seller or chattel mortgagee in connection with the installation in the Premises
of any personal property or trade fixtures of Tenant, pursuant to which Landlord
shall agree to waive any rights it may have or may acquire with respect to any
such property, provided in all cases that such supplier, lessor, installment
seller or chattel mortgagee expressly agrees in writing that: (i) it will remove
at its sole cost and expense all such property from the Premises before the
expiration or termination of the Lease and if it fails to do so within ten (10)
days after written request from Landlord it shall be deemed to have waived any
and all rights it may have had to such property; (ii) prior to making any such
removal it will advise Landlord in writing of the date and time of such removal
and will at the time of such removal, allow a representative of Landlord to be
present; (iii) it will promptly and diligently and at its sole cost and expense
repair any and all damage to the Premises attributable to such removal and shall
restore the Premises to substantially the same condition it was in prior to such
removal; (iv) it will allow Landlord to select the person or persons who will
effect such removal, repair and restoration, and will bear the costs and
expenses thereof; (v) it will, if Landlord chooses not to exercise its rights
under (iv) above, cause a performance and completion bond, satisfactory to
Landlord, to be furnished to Landlord with regard to the work of such removal,
repair and restoration; (vi) it will promptly pay Landlord any costs and
expenses incurred by Landlord in connection with the enforcement of Landlord's
rights hereunder, including reasonable attorneys' fees, and will indemnify and
hold Landlord harmless against any and all claims, loss, cost or expense arising
out of or in connection with such removal, repair and restoration; (vii) it will
pay Landlord interest on any outstanding amounts payable by it to Landlord at
the "Agreed Rate" (as hereinafter defined); (viii) it will not record such
statement without Landlord's prior written consent which Landlord may withhold
in its sole discretion and (ix) it will not assign its rights or delegate its
duties under such statement without Landlord's prior written consent, which
consent shall not be unreasonably withheld or delayed.
36. RULES AND REGULATIONS
36.1. The Rules and Regulations attached hereto as Exhibit F are
expressly made a part hereof. Tenant agrees to comply with such Rules and
Regulations and any reasonable, nondiscriminatory amendments, modifications or
additions thereto as may hereafter be adopted and published by notice to tenants
in the Building, and to cause its agents, contractors and employees to comply
therewith, and agrees that the violation of any of them shall constitute a
default by Tenant under this Lease. 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. Provided Landlord makes reasonable efforts to cause other
tenants and occupants to comply with the Rules and Regulations, Landlord shall
not be responsible to Tenant for the non-performance by any other tenant or
occupant of the Building or of the Project of any of the Rules and Regulations.
37. NOTICES
37.1. Any notice, demand or communication required or permitted to be
given hereunder to Landlord by Tenant shall be in writing and (i) personally
served or (ii) deposited in the United States mails, duly registered or
certified with postage fully prepaid thereon, addressed to Landlord at
Landlord's address as set forth in Section 1.9 hereof, or to such other address
or such other parties as Landlord may from time to time designate, or (iii) sent
to such address by a nationally recognized overnight courier service with
receipted delivery. Any notice, demand or communication required or permitted to
be given hereunder to Tenant by Landlord may be (i) mailed as above stated to
Tenant's address as set forth in Section 1.10 hereof, (ii) sent to such address
by a nationally recognized overnight courier service with receipted delivery, or
(iii) delivered personally to Tenant at the address of the Premises. Copies of
any notice to Tenant shall be sent to Tenant's legal department at the address
set forth in Section 1.10 hereof. Either party may by written notice similarly
given designate a different address for notice purposes, except that Landlord
may in any event use the Premises as Tenant's address for notice purposes.
Notice shall be effective when delivered in case of personal delivery, or on the
next business day in case of delivery by overnight courier service, or on the
third business day after mailing in the case of notice by registered or
certified mail (or on such earlier date of delivery as is shown on the return
receipt).
38. WAIVER
38.1. No delay or omission by a party hereto in the exercise of any
right or remedy for any default by the other party shall impair such right or
remedy or be construed as a waiver. The receipt and acceptance by Landlord of
delinquent payments shall not constitute a waiver of any other default, and
shall not constitute a waiver of timely payment of the particular payment
involved. No act or conduct of Landlord, including,
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without limitation, the acceptance of keys to the Premises, shall constitute an
acceptance of the surrender of the Premises by Tenant before the expiration of
the term. Only an express notice to such effect from Landlord to Tenant shall
constitute acceptance of the surrender of the Premises sufficient to terminate
this Lease. A party's consent to or approval of any act by the other party
requiring the first party's consent or approval shall not constitute a consent
or approval of any subsequent act by the second party. Any waiver of any default
must be in writing and shall not be a waiver of any other default concerning the
same or any other provision of this Lease.
39. MISCELLANEOUS
39.1. Execution by Landlord. The submission of this document for
examination and negotiation does not constitute an offer to lease, or a
reservation of, or an option for, the Premises. This document becomes effective
and binding only upon execution by Tenant and by Landlord and upon Tenant's
delivery to Landlord of the Guaranty, in the form set forth as Exhibit G, duly
executed by the "Guarantor" identified in Section 1.12 above. No act or omission
of any employee or agent of Landlord or of Landlord's broker shall alter, change
or modify any of the provisions hereof.
39.2. Landlord and Tenant. As used in this Lease, the words "Landlord"
and "Tenant" include the plural as well as the singular. Words used in the
neuter gender include the masculine and feminine and words in the masculine or
feminine gender include the neuter. If there is more than one person or entity
constituting Landlord or Tenant, the obligations imposed hereunder upon Landlord
or Tenant are joint and several. If Tenant consists of a husband and wife, the
obligations of Tenant hereunder extend individually to the sole and separate
property of each of them as well as to their community property. The obligations
contained in this Lease to be performed by Landlord shall be binding on
Landlord's successors and assigns only during their respective periods of
ownership of the Premises.
39.3. Brokers. Tenant shall hold Landlord harmless from all damages
(including reasonable attorneys' fees and costs) resulting from any claims that
may be asserted against Landlord by any broker, finder, or other person with
whom Tenant has or purportedly has dealt, except as set forth at Section 1.11.
Landlord shall pay a commission to the brokers identified in Section 1.11
pursuant to a separate agreement. If Tenant exercises its first Option to Extend
and Landlord fails to pay to Cushman & Wakefield a commission therefor in
accordance with that certain commission agreement dated January 17, 1995, Tenant
may upon not less than thirty (30) days' prior notice to Landlord, pay the
commission due and owing to Cushman & Wakefield and offset the amount thereof
against the Rent next payable by Tenant under this Lease.
39.4. Signs. Tenant shall not place or permit to be placed in or upon
the Premises, where visible from outside the Premises, or outside the Premises
on any part of the Building or Project, any signs, notices, drapes, shutters,
blinds, or displays of any type, without the prior written consent of Landlord.
Landlord reserves the right in its sole discretion to place and locate on the
roof or exterior of the Building, and in any area of the Project not leased to
Tenant, any signs, notices, displays and similar items as Landlord deems
appropriate. Landlord shall provide Tenant, at no cost to Tenant but as part of
Expenses, with at least thirty-five (35) strips on the Building directory board
to be located in the lobby of the Building and every other directory board
designed to accommodate the names of tenants and their personnel. Tenant will be
permitted group and alphabetical listings on such directory board.
39.5. Name of Building. Tenant shall not use the name of the Building
or the Project for any purpose other than the address of the business to be
conducted by Tenant in the Premises. Tenant shall not use any picture of the
Building or the Project in its advertising, stationery or in any manner so as to
imply that the entire Building is leased by Tenant. Landlord expressly reserves
the right at any time to change the name of the Building or Project without in
any manner being liable to Tenant therefor; provided, however, that so long as
Tenant or its Affiliate actually occupies the Premises, Landlord will not name
the Building for a direct competitor of Tenant. Landlord shall not use Tenant's
name, logo or tradename except with Tenant's prior written consent, which
consent shall not be unreasonably withhold or delayed; provided, however, that
Landlord may use Tenant's name in promotional materials which list tenants of
the Project.
39.6. Parking. During the term of this Lease, Tenant shall only be
entitled to such use of parking spaces in the parking areas located in the
Project as shall be confirmed in writing by the parties, and absent any written
agreement to the contrary, parking for Tenant and its employees, agents,
customers, invitees and licensees shall be on a first-come, first-served basis,
at rates and upon other terms and conditions as may be established from time to
time by Landlord or Landlord's operator of the parking areas. Parking rates may
be hourly, weekly or monthly, or such other rate system as Landlord deems
advisable, and Tenant acknowledges that its employees shall not be entitled to
park in such parking areas located in and about the Building which may from time
to time be designated for visitors of the Building. Landlord may also designate
areas for
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assigned, reserved or employee parking either within the parking areas located
in and about the Building, or in other areas reasonably close thereto. Landlord
shall have the right to change any such designated parking areas from time to
time. Tenant acknowledges that neither Landlord nor any agent of Landlord has
made any representation or warranty as to the suitability of the parking areas
for the conduct of Tenant's business.
39.7. Guarantee. Any guarantee of this Lease shall be in the form set
forth at Exhibit G. If this Lease shall have been guaranteed, any such guarantee
shall be deemed a material part of the consideration for Landlord's execution of
this Lease.
39.8. Approval of Landlord's Mortgagee. Tenant acknowledges that this
Lease is subject to the approval of Landlord's Mortgagee, as evidenced by such
Mortgagee's execution of a nondisturbance, recognition and attornment agreement
with Tenant.
39.9. Landlord's Financing. In connection with Landlord's financing of
the Premises or any other part of the Project, if Landlord's Mortgagee requires
Tenant to execute, acknowledge and deliver to Landlord or Landlord's Mortgagee
certain documents as may be ordinarily and customarily required by such lender
in connection with financing, including without limitation those documents as
may be required under Articles 30 and 31 of this Lease, Tenant shall execute,
acknowledge and deliver the requested documents within thirty (30) days after
receipt of Landlord's request therefor, and Tenant's failure to do so shall
constitute a default without necessity of further notice or right to cure. No
limitation on Landlord's recovery of consequential damages contained elsewhere
in this Lease shall apply to a default by Tenant under this Section 39.9.
39.10. Memorandum of Lease. Concurrently with the execution and
delivery of this Lease by Landlord and Tenant, Landlord shall execute and
notarize a short form Memorandum of Lease, in recordable form, and shall deliver
same to Tenant for Tenant's recording in the form attached hereto as Exhibit
"I", and Tenant shall execute, acknowledge and deliver to Landlord an undated
quit claim deed to Landlord. Tenant's quit claim deed to Landlord shall become
effective when Tenant's rights and interests under this Lease and in and to the
Premises are of no further force or effect, at which time Landlord is authorized
to date and record the quit claim deed. Tenant shall pay, or reimburse Landlord
for, all costs and expenses (including, without limitation, transfer taxes)
incurred in connection with recordation of the Memorandum of Lease or quit claim
deed.
39.11. Nonrecordability of Lease. Tenant agrees that in no event shall
this Lease be recorded.
39.12. Matters of Record. This Lease and Tenant's rights hereunder are
subject and subordinate in all respects to matters affecting Landlord's title
recorded in the official records of the county recorder's office for the county
in which the Project is located prior or subsequent to the date of execution of
this Lease, and is expressly subject and subordinate to the following:
Declaration of Restrictions dated September 15, 1978, and recorded on October 2,
1978, as Document No. 78-1093326 in the Official Records of Los Angeles County,
State of California, as amended, and Reciprocal Parking Agreement dated January
3, 1979, and recorded on January 19, 1979, as Document No. 79-86214 in the
Official Records of Los Angeles County, State of California, as amended. Tenant
agrees that as to its leasehold estate it, and all persons in possession or
holding under it, will conform with and will not violate any such covenants,
conditions and restrictions, or other matters of record.
39.13. Severability. If any provision of this Lease shall, to any
extent, be determined by a court of competent jurisdiction to be invalid or
unenforceable, the remainder of this Lease shall not be affected thereby, every
other term and provision of this Lease shall be valid and enforceable to the
fullest extent permitted by law, and a suitable and equitable provision shall be
substituted for the invalid or unenforceable provision in order to carry out, as
far as may be valid and enforceable, the intent and purpose of such invalid or
unenforceable provision.
39.14. Construction. All provisions hereof, whether covenants or
conditions, shall be deemed to be both covenants and conditions. The definitions
contained in this Lease shall be used to interpret this Lease.
39.15. Interest. Except as expressly provided otherwise in this Lease,
any amount due to Landlord which is not paid when due shall bear interest from
the date due at the prime commercial rate of interest charged from time to time
by Citibank N.A. plus two percent (2%) per annum, but not to exceed the maximum
rate of interest allowable under the law (the "Agreed Rate"). Payment of such
interest shall not excuse or cure any default by Tenant under this Lease.
39.16. Binding Effect; Choice of Law. Except as expressly provided
otherwise in this Lease, all of the provisions hereof shall be binding upon and
inure to the benefit of the parties hereto and their respective
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heirs, legal representatives, successors and assigns. This Lease shall be
governed by the laws of the State of California.
39.17. Waiver of Trial by Jury. LANDLORD AND TENANT EACH HEREBY WAIVE
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER
AGAINST THE OTHER ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY
CONNECTED WITH THIS LEASE OR TENANT'S USE OR OCCUPANCY OF THE PREMISES,
INCLUDING ANY CLAIM OF INJURY OR DAMAGE, AND ANY EMERGENCY AND OTHER STATUTORY
REMEDY WITH RESPECT THERETO. LANDLORD AND TENANT ALSO AGREE THAT THE VENUE OF
ANY SUCH ACTION, PROCEEDING OR COUNTERCLAIM SHALL BE IN THE CITY AND COUNTY OF
LOS ANGELES, STATE OF CALIFORNIA.
39.18. Time; Rights Cumulative. Time is of the essence of this Lease
and each and every provision hereof, except as may be expressly provided
otherwise. All rights and remedies of the parties shall be cumulative and
non-exclusive of any other remedy at law or in equity.
39.19. Inability to Perform. This Lease and the obligations of Landlord
and Tenant hereunder shall not be affected or impaired because Landlord or
Tenant is unable to fulfill any of its obligations hereunder or is delayed in
doing so, if such inability or delay is caused by reason of force majeure,
strike, labor troubles, acts of God, acts of government, unavailability of
materials or labor, or any other cause beyond the control of such party
(collectively, "Force Majeure"). Notwithstanding the foregoing, a party's
inability to perform for financial reasons shall not constitute Force Majeure.
Furthermore, the provisions of this Section 39.19 shall not: (i) extend the
Outside Date under Section 2.6; (ii) delay any right of Tenant to claim an
abatement of Rent where specifically permitted by this Lease or to exercise any
right to take a Required Action under Section 14.1.1; or (iii) except as
otherwise provided herein, impair the right of either party to terminate this
Lease.
39.20. Corporate Authority. If Tenant is a corporation, each individual
executing this Lease on behalf of Tenant represents and warrants that he or she
is duly authorized to execute and deliver this Lease on behalf of Tenant, and
that Tenant is qualified to do business in the State of California, and shall
deliver appropriate certification to that effect if requested.
39.21. Intentionally Omitted.
39.22. Submittal of Financial Statement. At any time and from time to
time during the term of this Lease, within fifteen (15) days after request
therefor by Landlord, Tenant shall supply to Landlord and/or any Mortgagee a
current annual report of Guarantor or such other financial information as may be
reasonably required by any such party.
39.23. Riders. Clauses, plats, addenda, and riders, if any, that are
signed by Landlord and Tenant and affixed to this Lease, are a part hereof.
40. TENANT'S PROVISION OF CABLE TELEVISION SERVICES
40.1. Grant. Landlord hereby grants to Tenant the exclusive right to
provide cable television services within the Building (the "Cable TV Service").
Furthermore, so long as Tenant has the exclusive right to provide the Cable TV
Service, Landlord shall not authorize any other provider of competing television
services to solicit tenants in the Building. Tenant's exclusive right to provide
the Cable TV Service shall end upon the earlier of: (i) expiration of the term
of this Lease; (ii) termination of this Lease prior to scheduled expiration of
the term; or (iii) cessation of Tenant's right, franchise or license to supply
cable television services within the City of Santa Monica. In addition, Landlord
may eliminate Tenant's exclusive right to provide Cable TV Service, allowing
Tenant to provide the Cable TV Service on a nonexclusive basis, where Landlord
determines that the rates charged to users of the Cable TV Service in the
Building exceed a commercially reasonable rate for such service.
40.2. Installation of System. Tenant shall install in the Building, at
Tenant's sole cost and expense, a cable television distribution system including
cable, amplifiers, outlets and all other necessary equipment including security
equipment for the provision of Tenant's Cable TV Service within the Building
(the "System"). Installation of any elements of the System within space occupied
by other tenants of the Building shall only be performed with the prior written
consent of each such tenant. The System shall have sufficient capacity to
provide the Cable TV Service to all tenants of the Building who are willing to
enter into Tenant's standard subscription agreement therefor. Except as
otherwise provided by federal law, the System (including all equipment installed
in the spaces occupied by tenants of the Building) shall remain the property of
Tenant.
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40.3. Approval of Location. Prior to installing the System, Tenant
shall provide Landlord with complete plans and specifications showing the types
and location of equipment constituting the System. Approval of Tenant's plans
and specifications for the System shall be subject to Landlord's sole but
reasonable discretion. Except as required in connection with maintenance and
repair of the Building, or for the preparation of vacant space for occupancy,
Landlord will not disconnect or otherwise alter or damage any of the System.
40.4. Maintenance and Repair. Tenant agrees to maintain and repair the
System so the same remains in proper operating condition and does not materially
interfere with ordinary use and occupancy of the Building. Without limiting the
generality of the foregoing, Tenant shall take all necessary precautions to
avoid damage to or interference with telecommunications, voice or other data
transmission equipment located within or serving the Building and shall act
promptly to correct any interruption of the Cable TV Service. Landlord
acknowledges that Tenant is the only entity authorized to maintain or repair the
System. Tenant shall, at Tenant's sole cost and expense, repair any damage to
the Building or the Common Areas of the Project resulting from Tenant's
activities in connection with the provision of the Cable TV Service.
40.5. Removal of System. Upon termination of Tenant's right to provide
Cable TV Service, Tenant shall remove all elements of the System and restore any
damage to the Building and/or the Common Areas resulting from such removal.
40.6. Services Provided. The Cable TV Service to be provided by Tenant
pursuant to this Article 40 may vary from time to time at the discretion of
Tenant, provided the services available to the Building shall correspond to
those available to cable television subscribers in the City of Santa Monica.
40.7. Charges. Tenant may charge individual tenants and occupants of
the Building who become subscribers to the Cable TV Service such rates and fees
as Tenant, in its discretion, deems appropriate. Landlord shall have no
liability to Tenant for failure of tenants or other occupants of the Building to
pay such fees or charges.
40.8. Limitations. Nothing herein shall be construed as authorizing
Tenant to provide any service to the Building other than the Cable TV Service.
Without limiting the foregoing, Tenant is not authorized to provide
telecommunications, voice or data transmission services to other tenants or
occupants of the Building.
41. INTENTIONALLY OMITTED
42. INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS
42.1. This Lease contains all of the agreements of the parties hereto
with respect to any matter covered or mentioned in this Lease, and no prior
agreement, negotiations, brochures, arrangements, or understanding pertaining to
any such matter shall be effective for any purpose unless expressed herein. No
provisions of this Lease may be amended or added to except by an agreement in
writing signed by the parties hereto or their respective successors in interest.
43. OPTIONS TO EXTEND TERM
43.1. Grant of Options to Extend Term. Landlord hereby grants Tenant
two (2) options ("Option(s) to Extend Term") to extend the Lease term specified
in Section 1.3 hereof (the "Initial Term"), in accordance with the provisions of
this Article 43.
43.2. Option(s) to Extend Term.
43.2.1. Extended Terms. Each Option to Extend Term shall extend
the term of the Lease for an additional sixty (60) months ("Extended Term(s)"),
with the first Extended Term commencing upon the expiration of the Initial Term
and the second Extended Term commencing upon the expiration of the first
Extended Term.
43.2.2. Terms for Extended Terms. If Tenant exercises an Option
to Extend Term, then all of the terms contained in this Lease shall continue in
full force and effect during each such Extended Term, except as follows:
43.2.2.1. The Basic Rent for the first Extended Term
shall equal the Basic Rent during the Initial Term. The Basic Rent for the
second Extended Term, however, shall equal ninety-five percent (95%) of the then
"Fair Market Rental Value of the Premises" (as defined below), including
escalations, as of the commencement of the second Extended Term, but in no event
less than the Basic Rent specified in Section 1.4
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above. The term "Fair Market Rental Value of the Premises" shall be Landlord's
good faith calculation of the rental and all other monetary payments and other
considerations of value and escalations that are then being agreed to by
Landlord and by non-related third parties in written lease agreements, taking
into account the age of the Building, the size and type of the Premises, the
location and floor levels of the Premises, the quality of construction of the
Building and the Premises, the services provided under the terms of this Lease,
the rental then being obtained for new or renewal leases of space comparable to
the Premises by landlords of comparable office buildings in the vicinity of the
Project located on Santa Monica Boulevard or Olympic Boulevard west of the 405
Freeway, and all other factors that would be relevant to a third party not
affiliated with Landlord desiring to lease the Premises in determining the
rental such party would be willing to pay therefor.
43.2.2.2. The Base Year for the first Extended Term shall
be calendar year 1995. The Base Year for the second Extended Term shall be
determined as part of the Fair Market Rental Value of the Premises.
43.2.2.3. Tenant shall have no further right to extend
the term of this Lease other than the two (2) Options to Extend Term described
herein.
43.2.3. Extended Term Notice. Tenant shall exercise each Option
to Extend Term, if at all, by delivering a written notice to Landlord ("Extended
Term Notice") at least nine (9) months, but not more than twelve (12) months,
before the expiration of the Initial Term or the expiration of the first
Extended Term, as the case may be. If Tenant does not deliver the Extended Term
Notice within the required time period, the Option to Extend Term shall lapse,
Tenant shall have no right to extend the Lease term, and this Lease shall expire
upon the expiration of the Initial Term or the expiration of the first Extended
Term, as the case may be, unless earlier terminated pursuant to the provisions
of this Lease. If Tenant fails to validly exercise the first Option to Extend
Term, Tenant's second Option to Extend Term shall terminate immediately and be
of no further force or effect.
43.2.4. Extension Rental Notice. Within a reasonable time after
Landlord receives the Extended Term Notice for the second Extended Term, if any,
Landlord shall provide Tenant written notice stating the Fair Market Rental
Value of the Premises for the second Extended Term ("Extension Rental Notice").
Within twenty (20) days after the date Landlord delivers the Extension Rental
Notice to Tenant, Tenant shall, by written notice delivered to Landlord, either
(a) accept the Fair Market Rental Value of the Premises stated in the Extension
Rental Notice ("Notice of Acceptance") or (b) reject the Fair Market Rental
Value of the Premises stated in the Extension Rental Notice ("Notice of
Rejection"), or (c) disagree with Landlord's determination of the Fair Market
Rent Value of the Premises, which notice must provide Tenant's good faith
determination of the Fair Market Rental Value of the Premises ("Notice of
Disagreement").
43.2.5. Notice of Acceptance. If Tenant delivers the Notice of
Acceptance in the manner and within the time frames herein provided, this Lease
shall be deemed extended for the second Extended Term at the Basic Rent and upon
the terms specified in this Article 43 without the need for any further notice
or documentation. If Tenant does not deliver to Landlord the Notice of
Acceptance, the Notice of Rejection or the Notice of Disagreement within said
twenty (20) day period, the same shall constitute Tenant's Notice of Acceptance
and Landlord shall be deemed to have received the Notice of Acceptance upon the
twentieth (20th) day after Landlord delivers the Extension Rental Notice.
43.2.6. Notice of Rejection. If Tenant delivers the Notice of
Rejection to Landlord within said twenty (20) day period, then this Lease shall
expire upon the expiration date of the first Extended Term, unless earlier
terminated in accordance with the provisions of this Lease.
43.2.7. Notice of Disagreement. If Tenant provides Landlord with
the Notice of Disagreement within the time period hereinabove provided, then the
parties shall have thirty (30) days ("Negotiation Period") after the date
Landlord receives the Notice of Disagreement in which to negotiate and agree
upon the Fair Market Rental Value of the Premises. During the Negotiation
Period, Landlord and Tenant shall share in good faith the information upon which
each relied to formulate their respective Fair Market Rental Value calculations.
If, within the Negotiation Period, the parties agree upon the Fair Market Rental
Value of the Premises, then the authorized officers of each party shall execute
a letter of agreement ("Rent Agreement Letter") stating the agreed Fair Market
Rental Value of the Premises. If the parties are unable to mutually agree upon
the Fair Market Rental Value of the Premises for the second Extended Term during
the Negotiation Period, then this Lease shall expire at the end of the first
Extended Term.
43.3. Documentation. If, within thirty (30) days following Landlord's
receipt of (a) the Extended Term Notice with respect to the first Extended Term,
or (b) the Notice of Acceptance or the executed Rent Agreement Letter with
respect to the second Extended Term, either party requests that both parties
enter into
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an amendment documenting the Extended Term, and Basic Rent during the Extended
Term, then Landlord shall prepare an amendment to this Lease documenting the
Extended Term, Basic Rent for the Extended Term and any other change to the
Lease required pursuant to this Article 43 ("Extended Term Amendment"). The
Extended Term Amendment shall be submitted to Tenant for execution and Tenant
shall have thirty (30) days following receipt thereof from Landlord in which to
execute and deliver the Extended Term Amendment to Landlord and Landlord shall
have thirty (30) days after receipt of the same in which to execute the Extended
Term Amendment and to deliver one fully-executed copy to Tenant. The failure of
either or both Landlord or Tenant to execute the Extended Term Amendment shall
not have the effect of nullifying the Extended Term Notice or the Notice of
Acceptance, as the case may be, and this Lease shall nevertheless be extended
for the applicable Extended Term as herein provided.
43.4. Personal Option. The second Option to Extend Term is personal to
the Tenant named on page 1 of this Lease. If Tenant assigns, mortgages, pledges,
hypothecates or encumbers this Lease or its interest in the Premises or sublets
all or any portion of the Premises before the exercise of the second Option to
Extend Term, then the second Option to Extend Term shall lapse. However,
Tenant's second Option to Extend Term shall not be affected in case of an
assignment or sublease to an Affiliate.
43.5. Additional Conditions. The Options to Extend Term shall be
exercisable by Tenant on the express condition that at the time Tenant exercises
each Option to Extend Term and at all times before, and upon the date of, the
commencement of the applicable Extended Term Tenant shall not be in default this
Lease as to any monetary obligations or any material non-monetary obligations.
44. RIGHT OF FIRST OFFER
44.1. Definitions.
44.1.1. Subject Space. Leasable space located in the building
(exclusive of the Premises) is sometimes referred to as the "Subject Space."
44.1.2. First Offer Space. The term "First Offer Space" means all,
or a portion, of the Subject Space subject to the expiration of any (a) lease,
sublease or other written agreement permitting entities to occupy space existing
as of the date of this Lease, and (b) for which there are no existing or prior
rights of expansion, extension or renewal which third parties may hold for the
Subject Space or any portion thereof existing as of the date of this Lease.
Notwithstanding the foregoing, (i) Landlord may offer space to Tenant as "First
Offer Space" up to six (6) months in advance of the same becoming available as
First Offer Space if Landlord has knowledge of the space becoming available in
advance of the expiration or termination of a lease or other agreement for such
space (e.g., where a tenant has an option to extend with six (6) months' prior
written notice and such right lapses because such tenant did not exercise such
right, Landlord may then offer such space to Tenant in fulfillment of its
obligations under this Article 44), and (ii) Landlord may hereafter enter into a
lease, sublease or other written agreement permitting entities to occupy space
for the purpose of extending a tenancy or subtenancy existing as of the date of
this Lease, in which case the same shall not be deemed to have expired for
purposes of the preceding clause (a).
44.2. Right of First Offer. Subject to the limitations hereinbelow
expressed, before entering into a lease with any person or entity for First
Offer Space, Landlord shall first offer to lease to Tenant the First Offer Space
subject to, and upon all of the terms, covenants and conditions set forth in
this Article 44 ("Right of First Offer"). This Right of First Offer is subject
and subordinate to all existing rights granted to other tenants as specified in
clauses (a) and (b) of Section 44.1.2. Landlord may simultaneously give a Notice
of First Offer to Tenant and all other tenants holding existing rights which are
prior to Tenant's Right of First Offer, in which case Tenant's acceptance
thereof shall be subject to non-exercise of the rights of first offer prior to
Tenant.
44.2.1. Exception For Current Vacancy. Notwithstanding any
contrary provision of this Article 44, Landlord shall not be obligated to give
Tenant a Right of First Offer as to any Subject Space which is vacant and
available for lease as of the date of this Lease unless and until such currently
vacant and available Subject Space is first leased to a third party and
thereafter becomes vacant and available at a time when Tenant's Right of First
Offer is in effect.
44.2.2. Continuity and Duration. For the first forty-eight (48)
months of the Initial Term, if Tenant delivers (or is deemed to have delivered)
a "First Offer Rejection Notice," as defined in Section 44.4 below, with respect
to a given First Offer Space and such First Offer Space is hereafter leased to a
third party and then upon the expiration or earlier termination of such third
party lease, Tenant again shall have the Right of Offer if Landlord intends to
enter into another lease of such First Offer Space within the first forty-eight
(48) months of the Initial Term. Tenant's rights under this Article 44 shall
expire at the end of the forty- eighth (48)
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month of the initial Term unless prior to such time Tenant has validly exercised
its first Option to Extend Term pursuant to Article 43. If Tenant does validly
exercise the first Option to Extend Term, Tenant's rights under this Article 44
shall continue for the balance of the Initial Term and for the first Extended
Term, except that if at any time after the first forty-eight (48) months of the
Initial Term, Tenant delivers (or is deemed to have delivered) a First Offer
Rejection Notice, or if Tenant delivers a Notice of Counter-Offer and the
parties do not thereafter reach agreement with respect to such First Offer
Space, Tenant's rights under this Article 44 shall end as to the First Offer
Space described in the Notice of First Offer to which Tenant's First Offer
Rejection Notice pertains.
44.3. Term. The term with respect to the First Offer Space shall be
coterminous with the date of expiration or earlier termination of this Lease.
44.4. Rent for First Offer Space. The First Offer Space shall be
offered to Tenant at the Fair Market Rental Value of the First Offer Space. The
term "Fair Rental Market Value of the First Offer Space" shall be Landlord's
good faith determination of the prevailing fair market rental rate for the First
Offer Space, delivered in as-is condition, based on recent leases of space in
the Project comparable to the First Offer Space for a term comparable to the
unexpired term of this Lease.
44.5. Notice of First Offer. Landlord shall provide Tenant in writing
the First Offer and the terms of the First Offer for such First Offer Space
("Notice of First Offer"). Within ten (10) days after receiving the Notice of
First Offer, Tenant shall notify Landlord in writing that: (i) Tenant accepts
the Notice of First Offer ("First Offer Acceptance Notice"); or (ii) Tenant
rejects the Notice of First Offer and, consequently, waives its then right to
such First Offer Space ("First Offer Rejection Notice"); or (iii) Tenant commits
to lease the First Offer Space on such other terms and conditions as are
specified in Tenant's notice ("Notice of Counter-Offer"). If Tenant does not for
any reason deliver the First Offer Acceptance Notice or the First Offer
Rejection Notice or the Notice of Counter-Offer to Landlord within the time
frames herein contained, the same shall constitute Tenant's First Offer
Rejection Notice. The First Offer Acceptance Notice or the First Offer Rejection
Notice, as the case may be, shall be irrevocable, and shall be binding upon both
Landlord and Tenant without the need for any further documentation. Tenant's
Notice of Counter-Offer shall likewise be irrevocable for a period of five (5)
business days after Landlord's receipt thereof.
44.5.1. First Offer Acceptance Notice. If Tenant delivers the
First Offer Acceptance Notice as specified in above, then Landlord shall prepare
a document ("First Offer Space Document") setting forth the terms by which
Tenant shall lease the First Offer Space, as set forth in this Article 44. The
First Offer Space Document shall be submitted to Tenant for execution and Tenant
shall have twenty (20) days in which to execute and deliver to Landlord the
First Offer Space Document. Landlord shall have twenty (20) days following
receipt of the First Offer Space Document from Tenant in which to execute and
deliver one (1) fully-executed copy to Tenant. The failure of either or both
Landlord or Tenant to execute the First Offer Document shall not have the effect
of nullifying Tenant's First Offer Acceptance Notice, and the First Offer Space
shall nevertheless be leased by Tenant as herein provided.
44.5.2. First Offer Rejection Notice. If Tenant delivers the First
Offer Rejection Notice as specified above, then Landlord shall have the right to
lease such First Offer Space to any third party.
44.5.3. Notice of Counter-Offer. If Tenant delivers a Notice of
Counter-Offer and Landlord timely accepts the same, then Landlord shall prepare
a First Offer Space Document and the parties shall proceed in accordance with
Section 44.5 above. If Tenant delivers a Notice of Counter-Offer and Landlord
does not immediately accept the same, Landlord shall within five (5) business
days after receipt of Tenant's Notice of Counter-Offer commence good faith
negotiations with Tenant in an effort to reach agreement on mutually acceptable
terms and conditions for the lease of such First Offer Space. However, in no
event shall Landlord be required to continue such negotiations for more than
five (5) business days.
44.6. Effect of Default. If Tenant is in default under this Lease on
(a) the date Landlord is otherwise obligated to provide Tenant with the Notice
of First Offer, Landlord (in its sole discretion) shall not be obligated to
provide Tenant with the Notice of First Offer in which case the rights of Tenant
to such First Offer Space under this Article 44 shall be void and of not further
force or effect, or (b) the date Tenant is required to accept delivery of
possession of the First Offer Space, then Landlord (in its sole discretion)
shall not be obligated to deliver the First Offer Space to Tenant in which case
the rights of Tenant to such First Offer Space under this Article 44 shall be
void and of no further force or effect. The foregoing rights of Landlord shall
be in addition to any other rights and remedies available to Landlord at law or
in equity. If such First Offer Space again becomes available while Tenant's
rights under this Article 44 remain in effect and Tenant is not in default, then
Tenant shall again have a Right of First Offer on such space, subject to the
provisions of this Article 44.
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44.7. First Offer Personal. The First Offer granted herein is personal
to Tenant named on page 1 of this Lease. If Tenant assigns, mortgages, pledges,
hypothecates or encumbers this Lease or its interests in the Premises or sublets
any portion of the Premises (other than to an Affiliate) (i) on or before the
date Landlord is otherwise obligated to provide Tenant with the Notice of First
Offer, the rights of Tenant to the First Offer Space under this Article 44 shall
be void and of no further force or effect, or (ii) on or before the date Tenant
is required to accept delivery of possession of the First Offer Space, then
Landlord (in its sole discretion) shall not be obligated to deliver possession
of the First Option Space to Tenant in which case the rights of Tenant, its
sublessee, successor or transferee to the First Offer Space under this Article
44 shall be void and of no further force or effect.
44.8. First Floor Offer Space Leased In 1995. Notwithstanding the
foregoing, as to any First Offer Space which is leased to Tenant in 1995, the
Basic Rent for such First Offer Space shall equal $1.70 per rentable square foot
of the First Offer Space, the Base Year for the First Offer Space shall be 1995,
and the Construction Allowance for the First Offer Space, calculated on a per
usable square foot basis, shall equal the product of thirty-five cents ($0.35)
multiplied by the number of full months remaining in the Initial Term as of the
date Tenant commences paying Rent for such First Offer Space.
45. ENVIRONMENTAL HAZARDS
45.1. Landlord's Representation. With the understanding that Landlord
has made no environmental site assessment of the Premises or the Project,
Landlord represents and warrants that Landlord has no actual knowledge of any
Hazardous Materials in or on the Premises or the Project that violates
Environmental Requirements, as defined in Section 45.6.2 below.
45.2. Landlord's Indemnity. Landlord shall indemnify and hold Tenant
(together with its officers, directors, stockholders, partners, beneficial
owners, trustees, employees, agents, contractors and attorneys) (collectively,
the "Tenant Parties") harmless from and against any and all Environmental
Damages, as defined in Section 45.6.3 below (excluding in any event, however,
any consequential damages), which may be asserted by any person or entity
(including any government agency) or which the Tenant may sustain or be put to
on account of (i) the presence or release of any Hazardous Materials upon, in or
from the Premises or the Project during the term caused by the action or default
of Landlord or any employee, contractor or agent of Landlord, (ii) the
activities or other action or inaction of Landlord or any employee, contractor
or agent of Landlord in violation of Environmental Requirements, and (iii) the
breach of any of Landlord's obligations under this Article.
45.3. Tenant's Covenants. Tenant shall not (either with or without
negligence) cause or permit the escape, disposal or release of any Hazardous
Materials. Tenant shall not allow the storage or use of Hazardous Materials in
any manner not sanctioned by law or by the highest standards prevailing in the
industry for the storage and use of such Hazardous Materials, nor allow to be
brought into the Project any such materials or substances except to use in the
ordinary course of Tenant's business, and then only after written notice is
given to Landlord of the identity of such Hazardous Materials. If any lender or
governmental agency shall ever require testing to ascertain whether or not there
has been any release of Hazardous Materials, then the reasonable costs thereof
shall be reimbursed by Tenant to Landlord upon demand if such requirement arises
due to the presence of Hazardous Materials which are used, stored, generated,
produced or disposed of by Tenant, or any subtenant of the Premises or the
agents, employees, contractors, licensees or invitee of either of them
(collectively "Tenant's Agents"). In addition, Tenant shall execute affidavits,
representations and the like from time to time at Landlord's request concerning
Tenant's best knowledge and belief regarding the presence of Hazardous Materials
on the Premises, and Tenant shall promptly deliver to Landlord copies of any
notices, orders or other communications received from any governmental agency or
official affecting the Premises and concerning alleged violations of the
Environmental Requirements.
45.4. Tenant's Indemnity. Tenant shall indemnify and hold Landlord
(together with its officers, directors, stockholders, partners, beneficial
owners, trustees, employees, agents, contractors, attorneys, and Mortgagees)
harmless from and against any and all Environmental Damages which may be
asserted by any person or entity (including any government agency) or which the
indemnified parties may sustain or be put to an account of (i) the presence or
release of any Hazardous Material upon, in or from the Premises during the Term
and during any period when Tenant, or Tenant's Agents are occupying the Premises
or any part thereof, unless caused by the action or default of Landlord,
Landlord's employees, agents or contractors, (ii) the presence or release of any
Hazardous Material upon, in or from the Property caused by the action or default
of Tenant or Tenant's Agents, (iii) the activities or other action or inaction
of Tenant or Tenant's Agents in violation of Environmental Requirements, and
(iv) the breach of any of Tenant's obligations under this Article.
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<PAGE> 53
45.5. Interruption In Use. If there shall be a release of Hazardous
Materials in the Project, and such release was not caused, in whole or in part,
by the acts, omissions, negligence or default of Tenant or Tenant's Agents, and
is not the result of a casualty or a taking (for which the provisions of
Articles 18 and 19, respectively, shall control), and such release results in
the Premises being untenantable by Tenant for its operations therein for a
period of more than one hundred eighty (180) consecutive days, Tenant may
terminate this Lease by written notice to Landlord given prior to the Premises
becoming tenantable again.
45.6. Definitions. The following terms as used herein shall have the
meanings set forth below:
45.6.1. "Hazardous Materials" shall mean any substance (i) which
is or becomes defined as Hazardous Substance, Hazardous Waste, Hazardous
Material or Oil under the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Section 6901 et seq., as amended, any applicable state
or local laws, and the regulations promulgated thereunder, as same may be
amended from time to time, or (ii) which is toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise
hazardous to health or the environment and which is or becomes regulated and the
presence of which requires investigation or remediation pursuant to any
applicable law.
45.6.2. "Environmental Requirements" shall mean all applicable
law, the provisions of any and all approvals, and the terms and conditions of
this Lease insofar as same relate to the releases, maintenance, use, storage,
containment, transportation, disposal or generation of Hazardous Materials,
including without limitation those pertaining to reporting, licensing,
permitting, health and safety of persons, investigation, containment,
remediation, and disposal.
45.6.3. "Environmental Damages" shall mean all liabilities,
injuries, losses, claims, damages (whether special, consequential or otherwise),
settlements, attorneys' and consultants' fees, fines and penalties, interest and
expenses, and costs of environmental site investigations, reports and cleanup,
including without limitation costs incurred in connection with: any
investigation or assessment of site conditions or of health of persons using the
Building or the Project; risk assessment and monitoring; any cleanup, remedial,
removal or restoration work required by any governmental agency or recommended
by Landlord's environmental consultant; any decrease in value of the Project;
any damage caused by loss or restriction of rentable or usable space in the
Project; or any damage caused by adverse impact on marketing or financing of the
Project.
46. WHEN PAYMENT IS DUE
46.1. Whenever a payment is required to be made by one party to the
other under the Lease, but a specific date for payment or a specific number of
days within which payment is to be made is not set forth in the Lease, or the
words "immediately", "promptly" and/or "on demand", or their equivalent, are
used to specify when such payment is due, then such payment shall be due thirty
(30) days after the party which is entitled to such payment sends written notice
to the other party demanding such payment.
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<PAGE> 54
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of
the day and year first above written.
LANDLORD: BARCLAY CURCI INVESTMENT COMPANY,
a California general partnership
By: SC ENTERPRISES,
a California limited partnership,
a general partner
By: SHURL CURCI,
a general partner
By: Illegible
-------------------------
Roberta P. Gilligan,
his attorney-in-fact
TENANT: CENTURY SOUTHWEST CABLE TELEVISION, INC.,
a Delaware corporation
By: Illegible
--------------------------------------
Name:
------------------------------------
Title: President
By:
--------------------------------------
Name:
------------------------------------
Title: Secretary
-40-
<PAGE> 55
EXHIBIT A
DESCRIPTION OF PREMISES
Suite 2001
3000 Ocean Park Boulevard ("R")
Santa Monica, California
Exhibit A
Page 1 of 2
<PAGE> 56
EXHIBIT A
DESCRIPTION OF PREMISES
Suite 3010
3000 Ocean Park Boulevard ("R")
Santa Monica, California
Exhibit A
Page 2 of 2
<PAGE> 57
EXHIBIT A-1
DESCRIPTION OF PROJECT
EXHIBIT A-1
<PAGE> 58
EXHIBIT B
VERIFICATION OF TERM AND INITIAL RENT
RE: Lease dated _____________________________ between _________________________
____________________________________________________________________("Landlord")
and_____________________________________________________________________________
_____________________________________________________________________ ("Tenant")
for premises in _______________________________________________________________.
Tenant hereby verifies that the information stated below is correct and further
acknowledges and accepts possession of the Premises.
Area: ____________________________(rentable/usable/gross) sq. ft.
Commencement Date: __________________________________________________________
Termination Date: _________________________________________________________
Options: __________________________________________________________
Initial Rent: __________________________________________________________
Address for Notices: __________________________________________________________
__________________________________________________________
__________________________________________________________
__________________________________________________________
__________________________________________________________
Billing Address: __________________________________________________________
__________________________________________________________
__________________________________________________________
__________________________________________________________
__________________________________________________________
ATTN: ________________________________________
Telephone: (___)_________________________________________
Federal Tax ID No.: __________________________________________________________
By: _________________________________
Title: ______________________________
Date: ________________________, 19__
EXHIBIT B
<PAGE> 59
EXHIBIT C
CONSTRUCTION PROVISIONS
These Construction Provisions shall set forth the terms and conditions
relating to the construction of the tenant improvements in the Premises. These
Construction Provisions are essentially organized chronologically and address
the issues of the construction of the Premises, in sequence. as such issues will
arise during the actual construction of the Premises. All capitalized terms used
but not defined herein shall have the meanings given such terms in the Lease.
All references in these Construction Provisions to Articles or Sections of "this
Lease" shall mean the relevant portion of Articles 1 through 46 of this Lease to
which these Construction Provisions are attached as Exhibit C and of which these
Construction Provisions form a part, and all references in these Construction
Provisions to Sections of "these Construction Provisions" shall mean the
relevant portions of Sections 1 through 6 of these Construction Provisions.
SECTION 1
LANDLORD'S INITIAL CONSTRUCTION IN THE PREMISES
1.1 Base Building as Constructed by Landlord. Landlord has constructed,
at its sole cost and expense, in accordance with all applicable codes and laws
(collectively, the "Laws") in effect at the time such construction was
completed, the base building (i) of the Premises and (ii) of the floors of the
Building on which the Premises is located (collectively, the "Base Building").
Tenant has inspected the Premises and the Base Building and agrees to accept the
same in their currently existing condition, "AS IS" and "WITH ALL FAULTS," and
Landlord shall have no obligation to alter or improve the Premises or the Base
Building, except that Landlord shall, at Landlord's cost (except as otherwise
provided in these Construction Provisions with respect to the work described in
Section 1.1.4 below), perform the work described in Sections 1.1.1 through 1.1.5
of these Construction Provisions.
1.1.1 Exterior Walls and Windows. Landlord shall cause the curtain
wall and exterior windows to be properly sealed and leak-free. Such work shall
be performed on an "as needed" basis after reasonable prior notice from Tenant
of the need therefor.
1.1.2 Electrical Room. Prior to the Commencement Date, Landlord
shall seal any penetrations in the Building's electrical room to comply with
fire safety requirements.
1.1.3 Public Restrooms. Landlord shall prior to the Commencement
Date perform any work in the restroom facilities on the second and third floors
which may be required to comply with disabled access laws, including the
Americans With Disabilities Act.
1.1.4 Public Corridors. Prior to the Commencement Date, if required
as a condition to issuance of permits needed for the Tenant Improvements (as
defined in Section 2.1 of these Construction Provisions), or for issuance of a
certificate of occupancy for the Premises, Landlord shall perform such work as
may be required to upgrade to current fire rating standards the Building's
public corridor walls.
1.1.5 In addition to any work as may be required under Section
1.1.4 of these Construction Provisions, Landlord shall, at its sole cost,
perform such modifications to the Base Building as may be required for both
issuance and sign-off of Tenant's building permits for the Tenant Improvements,
provided that: (i) Landlord shall not be required by this Section 1.1.5 to
undertake any Base Building modifications which are required due to Tenant's
specific use of the Premises or any Tenant Improvements which are not consistent
with ordinary office use; (ii) Landlord shall not be required to undertake any
such modifications until a reasonable time after written notice from Tenant of
the need therefor (which notice shall be delivered by Tenant within three (3)
business days after Tenant or Tenant's Agents first learn that such
modifications are needed); and (iii) Landlord shall not be responsible for any
unavoidable damage to the Tenant Improvements which results from such
modifications.
EXHIBIT C - Page 1
<PAGE> 60
SECTION 2
TENANT IMPROVEMENTS
2.1 Tenant Improvement Allowance. Tenant shall be entitled to a
one-time tenant improvement allowance (the "Tenant Improvement Allowance") in an
amount equal to Twenty-One and 21/100 Dollars ($21.21) per usable square foot of
the Premises for the costs relating to the initial design and construction of
Tenant's improvements set forth in the "Approved Working Drawings", as defined
in Section 3.4 of these Construction Provisions (the "Tenant Improvements").
2.2 Disbursement of the Tenant Allowance.
2.2.1 Tenant Improvement Allowance Items. Except as otherwise set
forth in these Construction Provisions, the Tenant Improvement Allowance shall
be disbursed by Landlord only for the following items and costs (collectively
the "Tenant Improvement Allowance Items"):
2.2.1.1 Payment of the fees of: (i) the "Architect," as
defined in Section 3.1 of these Construction Provisions, which fees shall not
exceed $2.15 per usable square foot of the Premises; (ii) the Project Management
Consultant, as defined in Section 3.1 of these Construction Provisions, which
fees shall not exceed $1.00 per usable square foot of the Premises; and (iii)
the "Engineers," as defined in Section 3.1 of these Construction Provisions;
2.2.1.2 The payment of plan check, permit and license fees
relating to construction of the Tenant Improvements;
2.2.1.3 The cost of construction of the Tenant Improvements,
including, without limitation, testing and inspection costs, and contractors'
fees and general conditions;
2.2.1.4 The cost of any changes in the Base Building work
when such changes are required by the Construction Drawings, such cost to
include all direct architectural and/or engineering fees and expenses incurred
in connection therewith;
2.2.1.5 The cost of any changes to the Construction Drawings
or Tenant Improvements required by Law to the extent not caused by Landlord's
failure to comply with its obligations hereunder;
2.2.1.6 Sales and use taxes and Title 24 fees;
2.2.1.7 Costs of relocation from Tenant's current premises to
the Premises, which costs shall not exceed $1.00 per usable square foot of the
Premises;
2.2.1.8 The cost of voice and data wiring within the
Premises;
2.2.1.9 The cost of signs installed by Tenant in accordance
with the provisions of Section 39.4 of the Lease;
2.2.1.10 The Landlord Supervision Fee, as defined in Section
4.4 of these Construction Provisions; and
2.2.1.11 Costs of demolishing the existing improvements in
the Premises in accordance with a demolition plan approved by Landlord.
2.2.1.12 Cost incurred by Landlord in performing the work
described in Section 1.1.4 of these Construction Provisions for upgrading the
public corridor walls which abut or are within the Premises. However, if the
cost of upgrading the public corridor walls which abut or are within the
Promises exceeds $20,000.00, the amount in excess thereof shall be paid by
Landlord and such excess amount shall not be a Tenant Improvement Allowance
Item.
2.2.1.13 All other costs approved by or expended in
connection with the construction of the Tenant Improvements, as reasonably
approved by Landlord.
2.2.2 Disbursement of Tenant Improvement Allowance. Prior to and
during the construction of the Tenant Improvements, as the case may be, Landlord
shall make monthly disbursements of the Tenant
EXHIBIT C - Page 2
<PAGE> 61
Improvement Allowance for Tenant Improvement Allowance Items for the benefit of
Tenant and shall reimburse monies expended by Tenant as follows.
2.2.2.1 Monthly Disbursements. On or before the first day
(the "Submittal Date") of each calendar month commencing with the first calendar
month following the execution of the Lease, Tenant shall deliver to Landlord:
(i) a request for payment of the "Contractor," as that term is defined in
Section 4.1.1 of these Construction Provisions, approved by Tenant, on the
standard AIA (G702) form showing, by trade, the percentage of completion of the
Tenant Improvements in the Premises and detailing the portion of the work
completed; (ii) executed conditional mechanic's lien releases from all of
"Tenant's Agents," as that term is defined in Section 4.1.2 of these
Construction Provisions, which shall comply with the appropriate provisions of
California Civil Code Section 3262(d); and (iii) all other information
reasonably requested in good faith by Landlord. Tenant's request for payment
shall be deemed Tenant's acceptance and approval of the work furnished and/or
the materials supplied as set forth in Tenant's payment request vis-a-vis the
Landlord. On or before the twenty-ninth (29th) day of each such calendar month
(the "Payment Date"), and assuming Landlord receives the applicable information
described in items (i) through (iii), above, and unconditional lien releases, as
applicable, for all work paid for from the Tenant Improvement Allowance as of
the previous Payment Date, Landlord shall make direct payment to the Contractor
of the amount Tenant has requested on the preceding Submittal Date, less the
"Retained Sum" and "Tenant's Share" (as said terms are defined in Section
2.2.2.2 of these Construction Provisions).
2.2.2.2 Retained Sum and Tenant's Share. The "Retained Sum"
is an amount equal to ten percent (10%) of each request by Tenant for
disbursement to the Contractor of the Tenant Improvement Allowance. The
aggregate amount of such retentions shall be known as the "Final Retention." The
term "Tenant's Share" means, if the estimated total cost of all work to be
performed under Tenant's contract with the Contractor (including the cost of any
"Tenant Change," as defined in Section 3.5 of these Construction Provisions)
exceeds the Tenant Improvement Allowance, the ratio that the cost in excess of
the Tenant Improvement Allowance bears to the estimated total cost of all work
to be performed by the Contractor.
2.2.2.3 Landlord's Right to Dispute. Landlord's payment of
any amounts called for under these Construction Provisions shall not be deemed
Landlord's approval or acceptance of the work furnished or materials supplied as
set forth in Tenant's payment request. Landlord may dispute any request for
payment based on material noncompliance of any work with the Approved Working
Drawings or due to any materially substandard work as identified in good faith
by Landlord. In the event that Landlord identifies any material noncompliance
with the Approved Working Drawings or substandard work, Tenant shall be provided
a detailed statement identifying such material noncompliance or substandard
work, and Landlord may withhold payment therefor until Landlord receives
reasonable evidence that such noncompliance or substandard work has been
corrected. If Tenant disputes Landlord's determination of material noncompliance
or substandard work, the matter shall be resolved by the architects engaged by
Tenant and Landlord (HOK and P. Murray, respectively). If the parties'
architects are unable to mutually agree on a proper resolution of the dispute
within ten (10) business days, the deadlock shall be resolved by Nadel
Partnership acting as a neutral arbitrator. The decision of Nadel Partnership,
which shall be limited to the question whether Contractor's work is not in
material compliance with the Approved Workings Drawings or is substandard, shall
be binding on Landlord and Tenant. Each party shall pay the fees and expenses of
its own architect; and the fees of Nadel Partnership shall be party whose
position in regard to the compliance and quality of Contractor's work was not
sustained by Nadel Partnership. Landlord's obligation to disburse the Tenant
Improvement Allowance under this Section 2.2.2 shall be suspended during any
period when Tenant is disputing Landlord's determination of material
noncompliance or substandard work as herein provided.
2.2.2.4 Final Retention. Subject to the provisions of these
Construction Provisions, a check for the Final Retention payable to Contractor
shall be delivered by Landlord to Tenant following the completion of
construction of the Premises, provided that (i) Tenant delivers to Landlord (A)
properly executed mechanics lien releases in compliance with both California
Civil Code Section 3262(d)(2) and either Section 3262(d)(3) or Section
3262(d)(4), (B) an executed verification in the form of Exhibit B to the Lease,
(C) a copy of all building permits with all sign-offs executed, a certificate
from Tenant's Architect that the Tenant Improvements were constructed per the
Approved Working Drawings and are 100% completed, (E) one set of "as built"
reproducible drawings (consisting of the Approved Working Drawings marked by
Contractor and/or HOK to reflect field modifications), and (F) copies of all
manufacturers' warranties, owner's manuals, etc., for equipment or materials
installed by Contractor and a warranty statement, naming Landlord as the
beneficiary of such warranty, from the Contractor guaranteeing all Tenant
Improvements for at least one year from the date of substantial completion
thereof; and (ii) Landlord has reasonably determined that no materially
substandard work exists which materially and adversely affects the mechanical,
electrical, plumbing, heating, ventilating and air conditioning, life-safety or
other systems of the Building, the curtain wall of the Building, or the
structure or exterior appearance of the Building.
EXHIBIT C - Page 3
<PAGE> 62
2.2.2.5 Ownership of Improvements. All Tenant Improvement
Allowance Items which are permanently affixed to the Premises for which the
Tenant Improvement Allowance has been made available shall be deemed Landlord's
property under the terms of Article 15 of this Lease.
2.2.3 Failure to Disburse Tenant Improvement Allowance. In the
event that Landlord fails to fulfill its obligation to disburse the Tenant
Improvement Allowance in accordance with the terms of Section 2.2.2 above,
following ten (10) business days notice from Tenant and Landlord's failure to
cure within such period, Tenant shall have the following rights, which rights
shall be cumulative and in addition to any rights or remedies available to
Tenant under this Lease, at law or in equity: (i) to cease performance of all or
any portion of the work of the Tenant Improvements, or (ii) continue to perform
the work of the Tenant Improvements (following a cessation pursuant to item (i),
above, or otherwise), and offset any unpaid portions of the Tenant Improvement
Allowance plus interest at the Agreed Rate (as defined in Section 39.15 of this
Lease) against Tenant's obligation for rent next coming due under this Lease.
2.2.4 Reimbursement of Allowance Items. If any portion of the
Tenant Improvement Allowance remains unused after Landlord has disbursed any sum
authorized by Section 2.2.1.12 of these Construction Provisions as a Tenant
Improvement Allowance Item and has made the disbursements to Contractor called
for under Section 2.2.2 of these Construction Provisions (including payment of
the Final Retention), and Landlord has received the Landlord Supervision Fee
called for under Section 4.4 of these Construction Provisions, the unused Tenant
Improvement Allowance shall be used to reimburse Tenant for any Tenant
Improvement Allowance Items for which Tenant has made payment. Landlord shall
reimburse such amounts to Tenant, up to the unused balance of the Tenant
Improvement Allowance, promptly after Tenant delivers to Landlord (i) receipted
invoices evidencing full payment of all items for which Tenant seeks
reimbursement, (ii) unconditional lien releases from all of Tenant's Agents
(where such releases are customarily required or necessary to assure no
attachment of mechanics' or materialmen's liens), and (iii) all other
information reasonably requested in good faith by Landlord.
2.2.5 Unused Allowances. In the event there remains any unused
portion of the Tenant Improvement Allowance after Landlord's disbursements under
Sections 2.2.1.12 and 2.2.2 and reimbursements under Section 2.2.4 (the "Unused
Allowance"), Tenant may credit any Unused Allowance, in an amount not to exceed
$2.50 per usable square foot of the Premises, against the payments coming due
under this Lease at least thirty (30) days after Landlord's final payment under
Section 2.2.4 above. Any Unused Allowance in excess of $2.50 per usable square
foot of the Premises shall be retained by Landlord.
SECTION 3
CONSTRUCTION DRAWINGS
3.1 Selection of Architect/Construction Drawings. Tenant shall retain
HOK (the "Architect") to prepare the Construction Drawings. Notwithstanding the
foregoing, Tenant may, at its option, retain an architect other than HOK,
subject to Landlord's reasonable approval, which approval shall be granted or
denied by Landlord within five (5) business days after Tenant has submitted the
proposed alternative architect to Landlord, to prepare the Construction
Drawings. Tenant shall retain Jack Spound of Corporate Real Estate Solutions (or
such other person or entity as Tenant may select, subject to Landlord's
reasonable approval) as project management consultant (the "Project Management
Consultant"). Tenant shall retain engineering consultants or shall cause
Contractor to select subcontractors qualified to provide design/build services
(referred to herein, in either case, as the "Engineers"). The Engineers, who
shall be subject to Landlord's reasonable approval, shall prepare all plans and
engineering working drawings relating to the structural, mechanical, electrical,
plumbing, HVAC, life safety, and sprinkler work of the Tenant Improvements. The
plans and drawings to be prepared by Architect and the Engineers hereunder shall
be known collectively as the "Construction Drawings." All Construction Drawings
shall be subject to Landlord's approval pursuant to the terms set forth in
Sections 3.2 and 3.3 below. Tenant and Architect shall verify, in the field, the
dimensions and conditions as shown on the relevant portions of the Building
plans, and Tenant and Architect shall be solely responsible for the same, and
Landlord shall have no responsibility in connection therewith. Landlord's review
of the Construction Drawings as set forth in this Section 3, shall be for its
sole purpose and shall not imply Landlord's review of the same, or obligate
Landlord to review the same, for quality, design compliance with laws or other
like matters.
3.2 Final Space Plan. Tenant and the Architect shall prepare the final
space plan for Tenant Improvements in the Premises (collectively, the "Final
Space Plan"), and shall deliver the Final Space Plan to Landlord for Landlord's
approval. Landlord shall, within five (5) business days after Landlord receives
such Final Space Plan, (i) approve the Final Space Plan, (ii) approve the Final
Space Plan subject to specified
EXHIBIT C - Page 4
<PAGE> 63
conditions to be complied with when the Final Working Drawings are submitted by
Tenant to Landlord, or (iii) disapprove the Final Space Plan and return the same
to Tenant with requested revisions; provided, however, that Landlord shall only
disapprove the Final Space Plan for reasonable and material reasons, including
without limitation, (i) an adverse effect on the structural integrity of the
Building; (ii) noncompliance with Laws; (iii) an adverse effect on the systems
and equipment of the Building; or (iv) an adverse effect on the exterior
appearance of the Building (individually or collectively, a "Design Problem").
If Landlord disapproves the Final Space Plan, Tenant may resubmit the Final
Space Plan to Landlord at any time, and Landlord shall approve or disapprove of
the resubmitted Final Space Plan, based upon the criteria set forth in this
Section 3.2, within two (2) business days after Landlord receives such
resubmitted Final Space Plan.
3.3 Final Working Drawings. Tenant, the Architect and the Engineers
shall complete the architectural and engineering drawings for the Premises in a
form which is complete to allow subcontractors to bid on the work and to obtain
all applicable permits (collectively, the "Final Working Drawings") and shall
submit the same to Landlord for Landlord's approval. The Final Working Drawings
may be submitted in one or more stages at one or more times, provided that
Tenant shall ultimately supply Landlord with two (2) completed copies signed by
Tenant of such Final Working Drawings. Landlord shall, within five (5) business
days after Landlord receives the Final Working Drawings, either (i) approve the
Final Working Drawings, (ii) approve the Final Working Drawings subject to
specified conditions to be satisfied by Tenant prior to submitting the Approved
Working Drawings for permits as set forth in Section 3.4, below, if the Final
Working Drawings do not comply with the Final Space Plan or contain a Design
Problem, or (iii) disapprove and return the Final Working Drawings to Tenant
with requested revisions if the Final Working Drawings do not comply with the
Final Space Plan or contain a Design Problem. If Landlord disapproves the Final
Working Drawings, Tenant may resubmit the Final Working Drawings to Landlord at
any time, and Landlord shall approve or disapprove of the resubmitted Final
Working Drawings, based upon the criteria set forth in this Section 3.3, within
two (2) business days after Landlord receives such resubmitted Final Working
Drawings. Should Landlord fail to respond within the five (5) business day or
two (2) business day period provided in this Section 3.3, as applicable, such
failure shall be deemed to constitute Landlord's approval under this Section
3.3.
3.4 Permits. The Final Working Drawings shall be approved by Landlord
(the "Approved Working Drawings") prior to the commencement of the construction
of the Tenant Improvements. Architect shall submit the Approved Working Drawings
to the appropriate municipal authorities for all applicable building permits
necessary to allow Contractor to commence and fully complete the construction of
the Tenant Improvements (excluding only engineering permits related to the
design/build work, which permits Tenant shall procure on a timely basis). Tenant
shall be responsible for obtaining any building permit or certificate of
occupancy for the Premises; provided, however, that Landlord shall cooperate
with Tenant in executing permit applications and performing other ministerial
acts reasonably necessary to enable Tenant to obtain any such permit or
certificate of occupancy.
3.5 Change Orders. In the event Tenant desires to change the Approved
Working Drawings, Tenant shall deliver notice (the "Drawing Change Notice") of
the same to Landlord, setting forth in detail the changes (the "Tenant Change")
Tenant desires to make to the Approved Working Drawings. Landlord shall, within
five (5) business days of receipt of the Drawing Change Notice, either (i)
approve the Tenant Change, or (ii) disapprove the Tenant Change and deliver a
notice to Tenant specifying in detail the reasons for Landlord's disapproval;
provided, however, that Landlord may only disapprove of the Tenant Change if the
Tenant Change contains a Design Problem. Landlord's failure to respond within
the five (5) business day period specified in this Section 3.5 shall be deemed
to constitute Landlord's approval of that particular Tenant Change. Tenant shall
pay Tenant's share (if any) of costs which arise in connection with such Tenant
Change.
SECTION 4
CONSTRUCTION OF THE TENANT IMPROVEMENTS
4.1 Selection and Approval of Contractors.
4.1.1 The Contractor. Tenant shall retain a licensed general
contractor (the "Contractor"), as contractor for the construction of the Tenant
Improvements, which Contractor shall be selected by Tenant, but subject to
Landlord's approval, which approval shall not be unreasonably withhold or
conditioned, and which approval or refusal shall be granted or denied within
five (5) business days after Tenant has submitted the name of the contractor and
relevant financial data and business references for the contractor; provided
that Landlord hereby approves Corporate Contractors as a potential Contractor.
EXHIBIT C - Page 5
<PAGE> 64
4.1.2 Tenant's Agents. All subcontractors, laborers, materialmen
and suppliers used by Tenant (such subcontractors, laborers, materialmen and
suppliers, and the Contractor to be known collectively as "Tenant's Agents")
must be approved in writing by Landlord, which approval shall not be
unreasonably withheld or delayed, and which approval or refusal shall be granted
or denied within five (5) business days after Tenant has submitted the names
thereof to Landlord and also has submitted any relevant financial data or
business references therefor requested by Landlord. Landlord's failure to
respond within the five (5) business day period specified in this Section 4.1.2
shall be deemed to constitute Landlord's approval under this Section 4.1.2.
4.2 Construction of Tenant Improvements by Tenant's Agents.
4.2.1 Landlord's General Conditions for Tenant's Agents and Tenant
Improvement Work. Tenant's and Tenant's Agent's construction of the Tenant
Improvements shall comply with the following: (i) the Tenant Improvements shall
be constructed in substantial accordance with the Approved Working Drawings;
provided however that Tenant may make changes to the Approved Working Drawings
pursuant to the terms of Section 3.5, above; and (ii) Tenant shall abide by all
reasonable and nondiscriminatory rules made by Landlord's Building manager with
respect to the use of freight, loading dock and service elevators, storage of
materials, coordination of work with the contractors of other tenants, and any
other matter in connection with these Construction Provisions, including,
without limitation, the construction of the Tenant Improvements.
4.2.2 Requirements of Tenant's Agents. Each of Tenant's Agents
shall guarantee to Tenant and for the benefit of Landlord that the portion of
the Tenant Improvements for which it is responsible shall be free from any
defects in workmanship and materials for a period of not less than one (1) year
from the date of completion thereof. Each of Tenant's Agents shall be
responsible for the replacement or repair, without additional charge, of all
work done or furnished in accordance with its contract that shall become
defective within one (1) year after the later to occur of (i) completion of the
work performed by such contractor or subcontractors and (ii) the Commencement
Date. The correction of such work shall include, without additional charge, all
additional expenses and damages incurred in connection with such removal or
replacement of all or any part of the Tenant Improvements, and/or the Building
and/or common areas that may be damaged or disturbed thereby. All such
warranties or guarantees as to materials or workmanship of or with respect to
the Tenant Improvements shall be contained in the general contract or
subcontract and shall be written such that such guarantees or warranties shall
inure to the benefit of both Landlord and Tenant, as their respective interests
may appear, and can be directly enforced by either. Tenant covenants to give to
Landlord any assignment or other assurances which may be necessary to effect
such right of direct enforcement.
4.3 Notice of Completion. Within ten (10) days after the issuance of
the permanent or temporary certificate of occupancy for the Tenant Improvements
(or final inspection and sign-off by the City of Santa Monica Building
Inspector, if such procedure is employed in lieu of issuance of a certificate of
occupancy), Tenant shall cause a Notice of Completion or its legal equivalent to
be recorded in the office of the Recorder of the County of Los Angeles in
accordance with Section 3093 of the Civil Code of the State of California or any
successor statute, and shall furnish a copy thereof to Landlord upon such
recordation.
4.4 Landlord's Supervision Fee. Landlord shall be entitled to a fee
(the "Landlord Supervision Fee") in the amount of the product of (i) One Dollar
($1.00) and (ii) the number of usable square feet of the Premises. Except for
the Landlord Supervision Fee, Landlord shall receive no profit, overhead,
general conditions or supervisory fee in connection with Landlord's supervision
of the Contractor.
SECTION 5
DELAY OF COMMENCEMENT DATE
5.1 Commencement Date Delays. The Commencement Date shall occur as
provided in Article 3 of this Lease; provided, however, that notwithstanding any
contrary provision of Article 3 of this Lease, the Commencement Date shall be
delayed by the number of days of delay of the "substantial completion of the
Tenant Improvements," as that term is defined below in this Section 5, in the
Premises to the extent caused by a "Commencement Date Delay." As used herein,
the term "Commencement Date Delay" shall mean only actual delays to the extent
resulting from: (i) material interference by Landlord, its agents or contractors
with the completion of the Tenant Improvements and which objectively preclude
construction of tenant improvements in the Building by any person, which
interference relates to access by Tenant, its agents and contractors to the
Building or any Building facilities or service (including temporary power and
parking areas as provided herein) during normal construction hours, or the use
thereof during normal construction hours
EXHIBIT C - Page 6
<PAGE> 65
(provided, however, that Landlord's enforcement of all reasonable and
non-discriminatory rules referred to in clause (ii) of Section 4.2.1 of these
Construction Provisions shall not be considered a Commencement Date Delay
hereunder); (ii) delays due to the acts or failures to act of Landlord, its
agents or contractors with respect to payment of the Tenant Improvement
Allowance and/or any cessation of work upon the Tenant Improvements as a result
thereof; (iii) Landlord's failure to substantially complete the Base Building
work described in Sections 1.1.1, 1.1.2, 1.1.3, 1.1.4 and 1.1.5 of these
Construction Provisions within the time periods specified in each of such
Sections; and (iv) the failure of Landlord (except where caused by "Force
Majeure" as defined for these purposes in Section 5.1.1 of these Construction
Provisions) to provide all services and utilities to the Premises in a manner
and condition pursuant to the terms of this Lease; (v) subject to the
limitations expressed in Sections 5.1.1 through 5.1.3 below, "Force Majeure" as
that term is defined, for purposes of this Section 5.1 of these Construction
Provisions only, in Section 5.1.1.
5.1.1 "Force Majeure", for purposes of Section 5.1 of these
Construction Provisions, shall mean an event, condition or circumstance falling
within the definition of Force Majeure in Section 39.19 of this Lease, but only
where such event, condition or circumstance is of a nature such that it would
objectively preclude the construction of tenant improvements in the Building for
general office use by any person.
5.1.2 Tenant may not claim a Commencement Date Delay due to Force
Majeure unless and until Tenant has sustained an aggregate of five (5) days of
delay due to one or more events of Force Majeure. Moreover, Tenant may not claim
a Commencement Date Delay due to Force Majeure unless Tenant gives Landlord
written notice of the Force Majeure delay within two (2) business days following
the date of the Force Majeure delay. Tenant shall maintain accurate records to
substantiate the existence and duration of any Force Majeure delay.
5.1.3 If there is more than one hundred five (105) days of
Commencement Date Delay due to Force Majeure (meaning that Tenant must have
sustained one hundred ten (110) days of Force Majeure delays), Landlord shall
have the right to terminate this Lease upon delivery of written notice to
Tenant. If Landlord so elects to terminate this Lease, this Lease shall end and
the parties shall be released of their obligations hereunder on the date
specified in Landlord's termination notice (except for obligations which have
accrued and remain unperformed as of the date of termination), which termination
date shall be not less than five (5) business days after delivery of Landlord's
termination notice, unless, prior to such termination date, Tenant delivers to
Landlord Tenant's written agreement that there shall be no more than one hundred
five (105) days of Commencement Date Delay due to Force Majeure.
5.2 Determination of Commencement Date Delay. If Tenant contends that a
Commencement Date Delay has occurred, Tenant shall notify Landlord in writing
(the "Delay Notice") of the event which constitutes such Commencement Date
Delay. If the Commencement Date Delay arises under clause (i) of Section 5.1 of
these Construction Provisions and was not due to Landlord's failure to perform
in accordance with a written schedule approved in advance by Landlord's
representative under Section 6.2 of these Construction Provisions, the
Commencement Date Delay shall be deemed to have occurred commencing on the
second business day following the date of Landlord's receipt of the Delay
Notice. In all other cases, the Commencement Date Delay shall be deemed to have
occurred on the date of Landlord's receipt of the Delay Notice.
5.3 Definition of Substantial Completion of the Tenant Improvements.
For purposes of this Section 5, "substantial completion of the Tenant
Improvements" shall mean completion of construction of the Tenant Improvements
in the Premises pursuant to the "Approved Working Drawings," with the exception
of any punch list items, but including any furniture, fixtures, workstations,
built-in furniture or equipment (even if the same requires installation or
electrification by Tenant's Agents).
SECTION 6
MISCELLANEOUS
6.1 Tenant's Representative. Tenant has designated Jack Spound as its
sole representative with respect to the matters set forth in these Construction
Provisions, who, until further notice to Landlord, shall have full authority and
responsibility to act on behalf of the Tenant as required in these Construction
Provisions.
6.2 Landlord's Representative. Landlord has designated Michael Pace as
its sole representative with respect to the matters set forth in these
Construction Provisions, who, until further notice to Tenant, shall have full
authority and responsibility to act on behalf of the Landlord as required in
these Construction Provisions.
EXHIBIT C - Page 7
<PAGE> 66
6.3 Time of the Essence in These Construction Provisions. Unless
otherwise indicated, all references herein to a "number of days" shall mean and
refer to calendar days. In all instances where Tenant is required to approve or
deliver an item, if no written notice of approval is given or the item is not
delivered within the stated time period, at the end of such period the item
shall automatically be deemed disapproved by Tenant.
6.4 Elevator Usage. Landlord shall cooperate with Tenant in making
available for Tenant's use a passenger elevator for Tenant's construction and
move-in activities. Tenant shall be responsible for any damage to the elevator,
elevator lobby and other Common Area of the Building resulting from Tenant's
construction and move-in activities.
6.5 Miscellaneous Charges. During the period of construction of the
Tenant Improvements and Tenant's move into the Premises, Tenant or Tenant's
Agents shall not be charged for reasonable amounts of parking, HVAC usage,
electricity, water, elevator and restroom usage, or access to loading docks, or
standard security services.
6.6 Clean-Up. Prior to the delivery of the Premises to Tenant for the
commencement of the construction of the Tenant improvements, Landlord shall
remove all rubbish and debris therefrom. Following substantial completion of the
Tenant Improvements and Tenant's move into the Premises, Landlord shall provide,
as an Operating Expense, janitorial service to the Premises in accordance with
the Building's standard cleaning specifications.
LANDLORD: BARCLAY CURCI INVESTMENT COMPANY,
a California general partnership
By: SC ENTERPRISES,
a California limited partnership,
a general partner
By: SHURL CURCI,
a general partner
By:
-----------------------------------
Roberta P. Gilligan,
his attorney-in-fact
TENANT: CENTURY SOUTHWEST CABLE TELEVISION, INC.,
a Delaware corporation
By:
--------------------------------------------
Name:
------------------------------------------
Title: President
By:
--------------------------------------------
Name:
------------------------------------------
Title: Secretary
EXHIBIT C - Page 8
<PAGE> 67
EXHIBIT D
SUBORDINATION OF LEASE
LEASE SUBORDINATION, ATTORNMENT
AND
NON-DISTURBANCE AGREEMENT
THIS AGREEMENT, made this day of 19 , by and between
(herein "Lessee"), and MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, a
Massachusetts corporation (herein "Lender").
RECITALS
A. Lender is the holder of a certain promissory note (herein the
"Note") issued by
("Lessor"), dated in the principal sum of
DOLLARS ($ ) and of the mortgage of even date therewith (herein the
"Mortgage") securing the Note, recorded on
which Mortgage encumbers the real property (herein called the "Subject
Property") described on Exhibit A, attached hereto and made a part hereof.
B. Lessee and
as Lessor, entered into a lease agreement (herein the "Lease") dated
by which Lessee leased from Lessor certain premises commonly known as
(herein the "Leased Premises"), and constituting a portion of the Subject
Property.
C. Lessee desires to be able to obtain the advantages of the Lease and
occupancy thereunder in the event of foreclosure of the Mortgage and Lender
wishes to have Lessee confirm the priority of the Mortgage over the Lease.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
set forth hereinbelow, the parties hereto agree as follows:
1. Lessee hereby covenants and agrees that all its rights and interests
whatsoever under the Lease in the Leased Premises and the Subject Property are
and shall remain subject and subordinate to the lien of the Mortgage and to all
the terms, conditions and provisions thereof, to all advances made or to be made
thereunder or under the Note, and to any increases, renewals, extensions,
modifications, substitutions, consolidations or replacements thereof or of the
Note.
2. So long as Lessee is not in default (beyond any period given Lessee
in the Lease to cure such default) in the payment of rent or additional charges
or in the performance of any of the other terms, covenants or conditions of the
Lease on Lessee's part to be performed, Lender or any Purchaser (as defined in
Section 3 hereof) shall not terminate the Lease and Lessee shall not be
disturbed by Lender or any Purchaser in its possession of the Leased Premises
during the term of the Lease, or any extension or renewal thereof, or in the
enjoyment of its rights under the Lease.
If the interest of the Lessor under the Lease shall be
acquired by Lender or any Purchaser ("Purchaser") by reason of exercise of the
power of sale or the foreclosure of the Mortgage or other proceedings brought to
enforce the rights of the holder thereof, by deed in lieu of foreclosure or by
any other method, and Lender or Purchaser succeeds to the interest of Lessor
under the Lease, Lessee shall attorn to Lender or Purchaser as its lessor, said
attornment to be effective and self-operative without the execution of any other
instruments on the part of either party hereto immediately upon Lender's or
Purchaser's succeeding to the interest of the Lessor under the Lease, and the
Lease shall continue in accordance with its terms between Lessee as lessee and
Lender or Purchaser as lessor; provided, however, that:
EXHIBIT D - Page 1
<PAGE> 68
(a) Lender or Purchaser shall not be personally liable under the
Lease and Lender's liability under the Lease shall be limited
to the ownership interest of Lender in the Subject Property;
(b) Lender or Purchaser shall not be liable for any act or omission
of any prior lessor (including Lessor) except to the extent
such act or omission pertains to a continuing covenant, and
then Lender or Purchaser shall be liable only for a failure to
cure the same which continues after Lender or Purchaser takes
title to the Subject Property;
(c) Lender or Purchaser shall not be subject to any offsets or
defenses which Lessee might have against any prior lessor
(including Lessor), if such offsets or defenses relate to
obligations of any prior lessor (including Lessor) which arise
prior to the date Lender or Purchaser takes title to the
Subject Property;
(d) Lender shall not be bound by any prepayment of rent or deposit,
rental security or any other sums deposited with any prior
lessor (including Lessor) under the Lease unless actually
received by Lender, except as to monthly installments of
Expenses paid no more than thirty (30) days in advance;
(e) Lender shall not be bound by any agreement or modification of
the Lease made without Lender's consent, except for agreements
or modifications expressly contemplated by this Lease in
connection with expansion of the Premises or extension of the
term of the Lease;
(f) Lender shall not be bound to commence or complete any
construction or to make any contribution toward construction or
installation of any improvements upon the Leased Premises
required under the Lease or any expansion or rehabilitation of
existing improvements thereon, or for restoration of
improvements following any casualty not required to be insured
under the Lease or for the costs of any restoration in excess
of any proceeds recovered under any insurance required to be
carried under the Lease; and
(g) Lender shall not be bound by any restriction on competition
beyond the Leased Premises.
4. Lessee certifies to Lender that the Lease is presently in full force
and effect with no defaults thereunder by the Lessor or by Lessee and unmodified
except as indicated hereinabove that no rent under the Lease has been paid more
than thirty (30) days in advance of its due date; that the address for notices
to be sent to Lessee is as set forth in the Lease, or at the Leased Premises;
and that the Lessee does not presently have or claim any charge, lien or offset
under the Lease or otherwise, against rents or other charges due or to become
due thereunder.
5. Lessee agrees with Lender that from and after the date hereof,
Lessee will not terminate or seek to terminate the Lease by reason of any act or
omission of the Lessor thereunder until Lessee shall have given written notice,
by registered or certified mail, return receipt requested, of said act or
omission to Lender, which notice shall be addressed to Massachusetts Mutual Life
Insurance Company, 1295 State Street, Springfield, Massachusetts 01111,
Attention: Senior Vice President, Real Estate Investment Division, and until a
reasonable period of time shall have elapsed following the giving of such
notice, during which period Lender shall have the right, but shall not be
obligated, to remedy such act or omission.
6. This Agreement shall inure to the benefit of and shall be binding
upon Lessee and Lender, and their respective heirs, personal representatives,
successors and assigns. This Agreement may not be altered, modified or amended
except in writing signed by all of the parties hereto. In the event any one or
more of the provisions contained in this Agreement shall for any reason be held
to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provisions of this
Agreement, but this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein. This Agreement shall be
governed by and construed according to the laws of the State of
EXHIBIT D - PAGE 2
<PAGE> 69
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
LESSEE:
[ATTEST OR WITNESSES (2)] CENTURY SOUTHWEST CABLE TELEVISION,
INC.
a Delaware corporation
By:
- ----------------------------------- ------------------------------------
Its:
- ----------------------------------- ------------------------------------
[SEAL]
[ATTEST] MASSACHUSETTS MUTUAL LIFE INSURANCE
COMPANY,
a Massachusetts corporation
By:
- ----------------------------------- ------------------------------------
Its:
- ----------------------------------- ------------------------------------
[SEAL]
EXHIBIT D - PAGE 3
<PAGE> 70
EXHIBIT D-1
SUBORDINATION OF DEED OF TRUST
______________________________________________________________________
(hereinafter called "Lender") as owner and holder of a certain promissory note
dated ______________ in the principal sum of _____________ Dollars
($____________) and a Deed of Trust dated of even date herewith securing said
Note, now a first lien upon the premises more particularly demised and described
in those certain leases by and between ____________, as Landlord, and the
persons named (whose agreement hereto is evidenced by unrecorded agreements in
the possession of Landlord and Lender) in Exhibit A attached hereto and made a
part hereof, as Tenant, and upon other property, in consideration of such
leasing and of the sum of One Dollar ($1.00) and other good and valuable
consideration, receipt of which is hereby acknowledged,
DOES hereby covenant and agree that the said Deed of Trust shall be,
and the same is hereby made, SUBJECT AND SUBORDINATE to said leases with the
same force and effect as if the said leases had been executed, delivered and
recorded prior to the execution, delivery and recording of said Deed of Trust,
without regard to the date on which said leases had been executed, delivered and
recorded in relation to the date on which said Deed of Trust has become an
effective lien by the terms therein demised;
EXCEPT, HOWEVER, that this Subordination shall not affect or be
applicable to and does hereby expressly exclude:
(a) The prior right, claim and lien of the said Deed of Trust, to and
upon any award or other compensation heretofore or hereafter to be
made for any taking by eminent domain of any part of said
premises, and to the right of disposition thereof in accordance
with the provisions of said Deed of Trust,
(b) The prior right, claim or lien of the said Deed of Trust in, to
and upon any proceeds payable under all policies of fire and rent
insurance upon the said premises and as to the right of
disposition thereof in accordance with the terms of said Deed of
Trust, and
(c) Any lien, right, power or interest, if any, which may have arisen
or intervened in the period between the recording of the said Deed
of Trust and the execution of the said leases, or any lien or
judgment which may arise at any time under the terms of such
leases.
The subordination shall inure to the benefit of and shall be binding
upon the undersigned, its successors and assigns.
IN WITNESS WHEREOF, this Subordination has been duly signed and
delivered by the undersigned this _____________ day of _________________, 19___.
"LENDER":
EXHIBIT D-1 - PAGE 1
<PAGE> 71
ACKNOWLEDGMENTS
STATE OF )
) SS.
COUNTY OF )
On this, the day of , 19 , before me, the
undersigned party, personally appeared
who acknowledged himself to be the of
, a
, and that he as such
being authorized to do so, executed the foregoing Lease Subordination,
Attornment and Non-Disturbance Agreement for the purposes therein contained by
signing the name of the by himself as
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
__________________________
Notary Public
My Commission Expires:
COMMONWEALTH OF MASSACHUSETTS )
) SS.
COUNTY OF )
On this, the day of , 19 , before me, the
undersigned party, personally appeared
who acknowledged himself to be the of MASSACHUSETTS
MUTUAL LIFE INSURANCE COMPANY, a Massachusetts corporation, and that he as such
being authorized to do so, executed the foregoing Lease
Subordination, Attornment and Non-Disturbance Agreement for the purposes therein
contained by signing the name of the corporation by himself as
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
__________________________
Notary Public
My Commission Expires:
<PAGE> 72
EXHIBIT E
ESTOPPEL STATEMENT
Re: Lease dated as of ____________________________(hereinafter the
"Lease"), between _______________________________ (hereinafter
the "Lessor") and _______________________________ (hereinafter
the "Lessee"), (and amended on _______________________________),
concerning the premises described in Exhibit A attached
hereto (the "Premises").
As Lessee under the above-referenced Lease, the undersigned hereby
acknowledges for the benefit of ________________________________ ("Lender"),
which has or is about to make a loan to said Lessor, part of the security for
which will be a mortgage or deed of trust covering the Premises leased to the
undersigned and an assignment of Lessor's interest in the Lease, the truth and
accuracy of the following statements pertaining to said Lease.
1. Lessee has accepted full possession of said Premises, including all
improvements, additions and alterations thereto required to be made by Lessor
under the said Lease, and Lessee is not aware of any patent or latent defects in
construction of said improvements (except for only nonsubstantial defects,
notice of which has previously been given to Lessor) which would constitute a
default by Lessor pursuant to the Lease.
2. Lessee is paying the full rent stipulated in said Lease to be paid
by Lessee as of the date hereof with no offsets, defenses or claims.
3. Lessor is not presently in default under any of the terms, covenants
or provisions of said Lease.
4. Lessor has satisfactorily complied with all of the requirements and
conditions precedent to the commencement of the term of said Lease as specified
in said Lease.
5. The current fixed base monthly rent under said Lease is $___________
and no monies have been paid to Lessor in advance of the due date set forth in
the Lease described above, except as follows:___________________________________
________________________________________________________________________________
_______________________________________________________________________________.
6. The Lease is for a term of ____________________ years and Lessee has
been in occupancy since _____________________ and paying rent since ____________
______________________.
7. The Lease commenced on ____________________________________________.
8. Lessee hereby acknowledges (a) that there have been no modifications
or amendments to said Lease other than herein specifically stated, (b) that it
has no notice of a prior assignment, hypothecation or pledge of rents or of the
Lease other than herein specifically stated, (c) that the Lease is in full force
and effect and Lessee has no defenses, setoffs or counterclaims against Lessor
arising out of the Lease or in any way relating thereto, or arising out of any
other transaction between Lessee and Lessor, (d) that the Lease represents the
entire agreement between the parties thereto as to the leased premises, and
Lessee neither has nor claims any right or interest in or under any contract,
option or agreement involving the sale or transfer of the leased premises except
as specifically provided in the Lease, (e) that no prepayment or reduction of
rent, and no modification, termination or acceptance of surrender of the Lease
will be valid as to Lender without the consent of Lender, and (f) that notice of
the proposed assignment of Lessor's interest in said Lease may be given Lessee
by Certified or Registered Mail, Return Receipt Requested, at the Premises, or
as otherwise directed herein.
Dated: __________________________, 19__________
LESSEE: ____________________________________
____________________________________
By:_________________________________
Its:________________________________
EXHIBIT E - PAGE 1
<PAGE> 73
(Address to which notices are to be sent if other than Premises)
________________________________________________________________
________________________________________________________________
________________________________________________________________
EXHIBIT E - PAGE 2
<PAGE> 74
EXHIBIT F
BUILDING RULES AND REGULATIONS
The following rules and regulations shall be applicable to the
Building:
1. No sign, placard, picture, advertisement, name or notice shall be
inscribed, displayed, printed or affixed on or to any part of the Building or
Premises if visible from outside the Premises, without the prior written consent
of Landlord. Tenant's identification signs and lettering shall be in accordance
with Landlord's standard requirements for the Building unless otherwise approved
in writing by Landlord, and shall be printed, painted, affixed, or inscribed at
the expense of Tenant by a person approved by Landlord.
2. Tenant shall not place or maintain any window covering, blinds or
drapes on any window without Landlord's prior written approval. A breach of this
rule will directly and adversely affect the exterior appearance of the Building.
Upon request by Landlord, Tenant shall remove any window covering, or any other
item visible from outside the Premises, if installed or placed without
Landlord's written approval.
3. A directory of the Building will be provided for the display of the
name and location of tenants. Landlord will install at Tenant's expense
directory strips for Tenant's name and a reasonable number of the principal
employees thereof, and Landlord reserves the right to exclude any other names
therefrom.
4. The sidewalks, halls, passages, exits, entrances, elevators,
escalators, and stairways shall not be obstructed by Tenant or used by it for
any purpose other than for ingress to and egress from the Premises. The halls,
passages, exits, entrances, elevators, escalators, stairways, balconies and roof
are not for the use of the general public and Landlord shall in all cases retain
the right to control and prevent access thereto by all persons whose presence in
the judgment of the Landlord might be prejudicial to the safety, character,
reputation and interests of the Building and its tenants, provided that nothing
herein contained shall be construed so as to prevent such access to persons with
whom Tenant normally deals in the ordinary course of Tenant's business unless
such persons are engaged in illegal activities or are creating a nuisance. No
employee, invitee, contractor or agent of Tenant shall go upon the roof of the
Building.
5. Tenant shall be responsible for assuring that doors to the Premises
are locked during non-business hours. Such doors shall not be left open during
business hours, except while moving furniture or other items in or out of the
Premises, unless Landlord consents otherwise.
6. The toilet rooms and urinals, wash bowls and other apparatus therein
shall not be used for any purpose other than that for which they were
constructed and no foreign substance of any kind whatsoever shall be placed
therein; the expense of breakage, stoppage or damage resulting from the
violation of this rule shall be borne by the tenant who, or whose employees,
invitees, contractors or agents, shall have caused it.
7. Except as to normal pictures and furnishings, Tenant shall not mark,
drive nails, screw or drill into partitions, woodwork or plaster or in any way
deface the Premises or any part thereof. No boring, cutting or stringing of
wires shall be permitted except with the prior written consent of Landlord and
as Landlord may direct. Tenant shall not lay linoleum, tile, carpet or other
similar floor covering so that the same shall be affixed to the floor of the
Premises in any manner except as approved by Landlord. The expense of repairing
any damage resulting from a violation of this rule or removal of any floor
covering shall be borne by Tenant.
8. Tenant shall not overload any floor of the Premises or the Building.
No furniture, freight or equipment of any kind shall be brought into the
Building by Tenant or its contractors or agents without prior consent of
Landlord and all moving of the same into or out of the Building shall be done at
such time and in such manner as Landlord shall designate. Landlord shall have
the right to prescribe the weight, size and position of all safes and other
heavy objects brought into the Building and also the time and manner of moving
the same in and out of the Building. Safes and other heavy objects shall, if
considered necessary by Landlord, stand on wood strips of such thickness as is
necessary to properly distribute weight. Landlord will not be responsible for
loss or damage to any property from any such cause, and all damage done to the
Building by moving or maintaining any such safe or other property shall be
repaired at the expense of Tenant. There shall not be used in any part of the
Building any hand truck unless it is equipped with rubber tires and side guards.
9. Tenant shall not employ any person or persons other than the janitor
of Landlord for the purpose of cleaning the Premises unless otherwise agreed to
in writing by Landlord. Except with the prior written consent of Landlord, no
person or persons other than those approved by Landlord shall be permitted to
enter the Building for the purpose of cleaning same. Tenant shall not cause any
unnecessary labor by reason
EXHIBIT F - PAGE 1
<PAGE> 75
of Tenant's carelessness or indifference in the preservation of good order and
cleanliness. Landlord shall in no way be responsible to Tenant for any loss of
property on the Premises, however occurring, or for any damage done to the
effects of Tenant or any of its employees or other persons by the janitor of
Landlord. Janitor service shall include ordinary dusting and cleaning by the
janitor assigned to such work and shall not include clearing of carpets or rugs,
except normal vacuuming, or moving of furniture and other special services.
Janitor service will not be furnished to rooms which are occupied after 9:30
p.m. Window cleaning shall be done only by Landlord at reasonable intervals and
as Landlord deems necessary.
10. Tenant shall not use, keep or permit to be used or kept any noxious
gas or substance in the Premises, or permit or suffer the Premises to be
occupied or used in a manner offensive or objectionable to Landlord, in
Landlord's reasonable judgment or other occupants of the Building by reason of
unreasonable noise, odors and/or vibrations, or unreasonably interfere in any
way with other tenants or those having business therein. No tenant shall make or
permit to be made any loud or disturbing noises or disturb or interfere with
occupants of the Building or those having business with them whether by the use
of any musical instrument, radio, phonograph, shouting or in any other manner.
Tenant shall not throw anything out of doors or down the passageways.
11. The Premises shall not be used for the storage of merchandise
except as such storage may be incidental to the use of the Premises authorized
by the Lease. No cooking shall be done or permitted in the Premises without
Landlord's consent, except that use by Tenant of Underwriter's
Laboratory-approved microwave ovens or equipment for brewing coffee or similar
beverages shall be permitted. Tenant shall not advertise for day laborers giving
an address at the Premises. The Premises shall not be used for lodging or for
any illegal purposes. Tenant shall not keep or maintain pets or animals of any
type and shall not store or keep bicycles, mopeds or motorcycles in the Premises
or the Building.
12. Tenant shall not use or keep in the Premises or the Building any
kerosene, gasoline or flammable or combustible fluid or material, or use any
method of heating or air conditioning other than that supplied or permitted by
Landlord.
13. Landlord will direct electricians as to where and how electrical,
telephone and telegraph wires are to be introduced to the Premises. No boring or
cutting for wires will be allowed without the prior consent of Landlord. The
location of telephone switching equipment, call boxes and other similar
equipment in the Premises shall be subject to the approval of Landlord.
14. Landlord will furnish Tenant free of charge two (2) keys for each
locking door in the Premises. Any additional or replacement keys will be
furnished at a reasonable charge. All keys to offices, rooms and toilet rooms
shall be obtained from Landlord and Tenant shall not duplicate or obtain such
keys from any other source. Upon termination of the Lease, Tenant shall deliver
to Landlord the keys to the offices, rooms and toilet rooms which were
previously furnished to Tenant, failing which Tenant shall pay Landlord the cost
of replacing same or of changing the lock or locks opened by any unreturned key
if Landlord deems it necessary to make such changes. Landlord shall have the
right periodically to change all locks and furnish Tenant with new keys
therefor. Tenant shall not alter any lock or install any new or additional locks
or any bolts on any door of the Premises without the prior written consent of
Landlord (except as to safes, vaults and other secured areas of Tenant approved
by Landlord).
15. No furniture, packages, supplies, equipment or merchandise will be
received in the Building or carried up or down in the elevators, except between
such hours and in such elevators as shall be designated by Landlord.
16. Landlord reserves the right to close and keep locked all entrances
and exit doors of the Building on Saturdays, Sundays, legal holidays and on
other days between non-business hours, and during such further hours as Landlord
may deem advisable for the adequate protection of the Building and the property
of its tenants (such hours are referred to as "After-Hours"). However, during
such After-Hours Tenant and/or authorized employees, as well as guests,
licensees or invitees of Tenant who are accompanied by Tenant or an authorized
employee of Tenant, shall be allowed access to the Building upon proper
identification. Landlord shall in no case be liable for damages for any error
with regard to the admission to or exclusion from the Building of any person. In
case of invasion, mob, riot, public excitement, or other commotion, Landlord
reserves the right to prevent access to the Building during the continuance of
same.
17. The "'normal business hours"' for the Building are from 7:00 a.m.
to 6:00 p.m. Monday through Friday, excluding nationally recognized standard
holidays. As of the date of the Lease, nationally recognized standard holidays
currently are: Martin Luther King's Birthday; President's Day; Memorial Day;
Independence Day; Labor Day; Thanksgiving Day; Day After Thanksgiving*;
Christmas; Day after Christmas*;
EXHIBIT F - PAGE 2
<PAGE> 76
New Year's Day, and Day After New Year's Days*. (*Subject to change depending on
day of the year.) Such nationally recognized standard holidays are subject to
change from time to time in Landlord's reasonable discretion. All other hours
are deemed "After-Hours".
18. Tenant shall not canvass or solicit other tenants in the Building
and Tenant shall cooperate to prevent any such canvassing and/or solicitation.
Canvassing and peddling in the Building is prohibited. Tenant shall not obtain
for use in the Premises food, beverage, shoe-shine or other services except as
expressly permitted by Landlord.
19. Landlord reserves the right to exclude or expel from the Building
any person who, in the judgment of Landlord, is intoxicated or under the
influence of liquor or drugs, has no legitimate purpose to be in the Building,
or is violating the rules and regulations of the Building.
20. The requirements of Tenant will be attended to only upon
application to Landlord's designated property manager. Tenant acknowledges that
employees of Landlord shall have no obligation to perform work for Tenant or do
anything outside their regular duties for Tenant unless under special
instructions from Landlord, and that no employee will have any obligation to
admit any person (Tenant or otherwise) to any office of Landlord without
specific instructions from Landlord.
21. No vending machines of any description shall be installed,
maintained, or operated by Tenant upon the Premises or in the Building without
the prior written consent of Landlord. Landlord will not unreasonably withhold
such consent provided the vending machines are of a weight which does not exceed
the applicable floor-loading limitations and neither the machines nor any light
or sound emanating therefrom are visible or audible outside the Premises.
22. Tenant agrees that it shall comply with all fire and security
regulations that may be issued from time to time by Landlord, and Tenant shall
also provide Landlord with the name of a designated responsible employee to
represent Tenant in all matters pertaining to such fire or security regulations.
23. Tenant shall not install any radio or television antenna,
loudspeaker or other device on the roof or exterior walls of the Building.
Tenant shall not interfere with broadcasting or reception from or in the
Building or elsewhere.
24. Tenant shall store its trash and garbage within the Premises or in
other facilities designated by Landlord. Tenant shall not place in any trash
receptacle any material, which cannot be disposed of in the ordinary practice of
trash disposal. All trash and garbage disposal shall be made pursuant to
directions issued from time to time by Landlord.
25. Landlord may waive any one or more of the rules and regulations as
to any tenant without being construed as having waived same as to any other
tenant.
26. Tenant shall be responsible for the observance of the rules and
regulations by Tenant's employees, agents, customers, invitees and guests.
27. Landlord reserves the right upon written notice to Tenant, to
rescind, alter or waive any rule or regulation at any time prescribed for the
Building, or to establish additional rules and regulations when, in Landlord's
sole judgment, it is necessary, desirable or proper for the best interest of the
Building and its tenants.
28. The rules and regulations shall be administered fairly by Landlord
and Landlord shall not enforce them in a discriminatory manner as between the
tenants of the Building.
29. In case of conflict between these rules and regulations and the
express provisions of the Lease, the latter shall control.
EXHIBIT F - PAGE 3
<PAGE> 77
EXHIBIT G
GUARANTY AGREEMENT
In consideration of the sum of $1.00, receipt of which is hereby
acknowledged, and in consideration of the execution of the Lease dated , 1995
(hereinafter referred to as the "Lease") between BARCLAY CURCI INVESTMENT
COMPANY (hereinafter referred to as "Lessor") and CENTURY SOUTHWEST CABLE
TELEVISION, INC. (hereinafter referred to as "Lessee") by Lessor, the
undersigned, hereinafter sometimes referred to as "Guarantor", hereby
unconditionally guarantees the prompt and faithful performance by Lessee of the
Lease and all the terms, covenants and conditions thereof, including but not
limited to the payment by Lessee of the rental and other sums to become due
thereunder. Guarantor agrees that this obligation shall be binding upon
Guarantor without any further notice or acceptance hereof, but the same shall be
deemed to have been accepted by the execution of the Lease, and Guarantor
further agrees that immediately upon an event of default by Lessee, upon notice
to Guarantor, Guarantor will pay to Lessor the sum or sums in default and will
comply with and perform the terms, covenants and conditions of the Lease.
Guarantor agrees that no extension, forbearance or leniency extended by
Lessor to Lessee, and no modification, alteration or assignment of the Lease,
shall discharge Guarantor, and Guarantor agrees at all times while the Lease is
in effect that Guarantor will be liable notwithstanding the fact that Guarantor
has had no notice of the said extension, forbearance or leniency, or said
modification, alteration or assignment of the Lease.
This Guaranty will continue unchanged by any bankruptcy, reorganization
or insolvency of Lessee or any successor or assignee thereof or by any
disaffirmance or abandonment by a trustee of Lessee, and is not contingent upon
the genuineness, validity, or enforceability of the Lease.
Landlord may, without notice, assign this Guaranty, in whole or in
part, and no assignment or transfer of the Guaranty shall operate to extinguish
or diminish the liability of Guarantor hereunder.
The liability of Guarantor hereunder shall be primary, and in any right
of action which shall accrue to Lessor under the Lease, Lessor may, at its
option, proceed against Guarantor without having commenced any action or having
obtained any judgment against Lessee. Guarantor further agrees that Lessor may
proceed against Lessee and the same shall not constitute a discharge of
Guarantor, and further that the exercise of certain rights hereunder may affect
or eliminate Guarantor's right of subrogation against Lessee, and that
notwithstanding the foregoing, Lessor may exercise any of its rights hereunder.
Guarantor shall pay all costs and other expenses incurred by Lessor
(including reasonable attorneys' fees) in collection or attempted collection
related to the obligations hereby guaranteed, or in enforcing this Guaranty
against Guarantor, unless Guarantor is the prevailing party in such collection
or enforcement action, in which case Guarantor shall be entitled to recover its
reasonable attorneys' fees and costs from Lessor.
Guarantor shall be discharged of its obligations pursuant to this
Guaranty upon the expiration or termination of the Lease, provided Lessee fully
performs and discharges all its obligations under the Lease and further provided
no events of default remain uncured as of the expiration or termination of the
Lease. However, expiration or termination of this Lease shall in no way relieve
Guarantor of any obligations which have accrued and remain unperformed at such
time or of any liability for damages due to Lessee's breach or default under
this Lease.
CENTURY COMMUNICATIONS CORP.,
a Texas corporation
Attest: By:
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- ------------------------------------- -------------------------------------
(please print) (please print)
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Title
EXHIBIT G - PAGE 1
<PAGE> 78
EXHIBIT H
JANITORIAL SPECIFICATIONS
A. JANITORIAL SERVICE SPECIFICATION FOR TENANT SUITES
1. Nightly Services - Five (5) nights per week, eight (8) hours
per night between the hours of 6:00 p.m. and 2:00 a.m. or
other schedule to be reviewed and approved by owner.
a. Secure all lights as soon as possible each night.
b. Vacuum all carpets.
c. Dust mop all resilient and composition floors with
treated dust mops. Damp mop to remove spills and
water stains as required.
d. Dust all desks and office furniture with treated dust
cloths.
e. Papers and folders on desks are not to be moved.
f. Sanitize all telephone receivers.
g. Empty all ash trays and ash urns. Clean and sanitize
as required.
h. Empty all waste paper baskets and other trash
containers.
i. Remove all trash from floors to designated trash
areas.
j. Remove fingerprints, dirt smudges, graffiti, etc.
from all doors, frames, glass partitions, windows,
wall switches, wall, elevator door iambs and elevator
interiors.
k. Return chairs and waste baskets to proper positions.
l. Clean, sanitize and polish drinking fountains.
m. Police all service stairwells.
n. Police all interior public corridor planters.
o. Dust and remove debris from all metal door
thresholds.
p. Wipe clean smudged bright work.
q. Spot clean all carpets, resilient and composition
floors as required.
r. Service all walk-off mats as required.
s. Close all blinds at exterior windows.
t. Check for burned out lights and report them to
supervisor. Supervisor to leave list of burned out
lights at management office on a nightly basis.
u. Spot clean entrance door glass and all partition
glass.
EXHIBIT H - PAGE 1
<PAGE> 79
v. Clean glass desk tops.
w. Clean lunchroom furniture and appliances.
x. Damp mop and spot clean lunchroom floors.
y. Sand jars to be wiped clean and fine-screened.
2. Weekly Services
a. Dust all low-reach areas including, but not limited
to, chair rungs, structural and furniture ledges,
baseboards, window sills, door louvers, wood paneling
molding, handrails and railings, etc.
b. Dust inside of all door jambs.
c. Clean and polish all metal door thresholds.
d. Wipe clean and polish all bright work.
e. Sweep all stairways throughout building.
f. Dust all vinyl base.
g. Edge all carpeted areas.
h. Move all plastic carpet protectors and thoroughly
vacuum under and around all desks and office
furniture.
i. Clean and spray buff all resilient and/or composition
flooring.
j. Raise and dust all blinds and dust window frames and
sills.
k. Remove all spots, smudges and marks from doors,
partitions, walls, woodwork, window frames, mullions
and ledges, wall switches and outlet plugs on floors
and walls.
l. Clean fire extinguisher and/or fire hose cabinets -
dust and clean glass.
m. Clean outside doors of mailboxes.
3. Monthly Services
a. Dust all high-reach areas including, but not limited
to, tops of door frames, structural and furniture
ledges, air conditioning diffusers and return grills,
tops of partitions, picture frames, etc.
b. Vacuum upholstered furniture.
EXHIBIT H - PAGE 2
<PAGE> 80
4. Quarterly Services
a. Shower-scrub or otherwise recondition all resilient
or composition flooring to provide level of
appearance equivalent to a completely refinished
floor.
b. Wipe down all vinyl, leather and wood furniture.
c. Vacuum window coverings (curtains or drapes) and
cornices.
d. Wash all chair pads.
B. RESTROOM SERVICE SPECIFICATIONS
1. Nightly Services - Five (5) nights per week.
a. Restock all restrooms with supplies including paper
towels, toilet tissue, seat covers, and hand soap, as
required.
b. Restock all sanitary napkin and tampon dispensers as
required.
c. Wash and polish all mirrors, dispensers, faucets,
flushometers, and bright work with non-scratch
disinfectant cleaners.
d. Wash and sanitize all toilet bowls, toilet seats,
urinals and sinks with non-scratch disinfectant
cleaner. Wipe dry all sinks.
e. Remove stains, descale toilets, urinals and sinks as
required.
f. Mop all restroom floors with disinfectant germicidal
solution.
g. Empty and sanitize all waste and sanitary napkin and
tampon receptacles.
h. Remove all restroom trash from building.
i. Spot clean fingerprints, marks and graffiti from
walls, partition glass, aluminum and wall switches as
required.
j. Empty and damp wipe all ashtrays.
k. Report all fixtures not working properly to
supervisor. Supervisor to leave list at management
office nightly.
EXHIBIT H - PAGE 3
<PAGE> 81
2. Weekly Services
a. Dust all low-reach and high-reach areas including but
not limited to, structural ledges, wainscoating,
mirror tops and edges, air conditioning diffusers and
return air grills.
b. Wash down urinal screens and adjacent tile.
3. Monthly Services
a. Wipe down all tile walls and metal partitions.
Partitions shall be left in an unstreaked condition.
b. Clean all ventilation grills.
c. Dust all doors and door jambs.
d. Scrub floors with special germicidal solution.
e. Spot clean walls around lavatories.
f. Descale toilets and urinals.
g. Pour clean water down floor drain to prevent sewer
gases from escaping.
h. Soap dispenser nozzles to be thoroughly cleaned.
i. Clean upholstered furniture in public areas if any.
4. Quarterly Services
a. Thoroughly clean, strip and reseal all ceramic tile
floors, using approved sealers.
C. MAIN FLOOR ELEVATOR LOBBIES AND PUBLIC CORRIDORS SPECIFICATIONS
1. Nightly Services - Five (5) nights per week (Monday through
Friday).
a. Thoroughly wash all swinging and revolving glass
doors exclusive of tenant doors.
b. Spot clean all glass including low partitions,
mirrors, and the corridor side of all windows and
glass doors to tenant premises.
c. Spot clean all brass or chrome bright work including
swinging and revolving door hardware, kick plates,
base, partition top hand rails, mirror wall hand
rails, waste paper
EXHIBIT H - PAGE 4
<PAGE> 82
receptacles, planters, elevator call button plates,
hose cabinets, mail boxes and any visible hardware on
the corridor side of tenant doors.
d. Spot clean all interior architectural finishes
including the corridor side of all tenant area
windows and door frames and base.
e. Spot clean all granite wall surfaces.
f. Thoroughly clean all door saddles of dirt and debris.
g. Spot clean, sweep, damp mop all corridor and
hard-surface flooring. Baseboards to be cleaned
concurrent with floor service.
h. Spot clean and dust directory board glass and ledges.
i. Empty, clean and sanitize as required all waste paper
baskets and refuse receptacles.
j. Vacuum all carpets and spot clean as necessary.
k. Clean all elevator doors and frames.
2. Weekly Services
a. Spot clean, sweep, mop and buff all hard-surface
flooring.
b. Treat all polished tile flooring with non-skid city
approval product.
3. Monthly Services
a. Thoroughly clean all chrome, brass, and architectural
interior finishes.
4. Quarterly Services
a. Steam extraction shampooing with neutralizing rinse
all elevator lobby and public corridor carpeting
(where installed).
EXHIBIT H - PAGE 5
<PAGE> 83
D. BASEMENT CORRIDORS, SERVICE OFFICE (ENGINEERING, SECURITY, CLEANING),
STOREROOMS, SERVICE CORRIDORS, ROOF AND SERVICE SINK CLOSETS; SHOWER
AND LOCKER ROOMS:
NOTE: Nightly and periodic services for offices, corridors, shower
rooms and restrooms included in the above areas shall be per
the specifications previously outlined for tenant areas and
common areas on tenant floors. Additional work not previously
specified shall be as follows:
1. Nightly Services - Five (5) nights per week (Monday through
Friday).
a. Remove all trash from all of above areas.
b. Maintain all orderly arrangement of all janitorial
supplies and paper products in the storage rooms and
service sink closets.
c. Maintain an orderly arrangement of all equipment
stored in these areas such as mops, buckets, brooms,
vacuum cleaners, scrubbers, etc.
d. Clean and disinfect service sinks.
e. Sweep and damp mop service sink closet floors.
Deodorize and disinfect as required.
f. Sweep storeroom floors.
g. Receive and store all janitorial supplies in an
orderly manner.
2. Weekly Services
a. Damp mop all composition floors in store areas.
Deodorize and disinfect as required.
b. High dusting of these areas including all pipes,
ducts, conduit, ventilating diffusers and grills and
mechanical, electrical equipment exposed beneath the
hung ceilings outside of the mechanical equipment
rooms.
EXHIBIT H - PAGE 6
<PAGE> 84
E. PASSENGER ELEVATOR CLEANING SPECIFICATIONS
1. Nightly Services - Five (5) nights per week (Monday through
Friday).
a. Wipe down with clean cloth all elevator doors,
interior walls and control panels;, vacuum floor
tracks and saddles.
b. Wipe down with clean cloth all outside surfaces of
all elevator doors and frames.
c. Spot clean elevator cab floor carpeting.
d. Vacuum all cab floor carpeting thoroughly. Edge all
carpeting thoroughly.
e. Vacuum all elevator thresholds.
\
2. Monthly Services
a. Steam extraction shampooing with neutralizing rinse
all elevator cab floor carpets.
b. Wipe clean all elevator cab lamps.
c. Wipe clean entire cab coiling.
F. LOADING DOCK, TRASH AREAS AND SERVICE ENTRANCE SPECIFICATIONS
1. Nightly Services - Five (5) nights per week (Monday through
Friday).
a. Place all miscellaneous trash and debris, except
construction material in trash receptacles or
compactor.
b. If necessary, clean any construction debris and place
in designated area. Record time and material used for
this work for back-charges to the responsible
contractors. Submit all records to Owner.
c. Neatly stack all trash in designated area.
d. Sweep entire area.
e. Mop entire trash area and disinfect and deodorize as
required.
EXHIBIT H - PAGE 7
<PAGE> 85
2. Weekly Services
a. Mop entire loading dock and service entrance area.
Deodorize and disinfect areas as required.
3. Quarterly Services
a. Perform high dusting and/or wash down services for
all high-reach projections, ducts, pipes, ledges,
etc. in loading dock and service entrance area.
G. EXTERIOR STRUCTURE AND GROUNDS SERVICE SPECIFICATIONS
1. Nightly Services - Five (5) nights per week (Monday through
Friday).
a. Police perimeter of Building including landscaped
areas, storm drain grills, and ventilation grills to
the property lines on all sides.
b. Spot sweep accumulations of dirt, papers and leaves
in all corner areas where wind tends to cause a
collection of this debris.
c. Spot clean and dust all ledges around entrances to
the Building.
d. Spot clean all exterior glass at Building entrances.
e. Thoroughly clean and polish all hand rails around
Building exterior.
f. Lift nap on all entry walk-off mats as necessary with
a heavy bristle brush and vacuum.
g. Empty all waste receptacles and remove trash to
designated trash area.
h. Sweep sidewalk steps and fountain area.
2. Quarterly Services
a. Machine scrub or steam clean exterior sidewalk areas.
EXHIBIT H - Page 8
<PAGE> 86
H. DAY CLEANING SPECIFICATIONS
Contractor shall supply two (2) day cleaning persons to the Project.
The duties of the day porter shall be primarily the maintenance and
upkeep of the main floor, common areas, restrooms and exterior of the
Project per the following. The work schedules of these individuals will
be as directed by Owner and may vary as requirements of the Project
dictate.
1. Restrooms
Damp wipe and polish all restroom sinks
Wash and dry mirrors
Check all dispensers; fill if necessary
Clean up as necessary
Minimum frequency 3% daily
2. Elevators
Check elevators and all elevator lobby floors
Clean doors, panels, buttons and casing
Vacuum floors and pick up debris
Replace burned out lamps; clean diffusers and grills when
relamping
Minimum frequency 2% daily
3. Lobbies and Public Areas
Clean lobby doors (both sides)
Straighten furniture
Pick up trash and debris; empty contains as necessary
Empty and wipe dry ashtrays
Sift and maintain sand urns
Minimum frequency 3 x daily
4. Lighting Maintenance
Replace all burned lamps in tenant offices, stairwells and
public areas
Clean diffuser and grill work when relamping
EXHIBIT H - Page 9
<PAGE> 87
5. Directories/Display Cases
Spot clean all directories and all other appropriate glass
enclosures
Minimum frequency 2 x daily
6. Stairwells
Police for trash; sweep or wet mop when necessary
7. Additional Duties
Perform all relevant maintenance duties as assigned by Owner
Check daily at office of the Building to obtain pick-up list
of missed or outstanding work left by night shift.
I. INITIAL CLEANING
Prior to tenant occupancy of new space, Contractor shall render a
thorough initial cleaning of all newly constructed and rented space,
including dusting, sweeping and vacuuming, polishing metal and bright
work, cleaning windows and mullions, and removal of residual
construction debris so that the premises shall be left in a clean,
orderly and proper condition. Contractor shall also provide complete
floor maintenance and initial waxing and polishing throughout the
premises prior to move in of all new tenants. Price paid to Contractor
for such services shall be negotiated and agreed upon by Owner and
Contractor before such services are performed.
EXHIBIT H - Page 10
<PAGE> 88
SHORT FORM MEMORANDUM OF LEASE
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
Allen, Matkins, Leck, Gamble & Mallory
1999 Avenue of the Stars
Suite 1800
Los Angeles, California 90067
Attention: Anton N. Natsis, Esq.
SHORT FORM OF MEMORANDUM OF LEASE
THIS SHORT FORM OF MEMORANDUM OF LEASE is entered into as of
__________, 1995, by and between BARCLAY CURCI INVESTMENT COMPANY, a California
general partnership ("Landlord"), and CENTURY SOUTHWEST CABLE TELEVISION, INC.,
a Delaware corporation ("Tenant"), who agree as follows:
1. Terms and Premises. Landlord leases to Tenant, and Tenant leases
from Landlord, certain premises (the "Premises") to be located on the real
property (the "Project") legally described on Schedule 1 attached hereto and
incorporated herein by this reference (including parking areas), for the term
and in accordance with the provisions of that certain Office Lease by and
between Landlord and Tenant, dated as of the date hereof (the "Lease"). The
provisions of the Lease are hereby incorporated herein.
2. Provisions Binding on Parties. The provisions of the Lease to be
performed by Landlord or Tenant, whether affirmative or negative in nature, are
intended to and shall bind or benefit the respective parties hereto and their
assigns or successors, as applicable, at all times.
3. Purpose of Short Form of Memorandum of Lease. This Short Form of
Memorandum of Lease is prepared solely for purposes of recordation, and in no
way modifies the provisions of the Lease.
"Landlord"
BARCLAY CURCI INVESTMENT COMPANY,
a California general partnership
By: SC Enterprises
a California partnership,
a general partner
By: Shurl Curci, a general partner
By:
----------------------------------
Roberta P. Gilligan,
his attorney-in-fact
EXHIBIT I - Page 1
<PAGE> 89
"Tenant"
CENTURY SOUTHWEST CABLE TELEVISION INC.,
a Delaware corporation
By:
------------------------------------------
Its:
------------------------------------------
By:
------------------------------------------
Its:
------------------------------------------
EXHIBIT I - PAGE 2
<PAGE> 90
[ACKNOWLEDGMENTS TO BE PROVIDED]
EXHIBIT I - PAGE 3
<PAGE> 91
SCHEDULE 1
LEGAL DESCRIPTION OF PROJECT
[To Be Provided]
SCHEDULE I - PAGE 1
<PAGE> 92
SCHEDULE A TO EXHIBIT C
SCHEDULE A TO EXHIBIT C HAS BEEN INTENTIONALLY OMITTED
SCHEDULE A - PAGE 1
<PAGE> 93
PARKING LICENSE AGREEMENT
BARCLAY CURCI INVESTMENT COMPANY, a California general partnership
("Licensor"), hereby grants to CENTURY SOUTHWEST CABLE TELEVISION, INC., a
Delaware corporation ("Licensee"), the right and license to use parking spaces
in Santa Monica Business Park (the "Project"), as described below and subject to
the following conditions:
1. TYPE AND NUMBER OF PARKING SPACES. Licensee shall have the right to
use up to [104] unassigned automobile parking spaces at a rate equal to four (4)
spaces per 1,000 rentable square feet. If the area of Licensee's Premises in the
Project is reduced, Licensee 's allotment of parking spaces will be adjusted
proportionately. If the area of Licensee's Premises is increased, Licensee may,
at its option, increase the number of its allotted parking spaces
proportionately. Notwithstanding the preceding, Licensee shall have no right to
use any number of parking spaces in excess of the number of employees of
Licensee, or Licensee's subtenant actually employed at the Premises.
2. MONTHLY FEE. Licensee shall pay for the right and license granted
hereby the prevailing rates charged for such spaces by Licensor from time to
time ("market rate") provided, however, that Tenant's monthly rate per space
shall not be increased by more than four percent (4%) per year on a compounded,
cumulative basis. As of the date of this Agreement, the market rate is $50.00
per space per month, plus any applicable municipal taxes. Such sums shall be
payable in advance on the first day of each calendar month. Licensor shall have
no obligation to accept any such payment from anyone other than Licensee (e.g.
Licensee's employees, subtenants, etc.). If Licensee fails to make any such
payment when due, Licensor, at its option and after five (5) business days'
notice to Licensee, may forthwith terminate this license and all rights of
Licensee hereunder. Any late payment of the monthly fee will result in
additional administrative and processing costs being incurred by Licensor, the
exact amount of which would be extremely difficult to determine, and it is
agreed that with respect thereto a late fee of Five Dollars ($5.00) per space is
a reasonable estimate thereof and will be payable by Licensee with regard to any
monthly fee not paid when due.
3. TERM. Licensee shall be entitled to the foregoing parking rights for
a period equivalent to the term of that certain Lease of Premises in the Project
entered into by Licensor and Licensee. Licensee's rights to any and all parking
spaces shall automatically be revoked and shall terminate upon any material
default hereunder (provided such default continues beyond notice and expiration
of any applicable cure period), or any expiration or termination of said Lease,
as well as upon any assignment of such Lease or sublease of such Premises in
violation of the terms of such Lease. Licensee shall deliver all required
security deposits and the initial monthly fee for the parking spaces described
above within thirty (30) days after the Commencement Date of the aforementioned
Lease as defined herein) unless otherwise agreed by Licensor. Failure of
Licensee to so exercise its rights will entitle Licensor without notice to
transfer to others Licensee's rights to park in any and all parking spaces as to
which Licensee has not so exercised its rights hereunder, and Licensee will be
deemed to have waived its rights hereunder with regard thereto.
4. LOCATION OF PARKING SPACES. Licensor shall have the right to
designate the particular location of said parking space(s), which designation is
subject to change from time to time. However, the parking space(s) shall be
located in the western phase of the Project in the area designated on Schedule 1
to this Agreement. Furthermore, Licensee shall be entitled to two (2) reserved
parking spaces next to the building in which the Premises are located, subject
to Tenant's payment of the reserved parking rate for such spaces.
5. RIGHTS NON-TRANSFERRABLE. The foregoing parking rights are personal
to Licensee and Licensee shall not assign, convey, or otherwise transfer said
rights in any manner whatsoever without Licensor's prior written consent, except
that said rights may be transferred to an Affiliate where Licensee assigns the
Lease or subleases the Premises to such Affiliate. Any attempt by Licensee to do
so shall be null and void and, at Licensor's election, shall constitute a
material default hereunder. If the Premises or any portion thereof is assigned
or sublet pursuant to the terms of the Lease, the number of parking spaces
allowed to Licensee under paragraph 1 hereof shall automatically be adjusted
accordingly and Licensor and Licensee shall immediately execute an amendment to
this Agreement setting forth (i) the number of spaces retained by Licensee, (ii)
the number of spaces allotted to Licensee's assignee or subtenant (which number
shall not exceed the amount stated in paragraph 1 above), (iii) the then current
"market rate" to be charged Licensee for the spaces allotted to its assignee or
subtenant (except that this clause (iii) shall not apply to an Affiliate
assignee or subtenant), and (iv) the security deposit to be paid by Licensee for
its assignee's or subtenant's parking cards.
6. RISK OF LOSS. Use of said parking spaces and of the parking areas in
the Project shall be at the sole risk of Licensee.
PARKING LICENSE AGREEMENT - PAGE 1
<PAGE> 94
7. INTERRUPTION OF USE. Licensor shall not be liable to Licensee for
any interruption of Licensee's use of the rights granted hereunder due to
repairs, improvements or alterations of the parking areas of the Project, or due
to any labor controversy, or resulting from any cause beyond the reasonable
control of Licensor. However, Licensee shall be entitled to reasonably similar
alternative spaces to be made available to it by Licensor.
8. RULES AND REGULATIONS. Licensor's parking rules and regulations are
attached hereto. Licensor may adopt such other reasonable and non-discriminatory
rules and regulations relating to the use of the parking areas as in Licensor's
opinion are necessary or desirable for the proper, orderly and safe use of the
parking areas. If Licensee fails to comply with the rules and regulations and
modifications thereto after receiving notice thereof and reasonable opportunity
to cure (not to exceed three (3) business days), Licensor may at its option
forthwith terminate this license and all rights of Licensee hereunder, and may
also, whether or not such license is so terminated, take such action as shall be
required to remedy such failure, and Licensee agrees to pay Licensor on demand
the reasonable cost to Licensor of such actions including attorneys' fees.
Licensee shall at all times be required to park in a lawful manner, and no
vehicle shall at any time be parked in more than one marked space at a time.
Licensor shall be entitled to tow away any vehicle which is improperly parked,
at the vehicle owner's sole cost and expense. In the event of such tow away,
neither Licensor nor any Mortgagee of Licensor shall have any liability therefor
to Licensee or to such vehicle owner.
9. LICENSOR'S PROPERTY RIGHTS. Licensor shall have the right to
decrease the size of any or all of the parking areas in the Project, to alter or
rearrange parking spaces and improvements in the parking areas, to take all or
any portion of the parking areas for purposes of maintaining, repairing or
restoring same, or for purposes of construction and operating structures thereon
or adjacent thereto, to have ingress and egress in connection with the exercise
of any such rights, and to do and perform such other acts with respect to the
parking areas as Licensor shall in its discretion deem appropriate; provided,
however, that Landlord shall provide Tenant with substitute parking within a
reasonable walking distance of the Premises. Licensor may at any time and from
time to time in its discretion designate any portion of the parking areas in the
Project for use as assigned parking, visitor parking or employee parking. If
Licensor establishes an "employee parking" area or other assigned parking area
for Licensee's employees to park in, Licensee shall furnish Licensor, within
five (5) days after written request to do so, with a list of the vehicle license
numbers of Licensee's employees parking in the Project. Licensor may charge
Licensee Ten Dollars ($10.00) per day for each day or partial day for each
vehicle parked by Licensee or any of its employees in a parking space or area
other than the space or parking area assigned or designated for such vehicle.
Licensor may tow away any such improperly parked vehicles and may also attach
violation notices or stickers to improperly parked vehicles. In the event of
such tow away, neither Licensor nor any Mortgagee of Licensor shall have any
liability therefor to Licensee or to such vehicle owner.
10. SECURITY DEPOSIT. If parking is in a controlled lot, a monthly
parking card or decal may be issued to Licensee for each parking space to be
used by Licensee hereunder. Licensee will pay a security deposit of Five Dollars
($5.00) for each parking card at the time of issuance of the card. Licensor
shall have no obligation to accept any such security deposit from anyone other
than Licensee. The security deposit shall be held by Licensor to secure
Licensee's due performance of its obligations with regard to parking hereunder
and the return to Licensor of such parking card(s) in good condition, normal
wear and tear excepted, upon termination of Licensee's rights hereunder.
Licensee shall be obligated to take reasonable steps to protect such cards from
warping or mutilation. Without limitation as to the generality of the foregoing,
Licensor may apply such security deposit to remedy any default by Licensee
hereunder and further, if such card(s) are lost or mutilated, Licensor may apply
any or all of said deposit toward Licensor's cost of such card(s). If at any
time Licensor applies any or all of such security deposit as provided herein,
Licensee shall be obligated to deposit with Licensor the amount so applied by
Licensor within ten (10) days after written request therefor is given. Upon
termination of Licensee's rights hereunder and the return to Licensor of the
aforementioned card(s) (or cards issued in substitution thereof) the security
deposit or balance thereof shall be returned to Licensee provided Licensee is
not then in default hereunder. Licensor need not hold said security deposit in a
separate account.
11. REPLACEMENT CARDS. If for any reason (other than a malfunction for
which Licensee is not responsible hereunder) any card issued to Licensee is
requested by Licensee to be replaced, Licensee shall pay Licensor the then
current non-refundable, reasonable charge for said replacement card.
12. MISCELLANEOUS. No waiver by Licensor of any breach of this
agreement by Licensee shall constitute a waiver of any other breach. Any amount
due to Licensor that is not paid when due shall bear interest at the maximum
rate allowable under law. In the event of any legal action taken or proceeding
brought to enforce the provisions hereof, the prevailing party shall be entitled
to recover its reasonable attorneys' fees and costs incurred in connection
therewith.
PARKING LICENSE AGREEMENT - PAGE 2
<PAGE> 95
DATED this ____ day of March __, 1995.
LICENSOR: BARCLAY CURCI INVESTMENT COMPANY,
a California general partnership
By: SC Enterprises,
a California limited partnership,
a general partner
By: SHURL CURCI,
a general partner
By:
-----------------------------------------
Roberta P. Gilligan,
his attorney-in-fact
LICENSEE: CENTURY SOUTHWEST CABLE TELEVISION, INC.,
a Delaware corporation
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
By:
-----------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
PARKING LICENSE AGREEMENT - PAGE 3
<PAGE> 96
PARKING RULES AND REGULATIONS
1. All claimed damage or loss must be reported and itemized in writing
delivered to the parking facility office or property manager's office within ten
business days after any claimed damage or loss occurs. Any claim not so made is
waived. Licensor has the option to make repairs at its expense of any claimed
damage within ten business days after filing a claim. In all court actions the
burden of proof to establish a claim remains with Licensee. Court actions by
Licensee for any claim must be filed within ninety days from date of parking in
a court of jurisdiction where the claimed loss occurred. Licensor is not
responsible for damage by water, fire, or defective brakes, or parts. or for the
acts or omissions of others, or for loss of articles left in vehicles. The total
liability of Licensor is limited to $250.00 for all damages or loss to any
vehicle. Licensor is not responsible for loss of use.
2. Licensee shall not park or permit the parking of any vehicle under
its control in any parking area designated by Licensor as areas for parking by
visitors. Licensee shall not leave vehicles in the parking area overnight nor
park any vehicles in the parking areas other than automobiles, motorcycles,
motor-driven or non-motor-driven bicycles or four-wheeled trucks.
3. Parking stickers or any other device or form of identification
supplied by Licensor as a condition of use of the parking facilities shall
remain the property of Licensor. Such parking identification device must be
displayed as requested and may not be mutilated in any manner. The serial number
of the parking identification device may not be obliterated. Devices are not
transferable and any device in the possession of an unauthorized holder will be
void.
4. No extended term storage of vehicles shall be permitted.
5. Vehicles must be parked entirely within the painted stall lines of a
single parking stall.
6. All directional signs and arrows must be observed.
7. The speed limit within all parking areas shall be 5 miles per hour.
8. Parking is prohibited:
(a) in areas not striped for parking;
(b) in driveways;
(c) where "no parking" signs are posted;
(d) in cross-hatched areas; and
(e) in such other areas as may be designated by Licensor or its
parking operator.
9. Every parker is required to park and lock his own vehicle unless
Licensor furnishes valet service. Valet parking attendants may refuse to drive
any vehicle reasonably believed to be unsafe.
10. Loss or theft of parking identification devices from vehicles must
be reported to the parking operator immediately, and a lost or stolen report
must be filed at that time. Licensor has the right to exclude any vehicles from
the parking facilities that does not have an identification device.
11. Any parking identification devices reported lost or stolen found on
any unauthorized vehicle will be confiscated and the illegal holder will be
subject to prosecution.
12. Lost or stolen identification devices found by the Licensee should
be reported to the parking facility office or property manager immediately to
avoid confusion.
13. Washing, waxing, cleaning or servicing of any vehicle in any area
not specifically reserved for such purpose is prohibited.
14. Licensee shall acquaint all persons to whom Licensee assigns
parking space of these Rules and Regulations. Parking facility managers or
attendants are not authorized to make or allow any exceptions to these Rules and
Regulations.
PARKING LICENSE AGREEMENT - PAGE 4
<PAGE> 97
15. Licensor reserves the right to refuse the sale of monthly stickers
or other parking identification devices to any person and/or his agents or
representatives who willfully refuses to comply with these Rules and
Regulations.
PARKING LICENSE AGREEMENT - PAGE 5
<PAGE> 98
PARKING LICENSE AGREEMENT
SCHEDULE 1
<PAGE> 99
ADDENDUM TO LEASE
This Addendum to Lease ("Addendum") modifies and supplements the Office
Lease dated March ___, 1995 ("Lease") between Barclay Curci Investment Company,
a California general partnership ("Landlord'), and Century Southwest Cable
Television, Inc., a Delaware corporation ("Tenant"), demising premises commonly
known as 3000 Ocean Park Boulevard (R), Suites 2001 and 3010, Santa Monica,
California ("Premises"). Landlord and Tenant further covenant and agree as
follows:
1. In Section 6.2.3.39 of the Lease, the word "except" is inserted
after the parenthetic phrase in the first line.
2. In Section 12.6.2 of the Lease, the ")" in the fifth line is
relocated after the word "passes" rather than "abated".
3. In Section 22.3 of the Lease, the word "and" is deleted before
"(iii)", the period after "Project" is changed to a semicolon, and the following
is added thereafter:
"(iv) Tenant's default in its obligations under Article 45 of this
Lease; and (v) any damages resulting from Tenant's construction
activities pursuant to the Construction Provisions attached as
Exhibit C to this Lease."
4. Section 30.2 of the Lease is hereby deleted and the following is
added as new Section 30.2:
30.2 NON-DISTURBANCE AGREEMENT.
30.2.1 Landlord shall undertake commercially reasonable
efforts to obtain a non-disturbance, recognition and
attornment agreement from its existing Mortgagee in such
Mortgagee's commercially reasonable and customary form. If
despite such efforts Landlord is unable to obtain a
commercially reasonable and customary form of non-disturbance,
recognition and attornment agreement from the existing
Mortgagee, Landlord will seek to obtain, and Tenant will
accept, the existing Mortgagee's standard form of
non-disturbance, recognition and attornment agreement provided
the same is modified to permit Tenant to exercise its right of
offset under Section 2.2.3 of the Construction Provisions
attached as Exhibit C to the Lease after the existing
Mortgagee (or any purchaser at the existing Mortgagee's
foreclosure sale) acquires title to the Premises, to the
extent of the unpaid balance of the Tenant Improvement
Allowance.
30.2.2 If Landlord is unable to obtain a non-disturbance,
recognition and attornment agreement from its existing
Mortgagee in conformance with Section 30.2.1 above prior to
the Commencement Date, then Landlord and Tenant shall
establish a blocked, interest-bearing account with a banking
institution licensed to do business in California and selected
by Landlord. Tenant shall timely deposit all payments of Rent
into the blocked bank account until whichever of the following
events first occurs: (a) Landlord obtains and delivers to
Tenant a non-disturbance, recognition and attornment agreement
signed by the Mortgagee existing on the date of this Lease in
conformance with Section 30.2.1 above; (b) Landlord obtains
the existing Mortgagee's standard form of non-disturbance,
recognition and attornment agreement, without the modification
described in Section 30.2.1 above, and either prepays the
unpaid balance of the Tenant Improvement Allowance or deposits
the unpaid balance of the Tenant Improvement Allowance into a
separate blocked account with the same banking institution,
with instructions to release said funds to Tenant in case of
foreclosure by the existing Mortgagee; (c) Landlord causes
this Lease to achieve priority over the deed of trust,
mortgage or other interest held by the Mortgagee existing on
the date of this Lease; (d) the term of this Lease expires; or
(e) this Lease terminates prior to the scheduled expiration
other than as a result of foreclosure of the prior mortgage,
deed of trust or other interest held by the Mortgagee existing
on the date of this Lease.
30.2.3 Upon the occurrence of any event described in clauses
(a), (b), (c), (d) or (e) of Section 30.2.2 above, all Rent
theretofore paid into the blocked bank account, together with
interest earned thereon, shall be released to Landlord, and
Tenant shall thereafter pay all Rent directly to Landlord. If
this Lease terminates before the occurrence of any of the
events described in clauses (a), (b), (c), (d) or (e) of
<PAGE> 100
Section 30.2.2 above, and such termination results from the
foreclosure of a mortgage, deed of trust or other interest
held by the Mortgagee existing on the date of this Lease, all
Rent theretofore paid into the blocked bank account, together
with interest thereon, shall be released to Tenant. Rent may
not be withdrawn from the blocked account by Landlord or
Tenant except as provided in this Section 30.2.3.
30.2.4 In case of any failure or delay in Tenant's payment of
Rent into the blocked account, Landlord shall have all rights
and remedies available where Rent is payable directly to
Landlord.
30.2.5 Tenant shall cooperate with Landlord's efforts to
obtain a nondisturbance, subordination and attornment
agreement as herein contemplated. If required by the existing
Mortgagee, Tenant should first execute and acknowledge a
nondisturbance, recognition and adornment agreement so the
same may be delivered to the existing Mortgagee for execution.
30.2.6 As a condition to the subordination of this Lease to
any future mortgage, deed of trust or ground or underlying
lease, Landlord shall obtain from the mortgagee, beneficiary
or lessor a nondisturbance, recognition and attornment
agreement in such form as is then reasonably and customarily
used by institutional lenders.
5. In Section 31.1 of the Lease, the word "by" is deleted after the
word "required" in the fourth line.
6. In Section 44.2 of the Lease, the reference in the fifth line to
"Section 44.1.1" is changed to "Section 44.1.2".
7. In Section 44.2.2 of the Lease, the reference in the third line to
"Section 44.4" is changed to "Section 44.5".
8. Tenant acknowledges that Tenant's right to use the parking
facilities of the Project is governed exclusively by the Parking License
Agreement entered into by Landlord and Tenant concurrently with their execution
of the Lease. Accordingly, nothing in the Memorandum of Lease attached as
Exhibit I to the Lease shall be construed as creating in Tenant any right or
interest in the Project's parking facilities.
9. Landlord and Tenant have duly executed this Addendum concurrently
with their execution of the Lease, intending that this Addendum form an integral
part of the Lease. In case of any conflict between the provisions of the Lease
and this Addendum, this Addendum shall control.
LANDLORD: BARCLAY CURCI INVESTMENT COMPANY,
a California general partnership
By: SC Enterprises,
a California limited partnership,
a general partner
By: SHURL CURCI,
a general partner
By:
-----------------------------------------
Roberta P. Gilligan,
his attorney-in-fact
TENANT: CENTURY SOUTHWEST CABLE TELEVISION, INC.,
a Delaware corporation
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
-2-
<PAGE> 1
EXHIBIT 10.8
IMPERIAL BANK
Member FDIC
NOTE
$ 3,000,000.00 Beverly Hills, California, April 30, 1996 .
On April 30, 1997, and as hereinafter provided, for value received, the
undersigned promises to pay to IMPERIAL BANK ("Bank"), a California banking
corporation, or order, at its Entertainment Industries Group office, the
principal sum of $ 3,000,000.00 MAXIMUM or such sums up to the maximum if so
stated, as the Bank may now or hereafter advance to or for the benefit of the
undersigned in accordance with the terms hereof, together with interest from
date of disbursement or N/A, whichever is later, on the unpaid principal balance
/ / at the rate of % per year /X/ at the rate of 1.000% per year in excess of
the rate of interest which Bank has announced as its prime lending rate (the
"Prime Rate"), which shall vary concurrently with any change in such Prime Rate,
or $250.00, whichever is greater. Interest shall be computed at the above rate
on the basis of the actual number of days during which the principal balance is
outstanding, divided by 360, which shall, for interest computation purposes, be
considered one year.
Interest shall be payable /X/ monthly / / quarterly / / included with principal
/ / in addition to principal / / , beginning May 30, 1996, and if not so paid
shall become a part of the principal. All payments shall be applied first to
interest, and the remainder, if any, on principal. / / (if checked), Principal
shall be payable in installments of $_________, or more, each installment on the
___________________ day of each ___________________ , beginning
___________________ . Advances not to exceed any unpaid balance owing at any one
time equal to the maximum amount specified above, may be made at the option of
Bank.
Any partial prepayment shall be applied to the installments, if any, in
inverse order of maturity. Should default be made in the payment of principal or
interest when due, or in the performance or observance, when due, of any item,
covenant or condition of any deed of trust, security agreement or other
agreement (including amendments or extensions thereof) securing or pertaining to
this note, at the option of the holder hereof and without notice or demand, the
entire balance of principal and accrued interest then remaining unpaid shall (a)
become immediately due and payable, and (b) thereafter bear interest, until paid
in full, at the increased rate of 5% per year in excess of the rate provided for
above, as it may vary from time to time.
Defaults shall include, but not be limited to, the failure of the maker(s)
to pay principal or interest when due; the filing as to each person obligated
hereon, whether as maker, co-maker, endorser or guarantor (individually or
collectively referred to as the "Obligor") of a voluntary or involuntary
petition under the provisions of the Federal Bankruptcy Act; the issuance of any
attachment or execution against any asset of any Obligor; the death of any
Obligor; or any deterioration of the financial condition of any Obligor which
results in the holder hereof considering itself, in good faith, insecure.
/X/ If any installment payment or principal balance payment due hereunder is
delinquent ten or more days, Obligor agrees to pay a late charge in the amount
of 5% of the payment so due and unpaid, in addition to the payment; but nothing
in this paragraph is to be construed as any obligation on the part of the holder
of this note to accept payment of any installment past due or less than the
total unpaid principal balance after maturity.
If this note is not paid when due, each Obligor promises to pay all costs
and expenses of collection and reasonable attorney's fees incurred by the holder
hereof on account of such collection, plus interest at the rate applicable to
principal, whether or not suit is filed hereon. Each Obligor shall be jointly
and severally liable hereon and consents to renewals, replacements and
extensions of time for payment hereof, before, at, or after maturity; consents
to the acceptance, release or substitution of security for this note; and waives
demand and protest and the right to assert any statute of limitations. Any
married person who signs this note agrees that recourse may be had against
separate property for any obligations hereunder. The indebtedness evidenced
hereby shall be payable in lawful money of the United States. In any action
brought under or arising out of this note, each Obligor, including successor(s)
or assign(s) hereby consents to the application of California law, to the
jurisdiction of any competent court within the State of California, and to
service of process by any means authorized by California law
No single or partial exercise of any power hereunder, or under any deed of
trust, security agreement or other agreement in connection herewith shall
preclude other or further exercises thereof or the exercise of any other such
power. The holder hereof shall at all times have the right to proceed against
any portion of the security for this note in such order and in such manner as
such holder may consider appropriate, without waiving any rights with respect to
any of the security. Any delay or omission on the part of the holder hereof in
exercising any right hereunder, or under any deed of trust, security agreement
or other agreement, shall not operate as a waiver of such right, or of any other
right, under this note or any deed of trust, security agreement or other
agreement in connection herewith.
Cybermedia, Inc.
- --------------------------- ---------------------------------
/S/ Unni Warrier
- --------------------------- ---------------------------------
/S/ Jeffrey Beaumont
- --------------------------- ---------------------------------
<PAGE> 2
IMPERIAL BANK
Member FDIC
CORPORATE RESOLUTION REGARDING CREDIT
OFFICE: Entertainment Industrial Group ADDRESS: 9777 Wilshire Blvd.
Beverly Hills, California
90212
RESOLVED, that CYBERMEDIA, INC. borrow from IMPERIAL BANK,
hereinafter referred to as "Bank", from time to time, such sums of money as, in
the judgement of the officer or officers herein after authorized, this
corporation may require; provided that the aggregate amount of such borrowing,
pursuant to this resolution, shall not at any one time exceed the principal sum
of Three Million Two Hundred Fifty Thousand and No/100 DOLLARS ($3,250,000.00),
in addition to such amount as may be otherwise authorized;
RESOLVED FURTHER, that any 2 of the following named officers
---------------
(Specify Number)
Unnikrishnan Warrier the President
Srikanth Chari the Vice President
Anne Lam the Vice President/Secretary
Jeffrey Beaumont the CFO
of this corporation (the officer or officers acting in combination, authorized
to act pursuant hereto being hereinafter designated as "authorized officers"),
be and they are hereby authorized, directed and empowered, for and on behalf and
in the name of this corporation (1) to execute and deliver to the Bank such
notes or other evidences of indebtedness of this corporation for the monies so
borrowed, with interest thereon, as the Bank may require, and to execute and
deliver, from time to time, renewals or extensions of such notes or other
evidences of indebtedness; (2) to grant a security interest In, transfer, or
otherwise hypothecate or deed in trust for Bank's benefit and deliver by such
instruments in writing or otherwise as may be demanded by the Bank, any of the
property of this corporation as may be required by the Bank to secure the
payment of any notes of other indebtedness of this corporation or third parties
to the Bank, whether arising pursuant to this resolution or otherwise; and (3)
to perform all acts and execute and deliver all instruments which the Bank may
deem necessary to carry out the purposes of this resolution;
RESOLVED FURTHER, that said authorized officers be and they are hereby
authorized and empowered, and that any one of said authorized officers be and
he/she is hereby authorized and empowered (1) to discount with or sell to the
Bank conditional sales contracts, notes, acceptances, drafts, bailment
agreements, leases, receivables and evidences of indebtedness payable to this
corporation, upon such terms as may be agreed upon by them and the Bank, and to
endorse in the name of this corporation said notes, acceptances, drafts,
bailment agreements, leases, receivables and evidences of indebtedness so
discounted, and to guarantee the payment of the same to the Bank, and (2) to
apply for and obtain from the Bank letters of credit and in connection therewith
to execute such agreement, applications, guarantees, indemnities and other
financial undertakings as Bank may require;
RESOLVED FURTHER, that said authorized officers are also authorized to
direct the disposition of the proceeds of any such obligation, and to accept or
direct delivery from the Bank of any property of this corporation at any time
held by the Bank;
RESOLVED FURTHER, that the authority given hereunder shall be deemed
retroactive and any and all acts authorized hereunder performed prior to the
passage of this resolution are hereby ratified and affirmed;
RESOLVED FURTHER, that this resolution will continue in full force and
effect until the Bank shall receive official notice in writing from this
corporation of the revocation thereof by a resolution duly adopted by the Board
of Directors of this corporation, and that the certification of the Secretary of
this corporation as to the signatures of the above named persons shall be
binding on this corporation.
I, Anne T. Lam, Secretary of the above named corporation, duly organized
and existing under the laws of the State of California, do hereby certify that
the foregoing is a full, true and correct copy of a resolution of the Board of
Directors of said corporation, duly and regularly passed and adopted by the
Board of Directors of said corporation.
I further certify that said resolution is still in full force and effect
and has not been amended or revoked, and that the specimen signatures appearing
below are the signatures of the officers authorized to sign for this corporation
by virtue of said resolution.
EXECUTED ON
AUTHORIZED SIGNATURES:
Signature: /S/ Unni Warrier
---------------------------
Unni Warrier
Signature: /S/ Srikanth Chari /S/ Anne Lam
--------------------------- ---------------------------
Srikanth Chari (Secretary)
Signature: /S/ Anne Lam
---------------------------
Anne Lam
Signature: /S/ Jeffrey Beaumont
---------------------------
<PAGE> 3
IMPERIAL BANK
Member FDIC
ITEMIZATION OF AMOUNT FINANCED
DISBURSEMENT INSTRUCTIONS
Name(s): CYBERMEDIA, INC. Dated: April 30, 1996
paid to you directly by Cashiers Check No.
$ 3,000,000.00 credited to deposit account No. 60-072-760 when
advances
$ 0.00 paid on Loan(s) No. 7/60/15441/3 are requested
$ amounts paid to Bank for:
Amounts paid to others on you behalf:
$ to Title Insurance Company
$ to Public Officials
$ to
$ to
$ to
$ to
$ 3,000,000.00 SUBTOTAL (NOTE AMOUNT)
LESS $ 0.00 Prepaid Finance Charge (Loan fee(s))
$ 3,000,000.00 TOTAL (AMOUNT FINANCED)
Upon consummation of this transaction, this document will also serve as the
authorization for Imperial Bank to disburse the loan proceeds as stated above.
CYBERMEDIA, INC.
By: /S/ Unni Warrier
--------------------------------- ----------------------------
Signature Signature
By: /S/ Jeffrey Beaumont
--------------------------------- ----------------------------
Signature Signature
<PAGE> 4
IMPERIAL BANK
Member FDIC
AGREEMENT TO PROVIDE INSURANCE
(REAL OR PERSONAL PROPERTY)
TO: IMPERIAL BANK Date: April 30, 1996
9777 Wilshire Blvd. Borrower:
Beverly Hills, California 90212 CYBERMEDIA, INC.
In consideration of a loan in the amount of $ 3,000,000.00, secured by all
tangible personal property including inventory and equipment.
I/We agree to obtain adequate insurance coverage to remain in force during the
term of the loan.
I/We also agree to advise the below named agent to add Imperial Bank as loss
payee on the new or existing insurance policy, and to furnish Bank at above
address with a copy of said policy/endorsements and any subsequent renewal
policies.
I/We understand that the policy must contain:
1. Fire and extended coverage in an amount sufficient to cover:
a) The amount of the loan, OR
b) All existing encumbrances, whichever is greater,
But not in excess of the replacement value of the improvements
on the real property.
2. Lender's "Loss Payable" Endorsement Form 438 BFU in favor
Imperial Bank, or any other form acceptable to Bank.
INSURANCE INFORMATION
Insurance Co./Agent: Telephone No.:
On File On file
Agent's Address:
CYBERMEDIA, INC.
Signature of Obligor: By /S/ Unni Warrier
------------------------
Signature of Obligor: By /S/ Jeffrey Beaumont
------------------------
<PAGE> 5
This STATEMENT is presented for filing pursuant to the California Uniform
Commercial Code
<TABLE>
<CAPTION>
<S> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
1.File No. of Orig. 1A Date of Filing of 1B. Date of Orig. Financing 1C. Place of Filing Orig.
Financing Statement Orig. Financing Statement Statement Financing Statement
95-434729 1/22/96 11/2/95 Sacramento
- ----------------------------------------------------------------------------------------------------------------------------------
2. DEBTOR (Last Name First) 2A. Social Security No.
or Federal Tax No.
CYBERMEDIA, INC. 95-434729
- ----------------------------------------------------------------------------------------------------------------------------------
2B. Mailing Address 2C. City, State 2D. Zip Code
2029 Century Park East, Ste 310 Century City, CA 90067
- ----------------------------------------------------------------------------------------------------------------------------------
3. Additional Debtor (if any) (Last Name First) 3A. Social Security No. or Federal Tax No.
- ----------------------------------------------------------------------------------------------------------------------------------
3B. Mailing Address 3C. City, State 3D. Zip Code
- ----------------------------------------------------------------------------------------------------------------------------------
4. Secured Party 4A. Social Security No., Federal Tax
No. or Bank Transit and A.B. A. No.
Name Imperial Bank
Mailing Addres 9777 Wilshire Blvd. 16-144/1222
City Beverly Hills State CA Zip Code 90212
- ----------------------------------------------------------------------------------------------------------------------------------
5. Assignee of Secured Party (if any) 5A. Social Security No., Federal Tax
No. or Bank Transit and A.B. A. No.
Name
Mailing Address
City State Zip Code
- ----------------------------------------------------------------------------------------------------------------------------------
6. CONTINUATION - - The original Financing Statement between the foregoing Debtor and Secured Party bearing the file number and
date
A. / / shown above is continued. If collateral is crops or timber, check here / / and insert description of real
property on which growing or to be grown in item 7 below.
B. / / RELEASE -- From the collateral described in the Financing Statement bearing the file number shown above, the
Secured Party releases the collateral described in Item 7 below.
C. / / ASSIGNMENT -- The Secured Party certifies that the Secured Party has assigned to the Assignee above named, all
the Secured Party's rights under the Financing Statement bearing the file number show above in the collateral
described in item 7 below.
D / / TERMINATION -- The Secured Party certifies that the Secured Party no longer claim a security interest under
the Financing Statement bearing the file number shown above.
E /X/ AMENDMENT -- The Financing Statement bearing the file number shown above is amended as set forth in item 7
below. (Signature of Debtor required on all amendments.)
F / / OTHER
- ----------------------------------------------------------------------------------------------------------------------------------
7.
Change Debtor's address to:
3000 Ocean Park Blvd., Suite 2001
Santa Monica, CA 90404
- ----------------------------------------------------------------------------------------------------------------------------------
8. (Date) 4/30 1996 C 9. This Space for Use of Filing Officer
O (Date, Time, Filing Office)
CYBERMEDIA, INC. D
By: /S/ Unni Warrier E
------------------------------------------------- 1
Signature (s) of Debtor(s) (Title)
Imperial Bank
By:
-------------------------------------------------
Signature (s) of Debtor(s) (Title)
- ----------------------------------------------------------------------------------------------------------------------------------
10. RETURN COPY TO 2
NAME Imperial Bank/Lending Services/14/CT 3
ADDRESS 9920 La Cienega Blvd. 4
CITY AND Inglewood, CA 90301 5
STATE Re: 6
7
8
9
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
UNIFORM COMMERCIAL CODE FORM UCC-2
<PAGE> 6
EXHIBIT I
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
Corporation: CyberMedia Inc., a California corporation
Number of Shares: Number of shares equal to $300,000 of shares purchased at the
Initial Exercise Price
Class of Stock: Common
Initial Exercise Price: The lesser of $3 per share and 75% of the next offering
price of one share by the Corporation.
Issue Date: May 1, 1996
Expiration Date: April 30, 2002 (subject to Article 4.1)
THIS WARRANT CERTIFIES THAT, in consideration of the payment of $1.00
and for other good and valuable consideration, IMPERIAL BANK ("Holder") is
entitled to purchase the number of fully paid and nonassessable shares of the
class of securities (the "Shares") of the Corporation (the "Company") at the
initial exercise price per Share (the 'Warrant Price") all as set forth above
and as adjusted pursuant to Article 2 of this Warrant, subject to the provisions
and upon the terms and conditions set forth of this Warrant.
ARTICLE 1. EXERCISE
1.1 Method of Exercise. Holder may exercise this Warrant by delivering
this Warrant and a duly executed Notice of Exercise in substantially the form
attached as Appendix 1 to the principal office of the Company. Unless Holder is
exercising the conversion right set forth in Section 1.2, Holder shall also
deliver to the Company a check for the aggregate Warrant Price for the Shares
being purchased.
1.2 Conversion Right. In lieu of exercising this Warrant as specified
in Section 1.1, Holder may from time to time convert this Warrant, in whole or
in part, into a number of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon exercise
of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share. The fair market value of the Shares shall be
determined pursuant to Section 1.5.
<PAGE> 7
1.3 Alternative Stock Appreciation Right. At Holder's option, the
Company shall pay Holder the fair market value of the Shares issuable upon
conversion of this Warrant pursuant to Section 1.2 in cash in lieu of such
Shares.
1.4 Right to Put Warrant. At Holder's option, in lieu of exercising its
rights as set forth in Sections 1.1, 1.2, or 1.3, Holder shall have the right to
require the Company to purchase the Warrant under the circumstances set forth on
Exhibit A, if attached.
1.5 Fair Market Value. If the Shares are traded regularly in a public
market, the fair market value of the Shares shall be the closing price of the
Shares (or the closing price of the Company's stock into which the Shares are
convertible) reported for the business day immediately before Holder delivers
its Notice of Exercise to the Company. If the Shares are not regularly traded in
a public market, the Board of Directors of the Company shall determine fair
market value in its reasonable good faith judgment. The foregoing
notwithstanding, if Holder advises the Board of Directors in writing that Holder
disagrees with such determination, then the Company and Holder shall promptly
agree upon a reputable investment banking firm to undertake such valuation. If
the valuation of such investment banking firm is greater than that determined by
the Board of Directors, then all fees and expenses of such investment banking
firm shall be paid by the Company. In all other circumstances, such fees and
expenses shall be paid by Holder.
1.6 Delivery of Certificate and New Warrant. Promptly after Holder
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.7 Replacement of Warrants. 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 amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.
1.8 Repurchase on Sale, Merger, or Consolidation of the Company.
1.8.1 "Acquisition". For the purpose of this Warrant,
"Acquisition" means any sale, license, or other disposition of all or
substantially all of the assets (including intellectual property) of the
Company, or any reorganization, consolidation, or merger of the Company where
the holders of the Company's securities before the transaction beneficially own
less than 50% of the outstanding voting securities of the surviving entity after
the transaction.
1.8.2 Assumption of Warrant. If upon the closing of any
Acquisition the successor entity assumes the obligations of this Warrant, then
this Warrant shall be exercisable for the same securities, cash, and property as
would be payable for the Shares issuable upon exercise of the unexercised
portion of this Warrant as if such Shares were outstanding on the record date
for the
-2-
<PAGE> 8
Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly. The Company shall use reasonable efforts to cause the surviving
corporation to assume the obligations of this Warrant.
1.8.3 Nonassumption. If upon the closing of any Acquisition
the successor entity does not assume the obligations of this Warrant and Holder
has not otherwise exercised this Warrant in full, then the unexercised portion
of this Warrant shall be deemed to have been automatically converted pursuant to
Section 1.2 and thereafter Holder shall participate in the acquisition on the
same terms as other holders of the same class of securities of the Company.
1.8.4 Purchase Right. Notwithstanding the foregoing, at the
election of Holder, the Company shall purchase the unexercised portion of this
Warrant for cash upon the closing of any Acquisition for an amount equal to (a)
the fair market value of any consideration that would have been received by
Holder in consideration of the Shares had Holder exercised the unexercised
portion of this Warrant immediately before the record date for determining the
shareholders entitled to participate in the proceeds of the Acquisition, less
(b) the aggregate Warrant Price of the Shares, but in no event less than zero.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a
dividend on its common stock (or the Shares if the Shares are securities other
than common stock) payable in common stock, or other securities, subdivides the
outstanding common stock into a greater amount of common stock, or, if the
Shares are securities other than common stock, subdivides the Shares in a
transaction that increases the amount of common stock into which the Shares are
convertible, then upon exercise of this Warrant, for each Share acquired, Holder
shall receive, without cost to Holder, the total number and kind of securities
to which Holder would have been entitled had Holder owned the Shares of record
as of the date the dividend or subdivision occurred.
2.2 Reclassification, Exchange or Substitution. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution, or
other event. Such an event shall include any automatic conversion of the
outstanding or issuable securities of the Company of the same class or series as
the Shares to common stock pursuant to the terms of the Company's Articles of
Incorporation upon the closing of a registered public offering of the Company's
common stock. The Company or its successor shall promptly issue to Holder a new
Warrant for such new securities or other property. The new Warrant shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 2 including, without limitation,
adjustments to the Warrant Price and to the number of securities or property
issuable upon exercise of the new Warrant. The provisions of this Section 2.2
shall similarly apply to successive reclassifications, exchanges, substitutions,
or other events.
-3-
<PAGE> 9
2.3 Adjustments for Combinations, Etc. If the outstanding Shares are
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased.
2.4 Adjustments for Diluting Issuances. The Warrant Price and the
number of Shares issuable upon exercise of this Warrant or, if the Shares are
Preferred Stock, the number of shares of common stock issuable upon conversion
of the Shares, shall be subject to adjustment, from time to time, in the manner
set forth on Exhibit B, if attached, in the event of Diluting Issuances (as
defined on Exhibit B).
2.5 No Impairment. The Company shall not, by amendment of its Articles
of Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out all the provisions of this Article 2 and in
taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment. If the Company takes any action
affecting the Shares or its common stock other than as described above that
adversely affects Holder's rights under this Warrant, the Warrant Price shall be
adjusted downward and the number of Shares issuable upon exercise of this
Warrant shall be adjusted upward in such a manner that the aggregate Warrant
Price of this Warrant is unchanged.
2.6 Certificate as to Adjustments. Upon each adjustment of the Warrant
Price, the Company at its expense shall promptly compute such adjustment, and
furnish Holder with a certificate of its Chief Financial Officer setting forth
such adjustment and the facts upon which such adjustment is based. The Company
shall, upon written request, furnish Holder a certificate setting forth the
Warrant Price in effect upon the date thereof and the series of adjustments
leading to such Warrant Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Representations and Warranties. The Company hereby represents and
warrants to the Holder that all Shares which may be issued upon the exercise of
the purchase right represented by this Warrant shall, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable, and free of any liens
and encumbrances except for restrictions on transfer provided for herein or
under applicable federal and state securities laws.
3.2 Notice of Certain Events. If the Company proposes at any time (a)
to declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock; (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (e) offer holders of registration rights the opportunity
to participate in an underwritten public offering of the Company's securities
for cash, then, in connection with each such event, the Company shall give
Holder (1) at least 20 days prior written notice of the date on which a record
will be
-4-
<PAGE> 10
taken for such dividend, distribution, or subscription rights (and specifying
the date on which the holders of common stock will be entitled thereto) or for
determining rights to vote, if any, in respect of the matters referred to in (c)
and (d) above; (2) in the case of the matters referred to in (c) and (d) above
at least 20 days prior written notice of the date when the same will take place
(and specifying the date on which the holders of common stock will be entitled
to exchange their common stock for securities or other property deliverable upon
the occurrence of such event); and (3) in the case of the matter referred to in
(e) above, the same notice as is given to the holders of such registration
rights.
3.3 Information Rights. So long as the Holder holds this Warrant and/or
any of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all communiques to the shareholders of the Company, (b)
within ninety (90) days after the end of each fiscal year of the Company, the
annual audited financial statements of the Company certified by independent
public accountants of recognized standing, and (c) within forty-five (45) days
after the end of each of the first three quarters of each fiscal year, the
Company's quarterly unaudited financial statements.
3.4 Registration Under Securities Act of 1933, as amended. The Company
agrees that the Shares shall be subject to the registration rights set forth on
Exhibit C.
ARTICLE 4. MISCELLANEOUS.
4.1 Term; Notice of Expiration. This Warrant is exercisable, in whole
or in part, at any time and from time to time on or before the Expiration Date
set forth above. The Company shall give Holder written notice of Holders right
to exercise this Warrant in the form attached as Appendix 2 not more than 90
days and not less than 30 days before the Expiration Date. If the notice is not
so given, the Expiration Date shall automatically be extended until 30 days
after the date the Company delivers the notice to Holder.
4.2 Legends. This Warrant and the Shares (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO
RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 Compliance with Securities Laws on Transfer. This Warrant and the
Shares issuable upon exercise of this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company). The Company
shall not require Holder to provide an opinion of counsel if the transfer is to
an affiliate of Holder or if there is no material question as to the
availability of current information as referenced in Rule
-5-
<PAGE> 11
144(c), Holder represents that it has complied with Rule 144(d) and (e) in
reasonable detail, the selling broker represents that it has complied with Rule
144(f), and the Company is provided with a copy of Holder's notice of proposed
sale.
4.4 Transfer Procedure. Subject to the provisions of Section 4.2,
Holder may transfer all or part of this Warrant or the Shares issuable upon
exercise of this Warrant (or the securities issuable, directly or indirectly,
upon conversion of the Shares, if any) by giving the Company notice of the
portion of the Warrant being transferred setting forth the name, address and
taxpayer identification number of the transferee and surrendering this Warrant
to the Company for reissuance to the transferee(s) (and Holder, if applicable).
Unless the Company is filing financial information with the SEC pursuant to the
Securities Exchange Act of 1934, the Company shall have the right to refuse to
transfer any portion of this Warrant to any person who directly competes with
the Company.
4.5 Notices. All notices and other communications from the Company to
the Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such Holder from time
to time.
4.6 Waiver. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
4.7 Attorneys' Fees. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
4.8 Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
CYBERMEDIA INC.
Name: /S/ Unni Warrier
-----------------------------
Title: President
-----------------------------
Name: /S/ Jeffrey Beaumont
-----------------------------
Title: Chief Financial Officer,
Corporate Secretary,
Assistant Treasurer or
Assistant Secretary
-6-
<PAGE> 12
APPENDIX 1
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase shares of the
Common/Series __ Preferred Stock (strike one that does not apply) of
_____________ pursuant to the terms of the attached Warrant, and tenders
herewith payment of the purchase price of such shares in full.
1. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This conversion
is exercised with respect to of the Shares covered by the Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name as is specified below:
Imperial Bank
Entertainment Industries Group
9777 Wilshire Boulevard
Fourth Floor
Beverly Hills, CA 90212
Attention: Jared Underwood
3. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.
-------------------------------
(Signature)
-------------------------------
(Date)
<PAGE> 13
APPENDIX 2
NOTICE THAT WARRANT IS ABOUT TO EXPIRE
,
-------------- ----
(Name of Holder)
(Address of Holder)
Attn: Chief Financial Officer
Dear :
This is to advise you that the Warrant issued to you described below
will expire on , 19 .
------------------ --
Issuer:
Issue Date:
Class of Security Issuable:
Exercise Price Per Share:
Number of Shares Issuable:
Procedure for Exercise:
Please contact [name of contact person at (phone number)] with any
questions you may have concerning exercise of the Warrant. This is your only
notice of pending expiration.
----------------------------------
(Name of Issuer)
By:
----------------------------
Title:
----------------------------
<PAGE> 14
EXHIBIT A
Put Right
Subject to the succeeding sentence, upon written notice to the Company,
Holder shall have the right (the "Put Right") to require that the Company
purchase the Warrant from Holder in consideration of the Company's payment to
Holder (due seven days after receipt of Holders written notice) of $
. The foregoing notwithstanding, Holder may only exercise the Put
Right during the first to occur of the following periods:
1. The six-month period ending on the Expiration Date; or
2. The 20-day period ending on the closing of the merger, consolidation
or sale of assets of the Company; or
3. The 20-day period ending on the liquidation, dissolution or winding
up of the Company.
<PAGE> 15
EXHIBIT B
Anti-Dilution Provisions
In the event of the issuance (a "Diluting Issuance") by the Company,
after the Issue Date of the Warrant, of securities at a price per share less
than the Warrant Price, then the number of Shares issuable upon exercise of the
Warrant, shall be adjusted as a result of Diluting Issuances in accordance with
the Holder's standard form of Anti-Dilution Agreement in effect on the Issue
Date.
Under no circumstances shall the aggregate Warrant Price payable by the
Holder upon exercise of the Warrant increase as a result of any adjustment
arising from a Diluting Issuance.
<PAGE> 16
EXHIBIT C
Registration Rights
The Shares shall be deemed "registrable securities" or otherwise
entitled to "piggy back" registration rights in accordance with the terms of the
following agreement (the "Agreement") between the Company and its investor(s):
[Identify Agreement by date, title and parties. If no Agreement
exists, indicate by "none."]
The Company agrees that no amendments will be made to the Agreement
which would have an adverse impact on Holder's registration thereunder without
the consent of Holder. By acceptance of the Warrant to which this Exhibit C is
attached, Holder shall be deemed to be a party to the Agreement.
If no Agreement exists, then the Company and the Holder shall enter
into Holder's standard form or Registration Rights Agreement as in effect on the
Issue Date of the Warrant.
<PAGE> 17
EXHIBIT "A"
ADDENDUM TO SECURITY AND LOAN AGREEMENT ("SECURITY AND LOAN AGREEMENT") BETWEEN
CYBERMEDIA, INC., AND IMPERIAL BANK.
DATED: MAY 31, 1996
This Addendum is made and entered into on May 31, 1996, between
CyberMedia, Inc. ("Borrower') and Imperial Bank ("Bank"). This Addendum amends
and supplements the Security and Loan Agreement. In the event of any
inconsistency between the terms herein and the terms of the Security and Loan
Agreement, the terms herein shall. in all cases govern and control. All
capitalized terms herein, unless otherwise defined herein, shall have the
meaning set forth in the Security and Loan Agreement.
1. Any commitment of Bank, pursuant to the terms of the Security and Loan
Agreement, to make advances against Eligible Accounts (collectively the "Loan")
shall expire on April 30, 1997, subject to Bank's right to renew said commitment
at its sole discretion. Any renewal of the commitment shall not be binding upon
the Bank unless it is in writing and signed by an officer of the Bank.
2. Borrower represents and warrants that:
a. EXISTENCE AND RIGHTS. Borrower is a corporation duly organized and
existing and in good standing under the laws of the State of California, without
limit as to the duration of its existence and is authorized and in good standing
to do business in the State of California; Borrower has powers and adequate
authority, rights and franchises to own its property and to carry on its
business as now and proposed to be conducted, and is duly qualified and in good
standing in each state in which the character of the properties owned by it
therein or the conduct of its business makes such qualification necessary; and
Borrower has the power and adequate authority to make and carry out this
Agreement.
b. AUTHORIZATION AND CONFLICT. The execution, delivery and performance
of this agreement are duly authorized and do not require the consent or approval
of any governmental body or other regulatory authority; are not in contravention
of or in conflict with any law or regulation or any term or provision of
Borrower's corporate documents or any agreement, indenture or undertaking to
which Borrower is a party or by which it or any of its property is bound or
affected and this agreement is the valid, binding and legally enforceable
obligation of Borrower in accordance with its terms.
c. LITIGATION. There is no litigation or other proceeding pending or
threatened against or affecting Borrower, and Borrower is not in default with
respect to any order, writ, injunction, decree or demand of any court or other
governmental or regulatory authority.
d. TRADEMARKS, PATENTS. Borrower, as of the date hereof, possesses all
necessary trademarks, trade names, copyrights, patents, patent rights, and
licenses to conduct its business as now operated, without any known conflict
with valid trademarks, trade names, copyrights, patents and license rights of
others.
<PAGE> 18
e. FINANCIAL CONDITION. The balance sheet of Borrower as of December
31, 1995, and the related profit and loss statement on that date, a copy of
which has heretofore been delivered to Bank by Borrower, and all other
statements and data submitted in writing by Borrower to Bank in connection with
this request for credit are true and correct, and said balance sheet and profit
and loss statement truly present the financial condition of Borrower as of the
date thereof and the results of the operations of Borrower for the period
covered thereby, and have been prepared in accordance with generally accepted
accounting principles on a basis consistently maintained. Since such date, there
have been no materially adverse changes. Borrower has no knowledge of any
liabilities, contingent or otherwise, at such date not reflected in said balance
sheet, and Borrower has not entered into any special commitments or substantial
contracts which are not reflected in said balance sheet, other than in the
ordinary and normal course of its business, which may have a materially adverse
effect upon its financial condition, operations or business as now conducted.
f. TAX STATUS. Borrower has no liability for any delinquent state,
local or federal taxes, and, if Borrower has contracted with any government
agency, Borrower has no liability for renegotiation of profits.
g. TITLE TO ASSETS. Borrower has good title to its assets, and they are
not subject to any liens or encumbrances other than those permitted in Section
2C hereof.
h. REGULATION U. The proceeds of the Loan Account shall not be used to
purchase or carry margin stock (as defined in Regulation U of the Board of
Governors of the Federal Reserve System).
3. Borrower agrees that so long as it is indebted to Bank, it will not, without
Bank's written consent:
a. TYPE OF BUSINESS; MANAGEMENT. Make any substantial change in the
character of its business; or make any material change in its executive
management.
b. OUTSIDE INDEBTEDNESS. Create, incur, assume or permit to exist any
indebtedness for borrowed monies other than loans from Bank except obligations
now existing as shown in financial statement dated December 31, 1995, excluding
those being refinanced by Bank; or sell or transfer, either with or without
recourse, any accounts or notes receivable or any monies due to become due.
c. LIENS AND ENCUMBRANCES. Create, incur, assume any mortgage, pledge,
encumbrance, lien or charge of any kind (including the charge upon property at
any time purchased or acquired under conditional sale or other title retention
agreement) upon any asset now owned or hereafter acquired by it, other than
liens for taxes not delinquent and liens in Bank's favor.
d. LOANS, INVESTMENTS, SECONDARY LIABILITIES. Make any loans or
advances to any person or other entity other than in the normal and ordinary
course of its business as now conducted or make any investment in the securities
of any person or other entity other than the United States Government; or
guarantee or otherwise become liable upon the obligation of any person or other
entity, except by endorsement of negotiable instruments for deposit or
collection in the ordinary and normal course of its business.
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e. ACQUISITION OR SALE OF BUSINESS; MERGER OR CONSOLIDATION. Purchase
or otherwise acquire the assets or business of any person or other entity; or
liquidate, dissolve, merge or consolidate, or commence any proceedings
therefore; or sell any assets except in the ordinary and normal course of its
business or fixed assets, or any property or other assets necessary for the
continuance of its business as now conducted, including without limitation the
selling of any property or other asset accompanied by leasing back of same.
f. DIVIDENDS, STOCK PAYMENTS. Declare or pay any dividend (other than
dividends payable in common stock of Borrower) or make any other distribution of
any of its capital stock now outstanding or hereafter issued or purchase, redeem
or retire any of such stock.
4. Should there be a default under the Security and Loan Agreement, the General
Security Agreement or under any obligation to Bank, all obligations, loans and
liabilities of Borrower to Bank, due or to become due, whether now existing or
hereafter arising, shall at the option of the Bank, become immediately due and
payable without notice or demand, and Bank shall thereupon have the right to
exercise all of its default rights and remedies.
5. Bank will advance up to 65% of Eligible Accounts Receivables, after a 15%
reserve for returned sales, of up to a maximum of $3,000,000. Eligible Accounts
shall only include such accounts as Bank in its sole discretion shall determine
are eligible from time to time. "Eligible Accounts" shall also NOT include any
of the following:
a. Accounts balances over ninety (90) days from invoice date.
b. Credit balances greater than ninety (90) days from invoice date.
c. Accounts with respect to which 20% or more of the account debtor's
total accounts or obligations outstanding to Borrower are more than 90 days from
invoice date are not eligible.
d. Excluding Ingram Micro and Navarre Corporation, whose concentrations
will be allowed up to twenty-five percent (25%) for accounts representing more
than 20% of total accounts receivable, the balance in excess of the 20% is not
eligible. However, the Bank may deem, at its sole discretion, the entire amount,
or any portion thereof, eligible.
e. Accounts with respect to international transactions unless insured
by an insurance company acceptable to the Bank or covered by letters of credit
issued or confirmed by a bank acceptable to the Bank.
f. Accounts with respect to which the account debtor is an officer,
director, shareholder, employee, subsidiary or affiliate of Borrower.
g. All accounts for sales to and purchases from a company of common
name/ownership, thereby a potential offset exists.
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<PAGE> 20
h. Consignment or guaranteed sales.
i. Accounts with creditors (contra accounts) to the extent of
offsetting accounts payable.
j. All accounts created by "Rush Order" (mail order house, COD) sales.
k. Bill and hold accounts.
l. Federal Government accounts, unless assigned to the Bank with
acknowledgment under the Assignment of Claims Act.
m. Any account if the account debtor or any person liable in connection
therewith is insolvent, subject to bankruptcy or receivership proceedings or has
made an assignment for the benefit of creditors or whose credit standing is
unacceptable to Bank and Bank has so notified Borrower.
n. Accounts in which Bank does not have a perfected first-priority
security interest.
o. Any account which is not from an acceptable debtor. Bank, however,
will permit accounts receivable from non-approved account debtors to be included
within the definition of eligible accounts receivable, provided that such
receivables are secured by a letter of credit in a form and substance acceptable
to Bank.
Borrower shall establish a lock-box and collection account to which all
collections due to Borrower will be mailed directly with daily reporting of
accounts receivable activity (i.e. sales, collections) required. Upon the
Borrower's successful completion of an initial public offering, Borrower will
thereafter be required to submit a monthly Borrowing Base calculation and daily
reporting of the Loan will cease, provided Borrower is in full compliance with
all terms and conditions contained herein. Thereafter, a Borrowing Base
calculation in a form acceptable to the Bank will be due by the 15th day of each
month with information as of the last day of the previous month.
6. COLLATERAL. Bank shall have a first priority perfected security interest in
all assets (including copyrights and other intellectual properties) of Borrower
as specified in a General Security Agreement perfected by a filed UCC-1
Financing Statement in the appropriates states' UCC Records office and the U.S.
Patent, Trademark and/or Copyright offices. All costs associated with perfecting
and filing said security interests are to be paid by Borrower.
7. All financial covenants and financial information referenced herein shall be
interpreted and prepared in accordance with generally accepted accounting
principles applied on basis consistent with previous years. Compliance with
financial covenants shall be calculated and monitored on a quarterly basis.
8. Borrower affirmatively covenants that so long as any loans, obligations or
liabilities remain outstanding or unpaid to Bank, it will:
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a. Maintain a minimum TANGIBLE NET WORTH of $1,500,000 at all times
through 6/29/96, thereafter of not less than $2,000,000 at all times through
9/29/96, thereafter of not less than $2,500,000 plus eighty percent (80%) of the
net proceeds from the issuance of common stock, preferred stock, or subordinated
debentures through 12/30/96, and at all times thereafter of not less than
$3,000,000 plus eighty percent (80%) of the net proceeds from the issuance of
common stock, preferred stock, or subordinated debentures.
Tangible Net Worth is defined as stockholders' equity, plus
subordinated debt, less any intangible assets including but not limited to for
goodwill, trademarks, patents, copyrights, and organization expense.
b. A minimum of $500,000 in SUBORDINATED DEBT from Industrial Credit
and Investment Corporation of India Limited ("ICICI") at all times through
1/14/96, with $50,000 principal reductions to ICICI allowed on a quarterly basis
commencing 1/15/96. Any interest due under the note to ICICI may be paid as
required by the note so long as no default exists under any obligation to Bank.
c. Maintain WORKING CAPITAL (defined as current assets minus current
liabilities) of not less than $1,000,000 at all times through 6/29/96,
thereafter of not less than $1,500,000 at all times through 9/29/96, thereafter
of not less than $2,000,000 at all times through 12/30/96, and at all times
thereafter of not less than $3,000,000.
d. Maintain a CURRENT RATIO (defined as ratio of Current Assets to
Current Liabilities) of not less than 1.1 to 1.0 at all times through 6/29/96,
thereafter of not less than 1.3 to 1.0 as of 9/29/96, thereafter of not less
than 1.5 to 1.0 at all times through 12/30/96, and at all times thereafter of
not less than 1.8 to 1.0.
e. Maintain all significant bank accounts and banking relationship with
Bank.
f. Within 15 days from each month-end, deliver to Bank an accounts
receivable detailed aging reconciled to the general ledger of Borrower, a
detailed accounts payable aging reconciled to the Borrower's general ledger and
setting forth the amount of any book overdraft or the amount of checks issued
but not sent. All the foregoing will be in form satisfactory to the Bank. Also
provide the Bank on a quarterly basis or more frequently if demanded by Bank, a
complete address listing of all active customers.
g. Within 45 days after the end of each quarter, deliver to Bank a
profit and loss statement, a balance sheet, reconciliation of Borrower's capital
accounts, and cash flow of Borrower as of the close of such period, prepared in
accordance with generally accepted accounting principles on a basis consistently
maintained by Borrower subject to year-end audit adjustments, and certified by
the Chief Financial Officer, stating that Borrower has performed and observed
each and every covenant contained in this Agreement and that no event has
occurred and no condition exists which constitutes an event of default.
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<PAGE> 22
h. Within 120 days after end of Borrower's fiscal year, deliver to Bank
audited financial statements, as of the close of and for such fiscal year, in
reasonable detail and stating in comparative form the figures as of the close of
and for the previous fiscal year, with the opinion of an independent public
accounting firm selected by Borrower but acceptable to Bank, together with
federal income tax returns and financial projections for the upcoming fiscal
year.
i. RIGHTS AND FACILITIES. Maintain and preserve all rights, franchises
and other authority adequate for the conduct of its business; maintain its
properties, equipment and facilities in good order and repair; conduct its
business or partnership; maintain and preserve its existence.
j. INSURANCE. Maintain public liability, property damage and workers'
compensation insurance and insurance on all its insurable property against fire
and other hazards with responsible insurance carriers to the extent usually
maintained by similar businesses. Borrower shall provide evidence of property
insurance in amounts and types acceptable to the Bank. Bank to be named as
lender loss payee under an endorsement acceptable to Bank.
k. TAXES AND OTHER LIABILITIES. Pay and discharge, before the same
become delinquent and before penalties accrue thereon, all taxes, assessments
and governmental changes upon or against it or any of its properties, and any of
its liabilities at any time existing, except to the extent and so long as:
(i) The same are being contested in good faith and by
appropriate proceedings in such manner as not to
cause any materially adverse effect upon its
financial condition or the loss of any right of
redemption from any sale thereunder; and
(ii) It shall have set aside on its books reserves
segregated to the extent required by generally
accepted accounting practice) deemed adequate with
respect thereto.
l. RECORDS AND REPORTS. Maintain a standard and modern system of
accounting in accordance with generally accepted accounting principles on a
basis consistently maintained; permit Bank's representatives to have access to,
and to examine its properties, books and records at reasonable times, at least
three times a year.
m. NOTICE OF DEFAULT. Promptly notify Bank in writing of the occurrence
of any event of default hereunder or event which would be such an event of
default upon notice and lapse of time.
9. INTEREST RATE. The rate of interest applicable to the Loan Account shall be
1.00% per year in excess of the rate of interest which Bank has announced as its
prime lending rate ("Prime Rate") which shall vary concurrently with any change
in such Prime Rate. Interest shall be computed at the above rate on the basis of
the actual number of days during which the principal balance of the loan account
is outstanding divided by 360, which shall, for interest computation purposes,
be considered one year. Bank at its option may demand payment of any or all of
the amount due under the Loan Account including accrued but unpaid interest, at
any time. Such notice may be given verbally or in writing and should be
effective upon receipt by Borrower. The default rate of interest shall be five
percent per year in excess of the rate otherwise applicable.
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<PAGE> 23
10. COMMITMENT FEE. Borrower shall pay to Bank a non-refundable commitment fee
equal to one half percent (0.5%) of the commitment amount of $3,000,000 as
detailed in the Summary of Terms and Conditions of Credit Facilities contained
in the commitment letter dated 5/l/96.
11. UNUSED FEE. Borrower shall pay to Bank on the last business day of each
calendar quarter (commencing on the last business day of June 1996) during the
term and on the maturity date of the Loan Account, a non-refundable fee equal to
one-quarter of one percent (0.25%) per annum, computed on the basis of actual
number of days elapsed over a year of 360 days, on the average daily amount by
which the then maximum drawable amount of $3,000,000 of the Loan Account exceeds
the sum of the related outstanding loan advances during the period or quarter in
question.
12. WARRANT. Borrower shall grant to Bank a warrant to purchase $300,000 of
common stock of Borrower. The price of the stock will be the lesser of $3 per
share and 75% of the next offering price of one share. The warrant will be
exercisable at any time prior to April 30, 2002. The terms and conditions of the
warrant are outlined in Exhibit 1.
13. MISCELLANEOUS PROVISIONS. Failure or Indulgence Not Waiver. No failure or
delay on the part of Bank or any holder of Notes Issued hereunder, in the
exercise of any power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof or of any other right,
power or privilege. All rights and remedies existing under this agreement or any
not issued in connection with a loan that Bank may make hereunder, are
cumulative to, not exclusive of, any rights or remedies otherwise available.
14. RECEIPTS. Notwithstanding any other provisions of the Security and Loan
Agreement, all sums received by Bank, whether from Borrower or from Borrower's
account debtors, shall be applied to the outstanding loan balance on the second
(2nd) day following receipt thereof by the Bank. Interest shall continue to
accrue on all loans outstanding pursuant to the Loan and Security Agreement
until sums received are applied as herein provided.
15. EVENTS OF DEFAULT. The occurrence of any of the following events of default
shall, at Bank's option, terminate Bank's commitment to lend and make all sums
of principal and interest then remaining unpaid on all Borrower's indebtedness
to Bank immediately due and payable, all without demand, presentment or notice,
all of which are hereby expressly waived:
a. FAILURE TO PAY NOTE. Failure to pay any installment of principal of
or interest on any indebtedness of Borrower to Bank, ten (10) calendar days
after its due date.
b. BREACH OF COVENANT. Failure of Borrower to perform any other term or
condition of this letter binding upon Borrower, where such breach has a material
financial consequence, that could reasonably result in a material adverse affect
on the financial condition of the Borrower. Borrower shall have the right to
remedy any breach of covenant within thirty (30) days of notice from Bank.
c. BREACH OF WARRANTY. Any of Borrower's material representations or
material warranties made herein or any statement or certificate at any time
given in writing pursuant hereto or in connection
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<PAGE> 24
herewith shall be false or misleading in any material respect, that could
reasonably result in a material adverse affect on the financial condition of
Borrower.
d. INSOLVENCY; RECEIVER OR TRUSTEE. Borrower shall become insolvent as
defined by the Bankruptcy Code, or admit its inability to pay its debts as they
mature, or make an assignment for the benefit of creditors, or apply for or
consent to the appointment of a receiver or trustee for it or for a substantial
part of its property or business.
e. JUDGMENTS; ATTACHMENTS. Any money judgment, writ or warrant of
attachment, or similar process shall be entered or filed against Borrower or any
of its assets and shall remain unvacated, unbonded or unstayed for a period
later than five days prior to the date of any proposed sale thereunder, for an
amount in excess of $50,000, that could reasonably result in a material adverse
affect on the financial condition of the Borrower.
f. BANKRUPTCY. Bankruptcy, insolvency, reorganization or liquidation
proceedings or other proceedings for relief under any bankruptcy law or any law
for the relief of debtors shall be instituted by or against Borrower and, if
instituted against it, shall be consented to.
g. FINANCIAL COVENANTS. Failure to maintain financial covenants as
stated.
16. CONDITIONS PRECEDENT. Until the following conditions have been met, Bank
shall have no obligation to lend under the Loan Account:
a. SUBORDINATION OF DEBT FROM ICICI. All current and future outstanding
debt from Borrower to ICICI must be subordinated to Bank, in form and substance
acceptable to Bank. Bank to have a first priority security interest in all
assets of Borrower with ICICI to subordinate its security interest to Bank.
b. PERFECTION OF SECURITY INTERESTS. Perfection of all security
interests and copyright mortgages to the extent set forth in Section 6.
c. NO MATERIAL ADVERSE CHANGES. There must be no material adverse
change of the facts and information upon which the Bank's credit decision was
made, as represented to date and prior to closing, on Borrower.
d. DOCUMENTATION. The completion of all documentation in a form
satisfactory to Bank.
e. SATISFACTORY AUDIT BY BANK'S ASSET-BASED LENDING GROUP. The Asset
Based Lending Group of the Bank shall have conducted an audit of Borrower in
which Borrower receives a review satisfactory to Bank. The fees for this audit
will be capped at $2,500.
f. AUDITED FINANCIAL STATEMENT. Receipt and satisfactory review of
Borrower's 12/31/95 audited financial statement.
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<PAGE> 25
17. ATTORNEYS' FEES. Borrower will pay promptly to Bank without demand after
notice, with interest thereon from the date of expenditure at the rate
applicable to the Loan, reasonable attorneys' fees and all costs and expenses
paid or incurred by Bank in collecting or compromising the Loan after the
occurrence of an event of default, whether or not suit is filed. If suit is
brought to enforce any provision of this Agreement, the prevailing party shall
be entitled to recover its reasonable attorneys' fees and court costs in
addition to any other remedy or recovery awarded by the court.
18. ADDITIONAL REMEDIES. The rights, powers and remedies given to Bank hereunder
shall be cumulative and not alternative and shall be in addition to all rights,
powers and remedies given to Bank by law against Borrower or any other person,
including but not limited to Bank's rights of setoff or banker's lien.
19. INUREMENTS. The benefits of this Agreement shall inure to the successors and
assigns of Bank and the permitted successors and assigns of Borrower.
20. APPLICABLE LAW. This Agreement and all other agreements and instruments
required by Bank in connection therewith shall be governed by and construed
according to the laws of the State of California to the jurisdiction of whose
courts the parties hereby agree to submit.
21. OFFSET. In addition to and not in limitation of all rights of offset that
Bank or other holder of the Loan may have under applicable law, Bank or other
holder of the Notes shall, upon the occurrence of any Event of Default or any
event which with the passage of time or notice would constitute such an Event of
Default, have the right to appropriate and apply to the payment of the Loan any
and all balances, credits, deposits, accounts or monies of Borrower then or
thereafter with Bank or other holder, within ten (10) days after the Event of
Default, and notice of the occurrence of any Event of Default by Bank to
Borrower.
22. SEVERABILITY. Should any one or more provisions of the Agreement be
determined to be illegal or unenforceable, all other provisions nevertheless
shall be effective.
23. TIME OF THE ESSENCE. Time is hereby declared to be of the essence of this
Agreement and of every part hereof.
24. INTEGRATION CLAUSES. Except for documents and instruments specifically
referenced herein, the Agreement constitutes the entire agreement between Bank
and Borrower regarding the Loan, and all prior communications verbal or written
between Borrower and Bank shall be of no further offset or evidentiary value. In
the event of a conflict or inconsistency among any other documents and
instruments and this Agreement, the provisions of this Agreement shall prevail.
25. ACCOUNTING. All accounting terms shall have the meanings applied under
generally accepted accounting principles unless otherwise specified.
26. MODIFICATION. This agreement may be modified only by a writing signed by
both parties hereto.
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<PAGE> 26
27. AUDITS. Bank anticipates a minimum of two audits by its Asset Based Lending
Group per year at a cost of $2,500 per audit, the fee for which shall be paid at
the time of the audit.
This Addendum is executed by and on behalf of the parties as of the
date first above written.
CYBERMEDIA, INC. IMPERIAL BANK
"BORROWER" "BANK"
By: /S/ Unni Warrier By:
------------------------ -----------------------------
Title: President Title:
------------------------ -----------------------------
By: /S/ Jeffrey Beaumont By:
------------------------ -----------------------------
Title: CFO Title:
------------------------ -----------------------------
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<PAGE> 27
IMPERIAL BANK
Member FDIC
SECURITY AND LOAN AGREEMENT
This Agreement is entered into between CYBERMEDIA, INC., a Corporation
(herein called "Borrower") and IMPERIAL BANK (herein called "Bank").
1. Bank hereby commits, subject to all the terms and conditions of this
Agreement and prior to the termination of its commitment as hereinafter
provided, to make loans to Borrower from time to time in such amounts
as may be determined by Bank herein, but not exceeding in the aggregate
unpaid principal balance, the following Borrowing Base:
65.000% of Eligible Accounts
and in no event more than $3,000,000.00
2. The amount of each loan made by Bank to Borrower hereunder shall be
debited to the loan ledger account of Borrower maintained by Bank
(herein called "Loan Account") and Bank shall credit the Loan Account
with all loan repayments made by Borrower. Borrower promises to pay
Bank (a) the unpaid balance of Borrower's Loan Account on demand, and
(b) on or before the tenth day of each month interest on the average
daily unpaid balance of the Loan Account during the immediate preceding
month at the rate of One percent (1.000%) per annum in excess of the
rate of interest which Bank has announced as its prime lending rate
("Prime Rate") which shall vary concurrently with any change in such
Prime Rate. Interest shall be computed at the above rate on the basis
of the actual number of days during which the principal balance of the
loan account is outstanding divided by 360, which shall for interest
computation purposes be considered one year. Bank at its option may
demand payment of any or all of the amount due under the Loan Account
including accrued but unpaid interest at any time. Such notice may be
given verbally or in writing and should be effective upon receipt by
Borrower. The amount of interest payable each month by Borrower shall
not be less than a minimum monthly charge of $250.00. Bank is hereby
authorized to charge Borrower's deposit account(s) with Bank for all
sums due Bank under this Agreement.
3. Requests for loans hereunder shall be in writing duly executed by
Borrower in a form satisfactory to Bank and shall contain a
certification setting forth the matters referred to in Section 1, which
shall disclose that Borrower is entitled to the amount of loan being
requested.
4. As used in this Agreement, the following terms shall have the following
meanings:
a. "Accounts" means any right to payment for goods sold or
leased, or to be sold or to be leased, or for services
rendered or to be rendered no matter how evidenced, including
accounts receivable, contract rights, chattel paper,
instruments, purchase orders, notes, drafts, acceptances,
general intangibles and other forms of obligations and
receivables.
b. "Collateral" means any and all personal property of Borrower
which is assigned or hereafter is assigned to Bank as security
or in which Bank now has or hereafter acquires a security
interest.
c. "Eligible Accounts" means all of Borrower's Accounts
excluding, however (1) all Accounts under which payment is not
received within 90 days from any invoice date, (2) all
Accounts against which the account debtor or any other person
obligated to make payment thereon asserts any defense, offset,
counterclaim or other right to avoid or reduce the liability
represented by the Account, and (3) any Accounts if the
account debtor or any other person liable in connection
therewith is insolvent, subject to bankruptcy or receivership
proceedings or has made an assignment for the benefit of
creditors or whose credit standing is unacceptable to Bank and
Bank has so notified Borrower. Eligible Accounts shall only
include such accounts as Bank in its sole discretion shall
determine are eligible from time to time.
5. Borrower hereby assigns to Bank all Borrower's present and future
Accounts, including all proceeds due thereunder, all guarantee and
security therefor, and hereby grants to Bank a continuing Security
interest in all monies in the Collateral Account referred to in Section
6 hereof, as security for any and all obligations of Borrower to Bank,
whether now owing or hereafter incurred and whether direct, indirect,
absolute or contingent. So long as Borrower is indebted to Bank or Bank
is committed to extend credit to Borrower, Borrower will execute and
deliver to Bank such assignments, including Bank's standard forms of
Specific or General Assignment covering individual Accounts, notices,
financing statements, and other documents and papers as Bank may
require in order to affirm, effectuate or further assure the assignment
to Bank of the Collateral or to give any third party, including the
account debtors obligated on the Accounts, notice of Bank's interest in
the Collateral.
6. Until Bank exercises its rights to collect the Accounts pursuant to
paragraph 10, Borrower will collect with diligence all Borrower's
Accounts, provided that no legal action shall be maintained thereon or
in connection therewith without Bank's prior written consent. Any
collection of Accounts by Borrower, whether in the form of cash,
checks, notes, or other instruments for the payment of money (properly
endorsed or assigned where required to enable Bank to collect same),
shall be in trust for Bank, and Borrower shall keep all such
collections separate and apart from all other funds and property so as
to be capable of identification as the property of Bank and deliver
said collections daily to Bank in the identical form received. The
proceeds of such collections when received by Bank may be applied by
Bank directly to the payment of Borrower's Loan Account or any other
obligation secured hereby. Any credit given by Bank upon receipt of
said proceeds shall be conditional credit subject to collection.
Returned items at Bank's option may be charged to Borrower's general
account. All collections of the Accounts shall be set forth on an
itemized schedule, showing the name of the account debtor, the amount
of each payment and such other information as Bank may require.
<PAGE> 28
7. Until Bank exercises its rights to collect the Accounts pursuant to
paragraph 10, Borrower may continue its present policies with respect
to returned merchandise and adjustments. However, Borrower shall
immediately notify Bank of all cases involving returns, repossessions,
and loss or damage of or to merchandise represented by the Accounts and
of any credits, adjustments or disputes arising in connection with the
goods or services represented by the Accounts and, in any of such
events. Borrower will immediately pay to Bank from its own funds (and
not from the proceeds of Accounts or Inventory) for application to
Borrower's Loan Account or any other obligation secured hereby the
amount of any credit for such returned or repossessed merchandise and
adjustments made to any of the Accounts.
8. Borrower represents and warrants to Bank: (i) If Borrower is a
corporation, that Borrower is duly organized and existing in the State
of its incorporation and the execution, delivery and performance hereof
are within Borrower's corporate powers, have been duly authorized and
are not in conflict with law or the terms of any charter, by-law or
other incorporation papers or of any indenture, agreement or
undertaking to which Borrower is a party or by which Borrower is found
or affected; (ii) Borrower is, or at the time the collateral becomes
subject to Bank's security interest will be, the true and lawful owner
of and has, or at the time the Collateral becomes subject to Bank's
security interest will have, good and clear title to the Collateral,
subject only to Bank's rights therein; (iii) Each Account is, or at the
time the Account comes into existence will be, a true and correct
statement of a bona fide indebtedness incurred by the debtor named
therein in the amount of the Account for either merchandise sold or
delivered (or being held subject to Borrower's delivery instructions)
to, or services rendered, performed and accepted by, the account
debtor; (iv) That there are or will be no defenses, counterclaims, or
setoffs which may be asserted against the Accounts; and (v) Any and all
financial information, including information relating to the
Collateral, submitted by Borrower to Bank, whether previously or in the
future, is or will be true and correct.
9. Borrower will: (i) Furnish Bank from time to time such financial
statements and information as Bank may reasonably request and inform
Bank immediately upon the occurrence of a material adverse change
therein; (ii) Furnish Bank periodically, in such form and detail and at
such times as Bank may require, statements showing aging and
reconciliation of the Accounts and collections thereon; (iii) Permit
representatives of Bank to inspect the Borrower's books and records
relating to the Collateral and make extracts therefrom at any
reasonable time and to arrange for verification of the Accounts, under
reasonable procedures, acceptable to Bank, directly with the account
debtors or otherwise at Borrower's expense; (iv) Promptly notify Bank
of any attachment or other legal process levied against any of the
Collateral and any information received by Borrower relative to the
Collateral, including the Accounts, the account debtors or other
persons obligated in connection therewith which may in any way affect
the value of the Collateral or the rights and remedies of Bank in
respect thereto; (v) Reimburse Bank upon demand for any and all legal
costs, including reasonable attorneys' fees, and other expense incurred
in collecting any sums payable by Borrower under Borrower's Loan
Account or any other obligation secured hereby, enforcing any term or
provision of this Security Agreement or otherwise or in the checking,
handling and collection of the Collateral and the preparation and
enforcement of any agreement relating thereto; (vi) Notify Bank of each
location and of each office of Borrower at which records of Borrower
relating to the Accounts are kept; (vii) Provide, maintain and deliver
to Bank policies insuring the Collateral against loss or damage by such
risks and in such amounts, forms and companies as Bank may require and
with loss payable solely to Bank, and, in the event Bank takes
possession of the Collateral, the insurance policy or policies and any
unearned or returned premium thereon shall at the option of Bank become
the sole property of Bank, such policies and the proceeds of any other
insurance covering or in any way relating to the Collateral, whether
now in existence or hereafter obtained, being hereby assigned to Bank;
and (viii) In the event the unpaid balance of Borrower's Loan Account
shall exceed the maximum amount of outstanding loans to which Borrower
is entitled under Section 1 hereof, Borrower shall immediately pay to
Bank, from its own funds and not from the proceeds of Collateral, for
credit to Borrower's Loan Account the amount of such excess.
10. Bank may at any time, without prior notice to Borrower, collect the
Accounts and may give notice of assignment to any and all account
debtors, and Borrower does hereby make, constitute and appoint Bank its
irrevocable, true and lawful attorney with power to receive, open and
dispose of all mail addressed to Borrower, to endorse the name of
Borrower upon any checks or other evidences of payment that may come
into the possession of Bank upon the Accounts to endorse the name of
the undersigned upon any document or instrument relating to the
Collateral, in its name or otherwise, to demand, sue for, collect and
give acquittance for any and all monies due or to become due upon the
Accounts, to compromise, prosecute or defend any action, claim or
proceeding with respect thereto; and to do any and all things necessary
and proper to carry out the purpose herein contemplated.
11. Until Borrower's Loan Account and all other obligations secured hereby
shall have been repaid in full, Borrower shall not sell, dispose of or
grant a security interest in any of the Collateral other than the Bank,
or execute any financing statements covering the Collateral in favor of
any secured party or person other than Bank.
12. Should: (i) Default be made in the payment of any obligation, or breach
be made in any warranty, statement promise, term or condition,
contained herein or hereby secured; (ii) Any statement or
representation make for the purpose of obtaining credit hereunder prove
false; (iii) Bank deemed the Collateral inadequate or unsafe or in
danger of misuse; (iv) Borrower become insolvent or make an assignment
for the benefit of creditors; or (v) Any proceeding be commenced by or
against Borrower under any bankruptcy, reorganization, arrangement,
readjustment of debt or moratorium law or statute; then in any such
event, Bank may, at its option and without demand first made and
without notice to Borrower, do any one or more of the following: (a)
Terminate its obligation to make loans to Borrower as provided in
Section 1 hereof; (b) Declare all sums covered hereby immediately due
and payable; (c) immediately take possession of the Collateral wherever
it may be found, using all necessary force so to do, or require
Borrower to assemble the Collateral and make it available to Bank at a
place designated by Bank wherever is reasonably convenient to Borrower
and Bank, and Borrower waives all claims for damages due to or arising
from or connected with any such taking; (d) Proceed in the foreclosure
of Bank's security interest and sale of the Collateral in any manner
permitted by law, or provided for herein; (e) Sell, lease or otherwise
dispose of the Collateral at public or private sale, with or without
having the Collateral at the place of sale, and upon terms and in such
manner as Bank may determine, and Bank may purchase same at any such
sale; (f) Retain the Collateral in full satisfaction of the obligations
secured thereby; (g) Exercise any remedies of a secured party under the
Uniform Commercial Code. Prior to any such disposition, Bank may, at
its option, cause any of the Collateral to be repaired or reconditioned
in such manner and to such extent as Bank may deem advisable, and any
sums expended therefor by Bank shall be repaid by Borrower and secured
hereby. Bank shall have the right to enforce one or more remedies
hereunder successively or concurrently, and any such action shall not
estop
-2-
<PAGE> 29
or prevent bank from pursuing any further remedy which it may have
hereunder or by law. If a sufficient sum is not realized from any such
disposition of Collateral to pay all obligations secured by this
Security Agreement, Borrower hereby promises and agrees to pay Bank any
deficiency.
13. If any writ of attachment, garnishment, execution or other legal
process be issued against any property of Borrower, or if any
assessment for taxes against Borrower, other than real property, is
made by the Federal or State government or any department thereof, the
obligation of Bank to make loans to Borrower as provided in Section 1
hereof shall immediately terminate and the unpaid balance of the Loan
Account, all other obligations secured hereby and all other sums due
hereunder shall immediately become due and payable without demand,
presentment or notice.
14. Borrower authorizes Bank to destroy all invoices, delivery receipts,
reports and other types of documents and records submitted to Bank in
connection with the transactions contemplated herein at any time
subsequent to four months from the time such items are delivered to
Bank.
15. Nothing herein shall in any way limit the effect of the conditions set
forth in any other security or other agreement executed by Borrower,
but each and every condition hereof shall be in addition thereto.
16. Additional Provisions: See attached Exhibit A consisting of 12 pages.
Executed this 30th day of April, 1996.
CYBERMEDIA, INC.
(Name of Borrower)
IMPERIAL BANK
By: /s/ Jeffrey Beaumont
------------------------------------
(Authorized Signature and Title)
By:
------------------------------
Title By: /S/ Anne Lam, VP and Secretary
------------------------------------
(Authorized Signature and Title)
*If none, insert "None"
-3-
<PAGE> 1
EXHIBIT 10.12
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of March 12,
1995 by and between CyberMedia, Inc., a California corporation (the "Company")
and __________________ ("Founder").
A. The Board believes that it is in the best interests of the
Company and its shareholders to provide the Founder with an incentive to
continue his employment and to motivate the Founder to maximize the value of the
Company for the benefit of its shareholders.
B. The Board believes that it is imperative to provide the
Founder with certain severance benefits upon the Founder's termination of
employment if without Cause which provides the Founder with enhanced financial
security and provides sufficient incentive and encouragement to the Founder to
remain with the Company.
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, the parties agree as follows:
1. Termination Without Cause.
(i) In the event the employment of any Founder is terminated
by the Company without Cause on or after the date six months from September 29,
1995, the Closing of the Series B Preferred Stock financing, and prior to twelve
months after such Closing, the Company shall continue to pay such Founder's
salary and provide without cost to the Founder the same insurance benefits to
such Founder as was provided on the date of termination for a period of eighteen
months from the effective date of termination. All options to purchase stock
held by such founder shall continue to vest for one year after the date of
termination.
(ii) In the event the employment of any Founder is terminated
without Cause on or after the date one year after such Closing and prior to
eighteen months after such Closing, the Company shall continue to pay such
Founder's salary and provide without cost to such Founder the same insurance
benefits as was provided on the date of termination for a period of twelve
months from the date of termination. All options to purchase stock held by such
Founder shall continue to vest for one year after the date of termination.
(iii) In the event the employment of any Founder is terminated
without cause on or after the date eighteen months after such Closing, the
Company shall continue to pay such Founder's salary and provide without cost to
such Founder the same insurance benefits as was provided on the date of
termination for a period of six months after the date of termination. All
options to purchase stock held by such Founder shall continue to vest for six
months after the date of termination.
(iv) No payments shall be made to the Founder and options
shall not continue to vest after termination of employment with the Company if
such employment is terminated with
<PAGE> 2
cause or if Founder voluntarily terminates his employment. Death or permanent
disability (as defined in Section 22(e)(3) of the Internal Revenue Code of 1986,
as amended, shall be deemed an involuntary termination without cause.
2. Definition of Cause. For purposes of paragraph 1 above,
"Cause" shall mean (i) the willful failure by the Founder to substantially
perform his or her duties within ten (10) days after written demand for
substantial improvement in performance is delivered to the Founder by the Board
of Directors which specifically identifies the manner in which the Board of
Directors believes that the Founder has not substantially performed his or her
duties, (ii) the Founder's failure (in a material respect) to follow reasonable
policies or directives established by the Board of Directors within ten (10)
days after written notice to the Founder by the Board of Directors that the
Founder is not following such policies or directives, (iii) bad faith conduct by
the Founder that is detrimental to the Company, or (iv) the conviction of the
Founder of any crime involving the property or business of the Company. No act,
or failure to act, by the Founder shall be considered "willful" unless committed
without a good faith reasonable belief that the act or omission was in the
Company's best interest. In the event a Founder is terminated for failure to
relocate more than 35 miles from his or her current place of employment, such
termination shall be deemed termination without Cause.
3. Miscellaneous.
(a) If any portion of this Agreement is held by a court
of competent jurisdiction to conflict with any federal, state or local law, such
portion of this Agreement shall be of no force or effect and this Agreement
shall otherwise remain in full force and effect and be construed as if such
portion had not been included in this Agreement.
(b) Founder shall not assign this Agreement or any rights
or obligations under this Agreement without the prior written consent of the
Company.
(c) Any notice or communication required or permitted
under this Agreement shall be made in writing and delivered personally to the
other party or sent by certified or registered mail, return receipt requested
and postage prepaid.
(d) This Agreement contains the entire agreement and
understanding of the parties and supersedes all prior discussions, agreements
and understandings relating to the subject matter of this Agreement. This
Agreement may not be changed or modified, except by an agreement in writing
executed by the Company and by Founder.
(e) The waiver of a breach of any term or provision of
this Agreement shall not operate as or be construed to be a waiver of any other
previous or subsequent breach of this Agreement.
-2-
<PAGE> 3
(f) This Agreement shall be governed by the internal laws
of the State of California as applied to agreements made and performed in
California by residents of California.
(g) All captions and section headings used in this
Agreement are for convenient reference only and do not form a part of this
Agreement.
(h) This Agreement may be executed in counterparts, each
of which shall constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
CYBERMEDIA, INC. FOUNDER
By:
------------------------------- ------------------------------
President
-3-
<PAGE> 1
EXHIBIT 10.13
LOAN AGREEMENT
BETWEEN
CYBERMEDIA, INCORPORATED
AS BORROWER
AND
THE INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LIMITED
AS LENDER
UNDER
PROGRAM FOR THE ADVANCEMENT OF COMMERCIAL TECHNOLOGY
<PAGE> 2
LOAN AGREEMENT
THIS AGREEMENT made this 20th day of June, One Thousand Nine Hundred
and Ninety Four between Cybermedia Incorporated, a corporation incorporated in
the State of California, having its Registered Office at 1800 Century Park East,
Suite 1145, Los Angeles, CA 90067, USA (hereinafter referred to as the
"Borrower," which expression shall, unless it be repugnant to the subject or
context thereof, include its successors and assigns);
AND
THE INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LIMITED, a
public company incorporated under the Indian Companies Act of 1913 (7 of 1913)
and having its registered office at 163, Backbay Reclamation, Bombay 400 020
(hereinafter referred to as the "Lender," which expression shall, unless it be
repugnant to the subject or context thereof, include its successors and
assigns);
WHEREAS
A. An Agreement (hereinafter referred to as "the PACT Agreement")
has been executed on 30th August, 1985 between the Government of India and the
Government of United States of America acting through United States Agency for
International Development (hereinafter referred to as "AID") for undertaking a
Program for the Advancement of Commercial Technology (PACT) which is designed to
accelerate the pace and quality of technological innovation for products and
production processes having applications in industry, agriculture, health and
other areas, wherein The Industrial Credit and Investment Corporation of India
Limited (ICICI) has been appointed as implementing agency for the PACT project;
B. Under the PACT Agreement, the Government of United States of
America acting through AID has agreed to contribute a certain sum for PACT
(hereinafter referred to as "AID Grant Resources");
C. The AID Grant Resources along with return flows therefrom are
to be used to promote and finance Indo-US joint technology development ventures
and towards achieving objectives of PACT in general;
D. AID Grant Resources would be disbursed by AID to ICICI through
GOI but ICICI shall not have any present or future beneficial interest therein
and ICICI has agreed to manage and administer the same in accordance with the
PACT Agreement for the purpose of implementing PACT;
E. The Borrower was earlier provided financial assistance from
PACT for "Development of a hardware, software and network administration package
codenamed "PRIZM." The Borrower with SR Associates Software Pvt. Ltd. had
jointly entered into Cooperation and Project Financing
<PAGE> 3
(CPF) Agreement with ICICI dated 3rd day of February, 1993. The Borrower has
completed the development.
F. The Borrower has heretofore submitted to PACT a loan proposal
(hereinafter called "the Proposal"). For and on the basis of the Proposal, the
Borrower has applied to ICICI for financial assistance out of the PACT resources
for commercializing the product; and
G. In accordance with the provisions of the PACT Agreement, the
appropriate authority has examined and approved the Proposal for financing out
of the AID Grant Resources and ICICI has agreed on behalf of GOI to provide
financing for the implementation of the Proposal on the terms and conditions
hereinafter set forth.
NOW THEREFORE THE PARTIES HERETO AGREE AS FOLLOWS:
ARTICLE I.
DEFINITIONS: GENERAL CONDITIONS
1. Definitions.
1.1 The following terms shall have the following meanings:
(a) "General Conditions" means the GENERAL CONDITIONS
APPLICABLE TO FOREIGN CURRENCY LOANS PROVIDED BY financial institutions
(GC-FC-88);
(b) "Project" means the project to be financed as
described by "the Proposal" dated the 31st day of January 1994, incorporated by
reference and made a part of this Agreement. Provided that if any of the said
Proposal is inconsistent with any other provision of this Agreement, the
provision otherwise set forth in this Agreement shall prevail. A brief
description of the project is included in Schedule I hereto; and
(c) "Financing Plan" means the financing plan as
described in Schedule II hereto.
1.2 General Conditions.
The Loan hereby agreed to be granted by the Lender shall be subject to
the Borrower complying with the terms and conditions set out herein and also the
General Conditions No. GC-FC- 88, a copy of which has been attached hereto. The
General Conditions shall be deemed to form part of this Agreement and shall be
read as if they are specifically incorporated herein. As specified in Article I
of the General Conditions No. GC-FC-88, the provisions of this Loan Agreement
shall take precedence over any inconsistent provision in the General Conditions.
-2-
<PAGE> 4
ARTICLE II.
AGREEMENT AND TERMS OF LOAN
2.1 Amount and Terms of Loan.
The Borrower agrees to borrow from the Lender and the Lender agrees to
lend to the Borrower, on the terms and conditions contained herein as also in
the General Conditions No. GC- FC-88, a sum to the maximum extent of US$ 500,000
(US$ Five Hundred Thousand Only).
2.2 Interest.
(i) The Borrower shall pay to the Lender interest at a
rate based on a spread of 2.25% above prime rate on the principal amounts of the
Loan outstanding on a quarterly basis in each year, on January 15, April 15,
July 15 and October 15.
The prime rate as defined in this agreement refers to the US prime rate
(as published in The Wall Street Journal) for the first work day of each quarter
beginning January 1, April 1, July 1 and October 1 respectively of each year.
This rate would be applicable for the next 3 months. The borrower shall inform
ICICI by telefax within one week after January 1, April 1, July 1 and October 1
respectively of each year of such rate.
2.3 Costs and Charges.
The Borrower shall pay all taxes, duties, costs, charges and expenses
in connection with or relating to the Loan transaction (including costs of
investigation of title and protection of Lender's interests). In the event of
the Borrower failing to pay the aforesaid moneys, the Lender will be at liberty
but shall not be obliged to pay the same. All such sums shall be reimbursed by
the Borrower to the Lender within 30 days from the date of notice of demand from
the Lender and shall be debited to the Borrower's Loan Account and shall carry
interest at the highest lending rate of the lender from the ate of payment till
such reimbursement.
2.4 Last Date of Withdrawal.
Unless the Lender otherwise agrees, the right to make withdrawals from
the Loan shall cease on March 31, 1995.
2.5 Repayment.
The Borrower undertakes to repay the principal amounts of the Loan in
accordance with the Amortization Schedule set forth in Schedule III hereto.
2.6 Except in the event of default the interest and repayment
terms as set forth in this section may be modified with the mutual consent of
the Lender and the Borrower.
-3-
<PAGE> 5
2.7 Review of the Project.
1. The Borrower shall implement the Project within the
overall project cost of US$ 1,100,000 (US$ Eleven Hundred Thousand Only) ("the
Project Cost") and in accordance with the financing plan ("the Financing Plan")
both as agreed to between the Borrower and the Lender and set out in Schedule II
hereto.
2. The Borrower agrees that the Lender shall have the
right to conduct a review of the Project before and after completion of the
Project.
3. The Borrower agrees that:
If, however, as a result of such review the Lender determines that the
Borrower has not implemented/nor is likely to implement the Project within the
Project Cost and or in accordance with the Financing Plan, the Lender shall have
the right to revise the Amortization Schedule and stipulate such additional
conditions (including strengthening of management set up, change in means of
financing, raising of additional equity capital/other interest-free unsecured
funds from the Promoters) as the Lender in its absolute discretion deem fit and
to require the Borrower to take such other measures as may be stipulated by the
Lender in the light of the revised cost of the Project/means of financing/date
of commencement of commercial production. Unless otherwise agreed to by the
Lender and in such event, the Loan shall become repayable on demand until the
Borrower complies with the stipulated terms and conditions to the satisfaction
of the Lender and commences commercial production. Upon such compliance of the
conditions and commencement of commercial production the Borrower shall repay
the Loan in accordance with the Repayment Schedule as may be stipulated by the
Lender, which Repayment Schedule shall be final and binding on the Borrower.
ARTICLE III.
SECURITY
3.1 Security for the Loan.
(A) The Borrower shall procure an unconditional personal
guarantee from Dr. Suhas Patil in favor of the Lender for the repayment of the
loan and the payment of all interest and other monies payable by the Borrower in
the form prescribed by the Lender and to be delivered to the Lender before any
part of the loan is advanced. The Borrower shall not pay any monetary guarantee
commission to the said guarantees.
(B) The loan provided out of PACT funds will be utilized
for purchase of machinery or equipment or other assets in whole and/or in part
for the project and shall be clearly identified. The borrower shall not sell,
give on lease, licence to conduct, mortgage, charge or otherwise dispose of the
said machinery or equipment or other assets without with the prior permission of
ICICI.
-4-
<PAGE> 6
(C) The Borrower may with the approval of ICICI change
the security provided for the Loan.
3.2 Creation of Additional Security.
If, at any time during the subsistence of this Agreement, the Lender is
of the opinion that the security provided by the Borrower has become inadequate
to cover the balance of the Loan then outstanding, then, on the Lender advising
the Borrower to that effect, the Borrower shall provide and furnish to the
Lender, to the satisfaction of the Lender to cover such deficiency. The Borrower
will not be required to furnish security totaling more than one hundred and
twenty (120%) percent of the unpaid balance of principal and accrued interest on
the loan.
ARTICLE IV.
APPOINTMENT OF NOMINEE DIRECTOR
In the event the Borrower is in default under the terms of this Loan
Agreement, the Borrower agrees that the Lender shall be entitled to appoint and
withdraw from time to time one Director on the Board of Directors of the
Borrower at any time during the currency of this Agreement.
ARTICLE V.
SPECIAL CONDITIONS
5.1 The Loan hereby granted shall also be subject to the Borrower
complying with the special conditions set out in Schedule IV hereto.
5.2 Cap on Costs. As used in this paragraph, the term "costs"
shall include any and all payments due under this Loan Agreement and the General
Conditions GC-FC-88, other than payments of principal or interest made or due on
the Loan. The parties agree that any costs imposed on Borrower under the terms
of this Loan Agreement and General Conditions GC-FC-88, shall not exceed a
maximum of Five Thousand ($5,000) US Dollars in the aggregate.
5.3 Exercise of Discretion. In all instances in which the Loan
Agreement and General Conditions GC-FC-88 give the Lender the right to act
unilaterally, and/or at its sole discretion, the Lender covenants and agrees
that it will exercise its discretion in a reasonable manner. Any dispute
regarding the same may be submitted to binding arbitration by either party.
-5-
<PAGE> 7
ARTICLE VI.
EFFECTIVE DATE OF AGREEMENT
This Agreement shall become binding on the Borrower and the Lender on
and from the date first above written. It shall be in force till all the moneys
due and payable under this Agreement are fully paid off.
ARTICLE VII.
1. Miscellaneous Conditions.
(i) This Agreement shall be construed and interpreted in
accordance with the laws of India and neither the Borrower or the Lender shall
request the Borrower to do anything contrary to any United States law or
regulation.
(ii) Binding Arbitration. Notwithstanding any provision in the Loan
Agreement and the General Conditions GC-FC-88 to the contrary, the parties agree
that all disagreements, claims and disputes between them arising from or related
to the Loan Agreement and the General Conditions GC-FC-88, shall be decided by
binding arbitration by arbitrators approved by the Indo-American Chamber of
Commerce. all such arbitration proceedings shall be conducted under the auspices
of, and in accordance with the rules of, the Indo-American Chamber of Commerce,
at a location to be mutually agreed to by the parties, or failing agreement, to
be decided by the arbitrators. The decision of the arbitrators shall be final
and binding on the parties.
(iii) The Borrower undertakes to comply with all applicable laws,
rules and regulations as prevailing in India and United States of America as the
case may be and will also apply and obtain all necessary licenses, consents and
permits for the purposes of entering into and carrying out their obligations.
-6-
<PAGE> 8
SCHEDULE I
THE PROJECT
The Borrower, an already existing company, proposes commercialization
of a software, hardware & network administration package codenamed "PRIZM." The
cost of the project estimated at US $ 1,100,000 is proposed to be financed by
Promoter's contribution of US $ 600,000, and foreign currency term loan from
ICICI of US $ 500,000.
The Borrower has approached the Lender to provide term loan of US $
500,000 to finance a part of the cost of project. The lender has agreed to
provide a Foreign Currency Term Loan of US $ 500,000 to the borrower from PACT
Resources.
-7-
<PAGE> 9
SCHEDULE II
COST OF PROJECT AND FINANCING PLAN
COST OF THE PROJECT
The cost of the project is estimated at US $ 1,100,000 as follows:
<TABLE>
<CAPTION>
(US $ '000)
---------
<S> <C>
Salaries and Wages 270
Brochures and Support material 75
Direct mail campaign 200
Trade and Road shows 75
Travel 30
Advertising 125
Channel marketing 50
Marketing Research 50
Consultants 125
Telemarketing 50
Communications 10
General & Administrative Expenses 40
-----
1,100
=====
</TABLE>
<PAGE> 10
MEANS OF FINANCING
The above project cost estimated at US $ 1,100,000 is proposed to be
financed as follows:
<TABLE>
<CAPTION>
(US $ '000)
-----------
<S> <C>
Promoter's Contribution 600
Foreign Currency Term Loan from PACT
Resources 500
-----
1,100
=====
</TABLE>
<PAGE> 11
SCHEDULE III
AMORTIZATION SCHEDULE
Name of the Lender: ICICI
<TABLE>
<CAPTION>
AMOUNT OUTSTANDING
DATE OF AMOUNT OF INSTALLMENT AFTER EACH PAYMENT
INSTALLMENT DUE (US$ '000) (US$ '000)
--------------- --------------------- ------------------
<S> <C> <C>
January 15, 1996 50 450
April 15, 1996 50 400
July 15, 1996 50 350
October 15, 1996 50 300
January 15, 1997 50 250
April 15, 1997 50 200
July 15, 1997 50 150
October 15, 1997 50 100
January 15, 1998 50 50
April 15, 1998 50 0
</TABLE>
<PAGE> 12
SCHEDULE IV
SPECIAL CONDITIONS as listed herein below
1. Before the loan becomes effective
a) The Borrower shall make necessary arrangements for
bringing in a part of the funds agreed to for financing the project.
b) In the event the Borrower is in default under the
terms of this loan agreement, it shall if required by ICICI, broad base its
Board of Directors and finalize/strengthen its management set-up in consultation
with and to the satisfaction of the ICICI.
c) The company shall make arrangements with its bankers,
satisfactory to ICICI, for meeting its working capital requirements.
2. The company undertakes that during the currency of the loan it
shall not declare any dividend on its share capital, if it fails to meet its
obligations to pay interest and/or installment or installments and/or other
moneys payable to ICICI so long as it is in such default.
3. a) The company undertakes to maintain proper books of accounts
for utilization of PACT funds and to submit auditors' certificate for the same.
It has to get them audited by a firm of Chartered Accountants on the approved
list of AID/W, Regional Inspector General (RIG/A/S) and submit a report in
accordance with the guidelines issued by RIG/A/S.
b) The company shall also enable periodic visits by
ICICI and United States Agency for International Development (USAID) officers
for assessing progress of work and monitoring the project.
c) The company shall comply with such special conditions
as may be stipulated by ICICI at the time of disbursement of loan or
subsequently.
4. In case of default under the terms of this loan agreement
ICICI shall be entitled to appoint one nominee on the Board of Directors of the
company during the currency of the ICICI assistance.
5. In case of default (set forth in General Conditions GC-FC-88),
ICICI has an option to convert moneys due to common stock of the borrower at
fair value to be decided by an independent evaluator.
6. The Borrower shall seek approval from Lender prior to raising
loans, issuing equity or engaging in any activities stipulated in Section 7.3 of
GC-FC-88. Such requests may be made by
<PAGE> 13
telefax and shall be considered to be approved by Lender unless notice to the
contrary is received within fourteen days of the request.
7. The Borrower shall provide ICICI with the opinion of the
Borrower's counsel that the Borrower is a validly existing organization and is
authorized to enter into all aspects of the transaction, that no liens affecting
the Property other than these to which ICICI specifically consents exist and
that the Borrower is authorized and empowered to borrow the sum specified herein
and to create security in favor of ICICI.
IN WITNESS WHEREOF the Borrower has caused its Common Seal to be
affixed hereto and to duplicate hereof on the day, month and year first
hereinabove written and the Lender has caused the same to be executed by the
head of authorized official of the Lender as hereinafter appearing.
THE COMMON SEAL of CYBERMEDIA, INC. was pursuant to the Resolution of
its Board of Directors passed in that behalf on the 20th day of June 1994
hereunto affixed in the presence of Mr. Sukanth Chari who has signed these
presents in token thereof.
SIGNED AND DELIVERED BY the within named Lender by the hand of Shri P.
D. Shedde and authorized official of the Lender.
-2-
<PAGE> 1
EXHIBIT 23.1
ACCOUNTANTS' CONSENT
The Board of Directors
CyberMedia, Inc.
We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
Long Beach, California
August 29, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FINANCIAL STATEMENTS ENCLOSED IN S-1 REGISTRATION STATEMENT AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH NO. 333-
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1994 JAN-01-1996
<PERIOD-END> DEC-31-1995 JUN-30-1996
<EXCHANGE-RATE> 1 1
<CASH> 2,050,000 569,000
<SECURITIES> 0 0
<RECEIVABLES> 1,182,000 3,968,000
<ALLOWANCES> 100,000 200,000
<INVENTORY> 412,000 1,235,000
<CURRENT-ASSETS> 3,765,000 6,432,000
<PP&E> 90,000 656,000
<DEPRECIATION> 44,000 86,000
<TOTAL-ASSETS> 3,855,000 7,088,000
<CURRENT-LIABILITIES> 3,331,000 8,771,000
<BONDS> 0 0
0 0
94,000 94,000
<COMMON> 13,000 25,000
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 3,855,000 7,088,000
<SALES> 4,797,000 13,949,000
<TOTAL-REVENUES> 4,797,000 13,949,000
<CGS> 2,103,000 4,888,000
<TOTAL-COSTS> 2,103,000 4,888,000
<OTHER-EXPENSES> 5,987,000 11,265,000
<LOSS-PROVISION> 97,000 102,000
<INTEREST-EXPENSE> 80,000 46,000
<INCOME-PRETAX> (3,351,000) (2,229,000)
<INCOME-TAX> 1,000 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (3,352,000) (2,229,000)
<EPS-PRIMARY> 0.0 0.0
<EPS-DILUTED> 0.0 0.0
</TABLE>
