<PAGE>
As filed with the Securities and Exchange Commission on December 17, 1999
Registration No. 333-90253
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
Vicinity Corporation
(Exact name of registrant as specified in its charter)
---------------
<TABLE>
<S> <C> <C>
Delaware 7374 77-0414631
(State or other
jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or
organization) Classification Code Number) Identification Number)
</TABLE>
1135A San Antonio Road
Palo Alto, California 94303
(650) 237-0300
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
---------------
Emerick M. Woods
Chief Executive Officer
Vicinity Corporation
1135A San Antonio Road
Palo Alto, California 94303
(650) 237-0300
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
Copies to:
<TABLE>
<S> <C>
Christopher L. Kaufman, Esq. Bruce Dallas, Esq.
Anthony J. Richmond, Esq. Davis Polk & Wardwell
Latham & Watkins 1600 El Camino Real
135 Commonwealth Drive Menlo Park, California 94025
Menlo Park, California 94025 (650) 752-2000
(650) 328-4600
</TABLE>
---------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement is declared effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement 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 this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
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- -------------------------------------------------------------------------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Proposed Proposed
maximum maximum
offering aggregate Amount of
Amount to be price per offering registration
Title of each class of securities to be registered registered(1) share(2) price(2) fee(3)
- ---------------------------------------------------------------------------------------------------------
Common Stock, $.001 par value...................... 5,750,000 $12.00 $69,000,000 $19,021
</TABLE>
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- -------------------------------------------------------------------------------
(1) Includes 750,000 shares that the Underwriters have the option to purchase
solely to cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the
registration fee in accordance with Rule 457(a) promulgated under the
Securities Act of 1933.
(3) An amount equal to $15,985 was paid in connection with the initial filing
of this registration statement on November 3, 1999. An additional amount
equal to $3,036 is being paid herewith.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
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- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the Se- +
+curities and Exchange Commission is effective. This prospectus is not an of- +
+fer to sell these securities, and we are not soliciting offers to buy securi- +
+ties, in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Prospectus Subject To Completion,
Dated December 17, 1999
5,000,000 Shares
[LOGO]
Vicinity Corporation
Common Stock
This is the initial public offering by Vicinity Corporation of shares of its
common stock.
We have filed an application to qualify the common stock for quotation on the
Nasdaq National Market under the symbol "VCNT." We estimate that the initial
public offering price will be between $10.00 and $12.00 per share.
Investing in our common stock involves material risks. See "Risk Factors"
beginning on page 6.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Price to Underwriting Proceeds to
Public Discounts Vicinity
- -----------------------------------------------------
<S> <C> <C> <C>
Per Share $ $ $
- -----------------------------------------------------
Total $ $ $
- -----------------------------------------------------
</TABLE>
We have granted the underwriters the right to purchase up to an additional
750,000 shares of common stock to cover over-allotments.
J.P. Morgan & Co.
Bear, Stearns & Co. Inc.
U.S. Bancorp Piper Jaffray
, 2000
<PAGE>
[GRAPHIC- Vicinity logo in the upper left-hand corner. A picture of shoppers in
a store is under logo. Text in the upper right-hand corner reads "Vicinity
drives customers to the world's leading brands." The lower half of the page has
a white rectangle with the logos of some of Vicinity's clients.]
[GRAPHIC- Text across the top reads "Vicinity Reaches Customers Anytime.
Anywhere." Beneath that, text line reads "A day in the life of Vicinity
Customers" and shows five scenarios of how consumers can use Vicinity's
products.]
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
Prospectus Summary..................... 1
Risk Factors........................... 6
Risks Related to Our Business......... 6
Risks Related to this Offering........ 15
Forward-Looking Statements............. 18
Use of Proceeds........................ 19
Dividend Policy........................ 19
Capitalization......................... 20
Dilution............................... 21
Selected Financial Data................ 22
Management's Discussion and Analysis
of Financial Condition and Results
of Operations......................... 24
</TABLE>
<TABLE>
<CAPTION>
Page
<S> <C>
Business................................................................... 32
Management................................................................. 51
Principal Stockholders..................................................... 61
Certain Transactions....................................................... 63
Description of Capital Stock............................................... 64
Shares Eligible for Future Sale............................................ 67
Underwriting............................................................... 69
Legal Matters.............................................................. 71
Experts.................................................................... 71
Available Information...................................................... 71
Index to Financial Statements.............................................. F-1
</TABLE>
---------------
In deciding whether to buy our common stock, you should rely only on the
information contained in this prospectus. To understand this offering fully,
you should read this entire prospectus carefully, including the financial
statements and notes. Individual sections of this prospectus, such as the
section entitled "Prospectus Summary," are not complete and do not contain all
of the information that you should consider before investing in our company. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. You should assume that the information appearing in this prospectus
is accurate as of the date on the front cover of this prospectus only. Our
business, financial condition, results of operations and prospects may have
changed since that date.
Until , 2000, all dealers that buy, sell or trade our common stock,
whether or not participating in this offering, may be required to deliver a
prospectus. This requirement is in addition to the dealers' obligation to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.
---------------
<PAGE>
Prospectus Summary
This summary highlights information found in greater detail elsewhere in this
prospectus. We urge you to read the entire prospectus carefully, especially the
risks of investing in our common stock discussed under "Risk Factors," before
you decide to buy our common stock.
Our Business
We are a leading provider of Internet-based marketing infrastructure
services. Our "clicks-and-mortar" solutions enable our clients to direct
consumers searching for a specific product or service to the nearest brick-and-
mortar location that carries that product or service. We have over 270 clients
with an aggregate of more than 2.5 million real world store locations. Our
growing client list includes leading companies in a number of industry segments
such as Barnes & Noble, Marriott, McDonald's, Mercedes-Benz and Nike.
While use of the Internet continues to grow rapidly and consumers are
increasingly going online to research products and services, an estimated 99%
of all retail transactions still take place at traditional brick-and-mortar
retail stores. We believe the reasons for consumers' continuing preference for
shopping in retail stores include the ability to physically inspect and compare
products, the possibility of same-day fulfillment and the relative ease with
which products can be returned to the store where purchased. In addition, many
merchants, such as restaurants, hotels and gas stations, offer goods and
services that cannot be provided online. Jupiter Communications Inc., an
industry research firm, has stated that the key to success for retailers in the
Internet age will be to find compelling ways to direct consumers researching
products online to the nearest brick-and-mortar store where they can complete a
purchase.
We provide a suite of Internet-based marketing infrastructure services
designed to help our clients turn Web traffic into store traffic. We host our
clients' store location and product information and deliver that information to
potential customers on demand via the Internet, land-line telephones, wireless
telephones and other wireless devices. We can also provide information to
potential customers concerning which items are regularly stocked at given
locations and what promotions are being offered by participating merchants.
Using our services, our clients are able to:
. Direct visitors from our clients' Web sites to the nearest store
location carrying our clients' products or services. For example, Levi
Strauss uses our Web Business Finder to direct customers from its Web
site located at www.levi.com to the nearest store that stocks a
selected model of Levi blue jeans.
. Provide customers with store and product location information via
telephone or wireless devices such as the Palm VII. For example, The
Wherehouse, Inc. uses our Telephone Business Finder to direct callers
to its toll-free number, 1-800-WHEREHOUSE, to the nearest Wherehouse
retail music store.
. Create a unique Web presence and extend local store-specific
promotions while maintaining brand integrity. For example, CarClub.com
uses our SiteMaker to permit each of its member locations to customize
individual Web sites with information such as store hours and special
promotions while maintaining control over CarClub.com's brand
integrity through the use of standard templates.
1
<PAGE>
. Provide customers with timely and relevant information about our
clients' products, services and regional promotions via electronic
mail. Our clients can distribute promotional messages to consumers
that have indicated a desire to receive these messages with our
MailMaker service that assembles, targets and delivers electronic mail
messages.
. Provide customers with timely incentives designed to motivate
purchases. Through our relationship with Prio, Inc. and other
Internet-based promotion companies, our clients can extend an "Act
Now!" promotional message to potential customers through a credit card
rebate system that eliminates the need for paper coupons and mail-in
receipts.
. Extend their Web presence through our partnerships with Inktomi
Corporation, ShopNow.com, Inc. and other Internet portals and search
engines. For example, a consumer submitting a search request to a
participating search engine will receive a list generated by our
BrandFinder of nearby stores that carry the desired product.
Our Strategy
We intend to enhance our position as a leading provider of Internet-based
marketing infrastructure services that enable our clients to direct consumers
to real world retail locations. Key elements of our strategy include the
following:
. expand our client base of large companies with established consumer
brands;
. enhance our relationships with existing clients;
. continue to develop relationships with strategic technology and
distribution partners;
. expand our international presence;
. expand our service offerings; and
. develop our transactional revenue model to receive payments based on
leads generated by, and actual sales resulting from, our services.
Our Organization
Our principal executive offices are located at 1135A San Antonio Road, Palo
Alto, California 94303, and our telephone number is (650) 237-0300. Our
corporate Web site is located at www.vicinity.com. The information contained on
our Web site does not constitute a part of this prospectus.
2
<PAGE>
The Offering
<TABLE>
<C> <S>
Common stock offered.......................... 5,000,000 shares
Common stock outstanding after this offering.. 24,235,325 shares
Use of proceeds............................... We intend to use the net
proceeds of this offering to
expand our sales and marketing
resources, including expanding
our business in Europe and
Asia, to develop new
technologies and products and
improve our technology
infrastructure and to use the
balance of the proceeds for
working capital and other
general corporate purposes.
Proposed Nasdaq National Market symbol........ "VCNT"
</TABLE>
The 24,235,325 shares of common stock outstanding after this offering is
based on the 6,119,571 shares of common stock outstanding at October 31, 1999
and includes the following:
. the conversion of all outstanding shares of our convertible preferred
stock into 12,163,373 shares of common stock upon the closing of this
offering; and
. the issuance of 952,381 shares of common stock upon the conversion of
shares of Series E Preferred Stock issued to Oak Investment Partners
VIII, L.P. and Oak VIII Affiliates Fund, L.P. in November 1999 upon the
exercise of warrants with an exercise price of $2.10 per share.
The shares of common stock outstanding after this offering exclude the
following:
. 1,426,250 shares of common stock issuable upon exercise of outstanding
stock options under our 1995 Stock Option Plan and 1996 Incentive Stock
Option Plan with a weighted average exercise price of $1.03 per share;
and
. shares of common stock issuable upon exercise of stock options to
be granted contemporaneously with the closing of this offering under our
2000 Equity Participation Plan with an exercise price equal to the price
to public listed on the cover of this prospectus.
Please see "Management--Employee Benefit Plans" and "Description of Capital
Stock."
Conventions Which Apply to this Prospectus
Unless we indicate otherwise, all information in this prospectus reflects the
following:
. our reincorporation in Delaware from California approved in October 1999
and effective in December 1999;
. the conversion of all outstanding shares of our convertible preferred
stock into 12,163,373 shares of common stock upon the closing of this
offering;
. the issuance of 952,381 shares of common stock upon the conversion of
shares of Series E Preferred Stock issued to Oak Investment Partners
VIII, L.P. and Oak VIII Affiliates Fund, L.P. in November 1999 upon the
exercise of warrants with an exercise price of $2.10 per share; and
. no exercise by the underwriters of their over-allotment option to
purchase up to 750,000 additional shares of common stock.
3
<PAGE>
References in this prospectus to the offering refer to the initial public
offering of our common stock being made by this prospectus, and references to
fiscal years refer to the fiscal year of our company ended on July 31 of that
year. We were incorporated as a California corporation in October 1995 and
reincorporated as a Delaware corporation in December 1999. Vicinity(R) and
MapBlast!(R) are registered marks of our company. Each trademark, trade name or
service mark of any other company appearing in this prospectus belongs to its
holder.
4
<PAGE>
Summary Financial Information
The following table sets forth summary financial data for our company. You
should read this information together with our financial statements and the
notes to those statements appearing elsewhere in this prospectus and the
information under "Selected Financial Data" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations." The pro forma data
set forth below give effect to the following:
. the conversion of all outstanding shares of our redeemable
convertible preferred stock into 12,163,373 shares of common stock
upon the closing of this offering; and
. the issuance of 952,381 shares of common stock upon the conversion of
shares of Series E Preferred Stock issued to Oak Investment Partners
VIII, L.P. and Oak VIII Affiliates Fund, L.P. in November 1999 upon
the exercise of warrants with an exercise price of $2.10 per share.
The pro forma as adjusted data set forth below are further adjusted to give
effect to the sale by our company of the shares of common stock offered hereby
and the application of the proceeds from this offering at an assumed initial
public offering price of $11.00 per share and after deducting underwriting
discounts and the estimated offering expenses payable by us.
<TABLE>
<CAPTION>
----------------------------------------------------------
Three Months Ended
Year Ended July 31, October 31,
----------------------------------- ---------------------
In thousands, except per 1997 1998 1999 1998 1999
share data ----------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues:
License and hosting
fees.................. $ 1,419 $ 4,386 $ 5,657 $ 1,244 $ 2,166
Service and transaction
fees.................. -- 424 767 248 365
----------- ---------- ---------- --------- ---------
Total revenues........ 1,419 4,810 6,424 1,492 2,531
Gross profit (loss)..... (557) 1,963 2,475 618 920
Loss from operations.... (6,347) (2,469) (5,464) (651) (2,927)
Net loss................ (6,238) (2,481) (5,515) (669) (2,872)
Net loss applicable to
common stockholders.... (6,621) (2,999) (6,553) (798) (3,374)
Basic and diluted net
loss per share......... $ (1.61) $ (1.00) $ (1.67) $ (0.21) $ (0.71)
Weighted average shares
outstanding used in
basic and diluted net
loss per share
calculation............ 4,102 2,986 3,913 3,813 4,745
Pro forma basic and
diluted net loss per
share (1).............. $ (0.50) $ (0.20)
Weighted average shares
outstanding used in pro
forma basic and diluted
net loss per share
calculations (1)....... 13,150 16,889
</TABLE>
<TABLE>
<CAPTION>
-----------------------------
As of October 31, 1999
-----------------------------
Pro Forma
As
Actual Pro Forma Adjusted
-------- --------- ---------
<S> <C> <C> <C>
In thousands
Balance Sheet Data:
Cash and cash equivalents........................ $ 6,663 $ 8,663 $58,663
Working capital.................................. 2,521 4,521 54,521
Total assets..................................... 11,415 13,415 63,415
Deferred revenue................................. 4,754 4,754 4,754
Capital lease obligations, excluding current
portion......................................... 524 524 524
Redeemable convertible preferred stock and
warrants........................................ 23,655 -- --
Total stockholders' equity (deficit)............. $(19,676) $ 5,979 $55,979
</TABLE>
- ------------------
(1) The pro forma basic and diluted net loss per share reflect the effect of
the conversion of the weighted average number of shares of the redeemable
convertible preferred stock as if the shares were converted as of the date
of issuance.
5
<PAGE>
Risk Factors
Any investment in our common stock involves a high degree of risk. You should
consider carefully the following information about these risks, together with
the other information contained in this prospectus, before you decide to buy
our common stock. If any of the following risks actually occurs, our business,
results of operations or financial condition would likely suffer. In addition,
the market price of our common stock could decline, and you may lose all or
part of the money you paid to buy our common stock.
Risks Related to our Business
Our business is difficult to evaluate because we have a limited operating
history.
Our company was founded in October 1995, and our initial revenues were
derived from providing maps, driving directions and directory services. In
early 1997, we refocused our business strategy on our Business Finder service.
Accordingly, we have a limited operating history from which you can evaluate
our present business and future prospects. As a relatively new entrant to the
Internet-based marketing services business, we face risks and uncertainties
relating to our ability to implement our business plan successfully. Our
prospects must be considered in light of the risks, expenses and difficulties
frequently encountered by companies in their early stage of development,
particularly companies in new and rapidly evolving markets such as the
Internet. If we are unsuccessful in addressing these risks and uncertainties,
our business, results of operations, financial condition and prospects will be
materially adversely affected.
We have a history of losses and negative cash flows and anticipate continued
net losses because we intend to continue to invest in developing our business.
We have not generated enough revenues to exceed the substantial amounts we
have spent to develop our business. We incurred a net loss of approximately
$5.5 million in fiscal 1999, $2.5 million in fiscal 1998 and $6.2 million in
fiscal 1997. As of October 31, 1999, we had an accumulated deficit of
approximately $18.0 million. We expect to continue to lose money for the
foreseeable future because we plan to continue to incur significant expenses as
we expand our sales and marketing resources, including expanding our business
in Europe and Asia, and develop new technologies and products and improve our
technology infrastructure. Moreover, we base current and future expense levels
on our operating plans and our estimates of future revenues. If our revenues
grow at a slower rate than we anticipate, or if our spending exceeds our
expectations or cannot be adjusted to reflect slower revenue growth, we may not
generate sufficient revenues to achieve profitability. If we do achieve
profitability, we may be unable to sustain or increase profitability on a
quarterly or annual basis in the future.
Our business is subject to quarterly fluctuations in operating results which
may negatively impact the price of our common stock.
You should not rely on quarter-to-quarter comparisons of our operating
results as an indication of future performance. It is possible that in some
future periods our quarterly operating results may fall below the expectations
of public market analysts and investors. In this event, the price of our common
stock is likely to fall.
Our quarterly net loss was approximately $2.9 million for the fiscal quarter
ended October 31, 1999, $2.4 million for the fiscal quarter ended July 31,
1999, $1.5 million for the fiscal quarter ended April 30, 1999 and $0.9 million
for the fiscal quarter ended January 31, 1999. We expect our net loss to
increase over the next several quarters because we plan to continue to incur
significant expenses as
6
<PAGE>
we expand our sales and marketing resources, including expanding our business
in Europe and Asia, and develop new technologies and products and improve our
technology infrastructure. However, our quarterly operating results may
fluctuate significantly in the future due to a variety of factors. These
factors include the following, which are generally outside of our control:
. competition in the markets for our services;
. the demand for Internet-based marketing infrastructure services and
seasonal trends relating to marketing spending;
. our ability to protect our systems from telecommunications failures,
power loss or equipment or software-related system failures; and
. economic conditions specific to the Internet as well as general
economic and market conditions.
Other factors which may cause our quarterly operating results to fluctuate
significantly which are at least partially under our control include:
. the rate of new customer acquisitions;
. whether revenues related to new customer acquisitions are recognized
currently or deferred over future time periods;
. the timing and effectiveness of our development of new services;
. the timing and effectiveness of potential strategic alliances; and
. changes in our operating expenses.
In addition, our operating expenses are based on our expectations of our
future revenues and some of our operating expenses are relatively fixed in the
short term, including personnel costs, data support expenses and the cost of
licensing necessary information. We may be unable to reduce our expenses
quickly enough to offset any revenue shortfall.
We rely on increased demand and market acceptance of Internet-based marketing
solutions.
Our future success is highly dependent on an increase in the use of the
Internet as a marketing medium. If demand for Internet-based marketing services
fails to develop or develops more slowly than we expect, we may not generate
sufficient revenues to achieve profitability. The market for Internet-based
marketing services is new and rapidly evolving, and it cannot yet be compared
with traditional marketing media to gauge its effectiveness. Companies that
have historically relied on traditional marketing methods may be reluctant or
slow to adopt online marketing. As a result, demand and market acceptance for
Internet-based marketing solutions cannot yet be determined. Many of our
current and potential clients have little or no experience using the Internet
for marketing purposes and may allocate only a limited portion of their
marketing budgets to the Internet. Companies that have invested substantial
resources in traditional methods of marketing may be reluctant to reallocate
those resources to online marketing. In addition, companies that have invested
a significant portion of their marketing budget in online marketing may decide
after a time to return to more traditional methods if they find that online
marketing is a less effective method of promoting their products and services
than traditional marketing methods.
7
<PAGE>
We will continue to dedicate significant resources toward developing new
clients in Europe and Asia; any success in these efforts may prove not to have
been worth the associated expense.
Our current business plan includes expanding into Europe and Asia. To date,
we have limited experience in marketing our services internationally, and we
cannot predict our success in these international markets. In order to expand
overseas, we intend to enter into relationships with foreign businesses, and we
cannot predict whether those relationships will be successful. Our plans to
expand internationally are subject to inherent risks, including:
. the impact of economic fluctuations in economies outside of the United
States;
. greater difficulty in accounts receivable collection and longer
collection periods;
. unexpected changes in regulatory requirements, tariffs and other trade
barriers;
. difficulties and costs of staffing and managing foreign operations due
to distance, as well as language and cultural differences;
. political instability, currency exchange fluctuations and potentially
adverse tax consequences; and
. reduced protection for intellectual property rights outside the United
States.
We cannot predict whether the expansion of our business internationally will be
successful. The results of our efforts may prove not to have been worth the
associated expense and opportunity cost.
Historically, we have depended on a limited number of services for most of our
revenues.
Historically, we have derived most of our revenues from our Web Business
Finder, maps, driving directions and directory services, which represented
approximately 78% of our revenues in the fiscal quarter ended October 31, 1999,
86% of our revenues in fiscal 1999 and 91% of our revenues in fiscal 1998. Our
results of operations would be materially and adversely affected by a reduction
in demand or a change in the pricing structure for these services.
We have relied on our ability to sell existing customers additional services to
generate revenue and the continued growth of our business depends on our
ability to continue to do so in the future.
Much of our past sales growth is the result of selling additional services to
existing clients. Our growth strategy depends on the introduction of new
services that we hope to sell to our existing clients. We may not develop any
of these new services in a cost-effective and timely manner, and we have
insufficient experience with these new service offerings to know whether they
will be well received by our clients. Any new service we introduce that is not
favorably received could damage our relationships with our clients. If our
existing clients decide to maintain their current level of service and not
upgrade to additional services, we will fall short of our projected sales and
would have to cultivate new sales opportunities, which may be expensive and
might not materialize. In fiscal 1999 and the fiscal quarter ended October 31,
1999, AutoTrader.com accounted for approximately 11% and 3%, respectively, of
our revenues.
We may be unable to maintain our current pricing structure because our business
is changing rapidly as are the services that we provide.
Our current business model is to provide marketing infrastructure services to
our business clients. We may not achieve an acceptable level of profitability,
or become profitable at all, if our
8
<PAGE>
clients' marketing executives do not perceive that the use of our services will
improve the effectiveness of their marketing campaigns or if they are otherwise
unable to generate a significant return on investment from using our products
and services. Internet-based marketing services are relatively new and unproven
and may not achieve widespread customer acceptance. To be successful, we must
adapt to our rapidly changing market by continually enhancing the technologies
used in our services and introducing new technology to address the changing
needs of our clients. Under our current pricing structure, clients pay for our
services through set-up and annual fees. There is a risk that competition with
respect to products and services we provide will eventually result in very low
prices for our products and services. If we are unable to maintain an adequate
pricing structure, we will not generate sufficient revenues to achieve and
maintain profitability.
Our business is dependent on the continuous, reliable and secure operation of
our databases and the related services that we provide, and a system failure
could negatively impact our business.
Our operations are dependent on our ability to maintain our databases,
servers and communications equipment in effective working order and to protect
them from fire, natural disaster, sabotage, power loss, telecommunications
failure, human error or similar events. Although we maintain back-up data at a
second site, a system failure or natural disaster could significantly disrupt
our operations. Any system failure, including a network, software or hardware
failure, that causes an interruption in the performance of our products and
services or a decrease in responsiveness of our services could result in lost
clients, reduced revenue and harm to our reputation. Despite the implementation
of security measures and standard operating procedures, our infrastructure may
also be vulnerable to computer viruses, hackers, human error or similar
problems caused by our employees, clients or Internet users. A party who is
able to circumvent our security measures could misappropriate proprietary
database information or cause interruptions in our operations. As a result, we
may be required to expend significant capital and other resources to help
protect against, or to alleviate problems caused by, these security breaches.
Our insurance may not adequately compensate us for any losses that may occur
due to any failure in our system or interruption in our service. In addition,
the growth of our business may strain the capacity of our computers and
telecommunications systems. If we are unable to maintain or upgrade our
systems, they could fail or suffer a degradation in performance. Any damage,
failure or delay that causes significant interruption in our databases or other
systems would adversely affect our operating results and could cause the price
of our common stock to decline.
Our current business plan depends in significant part on third party
relationships, many of which are short-term or terminable.
We presently rely on our arrangements with strategic partners, including
Inktomi and Netopia, to provide key services, marketing opportunities,
technologies, clients and users. These arrangements can be terminated by our
partners in some circumstances. If our relationships with our strategic
partners were terminated, we would have to adapt our operations or business
plan, which may take time and may interrupt the provision of affected services.
In addition, many companies that we may approach for a strategic relationship
in the future may have conflicting relationships with others. As a result,
these companies may be reluctant to enter into strategic relationships with us.
If we do not establish additional, and maintain existing, strategic
relationships on commercially reasonable terms or if our strategic
relationships do not result in an increase in the number of users of our
services, we may be unable to continue to offer existing products or to develop
new products and we may not experience a significant portion of the anticipated
growth in our clients and the number of end-users of our services.
9
<PAGE>
As a result, we may not generate sufficient revenues to achieve profitability,
and the price of our common stock is likely to fall. In addition, strategic
relationships may be difficult to implement and may not provide the anticipated
benefits.
We are dependent on a limited number of third parties for a significant portion
of our geographic data.
Our products and services rely on the availability and accuracy of geographic
data. We have licensed a significant portion of our geographic data from a
limited number of sources through non-exclusive, short-term contractual
arrangements. If any of these third parties were to merge or be acquired, the
number of sources providing this geographic data would be further reduced.
Given the short terms of our geographic data licenses, we will have to
renegotiate our contracts in the foreseeable future which may result in
contractual terms that are not as favorable to us as our existing data
licenses. If we cannot maintain these data licenses or any other third-party
license arrangement on commercially reasonable terms, the accuracy of our
services may suffer.
If we are unable to generate fast and accurate responses to queries, the
marketability of our services will be reduced.
If we are unable to generate responses quickly or if the responses we
generate are not accurate, the marketability of our services will be reduced
and we may experience a decline in the number of users of our services. The
accuracy of our services is substantially dependent on the accuracy of data
that we license from third parties. We plan to update our geographic databases
periodically. However, in view of the complexity of updating multiple
databases, revising software and the need to obtain geographic data for address
information from third parties, we may not be able to perform these updates as
planned. This could harm our business, financial condition and results of
operations.
We have recently experienced and currently anticipate rapid growth in our
business, and any inability to manage this growth could harm our business.
In order to execute our business plan, we must grow significantly. The number
of our employees grew from 49 as of October 31, 1998 to 121 as of December 10,
1999. We expect that the number of our employees will continue to increase for
the foreseeable future, in particular with respect to persons engaged in
product development, professional services and sales activities. This growth
has placed, and our anticipated future growth combined with the requirements we
will face as a public company will continue to place, a significant strain on
our management systems and resources. We expect that we will need to continue
to improve our financial and managerial controls and reporting systems and
procedures. We will also need to continue to expand and maintain close
coordination among our technical, finance, sales and marketing groups.
We will not be able to execute our business plan if we cannot increase our
direct and indirect sales channels.
We will need to expand substantially our direct and indirect sales
operations, both domestically and internationally, in order to increase market
awareness and sales of our products. Our products and services require a
sophisticated sales effort targeted at several people within our prospective
clients' organizations. We have recently expanded our direct sales force and
plan to hire additional sales personnel. Competition for qualified sales
personnel is intense, and we might not be able to hire the kind and number of
sales personnel we are targeting. In addition, we believe that our future
success is dependent upon establishing and maintaining productive relationships
with a variety of distribution
10
<PAGE>
partners, resellers, systems integrators and joint marketing partners. We
cannot be sure that we will be successful in signing up desired partners or
that our partners will devote adequate resources or have the technical and
other sales capabilities to sell our products.
Similarly, the complexity of our products and the difficulty of installing
them require highly trained customer service and support personnel. We
currently have a small customer service and support organization, and we will
need to increase our staff to support new services, new customers and the
expanding needs of existing customers. Competition for customer service and
support personnel is intense in our industry due to the limited number of
people available with the necessary technical skills and understanding of the
Internet.
Acquisitions or strategic investments may disrupt or otherwise have a negative
impact on our business.
We may acquire or make investments in complementary businesses, technologies,
services or products, or enter into strategic partnerships with parties who can
provide access to those assets, if appropriate opportunities arise. From time
to time we have had discussions and negotiations with companies regarding our
acquiring, investing in or partnering with their businesses, products, services
or technologies, and we regularly engage in these discussions and negotiations
in the ordinary course of our business. Some of those discussions also
contemplate the other party making an investment in our company. We may not
identify suitable acquisition, investment or strategic partnership candidates,
or if we do identify suitable candidates, we may not complete those
transactions on commercially acceptable terms or at all. If we acquire another
company, we could have difficulty in assimilating that company's personnel,
operations, technology and software. In addition, the key personnel of the
acquired company may decide not to work for us. If we make other types of
acquisitions, we could have difficulty in integrating the acquired products,
services or technologies into our operations. These difficulties could disrupt
our ongoing business, distract our management and employees and increase our
expenses. Furthermore, we may incur indebtedness or issue equity securities to
pay for any future acquisitions. The issuance of equity securities would dilute
the ownership interests of the holders of our common stock. As of the date of
this prospectus, we have no agreement to enter into any material investment or
acquisition transaction.
We face competition and may face future competition from companies with
different business strategies which could cause us to lower our prices or to
lose a significant portion of our market share.
We may be unable to compete successfully with current or future competitors.
We face competition from many companies, both traditional and online. Increased
competition could result in price reductions for our services, reduced gross
margins and loss of our market share. In fiscal 1998, we lost our then largest
client, Yahoo!, due to price competition with a competitor that continues to
provide map and driving direction services to Yahoo!.
Many of our existing competitors, as well as potential future competitors,
have longer operating histories, greater name recognition, larger customer
bases and significantly greater financial, technical and marketing resources
than our company. These advantages may allow them to respond more quickly and
effectively to new or emerging technologies and changes in customer
requirements. It may also allow them to engage in more extensive research and
development, undertake farther-reaching marketing campaigns, adopt more
aggressive pricing policies and make more attractive offers to potential
employees and strategic partners. One or more of these companies could adopt a
different
11
<PAGE>
business strategy for achieving profitability which could allow them to charge
fees that are lower than ours in order to attract clients. In addition, current
and potential competitors have established or may establish cooperative
relationships among themselves or with third parties to increase the ability of
their products or services to address the needs of our current and prospective
clients.
Online marketing is a rapidly developing industry, and new types of products
and services may emerge that are more attractive to consumers and marketers
than the types of services we offer. As a result, it is possible that new
competitors may emerge and rapidly acquire significant market share. See
"Business--Competition."
Without the continued growth in use of the Internet and wireless devices, we
may not experience a significant portion of the growth currently anticipated.
Our future success is substantially dependent upon continued growth and use
of the Internet and wireless devices such as cellular telephones. Rapid growth
in the use of and interest in the Internet and wireless devices is a relatively
recent phenomenon and may not continue to grow at their current rates. Internet
usage may be inhibited for any of the following reasons:
. the inability of Web sites to provide security and authentication of
confidential information contained in transmissions over the Internet;
and
. the inability of Web sites to respond to privacy concerns of potential
users, including concerns related to the placement by Web sites of
information, so-called cookies, on a user's hard drive without the
user's knowledge or consent.
Even if the Internet and wireless services continue to experience significant
growth in the number of users and level of use, the Internet and wireless
services infrastructures may not be able to support the demands placed upon
them by this growth. Our success and the viability of the Internet and wireless
services as information media and commercial marketplaces will depend in large
part upon the development of robust telecommunications infrastructure for
providing Internet access and carrying Internet and wireless traffic. If the
use of the Internet and wireless services do not continue to grow, if the
necessary telecommunications infrastructure or complementary products are not
developed or do not effectively support growth that may occur or if the
Internet and wireless services do not become viable information media and
commercial marketplaces, we may not experience a significant portion of the
growth currently anticipated and the price of our common stock is likely to
fall.
We face a competitive labor market for highly skilled employees which we must
attract, retain and motivate in order to execute our growth plan.
Our future success depends on our ability to attract, train, motivate and
retain highly skilled employees. Competition for employees among Internet and
software companies is intense, particularly in the Silicon Valley area in which
our headquarters are located. We may be unable to retain our key employees or
attract, assimilate or retain other highly qualified employees in the future.
We have from time to time in the past experienced, and we expect to continue to
experience in the future, difficulty in hiring and retaining highly skilled
employees with appropriate qualifications. The inability to attract additional
qualified personnel could disrupt the implementation of our growth strategy
upon which the success of our business depends.
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<PAGE>
We are highly dependent on the acceptance and effectiveness of the Internet as
a medium for consumer transactions.
The future success of a number of our products and services is dependent in
large part on an increase in the use of the Internet for business transactions
with consumers. The electronic commerce market is new and rapidly evolving and
the extent of consumer acceptance of the Internet cannot yet be determined. If
a sufficiently broad base of consumers do not accept the use of the Internet
for transacting business, our business, financial condition and results of
operations could be materially and adversely affected.
If we fail to protect our intellectual property rights or face a claim of
intellectual property infringement by a third-party, we could lose our
intellectual property rights or be liable for significant damages.
Our success depends significantly upon our proprietary technology. We
currently rely on a combination of copyright and trademark laws, trade secrets,
confidentiality procedures and contractual provisions to protect our
proprietary rights. Our employees are generally required to execute
confidentiality and assignment agreements which transfer any rights they may
have in copyrightable works or patentable technologies to us. In addition,
prior to entering into discussions with strategic partners, we generally
require that these parties enter into a non-disclosure agreement. If these
discussions result in a license or other business relationship, we also
generally require that the agreement setting forth the parties' respective
rights and obligations include provisions for the protection of our
intellectual property rights. Our failure to enter into these agreements when
appropriate or our inability to enforce our rights under one or more of these
agreements could jeopardize our ability to protect our intellectual property.
This could materially and adversely affect our business.
We have applied for registration of a number of service marks and trademarks,
including "Vicinity," "Business Finder" and "MapBlast!," in the United States
and in other countries, and will seek to register additional service marks and
trademarks, as appropriate. We may be unsuccessful in obtaining the service
marks and trademarks for which we have applied. We may not be granted any
patent with respect to our technology, and any patent which is granted may be
challenged or invalidated. We may not develop proprietary products or
technologies that are patentable, and any issued patent may not provide us with
any competitive advantages or withstand challenges by third parties. In
addition, the patents of others may adversely affect our ability to conduct our
business. Despite our efforts to protect our proprietary rights, unauthorized
parties may copy aspects of our products or services or obtain and use
information that we regard as proprietary. The laws of some foreign countries
do not protect proprietary rights to as great an extent as do the laws of the
United States, and we do not currently have any patents or patent applications
pending in any foreign country. Our means of protecting our proprietary rights
may not be adequate, and our competitors may independently develop similar
technology or duplicate our products or design around patents issued to us or
our other intellectual property rights. Our failure to protect our proprietary
rights adequately or our competitors' successful duplication of our technology
could harm our operating results and cause the price of our common stock to
decline.
Litigation over intellectual property rights could disrupt or otherwise have a
negative impact on our business.
There has been frequent litigation in the computer industry regarding
intellectual property rights. We have in the past been subject to claims
regarding the alleged intellectual property rights of third
13
<PAGE>
parties. In fiscal 1999, we entered into a settlement agreement and agreed to
pay $440,500 for a patent license with respect to an intellectual property
rights claim. Third parties may make additional claims of infringement by us
with respect to current or future products, trademarks or other proprietary
rights. These claims could be time-consuming, result in costly litigation,
divert our management's attention, cause product or service release delays,
require us to redesign our products or services or require us to enter into
costly royalty or licensing agreements.
Privacy concerns may adversely affect our ability to implement our Internet
solutions.
Web sites and Internet ad servers typically place a small file commonly known
as a "cookie" on a user's hard drive, generally without the user's knowledge or
consent. In the future, we may introduce products and services that are
dependent on the use of cookies to collect, sort and analyze information about
Internet users. Most currently available Internet browsers allow users to
modify their browser settings to prevent cookies from being stored on their
hard drive or to delete cookies at any time. In addition, some Internet
commentators and privacy advocates have suggested limiting or eliminating the
use of cookies. The effectiveness of our services would be greatly limited by a
significant reduction or limitation in the use of cookies. In addition, privacy
concerns may cause some Web users to be less likely to visit Web sites that use
cookies. If enough Web users choose not to visit sites that use cookies, our
ability to sell our future products and services that are dependent on the use
of cookies would be adversely affected and could require us to alter or adjust
our business plan.
Legislation or regulations may be adopted that could affect our ability to
generate or use information for profiles and may hinder our ability to conduct
business.
The legal and regulatory environment governing the Internet and the use of
information about Internet users is constantly evolving. United States
legislators in the past have introduced a number of bills aimed at regulating
the collection and use of personal data from Internet users and additional
similar bills may be considered during any congressional session. Although we
believe no current legislation has had a material adverse effect on our
business, it is possible that a bill may be enacted into law that negatively
affects our ability to collect and use data about Internet users or that
otherwise affects our business. The European Union has recently adopted a
directive addressing data privacy that may result in limitations on the
collection and use of specific personal information regarding Internet users.
In addition, Germany has imposed its own laws protecting data that can become
personally identifiable through subsequent processing. Other countries may also
enact limitations on the use of personal data.
To date, these regulations have not materially restricted the use of our
products. However, legislation or regulations may in the future be adopted
which may limit our ability to target advertising or collect and use
information in one or more countries. Further, a number of laws and regulations
have been and may be adopted covering issues such as pricing, acceptable
content, taxation and quality of products and services on the Internet. This
legislation could dampen the growth in use of the Internet generally and
decrease the acceptance of the Internet as a communications and commercial
medium. In addition, due to the global nature of the Internet, it is possible
that multiple federal, state or foreign jurisdictions might inconsistently
regulate our activities or the activities of ad networks or Web sites.
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<PAGE>
Risks Related to this Offering
Our management will have broad discretion in using the proceeds from this
offering and therefore investors will be relying on the judgment of our
management to invest those funds effectively.
We intend to use the net proceeds of this offering to expand our sales and
marketing resources, including expanding our business in Europe and Asia, to
develop new technologies and products and improve our technology infrastructure
and for working capital and other general corporate purposes. The amounts and
timing of these expenditures will vary significantly depending upon a number of
factors, including the amount of cash generated by our operations, the progress
of our services development activities and the market response to introduction
of any new services. In addition, we may use a portion of the net proceeds from
this offering to acquire or invest in businesses, products, services or
technologies complementary to our current business, through mergers,
acquisitions, joint ventures or otherwise. However, we have no specific
agreements or commitments and are not currently engaged in any negotiations
with respect to these transactions. Accordingly, our management will retain
broad discretion with respect to the expenditure of proceeds. Investors will be
relying on the judgment of our management regarding the application of the
proceeds of this offering.
We may be unable to raise additional financing.
We may need to raise additional funds in the future in order to implement our
business plan, to fund more aggressive marketing programs or to acquire
complementary businesses, technologies or services. Any required additional
financing may be unavailable on terms favorable to us, or at all. If we raise
additional funds by issuing equity securities, you may experience significant
dilution of your ownership interest and these securities may have rights senior
to those of the holders of our common stock. If additional financing is not
available when required or is not available on acceptable terms, we may be
unable to fund our expansion, develop or enhance our products and services,
take advantage of business opportunities or respond to competitive pressures.
Market prices of emerging Internet companies have been highly volatile, and the
market for our stock may exhibit volatility as well.
The financial markets have experienced significant price and volume
fluctuations, and the market prices of technology companies, particularly
Internet-related companies, have been and continue to be extremely volatile.
Volatility in the price of our common stock may be caused by factors outside of
our control and may be unrelated or disproportionate to our operating results.
In the past, following periods of volatility in the market price of a public
company's securities, securities class action litigation has often been
instituted against that company. Securities class action litigation could
result in substantial costs and a diversion of our management's attention and
resources.
We have negative net book value for accounting purposes, and new investors will
suffer immediate and substantial dilution in the tangible net book value of
their shares.
The purchase price of the common stock offered by this prospectus will be
substantially higher than the tangible book value of our outstanding common
stock. Any shares you purchase in this offering will have a post-closing net
tangible book value of $8.69 per share less than the initial public offering
price paid, assuming an initial public offering price of $11.00 per share.
Investors who purchase common stock in this offering will therefore experience
immediate and significant dilution in the tangible net book value of their
investment. For additional information regarding dilution to investors in our
common stock, please see "Dilution."
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The large number of shares eligible for public sale after this offering could
cause our stock price to decline.
The market price of our common stock could decline as a result of sales of a
large number of shares after this offering or the perception that sales could
occur. The large number of shares eligible for sale might make it more
difficult for us to sell common stock in the future at a time and at a price
that we deem appropriate. After this offering, we will have an aggregate of
24,235,325 shares outstanding. Of the outstanding shares, the 5,000,000 shares
sold in this offering will be freely tradable, other than shares purchased by
our affiliates. The remaining shares may be sold only pursuant to a
registration statement under the Securities Act or an exemption from the
registration requirements of the Securities Act. After the closing of this
offering, holders of 16,682,100 shares of common stock will be entitled to
demand and piggyback registration rights with respect to the registration of
their shares under the Securities Act. For additional information regarding
these registration rights, please see "Description of Capital Stock--
Registration Rights" and "Shares Eligible for Future Sale." Each of our
directors and executive officers and several of our current stockholders has
agreed not to offer, sell or agree to sell, directly or indirectly, or
otherwise dispose of any equity shares without the prior written consent of
J.P. Morgan Securities, Inc. for a period of 180 days from the date of this
prospectus. For additional information regarding possible future sales of our
securities, please see "Underwriting" and "Shares Eligible for Future Sale."
We do not plan to pay dividends in the foreseeable future.
We do not anticipate paying cash dividends to the holders of our common stock
in the foreseeable future. Accordingly, investors must rely on sales of their
common stock after price appreciation, which may never occur, as the only way
to realize on their investment. Investors seeking cash dividends should not
purchase our common stock.
A third party's ability to acquire us might be more difficult because of anti-
takeover provisions in our certificate of incorporation and bylaws.
We are authorized to issue five million shares of undesignated preferred
stock. Our Board of Directors has the authority to issue the preferred stock in
one or more series and to fix the price, rights, preferences, privileges and
restrictions thereof, including dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption, redemption prices, liquidation
preferences and the number of shares constituting a series or the designation
of any series, without any further vote or action by our stockholders. The
issuance of preferred stock, while providing desirable flexibility in
connection with possible acquisitions and other corporate purposes, could have
the effect of delaying, deferring or preventing a change in control of our
company without further action by our stockholders and may adversely affect the
market price of our common stock and the voting and other rights of our
stockholders. The issuance of preferred stock with voting and conversion rights
may adversely affect the voting power of the holders of our common stock,
including the loss of voting control to others. We have no current plans to
issue any shares of preferred stock.
Provisions of our Certificate of Incorporation and Bylaws eliminate the right
of stockholders to act by written consent without a meeting, eliminate the
right of stockholders to call a special meeting of stockholders, specify
procedures for nominating directors and submitting proposals for consideration
at stockholder meetings and provide for a staggered Board of Directors, so that
no more than three directors could be replaced each year and it would take
three successive annual meetings to replace all directors. These provisions are
intended to enhance the likelihood of continuity and stability in the
composition of our Board of Directors and in the policies formulated by our
Board of Directors and to discourage some transactions which may involve an
actual or threatened change of control of our
16
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company. These provisions are designed to reduce the vulnerability of our
company to an unsolicited acquisition proposal and, accordingly, could
discourage potential acquisition proposals and delay or prevent a change in
control of our company. These provisions are also intended to discourage
tactics that may be used in proxy fights but could, however, have the effect of
discouraging others from making tender offers for our common stock and,
consequently, may also inhibit fluctuations in the market price of our common
stock that could result from actual or rumored takeover attempts. These
provisions may also have the effect of preventing changes in the management of
our company.
Many corporate actions will be controlled by officers, directors and affiliated
entities regardless of the opposition of other investors or the desire of other
investors to pursue an alternative course of action.
We anticipate that the executive officers, directors and entities affiliated
with them will, in the aggregate, beneficially own approximately 43.0% of our
outstanding common stock following the completion of this offering. These
stockholders, if acting together, would be able to significantly influence all
matters requiring approval by our stockholders, including the election of
directors and the approval of mergers or other business combination
transactions. See "Principal Stockholders."
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Forward-looking Statements
This prospectus contains forward-looking statements that involve substantial
risks and uncertainties. You can identify these statements by forward-looking
words such as "may," "will," "expect," "intend," "anticipate," "believe,"
"estimate" and "continue" or similar words. You should read statements that
contain these words carefully because they discuss our future expectations,
contain projections of our future results of operations or of our financial
condition or state other forward-looking information. We believe that it is
important to communicate our future expectations to our investors. However,
there may be events in the future that we are not able to predict or control.
The factors listed in the sections captioned "Risk Factors" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations," as
well as any cautionary language in this prospectus, provide examples of risks,
uncertainties and events that may cause our actual results to differ materially
from the expectations we describe in our forward-looking statements. Before you
invest in our common stock, you should be aware that the occurrence of the
events described in the "Risk Factors" section and the "Management's Discussion
and Analysis of Financial Condition and Results of Operations" section and
elsewhere in this prospectus could have a material adverse effect on our
business, operating results and financial condition.
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Use of Proceeds
The net proceeds to us from the sale of the shares offered by this
prospectus, after deducting underwriting discounts and the estimated offering
expenses, are estimated to be approximately $50 million ($58 million if the
underwriters' over-allotment option is exercised in full), assuming an initial
public offering price of $11.00 per share. We currently estimate that we will
use the net proceeds of this offering as follows:
. approximately $ million to expand our sales and marketing resources,
including expanding our business in Europe and Asia;
. approximately $ million to develop new technologies and products and
improve our technology infrastructure; and
. the balance of the proceeds of this offering for working capital and
other general corporate purposes.
In addition, we may use a portion of the net proceeds from this offering to
acquire or invest in businesses, products, services or technologies
complementary to our current business through mergers, acquisitions, joint
ventures or otherwise. However, we have no specific agreements or commitments
and are not currently engaged in any negotiations with respect to these
transactions.
In order to expand our sales and marketing resources, we intend to hire and
train significant additional sales and marketing personnel in the United
States, Europe and Japan. In addition, we plan to increase spending on
advertising, marketing and public relations projects in order to increase
awareness of our company and services and to attract new clients and partners.
In order to develop new technologies and products, we intend to hire and train
additional engineering personnel, to develop and license additional software
and technology and to purchase or license additional information content
consistent with our business strategy. In order to develop our technology
infrastructure, we intend to develop or license new software applications, to
purchase additional computer hardware and to open new data centers to host our
clients' data.
We have not yet finalized the amount of net proceeds to be used specifically
for each of the foregoing purposes. Accordingly, our management will have
significant flexibility in applying the net proceeds of this offering. Pending
any use, as described above, we intend to invest the net proceeds in high
quality, interest-bearing securities. See "Risk Factors--Our management will
have broad discretion in using the proceeds from this offering and therefore
investors will be relying on the judgment of our management to invest those
funds effectively."
Dividend Policy
We have not declared or paid any cash dividends on our capital stock since
inception and do not expect to pay any cash dividends for the foreseeable
future. We currently intend to retain future earnings, if any, to finance the
expansion of our business. You should not purchase our common stock with the
expectation of receiving cash dividends.
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Capitalization
The following table sets forth, as of October 31, 1999, the cash and cash
equivalents and the capitalization of our company on an actual, pro forma and
pro forma as adjusted basis:
The pro forma data set forth below give effect to the following:
. the conversion of all outstanding shares of our redeemable convertible
preferred stock into 12,163,373 shares of common stock upon the
closing of this offering; and
. the issuance of 952,381 shares of common stock upon the conversion of
shares of Series E Preferred Stock issued to Oak Investment Partners
VIII, L.P. and Oak VIII Affiliates Fund, L.P. in November 1999 upon
the exercise of warrants with an exercise price of $2.10 per share.
The pro forma as adjusted data set forth below are further adjusted to give
effect to the sale by our company of the shares of common stock offered hereby
and the application of the proceeds from this offering at an assumed initial
public offering price of $11.00 per share and after deducting underwriting
discounts and the estimated offering expenses payable by us. This information
should be read in conjunction with our financial statements and the notes
relating to our financial statements appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
--------------------------------
As of October 31, 1999
--------------------------------
Pro Forma
Actual Pro Forma As Adjusted
In thousands, except per share data -------- --------- -----------
<S> <C> <C> <C>
Cash and cash equivalents...................... $ 6,663 $ 8,663 $58,663
======== ======== ========
Capital lease obligations, excluding current
portion....................................... $ 524 $ 524 $ 524
Redeemable convertible preferred stock; $0.001
par value; 12,520 shares authorized; 11,567
shares issued and outstanding actual; no
shares issued and outstanding pro forma or pro
forma as adjusted............................. 23,655 -- --
Stockholders' equity (deficit):
Preferred stock, $0.001 par value, 5,000
shares authorized; no shares issued and
outstanding actual, pro forma or pro forma
as adjusted................................. -- -- --
Common stock, $0.001 par value, 22,000
shares authorized actual and pro forma;
75,000 shares authorized pro forma as
adjusted; 6,120 shares issued and
outstanding actual; 19,235 shares issued
and outstanding pro forma; and 24,235
shares issued and outstanding pro forma as
adjusted.................................... 6 19 24
Additional paid-in capital................... (432) 26,073 76,068
Deferred stock-based compensation............ (1,897) (1,897) (1,897)
Notes receivable from employees upon
purchase of stock........................... (213) (213) (213)
Accumulated deficit.......................... (18,003) (18,003) (18,003)
-------- -------- --------
Total stockholders' equity (deficit)...... (19,676) 5,979 55,979
-------- -------- --------
Total capitalization.................... $ 4,503 $ 6,503 $ 56,504
======== ======== ========
</TABLE>
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Dilution
Our pro forma net tangible book value as of October 31, 1999 was $5.9 million
or $0.31 per share of common stock. Pro forma net tangible book value per share
is equal to the amount of our total tangible assets (total assets less
intangible assets) less total liabilities, divided by the pro forma number of
shares of common stock outstanding as of October 31, 1999. Assuming the sale by
us of the shares offered by this prospectus at an assumed initial public
offering price of $11.00 per share and after deducting underwriting discounts
and the estimated offering expenses payable by us, our as adjusted pro forma
net tangible book value as of October 31, 1999 would have been $56.0 million,
or $2.31 per share of common stock. This represents an immediate increase in
pro forma net tangible book value of $2.00 per share to existing stockholders
and an immediate dilution in pro forma net tangible book value of $8.69 per
share to new investors. The following table illustrates this per share
dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................. $11.00
Pro forma net tangible book value per share as of October 31,
1999......................................................... $(0.31)
Pro forma increase in net tangible book value attributable to
new investors................................................ 2.00
------
Pro forma net tangible book value per share after this
offering....................................................... 2.31
------
Pro forma dilution per share to new investors................... $ 8.69
======
</TABLE>
The following table summarizes, on a pro forma basis as of October 31, 1999,
the total number of shares of common stock purchased from us, the total
consideration paid to us and the average price per share paid by existing
stockholders and by new investors purchasing shares in this offering:
<TABLE>
<CAPTION>
-----------------------------------------------------
Shares Purchased Total Consideration
------------------ -------------------- Average Price
Number Percent Amount Percent Per Share
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.... 20,661,575 80.5% $25,460,821 31.6% $ 1.23
New investors............ 5,000,000 19.5 55,000,000 68.4 $11.00
---------- ---- ------------ ----
Total.................. 25,661,575 100% $ 80,460,821 100%
========== ==== ============ ====
</TABLE>
The foregoing tables and calculations give effect to the following:
. the issuance of 952,381 shares of common stock upon the conversion of
shares of Series E Preferred Stock issued to Oak Investment Partners
VIII, L.P. and Oak VIII Affiliates Fund, L.P. in November 1999 upon the
exercise of warrants with an exercise price of $2.10 per share; and
. the issuance of 1,426,250 shares of common stock issuable upon exercise
of stock options outstanding as of October 31, 1999 under our 1995 Stock
Option Plan and 1996 Incentive Stock Option Plan with a weighted average
exercise price of $1.03 per share. Please see "Management--Employee
Benefit Plans" and "Description of Capital Stock."
21
<PAGE>
Selected Financial Data
The following selected financial data should be read in conjunction with the
financial statements and the notes to our financial statements and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus. The statement of operations
data for the fiscal years ended July 31, 1997, 1998 and 1999, and the balance
sheet data as of July 31, 1998 and 1999, are derived from our audited financial
statements included elsewhere in this prospectus. The statement of operations
data for the period ended July 31, 1996 and the balance sheet data at July 31,
1996 and 1997 are derived from audited financial statements not included in
this prospectus. The statement of operations data for each of the three-month
periods ended October 31, 1998 and 1999 and the balance sheet data as of
October 31, 1999 are derived from our unaudited interim financial statements
included elsewhere in this prospectus. In management's opinion, the unaudited
financial statements have been prepared on substantially the same basis as the
audited financial statements and include all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the results
of operations for these periods. Historical results are not indicative of the
results to be expected in the future.
<TABLE>
<CAPTION>
------------------------------------------------------------
October 15, Three Months
1995 Ended October
(inception) Year Ended July 31, 31,
to July 31, ------------------------------- --------------
In thousands, except per 1996 1997 1998 1999 1998 1999
share data ----------- --------- --------- --------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
License and hosting
fees.................. $ 20 $ 1,419 $ 4,386 $ 5,657 $1,244 $2,166
Service and transaction
fees.................. -- -- 424 767 248 365
------ --------- --------- --------- ------ ------
Total revenues........ 20 1,419 4,810 6,424 1,492 2,531
Cost of revenues........ 9 1,976 2,847 3,949 874 1,611
------ --------- --------- --------- ------ ------
Gross profit (loss)..... 11 (557) 1,963 2,475 618 920
Operating expenses:
Product development.... 285 1,703 1,551 1,748 339 681
Sales and marketing.... 298 2,959 1,676 3,588 568 2,203
General and
administrative........ 297 1,128 1,205 1,995 362 766
Other.................. -- -- -- 441 -- --
Stock-based
compensation.......... -- -- -- 167 -- 197
------ --------- --------- --------- ------ ------
Total operating
expenses............. 880 5,790 4,432 7,939 1,269 3,847
------ --------- --------- --------- ------ ------
Loss from operations.... (869) (6,347) (2,469) (5,464) (651) (2,927)
Other expense (income),
net.................... (5) (109) 12 51 18 (55)
------ --------- --------- --------- ------ ------
Net loss................ (864) (6,238) (2,481) (5,515) (669) (2,872)
Net loss applicable to
common stockholders.... (898) (6,621) (2,999) (6,553) (798) (3,374)
Basic and diluted net
loss per share........ $(0.20) $ (1.61) $ (1.00) $ (1.67) $(0.21) $(0.71)
Weighted average shares
outstanding used in
basic and diluted net
loss per share
calculations........... 4,458 4,102 2,986 3,913 3,813 4,745
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------
As of July 31, As of
------------------------------------------ October
1996 1997 1998 1999 31, 1999
In thousands --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents............ $ 1,015 $ 912 $ 264 $ 9,060 $ 6,663
Working capital......... 931 (106) (2,381) 4,220 2,521
Total assets............ 1,509 1,623 1,821 13,203 11,415
Deferred revenue........ 114 885 2,477 4,955 4,754
Capital lease
obligations, excluding
current portion........ -- -- -- 298 524
Redeemable convertible
preferred stock and
warrants............... 2,094 7,454 7,972 21,403 23,655
Total stockholders'
deficit................ $ (890) $ (7,512) $ (10,287) $ (16,569) $ (19,676)
</TABLE>
23
<PAGE>
Management's Discussion and Analysis
Financial Condition and Results of Operations
The following discussion of the financial condition and results of operations
of our company should be read in conjunction with the financial statements and
the notes to those statements included elsewhere in this prospectus. This
discussion contains forward-looking statements that involve risks and
uncertainties. Please see "Risk Factors."
Overview
We are a leading provider of Internet-based marketing infrastructure
services. Our clients use our services to direct consumers searching for a
specific product or service to the nearest brick-and-mortar store that carries
that product or service. Our company was formed in October 1995, and our
initial revenues were derived from providing maps, driving directions and
directory services to regional telephone companies and large portal companies.
In fiscal 1997, we restructured our company by cutting staff and expenses,
hiring a new chief executive officer and refocusing our strategy on our
Business Finder service.
In fiscal 1998, we grew our clients from 102 companies to 193 companies as a
result of the continued concentration of our efforts on Business Finder. We
continued to increase our revenues in fiscal 1998 despite the loss of our
biggest customer at the time, Yahoo!. In fiscal 1999, we recruited additional
key members of our management team and expanded our product offerings to
include Telephone Business Finder, SiteMaker and Print Maps. Historically, we
have generated substantially all of our revenues from our Web Business Finder,
maps, driving directions and directory services.
We have not achieved profitability on a quarterly or annual basis and expect
to continue to incur net losses for the foreseeable future. We anticipate
incurring significant sales and marketing, product development and
administrative expenses as we continue to expand our product offerings and
attempt to build our customer base.
Revenue Recognition
We primarily derive revenue from license and hosting fees. These revenues are
recognized ratably over the life of the contract, which typically has one year,
non-refundable terms. Service and transaction fees consist of revenue generated
from project related professional services and to a lesser degree from
advertising, sponsorship and e-commerce transactions. These revenues are
recognized as the services are performed. We have no barter agreements, and no
revenues have been derived from barter transactions to date.
Deferred revenue consists of customer payments received and accounts
receivable recorded in advance of recognizing revenue for license and hosting
revenues.
Stock-based Compensation Expense
As of October 31, 1999, we recorded deferred stock-based compensation expense
aggregating $2.3 million for the difference at the date of grant between the
exercise price and the fair value of the common stock underlying stock options
granted in fiscal 1999 and the first quarter of fiscal 2000. Of this amount, we
recognized $0.2 million in fiscal 1999 and $0.2 million in the fiscal quarter
ended October 31, 1999. In addition, we expect to recognize $0.8 million in the
remainder of fiscal 2000, $0.6 million in fiscal 2001 and $0.5 million in later
years.
24
<PAGE>
Results of Operations
Comparison of three months ended October 31, 1999 to three months ended October
31, 1998
Revenues. In the three months ended October 31, 1999, we had $2.5 million in
total revenues, compared to $1.5 million for the three months ended October 31,
1998, representing an increase of $1.0 million, or 70%. Revenues associated
with license and hosting fees were $2.2 million in the three months ended
October 31, 1999, compared to $1.2 million in the three months ended October
31, 1998, representing an increase of $1.0 million, or 74%. Our service and
transaction fees were $0.4 million in the three months ended October 31, 1999.
The increase in license and hosting fees revenues was primarily attributable to
growth in our customer base due to increased market acceptance in our targeted
markets.
Deferred revenues as of October 31, 1999, were $4.8 million, compared to $2.7
million as of October 31, 1998, representing an increase of $2.1 million, or
74%.
Cost of Revenues. These costs include salaries and benefits of our operations
personnel, the cost of acquiring data and content, the leasing and depreciation
costs of our computer hosting equipment and Internet connection and data center
charges. Cost of revenues was $1.6 million for the three months ended October
31, 1999, compared to $0.9 million for the three months ended October 31, 1998,
representing an increase of $0.7 million, or 84%. This increase was due to
increases in headcount to support our business growth, the expansion of our
data centers with related increases in equipment costs and additions to our set
of content providers.
Product Development. This expense consists primarily of salaries and
benefits, consulting expenses and equipment costs. To date, we have expensed
all product development costs as incurred. Product development expense was $0.7
million for the three months ended October 31, 1999, compared to $0.3 million
for the three months ended October 31, 1998, representing an increase of $0.4
million, or 100%. This increase was primarily attributable to increases in
personnel and personnel-related costs due to our expanded product offerings. We
expect our product development expense to increase, albeit at a slower rate
than that experienced during the latter half of fiscal 1999, as we continue to
add members to our product development teams.
Sales and Marketing. This expense consists primarily of salaries,
commissions, promotions costs and advertising and travel-related expenses.
Sales and marketing expense was $2.2 million for the three months ended October
31, 1999, compared to $0.6 million for the three months ended October 31, 1998,
representing an increase of $1.6 million, or 288%. This increase was primarily
attributable to increases in personnel, personnel-related costs, promotion and
advertising to support our expanded sales and marketing efforts. We expect our
sales and marketing expense to continue to increase as a result of the
aggressive expansion of our sales and marketing efforts both domestically and
internationally.
General and Administrative. This expense consists primarily of salaries and
related costs of our executive, administrative, finance and human resources
personnel as well as professional services fees. General and administrative
expense was $0.8 million for the three months ended October 31, 1999, compared
to $0.4 million for the three months ended October 31, 1998, representing an
increase of $0.4 million, or 112%. This increase was primarily attributable to
an increase in personnel and personnel-related costs to support and grow our
business including developing our human resources organization and contracting
with recruiters to support our aggressive hiring plans. We expect general
25
<PAGE>
and administrative expenses to grow as additional personnel are hired and
additional expenses are incurred in connection with the growth of our business
and our operation as a public company.
Stock-Based Compensation. Stock-based compensation expense was $0.2 million
for the three months ended October 31, 1999. There was no stock-based
compensation expense in the three months ended October 31, 1998.
Comparison of fiscal 1999 to fiscal 1998
Revenues. In fiscal 1999, we had $6.4 million in total revenues, compared to
$4.8 million for fiscal 1998, representing an increase of $1.6 million, or 34%.
Revenues associated with license and hosting fees were $5.7 million in fiscal
1999, compared to $4.4 million in fiscal 1998, representing an increase of $1.3
million, or 29%. Our service and transaction fees were $0.8 million in fiscal
1999, compared to $0.4 million in fiscal 1998, representing an increase of $0.4
million, or 81%. These increases were primarily attributable to growth in our
customer base due to increased market acceptance in our targeted markets and
the need for customized development work associated with that customer growth.
We grew our clients from 193 companies as of August 1, 1998 to 237 companies as
of July 31, 1999.
Deferred revenues as of July 31, 1999 were $5.0 million, compared to $2.5
million as of July 31, 1998, representing an increase of $2.5 million, or 100%.
Cost of Revenues. Cost of revenues was $3.9 million for fiscal 1999, compared
to $2.8 million for fiscal 1998, representing an increase of $1.1 million, or
39%. This increase was due to increases in each of the elements described above
to support our revenue growth.
Product Development. Product development expense was $1.7 million for fiscal
1999, compared to $1.6 million for fiscal 1998, representing an increase of
$0.1 million, or 13%. This increase was primarily attributable to increases in
personnel and personnel-related costs due to our expanded product offerings.
Sales and Marketing. Sales and marketing expense was $3.6 million for fiscal
1999, compared to $1.7 million for fiscal 1998, representing an increase of
$1.9 million, or 114%. This increase was primarily attributable to increases in
personnel and personnel-related costs to support our expanded sales and
marketing efforts.
General and Administrative. General and administrative expense was $2.0
million for fiscal 1999, compared to $1.2 million for fiscal 1998, representing
an increase of $0.8 million, or 66%. This increase was primarily attributable
to an increase in personnel and personnel-related costs to support and grow our
business.
Other. This expense was $0.4 million for fiscal 1999 representing a charge to
settle a patent infringement claim and obtain a perpetual license. There was no
similar expense for fiscal 1998.
Stock-Based Compensation. Stock-based compensation expense was $0.2 million
for fiscal 1999. There was no stock-based compensation expense in fiscal 1998.
Comparison of fiscal 1998 to fiscal 1997
Revenues. In fiscal 1998, we had $4.8 million in total revenues, compared to
$1.4 million for fiscal 1997, representing an increase of $3.4 million, or
239%. Revenues associated with license and hosting fees were $4.4 million in
fiscal 1998, compared to $1.4 million in fiscal 1997, representing an
26
<PAGE>
increase of $3.0 million, or 209%. Our service and transaction fees were $0.4
million in fiscal 1998. We had no service and transaction fees in fiscal 1997.
The increase in service and transaction fees was primarily attributable to the
change in our business strategy from maps, driving directions and directory
services to Internet-based marketing infrastructure services with the related
need for professional services.
Deferred revenues as of July 31, 1998 were $2.5 million, compared to $0.9
million as of July 31, 1997, representing an increase of $1.6 million, or 178%.
Cost of Revenues. Cost of revenues was $2.8 million for fiscal 1998, compared
to $2.0 million for fiscal 1997, representing an increase of $0.8 million, or
44%. This increase was primarily attributable to an increase in leasing and
depreciation costs of our computer hosting equipment, the cost of acquiring
content and salaries and benefits of operating personnel associated with our
revenue growth.
Product Development. Product development expense was $1.6 million for fiscal
1998, compared to $1.7 million for fiscal 1997, representing a decrease of $0.1
million, or 9%. This decrease was primarily attributable to a decrease in
personnel and personnel-related costs associated with the restructuring of our
business in fiscal 1997 and our refocused business strategy.
Sales and Marketing. Sales and marketing expense was $1.7 million for fiscal
1998, compared to $3.0 million for fiscal 1997, representing a decrease of $1.3
million, or 43%. This decrease was primarily attributable to a decrease in
personnel and personnel-related costs associated with the restructuring of our
business in fiscal 1997 and our refocused business strategy.
General and Administrative. General and administrative expense was $1.2
million for fiscal 1998, compared to $1.1 million for fiscal 1997, representing
an increase of $0.1 million, or 7%. This increase was primarily attributable to
an increase in consulting and professional services costs required to support
our business realignment.
27
<PAGE>
Quarterly Results of Operations Data
The following table sets forth unaudited quarterly statement of operations
data for each of the nine quarters ended October 31, 1999. In the opinion of
management, this data has been prepared substantially on the same basis as the
audited financial statements appearing elsewhere in this prospectus, including
all necessary adjustments, consisting only of normal recurring adjustments
necessary for a fair presentation of this data. The quarterly data should be
read in conjunction with our financial statements and the notes to our
financial statements appearing elsewhere in this prospectus. We expect our net
loss to increase over the next several quarters because we plan to continue to
incur significant expenses as we expand our sales and marketing resources,
including expanding our business in Europe and Asia, and develop new
technologies and products and improve our technology infrastructure. In view of
the rapidly evolving nature of our business and our limited operating history,
we believe that period-to-period comparisons of revenues and operating results
are not necessarily meaningful and should not be relied upon as indications of
future performance.
------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended,
--------------------------------------------------------------------------------------------------
October 31, January 31, April 30, July 31, October 31, January 31, April 30, July 31, October 31,
In thousands, except 1997 1998 1998 1998 1998 1999 1999 1999 1999
per share data ----------- ----------- --------- -------- ----------- ----------- --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of
Operations Data:
Revenues:
License and
hosting fees....... $ 877 $1,107 $1,203 $1,199 $1,225 $1,352 $ 1,336 $1,744 $ 2,166
Service and
transaction fees... 69 103 75 177 267 69 91 340 365
----- ------ ------ ------ ------ ------ ------- ------- -------
Total revenues..... 946 1,210 1,278 1,376 1,492 1,421 1,427 2,084 2,531
----- ------ ------ ------ ------ ------ ------- ------- -------
Cost of revenues..... 603 699 679 866 874 907 1,035 1,133 1,611
----- ------ ------ ------ ------ ------ ------- ------- -------
Gross profit (loss).. 343 511 599 510 618 514 392 951 920
Operating expenses:
Product
development........ 379 420 400 352 339 403 427 578 681
Sales and
marketing.......... 362 362 411 541 568 606 970 1,445 2,203
General and
administrative..... 218 261 257 468 362 425 448 760 766
Other............... -- -- -- -- -- -- -- 441 --
Stock-based
compensation....... -- -- -- -- -- 3 29 135 197
----- ------ ------ ------ ------ ------ ------- ------- -------
Total operating
expenses.......... 959 1,043 1,068 1,361 1,269 1,437 1,874 3,359 3,847
----- ------ ------ ------ ------ ------ ------- ------- -------
Loss from
operations.......... (616) (532) (469) (851) (651) (923) (1,482) (2,408) (2,927)
Interest expense
(income)............ (10) 5 4 14 18 5 8 20 (55)
----- ------ ------ ------ ------ ------ ------- ------- -------
Net loss............. $(606) $ (537) $ (473) $ (865) $ (669) $ (928) $(1,490) $(2,428) $(2,872)
===== ====== ====== ====== ====== ====== ======= ======= =======
</TABLE>
As a result of our limited operating history, we do not have historical
financial data for a significant number of periods on which to base planned
operating expenses. Quarterly revenues and operating results depend
substantially on the rate of new customer acquisitions, whether the related
revenues are recognized immediately or deferred over future time periods, the
timing and effectiveness of our development of new services, the timing and
effectiveness of any strategic alliances into which we enter and changes in our
operating expenses. Accordingly, these factors could have a material adverse
effect on our business, results of operations and financial condition. We may
be unable to adjust spending in a timely manner to compensate for any
unexpected revenue shortfall, and any significant shortfall in revenue in
relation to our expectations would have an immediate adverse effect on our
business, results of operation and financial condition. Due to the foregoing
factors, it is possible that in some future periods our operating results may
be below the expectations of public market analysts and investors. In this
event, the price of our common stock may underperform or fall.
28
<PAGE>
Liquidity and Capital Resources
Since inception, we have financed our operations primarily through the
private placement of equity securities, raising an aggregate of approximately
$23.2 million, including approximately $10.4 million in July and August 1999.
As of October 31, 1999, we had cash and cash equivalents of $6.7 million. In
fiscal 1998, we obtained a $1.0 million line of credit with a variable interest
rate that was approximately 8.5% as of October 31, 1999. This debt was
guaranteed by CMGI, Inc., an affiliate of our largest stockholder,
CMG@Ventures, and secured by our assets. The original line of credit was due to
expire in May 1999 but was extended an additional three months to expire in
August 1999. As of October 31, 1999, there was no outstanding balance on this
line of credit. We are currently in the process of negotiating a new line of
credit. We currently have $2.4 million in equipment financing outstanding with
an equipment leasing company. In August 1999, we entered into an agreement with
another equipment financing company for an additional $4.0 million equipment
leasing line.
Cash used in operating activities was $5.3 million in fiscal 1997, $1.7
million in fiscal 1998, $3.5 million in fiscal 1999 and $2.6 million in the
three months ended October 31, 1999. These increases in cash used in operating
activities were primarily due to increased net losses. Cash provided by
investing activities was $219,000 in fiscal 1997, and cash used in investing
activities was $8,000 in fiscal 1998, $214,000 in fiscal 1999 and $545,000 in
the three months ended October 31, 1999. These increases in cash used in
investing activities were primarily due to infrastructure expansion to meet our
growth and capital expenditures for computers and other equipment for our data
centers. Cash provided by financing activities was $5.0 million in fiscal 1997,
$1.1 million in fiscal 1998, $12.6 million in fiscal 1999 and $0.7 million in
the three months ended October 31, 1999. The increases in cash provided by
financing activities in fiscal 1997 and fiscal 1999 were primarily related to
the sale of preferred stock. In fiscal 1998, the increase in cash provided by
financing activities primarily reflects bank borrowings and, to a lesser
degree, the sale of common stock warrants. The increase in cash provided by
financing in the three months ended October 31, 1999 primarily reflects the
sale of preferred stock offset in large part by the repayment of our
outstanding bank loan balance of $1.0 million.
As part of our business strategy, we intend to invest significant amounts of
capital over the next 12 to 24 months to expand our sales and marketing
resources, including expanding our business in Europe and Asia, and to develop
new technologies and products and improve our technology infrastructure.
Future capital requirements will depend upon many factors, including the rate
of expansion of our sales and marketing resources and the timing and magnitude
of our research and product development efforts. We expect to continue to
expend significant amounts on expansion of facility infrastructure, computers
and related data center equipment, as well as personnel. We believe that our
cash and cash equivalents balances and funds available under our existing line
of credit, together with the proceeds of this offering, will be sufficient to
satisfy our cash requirements for at least the next 12 months. We intend to
invest our excess cash in high quality, interest-bearing securities.
Qualitative and Quantitative Disclosures About Market Risk
We develop products in the United States and market our products in North
America and Europe. As a result, our financial results could be affected by
factors such as changes in foreign currency exchange rates or weak economic
conditions in foreign markets. Since all of our sales are currently
29
<PAGE>
made in U.S. dollars, a strengthening of the dollar could make our products
less competitive in foreign markets.
Our interest income is sensitive to changes in the general level of U.S.
interest rates, particularly since the majority of our investments are in
short-term instruments. Due to the short-term nature of our investments, we
believe that we are not subject to any material market risk exposure.
Impact of the Year 2000
Many currently installed computer systems and software products are coded to
accept or recognize only two digit entries in the date code field. These
systems may recognize a date using "00" as the year 1900 rather than the year
2000. As a result, computer systems and/or software used by many companies and
governmental agencies may need to be upgraded to comply with Year 2000
requirements or risk system failure or miscalculations causing disruptions of
normal business activities.
State of Readiness
Costs. To date, we have not incurred any material costs in identifying or
evaluating Year 2000 compliance issues. Most of our expenses have related to
the operating costs associated with time spent by employees in the evaluation
and completion of our Year 2000 compliance process, including identification of
significant IT and non-IT systems, upgrades performed on any non-compliant
systems, completion of the assessment of material third party relationships as
well as various Year 2000 failure scenarios and other Year 2000 compliance
matters generally.
Risks. We have completed an assessment of the Year 2000 readiness of our
operating and administrative systems and the third-party software, hardware and
services used to host our services. Our assessment plan consisted of:
. contacting third-party vendors of material software, hardware and
services that are both directly and indirectly related to the
delivery of our services;
. assessing and testing components of our systems and repairing or
replacing components as required based on our assessments and tests;
and
. though no Year 2000 problems have occurred to date, reviewing
contingency plans involving engineering and production support in the
event of an unanticipated Year 2000 failure.
Vendors of material software, hardware and services have indicated that the
products used by us are currently Year 2000 compliant. We are not currently
aware of any internal Year 2000 compliance problems that could reasonably be
expected to have a material adverse effect on our business, results of
operations and financial condition, without taking into account our efforts to
avoid or fix these problems. However, we may discover Year 2000 compliance
problems in our computer infrastructure that will require substantial revisions
or replacements. In addition, third-party software, hardware or services
incorporated into our material systems or other systems upon which we are
reliant may need to be revised or replaced, which could be time consuming and
expensive.
In addition, governmental agencies, utility companies, Internet access
companies, third-party service providers and others outside of our control may
not be Year 2000 compliant. The failure by these entities to be Year 2000
compliant could result in a systemic failure beyond our control, such as a
prolonged Internet, telecommunications or electrical failure, which could also
prevent us from delivering our services, decrease the use of the Internet or
prevent users from accessing databases we
30
<PAGE>
maintain on our servers, any of which would have a material adverse effect on
our business, results of operations and financial condition.
Contingency Plan
As discussed above, we have completed our Year 2000 assessment and have
developed contingency plans. The results of our analyses and the responses
received from third-party vendors and service providers have been taken into
account to revise our contingency plans.
Impact of Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board, or FASB, issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No.
133 establishes accounting and reporting standards for derivative instruments,
including derivative instruments embedded in other contracts, and for hedging
activities. SFAS No. 133, as amended by SFAS No. 137, is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000. To date, we have
not entered into any derivative financial instruments or hedging activities.
31
<PAGE>
Business
The following description of our business should be read in conjunction with
the information included elsewhere in this prospectus. This description
contains forward-looking statements that involve risks and uncertainties. Our
actual results could differ significantly from the results discussed in these
forward-looking statements as a result of the factors set forth in "Risk
Factors" and elsewhere in this prospectus. The Jupiter Communications,
International Data Corporation, Forrester Research and Harris Interactive,
market data presented below and elsewhere in this prospectus are estimates
derived by them from a combination of vendor, user and other market sources and
therefore may differ from numbers claimed by specific vendors using different
market definitions or methods. There can be no assurance that any of these
projected amounts will be achieved.
Overview
We are a leading provider of Internet-based marketing infrastructure
services. Our "clicks-and-mortar" solutions enable our clients to direct
consumers searching for a specific product or service to the nearest brick-and-
mortar location that carries that product or service. Our services are
currently utilized by more than 270 companies with an aggregate of more than
2.5 million real world locations. Our growing client list includes leading
companies in a number of industry segments such as Barnes & Noble, Marriott,
McDonald's, Mercedes-Benz and Nike.
We use our expertise in designing and maintaining complex databases to
provide a suite of Internet-based marketing infrastructure services, ranging
from store locators for clients with a few hundred locations to the design and
maintenance of complex, multi-attribute databases for clients with millions of
product records that include information such as regularly stocked products and
current promotional offers.Through our strategic relationships with major
search engine, portal and wireless companies, we use store location and product
data to offer transaction-based lead generation services to our clients. Using
our services, our clients are able to direct potential customers to the nearest
store location, introduce those customers to a local retailer's Web site and
provide customers with timely incentives designed to motivate a purchase. Our
solutions enable our clients to take advantage of the marketing potential of
the Internet while recognizing that an estimated 99% of all retail transactions
still take place in traditional brick-and-mortar stores.
Industry Background
The Internet and its Impact on Traditional Retailing
The Internet is a very important element in commerce. Together with other
relatively new communications mediums such as wireless telephones and other
wireless devices, the Internet is reshaping the way consumers and businesses
obtain and disseminate information, purchase goods and transact business.
Jupiter Communications Inc., an industry research firm, estimates that 157
million Americans, representing 56% of the U.S. population, will use the
Internet by the end of 2003. International Data Corporation, or IDC, an
industry research firm, estimates that the total number of Internet users
worldwide will surpass 502 million by 2003. The Internet is accessible from an
increasing range of devices. IDC projects that over 93 million Internet-enabled
appliances will be sold during the four-year period from 1999 to 2002 and that
the annual shipments of Internet appliances will surpass shipments of personal
computers within the next six years.
People frequently go online to research products for possible purchase.
According to Jupiter Communications, 72% of Internet users use the Web to
research products and services, with only electronic mail and search engines
attracting a higher percentage of Internet users. In response,
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consumer products companies and national chains have established Web sites to
promote their brands. This has resulted in a proliferation of Web sites where
businesses provide information, market goods and services and conduct business.
To support this growth, Forrester Research, an industry research firm,
estimates that retailers will increase their spending on outsourced Internet-
related services from $10.6 billion in 1999 to $64.8 billion in 2003.
While retailers are increasingly focusing attention on the Internet, the
overwhelming majority of consumer spending still occurs in traditional brick-
and-mortar locations. Forrester Research estimates that $20.2 billion will be
spent online for retail products and services in 1999, representing less than
one percent of estimated total retail spending for the year. Forrester Research
estimates that annual online retail spending will increase to $184 billion by
2004, representing seven percent of the estimated total retail spending for
that year. Thus even with enormous projected growth in online commerce,
Forrester Research predicts that online spending will remain only a small part
of total retail spending. We believe the reasons for consumers' continuing
preference for "real world" shopping include the ability to physically inspect
and compare products, the possibility of same-day fulfillment and the relative
ease with which products can be returned to the store where purchased. In
addition, many merchants, such as restaurants, hotels and gas stations, offer
goods and services that cannot be provided online. These merchants require
customers to visit a physical location to complete a transaction.
Challenge for Retailers
The challenge for retailers and consumer product companies is to determine
how best to respond to the growth of the Internet. Although a large number of
traditional retail brands are on the Web with basic information and
advertising, consumer research has identified the benefits of connecting
individuals who are using the Internet to research products with real world
store locations. A recent consumer survey conducted by Jupiter Communications
reported that 51% of people who research products or services online do not use
the Internet to make purchases. However, Jupiter Communications found that
approximately 83% of consumers who shop online indicated that online research
at least occasionally influences their purchases off-line. Jupiter concluded
that the key to success for retailers in the Internet age will be to find
compelling ways to direct consumers researching products online to the nearest
brick-and-mortar store where they can complete a purchase. Advocates of
integrating a retailer's online presence with its real world presence have
dubbed this approach "clicks-and-mortar."
One clicks-and-mortar strategy for a retailer is to provide product
information to potential customers online and then direct those customers to
convenient store locations that carry a desired product. Existing consumer
awareness of national brands and traditional off-line marketing and advertising
efforts already combine to direct consumers to the Web sites maintained by
these companies. Once on a brand's Web site, consumers can be motivated to make
a purchase and, if a consumer prefers to transact business off-line, directed
to the nearest store carrying the brand's products. In many cases, retailers
prefer that transactions be completed in physical stores where shoppers can be
exposed to other product offerings. According to Harris Interactive, an
industry research firm, Internet shoppers spend twice as much money off-line
when they first browse for specific products online and spend four to nine
times as much money off-line on products which they researched on the Internet.
Retailers are under increasing pressure to develop strategies that will
enable them to capitalize on the opportunities created by the Internet quickly
and effectively. While most established retailers have begun Internet
initiatives, Jupiter Communications found that few retailers have found ways to
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allow online and off-line channels to work together with synergy. Forrester
Research estimates that firms seeking to improve their communications with
online consumers will increase spending on outsourced marketing services from
$422 million in 1999 to over $6.2 billion in 2002.
Our Solution
We provide a suite of Internet-based marketing infrastructure services to our
business clients. We host our clients' store location and product information
and deliver that information to potential customers on demand over the
Internet, land-line telephones, wireless telephones or other wireless devices.
Using our services, our clients are able to direct potential customers to the
nearest store location, introduce those consumers to local retailers through
store-specific Web sites, display product and product availability information
and provide a timely incentive to motivate potential customers to make a
purchase.
Our services provide the necessary infrastructure for companies to exploit
the growing potential of Internet marketing while leveraging their real world
presence. Our Internet-based marketing infrastructure services link traditional
off-line marketing programs, such as advertising and direct mail, to online Web
marketing initiatives.
Our services offer the following features and benefits to our clients:
. Clicks-and-Mortar Solution. Our services provide our clients a means
of directing online consumers who are interested in purchasing our
clients' products to local brick-and-mortar stores where the
overwhelming majority of transactions still occur.
. Expanded Lead Generation. Our services extend the reach of our
clients' Internet presence by providing a link through major portals
and search engines to consumers using the Internet to research
products and services prior to making a purchase decision.
. Multiple Platform Access. Our services enable potential customers to
access information regarding our clients' products and services not
only over the Internet, but also via land-line telephones, wireless
telephones and other wireless devices, such as the Palm VII.
. Local Web Marketing with Brand Integrity. Our SiteMaker product allows
each of our clients' locations to create a unique Web presence and
extend local store specific promotions while maintaining national
brand integrity.
. Cost Efficient Outsourced Services. Our automated services provide our
clients' customers with accurate and easy to use location, product and
product availability information on demand 24 hours per day, seven
days per week.
. Rapid Deployment. We are able to deploy our clicks-and-mortar
infrastructure solutions in an average of three to four weeks.
. Reporting and Feedback. Our record-keeping and reporting features
allow our clients to refine their online marketing approach and
effectively coordinate and evaluate off-line marketing efforts.
Finally, our location and product information provide consumers researching
products and services with the information that they need to choose the most
convenient means of purchasing goods or services. In some cases, our services
offer consumers the option of buying online or buying off-line.
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Strategy
Key elements of our business strategy include:
Expand Our Client Base
We currently target large companies with established consumer brands that
offer their products or services in multiple locations. Our sales channels
include our direct sales force and our international channel partners. We
intend to expand our direct sales force and our network of channel partners
both to refer business to us and to sell our services under private-label
arrangements. We will also continue to maintain strong relationships with
advertising, promotional and Web marketing agencies that often incorporate our
services into the projects they manage for their clients.
Enhance Relationships with Clients
Working closely with our clients and select partners, we have recently
developed several new offerings that are designed to extend the capabilities of
the services that we already provide to our more than 270 clients. Several
clients utilizing our core Web Business Finder Service have recently licensed
our Telephone Business Finder and Wireless Business Finder products. In
September 1999, we launched our SiteMaker product which enables each location
within a national chain to have a unique Web site and to extend local store
specific promotions. In December 1999, we launched our MailMaker product which
enables our clients to deliver customized marketing messages through electronic
mail. These and other product offerings are designed to allow us to enhance our
relationships with clients.
Continue to Develop Relationships with Strategic Partners
Our technology expertise and strong customer base have allowed us to attract
numerous partners with whom we have agreed to co-develop and co-market new
products and services. In June 1999, we entered into an agreement with Inktomi
to provide our services as part of the "local" section of their shopping engine
product. Shortly thereafter, we entered into an agreement with Prio to develop
and market an Internet-based program that provides consumers incentives to make
purchases. This partnership extends our clients' Web presence beyond their Web
sites by allowing product searches (e.g., "blue jeans") on major portals to
return local stores that carry our clients' products (e.g., Levi's). We intend
to continue to identify and develop mutually beneficial partnerships with
search engines, major portals, wireless data providers and other strategic
partners.
Expand International Presence
Our multinational clients have reacted to the world-wide growth in Internet
use by requesting application of our services in markets outside the United
States. We are responding to these requests by making our services available in
markets that support the wide-spread consumer use of Internet and wireless
devices. We launched our services in Europe in June 1999 and, as of November 1,
1999, our services are available in 12 European nations and in seven languages.
As we expand into these new markets, we plan to establish local relationships
and attract local clients. One of our first Europe-based projects was the co-
development of a travel-related Web site covering ten European countries for
Shell International Petroleum Company Limited. Forrester Research estimates
that the leading European markets will experience rapid growth in Internet
services beginning approximately two years after similar developments in the
United States and that Japan will follow approximately two years behind
Europe's leaders. In preparation for this projected growth, we have selected a
strong group of channel partners in Europe, including Aperto Multimedia in
Germany, Gruppo L'Espresso in Italy and Icon MediaLab which is well established
in several European nations. We are also in discussions with
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several potential partners within Asia and we plan to offer our services in
Japan in the first half of calendar year 2000.
Expand Product Offerings
Through internal product development and through partnerships, we have
implemented services that deliver our clients' data to potential customers
through land-line and wireless telephones and other wireless devices. We intend
to continue to develop additional products and services, tailored to the needs
of large multi-location retailers and service companies by enhancing our
technology, delivering localized content, expanding our directory services and
offering effective data management capabilities. We intend to continue to
develop new products internally and to build partnerships and work closely with
manufacturers of smart phones, automotive personal computers, and other new
devices to offer our clients' data across any capable device or platform.
Develop Transactional Revenue Model
Historically, we have generated most of our revenue through annual license
fees charged to our clients for hosting and delivery services principally
related to our core Business Finder applications. Recently we commenced
offering distribution of this same data, on behalf of our customers, across
several highly trafficked Web sites and via wireless telephones and other
wireless devices. Additionally, through our partnerships with Internet-based
promotion companies, we are beginning to deploy services that generate a
transaction-based fee as a result of driving a consumer from a national brand's
Web site to a participating local merchant's store. Finally, we can offer
similar distribution arrangements for advertisers who participate in regional
yellow pages listings.
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Vicinity Services
[GRAPHIC Upper text reads "Vicinity Product Universe." Below that is
an oval containing a five-pointed star. Text in the center of the
graphic reads "Product and Location Data." Names and brief
descriptions of Vicinity's five principal products are arranged
between the points of the star.]
Vicinity Business Finder
Business Finder uses our proprietary proximity search technology to allow a
client's customers to find the store location nearest to an address input by
the customer. Because Business Finder is able to search hundreds of attributes,
it can also be used to locate a specific product stocked at a retailer. For
example, Levi Strauss utilizes a version of Web Business Finder to direct
customers from its Web site to the nearest store that carries the specific
product the customer is searching for, such as a pair of Levi 501 blue jeans.
There are currently four search categories employed by Vicinity Business
Finder: proximity, attribute, keyword and custom. These different categories
can be used singly or in combination with each other. For example, we manage
our client AutoTrader.com's database of more than one million used automobiles
that is updated several times per day and which is searchable by location and
attribute. AutoTrader's customers are able to search the database using one or
more selected variables. As an example, an AutoTrader shopper might search for
a four-door Ford Taurus that is less than three years old, costs no more than
$12,000 and is located within five miles of the shopper's home. While we have
not yet been asked to provide the service, Business Finder is also capable of
serving as a real-time outsourced inventory management system.
We refer to our search capabilities as "boundary-less" (i.e., searches for
the nearest items without regard for boundaries such as city, state, zip code,
or latitude-longitude boundaries). This search methodology starts at a
designated point and then spirals outward to find the nearest items. We believe
this methodology to be superior to common zip code matching techniques which
can misdirect callers to locations that while in the same zip code are more
distant than locations within adjoining zip codes. This process is also
scalable and allows us to support the millions of queries that we receive per
day. While most Business Finder applications return locations in order of
proximity, some of our customers
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require other orderings, or require that searches respect dealer territory
restrictions. Business Finder has the flexibility to handle these requirements.
Web Business Finder
Web Business Finder is a private-label service incorporated into our clients'
Web sites. Though the pages viewed by customers are often hosted and served by
our servers, the end user is unaware that he has left the branded site he chose
to visit. Using Web Business Finder, our clients' customers can quickly and
easily obtain a listing of our clients' nearest store locations with the
distance to each location provided. Web Business Finder can be customized to
provide information about each location, such as its address, telephone number
or hours of operation. For example, McDonald's uses this service to indicate
whether a particular restaurant features a McDonald's Playland and to allow
customers to locate every McDonald's location along a given route. Another
client, VISX, Inc., uses our telephone and Internet services to help potential
customers interested in laser vision correction to locate VISX-certified
doctors within their community. Our clients have the option of including within
the search results dynamic maps showing a specified number of nearby locations
and customized driving directions to those locations. We currently offer Web
Business Finder services in the United States, 12 European nations and in seven
languages.
Telephone Business Finder
Telephone Business Finder gives potential customers telephone access to the
same database we maintain for each of our client's Web Business Finder service.
Telephone Business Finder provides street addresses automatically and is able
to connect a caller directly to a store or to the client's customer service
representatives. The service uses an interactive voice response system to
provide automated interaction with callers. Caller identification can be used
to instantly recognize the location of a caller and direct him to the nearest
store locations or the service can be set to allow callers to search for stores
in their locality or another area simply by entering in a zip code or telephone
area code. The Wherehouse, a chain of retail music stores, is currently
utilizing Telephone Business Finder. Callers dialing 1-800-WHEREHOUSE can find
nearby Wherehouse locations by inputting their zip code or telephone number.
Wireless Business Finder
Through our partnership with GTE Telecommunications Services, Inc., we are
developing Wireless Business Finder to identify the area in which a wireless
device user is located. Once operational, the user will be automatically
directed to the client location closest to his current position and, if
desired, connected to that store or transferred to a customer service
representative. This technology can also be used to assist human operators or
to send short text messages to advanced wireless phones and other devices.
Our clients will soon be able to further promote their brands through the use
of vanity telephone numbers whereby consumers will be able to locate nearby
merchants by dialing easy to remember telephone numbers related to the brand
name. One of the key benefits of this service will be our clients' ability to
further extend the reach of the location and product information available
through our Web Business Finder service. Since the penetration of wireless
devices currently surpasses the penetration of personal computers into U.S.
households, we believe this ability to address the wireless market will be a
distinct competitive advantage for participating branded merchants.
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Vicinity SiteMaker
SiteMaker allows each store location of a national branded chain or franchise
to create its own Web site. SiteMaker provides a national brand with increased
visibility through promotions, discounts and other marketing programs at the
local level while allowing national control over brand integrity. These Web
sites can be customized with information such as store hours, calendars and
special promotions. The sites conform to design standards mandated by the
corporate parent. Local store managers can add photographs, product graphics,
unique local content and interactive objects to their SiteMaker sites.
SiteMaker is designed to allow these changes to be made by any authorized
person, regardless of whether he or she is knowledgeable in Internet
programming languages such as HTML. We provide a unique local map for each
site. Since the sites are hosted by us, the stores are not required to maintain
any server hardware. SiteMaker is fully integrated with our Web Business
Finder. For example, CarClub.com, a comprehensive online source of automotive
information, products and services, uses a customized Business Finder to allow
visitors to its Web site to search for the appropriate CarClub.com affiliated
auto dealers, lenders, insurers or mechanics in their area. Each participating
CarClub.com merchant is able to manage and maintain its own Web site complete
with product descriptions, photographs, pricing and store location information.
We also offer a secure credit card e-commerce module for franchisees who want
to sell their products and services directly over the Internet. This approach
provides the franchiser with the ability to participate in the growth of direct
to consumer e-commerce while avoiding the channel conflict associated with
selling direct from the its corporate Web site in competition with existing
stores or franchisees.
In July 1999, we entered began to integrate purchase incentive capabilities
into SiteMaker. With this technology, Vicinity-enabled stores can extend an
"Act Now!" promotional message to potential customers by offering credit on
their MasterCard, American Express or Visa credit cards without requiring the
need to print and submit paper coupons to the merchant. This partnership adds
timeliness to our clicks-and-mortar solution. In addition to directing a
potential customer to a client's retail location, our services enable our
clients to motivate that potential customer to visit a store within a specified
time period in order to redeem a promotional offer.
Vicinity MailMaker
MailMaker is an electronic mail management tool that allows national and
local retailers to create and deliver targeted elective electronic mail
campaigns. MailMaker provides our clients with a unique opportunity to tailor
the geographic scope of their electronic mail marketing campaigns to fit their
precise needs. We believe that MailMaker will enable us to service the needs of
many companies which, in order to capitalize on the low cost and high response
rate offered by these campaigns, outsource these services to providers that can
effectively and cost-efficiently manage large or multiple lists and track
results. MailMaker allows recipients with a means to opt in or out of mailings,
to specify their preferred electronic mail format and to select topics or
categories in which they are interested.
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Vicinity BrandFinder
BrandFinder is a consumer lead generation tool that we provide to our clients
through Web sites, wireless devices and shopping engines that allows
individuals online to search a designated area for a retailer that carries a
specific branded product. The first implementation of BrandFinder was the
result of a partnership with Inktomi in which we built and host the "local"
portion of the Inktomi shopping engine. More than 20 leading portal and
destination sites, including CNET, CNNfn and American Express have signed up to
utilize the Inktomi shopping engine.
[GRAPHIC-- Text above graphic reads "the Clicks-and-Mortar
Process." On the left-hand side are three persons, to the right of
them are pictures of two devices and two Web sites that customers
can use to access our services. To the right of the devices/Web
sites is the text "BrandFinder." To the right of that, text reads
"SiteMaker" with lines pointing to "Incentive" and "E-commerce."
On the far right is a column of five pictures, showing products
consumers can find using our services.]
A consumer may utilize BrandFinder in a number of ways. For example, if an
individual is interested in purchasing a pair of blue jeans, he or she might
start out on an Internet portal powered by Inktomi by typing in a generic
search request, such as "pants," or a brand-specific request, such as "Levi's."
Alternatively, if the individual did not have current access to a computer, he
or she could make a similar request via a Palm VII, a wireless telephone
utilizing the new Wireless Applications Protocol, or WAP, or through other
Internet-enabled devices. With BrandFinder, users can instantly generate
information on a wide array of businesses from banks and cash machines, to
restaurants, gas stations and hotels.
Once a search has been initiated, BrandFinder returns a list of the stores
that carry the desired product in the area in which the individual is
searching. If the consumer is online, he or she might also be presented the
option to visit a local store's Web site powered by SiteMaker. On the store's
local Web site, the individual might be exposed to promotional incentives from
one of our partners, which, if acted on, would appear as rebates on his or her
credit card statement. BrandFinder is designed to direct consumers to one of
our clients' store locations with the benefit of the following characteristics
or information:
. the storefront offers known national brand products and services;
. the locations are the ones nearest to the address specified;
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. the locations identified carry the desired product or service;
. which of the locations is running a special offer (e.g., "Save $5!")
through a promotion sponsored by one of our partners;
. when the locations are open; and
. whether each location accepts a specified credit card.
The combination of the access to a large number of shoppers and the ability
to offer each of those shoppers a specific incentive to visit a client's retail
location leaves us well positioned to take advantage of the explosive growth of
Internet usage. We link shoppers utilizing portals to browse for their
preferred brands and the brick-and-mortar stores that carry those brands.
MapBlast! Brand Mapping Service
Our MapBlast! business unit operates a leading consumer destination site that
attracts more than 1.3 million unique users and serves more than 21 million
pages a month. In addition to providing interactive U.S. and European maps and
driving directions, the MapBlast! Web site offers information on services and
products near a user's address or travel route, lodging information and
reservation capabilities, scheduling services, traffic reports and local points
of interest. MapBlast! also provides maps and driving directions to many small
businesses and several Internet portals as well as notable destination sites
including RandMcNally.com. Our partners include Hilton Hotels, Barnes & Noble,
AvantGo, WorldRes, Inc., ShopNow.com and TimeDance. In August 1999, MapBlast!
was selected to provide driving directions on interactive ATMs located in
Texaco service stations nationwide.
Professional Services
While our regular service offerings have been designed for scalability and
ease of implementation, our clients frequently request special features and
applications that must be custom built. In addition, we help design, maintain
and manage large databases that incorporate geographic or location-based
information. For example:
. Network Solutions selected us to build and host their "dot com
directory," a database of registered domain names designed to allow
individuals to search for specific attributes such as location or site
content;
. Prio selected us to host, maintain and deliver all of the
participating store and product data for its Web-based promotions; and
. Shell International Petroleum Company selected us to co-design and
deploy a European Trip Planner Web site.
Because these projects require special skill and attention, we have recently
decided to create a professional services organization within our company to
manage these projects. Our professional services group will apply our
specialized knowledge to specific business problems and develop solutions that
would be impractical for our clients to design or implement themselves.
Services, for which we will charge on an hourly or project basis, will range
from concept development and project design of clicks-and-mortar solutions to
the tracking, data-mining and analysis of Internet users' online activity.
Strategic Relationships
A key contributor to our growth has been the ability to develop strategic
relationships with leaders in other markets. These partnerships provide us with
valuable local content as well as
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distribution outlets. These relationships also have enabled us to significantly
expand our service offerings in 1999.
Technology and Infrastructure Partners
We continuously evaluate and enter into relationships with companies who are
leaders in their respective fields when a partnership will create more value
than we can create alone. Through these relationships, we attempt to create
unique products designed to extend the power of our clicks-and-mortar service
solutions by providing new functionality to our clients, Web sites and
consumers.
Prio, Inc.
Prio is a provider of electronic commerce solutions designed to drive
commerce both online and in traditional retail environments. The Prio platform
presents personalized, valuable promotions to consumers over the Internet. In
July 1999, we entered into an agreement with Prio to integrate Prio's incentive
capabilities into our SiteMaker service. With this technology, Vicinity-enabled
stores can extend an "Act Now!" promotional message to potential customers by
offering credits on their Mastercard, American Express or Visa credit cards
without requiring the need to print and submit paper coupons to the merchant.
Prio's promotional capabilities can be used to verify that a specific user
that originated on a client's Web site or a portal partner's search engine
later consummated a purchase with a participating local merchant. With this new
infrastructure technology, national brands as well as the local merchant are
presented with the opportunity to generate qualified leads through incentives
directed at consumers using the Internet to research products and services.
Because the Prio system tracks consumers' responsiveness to various incentive
programs, participating merchants can gain valuable insight into their
customer's purchasing behavior. Our company and Prio share in transactional
fees based on the value of the promotion offered by our clients.
In December 1999, InfoSpace.com, an Internet services company, announced that
it planned to acquire Prio. We currently do not believe that InfoSpace's
acquisition of Prio will materially affect our business relationship with Prio
or the integration of Prio's incentive capabilities into our SiteMaker service
in the near term. We cannot predict, however, the long term-effects of this
transaction.
GTE Telecommunications Services, Inc.
GTE TSI provides integrated wireless solutions for more than 180 wireless
operators throughout North America, Latin America and Europe. In February 1999,
we entered into a partnership with GTE TSI to offer GTE's INPosition service
with our Wireless Business Finder. Once this service becomes operational,
callers will be able to locate nearby businesses through a system that is able
to automatically identify the caller's approximate location. Wireless Business
Finder will take advantage of new wireless infrastructure technology currently
being installed to accurately determine an emergency 911 caller's location.
Phone.com
Phone.com develops, markets and supports infrastructure software and
applications that enable the convergence of the Internet and mobile telephony.
In October 1999, in cooperation with Phone.com, we deployed BrandFinder on WAP
telephones. In addition, as a member of Phone.com's Alliances Program, we have
gained access to wireless equipment vendors around the world who we plan to
work with to distribute our content.
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Kleline
In August 1999, we entered into a set of agreements with Kleline, a
subsidiary of BNP Paribas Group, to enable us to process credit card payments
securely and cost-effectively in multiple currencies across Europe and North
America. Kleline will also act as a reseller, promoting our services to its own
customers.
US West DEX
US West DEX, the directory publishing and Internet yellow pages division of
US West, has contracted with Vicinity to give wider exposure to DEX listings
through geographically oriented search results in its various shopping and
searching services. This distribution provides extremely targeted exposure to
DEX listings.
Distribution Partners
Through our relationships with search engines, Internet portals and other
partners, we enable our clients and partners to reach a wide consumer audience.
This integration of our corporate locator content and services with major
Internet sites provides our national brand clients access to a large online
distribution network.
Inktomi
Inktomi provides search engines, online comparison shopping solutions and
network cache software to some of the world's largest Internet infrastructure
and media companies. In June 1999, we entered into a partnership with Inktomi
in which we agreed to build and host the "Local" section of Inktomi's shopping
engine, which gives online shoppers the capability to more easily find a wide
variety of products and services both online and in the real world. This
integration of our corporate locator content and services with Inktomi's
shopping engine provides our national brand clients access to a large online
distribution network while providing Inktomi a large amount of accurate local
content. More than 20 leading portal and destination sites have signed up to
use the Inktomi shopping engine.
Northern Light
Northern Light, one of the world's most comprehensive search engines, prides
itself on the accuracy and usefulness of the search results it gleans from some
5,400 sources. In March 1999, we entered into a technology development and
marketing agreement with Northern Light to deploy our GeoSearch technology
within the Northern Light search engine. GeoSearch allows Northern Light to add
a geographic component to its searches by filtering tens of millions of Web
pages based on the addresses they contain. This technology permits individuals
online to conduct proximity related searches with far greater success than the
alternative of inputting the names of all neighboring towns as keywords in the
search.
ShopNow.com
ShopNow.com provides shoppers and merchants with an online marketplace and a
broad array of e-commerce and direct marketing solutions by aggregating more
than one million products and services from more than 29,000 merchants at one
Web site that can be rapidly and efficiently searched by category, merchant or
product. ShopNow's mission is to sell anything to anyone at anytime, anywhere.
In July 1999, we entered into an agreement with ShopNow.com in which we will
provide a "go local" capability through our BrandFinder service. In other
words, if a consumer is searching for jeans, ShopNow can now present them with
an array of online jeans merchants from their own
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database and, with our services, also offer a selection of relevant real world
stores near their home. Our clients are prominently featured in this result,
bringing highly-targeted choices and offers to the consumer and valuable leads
to our clients.
Resellers
We operate an active channel partner program encouraging leading companies
worldwide to integrate our services into their own products and service
offerings or refer customers to us.
Aperto Multimedia
Aperto Multimedia is one of the leading multimedia agencies in Berlin and
provides Web marketing services to Coca-Cola, Siemens and Sony in Germany. In
June 1999, we signed a partnership establishing Aperto as one of our leading
channel partners for the German market. The companies started conducting joint
sales calls and producing German language marketing materials in July 1999.
Exodus
Exodus is a leading provider of secure communications systems and network
management solutions for enterprises with mission-critical Internet operations.
Two of our three existing data centers are located within Exodus facilities.
Since all Exodus customers with real-world stores are candidates for our
services, and because many of our customers may consider Exodus for their
Internet hosting requirements, in October 1999 our company and Exodus joined
each other's alliance partner programs. Under this arrangement, our company and
Exodus will work together to refer each party's existing customers to the
other.
Icon MediaLab
Icon MediaLab is a Web development and consulting firm, headquartered in
Stockholm with offices across Europe and in New York and San Francisco. In June
1999, Icon became a channel partner, promoting our services to its global
clients who operate real-world sales locations.
Kataweb
Kataweb is the Internet subsidiary of Gruppo Editoriale L'Espresso S.p.A.,
Italy's largest media company. In April 1999, our company and Kataweb entered
into a partnership in which we will create a searchable online classified ad
site for Gruppo L'Espresso's publishing group and expose the Italian consumer
and business markets to our technology and capabilities. Kataweb also agreed to
become a channel partner and is utilizing its sales force to sell our services
in Italy.
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Clients
We have more than 270 clients including many of the leading names in the
retail, hospitality, food and beverage, shipping, banking, automotive,
technology and manufacturing industries. Examples of our existing clients
include:
<TABLE>
<CAPTION>
Consumer Brands Retailers Hospitality
--------------- --------- -----------
<S> <C> <C>
Harley-Davidson Barnes & Noble British Airways
Levi Strauss The Gap Choice Hotels
Nike Home Depot Hilton Hotels
Olympus Kmart Marriott
Tommy Hilfiger Nordstrom Starwood
<CAPTION>
Food and Beverage Shipping Banking/Financing
----------------- -------- -----------------
<S> <C> <C>
KFC Airborne Express Edward Jones
McDonald's DHL Fleet Financial/Bank Boston
Pizza Hut FedEx Novus/Discover
Taco Bell United Parcel Service Prudential
Starbucks U-Haul Wells Fargo/Norwest
<CAPTION>
Automotive Technology Manufacturing
---------- ---------- -------------
<S> <C> <C>
Ford Epson America AC Delco
General Motors Hewlett-Packard Avery Dennison
Honda Iomega Bridgestone/Firestone
Mercedes-Benz NEC Technologies John Deere
Toyota Oracle Whirlpool
</TABLE>
Historically, we have been successful in retaining existing clients. Of the
more than 230 Business Finder clients signed since the beginning of fiscal
1998, more than 94% remained as Business Finder clients as of December 1, 1999.
The contract value of the Business Finder clients lost during that period would
have represented less than three percent of our revenues during fiscal 1999. We
believe that our unique service offerings and our ability to provide a complete
outsourced solution for our clients have been significant factors contributing
to our high historical retention rates. In fiscal 1999, AutoTrader.com
accounted for approximately 11% of our revenues.
While we offer a variety of service offerings, all of our clients turn to us
for assistance in implementing a strategy. With each client relationship, we
work with the client to identify additional ways to leverage the technology
deployed by us. Examples include:
Federal Express
Federal Express maintains tens of thousands of drop-box locations and offices
throughout the United States with more being added or relocated on a daily
basis. The problem Federal Express faced was providing a way for its customers
to conveniently find the nearest location and to do this in a cost effective
manner. Even though Federal Express's business requires mastery of location
information, their internal review of the problem revealed that Web Business
Finder provided the most efficient solution available.
Marriott
Marriott has implemented our clicks-and-mortar services in an effort to
accomplish two goals. First, our services help turn visitors to Marriott's Web
site into reservations at Marriott properties by
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directing users to specific sites that best fit their interests. Whether a
customer is seeking the hotel closest to the convention center or the hotel
that has a heated indoor pool, he can utilize our search and database
capabilities to find the appropriate property. In addition, by utilizing our
reports, Marriott is able to determine which features of a particular property,
such as a pool or business center, are most important to potential visitors to
that property.
Second, Marriott wanted visitors to its Web site to have easy access to local
content and information such as the location of nearby restaurants and popular
nearby tourist attractions. By providing this information, Marriott believes
that visitors to its Web site will spend more time on the site. This objective
is sometimes referred to as making the Web site "sticky." We helped Marriott
accomplish this goal by making available local information for each hotel
location such as restaurants and popular nearby tourist sites. By providing
this information on its site through us, Marriott is able to keep visitors on
its Web site to plan their visits rather than sending them to another travel
planning destination. Marriott's vice president of interactive business
operations estimates 60% of the visitors to the Web site utilize our services.
Shell International Petroleum Company
For several years we have provided Shell with a Web Business Finder solution
for its gas stations located within the U.S. In late 1999, Shell decided to
build a destination Web site incorporating an elaborate Trip Planning Guide to
give Shell customers driving directions and points-of-interest guidance in
local languages across 12 European countries. Shell contracted with Vicinity
and USWeb/CKS to co-develop this site which went live in October 1999.
Eveready Battery Company
Eveready is one of the world's largest manufacturers of dry cell batteries.
Although its Energizer and Eveready brands are known worldwide and sold in more
than 160 countries, consumers frequently do not know which Eveready battery is
the right one for their calculators, toys, watches or other electronic devices.
To solve this problem, Eveready worked with us to build and host a product
search engine and store locator. Using our technology, the "Rechargeable"
section of Eveready's Web site allows customers to search a database of 8,500
cellular phones, camcorders and cordless phones to determine the right Eveready
product to power each device. Customers can type in any or all of the following
information: brand, model number, as well as other useful information, or click
on a picture of the product, and be directed to the correct Eveready battery
and a local store that regularly carries that battery.
Network Solutions, Inc.
NSI is the world's leading registrar of Internet domain names. NSI registers
the majority of Web addresses worldwide through various channels including
almost 200 companies in its Premier program. In April 1999, we entered into a
partnership in which we are building and hosting significant portions of the
database and search engine for NSI's "dot com directory," a new search engine
that locates businesses through information linked to their domain name
registration. NSI intends the "dot com directory" to be the Web's definitive
source for locating online businesses.
Sales and Marketing
Our services are sold through an in-house direct sales team as well as an
outsourced telemarketing agency. We also utilize our network of channel
partners to both refer business to us and to sell our services under their own
private-labels. Current channel partners include SpeechWorks
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International, Inc., Icon MediaLab, Aperto Multimedia, Gruppo L'Espresso, Price
Interactive, Inc., Netopia, Inc., ClickAction and Prio. We also maintain strong
relationships with advertising, promotional and Web marketing agencies that
often incorporate our services into projects they manage for their brand
clients. We are working aggressively to expand our existing internal sales and
marketing capabilities as well as the company's channel partner program.
Our target markets for sale of our clicks-and-mortar services include:
. large companies with an established consumer brand;
. companies with a branded product line sold through retail
distribution;
. companies with a branded chain of stores;
. advertising agencies servicing national brands;
. web development agencies servicing national brands;
. direct marketing agencies servicing national brands;
. franchisers and their franchisees; and
. shopping and search engines.
We build awareness and demand for our services through marketing programs
including direct marketing, print and Internet advertising, trade shows and
events, public relations, international marketing, channel marketing and
telemarketing. Sales are implemented through a team of direct sales
representatives and channel partners. The sales cycle, from identifying a
prequalified lead to the signing of a services contract, is typically two to
four months, though in some cases this cycle is accelerated due to a client's
desire to implement a solution quickly or meet a promotional or season
deadline, such as the holiday shopping season. Frequently with a potential new
client, the initial competitor to our service offering is the client's own in-
house information systems department which may initially believe that it can
duplicate our services at a lower cost. This often delays the sales process,
but we are currently unaware of any retailer or merchant that has decided to
build its own solution after having been exposed to our service offerings.
Technology and Infrastructure
Our core competency is the ability to design, build, implement and manage
projects involving large databases that contain product, location and attribute
information. Our technical expertise spans many software development
specialties including system-level programming, cross-platform solutions, user-
interface and template design, production system operation and localization.
Our most important skill is the development of high performance spatial
databases that are used to manage our location-specific data and to manage
large amounts of client information, including store location and product
availability data. Through an automated process, our customers update this data
set based on their own business rules.
Architecture
The architectural model for our services is a general purpose template
processing engine which handles user events, controls program flow and calls
component sub-servers that manage our Web Business Finder service to handle all
content-specific transactions. The sub-servers handle service requests as
socket-based stateless transaction processors. Since the engine and the various
sub-servers are all continuously running processes, it is not necessary to
start-up any processes in order to handle a request. These processes are
adjusted to respond to system load as well as recovery from the
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occasional system error. This architecture allows maximum flexibility of
resource deployment across multiple networked machines.
Service Delivery
We deliver our services to customers through either an application
programming interface, or API, or through our client support organization which
produces a specific template set for an individual customer. The API allows the
customer to control the interface and provide the customer with maximum
flexibility in terms of creative control. Whether delivered via templates
generated by us or using the API, the service is built around customer supplied
data that may be updated in batch mode, net change, or on a transaction basis
depending on customer needs. Our customer service organization maintains
contact with customers to help them work through any issues before, during and
after deployment of their application.
Reporting and Data Mining Capabilities
The usage and reporting data generated by the system are measured in
gigabytes per day and are a valuable tool for customers to understand the
effectiveness of their marketing efforts. We report usage results through
standard secure reports by customer, category, keyword, designated marketing
area or other custom requirements.
Scalability and Stability
We have invested significant resources in the hardware systems that deliver
our services with the objective of 99.9% availability in a fully scalable
environment across multiple data centers. Our front-end Web servers and
database servers are Sun Enterprise systems designed for reliability,
availability and serviceability to support the operation of our customer's
mission-critical applications. We have designed the servers to tolerate power,
cooling, or storage failures without affecting system operation and to recover
from most failures with minimal disruption. These systems are optimized to
provide extremely high throughput.
Our services are monitored on a 24 hours per day, seven days per week basis.
At the present time, our system is generally running at less than 40% of rated
capacity at peak usage to permit quick application response. We do not intend
to permit the production system to be allowed to exceed 50% of its rated
capacity. This excess capacity is designed to ensure availability despite
partial system failure. In addition, the system is protected by a high
performance firewall and balanced through a state-of-the-art load balancing
solution.
We currently operate three geographically separate data centers. A typical
data center configuration has front-end servers processing requests from our
customers through switches connected to a load balancing solution. These front-
end servers make specific requests to multiple back-end database machines as
well as systems that process geographic content such as maps and driving
directions. For security reasons, back-end systems cannot be accessed from the
Internet and process only specially formed queries from the front-end machines.
Each of these sub-systems is fully redundant both in terms of software and
hardware. In the event of a sub-system failure, the load is automatically
transferred to the next available machine. Monitoring software automatically
notifies the on-duty operator of a problem so that immediate action can be
taken.
Competition
The market in which we compete is relatively new and our services are highly
specialized. While competition exists for most of our service offerings, the
number of companies with which we compete
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is relatively small and we are unaware of any one company that competes against
us across our full range of services. We expect competition with our services
to increase over time as the market for our services grows. Competition may
also increase as a result of industry consolidation.
In the markets occupied by our higher-end products such as Web Business
Finder, we face competition from companies including InfoNow Corporation, which
provides outsourced Web-based inquiry management services, and Where 2 Get It
Inc., which provides Internet-based dealer locator service. Our SiteMaker
service competes indirectly with companies that provide free or low-cost web
creation and hosting services in conjunction with internet service provider, or
ISP, services. Our MailMaker service competes directly with other Internet
marketing companies, including Post Communications, Digital Impact, and
yesmail.com, which all provide outsourced electronic mail marketing services.
Finally, with many potential new clients, the initial competitor to our service
offerings is the client's own in-house information systems department which may
initially believe that it can duplicate our services at a lower cost. This
often delays the sale process, but we are currently unaware of any retailer or
merchant that has decided to build its own solution after having been exposed
to our service offerings. In each competitive situation that we face, we
believe the factors that cause potential clients to consider our services
include the depth of our service offerings, our ability to integrate our
services into larger marketing initiatives, the quality and reliability of our
services, our speed of implementation and the overall quality of our technology
and client service.
Our MapBlast! business unit focuses on providing simple maps and driving
directions and faces significant competition from a variety of companies,
including MapQuest.com, Inc., Zip2 Corporation, now known as AltaVista Local
Portal Services, and Switchboard Incorporated, all of which are able to provide
these services at very competitive prices. Competitive factors within this
marketplace include being the first to offer a mapping solution to a potential
customer, product and service pricing and the quality of the products and
services offered.
We believe that our ability to compete depends upon many factors, including
our ability to provide depth and accuracy of destination information, to
increase our sales force and to implement our sales and marketing initiatives,
in addition to the introduction and acceptance of new and enhanced products and
services developed either by us or our competitors and the ease of use of
products and services developed either by us or our competitors.
Intellectual Property
We have filed several applications for U.S. patents in order to protect
proprietary intellectual property that we believe is important to our business.
These include an application entitled "Method and Apparatus for Efficient
Proximity Searching," "A Method and Apparatus of Expanding Web Searching
Capabilities" and "A Method and System for Providing a Web-Shareable Personal
Database."
Our products and services rely on the availability and accuracy of geographic
data. We have licensed a significant portion of our geographic data from a
limited number of sources through non-exclusive, short-term contractual
arrangements. If any of these third parties were to merge or be acquired, the
number of sources providing this geographic data would be further reduced.
Given the short terms of our geographic data licenses, we will have to
renegotiate our contracts in the foreseeable future which may result in
contractual terms that are not as favorable to us as the existing data
licenses. If we cannot maintain these data licenses or any other third-party
license arrangement on commercially reasonable terms, the accuracy of our
services may suffer.
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Government Regulation
We are subject, both directly and indirectly, to various laws and
governmental regulations relating to our business. There are currently few laws
or regulations directly applicable to commercial online services or the
Internet. However, due to increasing popularity and use of commercial online
services and the Internet, it is possible that a number of laws and regulations
may be adopted with respect to commercial online services and the Internet.
These laws and regulations may cover issues including, for example, user
privacy, liability for information retrieved from or transmitted over the
Internet, online content regulation, user privacy, taxation and domain name
registration. Moreover, the applicability to the Internet of existing laws
governing issues such as intellectual property ownership and infringement,
copyright, patent, trademark, trade secret, obscenity, libel, employment and
personal privacy is uncertain and developing. Any new legislation or regulation
or the application of existing laws and regulations to the Internet could have
a material and adverse effect on our business.
As our services are available over the Internet anywhere in the world,
multiple jurisdictions may claim that we are required to qualify to do business
as a foreign corporation in each of those jurisdictions. Our failure to qualify
as a foreign corporation in a jurisdiction where we are required to do so could
subject us to taxes and penalties for the failure to qualify. It is possible
that state and foreign governments might also attempt to regulate our
transmissions of content on our Web site or on the Web sites of others or
prosecute us for violations of their laws. We cannot assure you that violations
of local laws will not be alleged or charged by state or foreign governments,
that we might not unintentionally violate these laws or that these laws will
not be modified, or new laws enacted, in the future.
Employees
As of December 10 , 1999, we had 121 employees, including five hourly
personnel and consultants, employed in engineering, sales, marketing, business
development, customer support and related activities, and general and
administrative functions. None of our employees is represented by a labor
union, and we consider our relations with our employees to be good. See "Risk
Factors--In order to execute our growth plan we must attract, retain and
motivate highly skilled employees."
Facilities
Our headquarters facilities consist of approximately 25,600 square feet
located in Palo Alto, California which we occupy under leases expiring in June
2000. We occupy 11,500 square feet in New Hampshire under a three year lease
which is used for engineering and product development. We also lease
approximately 1,200 square feet in San Francisco, California for satellite
office space. We consider this space adequate for our current operations and
plan to evaluate our long-term need for office space in early 2000. We also
lease space in a number of data centers in which we locate our equipment.
Legal Proceedings
We are not currently engaged in any material legal proceedings.
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Management
The following table sets forth, as of November 1, 1999, the name, age and
position of each of our directors and executive officers.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Name Age Position
- --------------------------- --- -----------------------------------------------
<S> <C> <C>
Emerick Woods.............. 44 President and Chief Executive Officer, Director
Scott Young................ 41 Senior Vice President, Operations
David Seltzer.............. 45 Vice President and Chief Financial Officer
Gregory Beasley............ 36 Vice President, Business Development
Mary Gavin................. 42 Vice President, Engineering
Elaine Hamilton............ 52 Vice President, Human Resources
Dinesh Wadhawan............ 42 Vice President, Sales
Eric Winkler............... 33 Vice President, Marketing
David Cherner.............. 35 General Manager, MapBlast!
Scott Shuda................ 34 General Counsel and Secretary
Herbert M. Dwight, Jr. 69 Chairman of the Board of Directors
(1)(2)....................
Jonathan Callaghan......... 30 Director
James J. Geddes, Jr........ 49 Director
Fred Gibbons (2)........... 50 Director
Peter Mills................ 48 Director
Norman Nie (1)............. 56 Director
Michael Sears (2).......... 43 Director
Peter Ziebelman (1)........ 43 Director
</TABLE>
- -------------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
Emerick Woods has served as our President and Chief Executive Officer since
August 1997 and as a Director since February 1998. From August 1996 to August
1997, Mr. Woods was the President and Chief Executive Officer of TuneUp.com,
Inc., an Internet based computing updating service. In May 1997, TuneUp.com
filed a voluntary petition for Chapter 11 bankruptcy, after which it was
reorganized and sold to Quarterdeck Corporation, a provider of software
utilities. From November 1994 to June 1997, Mr. Woods was a Vice President and
General Manager of Quarterdeck Corporation. Mr. Woods holds a B.S. in Computer
Science from Yale University and an M.B.A. from Harvard University. Mr. Woods
is also a Director of ClickAction, Inc., a provider of Internet marketing
solutions.
Scott Young has served as our Senior Vice President, Operations since October
1997. From October 1996 to October 1997, Mr. Young was our Director of
Operations. From February 1994 to October 1996, Mr. Young was the Vice
President of Sales and Marketing of Infrastructures for Information, Inc., a
provider of integrated information management systems software. From August
1989 to October 1994, Mr. Young was the Director of Technology and Government
Relations for Semiconductor Equipment and Materials International, an industry
consortium for the semiconductor industry. Mr. Young holds a B.A. and a J.D.
from the University of Kansas.
David Seltzer has served as our Vice President and Chief Financial Officer
since June 1998. From August 1998 to May 1999, Mr. Seltzer also served as our
Secretary. From August 1997 to May 1998, Mr. Seltzer was an independent
financial consultant. From June 1994 to July 1997, Mr. Seltzer was Vice
President and Chief Financial Officer of Portrait Displays, Inc., a developer
of pivoting displays and image rotation software. From April 1992 to May 1994,
Mr. Seltzer was the Corporate
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Controller for Truevision, formerly known as RasterOps, a provider of digital
video computer products. Mr. Seltzer holds a B.A. in Business Studies from the
College of Technology in Glasgow, Scotland.
Gregory Beasley has served as our Vice President, Business Development since
August 1998. From 1996 to 1998, Mr. Beasley was the Chief Executive Officer of
Skytech, Inc., an Internet business development company. From 1994 to 1996, Mr.
Beasley was Co-Founder, Vice President of Marketing and General Manager of the
Consumer Division of Worlds, Inc., a developer of graphic chat spaces on the
Internet. Mr. Beasley holds a B.A. in Computer Science and Psychology from
Dartmouth College, and an M.B.A. from Harvard University.
Mary Gavin has served as our Vice President, Engineering since August 1999.
From October 1997 to August 1999, Ms. Gavin was our Director of Engineering
Projects. From March 1997 to October 1997, Ms. Gavin was our Project Manager.
In 1996, Ms. Gavin was a Marketing Manager of NetRights, LLC, a start-up
Internet company. In 1995, Ms. Gavin was a Support and Training Manager of
Codman Research Group, a developer of decision support systems for the health
care industry. Ms. Gavin holds a B.A. from Ripon College.
Elaine Hamilton has served as our Vice President, Human Resources since
October 1999. From June 1998 to October 1999, Ms. Hamilton was the Vice
President of Human Resources of Geron Corporation, a biopharmaceutical company
providing therapeutic and diagnostic products for cancer and other age-related
diseases. From April 1995 to June 1998, Ms. Hamilton was the Director of Human
Resources for Metricom, Inc., a provider of wide area wireless data
communications solutions. Ms. Hamilton holds a B.A. in Education and Psychology
from the University of Iowa and an M.S. in Human Resources and Organization
Development from the University of San Francisco.
Dinesh Wadhawan has served as our Vice President, Sales since March 1999.
From October 1995 to March 1999, Mr. Wadhawan was the Director of Operations,
Western North America of Systems Union, Inc., a provider of international
business and financial software. From January 1994 to September 1995, Mr.
Wadhawan was the Global Manager, Oil and Gas, of Systems Union Limited, the
United Kingdom component of Systems Union. Mr. Wadhawan holds a B.S. and a Post
Graduate Diploma in Business Management from the University of Delhi, India.
Eric Winkler has served as our Vice President, Marketing since January 1999.
From 1998 to 1999, Mr. Winkler was a Director of Consumer Marketing for the
consumer software division of IBM. From 1994 to 1998, Mr. Winkler was a
Marketing and Communications Department Manager and then Director for
Broderbund Software, a software publisher. Mr. Winkler holds a B.A. from the
Allen School of Advertising at the University of Oregon.
David Cherner has served as our General Manager, MapBlast! since April 1999.
From October 1997 through April 1999, Mr. Cherner was a management consultant
to several early-stage Internet companies, including Third Age Media, eWork
Exchange and Vicinity. During that time, Mr. Cherner also served as Vice
President of the Panterra Group, a management consulting organization. In
February 1996, Mr. Cherner founded i-Health, Inc., an Internet health content
community, where he served as President and Chief Executive Officer until
September 1997. From 1994 to 1996, Mr. Cherner was a senior manager, business
development of Access Health, Inc., an information services company. Mr.
Cherner holds a B.A. in Economics from Emory University and an M.B.A. from the
Haas School of Business at the University of California, Berkeley.
Scott Shuda has served as our General Counsel and Secretary since May 1999.
From May 1998 to May 1999, Mr. Shuda was a corporate associate in the Silicon
Valley office of the law firm of Latham & Watkins. From September 1996 to May
1998, Mr. Shuda was a corporate associate in the
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law firm of O'Sullivan, Graev & Karabell in New York. From September 1994 to
August 1996, Mr. Shuda was a corporate associate in the law firm of Roger &
Wells in New York. Mr. Shuda holds a B.A., an M.B.A. and a J.D. from Georgetown
University.
Herbert M. Dwight, Jr. has served as Chairman of the Board of Directors since
October 1999. Mr. Dwight has served in a number of positions for Optical
Coating Laboratory, Inc., a manufacturer of optical thin films, including
Chairman of the Board since August 1991, President from August 1991 to November
1997, Chief Executive Officer from August 1991 to April 1998 and Chief
Financial Officer from December 1993 to April 1995. Mr. Dwight was Chairman,
President and Chief Executive Officer of Superconductor Technologies, Inc., a
telecommunications technology company, from 1988 through August 1991 and
continued to served as Chairman from 1991 until May 1994. Mr. Dwight holds a
B.S. and an M.S. in Electrical Engineering from Stanford University. Mr. Dwight
is also a Director of Applied Materials, Inc., Applied Magnetics Corporation
and Advanced Fiber Communications, Inc.
Jonathan Callaghan has served as a Director since May 1997. Since May 1997,
Mr. Callaghan has been a General Partner of CMG@Ventures, a venture capital
firm. From June 1991 to June 1995, Mr. Callaghan was an associate of Summit
Partners, a venture capital firm. Mr. Callaghan holds a B.A. from Dartmouth
College and an M.B.A. from Harvard University. Mr. Callaghan is also a Director
of Chemdex Corporation, Hotlinks Corporation, Exp.com, Inc. and several private
companies.
James J. Geddes, Jr. has served as a Director since August 1999. Since
September 1995, Mr. Geddes has been the Managing Director of Trans Cosmos USA,
Inc., an investment management company, which is an affiliate of the EnCompass
Group, Inc. From August 1993 to August 1995, Mr. Geddes was the President and
Chief Executive Officer of InVision Systems Corporation, a provider of
Internet-based desktop video software. Mr. Geddes holds a B.S. in Electrical
Engineering from the University of Maryland.
Fred Gibbons has served as a Director since October 1995. From October 1995
to October 1999, Mr. Gibbons was the Chairman of the Board of Directors. From
1995 to 1999, Mr. Gibbons was a Lecturer at Stanford University's Graduate
School of Engineering. Since 1994, Mr. Gibbons has been the principal of
Venture-Concept.com, a concept stage venture management firm. Mr. Gibbons holds
a B.S. in Science Engineering and a M.S. in Computer Engineering from the
University of Michigan and an M.B.A. from Harvard University. Mr. Gibbons is
also a Director of MIPS technologies, Inc., Inverse Networks, Inc. and several
private companies.
Peter Mills has served as a Director since February 1996. Since March 1995,
Mr. Mills has been a General partner of CMG@Ventures, a venture capital firm.
From March 1992 to March 1994, Mr. Mills was the Chief Executive Officer of the
United States Display Consortium, a non-profit consortium for the development
of flat panel displays. Mr. Mills holds a B.S. in Communications from Ithaca
College and an M.B.A. from Columbia University.
Norman Nie has served as a Director since December 1998. Since 1997, Mr. Nie
has been a Technology Partner of Oak Investments, a venture capital firm. From
1975 to 1991, Mr. Nie was the Chief Executive Officer of SPSS, Inc., a provider
of statistical software and service solutions. Mr. Nie holds a B.A. from the
University of Washington and an M.A. and a Ph.D from Stanford University.
Mr. Nie is also a director of SPSS, Inc. and several private companies.
Michael Sears has served as a Director since June 1998. Mr. Sears is
currently the President and Chief Executive Officer of Black Pearl Software,
Inc., a provider of Internet enterprise software tools. From 1997 to 1999, Mr.
Sears was the General Manager of Spyglass, Inc., a provider of Internet
connectivity solutions. From 1996 to 1997, Mr. Sears was an independent
consultant, and from 1990
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to 1996, Mr. Sears was a General Manager of Sun Microsystems, Inc. Mr. Sears
holds a B.S. from the United States Naval Academy, and a J.D. and an M.B.A.
from Stanford University.
Peter Ziebelman has served as a Director since June 1997. Mr. Ziebelman is a
Founding Partner of 21st Century Internet Venture Partners, a venture capital
firm. From 1988 to October 1996, Mr. Ziebelman was a partner of Thompson Clive
Venture Capital, an international venture capital firm. Mr. Ziebelman holds a
B.S. in Computer Science and Psychology from Yale University, and an M.S. in
Management from Stanford Graduate School of Business.
Board Composition
We currently have nine authorized directors. In accordance with the terms of
our Restated Certificate of Incorporation which will become effective upon the
closing of this offering, the terms of office of our directors will be divided
into three classes: Class I, whose term will expire at the annual meeting of
our stockholders to be held in 2000; Class II, whose term will expire at the
annual meeting of stockholders to be held in 2001; and Class III, whose term
will expire at the annual meeting of stockholders to be held in 2002. The Class
I directors are , and ; the Class II directors are , and
; and the Class III directors are , and . At each annual
meeting of stockholders the successors to directors whose terms will then
expire will be elected to serve from the time of election and qualification
until the third annual meeting following election or special meeting held in
lieu thereof. In addition, our Restated Certificate of Incorporation provides
that the authorized number of directors may be changed only by a resolution of
the Board of Directors or a super-majority vote of our stockholders. Any
additional directorships resulting from an increase in the number of directors
will be distributed among the three classes so that, as nearly as possible,
each class will consist of one-third of our directors. This classification of
our Board of Directors may have the effect of delaying or preventing changes in
control or management of our company.
Board Committees
Audit Committee
The Audit Committee of the Board of Directors reviews, acts on and reports to
the Board of Directors with respect to various auditing and accounting matters,
including the recommendation of our independent auditors, the scope of the
annual audits, fees to be paid to the independent auditors, the performance of
our independent auditors and our accounting practices. The members of the Audit
Committee are Messrs. Dwight, Gibbons and Sears.
Compensation Committee
The Compensation Committee of the Board of Directors determines the salaries,
benefits and stock option grants for our employees, consultants, directors and
other individuals compensated by our company. The Compensation Committee also
administers our stock-based compensation plans. The members of the Compensation
Committee are Messrs. Dwight, Nie and Ziebelman.
Director Compensation
Historically, we have not paid any cash compensation to our Directors for
serving on our Board of Directors, but have reimbursed them for their out-of-
pocket expenses incurred in connection with attending meetings of our Board of
Directors and, in some instances, granted them options to purchase shares of
our common stock. After the closing of this offering, we anticipate providing
customary compensation to our non-employee directors. However, the amount and
nature of this compensation
54
<PAGE>
has not yet been determined. We anticipate that we will continue to reimburse
all Directors for their out-of-pocket expenses incurred in attending meetings
of our Board of Directors.
Compensation Committee Interlocks And Insider Participation
Our Compensation Committee currently consists of Messrs. Dwight, Nie and
Ziebelman. Each is a Director and none is an employee. None of our executive
officers served as a director or member of the Compensation Committee or other
board committee performing equivalent functions of another corporation, one of
whose executive officers served on our Board of Directors or Compensation
Committee.
Employment, Severance And Other Agreements
Employment Agreement with Emerick Woods
Effective February 1998, we entered into an employment agreement with Emerick
Woods pursuant to which Mr. Woods agreed to serve as our President and Chief
Executive Officer. This employment agreement provides that Mr. Woods will
receive an annual base salary of $200,000 and is eligible to receive an annual
incentive bonus of up to $100,000. In addition, we agreed to grant Mr. Woods
options to purchase 955,137 shares of our common stock, 25% of which vested
immediately on the date of grant with a ratable portion of the balance of the
options vesting each month for a three-year period commencing March 1998. In
the event of specified merger or reorganization transactions, an aggregate
additional 50% of these options will become immediately vested, subject to
specified conditions. In July 1999, Mr. Woods exercised all of his options,
subject to vesting. Under the employment agreement, Mr. Woods receives a
housing subsidy and is eligible to participate in employee benefit plans
available to our employees. In the event that Mr. Woods' employment is
terminated without cause or due to death or disability, the contract provides
that the base salary will be continued for up to nine months.
Stock Option Acceleration Rights of Executive Officers
We have entered into agreements with a number of our executive officers
providing that up to 25% of their stock options will become immediately vested
in the event of specified merger or reorganization transactions.
55
<PAGE>
Executive Compensation
The following table sets forth all compensation awarded to, earned by or paid
to our Chief Executive Officer and the four other most highly compensated
executive officers of our company whose annual salary and bonus exceeded
$100,000 in fiscal 1999, or Named Executive Officers, for services rendered in
all capacities to us during fiscal 1999.
<TABLE>
<CAPTION>
---------------------------------
Long-Term
Annual Compensation
Compensation(1) Awards
-------------------- ------------
Shares
Underlying
Name and Principal Position Salary Bonus Options
- --------------------------- -------- -------- ------------
<S> <C> <C> <C>
Emerick Woods, President and Chief Executive
Officer..................................... $200,000(2) $100,000 0
Scott Young, Senior Vice President,
Operations.................................. 130,000 30,000 190,000
David Seltzer, Vice President and Chief
Financial Officer........................... 130,000 20,000 0
Gregory Beasley, Vice President, Business
Development................................. 117,468 20,000 180,000
Mary Gavin, Vice President, Engineering...... 92,083 10,000 55,000
</TABLE>
- -------------------
(1) In accordance with the rules of the Securities and Exchange Commission,
other compensation in the form of perquisites and other personal benefits
has been omitted for the Named Executive Officers because the aggregate
amount of these perquisites and other personal benefits constituted less
than the lesser of $50,000 or 10% of the total of annual salary and bonuses
for each of our Named Executive Officers in fiscal 1999.
(2) Excludes $33,000 related to housing expenses paid by us on behalf of Mr.
Woods.
Option Grants In Last Year
The following table sets forth information regarding stock options granted to
each of the Named Executive Officers during fiscal 1999. We have not granted
any stock appreciation rights.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
Potential Realizable Value at
Number of % of Total Assumed Annual Rates of
Securities Options Stock Price Appreciation for
Underlying Granted to Option Term(1)
Options Employees in Exercise Market Expiration ------------------------------
Name Granted(1) Fiscal Year Price Price Date 5% 10%
- ---- ---------- ------------ -------- ---------- ---------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Emerick Woods........... 0 0% -- -- -- -- --
Scott Young............. 0 0 -- -- -- -- --
David Seltzer........... 0 0 -- -- -- -- --
Gregory Beasley......... 180,000 15.4 $0.15 $1,980,000 8/19/08 $ 3,181,231 $ 5,065,579
Mary Gavin.............. 5,000 0.4 0.15 55,000 8/19/08 88,368 140,711
</TABLE>
- -------------------
(1) Potential realizable values are net of exercise price before taxes, and are
based on the assumptions that our assumed initial public offering price of
$11.00 per share was the fair market value of the stock on the date of
grant and that our common stock appreciates at the annual rate shown
compounded annually from the date of grant until the expiration of the ten-
year term. These numbers are calculated based on Securities and Exchange
Commission requirements and do not reflect our projection or estimate of
future stock price growth.
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<PAGE>
Option Exercises and Fiscal Year-End Option Values
The following table sets forth information concerning stock option exercises
in fiscal 1999 and the number and value of unexercised options held by each of
the Named Executive Officers at July 31, 1999.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------
Number of Securities Underlying Value of Unexercised
Unexercised Options at In-the-Money Options at
Shares July 31, 1999 July 31, 1999(1)
Acquired Value ------------------------------- -------------------------------
Name on Exercise Realized Exercisable(2) Unexercisable(2) Exercisable(2) Unexercisable(2)
- ---- ----------- -------- -------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Emerick Woods........... 955,137 0 0 -- --
Scott Young............. 50,000 190,000 0 $2,071,000 --
David Seltzer........... 130,000 0 0 -- --
Gregory Beasley......... 0 180,000 0 1,953,000 --
Mary Gavin.............. 0 55,000 0 54,250 --
</TABLE>
- -------------------
(1) There was no public trading market for the common stock as of July 31,
1999. Accordingly, these values have been calculated on the basis of the
assumed initial public offering price of $11.00 per share, less the
applicable exercise price per share, multiplied by the number of underlying
shares.
(2) All options granted under our stock option plans are immediately
exercisable; unvested shares issued upon exercise are subject to repurchase
by our company.
Employee Benefit Plans
1995 Stock Option Plan
Our 1995 Stock Option Plan was adopted by our Board of Directors in October
1995, and approved by our stockholders in February 1996. Under the 1995 Plan, a
total of 2,000,000 shares of common stock were authorized and 1,362,143 shares
were issued, 1,050,585 of which have subsequently been retired. No further
grants will be made under the 1995 Plan.
The 1995 Plan may be administered by our Board of Directors, or a committee
thereof. Subject to the Act, Delaware corporate and securities laws, the
Internal Revenue Code and the rules of the Nasdaq National Market, our Board of
Directors may adjust the size and composition of the committee, or remove the
committee and administer the 1995 Plan directly. Our Board of Directors may
amend, alter, suspend or discontinue the 1995 Plan at any time. However, this
action will not affect the rights of previously granted options, unless there
is a written agreement to that affect signed by the option holder and our
company.
Upon any changes in our capitalization, such as a stock split or stock
dividend, the number of shares subject to each option and the shares
authorized, as well as the per share exercise price will be adjusted
proportionally. However, issues of any class of stock, or securities
convertible into shares of stock, will not trigger this proportional
adjustment. In the event of our proposed dissolution or liquidation, our Board
of Directors will notify each option holder before any action is taken. All
unexercised options will terminate immediately before the completion of a
dissolution or liquidation transaction. If we merge or sell substantially all
our assets, the outstanding options must be assumed or substituted for by the
successor corporation and/or its affiliates. If the successor corporation
refuses to honor or substitute the outstanding options, they will become
immediately and fully vested and exercisable.
57
<PAGE>
1996 Incentive Stock Option Plan
Our 1996 Incentive Stock Option Plan was adopted by our Board of Directors
and approved by our stockholders in November 1996. Under the 1996 Plan, a total
of 4,291,317 shares of common stock were authorized and as of December 15,
1999, 3,889,417 shares were issued, none of which have subsequently been
retired. Upon the completion of this offering, no further grants will be made
under the 1996 Plan.
The 1996 Plan may be administered by our Board of Directors, or a committee
thereof. Subject to the Act, Delaware corporate and securities laws, the
Internal Revenue Code and the rules of the Nasdaq National Market, our Board of
Directors may adjust the size and composition of the committee, or remove the
committee and administer the 1996 Plan directly. Our Board of Directors may
amend, alter, suspend or discontinue the 1996 Plan at any time. However, this
action will not affect the rights of previously granted options, unless there
is a written agreement to that affect signed by the option holder and our
company.
Upon any changes in our capitalization, such as a stock split or stock
dividend, the number of shares subject to each option and the shares
authorized, as well as the per share exercise price will be adjusted
proportionally. However, issues of any class of stock, or securities
convertible into shares of stock, will not trigger this proportional
adjustment. In the event of our proposed dissolution or liquidation, our Board
of Directors will notify each option holder before any action is taken. All
unexercised options will terminate immediately before the completion of a
dissolution or liquidation transaction. If we merge or sell substantially all
our assets, the outstanding options must be assumed or substituted for by the
successor corporation and/or its affiliates. If the successor corporation
refuses to honor or substitute the outstanding options, they will become
immediately and fully vested and exercisable.
2000 Equity Participation Plan
Our 2000 Equity Participation Plan was adopted by our Board of Directors in
December 1999 as a successor equity plan to our 1996 Incentive Stock Option
Plan. The 2000 Plan will become effective upon the completion of this offering.
Under the 2000 Plan, a total of shares of common stock have been reserved
for issuance. As of the date of this prospectus, no shares have been issued
under the 2000 Plan.
The 2000 Plan provides for the discretionary grant of incentive stock options
to employees and for the grant of nonstatutory stock options, stock
appreciation rights, performance awards, dividend equivalents, stock payments
and deferred stock to employees and consultants. The 2000 Plan provides that we
cannot issue incentive stock options after November 1, 2009. The 2000 Plan also
provides for formula grants to our non-employee directors of nonstatutory stock
options to purchase 5,000 shares of common stock on the date of each annual
meeting of our stockholders at which he or she is reelected to our Board of
Directors.
The 2000 Plan may be administered by our Board of Directors or a committee
thereof. The administrator has the power to determine the terms of the options
or other awards granted, including the exercise price of the options or other
awards, the number of shares subject to each option or other award (up to
1,000,000 per year per participant), the exercisability thereof, and the form
of consideration payable upon exercise. In addition, the administrator has the
authority to amend, suspend or terminate the 2000 Plan, provided that no action
may affect any share of common stock previously issued and sold or any option
previously granted under the 2000 Plan without the consent
58
<PAGE>
of the holder. The exercise price of nonstatutory stock options and other
awards granted under the 2000 Plan is determined by the administrator, but with
respect to nonstatutory stock options intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Internal Revenue
Code, the exercise price must be at least equal to 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 our
outstanding capital stock, the exercise price of any incentive stock option
granted must be at least equal 110% of the fair market value on the grant date
and the term must not exceed five years. The term of all other options granted
under the 2000 Plan may not exceed ten years.
In the case of restricted stock, unless the administrator determines
otherwise, the restricted stock purchase agreement will grant us a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's employment or consulting relationship with our company for any
reason, including death or disability. The purchase price for shares
repurchased pursuant to a restricted stock purchase agreement must be the
original price paid by the purchaser. The repurchase option will lapse at a
rate determined by the administrator. Options and other awards granted under
the 2000 Plan are generally not transferable by the optionee, and each option
and other award is exercisable during the lifetime of the optionee only by the
optionee. Options granted under the 2000 Plan must generally be exercised
within three months after the end of optionee's status as an employee, director
or consultant, or within one year after the optionee's termination by
disability or death, respectively, but in no event later than the expiration of
the option's term. The 2000 Plan provides that, in the event of a merger of
Vicinity with or into another corporation, the administrator will have the
authority, but not the obligation to accelerate the vesting of each outstanding
option and other award, except that options issued to non-employee directors
will vest in full upon the closing of a merger transaction.
Contemporaneously with this offering, we will grant options to purchase
shares of common stock. The exercise price of these options will be the
price to public disclosed on the cover of this prospectus.
Employee Stock Purchase Plan
The Vicinity Corporation 2000 Employee Stock Purchase Plan was adopted by our
Board of Directors and our stockholders in December 1999. A total of shares
of common stock may be sold under the purchase plan, provided that during the
term of the purchase plan, on each anniversary date of the purchase plan's
initial adoption by our Board of Directors, the number of shares of common
stock which may be sold under the purchase plan will be increased by . As of
the date of this prospectus, no shares have been issued under the purchase
plan. The purchase plan, which is intended to qualify under Section 423 of the
Internal Revenue Code, contains consecutive offer periods that are generally
six months in duration. The offer periods start and end on June 1 and December
1 of each year, except for the first offer period, which will commence on the
date immediately preceding the first date on which a share of common stock is
traded on an exchange or quoted on Nasdaq or a successor quotation system and
end on June 1, 2000. Employees are eligible to participate if they are
customarily employed by us or any participating subsidiary for at least twenty
hours per week. However, no employee may be granted a right to purchase stock
under the purchase plan (1) to the extent that, immediately after the grant of
the right to purchase stock, the employee would own, or be treated as owning,
stock possessing 5% or more of the total combined voting power or value of all
classes of our capital stock or (2) to the extent that his or her rights to
purchase stock under all of our employee stock purchase plans accrues at a rate
which exceed $25,000 worth of stock for each calendar year.
59
<PAGE>
The purchase plan permits participants to purchase common stock through
payroll deductions of up to 15% of the participant's base compensation. Base
compensation is defined as the participant's total compensation which he or she
receives on each payday as compensation for services to our company. The
maximum number of shares a participant may purchase with respect to a single
offer period is 5,000 shares. Amounts deducted and accumulated by the
participant are used to purchase shares of common stock at the end of each
offer period. The price of stock purchased under the purchase plan is 85% of
the lesser of the fair market value of the common stock (1) the first day of
the offer period or (2) the last day of the offer period. Participants may end
their participation at any time other than the final 10 days of an offer
period, and they will be paid their payroll deductions to date. Participation
ends automatically upon termination of employment with Vicinity.
Rights to purchase stock granted under the purchase plan are not transferable
by a participant other than by will, the laws of descent and distribution, or
as otherwise provided under the purchase plan. The purchase plan provides that,
in the event of a merger of Vicinity with or into another corporation or a sale
of substantially all of our assets, each outstanding right to purchase stock
may be assumed or substituted for by the successor corporation. Our Board of
Directors has the authority to amend or terminate the purchase plan. However,
no action by our Board may adversely affect any outstanding rights to purchase
stock under the purchase plan, except that our Board may terminate an offer
period on any exercise date if our Board determines that the termination of the
purchase plan is in the best interests of Vicinity and our stockholders.
Registration under the Securities Act
We intend promptly after the completion of this offering to register on Form
S-8 all shares of common stock issuable under our compensatory stock plans
other than shares which may be resold under Rule 701 without registration.
60
<PAGE>
Principal Stockholders
The following table sets forth information with respect to the beneficial
ownership of our common stock as of November 1, 1999, and as adjusted to
reflect the conversion of the preferred stock into common stock immediately
prior to the completion of this offering and sale of the shares of common stock
offered by this prospectus, by:
. each person, or group of affiliated persons, who is known by us to
beneficially own 5% or more of our common stock;
. each of our directors and Named Executive Officers; and
. all of our directors and executive officers as a group.
Share ownership in each case includes shares issuable upon exercise of
outstanding options and warrants that are exercisable within 60 days of
November 1, 1999, as described in the footnotes below. Percentage of ownership
is calculated according to SEC Rule 13d-3(d)(1). Percentage ownership
calculations before and after this offering are based on 19,235,325 shares and
24,235,325 shares, respectively, of common stock outstanding. The address for
all executive officers and directors is c/o Vicinity Corporation, 1135A San
Antonio Road, Palo Alto, CA 94303.
<TABLE>
<CAPTION>
-------------------------------------------
Percentage of
Common Stock
Number of Beneficially Owned (1)
Shares ------------------------------
Name and Address of Beneficially Before the After the
Beneficial Owner Owned (1) Offering Offering
- ------------------- ------------ ----------- -----------
<S> <C> <C> <C>
CMG@Ventures (2)............ 5,788,536 30.1% 23.9%
Oak Investment Partners
(3)........................ 4,252,994 22.1 17.5
21st Century Internet Fund,
L.P. (4)................... 1,850,000 9.6 7.6
EnCompass Group, Inc. (5)... 1,332,000 6.9 5.5
Emerick Woods............... 755,137 3.9 3.1
Scott Young................. 240,000 1.2 *
David Seltzer............... 130,000 * *
Gregory Beasley............. 205,000 1.1 *
Mary Gavin.................. 80,000 * *
Herbert M. Dwight, Jr....... 210,000 1.1 *
Jon Callaghan (2)........... 5,788,536 30.1 23.9
Jim J. Geddes, Jr. (5)...... 200,000 1.0 *
Fred Gibbons (6)............ 108,576 * *
Peter Mills (2)............. 5,788,536 30.1 23.9
Norman Nie.................. 31,905 * *
Michael Sears............... 20,000 * *
Peter Ziebelman (4)......... 1,850,000 9.6 7.6
All directors and executive
officers as a group (18
persons)................... 10,174,154 52.9 43.0
</TABLE>
- -------------------
* Less than 1% of total.
(1) Gives effect to the shares of common stock issuable within 60 days of
November 1, 1999 upon the exercise of all options and other rights
beneficially owned by the indicated stockholders on that date. Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission and includes voting and investment power with respect
to shares. Unless otherwise indicated, the persons named in the table have
sole voting and sole investment control with respect to all shares
beneficially owned.
61
<PAGE>
(2) Consists of 5,788,536 shares held by CMG@Ventures I, an affiliate of
CMG@Ventures. Guy S. Bradley, Andrew J. Hajducky, III, David S. Wetherell
and Messrs. Callaghan and Mills are each a General Partner of CMG@Ventures
and may be deemed to have voting and investment powers over these shares.
Messrs. Callaghan and Mills disclaim beneficial ownership of these shares,
except to the extent of each of their interests in CMG@Ventures and
CMG@Ventures I.
(3) Excludes 31,905 shares held by Norman Nie, one of our Directors and a
limited partner of Oak VIII Affiliates Fund, L.P. Bandel Carano, Jerry
Gallagher, Ed Glassmeyer, Fred Harmon and Ann Lamont are each a General
Partner of Oak Investment Partners.
(4) Consists of 1,850,000 shares held by 21st Century Internet Fund, L.P., an
affiliate of 21st Century Internet Management Partners, LLC. J. Neil
Weintraut and Mr. Ziebelman are each a General Partner of 21st Century
Internet Fund L.P. Mr. Ziebelman, is a General Partner of 21st Century
Internet Management Partners, LLC, and may be deemed to have voting and
investment powers over these shares. Mr. Ziebelman disclaims beneficial
ownership in these shares, except to the extent of his interest in 21st
Century Internet Management Partners, LLC.
(5) Includes 932,000 shares held by EnCompass Group, Inc., 200,000 shares held
by U.S. Information Technology Financing L.P., 190,000 shares held by Trans
Cosmos USA, Inc., and 10,000 shares held by TCI Club. The executive
officers of EnCompass Group, Inc. are James Doane, Hiroyuki Kohara, Yasuki
Matsumoto and Shozo Okuda. The directors of EnCompass Group, Inc. are
Anindya Bose, Koji Funatsu, Hirofumi Hirano, Kideaki Ishioka, Hiroshi
Kaizuka, Ichizo Nakai, Koki Okuda and Masataka Okuda. Mr. Geddes is
Managing Director of Trans Cosmos USA, Inc., and may be deemed to have
voting and investment powers over the shares held by Trans Cosmos USA, Inc.
and TCI Club. Mr. Geddes disclaims beneficial ownership in these shares,
except to the extent of his interest in Trans Cosmos USA, Inc. and TCI
Club.
(6) All shares are held by a trust with respect to which Mr. Gibbons maintains
sole voting power.
62
<PAGE>
Certain Transactions
We have entered into various service agreements with NaviSite Internet
Services Corporation pursuant to which NaviSite agreed to host a portion of our
data center equipment and provide Internet connections and we agreed to pay
NaviSite various setup and service fees. Our current agreement with NaviSite,
entered into in June 1998, had an original one year term with automatic annual
renewals unless either party provides notice to the other of its intention to
terminate. NaviSite's largest stockholder is CMGI, Inc., an affiliate of our
largest stockholder, CMG@Ventures. In addition, Craig D. Goldman, Andrew J.
Hajducky, III and David S. Wetherell are directors of NaviSite and principals
of CMG@Ventures and Messrs. Hajducky and Wetherell are officers of, and Mr.
Goldman is a director of, CMGI, Inc. We paid NaviSite approximately $246,000,
$149,000 and $190,000 in fiscal 1997, 1998 and 1999, respectively.
In June 1998, we entered into a service agreement with AltaVista pursuant to
which we provided AltaVista with United States and Canadian maps and driving
directions. The original term of the agreement expired in May 1999. In fiscal
1998 and 1999, our revenue related to this agreement was approximately $42,667
and $213,333, respectively. AltaVista's largest stockholder is CMGI, Inc., an
affiliate of our largest stockholder CMG@Ventures.
In July 1999, we loaned approximately $96,000 to Emerick Woods, our President
and Chief Executive Officer, to enable Mr. Woods to exercise options to
purchase shares of our common stock. This recourse loan bears interest at a
rate equal to 8 1/4% and is payable by Mr. Woods on the first to occur of the
following:
.18 months after an initial public offering of our common stock;
.30 days after the sale of our company;
.90 days after the termination of Mr. Woods' employment; and
.July 2004.
In October 1999, we loaned approximately $113,000 to Dinesh Wadhawan, our
Vice President, Sales, to enable Mr. Wadhawan to exercise options to purchase
shares of our common stock. In December 1999, we increased the amount of this
loan to approximately $135,000 to assist Mr. Wadhawan in paying taxes relating
to the exercise of his options. This recourse loan bears interest at a rate
equal to 8 1/4% and is payable by Mr. Wadhawan on the first to occur of the
following:
.18 months after an initial public offering of our common stock;
.30 days after the sale of our company;
.90 days after the termination of Mr. Wadhawan's employment; and
.October 2004.
In November 1999, we entered into a license agreement with ClickAction Inc.
pursuant to which we license software from ClickAction. In December 1999, we
paid an aggregate of $250,000 in license fees under this license agreement. Mr.
Woods is a Director of ClickAction.
We believe that each of the foregoing transactions was on terms no less
favorable to us than we could have obtained from independent third parties.
63
<PAGE>
Description of Capital Stock
The following description of our capital stock and related provisions of our
Restated Certificate of Incorporation as will be in effect upon the closing of
this offering, or Certificate, and Bylaws as will be in effect upon the closing
of this offering, or Bylaws, are summaries of these documents and are qualified
by reference to the Certificate and the Bylaws. Copies of these documents have
been filed with the Securities and Exchange Commission as exhibits to our
registration statement, of which this prospectus forms a part. The descriptions
of the common stock and preferred stock reflect changes to our capital
structure that will occur upon the closing of this offering.
The authorized capital stock of our company consists of 100,000,000 shares of
common stock, par value $.001 per share, and 5,000,000 shares of preferred
stock, par value $.001 per share.
Common Stock
As of October 31, 1999, there were 19,235,325 shares of common stock
outstanding and held of record by 76 stockholders assuming conversion of all
outstanding shares of preferred stock.
Holders of common stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and they do not have cumulative
voting rights. Accordingly, holders of a majority of the shares of common stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Holders of common stock are entitled to receive ratably
dividends, if any, as may be declared by the Board of Directors out of funds
legally available therefor, subject to any preferential dividend rights of any
outstanding preferred stock. Upon the liquidation, dissolution or winding up of
our company the holders of common stock are entitled to receive ratably our net
assets available after the payment of all debts and other liabilities and
subject to the prior rights of any outstanding preferred stock. Holders of the
common stock have no preemptive, subscription, redemption or conversion rights.
The rights, preferences and privileges of holders of common stock are subject
to, and may be adversely affected by, the rights of the holders of shares of
any series of preferred stock which we may designate and issue in the future.
Upon the closing of this offering, there will be no shares of preferred stock
outstanding.
Preferred Stock
Upon the closing of this offering, our Board of Directors will be authorized,
without further stockholder approval, to issue from time to time up to an
aggregate of 5,000,000 shares of preferred stock in one or more series and to
fix or alter the designations, preferences, rights and any qualifications,
limitations or restrictions of the shares of any series thereof, including the
dividend rights, dividend rates, conversion rights, voting rights, terms of
redemption including sinking fund provisions, redemption price or prices,
liquidation preferences and the number of shares constituting any series or
designations of any series. We have no present plans to issue any shares of
preferred stock. See "Anti-Takeover Effects of Delaware Law and our Certificate
of Incorporation and Bylaws."
Registration Rights
Pursuant to the terms of the Amended and Restated Information and
Registration Rights Agreement, after the closing of this offering the holders
of 16,682,100 shares of common stock will be entitled to demand and piggyback
registration rights with respect to the registration of their shares under the
Securities Act. Please see "Shares Eligible for Future Sale."
64
<PAGE>
Anti-Takeover Effects of Delaware Law and Our Certificate of Incorporation and
Bylaws
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law, as amended, or DGCL. Subject to a number of exceptions,
Section 203 of the DGCL prohibits a publicly-held Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the interested stockholder attained
status as an interested stockholder with the approval of the board of directors
or unless the business combination is approved in a prescribed manner. A
"business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested stockholder. Subject to
exceptions, an "interested stockholder" is a person who, together with
affiliates and associates, owns, or within three years did own, 15% or more of
a corporation's voting stock. This statute could prohibit or delay the
accomplishment of mergers or other takeover or change in control attempts with
respect to our company and, accordingly, may discourage attempts to acquire us.
In addition, a number of provisions of the Certificate and Bylaws, which
provisions will be in effect upon the closing of this offering and are
summarized in the following paragraphs, may be deemed to have an anti-takeover
effect and may delay, defer or prevent a tender offer or takeover attempt that
a stockholder might consider in its best interest, including those attempts
that might result in a premium over the market price for the shares held by our
stockholders.
Board of Directors Vacancies. The Certificate authorizes our Board of
Directors to fill vacant directorships or increase the size of the Board of
Directors. This may deter a stockholder from removing incumbent directors and
simultaneously gaining control of the Board of Directors by filling the
vacancies created by removal with its own nominees.
Stockholder Action; Special Meeting of Stockholders. The Certificate provides
that stockholders may not take action by written consent, but only at a duly
called annual or special meeting of stockholders. The Certificate further
provides that special meetings of stockholders of our company may be called
only by the Chairman of the Board of Directors or a majority of the Board of
Directors.
Advance Notice Requirements for Stockholder Proposals and Director
Nominations. The Bylaws provide that stockholders seeking to bring business
before an annual meeting of stockholders, or to nominate candidates for
election as directors at an annual meeting of stockholders, must provide timely
notice thereof in writing. To be timely, a stockholder's notice must be
delivered to or mailed and received at our principal executive offices not less
than 120 days nor more than 150 days prior to the first anniversary of the date
of our notice of annual meeting provided with respect to the previous year's
annual meeting of stockholders; provided, that if no annual meeting of
stockholders was held in the previous year or the date of the annual meeting of
stockholders has been changed to be more than 30 calendar day earlier than or
60 calendar days after the first anniversary of the date of our notice of
annual meeting, notice by the stockholder, to be timely, must be so received
not more than 90 days nor later than the later of (1) 60 days prior to the
annual meeting of stockholders or (2) the close of business on the 10th day
following the date on which notice of the date of the meeting is given to
stockholders or made public, whichever first occurs. The Bylaws also specify
requirements as to the form and content of a stockholder's notice. These
provisions may preclude stockholders from bringing matters before an annual
meeting of stockholders or from making nominations for directors at an annual
meeting of stockholders.
Authorized But Unissued Shares. The authorized but unissued shares of common
stock and preferred stock are available for future issuance without stockholder
approval, subject to limitations imposed by the Nasdaq National Market. These
additional shares may be utilized for a variety of
65
<PAGE>
corporate purposes, including future public offerings to raise additional
capital, corporate acquisitions and employee benefit plans. The existence of
authorized but unissued and unreserved common stock and preferred stock could
render more difficult or discourage an attempt to obtain control of our company
by means of a proxy contest, tender offer, merger or otherwise.
The DGCL provides generally that the affirmative vote of a majority of the
shares entitled to vote on any matter is required to amend a corporation's
certificate of incorporation or bylaws, unless a corporation's certificate of
incorporation or bylaws, as the case may be, requires a greater percentage. We
have provisions in our certificate and bylaws that require a super-majority
vote of the stockholders to amend, revise or repeal provisions that may have an
anti-takeover effect.
Limitation of Liability and Indemnification Matters
The Certificate includes provisions to (1) eliminate the personal liability
of our Directors for monetary damages resulting from breaches of their
fiduciary duty to the extent permitted by the DGCL and (2) indemnify our
Directors and officers to the fullest extent permitted by the DGCL, including
circumstances in which indemnification is otherwise discretionary.
We have entered into agreements to indemnify our directors and officers, in
addition to the indemnification provided for in the Bylaws. We believe that
these provisions and agreements are necessary to attract and retain qualified
directors and officers. Our Bylaws also permit us to secure insurance on behalf
of any officer, director, employee or other agent for any liability arising out
of his or her actions, regardless of whether the DGCL would permit
indemnification.
Transfer Agent And Registrar
Upon the closing of this offering, the transfer agent and registrar for the
common stock will be .
66
<PAGE>
Shares Eligible for Future Sale
Prior to this offering, there has not been any public market for the common
stock, and no prediction can be made as to the effect, if any, that market
sales of shares of common stock or the availability of shares of common stock
for sale will have on the market price of the common stock prevailing from time
to time. Nevertheless, sales of substantial amounts of common stock in the
public market, or the perception that sales could occur, could adversely affect
the market price of the common stock and could impair our company's future
ability to raise capital through the sale of its equity securities. See "Risk
Factors--The large number of shares eligible for public sale after this
offering could cause our stock price to decline."
Upon the closing of this offering, we will have an aggregate of 24,235,325
shares of common stock outstanding, assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options or warrants. Of
the outstanding shares, the shares sold in this offering will be freely
tradable, except that any shares held by our "affiliates," as defined in Rule
144 under the Securities Act, may only be sold in compliance with the
limitations described below. The remaining 19,235,325 shares of common stock
will be deemed "restricted securities" as defined under Rule 144. 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) or 701
promulgated under the Securities Act, which rules are summarized below. Subject
to the lock-up agreements described below and the provisions of Rules 144,
144(k) and 701, additional shares will be available for sale in the public
market as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Number of Shares Date
- ---------------- -----------------------------------------------------------------------------------
<S> <C>
After the date of this prospectus
Upon the filing of a registration statement to register for resale shares of common
stock issuable upon the exercise of options granted under our company's stock
option plan
At various times after 90 days from the date of this prospectus (Rule 144)
After 180 days from the date of this prospectus (subject, in some cases, to volume
limitations)
At various times after 180 days from the date of this prospectus (Rule 144)
</TABLE>
In general, under Rule 144, as currently in effect, a person (or persons
whose shares are required to be aggregated), including an affiliate, who has
beneficially owned shares for at least one year is entitled to sell, within any
three-month period commencing 90 days after the date of this prospectus, a
number of shares that does not exceed the greater of 1% of the then outstanding
shares of common stock (approximately 192,353 shares immediately after this
offering) or the average weekly trading volume in the common stock during the
four calendar weeks preceding the date on which notice of the sale is filed,
subject to restrictions. In addition, a person who is not deemed to have been
our affiliate at any time during the 90 days preceding a sale and who has
beneficially owned the shares proposed to be sold for at least two years would
be entitled to sell these shares under Rule 144(k) without regard to the
requirements described above. To the extent that shares were acquired from any
of our affiliates, the holding period for the purpose of effecting a sale under
Rule 144 commences on the date of transfer from the affiliate.
Our officers, directors and holders of an aggregate of approximately 16.4
million shares of our common stock have agreed that they will not offer, sell
or agree to sell, directly or indirectly, or otherwise dispose of any shares of
common stock without the prior written consent of J.P. Morgan Securities, Inc.
for a period of 180 days from the date of this prospectus. Please see
"Underwriting."
67
<PAGE>
Any of our employees or consultants who purchased his or her shares pursuant
to a written compensatory plan or contract is entitled to rely on the resale
provisions of Rule 701, which permits nonaffiliates to sell their Rule 701
shares without having to comply with the public information, holding period,
volume limitation or notice provisions of Rule 144 and permits affiliates to
sell their Rule 701 shares without having to comply with the Rule 144 holding
period restrictions, in each case commencing 90 days after the date of this
prospectus. As of October 31, 1999, the holders of options exercisable into
approximately shares of common stock will be eligible to sell their
shares on the expiration of the 180-day lockup period or subject in some cases
to vesting of options. We intend to file one or more registration statements on
Form S-8 under the Securities Act to register all shares of common stock
subject to outstanding stock options and common stock issued or issuable under
our stock plans which are not eligible for resale under Rule 701. We expect to
file this registration statement within 180 days after the date of this
prospectus, thus permitting the resale of shares by nonaffiliates in the public
market without restriction under the Securities Act.
We have agreed not to sell or otherwise dispose of any shares of common stock
during the 180-day period following the date of the prospectus, except that we
may issue, and grant options to purchase, shares of common stock under the 2000
Equity Participation Plan. In addition, we may issue shares of common stock in
connection with any acquisition of another company if the terms of the issuance
provide that this common stock shall not be resold prior to the expiration of
the 180-day period referenced in the preceding sentence. See "Risk Factors--The
sale of shares eligible for future sale and expectations of future sales of
these shares could depress share prices."
Following this offering, holders of shares of outstanding common stock will
have demand registration rights with respect to their shares of common stock
(subject to the 180-day lock-up arrangement described above) to require us to
register their shares of common stock under the Securities Act, and they will
have specified rights to participate in any future registration of our
securities. These holders are subject to lock-up periods of not more than 180
days following the date of this prospectus or any subsequent prospectus. See
"Description of Capital Stock--Registration Rights."
68
<PAGE>
Underwriting
Under the terms and subject to the conditions contained in an underwriting
agreement dated the date of this prospectus, the underwriters named below, for
whom J.P. Morgan Securities, Inc., Bear, Stearns & Co. Inc. and U.S. Bancorp
Piper Jaffray Inc., are acting as representatives, have severally agreed to
purchase, and we have agreed to sell to them, the respective number of shares
of common stock set forth opposite their names below.
<TABLE>
<CAPTION>
---------
Number of
Underwriters Shares
------------ ---------
<S> <C>
J.P. Morgan Securities, Inc.....................................
Bear, Stearns & Co. Inc.........................................
U.S. Bancorp Piper Jaffray Inc..................................
---------
Total........................................................... 5,000,000
=========
</TABLE>
The underwriters are offering the common stock subject to their acceptance of
the common stock and subject to prior sale. The underwriting agreement provides
that the obligations of the several underwriters to purchase shares of common
stock are subject to receipt of an opinion of their counsel and other
conditions. If any of the shares of common stock are purchased by the
underwriters under the underwriting agreement, all of the shares, other than
the shares covered by the over-allotment option described below, must be
purchased.
The underwriters propose initially to offer the shares of common stock
directly to the public at the public offering price set forth on the cover page
of this prospectus and to dealers at the public offering price less a
concession not in excess of $ per share. The underwriters may allow, and
dealers may reallow, a concession not in excess of $ per share to other
dealers. After the initial public offering of the common stock, the offering
price and other selling terms may be changed from time to time by the
underwriters.
The underwriters have informed us that they do not intend sales to their
customer accounts as to which they have discretionary trading authority to
exceed five percent of the total number of shares offered.
We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to 750,000 additional shares of
common stock, on the same terms and conditions as set forth on the cover page
hereof. The underwriters may exercise the option solely to cover over-
allotments, if any, made in connection with the sale of shares of common stock
offered hereby. If the underwriters' option is exercised in full, the total
price to public would be $ the total underwriting discounts and commissions
would be $ , and the total proceeds to us would be $ , before deducting
$ in estimated expenses payable by Vicinity.
Vicinity and our officers, directors and holders of an aggregate of
approximately 16.4 million shares of our common stock have agreed that, without
the prior written consent of J.P. Morgan Securities, Inc., during the period
beginning from the date of this prospectus and continuing to and including the
date 180 days from the date of this prospectus they will not:
. offer, pledge, announce the intention to sell, 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 of our securities which are substantially
similar to the common stock, including but not limited to any
securities that are convertible into or exercisable or exchangeable
for,
69
<PAGE>
or that represent the right to receive common stock or any
substantially similar securities; or
. enter into any swap, option, future, forward or other agreement that
transfers, in whole or in part, the economic consequences of ownership
of common stock or any securities substantially similar to the common
stock.
The restrictions described in this paragraph do not apply to:
. the issuance of shares under our employee stock option or stock
purchase plans;
. the grant by us of employee stock options;
. the issuance of shares by us upon exercise of warrants outstanding on
the date of this prospectus; or
. the issuance of common stock in connection with the transactions
described in this prospectus
The underwriters have reserved for sale, at the initial public offering
price, shares of the common stock for some of our directors, officers,
employees, friends and family who, after receiving a preliminary prospectus
and a letter explaining our directed share program, have expressed an interest
in purchasing shares of common stock in the offering. These persons are
expected to purchase, in the aggregate, not more than five percent of the
common stock offered in the offering. The number of shares available for sale
to the general public in the offering will be reduced to the extent these
persons purchase reserved shares. Any reserved shares not so purchased will be
offered to the general public on the same basis as the other shares offered by
this prospectus.
We have agreed to indemnify the underwriters against liabilities, losses and
expenses, including liabilities under the Securities Act, or to contribute to
payments that the underwriters may be required to make in respect thereof.
It is expected that delivery of the shares will be made to investors on or
about , 2000.
In connection with this offering, the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
common stock. Specifically, the underwriters may over-allot in connection with
this offering, creating a syndicate short position. In addition, the
underwriters may bid for, and purchase, shares of common stock in the open
market to cover syndicate short positions or to stabilize the price of the
common stock. Finally, the underwriting syndicate may reclaim selling
concessions allowed for distributing the common stock in the offering, if the
syndicate repurchases previously distributed common stock in syndicate
covering transactions, in stabilization transactions or otherwise. Any of
these activities may stabilize or maintain the market price of the common
stock above independent market levels. The underwriters are not required to
engage in these activities, and may end any of these activities at any time.
Prior to this offering, there has been no public market for the common
stock. The initial public offering price for the shares of common stock
offered hereby will be determined by agreement between us and the
underwriters. Among the factors considered in making this determination were
the history of and the prospects for the industry in which we compete, an
assessment of our management, our present operations, our historical results
of operations and the trend of our revenues and earnings, the prospects for
our future earnings, the general condition of the securities markets at the
time of the offering and the prices of similar securities of generally
comparable companies. We cannot assure you that an active trading market will
develop for our common stock or that our common stock will trade in the public
market at or above the initial public offering price.
70
<PAGE>
Legal Matters
The validity of the shares of common stock offered hereby will be passed upon
for Vicinity Corporation by Latham & Watkins, Menlo Park, California. Davis
Polk & Wardwell, Menlo Park, California has acted as counsel for the
underwriters in connection with this offering.
Experts
The financial statements of Vicinity Corporation as of July 31, 1998 and 1999
and for each of the years in the three-year period ended July 31, 1999, have
been included herein and in the registration statement in reliance on the
report of KPMG, LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of that firm as experts in accounting
and auditing.
Available Information
We have filed with the Securities and Exchange Commission a Registration
Statement on Form S-1, including the exhibits, schedules and amendments
thereto, under the Securities Act with respect to the shares of common stock to
be sold in this offering. This prospectus does not contain all the information
set forth in the registration statement. For further information regarding our
company and the shares of common stock to be sold in this offering, please
refer to the registration statement. Statements contained in this prospectus as
to the contents of any contract, agreement or other document referred to are
not necessarily complete, and in each instance reference is made to the copy of
the contract, agreement or other document filed as an exhibit to the
registration statement. These statements are qualified in all respects by these
references.
You may read and copy all or any portion of the registration statement or any
other information that we file at the Securities and Exchange Commission's
public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. You
can request copies of these documents, upon payment of a duplicating fee, by
writing to the Securities and Exchange Commission. Please call the Securities
and Exchange Commission at 1-800-732-0330 for further information on the
operation of the public reference rooms. Our Securities and Exchange Commission
filings, including the registration statement, are also available to you on the
Securities and Exchange Commission's Web site located at www.sec.gov.
As a result of this offering, we will become subject to the information and
reporting requirements of the Securities Exchange Act of 1934 and in accordance
therewith will file periodic reports, proxy statements and other information
with the Securities and Exchange Commission. Upon approval of the common stock
for the quotation on the Nasdaq National Market, reports, proxy and information
statements and other information may also be inspected at the offices of Nasdaq
Operations, 1735 K Street, N.W., Washington, D.C. 20006.
71
<PAGE>
Vicinity Corporation
Index to Financial Statements
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report............................................. F-2
Balance Sheets........................................................... F-3
Statements of Operations................................................. F-4
Statements of Redeemable Convertible Preferred Stock and Stockholders'
Equity (Deficit)........................................................ F-5
Statements of Cash Flows................................................. F-6
Notes to Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE>
Independent Auditors' Report
The Board of Directors
Vicinity Corporation:
We have audited the accompanying balance sheets of Vicinity Corporation (the
Company) as of July 31, 1998 and 1999, and the related statements of
operations, redeemable convertible preferred stock and stockholders' equity
(deficit) and cash flows for each of the years in the three-year period ended
July 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Vicinity Corporation as of
July 31, 1998 and 1999, and the results of its operations and its cash flows
for each of the years in the three-year period ended July 31, 1999 in
conformity with generally accepted accounting principles.
KPMG LLP
Mountain View, California
September 22, 1999, except as to Note 11
for which the date is November 16, 1999
F-2
<PAGE>
Vicinity Corporation
Balance Sheets
<TABLE>
<CAPTION>
------------------------------------------------------
July 31, Pro Forma
-------------------------- October 31, October 31,
1998 1999 1999 1999
------------ ------------ ------------ ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents.......... $ 263,944 $ 9,060,393 $ 6,663,222 $ 8,663,222
Accounts receivable,
net.................. 1,181,302 2,847,372 2,339,081 2,339,081
Prepaid expenses and
other current
assets............... 310,009 382,995 430,017 430,017
<CAPTION>
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Total current
assets............. 1,755,255 12,290,760 9,432,320 11,432,320
Property and equipment,
net.................... 65,853 912,489 1,982,685 1,982,685
<CAPTION>
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Total assets........ $ 1,821,108 $ 13,203,249 $ 11,415,005 $ 13,415,005
<CAPTION>
============ ============ ============ ============
<S> <C> <C> <C> <C>
LIABILITIES AND
STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Bank note............. $ 800,000 $ 1,000,000 $ -- $ --
Accounts payable...... 484,846 491,290 881,397 881,397
Capital lease
obligations, current
portion.............. -- 379,545 730,082 730,082
Accrued liabilities... 210,775 1,245,234 545,672 545,672
Deferred revenue...... 2,476,988 4,954,878 4,754,421 4,754,421
Payable to related
party................ 163,686 -- -- --
<CAPTION>
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Total current
liabilities........ 4,136,295 8,070,947 6,911,572 6,911,572
Capital lease
obligations, excluding
current portion........ -- 298,009 523,974 523,974
<CAPTION>
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
4,136,295 8,368,956 7,435,546 7,435,546
<CAPTION>
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Series A, B, C, D, E and
F redeemable
convertible preferred
stock and Series E
warrants, $0.001 par
value; authorized
10,000,000 at July 31,
1998, 12,519,768 at
July 31 and October 31,
1999; issued and
outstanding 7,137,250
at July 31, 1998,
11,217,387 at July 31,
1999 and 11,567,387 at
October 31, 1999;
aggregate liquidation
preference of
$7,971,578 at July 31,
1998, $32,066,788 at
July 31, 1999 and
$34,994,570 at October
31, 1999; aggregate
redemption amount of
$7,971,578 at July 31,
1998, $22,641,677 at
July 31, 1999 and
$24,857,320 at October
31, 1999............... 7,971,578 21,403,089 23,655,362 --
Commitments
Stockholders' equity
(deficit):
Common stock, $0.001
par value; 22,000,000
shares authorized;
issued and
outstanding 3,760,081
at July 31, 1998,
5,287,667 at July 31,
1999 and 6,119,571 at
October 31, 1999 .... 3,761 5,289 6,120 19,235
Additional paid-in
capital, net of
preferred stock
accretion............ (671,691) (300,941) 431,656 26,073,903
Deferred stock-based
compensation......... -- (1,044,132) (1,897,125) (1,897,125)
Notes receivable from
employees upon
purchase of stock.... (2,138) (97,652) (213,246) (213,246)
Accumulated deficit... (9,616,697) (15,131,360) (18,003,308) (18,003,308)
<CAPTION>
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Total stockholders'
equity (deficit)... (10,286,765) (16,568,796) (19,675,903) 5,979,459
<CAPTION>
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Total liabilities
and stockholders'
equity (deficit)... $ 1,821,108 $ 13,203,249 $ 11,415,005 $ 13,415,005
<CAPTION>
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
Vicinity Corporation
Statements of Operations
<TABLE>
<CAPTION>
--------------------------------------------------------------
Three Months Ended
Year Ended July 31, October 31,
------------------------------------- -----------------------
1997 1998 1999 1998 1999
----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Revenues:
License and hosting
fees.................. $ 1,419,404 $ 4,386,235 $ 5,656,529 $1,243,810 $ 2,166,479
Service and transaction
fees.................. -- 423,648 767,122 247,958 365,027
<CAPTION>
----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Total revenues........ 1,419,404 4,809,883 6,423,651 1,491,768 2,531,506
<CAPTION>
----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Cost of revenues........ 1,976,653 2,847,089 3,949,081 874,236 1,611,322
<CAPTION>
----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Gross profit (loss)... (557,249) 1,962,794 2,474,570 617,532 920,184
<CAPTION>
----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Operating expenses:
Product development.... 1,703,365 1,550,937 1,747,754 339,482 680,589
Sales and marketing.... 2,958,917 1,676,208 3,588,502 568,010 2,202,967
General and
administrative........ 1,127,471 1,204,240 1,995,384 361,503 765,794
Other.................. -- -- 440,500 -- --
Stock-based
compensation.......... -- -- 166,668 -- 197,432
<CAPTION>
----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Total operating
expenses............. 5,789,753 4,431,385 7,938,808 1,268,995 3,846,782
<CAPTION>
----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Loss from operations.. (6,347,002) (2,468,591) (5,464,238) (651,463) (2,926,598)
Other expense (income),
net.................... (108,907) 12,025 50,425 17,853 (54,648)
<CAPTION>
----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Net loss.............. (6,238,095) (2,480,616) (5,514,663) (669,316) (2,871,950)
Accretion on redeemable
convertible preferred
stock and warrants..... 383,379 517,965 1,038,230 128,658 502,273
<CAPTION>
----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Net loss applicable to
common stockholders.. $(6,621,474) $(2,998,581) $(6,552,893) $ (797,974) $(3,374,223)
<CAPTION>
=========== =========== =========== ========== ===========
<S> <C> <C> <C> <C> <C>
Net loss per common
share--basic and
diluted................ $ (1.61) $ (1.00) $ (1.67) $ (0.21) $ (0.71)
<CAPTION>
----------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Weighted average
shares--basic and
diluted................ 4,101,579 2,985,614 3,913,333 3,813,186 4,744,659
<CAPTION>
=========== =========== =========== ========== ===========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
Vicinity Corporation
Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity
(Deficit)
<TABLE>
<CAPTION>
<CAPTION>
----------------------------
Additional Notes
paid-in receivable
capital, from
Redeemable convertible net of employees
preferred stock Common stock preferred upon Deferred
---------------------- ---------------- stock purchase stock-based
Shares Amount Shares Amount accretion of stock compensation
---------- ----------- --------- ------ ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, July
31, 1997....... 7,137,250 $ 7,453,613 2,465,934 $2,466 $ (376,444) $ (2,138) $ --
Accretion on
redeemable
preferred
stock.......... -- 517,965 -- -- (517,965) --
Exercise of
common stock
warrant for
cash........... -- -- 275,512 276 207,918 -- --
Issuance of
common stock... -- -- 1,018,635 1,019 14,800 -- --
Net loss........ -- -- -- -- -- -- --
<CAPTION>
---------- ----------- --------- ------ ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, July
31, 1998....... 7,137,250 7,971,578 3,760,081 3,761 (671,691) (2,138) --
<CAPTION>
========== =========== ========= ====== =========== ========== ============
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of
preferred stock
and warrants
for cash....... 4,080,137 12,393,281 -- -- -- -- --
Accretion on
redeemable
preferred stock
and warrants... -- 1,038,230 -- -- (1,038,230) -- --
Issuance of
common stock
for cash and
note
receivable..... -- -- 1,527,586 1,528 198,180 (95,514) --
Deferred
compensation
related to
option grants.. -- -- -- -- 1,210,800 -- (1,210,800)
Amortization of
stock-based
compensation... -- -- -- -- -- -- 166,668
Net loss........ -- -- -- -- -- -- --
<CAPTION>
---------- ----------- --------- ------ ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, July
31, 1999....... 11,217,387 21,403,089 5,287,667 5,289 (300,941) (97,652) (1,044,132)
<CAPTION>
========== =========== ========= ====== =========== ========== ============
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of
preferred stock
for cash
(unaudited).... 350,000 1,750,000 -- -- -- -- --
Issuance of
common stock
for cash and
notes
receivable
(unaudited).... -- -- 831,904 831 184,445 (115,594) --
Accretion on
redeemable
preferred stock
and warrants
(unaudited).... -- 502,273 -- -- (502,273) -- --
Deferred
compensation
related to
option grants
(unaudited).... -- -- -- -- 1,050,425 -- (1,050,425)
Amortization of
stock-based
compensation
(unaudited).... -- -- -- -- -- -- 197,432
Net loss
(unaudited).... -- -- -- -- -- -- --
<CAPTION>
---------- ----------- --------- ------ ----------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances,
October 31,
1999
(unaudited).... 11,567,387 $23,655,362 6,119,571 $6,120 $ 431,656 $(213,246) $(1,897,125)
- --------------------------------------------------
========== =========== ========= ====== =========== ========= ===========
Total
Accumulated stockholders'
deficit deficit
------------- --------------
<S> <C> <C>
Balances, July
31, 1997....... $ (7,136,081) $ (7,512,197)
Accretion on
redeemable
preferred
stock.......... -- (517,965)
Exercise of
common stock
warrant for
cash........... -- 208,194
Issuance of
common stock... -- 15,819
Net loss........ (2,480,616) (2,480,616)
<CAPTION>
------------- --------------
<S> <C> <C>
Balances, July
31, 1998....... (9,616,697) (10,286,765)
<CAPTION>
============= ==============
<S> <C> <C>
Issuance of
preferred stock
and warrants
for cash....... -- --
Accretion on
redeemable
preferred stock
and warrants... -- (1,038,230)
Issuance of
common stock
for cash and
note
receivable..... -- 104,194
Deferred
compensation
related to
option grants.. -- --
Amortization of
stock-based
compensation... -- 166,668
Net loss........ (5,514,663) (5,514,663)
<CAPTION>
------------- --------------
<S> <C> <C>
Balances, July
31, 1999....... (15,131,360) (16,568,796)
<CAPTION>
============= ==============
<S> <C> <C>
Issuance of
preferred stock
for cash
(unaudited).... -- --
Issuance of
common stock
for cash and
notes
receivable
(unaudited).... -- 69,682
Accretion on
redeemable
preferred stock
and warrants
(unaudited).... -- (502,273)
Deferred
compensation
related to
option grants
(unaudited).... -- --
Amortization of
stock-based
compensation
(unaudited).... -- 197,432
Net loss
(unaudited).... (2,871,948) (2,871,948)
<CAPTION>
------------- --------------
<S> <C> <C>
Balances,
October 31,
1999
(unaudited).... $(18,003,308) $(19,675,903)
- --------------------------------------------------
============= ==============
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
Vicinity Corporation
Statements of Cash Flows
<TABLE>
<CAPTION>
---------------------------------------------------------------
Months Ended
Year Ended July 31, October 31, 1999
------------------------------------- ------------------------
1997 1998 1999 1998 1999
----------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss............... $(6,238,095) $(2,480,616) $(5,514,663) $ (669,316) $ (2,871,948)
Adjustments to
reconcile net loss to
net cash used in
operating activities:
Depreciation and
amortization......... 16,805 13,963 191,338 14,698 177,358
Amortization of stock-
based compensation... -- -- 166,668 -- 197,432
Allowance for doubtful
accounts............. -- -- 80,000 20,000 15,000
Changes in operating
assets and
liabilities:
Accounts receivable.. (165,389) (1,023,207) (1,746,070) (375,085) 493,291
Prepaid expenses and
other current
assets.............. (265,316) 98,870 (72,986) 9,484 (47,022)
Accounts payable..... 325,308 61,530 6,444 185,388 390,107
Accrued liabilities.. 42,655 54,258 1,034,459 92,201 (699,562)
Deferred revenue..... 771,197 1,591,591 2,477,890 536,978 (200,457)
Payable to related
party............... 216,162 (52,476) (163,686) (163,686) --
<CAPTION>
----------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Net cash used in
operating
activities......... (5,296,673) (1,736,087) (3,540,606) (349,338) (2,545,801)
<CAPTION>
----------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchases of property
and equipment........ (302,334) (105,782) (214,351) (2,532) (544,507)
Proceeds from sale of
property and
equipment............ 520,885 97,296 -- -- --
<CAPTION>
----------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Net cash provided by
(used in) investing
activities......... 218,551 (8,486) (214,351) (2,532) (544,507)
<CAPTION>
----------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
FINANCING ACTIVITIES:
-- (1,000,000)
Proceeds from bank
note.................. -- 800,000 200,000 200,000 --
Proceeds from factoring
receivables........... -- 72,961 -- -- --
Principal payments for
capital lease
obligations........... -- -- (146,069) (6,985) (126,545)
Proceeds from exercise
of common stock
warrant............... -- 208,194 -- -- --
Proceeds from sale of
preferred stock....... 4,975,988 -- 12,393,281 -- 1,750,000
Proceeds from sale of
common stock.......... 1,000 15,819 104,194 6,468 69,682
Repurchase of unvested
common stock.......... (1,867) -- -- -- --
<CAPTION>
----------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Net cash provided by
financing
activities......... 4,975,121 1,096,974 12,551,406 199,483 693,137
<CAPTION>
----------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Net (decrease) increase
in cash and cash
equivalents............ (103,001) (647,599) 8,796,449 (152,387) (2,397,171)
Cash and cash
equivalents at
beginning of period.... 1,014,544 911,543 263,944 263,944 9,060,393
<CAPTION>
----------- ----------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Cash and cash
equivalents at end of
period................. $ 911,543 $ 263,944 $ 9,060,393 $ 111,557 $ 6,663,222
<CAPTION>
=========== =========== =========== ========== ============
<S> <C> <C> <C> <C> <C>
Supplemental disclosure
of cash flow
information:
Cash paid during the
period for interest... $ -- $ 23,520 $ 97,205 $ 43 $ 59,741
<CAPTION>
=========== =========== =========== ========== ============
<S> <C> <C> <C> <C> <C>
Schedule of noncash
investing and financing
activities:
Equipment purchased
under capital lease... $ -- $ -- $ 823,623 $ 131,164 $ 708,424
<CAPTION>
=========== =========== =========== ========== ============
<S> <C> <C> <C> <C> <C>
Common stock
repurchased with
forgiveness of notes
receivable............ $ 3,612 $ -- $ -- $ -- $ --
<CAPTION>
=========== =========== =========== ========== ============
<S> <C> <C> <C> <C> <C>
Accretion on redeemable
preferred stock and
warrants.............. $ 383,379 $ 517,965 $ 1,038,230 $ 128,658 $ 502,273
<CAPTION>
=========== =========== =========== ========== ============
<S> <C> <C> <C> <C> <C>
Common stock issued for
note receivable....... $ -- $ -- $ 95,514 $ -- $ 115,594
<CAPTION>
=========== =========== =========== ========== ============
<S> <C> <C> <C> <C> <C>
Deferred compensation
related to stock
option grants......... $ -- $ -- $ 1,210,800 $ -- $ 1,050,425
<CAPTION>
=========== =========== =========== ========== ============
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
Vicinity Corporation
Notes to Financial Statements
1. Description of Business and Summary of Significant Accounting Policies
(a) Description of Business
The Company provides a suite of Internet-based marketing infrastructure
services designed to help clients turn Web traffic into store traffic. The
Company hosts clients' store location and product information and delivers that
information to potential customers on demand via the Internet, land-line
telephones, wireless telephones and other wireless devices. The Company can
also provide information to potential customers concerning which items are
regularly stocked at given locations and what promotions are being offered by
participating merchants.
(b) Unaudited Financial Statements
The financial information as of October 31, 1999 and for the three months ended
October 31, 1998 and 1999 is unaudited. In the opinion of management, the
accompanying unaudited financial statements have been prepared on the same
basis as the audited financial statements and include all adjustments
(consisting only of normal recurring adjustments) that the Company considers
necessary for a fair presentation of the financial position of the Company at
October 31, 1999 and the operations and cash flows for the three months ended
October 31, 1998 and 1999. Operating results for the three months ended October
31, 1999 are not necessarily indicative of results that may be expected for the
year ending July 31, 2000.
(c) Concentration of Credit Risk
Financial instruments that subject the Company to concentration of credit risk
consist primarily of cash and cash equivalents, and trade accounts receivable.
The Company places its cash and cash equivalents primarily in depository
accounts and money market accounts of recognized financial institutions. To
reduce credit risk with trade accounts receivable, the Company performs
evaluations of the credit worthiness of its customers on an ongoing basis. The
Company does not generally require collateral or other security. The Company
historically has not experienced any significant credit losses. As of July 31,
1998, July 31, 1999 and October 31, 1999, the allowance for bad debt was $0,
$80,000 and $95,000, respectively.
(d) Impairment of Long-Lived Assets
The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If these assets are considered to be impaired,
the impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of their carrying cost or fair value less
costs to sell.
(e) Revenue Recognition
The Company primarily derives its revenues from product license and hosting
fees. These revenues are recognized ratably over the life of the contract,
which typically has one year, non-refundable terms. Service and transaction
fees consist of revenue generated from project related professional services
and to a lesser degree from fees derived from advertising, sponsorship and e-
commerce transactions. These revenues are recognized as the services are
performed. The Company has no barter agreements, and no revenues have been
derived from barter transactions to date.
Accounts receivable consists of amounts due from customers under signed
contracts where performance on the contract has commenced. Deferred revenue
consists of customer payments received and accounts receivable recorded in
advance of recognizing revenue for license and hosting fees.
(f) Cost of Revenues
Cost of revenues include salaries and benefits of the Company's operations
personnel, the cost of acquiring data and content, the leasing and depreciation
cost of the Company's computer hosting equipment and internet connection and
data center charges.
F-7
<PAGE>
Vicinity Corporation
Notes to Financial Statements--(Continued)
(g) Cash Equivalents
The Company considers all highly liquid investments purchased with remaining
maturities of three months or less to be cash equivalents.
(h) Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is calculated using the straight-line method over the estimated
useful lives of the equipment, generally three to five years. Leasehold
improvements are amortized over the lesser of the remaining life of the lease
or five years.
(i) Income Taxes
The Company accounts for income taxes using the asset and liability method. In
accordance with this method, deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using the enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
(j) Software Development Costs
Costs related to the development of new products and enhancements to existing
products are charged to operations as incurred. Software development costs are
required to be capitalized when a product's technological feasibility has been
established by completion of a working model of the product. To date,
completion of a working model of the Company's products and general release
have substantially coincided. As a result, the Company has not capitalized any
software development costs.
(k) Advertising Expense
The cost of advertising is expensed as incurred. Advertising costs totaled
approximately $119,000, $1,200, $287,000, $6,000 and $250,000 for the years
ended July 31, 1997, 1998 and 1999 and the three months ended October 31, 1998
and 1999, respectively.
(l) Unaudited Pro Forma Balance Sheet
If the initial public offering discussed in Note 11 is consummated, all of the
redeemable convertible preferred stock outstanding will automatically be
converted into common stock upon the closing of the offering. The exercise of
the Series E warrants and the conversion of the redeemable convertible
preferred stock have been reflected in the accompanying unaudited pro forma
balance sheet as of October 31, 1999.
(m) Per Share Computations
Basic net loss per share is computed by dividing net loss applicable to common
stockholders by the weighted-average number of common shares outstanding for
the period. Diluted net loss per share is computed by dividing net loss
applicable to common stockholders by the weighted-average number of common and,
when dilutive, potential common equivalent shares outstanding during the
period. Common equivalent shares include the effect of redeemable convertible
preferred stock, outstanding warrants and stock options. All potential common
shares have been excluded from the computation of diluted net loss per share
for all periods presented because the effect would be antidilutive.
F-8
<PAGE>
Vicinity Corporation
Notes to Financial Statements--(Continued)
Diluted net loss per share does not include the effect of the following
antidilutive common equivalent shares (in thousands):
<TABLE>
<CAPTION>
--------------------------------------
Three months
Year ended July 31, ended October 31,
------------------- ------------------
1997 1998 1999 1998 1999
----- ------ ------ ------------------
<S> <C> <C> <C> <C> <C>
unaudited
Stock options.......................... 995 2,873 2,064 2,799 1,426
Shares of common stock subject to
repurchase............................ -- -- 738 6 1,147
Convertible preferred warrants......... -- -- 952 -- 952
Convertible preferred stock (as if
converted)............................ 6,357 7,733 9,152 7,733 12,163
<CAPTION>
----- ------ ------ ------------------
<S> <C> <C> <C> <C> <C>
7,352 10,606 12,906 10,538 15,688
<CAPTION>
===== ====== ====== ==================
</TABLE>
The weighted-average exercise prices of stock options were $0.10, $0.11, $0.11,
$0.10 and $0.22 as of July 31, 1997, 1998 and 1999 and October 31, 1998 and
1999, respectively. The weighted-average exercise price of shares of common
stock subject to repurchase was $0.15 and $0.22 as of July 31, 1999 and October
31, 1999, respectively.
(n) Stock-Based Compensation
The Company accounts for its stock-based compensation arrangements for
employees using the intrinsic-value method pursuant to Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees. Compensation
expense is recorded for the Company's stock options on the date of grant, to
the extent the fair value of the underlying common stock exceeds the exercise
price for stock options or the purchase price for common stock. Options granted
to consultants and other nonemployees are considered compensatory and are
accounted for at fair value pursuant to Statement of Financial Accounting
Standards (SFAS) No. 123, Accounting for Stock-Based Compensation. The Company
discloses the pro forma effect of using the fair value method of accounting for
all stock-based compensation arrangements, in accordance with SFAS No. 123.
(See footnote 5(e)). Because the options generally vest ratably over a four
year period, the service period over which compensation is accrued as a charge
to expense is determined separately for each 25 percent portion of the total
award, in accordance with Financial Accounting Standards Board (FASB)
Interpretation No. 28 (FIN 28). The result of applying FIN 28 is that
approximately 52% of the unearned deferred compensation will be amortized in
the first year, 27% in the second year, 15% in the third year and 6% in the
fourth year following the date of grant.
(o) Segment Information
During fiscal 1999, the Company adopted the provisions of SFAS No. 131,
Disclosures About Segments of an Enterprise and Related Information. SFAS No.
131 established annual and interim reporting standards for a company's
operating segments. SFAS No. 131 requires disclosures of selected segment-
related financial information about products, major customers and geographic
areas.
(p) Comprehensive Loss
The Company has no significant components of other comprehensive loss, and
accordingly, comprehensive loss is the same as net loss for all periods
presented.
(q) Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
F-9
<PAGE>
Vicinity Corporation
Notes to Financial Statements--(Continued)
(r) Internal Use Software
In March 1998, the American Institute of Certified Public Accountants (AICPA)
issued Statement of Position (SOP) 98-1, Accounting for the Cost of Computer
Software Developed or Obtained for Internal Use. SOP 98-1 is effective for
financial statements for years beginning after December 15, 1998. SOP 98-1
provides guidance over accounting for computer software developed or obtained
for internal use, including the requirement to capitalize specified costs and
amortization of these costs. The Company adopted SOP 98-1 on August 1, 1999.
(s) Recent Acounting Pronouncements
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No.
133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133
establishes accounting and reporting standards for derivative instruments
(including derivative instruments embedded in other contracts) and for hedging
activities. SFAS No. 133, as amended by SFAS No. 137, is effective for all
fiscal quarters of fiscal years beginning after June 15, 2000. To date, the
Company has not entered into any derivative financial instruments or hedging
activities.
2. Balance Sheet Components
(a) Cash and Cash Equivalents
Cash and cash equivalents consisted of the following:
<TABLE>
<CAPTION>
--------------------- ----------
October
July 31, 31, 1999
--------------------- ----------
1998 1999 unaudited
---------- ---------- ----------
<S> <C> <C> <C>
Cash........................................... $ 261,221 $ 121,444 $ 277,898
Money market funds............................. 2,723 8,938,949 6,385,324
<CAPTION>
---------- ---------- ----------
<S> <C> <C> <C>
$ 263,944 $9,060,393 $6,663,222
<CAPTION>
========== ========== ==========
</TABLE>
(b) Property and Equipment
Property and equipment consisted of the following as of July 31:
<TABLE>
<CAPTION>
---------------------- -----------
October 31,
July 31, 1999
---------------------- -----------
1998 1999 unaudited
---------- ---------- -----------
<S> <C> <C> <C>
Furniture and fixtures................... $ -- $ 14,749 $ 124,949
Computer equipment....................... 8,822 144,418 296,303
Purchased software....................... 68,625 103,506 373,301
Equipment under capital leases........... -- 823,623 1,532,047
Leasehold improvements................... -- 29,125 36,375
<CAPTION>
---------- ---------- -----------
<S> <C> <C> <C>
77,447 1,115,421 2,362,975
Less accumulated depreciation and
amortization............................ (11,594) (202,932) (380,290)
<CAPTION>
---------- ---------- -----------
<S> <C> <C> <C>
$ 65,853 $ 912,489 $1,982,685
<CAPTION>
========== ========== ===========
</TABLE>
The Company entered into capital lease arrangements for equipment. Accumulated
depreciation on the leased equipment totaled approximately $151,000 and
$277,000 as of July 31, 1999 and October 31, 1999, respectively. Amortization
of assets under capital leases is included in depreciation and amortization
expense.
F-10
<PAGE>
Vicinity Corporation
Notes to Financial Statements--(Continued)
(c) Accrued Liabilities
A summary of accrued liabilities as follows:
<TABLE>
<CAPTION>
--------------------- ---------
October
July 31, 31, 1999
--------------------- ---------
1998 1999 unaudited
---------- ---------- ---------
<S> <C> <C> <C>
Accrued compensation........................... $ 176,701 $ 433,295 $274,436
Accrued legal settlement....................... -- 440,500 --
Accrued expenses............................... 34,074 371,439 271,236
<CAPTION>
---------- ---------- ---------
<S> <C> <C> <C>
$ 210,775 $1,245,234 $545,672
<CAPTION>
========== ========== =========
</TABLE>
In fiscal 1999, the Company entered into a settlement agreement and agreed to
pay $440,500 for a patent license with respect to an intellectual property
rights claim. The payment was made in August 1999.
3. Line of Credit
In fiscal 1998, the Company entered into a line of credit agreement with a
credit limit of $1,000,000 and a variable interest rate that was approximately
8.5% as of July 31, 1999. The debt was guaranteed by CMGI, Inc., an affiliate
of the Company's largest stockholder, CMGI@Ventures, and was secured by the
assets of the Company. The Company had $800,000 and $1,000,000 outstanding
under the line of credit agreement as of July 31, 1998 and 1999, respectively.
In August 1999, the Company paid the outstanding balance of $1,000,000 and is
currently in the process of negotiating a new line of credit with a major bank.
4. Redeemable Convertible Preferred Stock
A summary of redeemable convertible preferred stock follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Shares outstanding October 31, Liquidation Liquidation Redemption Redemption
-------------------- 1999 preference premium per price per premium
1998 1999 (unaudited) per share share share per share
--------- ---------- ----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Series A................ 1,852,000 1,852,000 1,852,000 $0.270 $0.019 $0.270 $0.019
Series B................ 1,981,250 1,981,250 1,981,250 0.800 0.056 0.800 0.056
Series C................ 3,304,000 3,304,000 3,304,000 1.510 0.110 1.510 0.110
Series D................ -- 2,300,613 2,300,613 4.350 0.152 2.173 0.152
Series E................ -- 59,524 59,524 4.200 0.147 2.100 0.147
Series F................ -- 1,720,000 2,070,000 7.500 -- 5.000 0.350
<CAPTION>
--------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
7,137,250 11,217,387 11,567,387
<CAPTION>
========= ========== ===========
</TABLE>
In the event of any liquidation event, the holders of the Series A, B, C, D and
E preferred stock are entitled to receive the liquidation preference per share
plus the liquidation premium per share per annum from the date of issuance of
these shares, plus all declared but unpaid dividends. Shares of Series F
preferred stock shall have a liquidation preference of $7.50 per share, plus
all declared but unpaid dividends, in the event of a dissolution or winding up,
either voluntary or involuntary, of the Company. Upon the sale of the Company,
shares of Series F preferred stock have a liquidation preference of $5.00 per
share, plus all declared but unpaid dividends.
The holders of the redeemable convertible preferred stock may request
redemption of their shares plus the redemption premium per share per annum from
the date of issuance of these shares, plus all declared but unpaid dividends.
The redemption may be requested on or after January 31, 2003 and must be paid
in cash by the Company within two years and three months from the date that a
written request for redemption is received. The redemption premium is charged
to the statement of operations as accretion on redeemable convertible preferred
stock. For the years ended July 31, 1997, 1998
F-11
<PAGE>
Vicinity Corporation
Notes to Financial Statements--(Continued)
and 1999 and the three months ended October 31, 1998 and 1999, the amount of
accretion recorded by the Company was $383,379, $517,965, $945,820, $128,658
and $466,082, respectively. The Series D preferred stock was issued at a price
per share less than the redemption price per share. This difference which
amounted to approximately $1.2 million is being charged to the statement of
operations as a component of accretion on redeemable convertible preferred
stock through January 31, 2003.
A summary of the liquidation and redemption amounts follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------
Liquidation Amount Redemption Amount
------------------------------------ -----------------------------------
July 31,October 31, July 31,October 31,
------------------------ ----------- ----------------------- -----------
1998 1999 1999 1998 1999 1999
----------- ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Series A................ $ 576,880 $ 614,185 $ 623,511 $ 576,880 $ 614,185 $ 623,511
Series B................ 1,810,900 1,923,033 1,951,066 1,810,900 1,923,033 1,951,066
Series C................ 5,583,798 5,952,838 6,043,698 5,583,798 5,952,838 6,043,698
Series D................ -- 10,423,520 10,595,895 -- 5,415,853 5,578,714
Series E................ -- 253,212 255,400 -- 128,212 130,400
Series F................ -- 12,900,000 15,525,000 -- 8,607,556 10,529,931
<CAPTION>
----------- ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
$ 7,971,578 $ 32,066,788 $34,994,570 $ 7,971,578 $22,641,677 $24,857,320
<CAPTION>
=========== ============ =========== =========== =========== ===========
</TABLE>
Each share of Series A, C, D, E and F preferred stock is convertible into 1.0
share of common stock. Each share of Series B preferred stock is convertible
into 1.3 shares of common stock. Upon completion of an initial public offering
(IPO) all shares are automatically converted to common stock and the holders of
these shares will not be paid the redemption premium. The redemption premium
accrued through that date will be credited to additional paid in capital.
Holders of Series A, B, C, D, E and F preferred stock vote equally with holders
of common stock on an as-if-converted basis.
No dividends have been declared or paid on the preferred stock or common stock
since the Company's inception.
5. Stockholder's Deficit
(a) Warrants
In connection with the Series D preferred stock issuance, the Company issued
warrants to a venture capital firm to purchase 952,381 shares of Series E
preferred stock with an exercise price of $2.10 per share. The warrants are
exercisable at any time, but in no case later than the earlier of either
December 9, 1999 or the closing of a firm commitment underwritten IPO, and were
valued at approximately $551,000 using the Black-Scholes option pricing model
with the following assumptions: a risk-free interest rate of approximately
5.6%; a contractual life of one year; no dividends; and an expected volatility
of 65%. The value of these warrants was recorded as a reduction in the value of
the Series D preferred stock. This $551,000 warrant value is being charged to
the statement of operations as a component of accretion on redeemable
convertible preferred stock through January 31, 2003. For the year ended July
31, 1999, and the three months ended October 31, 1999, $92,410 and $36,190,
respectively, of accretion was recorded by the Company.
In addition, in June and July 1999, the Company entered into agreements with
two separate business partners whereby the Company agreed to issue warrants for
the purchase of common stock contingent upon the attainment of performance
milestones. The first agreement, signed in June 1999, provides for the issuance
of warrants exercisable for up to 50,000 shares of common stock at an exercise
price of $0.50 per share as performance milestones are achieved, and expires in
June 2002. Upon issuance of the warrants, the difference between the fair value
and the exercise price at the date of achievement of the performance milestone
will be recorded as an expense.
The second agreement, signed in July 1999, provides for the issuance of
warrants exercisable for up to 275,000 shares of common stock, contingent upon
the attainment of performance milestones and expires in July 2002. The exercise
price for these warrants shall be determined as of the date when a specific
milestone is achieved and shall be equal to the price per share received by the
Company in the most recent private equity financing round of the Company or,
following an IPO, the
F-12
<PAGE>
Vicinity Corporation
Notes to Financial Statements--(Continued)
average trading price of the Company's common stock over the five trading days
immediately prior to the date of issuance of these warrants. Upon issuance of
the warrants, any difference between the fair value and the exercise price at
the date of achievement of the performance milestone will be recorded as an
expense.
At July 31, 1999, no performance milestones under either agreement had been met
or determined to be probable and, accordingly, no warrants have been issued or
related expense recorded.
(b) Common Stock
The Company has reserved a total of 12,163,373 shares of common stock for the
conversion of preferred stock.
The Company issues stock options which may be exercised by note or by cash to
purchase common stock at any time subsequent to issuance. These shares of
common stock may be subject to vesting. The Company has the right to repurchase
all unvested shares at the original exercise price in the event of employee
termination. The number of shares subject to the repurchase right decreases as
the shares vest under the original option terms, generally four years. As of
July 31, 1999, there were 737,904 shares subject to repurchase at prices
ranging from $0.10 to $0.50, with a weighted-average repurchase price of $0.15
per share. As of October 31, 1999, there were 1,147,024 shares subject to
repurchase at prices ranging from $0.10 to $0.50 with a weighted average
repurchase price of $0.22 per share.
(c) 1995 Stock Option Plan
In October 1995, the Company's Board of Directors approved the 1995 Stock
Option Plan (1995 Plan) and reserved 1,000,000 shares of common stock for
issuance under the Plan. In fiscal 1996, an additional 1,000,000 shares of
common stock were approved by the Board of Directors and reserved for issuance
under the 1995 Plan. During fiscal 1997, the Board of Directors elected to
reduce the number of shares of common stock reserved under the 1995 Plan and
1,353,400, 296,448 and 28,281 shares were retired from the 1995 Plan in fiscal
1997, 1998 and 1999, respectively. The 1995 Plan provides for stock options to
be granted to employees, consultants, officers, and directors. Options may be
granted at an exercise price not less than 100% of the estimated fair market
value, as determined by the Company's Board of Directors, for incentive stock
options, and 85% of the estimated fair market value at the date of grant for
nonqualified stock options. All options are granted at the discretion of the
Company's Board of Directors and have a term not greater than ten years from
the date of grant. Options issued generally vest ratably over four years (25%
one year after the grant date and at a rate of 1/48 per month thereafter).
(d) 1996 Incentive Stock Option Plan
In November 1996, the Company's Board of Directors approved the 1996 Incentive
Stock Option Plan (1996 Plan), which is effective for a term of ten years. The
Board of Directors reserved 809,132 shares of common stock for issuance under
the 1996 Plan at that time. During fiscal 1998 and 1999, additional shares of
common stock of 2,482,185 and 600,000, respectively, were approved by the Board
of Directors and reserved for issuance under the 1996 Plan. Options may be
granted at an exercise price not less than 100% of the estimated fair market
value, as determined by the Company's Board of Directors, for incentive stock
options, and 85% of the estimated fair market value at the date of grant for
nonqualified stock options. All options are granted at the discretion of the
Company's Board of Directors and have a term not greater than ten years from
the date of grant. Options issued generally vest ratably over four years (25%
one year after the grant date and at a rate of 1/48 per month thereafter).
(e) Accounting for Stock-Based Compensation
The Company uses the intrinsic-value method prescribed in APB No. 25 in
accounting for its stock-based compensation arrangements with employees. Stock-
based compensation expense is recognized for employee stock option grants in
those instances in which the fair value of the underlying common stock exceeds
the exercise price of the stock options at the date of grant. The Company
recorded deferred stock-based compensation expense before taxes of $1,210,800
and $1,050,425 during the year ended July 31, 1999 and the three months ended
October 31, 1999, respectively. Because the option grants generally vest
ratably over a four-year period, the service period over which compensation is
accrued as a charge to expense is determined separately for each 25 percent
portion of the total award, in accordance with Financial
F-13
<PAGE>
Vicinity Corporation
Notes to Financial Statements--(Continued)
Accounting Standards Board (FASB) Interpretation No. 28 (FIN 28). The result of
applying FIN 28 is that approximately 52% of the unearned deferred compensation
will be amortized in the first year, 27% in the second year, 15% in the third
year and 6% in the fourth year following the date of the grant. Approximately
$167,000 and $197,000 of stock-based compensation expense was recognized in the
year ended July 31, 1999 and the three months ended October 31, 1999,
respectively.
A summary of all stock option activity follows:
<TABLE>
<CAPTION>
----------------------------------
Options Weighted-
available average
for future Options exercise
grant outstanding price
---------- ----------- ---------
<S> <C> <C> <C>
Balances as of July 31, 1996................ 1,952,400 -- $ --
Authorized................................ 809,132 -- --
Shares retired............................ (1,353,400) -- --
Options granted........................... (1,810,043) 1,810,043 0.10
Options exercised......................... -- (10,000) 0.10
Options canceled.......................... 805,543 (805,543) 0.10
<CAPTION>
---------- ----------- ---------
<S> <C> <C> <C>
Balances as of July 31, 1997................ 403,632 994,500 0.10
Authorized................................ 2,482,185 -- --
Shares retired............................ (296,448) -- --
Options granted........................... (2,530,637) 2,530,637 0.11
Options exercised......................... -- (136,135) 0.10
Options canceled.......................... 516,365 (516,365) 0.11
<CAPTION>
---------- ----------- ---------
<S> <C> <C> <C>
Balances as of July 31, 1998................ 575,097 2,872,637 0.11
Authorized................................ 600,000 -- --
Shares retired............................ (28,281) -- --
Options granted at fair value............. (349,000) 349,000 0.15
Options granted below fair value.......... (822,500) 822,500 0.42
Options exercised......................... -- (1,527,586) 0.13
Options canceled.......................... 452,551 (452,551) 0.10
<CAPTION>
---------- ----------- ---------
<S> <C> <C> <C>
Balances as of July 31, 1999................ 427,867 2,064,000 $ 0.22
<CAPTION>
========== =========== =========
</TABLE>
There were 692,470 and 547,042 options exercisable as of July 31, 1998 and
1999, respectively.
The following table summarizes information about stock options under the plans
as of July 31, 1999:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
Options outstanding Options exercisable
- -------------------------------------------------------- ------------------------
Weighted-
average Weighted- Weighted-
Range of Number of remaining life average Number of average
xerciseeprices shares (in years) exercise price shares exercise price
- --------------- --------- -------------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C>
$0.10 1,084,500 8.0 $0.10 539,750 $0.09
0.15 424,000 9.1 0.15 7,292 0.15
0.20 76,500 9.6 0.20 -- --
0.50 390,000 9.7 0.50 -- --
0.75 to 1.25 89,000 9.9 0.77 -- --
<CAPTION>
- --------------- --------- -------------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C>
$0.10 to 1.25 2,064,000 8.7 $0.22 547,042 $0.10
<CAPTION>
=============== ========= ============== ============== ========= ==============
</TABLE>
The weighted-average fair value of employee stock options granted at fair value
during fiscal 1997, 1998 and 1999 was $0.02, $0.02, and $0.03, respectively.
The weighted average fair value of employee stock options granted below fair
value during fiscal 1999 was $1.51. The fair value of employee options granted
was estimated on the date of grant using the
F-14
<PAGE>
Vicinity Corporation
Notes to Financial Statements--(Continued)
Black-Scholes option pricing model. The following weighted-average assumptions
were used in these calculations: a risk-free interest rate of 6.6%, 5.6% and
5.2% for the years ended July 31, 1997, 1998 and 1999, respectively; an
expected life of six years for the years ended July 31, 1997 and 1998 and four
years for the year ended July 31, 1999; dividend yield of 0%; and volatility of
0%.
Had compensation cost for the Company's stock-based compensation plans been
determined consistent with the fair value approach set forth in SFAS No. 123,
the Company's net losses for the years ended July 31, 1997, 1998 and 1999 would
have been as follows:
<TABLE>
<CAPTION>
-------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Net loss applicable to common
stockholders - as reported............ $(6,621,474) $(2,998,581) $(6,552,893)
Pro forma stock-based compensation
expense............................... (4,632) (16,735) (37,045)
<CAPTION>
----------- ----------- -----------
<S> <C> <C> <C>
Net loss applicable to common
stockholders - pro forma.............. $(6,626,106) $(3,015,316) $(6,589,938)
<CAPTION>
=========== =========== ===========
<S> <C> <C> <C>
Basic and diluted net loss per share:
As reported.......................... $ (1.61) $ (1.00) $ (1.67)
<CAPTION>
=========== =========== ===========
<S> <C> <C> <C>
Pro forma............................ $ (1.62) $ (1.00) $ (1.67)
<CAPTION>
=========== =========== ===========
</TABLE>
6. Income Taxes
The Company incurred no income tax expense for the years ended July 31, 1997,
1998 and 1999. The income tax expense differed from the amounts computed by
applying the U.S. federal income tax rate of 34% to pretax income as a result
of the following:
<TABLE>
<CAPTION>
-----------------------------------
1997 1998 1999
----------- --------- -----------
<S> <C> <C> <C>
Computed expected tax (benefit)........... $(2,121,228) $(839,729) $(1,794,799)
Current year net operating losses and
temporary differences for which no tax
benefit is recognized.................... 2,113,848 833,315 1,782,440
Other..................................... 7,380 6,414 12,359
<CAPTION>
----------- --------- -----------
<S> <C> <C> <C>
$ -- $ -- $ --
<CAPTION>
=========== ========= ===========
</TABLE>
The effects of temporary differences that give rise to significant portions of
deferred tax assets as of July 31 are as follows:
<TABLE>
<CAPTION>
------------------------
1998 1999
----------- -----------
<S> <C> <C>
Deferred tax assets:
Accruals and reserves............................... $ 1,171,151 $ 2,428,136
Net operating loss carryforwards and credits........ 3,470,201 3,853,027
<CAPTION>
----------- -----------
<S> <C> <C>
Total gross deferred tax assets before valuation
allowance......................................... 4,641,352 6,281,163
Valuation allowance.................................. (4,641,352) (6,281,163)
<CAPTION>
----------- -----------
<S> <C> <C>
Net deferred tax assets............................ $ -- $ --
<CAPTION>
=========== ===========
</TABLE>
As of July 31, 1999, the Company has available net operating losses for federal
and state income tax purposes of $9,530,784 and $6,929,414, respectively. The
federal net operating loss carryforward will expire, if not utilized, in the
year 2011. The California net operating loss carryforwards will expire, if not
utilized, in the year 2004. The Company has research credit carryforwards for
federal income tax purposes of $181,689. The Company has a valuation allowance
for the full amount of the deferred tax assets as of July 31, 1998 and 1999, as
management does not believe it is more likely than not that the value of the
assets is recoverable.
Federal and state tax laws impose substantial restrictions on the utilization
of net operating loss carryforwards in the event of an "ownership change" as
defined in Section 382 of the Internal Revenue Code. The Company has not yet
determined
F-15
<PAGE>
Vicinity Corporation
Notes to Financial Statements--(Continued)
whether an ownership change occurred due to significant stock transactions in
each of the reporting years disclosed. If an ownership change has occurred,
utilization of the net operating loss carryforwards could be significantly
deferred.
7. Commitments
(a) Leases
The Company leases equipment and its facilities under noncancelable operating
and capital leases with expiration dates through 2003. Future minimum lease
payments under the Company's noncancelable operating and capital leases as of
October 31, 1999 are as follows:
<TABLE>
<CAPTION>
------------------------
Year Ending Capital Operating
July 31, leases leases
- ----------- ----------- -----------
<S> <C> <C>
2000.................................................. $ 585,420 $ 712,787
2001.................................................. 672,370 188,362
2002.................................................. 72,905 125,294
2003.................................................. -- 13,238
<CAPTION>
----------- -----------
<S> <C> <C>
Total minimum lease payments......................... 1,330,695 $ 1,039,681
<CAPTION>
===========
<S> <C> <C>
Less amount representing interest..................... (76,639)
<CAPTION>
-----------
<S> <C> <C>
Present value of minimum lease payments............... 1,254,055
Less current portion.................................. (730,082)
<CAPTION>
-----------
<S> <C> <C>
$ 523,974
<CAPTION>
===========
</TABLE>
Rental expense amounted to approximately $841,000, $771,000, $1,142,000,
$177,000 and $524,000 for the years ended July 31, 1997, 1998 and 1999 and the
three months ended October 31, 1998 and 1999, respectively. Rental expense of
approximately $142,000 during the years ended July 31, 1997, 1998 and 1999 and
$35,000 during the three months ended October 31, 1999 was paid to Navisite, a
subsidiary of CMGI.
(b) License Fees
The Company has entered into agreements with several content providers. As of
July 31, 1999, the terms of such agreements include the following future
minimum license fees.
<TABLE>
<CAPTION>
Year Ending
July 31,
- -----------
<S> <C>
2000................................................................. $ 575,146
2001................................................................. 283,956
2002................................................................. 141,667
2003................................................................. 75,000
2004................................................................. 6,575
<CAPTION>
----------
<S> <C>
$1,082,344
<CAPTION>
==========
</TABLE>
8. Segment Information
During fiscal 1999, the Company adopted the provisions of SFAS No. 131,
Disclosures About Segments of an Enterprise and Related Information. SFAS No.
131 requires disclosures of selected segment-related financial information
about products, major customers and geographic areas.
The Company's chief operating decision maker (CODM) is considered to be the
Company's CEO. The CODM evaluates performance, makes operating decisions and
allocates resources based on financial data consistent with the presentation in
the accompanying financial statements. Therefore, the Company operates in a
single segment for purposes of disclosure under SFAS No. 131.
F-16
<PAGE>
Vicinity Corporation
Notes to Financial Statements--(Continued)
The Company's revenues have been earned from customers in the United States
with the exception of approximately $8,000, $2,000, $50,000, $29,000 and
$137,000 in revenues in fiscal 1997, 1998, and 1999 and the three months ended
October 31, 1998 and 1999, respectively, which were earned from customers in
Europe. During fiscal 1997 and 1998, the Company had sales to one customer that
accounted for 48% and 26%, respectively, of the Company's revenues. During
fiscal 1999, the Company had sales to one customer that accounted for 11% of
revenues.
All of the Company's long-lived assets are located in the United States.
9. Related Party Transaction
As of July 31, 1998, the Company had a noninterest bearing payable to Navisite
Internet Services, a subsidiary of CMGI, for $163,686, relating to the lease of
computer equipment that was paid during fiscal 1999.
In addition to rental expense paid to Navisite, approximately $105,000, $8,000
and $49,000 was paid for data center services during the years ended July 31,
1997, 1998 and 1999.
10. Retirement Plan
Effective March 1997, the Company established a qualified 401(k) plan (the
Plan) available to all employees who meet the Plan's eligibility requirements.
Participants may elect to contribute a percentage of their compensation to the
Plan up to a statutory maximum amount. The Company may make matching
contributions to the Plan on a discretionary basis. The Company did not make
any contributions to the Plan in fiscal 1997, 1998 or 1999.
11. Subsequent Events
In August 1999, the Company signed a $4,000,000 equipment leasing agreement
with a finance company. The facility is cancellable by either party upon thirty
days notice. Equipment leased under this facility will have an initial term of
24 months from the date of equipment acceptance.
In August 1999, the Company issued an additional 350,000 shares of Series F
preferred stock for aggregate proceeds of $1,750,000.
In October 1999, the Board of Directors authorized the filing of a registration
statement with the Securities and Exchange Commission that would permit the
Company to sell shares of the Company's stock in connection with a proposed
initial public offering.
In October 1999, the Board of Directors authorized a reincorporation of the
Company in the State of Delaware.
In November 1999, the Company issued 952,381 shares of preferred stock upon the
exercise of Series E warrants at a per share exercise price of $2.10 for a
total of $2,000,000 received in proceeds.
F-17
<PAGE>
[GRAPHIC--Vicinity logo in the upper left-hand corner. Text in the upper right-
hand corner reads "What Customers Have to Say About Vicinity." The body of the
graphic displays four client testimonials.]
<PAGE>
[LOGO]
<PAGE>
Part II
Information Not Required in Prospectus
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than the
underwriting discount, payable by the Registrant in connection with the sale of
the Common Stock being registered. All amounts are estimates except the SEC
registration fee, the NASD filing fees and the Nasdaq National Market listing
fee.
<TABLE>
<CAPTION>
Amount to
Be Paid
---------
<S> <C>
SEC registration fee.............................................. $19,021
NASD filing fee................................................... 7,400
Nasdaq National Market listing fee................................ 95,000
Legal fees and expenses........................................... 350,000
Accounting fees and expenses...................................... 350,000
Printing and engraving............................................ 300,000
Blue sky fees and expenses (including legal fees)................. 2,500
Transfer agent fees............................................... 15,000
Miscellaneous..................................................... 11,079
---------
Total........................................................... 1,150,000
=========
</TABLE>
-------------------
* To be provided by amendment.
Item 14. Indemnification of Directors and Officers
Our Certificate of Incorporation in effect as of the date hereof, and our
Restated Certificate of Incorporation to be in effect upon the closing of this
offering (collectively, the "Certificate") provides that, except to the extent
prohibited by the Delaware General Corporation Law, as amended (the "DGCL"),
the Registrant's directors shall not be personally liable to the Registrant or
its stockholders for monetary damages for any breach of fiduciary duty as
directors of the Registrant. Under the DGCL, the directors have a fiduciary
duty to the Registrant which is not eliminated by this provision of the
Certificate and, in appropriate circumstances, equitable remedies such as
injunctive or other forms of nonmonetary relief will remain available. In
addition, each director will continue to be subject to liability under the DGCL
for breach of the director's duty of loyalty to the Registrant, for acts or
omissions which are found by a court of competent jurisdiction to be not in
good faith or involving intentional misconduct, for knowing violations of law,
for actions leading to improper personal benefit to the director, and for
payment of dividends or approval of stock repurchases or redemptions that are
prohibited by the DGCL. This provision also does not affect the directors'
responsibilities under any other laws, such as the Federal securities laws. The
Registrant may obtain for liability insurance for its officers and directors.
Section 145 of the DGCL empowers a corporation to indemnify its directors and
officers and to purchase insurance with respect to liability arising out of
their capacity or status as directors and officers, provided that this
provision shall not eliminate or limit the liability of a director: (i) for any
breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) arising under
Section 174 of the DGCL or (iv) for any transaction from which the director
derived an improper personal benefit. The DGCL provides further that the
indemnification permitted thereunder shall not
II-1
<PAGE>
be deemed exclusive of any other rights to which the directors and officers may
be entitled under the corporation's bylaws, any agreement, a vote of
stockholders or otherwise. The Certificate eliminates the personal liability of
directors to the fullest extent permitted by Section 102(b)(7) of the DGCL and
provides that the Registrant may fully 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) by reason of the fact that such person is or was a director
or officer of the Registrant, or is or was serving at the request of the
Registrant as a director or officer of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, against expenses
(including attorney's fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding.
Item 15. Recent Sales of Unregistered Securities
(a) Issuances of Shares of Preferred Stock and warrants exercisable for
Preferred Stock
On December 12, 1996, the Registrant issued and sold 3,304,000 shares of its
Series C Preferred Stock to 21st Century Internet Fund, L.P., CMG@Ventures I,
L.P. and EnCompass Group, Inc. for an aggregate purchase price equal to
$4,989,040. This sale was deemed to be exempt from registration under the
Securities Act in reliance on Section 4(2) of the Securities Act or Regulation
D promulgated thereunder as a transaction by an issuer not involving a public
offering.
On December 9, 1998, the Registrant issued and sold 2,300,613 shares of its
Series D Preferred Stock and warrants exercisable for up to 952,381 shares of
Series E Preferred Stock at an exercise price of $2.10 per share to Oak
Investment Partners VIII, L.P. and Oak VIII Affiliates Fund, L.P. for an
aggregate purchase price equal to $3,750,952. This sale was deemed to be exempt
from registration under the Securities Act in reliance on Section 4(2) of the
Securities Act or Regulation D promulgated thereunder as a transaction by an
issuer not involving a public offering.
On March 19, 1999, the Registrant issued and sold 59,524 shares of its Series
E Preferred Stock to two individual accredited investors for an aggregate
purchase price equal to $125,000. This sale was deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act or Regulation D promulgated thereunder as a transaction by an
issuer not involving a public offering.
Between July 12, 1999 and August 31, 1999, the Registrant issued and sold
2,070,000 shares of its Series F Preferred Stock to EnCompass Group, Inc., 21st
Century Internet Fund, L.P. and ten other individual accredited institutional
investors for an aggregate purchase price equal to $10,385,000. This sale was
deemed to be exempt from registration under the Securities Act in reliance on
Section 4(2) of the Securities Act or Regulation D promulgated thereunder as a
transaction by an issuer not involving a public offering.
On November 16, 1999, the Registrant issued and sold 952,381 shares of its
Series E Preferred Stock to Oak Investment Partners VIII, L.P. and Oak VIII
Affiliates Fund, L.P. upon the exercise of warrants.
(b) Issuances of Shares of Common Stock
On February 1, 1998, the Registrant issued 882,500 shares of its Common Stock
in consideration of Settlement and Release Agreements entered into on that day
between the Registrant and each of Rama Aysola, James DiSanto and Eddie
Babcock, each of whom, together with Timothy Bacci, was a founder and a former
employee of the Registrant. This sale was deemed to be exempt from registration
under the Securities Act in reliance on Section 4(2) of the Securities Act or
Regulation D promulgated thereunder as a transaction by an issuer not involving
a public offering.
II-2
<PAGE>
On July 27, 1998, the Registrant issued and sold 275,512 shares of its Common
Stock pursuant to the early exercise of outstanding warrants by CMG@Ventures I,
L.P. This sale was deemed to be exempt from registration under the Securities
Act in reliance on Section 4(2) of the Securities Act or Regulation D
promulgated thereunder as a transaction by an issuer not involving a public
offering.
Between July 8, 1997 and November 1, 1999, the Registrant issued 2,485,625
shares of its Common Stock to 40 individuals upon exercise of outstanding
employee incentive stock options. This sale was deemed to be exempt from
registration under the Securities Act in reliance on Rule 701 promulgated under
Section 3(b) of the Securities Act as a transaction to compensatory benefit
plans and contracts relating to compensation as provided under Rule 701.
(c) Issuances of Options to Employees, Directors and Consultants
Between November 25, 1996 and November 1, 1999, the Registrant issued options
exercisable for 3,916,917 shares (net of cancellations) of its Common Stock
pursuant to Registrant's 1996 Incentive Stock Option Plan to 138 individuals.
Of this amount, options for 2,311,667 shares of Common Stock had been exercised
as of November 1, 1999. This sale was deemed to be exempt from registration
under the Securities Act in reliance on Rule 701 promulgated under Section 3(b)
of the Securities Act as a transaction to compensatory benefit plans and
contracts relating to compensation as provided under such Rule 701. The
recipients of securities in each of the foregoing represented their intentions
to acquire the securities for investment only and not with a view to or for
sale in connection with any distribution thereof and appropriate legends were
affixed to the instruments representing such securities issued in such
transactions.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Certificate of Incorporation.
3.2 Form of Restated Certificate of Incorporation to be in effect upon the
closing of this offering.
3.3 Bylaws.
3.4 Form of Restated Bylaws to be in effect upon the closing of this
offering.
4.1* Specimen Common Stock certificate.
5.1* Opinion of Latham & Watkins.
10.1** 1995 Stock Option Plan.
10.2** 1996 Incentive Stock Option Plan.
10.3* 2000 Equity Participation Plan.
10.4* 2000 Employee Stock Purchase Plan
10.5** Amended and Restated Registration and Information Rights Agreement,
dated as of December 9, 1998, by and among Vicinity Corporation, Rama
Aysola, Eddie Babcock, Timothy Bacci, James DiSanto and the investors
named on Schedule I thereto.
10.6** Amended and Restated Shareholders Agreement, dated as of December 9,
1998, by and among Vicinity Corporation, Rama Aysola, Eddie Babcock,
Timothy Bacci, James DiSanto and the investors named in Schedule I
thereto.
10.7** Voting Agreement, dated as of December 12, 1996, by and among Vicinity
Corporation, Rama Aysola, Eddie Babcock, Timothy Bacci, James DiSanto
and the investors named in Schedule I thereto.
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
10.8** Employment Agreement, dated June 17, 1998, by and between Vicinity
Corporation and Emerick M. Woods.
10.9** Loan Agreement, dated July 14, 1999, by and between Vicinity
Corporation and Emerick M. Woods.
10.10** Form of 1996 Incentive Stock Option Plan Stock Option Agreement.
10.11** Amendment to Incentive Stock Option Plan Agreement, dated August 19,
1998, by and between Vicinity Corporation and Scott Young.
10.12** Amendment to Incentive Stock Option Plan Agreement, dated August 19,
1998, by and between Vicinity Corporation and David Seltzer.
10.13** Amendment to Incentive Stock Option Plan Agreement, dated August 19,
1998, by and between Vicinity Corporation and Mary Gavin.
10.14+** Management Support Agreement, dated June 11, 1999, by and between
Vicinity Corporation and Aperto Multimedia GmbH.
10.15** Management Support Agreement dated July 27, 1999, by and between
Vicinity Corporation and Invision AG.
10.16 Master Lease and Financing Agreement, dated July 27, 1999, by and
between Vicinity Corporation and Compaq.
10.17 Capital Lease Agreement, dated April 24, 1996, by and between
Vicinity Corporation and Pacific Atlantic.
10.18+** Joint Marketing Agreement, dated June 23, 1999, by and between
Vicinity Corporation and Prio, Inc.
10.19+** Service and Distribution Agreement, dated June 14, 1999, by and
between Vicinity Corporation and Inktomi Corporation.
10.20** NaviSite Siteharbor Co-Location Services Agreement, dated June 30,
1998, by and between Vicinity Corporation and NaviSite Internet
Services Corporation.
10.21** Sublease Agreement, dated October 1, 1996, by and between Vicinity
Corporation and Attachmate Corporation.
10.22** First Sublease Agreement Amendment, dated August 6, 1997, by and
between Vicinity Corporation and Attachmate Corporation.
10.23** Second Sublease Agreement Amendment, dated September 22, 1998, by and
between Vicinity Corporation and Attachmate Corporation.
10.24** Sub-Sublease Agreement, dated August 1, 1999, by and between Vicinity
Corporation and E*Trade Group, Inc.
10.25** Lease Agreement, dated August 10, 1999, by and between Vicinity
Corporation and Gordon E. and Blanche M. Bagley.
23.1 Consent of KPMG LLP.
23.2* Consent of Latham & Watkins (included in Exhibit 5.1).
24.1** Power of Attorney (included on page S-1 of prior filing).
27.1** Financial Data Schedule.
27.2 Financial Data Schedule.
</TABLE>
- -------------------
+ Registrant has requested confidential treatment pursuant to Rule 406 for a
portion of the referenced exhibit and has separately filed such exhibit with
the Commission.
* To be supplied by amendment.
** Previously filed.
II-4
<PAGE>
(b) Financial Statement Schedules.
Independent Auditors' Report on Financial Statement Schedule
Schedule II--Valuation and Qualifying Accounts
Item 17. Undertakings
The undersigned Registrant hereby undertakes to provide to the Underwriter at
the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424 (b)(1) or
(4), or 497(h) under the Securities Act of 1933, shall be deemed to be part
of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and this offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Palo Alto, State of
California, on this 17th day of December, 1999.
Vicinity Corporation
By: /s/ Emerick M. Woods
--------------------------------------
Name: Emerick M. Woods
Title: Chief Executive Officer
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/ Emerick M. Woods Chief Executive Officer December 17, 1999
______________________________________ and Director (Principal
Emerick M. Woods Executive Officer)
/s/ David Seltzer Chief Financial Officer December 17, 1999
______________________________________ (Principal Financial and
David Seltzer Accounting Officer)
* Chairman of the Board of December 17, 1999
______________________________________ Directors
Herbert M. Dwight, Jr.
* Director December 17, 1999
______________________________________
Jonathan Callaghan
* Director December 17, 1999
______________________________________
James J. Geddes, Jr.
* Director December 17, 1999
______________________________________
Fred Gibbons
* Director December 17, 1999
______________________________________
Peter Mills
* Director December 17, 1999
______________________________________
Norman Nie
* Director December 17, 1999
______________________________________
Michael Sears
* Director December 17, 1999
______________________________________
Peter Ziebelman
/s/ Emerick M. Woods
*By: _________________________________
Emerick M. Woods
Attorney-in-Fact
</TABLE>
S-1
<PAGE>
Independent Auditors' Report on Financial Statement Schedule
The Board of Directors
Vicinity Corporation:
Under the date of September 22, 1999 except as to Note 11 for which the date is
November 16, 1999, we reported on the balance sheets of Vicinity Corporation as
of July 31, 1998 and 1999, and the related statements of operations, redeemable
convertible preferred stock and stockholders' equity (deficit), and cash flows
for each of the years in the three-year period ended July 31, 1999, which are
included in the registration statement. In connection with our audits of the
aforementioned financial statements, we also audited the accompanying financial
statement schedule. The financial statement schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion on this
financial statement schedule based on our audit.
In our opinion, such financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
KPMG LLP
Mountain View, California
September 22, 1999
<PAGE>
Vicinity Corporation
Schedule II--Valuation and Qualifying Accounts
<TABLE>
- --------------------------------------------------------------------------------
<CAPTION>
Balance Addition
at Charged Balance
Beginning to at End of
Description of Period Expense Deduction Period
- ----------- --------- -------- --------- ---------
(in thousands)
<S> <C> <C> <C> <C>
Year ended July 31, 1997:
Allowance for doubtful accounts......... $ -- $ -- $ -- $ --
======= ======= ======= =======
Year ended July 31, 1998:
Allowance for doubtful accounts......... $ -- $ -- $ -- $ --
======= ======= ======= =======
Year ended July 31, 1999
Allowance for doubtful accounts......... $ -- $ 80 $ -- $ 80
======= ======= ======= =======
</TABLE>
<PAGE>
Exhibits
<TABLE>
<CAPTION>
Number Description of Document
------ -----------------------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Certificate of Incorporation.
3.2 Form of Restated Certificate of Incorporation to be in effect upon
the closing of this offering.
3.3 Bylaws.
3.4 Form of Restated Bylaws to be in effect upon the closing of this
offering.
4.1* Specimen Common Stock certificate.
5.1* Opinion of Latham & Watkins.
10.1** 1995 Stock Option Plan.
10.2** 1996 Incentive Stock Option Plan.
10.3* 2000 Equity Participation Plan.
10.4* 2000 Employee Stock Purchase Plan
10.5** Amended and Restated Registration and Information Rights Agreement,
dated as of December 9, 1998, by and among Vicinity Corporation, Rama
Aysola, Eddie Babcock, Timothy Bacci, James DiSanto and the investors
named on Schedule I thereto.
10.6** Amended and Restated Shareholders Agreement, dated as of December 9,
1998, by and among Vicinity Corporation, Rama Aysola, Eddie Babcock,
Timothy Bacci, James DiSanto and the investors named in Schedule I
thereto.
10.7** Voting Agreement, dated as of December 12, 1996, by and among
Vicinity Corporation, Rama Aysola, Eddie Babcock, Timothy Bacci,
James DiSanto and the investors named in Schedule I thereto.
10.8** Employment Agreement, dated June 17, 1998, by and between Vicinity
Corporation and Emerick M. Woods.
10.9** Loan Agreement, dated July 14, 1999, by and between Vicinity
Corporation and Emerick M. Woods.
10.10** Form of 1996 Incentive Stock Option Plan Stock Option Agreement.
10.11** Amendment to Incentive Stock Option Plan Agreement, dated August 19,
1998, by and between Vicinity Corporation and Scott Young.
10.12** Amendment to Incentive Stock Option Plan Agreement, dated August 19,
1998, by and between Vicinity Corporation and David Seltzer.
10.13** Amendment to Incentive Stock Option Plan Agreement, dated August 19,
1998, by and between Vicinity Corporation and Mary Gavin.
10.14+** Management Support Agreement, dated June 11, 1999, by and between
Vicinity Corporation and Aperto Multimedia GMBH.
10.15** Management Support Agreement dated July 27, 1999, by and between
Vicinity Corporation and Invision AG.
10.16 Equipment Lease Agreement, dated July 27, 1999, by and between
Vicinity Corporation and Compaq.
10.17 Equipment Lease Agreement, dated April 24, 1996, by and between
Vicinity Corporation and Pacific Atlantic.
10.18+** Joint Marketing Agreement, dated June 23, 1999, by and between
Vicinity Corporation and Prio, Inc.
10.19+** Service and Distribution Agreement, dated June 14, 1999, by and
between Vicinity Corporation and Inktomi Corporation.
10.20** NaviSite Siteharbor Co-Location Services Agreement, dated June 30,
1998, by and between Vicinity Corporation and NaviSite Internet
Services Corporation.
</TABLE>
<PAGE>
<TABLE>
<C> <S>
10.21** Sublease Agreement, dated October 1, 1996, by and between Vicinity
Corporation and Attachmate Corporation.
10.22** First Sublease Agreement Amendment, dated August 6, 1997, by and
between Vicinity Corporation and Attachmate Corporation.
10.23** Second Sublease Agreement Amendment, dated September 22, 1998, by and
between Vicinity Corporation and Attachmate Corporation.
10.24** Sub-Sublease Agreement, dated August 1, 1999, by and between Vicinity
Corporation and E*Trade Group, Inc.
10.25** Lease Agreement, dated August 10, 1999, by and between Vicinity
Corporation and Gordon E. and Blanche M. Bagley.
23.1 Consent of KPMG LLP.
23.2* Consent of Latham & Watkins (included in Exhibit 5.1).
24.1** Powers of Attorney (See Signature Page on Page S-1).
27.1** Financial Data Schedule.
27.2 Financial Data Schedule.
</TABLE>
- -------------------
+ Registrant has requested confidential treatment pursuant to Rule 406 for a
portion of the referenced exhibit and has separately filed such exhibit with
the Commission.
* To be supplied by amendment.
**Previously filed.
<PAGE>
Certificate of Secretary
------------------------
I, the undersigned, do hereby certify:
(1) That I am the duly elected and acting Secretary of VICINITY
CORPORATION, a Delaware corporation; and
(2) That the foregoing Restated Certificate of Incorporation
constitutes the Restated Certificate of Incorporation of said corporation as of
December __, 1999.
IN WITNESS WHEREOF, I have hereunto subscribed my name this ___ day of
December, 1999.
______________________________
Scott A. Shuda,
Secretary
22
<PAGE>
EXHIBIT 3.2
RESTATED
CERTIFICATE OF INCORPORATION
OF
VICINITY CORPORATION
VICINITY CORPORATION, a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify that:
I. The name of the Corporation is Vicinity Corporation.
II. The original Certificate of Incorporation of the Corporation was
filed with the Delaware Secretary of State on November 23, 1999.
III. The Board of Directors of the Corporation, acting in accordance
with Sections 141(f), 242 and 245 of the General Corporation Law of the State of
Delaware, duly adopted resolutions and declared the advisability of such
resolutions to amend and restate the Certificate of Incorporation of the
Corporation to read in its entirety as follows:
ARTICLE I.
The name of the corporation is Vicinity Corporation
ARTICLE II.
The address of the Corporation's registered office in the State of Delaware
is 9 East Loockerman Street, in the City of Dover, County of Kent, 19901. The
name of its registered agent at such address is National Registered Agents, Inc.
ARTICLE III.
The nature of the business or purpose to be conducted or promoted is to
engage in any lawful act or activity for which a corporation may be organized
under the General Corporation Law of Delaware.
ARTICLE IV.
(a) The Corporation is authorized to issue two classes of shares to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the Corporation shall have authority to issue is one hundred
five million (105,000,000) shares. The total number of shares of Common Stock
which the Corporation shall have authority to issue is one hundred million
(100,000,000) shares, and the par value of each share of Common Stock is one-
tenth of one cent ($0.001). The total number of shares of Preferred Stock which
the Corporation shall have authority to issue is five million (5,000,000)
shares, and the par value of each share of Preferred Stock is one-tenth of one
cent ($0.001). The Preferred Stock may be issued from time to time, in one or
more
<PAGE>
series, each series to be appropriately designated by a distinguishing letter or
title, prior to the issue of any shares thereof.
(b) The Board of Directors is hereby authorized to fix or alter the
dividend rights, dividend rate, conversion rights, voting rights, rights and
terms of redemption (including sinking fund provisions, if any), the redemption
price or prices, the liquidation preferences, any other designations,
preferences and relative, participating, optional or other special rights, and
any qualifications, limitations or restrictions thereof, of any wholly unissued
series of Preferred Stock, and the number of shares constituting any such
unissued series and the designation thereof, or any of them; and to increase or
decrease the number of shares of any series subsequent to the issue of shares of
that series, but not below the number of shares of such series then outstanding.
In case the number of shares of any series shall be so decreased, the shares
constituting such decrease shall resume the status which they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
ARTICLE V.
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to adopt, repeal, alter, amend
and rescind the bylaws of the Corporation.
ARTICLE VI.
Notwithstanding Article V hereof, the bylaws may be rescinded, altered,
amended or repealed in any respect by the affirmative vote of the holders of at
least sixty-six and two-thirds percent (66-2/3%) of the outstanding voting stock
of the Corporation, voting together as a single class.
ARTICLE VII.
The Board of Directors shall have that number of Directors set out in the
bylaws of the Corporation as adopted or as set from time to time by a duly
adopted amendment thereto by the Board of Directors or stockholders of the
Corporation acting in accordance with Article VI.
ARTICLE VIII.
The Board of Directors shall be and is divided into three classes, Class I,
Class II and Class III. The number of directors in each class shall be the whole
number contained in the quotient arrived at by dividing the number of directors
by three, and if a fraction is also contained in such quotient then if such
fraction is on-third (1/3) the extra director shall be a member of Class III and
if the fraction is two-thirds (2/3) one of the extra directors shall be a member
of Class III and the other shall be a member of Class II. Each director shall
serve for a term ending on the date of the third annual meeting following the
annual meeting at which such director was elected; provided, however, that the
-------- -------
directors of the Corporation as of the date of filing of this Restated
Certificate of Incorporation are hereby each assigned to a class, and the
directors assigned to Class I shall serve for a term ending on the date of the
first annual meeting next following January 1, 2000, the directors assigned to
Class II shall serve for a term ending on the date of the second annual meeting
next following January 1, 2000, and the directors assigned to Class III shall
serve for a term ending on the date of the third annual meeting next following
January 1, 2000.
In the event of any increase or decrease in the number of directors, (a)
each director then serving as such shall nevertheless continue as a director of
the class of which he or she is a member until the expiration of his or her
current term, or his or her prior death, retirement, resignation or removal, and
(b) the newly created or eliminated directorships resulting from such increase
or decrease shall be apportioned by the Board of Directors to such class or
classes as shall, so far as possible bring the number of directors in the
respective classes into conformity with the formula in this Article VIII, as
applied to the new number of directors.
Notwithstanding any of the foregoing provisions of this Article VIII, each
director shall serve until his successor is elected and qualified or until his
death, retirement, resignation or removal. Should a vacancy occur or be created,
the remaining directors (even though less than a quorum) may fill the vacancy
for the full term of the class in which the vacancy occurs or is created.
ARTICLE IX.
Elections of directors at an annual or special meeting of stockholders need
not be by written ballot unless the bylaws of the Corporation shall so provide.
ARTICLE X.
No action shall be taken by the stockholders except at an annual or special
meeting of stockholders. The stockholders may not take action by written
consent.
ARTICLE XI.
2
<PAGE>
Special meetings of the stockholders of the Corporation for any purpose or
purposes may be called at any time by the Board of Directors, or by a majority
of the members of 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 provided in a resolution of the Board of Directors or
in the Bylaws of the Corporation, include the power to call such meetings, but
such special meetings may not be called by any other person or persons;
provided, however, that if and to the extent that any special meeting of
- -------- -------
stockholders may be called by any other person or persons specified in any
provisions of the Certificate of Incorporation or any amendment thereto or any
certificate filed under Section 151(g) of the Delaware General Corporation Law,
then such special meeting may also be called by the person or persons, in the
manner, at the times and for the purposes so specified.
ARTICLE XII.
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred on stockholders herein
are granted subject to this reservation; provided, however, that no amendment,
-------- -------
alteration, change or repeal may be made to Article VI, VII, VIII, X, XI or XII
without the affirmative vote of the holders of at least sixty-six and two-thirds
percent (66-2/3%) of the outstanding voting stock of the Corporation, voting
together as a single class.
ARTICLE XIII.
Each reference in this Certificate of Incorporation to any provision of the
Delaware General Corporation Law refers to the specified provision of the
General Corporation Law of the State of Delaware, as the same now exists or as
it may hereafter be amended or superseded.
ARTICLE XIV.
To the fullest extent permitted by the General Corporation Law of the State
of Delaware, the Corporation shall indemnify and advance indemnification
expenses on behalf of all directors and officers of the Corporation. The
Corporation shall indemnify such other persons as may be required by statute or
by the bylaws of the Corporation. The Corporation may, to the full extent
permitted by Delaware law, purchase and maintain insurance on behalf of any
director or officer, or such other person as may be permitted by statute or the
bylaws of the Corporation, against any liability which may be asserted against
any director, officer or such other person and may enter into contracts
providing for the indemnification of any director, officer or such other person
to the full extent permitted by Delaware law. The liability of directors of the
Corporation (for actions or inactions taken by them as directors) for monetary
damages shall be eliminated to the fullest extent permissible under Delaware
law.
If the General Corporation Law of the State of Delaware is hereafter
amended to authorize corporate action further limiting or eliminating the
personal liability of directors, then the liability of the director to the
Corporation shall be limited or eliminated to the fullest extent permitted by
the General Corporation Law of the State of Delaware, as so amended from time to
time. Any repeal
3
<PAGE>
or modification of this Article XIV by the stockholders of the Corporation shall
be prospective only, and shall not adversely affect any limitation on the
personal liability of a director of the Corporation existing at the time of such
repeal or modification.
IV. Thereafter, pursuant to a resolution of the Board of Directors, this
Restated Certificate of Incorporation was duly approved by the holders of the
necessary number of shares of the Company's voting securities in accordance with
the provisions of Section 228, 242 and 245 of the General Corporation Law of the
State of Delaware.
IN WITNESS WHEREOF, Vicinity Corporation has caused this certificate to be
signed by its duly authorized officer this ____ day of January, 2000.
VICINITY CORPORATION
By: ______________________________
Emerick M. Woods, President
Attest:
_________________________________
Scott A. Shuda
Secretary
4
<PAGE>
EXHIBIT 3.3
BYLAWS
OF
VICINITY CORPORATION
Adopted December 15, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. CORPORATE OFFICES....................................................... 1
1.1. REGISTERED OFFICES........................................................ 1
1.2. OTHER OFFICES............................................................. 1
ARTICLE II. MEETINGS OF SHAREHOLDERS............................................... 1
2.1. PLACE OF MEETINGS......................................................... 1
2.2. ANNUAL MEETING............................................................ 1
2.3. SPECIAL MEETING........................................................... 1
2.4. NOTICE OF SHAREHOLDERS' MEETINGS.......................................... 2
2.5. MANNER OF GIVING NOTICE AFFIDAVIT OF NOTICE............................... 2
2.6. QUORUM.................................................................... 3
2.7. ADJOURNED MEETING; NOTICE................................................. 3
2.8. VOTING.................................................................... 3
2.9. VALIDATION OF MEETINGS; WAIVER OF NOTICE CONSENT.......................... 4
2.10. SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING.................. 5
2.11. RECORD DATE FOR SHAREHOLDER NOTICE; VOTING; GIVING CONSENTS.............. 5
2.12. PROXIES.................................................................. 6
2.13. INSPECTORS OF ELECTION................................................... 6
ARTICLE III. DIRECTORS............................................................. 7
3.1. POWERS.................................................................... 7
3.2. NUMBER OF DIRECTORS....................................................... 7
3.3. ELECTION AND TERM OF OFFICE OF DIRECTORS.................................. 8
3.4. RESIGNATION AND VACANCIES................................................. 8
3.5. PLACE OF MEETINGS; MEETINGS BY TELEPHONE.................................. 9
3.6. REGULAR MEETINGS.......................................................... 9
3.7. SPECIAL MEETINGS; NOTICE.................................................. 9
3.8. QUORUM.................................................................... 9
3.9. WAIVER OF NOTICE.......................................................... 10
3.10. ADJOURNMENT.............................................................. 10
3.11. NOTICE OF ADJOURNMENT.................................................... 10
3.12. BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING........................ 10
3.13. FEES AND COMPENSATION OF DIRECTORS....................................... 10
3.14. APPROVAL OF LOANS TO OFFICERS............................................ 10
ARTICLE IV. COMMITTEES............................................................. 11
4.1. COMMITTEES OF DIRECTORS................................................... 11
4.2. MEETINGS AND ACTION OF COMMITTEES......................................... 11
ARTICLE V. OFFICERS................................................................ 12
5.1. OFFICERS.................................................................. 12
5.2. ELECTION OF OFFICERS...................................................... 12
5.3. SUBORDINATE OFFICERS...................................................... 12
5.4. REMOVAL AND RESIGNATION OF OFFICERS....................................... 12
5.5. VACANCIES IN OFFICES...................................................... 13
5.6. CHAIRMAN OF THE BOARD..................................................... 13
5.7. PRESIDENT................................................................. 13
5.8. VICE PRESIDENTS........................................................... 13
5.9. SECRETARY................................................................. 13
5.10. CHIEF FINANCIAL OFFICER.................................................. 14
</TABLE>
i
<PAGE>
TABLE OF CONTENTS
(Continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VI. INDEMNIFICATION OF DIRECTORS- OFFICERS, EMPLOYEES, AND OTHER AGENTS.... 14
6.1. INDEMNIFICATION OF DIRECTORS AND OFFICERS................................. 14
6.2. INDEMNIFICATION OF OTHERS................................................. 14
6.3. PAYMENT OF EXPENSES IN ADVANCE............................................ 15
6.4. INDEMNITY NOT EXCLUSIVE................................................... 15
6.5. INSURANCE INDEMNIFICATION................................................. 15
6.6. CONFLICTS................................................................. 15
ARTICLE VII. RECORDS AND REPORTS................................................... 16
7.1. MAINTENANCE AND INSPECTION OF SHARE REGISTER.............................. 16
7.2. MAINTENANCE AND INSPECTION OF BYLAWS...................................... 16
7.3. MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS..................... 17
7.4. INSPECTION BY DIRECTORS................................................... 17
7.5. ANNUAL REPORT TO SHAREHOLDERS; WAIVER..................................... 17
7.6. FINANCIAL STATEMENTS...................................................... 17
7.7. REPRESENTATION OF SHARES OF OTHER CORPORATIONS............................ 18
ARTICLE VIII. GENERAL MATTERS...................................................... 18
8.1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING..................... 18
8.2. CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS................................. 19
8.3. CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED......................... 19
8.4. CERTIFICATES FOR SHARES................................................... 19
8.5. LOST CERTIFICATES......................................................... 19
8.6. CONSTRUCTION; DEFINITIONS................................................. 20
ARTICLE IX. AMENDMENTS............................................................. 20
9.1. AMENDMENT BY SHAREHOLDERS................................................. 20
9.2. AMENDMENT BY DIRECTORS.................................................... 20
</TABLE>
ii
<PAGE>
BYLAWS
OF
VICINITY CORPORATION
ARTICLE I.
CORPORATE OFFICES
1.1 REGISTERED OFFICES
The registered office shall be in the City of Dover, County of Kent, State
of Delaware.
1.2 OTHER OFFICES
The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
ARTICLE II.
MEETINGS OF SHAREHOLDERS
2.1 PLACE OF MEETINGS
Meetings of shareholders shall be held at any place within or outside the
State of Delaware designated by the board of directors. In the absence of any
such designation, shareholders' meetings shall be held at the principal
executive office of the corporation.
2.2 ANNUAL MEETING
The annual meeting of shareholders shall be held each year on a date and at
a time designated by the board of directors. In the absence of such
designation, the annual meeting of shareholders shall be held on the second
Tuesday of May in each year at 10: 00 a.m. However, if such day falls on a
legal holiday, then the meeting shall be held at the same time and place on the
next succeeding full business day. At the meeting, directors shall be elected,
and any other proper business may be transacted.
2.3 SPECIAL MEETING
A special meeting of the shareholders may be called at any time by the
board of directors, or by the chairman of the board, or by the president, or by
one or more shareholders holding shares in the aggregate entitled to cast not
less than ten percent (10%) of the votes at that meeting.
If a special meeting is called by any person or persons other than the
board of directors or the president or the chairman of the board, then the
request shall be in writing, specifying the time of such meeting and the general
nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
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transmission to the chairman of the board, the president, any vice president or
the secretary of the corporation. The officer receiving the request shall cause
notice to be promptly given to the shareholders entitled to vote, in accordance
with the provisions of Sections 2.4 and 2.5 of these bylaws, that a meeting will
be held at the time requested by the person or persons calling the meeting, so
long as that time is not less than thirty-five (35) nor more than sixty (60)
days after the receipt of the request. If the notice is not given within twenty
(20) days after receipt of the request, then the person or persons requesting
the meeting may give the notice. Nothing contained in this paragraph of this
Section 2.3 shall be construed as limiting, fixing or affecting the time when a
meeting of shareholders called by action of the board of directors may be held.
2.4 NOTICE OF SHAREHOLDERS' MEETINGS
All notices of meetings of shareholders shall be sent or otherwise given in
accordance with Section 2.5 of these bylaws not less than ten (10) (or, if sent
by third-class mail pursuant to Section 2.5 of these bylaws, thirty (30)) nor
more than sixty (60) days before the date of the meeting . The notice shall
specify the place, date, and hour of the meeting and (i) in the case of a
special meeting, the general nature of the business to be transacted (no
business other than that specified in the notice may be transacted) or (ii) in
the case of the annual meeting, those matters which the board of directors, at
the time of giving the notice, intends to present for action by the shareholders
(but subject to the provisions of the next paragraph of this Section 2.4 any
proper matter may be presented at the meeting for such action). The notice of
any meeting at which directors are to be elected shall include the name of any
nominee or nominees who, at the time of the notice, the board intends to resent
for election.
If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a director has a direct or indirect financial
interest, pursuant to Section 144 of the Delaware General Corporation Law (the
"DGCL"), (ii) an amendment of the articles of incorporation, pursuant to Section
242 of the DGCL, (iii) a reorganization of the corporation, pursuant to
Subchapter IX of the DGCL, (iv) a voluntary dissolution of the corporation,
pursuant to Section 275 of the DGCL, or (v) a distribution in dissolution other
than in accordance with the rights of outstanding preferred shares, pursuant to
Section 281 of the DGCL, then the notice shall also state the general nature of
that proposal.
2.5 MANNER OF GIVING NOTICE AFFIDAVIT OF NOTICE
Written notice of any meeting of shareholders shall be given either (i)
personally or (ii) by first-class mail or (iii) by third-class mail but only if
the corporation has outstanding shares held of record by five hundred (500) or
more persons (determined as provided in Section 219 of the DGCL) on the record
date for the shareholders' meeting, or (iv) by telegraphic or other written
communication. Notices not personally delivered shall be sent charges prepaid
and shall be addressed to the shareholder at the address of that shareholder
appearing on the books of the corporation or given by the shareholder to the
corporation for the purpose of notice. If no such address appears on the
corporation's books or is given, notice shall be deemed to have been given if
sent to that shareholder by mail or telegraphic or other written communication
to the corporation's principal executive office, or if published at least once
in a newspaper of general circulation in the county where that office is
located. Notice shall be deemed to have been given
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at the time when delivered personally or deposited in the mail or sent by
telegram or other means of written communication.
If any notice addressed to a shareholder at the address of that shareholder
appearing on the books of the corporation is returned to the corporation by the
United States Postal Service marked to indicate that the United States Postal
Service is unable to deliver the notice to the shareholder at that address, then
all future notices or reports shall be deemed to have been duly given without
further mailing if the same shall be available to the shareholder on written
demand of the shareholder at the principal executive office of the corporation
for a period of one (1) year from the date of the giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
shareholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
2.6 QUORUM
The presence in person or by proxy of the holders of a majority of the
shares entitled to vote thereat constitutes a quorum for the transaction of
business at all meetings of shareholders. The shareholders present at a duly
called or held meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding the withdrawal of enough shareholders to
leave less than a quorum, if any action taken (other than adjournment) is
approved by at least a majority of the shares required to constitute a quorum.
2.7 ADJOURNED MEETING; NOTICE
Any shareholders' meeting, annual or special, whether or not a quorum is
present, may be adjourned from time to time by the vote of the majority of the
shares represented at that meeting, either in person or by proxy. In the
absence of a quorum, no other business may be transacted at that meeting except
as provided in Section 2.6 of these bylaws.
When any meeting of shareholders, either annual or special, is adjourned to
another time or place, notice need not be given of the adjourned meeting if the
time and place are announced at the meeting at which the adjournment is taken.
However, if a new record date for the adjourned meeting is fixed or if the
adjournment is for more than forty-five (45) days from the date set for the
original meeting, then notice of the adjourned meeting shall be given. Notice
of any such adjourned meeting shall be given to each shareholder of record
entitled to vote at the adjourned meeting in accordance with the provisions of
Sections 2.4 and 2.5 of these bylaws. At any adjourned meeting the corporation
may transact any business which might have been transacted at the original
meeting.
2.8 VOTING
The shareholders entitled to vote at any meeting of shareholders shall be
determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 160, 217 and 218 of the DGCL (relating to
voting shares held by a corporation, a fiduciary, a pledger or in joint
ownership).
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The shareholders' vote may be by voice vote or by ballot; provided,
however, that any election for directors must be by ballot if demanded by any
shareholder at the meeting and before the voting has begun.
Except as provided in the last paragraph of this Section 2.8, or as may be
otherwise provided in the articles of incorporation, each outstanding share,
regardless of class, shall be entitled to one vote on each matter submitted to a
vote of the shareholders. Any shareholder entitled to vote on any matter may
vote part of the shares in favor of the proposal and refrain from voting the
remaining shares or, except when the matter is the election of directors, may
vote them against the proposal; but, if the shareholder fails to specify the
number of shares which the shareholder is voting affirmatively, it will be
conclusively presumed that the shareholder's approving vote is with respect to
all shares which the shareholder is entitled to vote.
If a quorum is present, the affirmative vote of the majority of the shares
represented and voting at a duly held meeting (which shares voting affirmatively
also constitute at least a majority of the required quorum) shall be the act of
the shareholders, unless the vote of a greater number or a vote by classes is
required by the DGCL or by the articles of incorporation.
At a shareholders' meeting at which directors are to be elected, a
shareholder shall be entitled to cumulate votes (i.e., cast for any candidate a
number of votes greater than the number of votes which such shareholder normally
is entitled to cast) if the candidates' names have been placed in nomination
prior to commencement of the voting and the shareholder has given notice prior
to commencement of the voting of the shareholder's intention to cumulate votes.
If any shareholder has given such a notice, then every shareholder entitled to
vote may cumulate votes for candidates in 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 that shareholder's shares are
normally entitled or (ii) by distributing the shareholder's votes on the same
principle among any or all of the candidates, as the shareholder 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.
2.9 VALIDATION OF MEETINGS; WAIVER OF NOTICE CONSENT
The transactions of any meeting of shareholders, either annual or special,
however called and noticed, and wherever held, shall be as valid as though they
had been taken at a meeting duly held after regular call and notice, if a quorum
be present either in person or by proxy, and if, either before or after the
meeting, each person entitled to vote, who was not present in person or by
proxy, signs a written waiver of notice or a consent to the holding of the
meeting or an approval of the minutes thereof. The waiver of notice or consent
or approval need not specify either the business to be transacted or the purpose
of any annual or special meeting of shareholders, except that if action is taken
or proposed to be taken for approval of any of those matters specified in the
second paragraph of Section 2.4 of these bylaws, the waiver of notice or consent
or approval shall state the general nature of the proposal. All such waivers,
consents, and approvals shall be filed with the corporate records or made a part
of the minutes of the meeting.
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Attendance by a person at a meeting shall also constitute a waiver of
notice of and presence at that meeting, except when the person objects at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened. Attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by the DGCL to be
included in the notice of the meeting but not so included, if that objection is
expressly made at the meeting.
2.10 SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action which may be taken at any annual or special meeting of
shareholders may be taken without a meeting and without prior notice, if a
consent in writing, setting forth the action so taken, is signed by the holders
of outstanding shares having not less than the minimum number of votes that
would be necessary to authorize or take that action at a meeting at which all
shares entitled to vote on that action were present and voted.
In the case of election of directors, such a consent shall be effective
only if signed by the holders of all outstanding shares entitled to vote for the
election of directors. However, a director may be elected at any time to fill
any vacancy on the board of directors, provided that it was not created by
removal of a director and that it has not been filled by the directors, by the
written consent of the holders of a majority of the outstanding shares entitled
to vote for the election of directors.
All such consents shall be maintained in the corporate records. Any
shareholder giving a written consent, or the shareholder's proxy holders, or a
transferee of the shares, or a personal representative of the shareholder, or
their respective proxy holders, may revoke the consent by a writing received by
the secretary of the corporation before written consents of the number of shares
required to authorize the proposed action have been filed with the secretary.
If the consents of all shareholders entitled to vote have not been
solicited in writing and if the unanimous written consent of all such
shareholders has not been received, then the secretary shall give prompt notice
of the corporate action approved by the shareholders without a meeting. Such
notice shall be given to those shareholders entitled to vote who have not
consented in writing and shall be given in the manner specified in Section 2.5
of these bylaws. In the case of approval of (i) a contract or transaction in
which a director has a direct or indirect financial interest, pursuant to
Section 144 of the DGCL, (ii) indemnification of a corporate " agent," pursuant
to Section 145 of the DGCL, (iii) a reorganization of the corporation, pursuant
to Subchapter IX of the DGCL, and (iv) a distribution in dissolution other than
in accordance with the rights of outstanding preferred shares, pursuant to
Section 281 of the DGCL, the notice shall be given at least ten (10) days before
the consummation of any action authorized by that approval.
2.11 RECORD DATE FOR SHAREHOLDER NOTICE; VOTING; GIVING CONSENTS
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For purposes of determining the shareholders entitled to notice of any
meeting or to vote thereat or entitled to give consent to corporate action
without a meeting, the board of directors may fix, in advance, a record date,
which shall not be more than sixty (60) days nor less than ten (10) days before
the date of any such meeting nor more than sixty (60) days before any such
action without a meeting, and in such event only shareholders of record on the
date so fixed are entitled to notice and to vote or to give consents, as the
case may be, notwithstanding any transfer of any shares on the books of the
corporation after the record date, except as otherwise provided in the DGCL.
If the board of directors does not so fix a record date:
(a) the record date for determining shareholders entitled to notice of
or to vote at a meeting of shareholders shall be at the close of business on the
business day next preceding the day on which notice is given or, if notice is
waived, at the close of business on the business day next preceding the day on
which the meeting is held; and
(b) the record date for determining shareholders entitled to give
consent to corporate action in writing without a meeting, (i) when no prior
action by the board has been taken, shall be the day on which the first written
consent is given, or (ii) when prior action by the board has been taken, shall
be at the close of business on the day on which the board adopts the resolution
relating to that action, or the sixtieth (60th) day before the date of such
other action, whichever is later.
The record date for any other purpose shall be as provided in Article VIII
of these bylaws.
2.12 PROXIES
Every person entitled to vote for directors, or on any other matter, shall
have the right to do so either in person or by one or more agents authorized by
a written proxy signed by the person and filed with the secretary of the
corporation. A proxy shall be deemed signed if the shareholder's name is placed
on the proxy (whether by manual signature, typewriting, telegraphic transmission
or otherwise) by the shareholder or the shareholder's attorney-in-fact. A
validly executed proxy which does not state that it is irrevocable shall
continue in full force and effect unless (i) the person who executed the proxy
revokes it prior to the time of voting by delivering a writing to the
corporation stating that the proxy is revoked or by executing a subsequent proxy
and presenting it to the meeting or by voting in person at the meeting, or (ii)
written notice of the death or incapacity of the maker of that proxy is received
by the corporation before the vote pursuant to that proxy is counted; provided,
however, that no proxy shall be valid after the expiration of eleven (11) months
from the date of the proxy, unless otherwise provided in the proxy. The dates
contained on the forms of proxy presumptively determine the order of execution,
regardless of the postmark dates on the envelopes in which they are mailed. The
revocability of a proxy that states on its face that it is irrevocable shall be
governed by the provisions of Section 212 of the DGCL.
2.13 INSPECTORS OF ELECTION
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Before any meeting of shareholders, the board of directors may appoint an
inspector or inspectors of election to act at the meeting or its adjournment.
If no inspector of election is so appointed, then the chairman of the meeting
may, and on the request of any shareholder or a shareholder's proxy shall,
appoint an inspector or inspectors of election to act at the meeting. The
number of inspectors shall be either one (1) or three (3). If inspectors are
appointed at a meeting pursuant to the request of one (1) or more shareholders
or proxies, then the holders of a majority of shares or their proxies present at
the meeting shall determine whether one (1) or three (3) inspectors are to be
appointed. If any person appointed as inspector fails to appear or fails or
refuses to act, then the chairman of the meeting may, and upon the request of
any shareholder or a shareholder's proxy shall, appoint a person to fill that
vacancy.
Such inspectors shall:
(a) determine the number of shares outstanding and the voting power of
each, the number of shares represented at the meeting, the existence of a
quorum, and the authenticity, validity, and effect of proxies;
(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in any way arising
in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result; and
(g) do any other acts that may be proper to conduct the election or
vote with fairness to all shareholders.
ARTICLE III.
DIRECTORS
3.1 POWERS
Subject to the provisions of the DGCL and any limitations in the articles
of incorporation and these bylaws relating to action required to be approved by
the shareholders or by the outstanding shares, the business and affairs of the
corporation shall be managed and all corporate powers shall be exercised by or
under the direction of the board of directors.
3.2 NUMBER OF DIRECTORS
The number of directors of the corporation shall be not less than five (5)
nor more than nine (9). The exact number of directors shall be nine (9) until
changed, within the limits specified above, by a bylaw amending this Section
3.2, duly adopted by the board of directors or by the shareholders. The
indefinite number of directors may be changed, or a definite number may be
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fixed without provision for an indefinite number, by a duly adopted amendment to
the Restated Articles of Incorporation or by an amendment to this bylaw duly
adopted by the vote or written consent of holders of a majority of the
outstanding shares entitled to vote; provided, however, that an amendment
reducing the fixed number or the minimum number of directors to a number less
than five (5) cannot be adopted if the votes cast against its adoption at a
meeting, or the shares not consenting in the case of an action by written
consent, are equal to more than sixteen and two-thirds percent (16-2/3 %) of the
outstanding shares entitled to vote thereon. No amendment may change the stated
maximum number of authorized directors to a number greater than two (2) times
the stated minimum number of directors minus one (1).
No reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS
Directors shall be elected at each annual meeting of shareholders to hold
office until the next annual meeting. Each director, including a director
elected to fill a vacancy, shall hold office until the expiration of the term
for which elected and until a successor has been elected and qualified.
3.4 RESIGNATION AND VACANCIES
Any director may resign effective on giving written notice to the chairman
of the board, the president, the secretary or the board of directors, unless the
notice specifies a later time for that resignation to become effective. If the
resignation of a director is effective at a future time, the board of directors
may elect a successor to take office when the resignation becomes effective.
Vacancies in the board of directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote or
written consent of the shareholders or by court order may be filled only by the
affirmative vote of a majority of the shares represented and voting at a duly
held meeting at which a quorum is present (which shares voting affirmatively
also constitute a majority of the required quorum), or by the unanimous written
consent of all shares entitled to vote thereon. Each director so elected shall
hold office until the next annual meeting of the shareholders and until a
successor has been elected and qualified.
A vacancy or vacancies in the board of directors shall be deemed to exist
(i) in the event of the death, resignation or removal of any director, (ii) if
the board of directors by resolution declares vacant the office of a director
who has been declared of unsound mind by an order of court or convicted of a
felony, (iii) if the authorized number of directors is increased, or (iv) if the
shareholders fail, at any meeting of shareholders at which any director or
directors are elected, to elect the number of directors to be elected at that
meeting.
The shareholders may elect a director or directors at any time to fill any
vacancy or vacancies not filled by the directors, but any such election other
than to fill a vacancy created by
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removal, if by written consent, shall require the consent of the holders of a
majority of the outstanding shares entitled to vote thereon.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
Regular meetings of the board of directors may be held at any place within
or outside the State of Delaware that has been designated from time to time by
resolution of the board. In the absence of such a designation, regular meetings
shall be held at the principal executive office of the corporation. Special
meetings of the board may be held at any place within or outside the State of
Delaware that has been designated in the notice of the meeting or, if not stated
in the notice or if there is no notice, at the principal executive office of the
corporation.
Any meeting, regular or special, may be held by conference telephone or
similar communication equipment, so long as all directors participating in the
meeting can hear one another; and all such directors shall be deemed to be
present in person at the meeting.
3.6 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice if
the times of such meetings are fixed by the board of directors.
3.7 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes may
be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
corporation.
3.8 QUORUM
A majority of the authorized number of directors shall constitute a quorum
for the transaction of business, except to adjourn as provided in Section 3.10
of these bylaws. Every act or decision done or made by a majority of the
directors present at a duly held meeting at which a quorum is present shall be
regarded as the act of the board of directors, subject to the provisions of
Section 144 of the DGCL (as to approval of contracts or transactions in which a
director has a direct or indirect material financial interest), Section 141 of
the DGCL (as to appointment of
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committees), Section 145 of the DGCL (as to indemnification of directors), the
articles of incorporation, and other applicable law.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum for that meeting.
3.9 WAIVER OF NOTICE
Notice of a meeting need not be given to any director (i) who signs a
waiver of notice or a consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or (ii) who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such directors. All such waivers, consents, and approvals shall be
filed with the corporate records or made part of the minutes of the meeting. A
waiver of notice need not specify the purpose of any regular or special meeting
of the board of directors.
3.10 ADJOURNMENT
A majority of the directors present, whether or not constituting a quorum,
may adjourn any meeting to another time and place.
3.11 NOTICE OF ADJOURNMENT
Notice of the time and place of holding an adjourned meeting need not be
given unless the meeting is adjourned for more than twenty-four (24) hours. If
the meeting is adjourned for more than twenty-four (24) hours, then notice of
the time and place of the adjourned meeting shall be given before the adjourned
meeting takes place, in the manner specified in Section 3.7 of these bylaws, to
the directors who were not present at the time of the adjournment.
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken by the board of directors may
be taken without a meeting, provided that all members of the board individually
or collectively consent in writing to that action. Such action by written
consent shall have the same force and effect as a unanimous vote of the board of
directors. Such written consent and any counterparts thereof shall be filed
with the minutes of the proceedings of the board.
3.13 FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if any,
for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the board of directors. This Section 3.13 shall not
be construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee or otherwise and receiving compensation
for those services.
3.14 APPROVAL OF LOANS TO OFFICERS
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The corporation may, upon the approval of the board of directors alone,
make loans of money or property to, or guarantee the obligations of, any officer
of the corporation or its parent or subsidiary, whether or not a director, or
adopt an employee benefit plan or plans authorizing such loans or guaranties
provided that (i) the board of directors determines that such a loan or guaranty
or plan may reasonably be expected to benefit the corporation, (ii) the
corporation has outstanding shares held of record by 100 or more persons
(determined as provided in Section 219 of the DGCL) on the date of approval by
the board of directors, and (iii) the approval of the board of directors is by a
vote sufficient without counting the vote of any interested director or
directors.
ARTICLE IV.
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one (1) or more committees, each
consisting of two or more directors, to serve at the pleasure of the board. The
board may designate one (1) or more directors as alternate members of any
committee, who may replace any absent member at any meeting of the committee.
The appointment of members or alternate members of a committee requires the vote
of a majority of the authorized number of directors. Any committee, to the
extent provided in the resolution of the board, shall have all the authority of
the board, except with respect to:
(a) the approval of any action which, under the DGCL, also requires
shareholders' approval or approval of the outstanding shares;
(b) the filling of vacancies on the board of directors or in any
committee;
(c) the fixing of compensation of the directors for serving on the
board or any committee;
(d) the amendment or repeal of these bylaws or the adoption of new
bylaws;
(e) the amendment or repeal of any resolution of the board of
directors which by its express terms is not so amendable or repealable;
(f) a distribution to the shareholders of the corporation, except at a
rate or in a periodic amount or within a price range determined by the board of
directors; or
(g) the appointment of any other committees of the board of directors
or the members of such committees.
4.2 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and taken
in accordance with, the provisions of Article III of these bylaws, Section 3.5
(place of meetings), Section 3.6 (regular meetings), Section 3.7 (special
meetings and notice), Section 3.8 (quorum),
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Section 3.9 (waiver of notice), Section 3.10 (adjournment), Section 3.11 (notice
of adjournment), and Section 3.12 (action without meeting), with such changes in
the context of those bylaws as are necessary to substitute the committee, and
its members for the board of directors and its members; provided, however, that
the time of regular meetings of committees may be determined either by
resolution of the board of directors or by resolution of the committee, that
special meetings of committees may also be called by resolution of the board of
directors, and that notice of special meetings of committees shall also be given
to all alternate members, who shall have the right to attend all meetings of the
committee. The board of directors may adopt rules for the government of any
committee not inconsistent with the provisions of these bylaws.
ARTICLE V.
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a president, a secretary, and a
chief financial officer. The corporation may also have, at the discretion of
the board of directors, a chairman of the board, one or more vice presidents,
one or more assistant secretaries, one or more assistant treasurers, and such
other officers as may be appointed in accordance with the provisions of Section
5.3 of these bylaws. Any number of offices may be held by the same person.
5.2 ELECTION OF OFFICERS
The officers of the corporation, except such officers as may be appointed
in accordance with the provisions of Section 5.3 or Section 5.5 of these bylaws,
shall be chosen by the board, subject to the rights, if any, of an officer under
any contract of employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or may empower the president to
appoint, such other officers as the business of the corporation may require,
each of whom shall hold office for such period, have such authority, and perform
such duties as are provided in these bylaws or as the board of directors may
from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by the
board of directors at any regular or special meeting of the board or, except in
case of an officer chosen by the board of directors, by any officer upon whom
such power of removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
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5.5 VACANCIES IN OFFICES
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these bylaws for regular appointments to that office.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the board of
directors to the chairman of the board, if there be such an officer, the
president shall be the chief executive officer of the corporation and shall,
subject to the control of the board of directors, have general supervision,
direction, and control of the business and the officers of the corporation. He
shall preside at all meetings of the shareholders and, in the absence or
nonexistence of a chairman of the board, at all meetings of the board of
directors. He shall have the general powers and duties of management usually
vested in the office of president of a corporation, and shall have such other
powers and duties as may be prescribed by the board of directors or these
bylaws.
5.8 VICE PRESIDENTS
In the absence or disability of the president, the vice presidents, if any,
in order of their rank as fixed by the board of directors or, if not ranked, a
vice president designated by the board of directors, shall perform all the
duties of the president and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the president. The vice presidents shall
have such other powers and perform such other duties as from time to time may be
prescribed for them respectively by the board of directors, these bylaws, the
president or the chairman of the board.
5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors and shareholders. The minutes shall show the time and place of
each meeting, whether regular or special (and, if special, how authorized and
the notice given), the names of those present at directors' meetings or
committee meetings, the number of shares present or represented at shareholders'
meetings, and the proceedings thereof.
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The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all shareholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the shareholders and of the board of directors required to be given by law or by
these bylaws. He shall keep the seal of the corporation, if one be adopted, in
safe custody and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or by these bylaws.
5.10 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all money and other valuables in
the name and to the credit of the corporation with such depositaries as may be
designated by the board of directors. He shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his
transactions as chief financial officer and of the financial condition of the
corporation, and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or these bylaws.
ARTICLE VI.
INDEMNIFICATION OF DIRECTORS- OFFICERS, EMPLOYEES,
AND OTHER AGENTS
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner permitted by
the DGCL, indemnify each of its directors and officers against expenses (as used
in Section 145 of the DGCL), judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with any proceeding (as used in
Section 145 of the DGCL), arising by reason of the fact that such person is or
was an agent of the corporation. For purposes of this Article VI, a "director"
or "officer" of the corporation includes any person (i) who is or was a director
or officer of the corporation, (ii) who is or was serving at the request of the
corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, or (iii) who was a director or officer of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
6.2 INDEMNIFICATION OF OTHERS
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The corporation shall have the power, to the extent and in the manner
permitted by the DGCL, to indemnify each of its employees and agents (other than
directors and officers) against expenses (as used in Section 145 of the DGCL),
judgments, fines, settlements, and other amounts actually and reasonably
incurred in connection with any proceeding (as used in Section 145 of the DGCL),
arising by reason of the fact that such person is or was an agent of the
corporation. For purposes of this Article VI, an "employee" or "agent" of the
corporation (other than a director or officer) includes any person (i) who is or
was an employee or agent of the corporation, (ii) who is or was serving at the
request of the corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was an
employee or agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.3 PAYMENT OF EXPENSES IN ADVANCE
Expenses incurred in defending any civil or criminal action or proceeding
for which indemnification is required pursuant to Section 6.1 or for which
indemnification is permitted pursuant to Section 6.2 following authorization
thereof by the Board of Directors shall be paid by the corporation in advance of
the final disposition of such action or proceeding upon receipt of an
undertaking by or on behalf of the indemnified party to repay such amount if it
shall ultimately be determined that the indemnified party is not entitled to be
indemnified as authorized in this Article VI.
6.4 INDEMNITY NOT EXCLUSIVE
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office, to the extent that such
additional rights to indemnification are authorized in the Articles of
Incorporation.
6.5 INSURANCE INDEMNIFICATION
The corporation shall have the power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation against any liability asserted against or incurred by such person in
such capacity or arising out of such person's 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.
6.6 CONFLICTS
No indemnification or advance shall be made under this Article VI, except
where such indemnification or advance is mandated by law or the order, judgment
or decree of any court of competent jurisdiction, in any circumstance where it
appears:
(1) That it would be inconsistent with a provision of the Articles of
Incorporation, these bylaws, a resolution of the shareholders or an agreement in
effect at the time of the accrual of the alleged cause of the action asserted in
the proceeding in which the expenses
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were incurred or other amounts were paid, which prohibits or otherwise limits
indemnification; or
(2) That it would be inconsistent with any condition expressly imposed
by a court in approving a settlement.
ARTICLE VII.
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF SHARE REGISTER
The corporation shall keep either at its principal executive office or at
the office of its transfer agent or registrar (if either be appointed), as
determined by resolution of the board of directors, a record of its shareholders
listing the names and addresses of all shareholders and the number and class of
shares held by each shareholder.
A shareholder or shareholders of the corporation who holds at least five
percent (5%) in the aggregate of the outstanding voting shares of the
corporation or who holds at least one percent (1%) of such voting shares and has
filed a Schedule 14B with the Securities and Exchange Commission relating to the
election of directors, may (i) inspect and copy the records of shareholders'
names, addresses, and shareholdings during usual business hours on five (5)
days' prior written demand on the corporation, (ii) obtain from the transfer
agent of the corporation, on written demand and on the tender of such transfer
agent's usual charges for such list, a list of the names and addresses of the
shareholders who are entitled to vote for the election of directors, and their
shareholdings, as of the most recent record date for which that list has been
compiled or as of a date specified by the shareholder after the date of demand.
Such list shall be made available to any such shareholder by the transfer agent
on or before the later of five (5) days after the demand is received or five (5)
days after the date specified in the demand as the date as of which the list is
to be compiled.
The record of shareholders shall also be open to inspection on the written
demand of any shareholder or holder of a voting trust certificate, at any time
during usual business hours, for a purpose reasonably related to the holder's
interests as a shareholder or as the holder of a voting trust certificate.
Any inspection and copying under this Section 7.1 may be made in person or
by an agent or attorney of the shareholder or holder of a voting trust
certificate making the demand.
7.2 MAINTENANCE AND INSPECTION OF BYLAWS
The corporation shall keep at its principal executive office or, if its
principal executive office is not in the State of California, at its principal
business office in California the original or a copy of these bylaws as amended
to date, which bylaws shall be open to inspection by the shareholders at all
reasonable times during office hours. If the principal executive office of the
corporation is outside the State of California and the corporation has no
principal business office in such state, then the secretary shall, upon the
written request of any shareholder, furnish to that shareholder a copy of these
bylaws as amended to date.
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7.3 MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS
The accounting books and records and the minutes of proceedings of the
shareholders, of the board of directors, and of any committee or committees of
the board of directors shall be kept at such place or places as are designated
by the board of directors or, in absence of such designation, at the principal
executive office of the corporation. The minutes shall be kept in written form,
and the accounting books and records shall be kept either in written form or in
any other form capable of being converted into written form.
The minutes and accounting books and records shall be open to inspection
upon the written demand of any shareholder or holder of a voting trust
certificate, at any reasonable time during usual business hours, for a purpose
reasonably related to the holder's interests as a shareholder or as the holder
of a voting trust certificate. The inspection may be made in person or by an
agent or attorney and shall include the right to copy and make extracts. Such
rights of inspection shall extend to the records of each subsidiary corporation
of the corporation.
7.4 INSPECTION BY DIRECTORS
Every director shall have the absolute right at any reasonable time to
inspect all books, records, and documents of every kind as well as the physical
properties of the corporation and each of its subsidiary corporations. Such
inspection by a director may be made in person or by an agent or attorney. The
right of inspection includes the right to copy and make extracts of documents.
7.5 ANNUAL REPORT TO SHAREHOLDERS; WAIVER
The board of directors shall cause an annual report to be sent to the
shareholders not later than one hundred twenty (120) days after the close of the
fiscal year adopted by the corporation. Such report shall be sent at least
fifteen (15) days (or, if sent by third-class mail, thirty-five (35) days)
before the annual meeting of shareholders to be held during the next fiscal year
and in the manner specified in Section 2.5 of these bylaws for giving notice to
shareholders of the corporation.
The annual report shall contain (i) a balance sheet as of the end of the
fiscal year, (ii) an income statement, (iii) a statement of changes in financial
position for the fiscal year, and (iv) any report of independent accountants or,
if there is no such report, the certificate of an authorized officer of the
corporation that the statements were prepared without audit from the books and
records of the corporation.
The foregoing requirement of an annual report shall be waived so long as
the shares of the corporation are held by fewer than one hundred (100) holders
of record.
7.6 FINANCIAL STATEMENTS
If no annual report for the fiscal year has been sent to shareholders, then
the corporation shall, upon the written request of any shareholder made more
than one hundred twenty (120) days
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after the close of such fiscal year, deliver or mail to the person making the
request, within thirty (30) days thereafter, a copy of a balance sheet as of the
end of such fiscal year and an income statement and statement of changes in
financial position for such fiscal year.
If a shareholder or shareholders holding at least five percent (5%) of the
outstanding shares of any class of stock of the corporation makes a written
request to the corporation for an income statement of the corporation for the
three-month, six-month or nine-month period of the then current fiscal year
ended more than thirty (30) days before the date of the request, and for a
balance sheet of the corporation as of the end of that period, then the chief
financial officer shall cause that statement to be prepared, if not already
prepared, and shall deliver personally or mail that statement or statements to
the person making the request within thirty (30) days after the receipt of the
request. If the corporation has not sent to the shareholders its annual report
for the last fiscal year, the statements referred to in the first paragraph of
this Section 7.6 shall likewise be delivered or mailed to the shareholder or
shareholders within thirty (30) days after the request.
The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report, if any, of any independent
accountants engaged by the corporation or by the certificate of an authorized
officer of the corporation that the financial statements were prepared without
audit from the books and records of the corporation.
7.7 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, any vice president, the chief
financial officer, the secretary or assistant secretary of this corporation, or
any other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority herein
granted may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.
ARTICLE VIII.
GENERAL MATTERS
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
For purposes of determining the shareholders entitled to receive payment of
any dividend or other distribution or allotment of any rights or the
shareholders entitled to exercise any rights in respect of any other lawful
action (other than action by shareholders by written consent without a meeting),
the board of directors may fix, in advance, a record date, which shall not be
more than sixty (60) days before any such action. In that case, only
shareholders of record at the close of business on the date so fixed are
entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except as
otherwise provided in the DGCL.
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If the board of directors does not so fix a record date, then the record
date for determining shareholders. for any such purpose shall be at the close of
business on the day on which the board adopts the applicable resolution or the
sixtieth (60th) day before the date of that action, whichever is later.
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.3 CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED
I The board of directors, except as otherwise provided in these bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.4 CERTIFICATES FOR SHARES
A certificate or certificates for shares of the corporation shall be issued
to each shareholder when any of such shares are fully paid. The board of
directors may authorize the issuance of certificates for shares partly paid
provided that these certificates shall state the total amount of the
consideration to be paid for them and the amount actually paid. All
certificates shall be signed in the name of the corporation by the chairman of
the board or the vice chairman of the board or the president or a vice president
and by the chief financial officer or an assistant treasurer or the secretary or
an assistant secretary, certifying the number of shares and the class or series
of shares owned by the shareholder. Any or all of the signatures on the
certificate may be facsimile.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed on a certificate ceases to be that officer,
transfer agent or registrar before that certificate is issued, it may be issued
by the corporation with the same effect as if that person were an officer,
transfer agent or registrar at the date of issue.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and canceled at the same time. The board of
directors may, in case any share certificate or certificates for any other
security is lost, stolen or destroyed, authorize the issuance of replacement
certificates on such terms and conditions as the board may require; the board
may require indemnification of the corporation secured by a bond or other
adequate security sufficient
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to protect the corporation against any claim that may be made against it,
including any expense or liability, on account of the alleged loss, theft or
destruction of the certificate or the issuance of the replacement certificate.
8.6 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the DGCL shall govern the construction of these
bylaws. Without limiting the generality of this provision, the singular number
includes the plural, the plural number includes the singular, and the term
"person" includes both a corporation and a natural person.
ARTICLE IX.
AMENDMENTS
9.1 AMENDMENT BY SHAREHOLDERS
New bylaws may be adopted or these bylaws may be amended or repealed by the
vote or written consent of holders of a majority of the outstanding shares
entitled to vote; provided, however, that if the articles of incorporation of
the corporation set forth the number of authorized directors of the corporation,
then the authorized number of directors may be changed only by an amendment of
the articles of incorporation.
9.2 AMENDMENT BY DIRECTORS
Subject to the rights of the shareholders as provided in Section 9.1 of
these bylaws, the bylaws, other than a bylaw or an amendment of a bylaw changing
the authorized number of directors (except to fix the authorized number of
directors pursuant to a bylaw providing for a variable number of directors), may
be adopted, amended or repealed by the board of directors.
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Certificate by Secretary of Vicinity Corporation
The undersigned hereby certifies that he is the duly elected, qualified,
and acting Secretary of Vicinity Corporation and that the foregoing Bylaws,
comprising twenty (20) pages, were adopted as the Bylaws of the corporation on
__________, 19___, by the Board of Directors and majority of outstanding
Shareholders.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and affixed
the corporate seal this ____ day of ___________, 19___.
________________________________________
__________ Secretary
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EXHIBIT 3.4
AMENDED AND RESTATED BYLAWS
OF
VICINITY CORPORATION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE I - OFFICES........................................................ 1
Section 1. Registered Office......................................... 1
Section 2. Other Offices............................................. 1
ARTICLE II - STOCKHOLDERS.................................................. 1
Section 1. Place of Meetings......................................... 1
Section 2. Annual Meetings of Stockholders........................... 1
Section 3. Special Meetings.......................................... 1
Section 4. Notice of Stockholders' Meetings.......................... 1
Section 5. Manner of Giving Notice; Affidavit of Notice.............. 2
Section 6. Quorum.................................................... 2
Section 7. Adjourned Meeting and Notice Thereof...................... 2
Section 8. Voting.................................................... 2
Section 9. Waiver of Notice or Consent by Absent Stockholders........ 3
Section 10. No Stockholder Action by Written Consent Without a Meeting 3
Section 11. Record Date for Stockholder Notice and Voting............. 3
Section 12. Proxies................................................... 3
Section 13. Inspectors of Election; Opening and Closing the Polls..... 4
Section 14. Nomination and Stockholder Business Bylaw................. 4
ARTICLE III - DIRECTORS.................................................... 6
Section 1. Powers.................................................... 6
Section 2. Number and Qualification of Directors..................... 6
Section 3. Election and Term of Office of Directors.................. 6
Section 4. Vacancies................................................. 6
Section 5. Place of Meetings and Telephonic Meetings................. 7
Section 6. Annual Meetings........................................... 7
Section 7. Other Regular Meetings.................................... 7
Section 8. Special Meetings.......................................... 7
Section 9. Quorum.................................................... 8
Section 10. Waiver of Notice.......................................... 8
Section 11. Adjournment............................................... 8
Section 12. Notice of Adjournment..................................... 8
Section 13. Action Without Meeting.................................... 8
Section 14. Fees and Compensation of Directors........................ 9
ARTICLE IV - COMMITTEES.................................................... 9
Section 1. Committees of Directors................................... 9
Section 2. Meetings and Action of Committees......................... 9
ARTICLE V - OFFICERS....................................................... 10
Section 1. Officers.................................................. 10
Section 2. Election of Officers...................................... 10
Section 3. Subordinate Officers, etc................................. 10
Section 4. Removal and Resignation of Officers....................... 10
Section 5. Vacancies in Office....................................... 10
Section 6. Chairman of the Board..................................... 11
Section 7. President................................................. 11
</TABLE>
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TABLE OF CONTENTS
(Continued)
Page
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<TABLE>
<S> <C>
Section 8. Vice Presidents........................................... 11
Section 9. Secretary................................................. 11
Section 10. Chief Financial Officer................................... 11
Section 11. Assistant Secretaries and Assistant Treasurers............ 12
ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND
OTHER AGENTS.................................................. 12
Section 1. Indemnification........................................... 12
ARTICLE VII - GENERAL CORPORATE MATTERS.................................... 13
Section 1. Record Date for Purposes Other Than Notice and Voting..... 13
Section 2. Checks, Drafts, Evidences of Indebtedness................. 13
Section 3. Corporate Contracts and Instruments, How Executed......... 13
Section 4. Stock Certificates........................................ 14
Section 5. Lost Certificates......................................... 14
Section 6. Representation of Stock of Other Corporations............. 14
Section 7. Construction and Definitions.............................. 14
Section 8. Fiscal Year............................................... 14
ARTICLE VIII - AMENDMENTS.................................................. 15
Section 1. Amendment................................................. 15
</TABLE>
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AMENDED AND RESTATED BYLAWS
OF
VICINITY CORPORATION
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of Vicinity
Corporation (hereinafter, called the "corporation") shall be in the City of
Dover, County of Kent, State of Delaware.
Section 2. Other Offices. The corporation may also have offices at
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
STOCKHOLDERS
Section 1. Place of Meetings. Meetings of stockholders shall be held
at any place within or outside the State of Delaware designated by the board of
directors. In the absence of any such designation, stockholders' meetings shall
be held at the principal executive office of the corporation.
Section 2. Annual Meetings of Stockholders. The annual meeting of
stockholders shall be held each year on a date and time designated by the board
of directors. Any previously scheduled annual meeting of the stockholders may
be postponed by resolution of the board of directors upon public notice given
prior to the date previously scheduled for such annual meeting of the
stockholders.
Section 3. Special Meetings. A special meeting of the stockholders may
be called at any time by the board of directors, or by a majority of the
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 provided
in a resolution of the board of directors, include the power to call such
meetings, but such special meetings may not be called by any other person or
persons. Any previously scheduled special meeting of the stockholders may be
postponed by resolution of the board of directors upon public notice given prior
to the date previously scheduled for such special meeting of the stockholders.
Section 4. Notice of Stockholders' Meetings. All notices of meetings
of stockholders shall be sent or otherwise given in accordance with Section 5 of
this Article II not less than ten (10) nor more than sixty (60) days before the
date of the meeting being noticed. The notice shall
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specify the place, date and hour of the meeting and in the case of a special
meeting, the general nature of the business to be transacted.
Section 5. Manner of Giving Notice; Affidavit of Notice. If mailed,
notice shall be deemed to have been given when deposited in the mail, postage
prepaid, directed to the stockholder at his address appearing on the books of
the corporation or given by the stockholder to the corporation for the purpose
of notice. An affidavit of the mailing or other means of giving any notice of
any stockholders' meeting shall be executed by the secretary, assistant
secretary or any transfer agent of the corporation giving such notice, and shall
be filed and maintained in the minute book of the corporation.
Section 6. Quorum. The presence in person or by proxy of the holders
of a majority of the shares entitled to vote at any meeting of stockholders
shall constitute a quorum for the transaction of business. The stockholders
present at a duly called or held meeting at which a quorum is present may
continue to do business until adjournment, notwithstanding the withdrawal of
enough stockholders to leave less than a quorum, if any action taken (other than
adjournment) is approved by at least a majority of the shares required to
constitute a quorum.
Section 7. Adjourned Meeting and Notice Thereof. Any stockholders'
meeting, annual or special, whether or not a quorum is present, may be adjourned
from time to time by the chairman of the meeting, but in the absence of a
quorum, no other business may be transacted at such meeting, except as provided
in Section 6 of this Article II.
When any meeting of stockholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place thereof are announced at a meeting at which the
adjournment is taken, unless a new record date for the adjourned meeting is
fixed, or unless the adjournment is for more than thirty (30) days from the date
set for the original meeting. Notice of any such adjourned meeting, if
required, shall be given to each stockholder of record entitled to vote at the
adjourned meeting in accordance with the provisions of Sections 4 and 5 of this
Article II. At any adjourned meeting the corporation may transact any business
which might have been transacted at the original meeting.
Section 8. Voting. The stockholders entitled to vote at any meeting of
stockholders shall be determined in accordance with the provisions of Section 11
of this Article II. Such vote may be by voice vote or by ballot, at the
discretion of the chairman of the meeting. Any stockholder entitled to vote on
any matter (other than the election of directors) may vote part of the shares in
favor of the proposal and refrain from voting the remaining shares or vote them
against the proposal; but, if the stockholder fails to specify the number of
shares such stockholder is voting affirmatively, it will be conclusively
presumed that the stockholder's approving vote is with respect to all shares
such stockholder is entitled to vote. If a quorum is present, the affirmative
vote of the majority of the shares represented at the meeting and entitled to
vote on any matter shall be the act of the stockholders, unless the vote of a
greater number or voting by classes is required by the Delaware General
Corporation Law or the certificate of incorporation or the certificate of
determination of preferences as to any preferred stock.
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At a stockholders' meeting involving the election of directors, no
stockholder shall be entitled to cumulate (i.e., cast for any one or more
candidates a number of votes greater than the number of the stockholders
shares). The candidates receiving the highest number of votes, up to the number
of directors to be elected, shall be elected.
Section 9. Waiver of Notice or Consent by Absent Stockholders. The
transactions of any meeting of stockholders, either annual or special, however
called and noticed, and wherever held, shall be as valid as though had at a
meeting duly held after regular call and notice, if a quorum be present either
in person or by proxy, and if, either before or after the meeting, each person
entitled to vote, not present in person or by proxy, signs a written waiver of
notice or a consent to the holding of the meeting, or an approval of the minutes
thereof. The waiver of notice or consent need not specify either the business
to be transacted or the purpose of any annual or special meeting of
stockholders. All such waivers, consents or approvals shall be filed with the
corporate records or made part of the minutes of the meeting.
Attendance of a person at a meeting shall also constitute a waiver of
notice of such meeting, except when the person objects, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened, and except that attendance at a meeting is not a waiver of
any right to object to the consideration of matters not included in the notice
of the meeting if such objection is expressly made at the meeting.
Section 10. No Stockholder Action by Written Consent Without a Meeting.
Stockholders may take action only at a regular or special meeting of
stockholders.
Section 11. Record Date for Stockholder Notice and Voting. For purposes
of determining the holders entitled to notice of any meeting or to vote, the
board of directors may fix, in advance, a record date, which shall not be more
than sixty (60) days nor less than ten (10) days prior to the date of any such
meeting, and in such case only stockholders of record on the date so fixed are
entitled to notice and to vote, notwithstanding any transfer of any shares on
the books of the corporation after the record date fixed as aforesaid, except as
otherwise provided in the Delaware General Corporation Law.
If the board of directors does not so fix a record date, the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the business day next
preceding the day on which notice is given or, if notice is waived, at the close
of business on the business day next preceding the day on which the meeting is
held.
Section 12. Proxies. Every person entitled to vote for directors or on
any other matter shall have the right to do so either in person or by one or
more agents authorized by a written proxy signed by the person and filed with
the secretary of the corporation. A validly executed proxy which does not state
that it is irrevocable shall continue in full force and effect unless (i)
revoked by the person executing it, prior to the vote pursuant thereto, by a
writing delivered to the corporation stating that the proxy is revoked or by a
subsequent proxy executed by, or attendance at the meeting and voting in person
by, the person executing the proxy, or (ii) written notice of the death or
incapacity of the maker of such proxy is received by the corporation before
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the vote pursuant thereto is counted; provided, however, that no such proxy
shall be valid after the expiration of three (3) years from the date of such
proxy, unless otherwise provided in the proxy.
Section 13. Inspectors of Election; Opening and Closing the Polls. The
board of directors by resolution shall appoint one or more inspectors, which
inspector or inspectors may include individuals who serve the corporation in
other capacities, including, without limitation, as officers, employees, agents
or representatives, to act at the meetings of stockholders and make a written
report thereof. One or more persons may be designated as alternate inspectors
to replace any inspector who fails to act. If no inspector or alternate has been
appointed to act or is able to act at a meeting of stockholders, the chairman of
the meeting shall appoint one or more inspectors to act at the meeting. Each
inspector, before discharging his or her duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of his or her ability. The inspectors shall have the
duties prescribed by law.
The chairman of the meeting shall fix and announce at the meeting the
date and time of the opening and the closing of the polls for each matter upon
which the stockholders will vote at a meeting.
Section 14. Nomination and Stockholder Business Bylaw.
(A) Annual Meetings of Stockholders.
(1) Nominations of persons for election to the board of directors
of the corporation and the proposal of business to be considered by the
stockholders may be made at an annual meeting of stockholders (a) pursuant to
the corporation's notice of meeting, (b) by or at the direction of the board of
directors or (c) by any stockholder of the corporation who was a stockholder of
record at the time of giving of notice provided for in this bylaw, who is
entitled to vote at the meeting and who complies with the notice procedures set
forth in this bylaw.
(2) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (c) of paragraph
(A)(1) of this bylaw, the stockholder must have given timely notice thereof in
writing to the secretary of the corporation and such other business must
otherwise be a proper matter for stockholder action. To be timely, a
stockholder's notice shall be delivered to the secretary at the principal
executive offices of the corporation not less than the close of business on the
120th calendar day in advance of the first anniversary of the date the
corporation's proxy statement was released to security holders in connection
with the preceding year's annual meeting; provided, however, that if no annual
meeting was held in the previous year or the date of the annual meeting has been
changed by more than thirty (30) calendar days from the date contemplated at the
time of the previous year's proxy statement, a proposal shall be received by the
corporation no later than the close of business on the tenth day following the
day on which notice of the date of the meeting was mailed or public announcement
of the date of the meeting was made, whichever comes first. In no event shall
the public announcement of an adjournment of an annual meeting commence a new
time period for the giving of a stockholder's notice as described above. Such
stockholder's notice shall set forth (a) as to each person whom the stockholder
proposes to nominate for
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election or reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors in an election contest, or is otherwise required, in each case
pursuant to applicable federal securities laws, including, without limitation,
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and Rule 14a-11 thereunder (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected); (b) as to any other business that the stockholder proposes
to bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (c) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the corporation's books, and of such beneficial
owner and (ii) the class and number of shares of the corporation which are owned
beneficially and of record by such stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph
(A)(2) of this bylaw to the contrary, in the event that the number of directors
to be elected to the board of directors of the corporation is increased and
there is no public announcement by the corporation naming all of the nominees
for director or specifying the size of the increased board of directors at least
70 days prior to the first anniversary of the date of the preceding years annual
meeting, a stockholders notice required by this bylaw shall also be considered
timely, but only with respect to nominees for any new positions created by such
increase, if it shall be delivered to the secretary at the principal executive
offices of the corporation not later than the close of business on the 10th day
following the day on which such public announcement is first made by the
corporation.
(B) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall be brought before the
meeting pursuant to the corporation's notice of meeting. A stockholder's
nomination of one or more persons for election to the board of directors shall
only be permitted to be made at a special meeting of stockholders if: (i) the
corporation's notice of such meeting specified that directors are to be elected
at such special meeting; (ii) such stockholder was a stockholder of record
entitled to vote at the meeting at the time of giving of notice provided for in
this bylaw; and (iii) if such stockholder complies with the notice procedures
set forth in this bylaw. In the event the corporation calls a special meeting of
stockholders for the purpose of electing one or more directors to the board of
directors, any such stockholder may nominate a person or persons (as the case
may be), for election to such position(s) as specified in the corporation's
notice of meeting, if the stockholder's notice required by paragraph (A)(2) of
this bylaw shall be delivered to the secretary at the principal executive
offices of the corporation not earlier than the close of business on the 90th
day prior to such special meeting and not later than the close of business on
the later of the 60th day prior to such special meeting or the 10th day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the board of directors to be
elected at such meeting. In no event shall the public announcement of an
adjournment of a special meeting commence a new time period for the giving of a
stockholder's notice as described above.
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(C) General.
(1) Only such persons who are nominated in accordance with the
procedures set forth in this bylaw shall be eligible to serve as directors.
Except as otherwise provided by law, the certificate of incorporation or these
bylaws, the chairman of the meeting shall have the power and authority to
determine the procedures of a meeting of stockholders, including, without
limitation, the authority to determine whether a nomination or any other
business proposed to be brought before the meeting was made or proposed, as the
case may be, in accordance with the procedures set forth in this bylaw and, if
any proposed nomination or business is not in compliance with this bylaw, to
declare that such defective proposal or nomination shall be disregarded.
(2) For purposes of this bylaw, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this bylaw, a
stockholder shall also comply with all applicable requirements of the Exchange
Act and the rules and regulations thereunder with respect to the matters set
forth in this bylaw. Nothing in this bylaw shall be deemed to affect any rights
(i) of stockholders to request inclusion of proposals in the corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act or (ii) of the holders
of any series of preferred stock, if any, to elect directors under certain
circumstances.
ARTICLE III
DIRECTORS
Section 1. Powers. Subject to the provisions of the Delaware General
Corporation Law and any limitations in the certificate of incorporation and
these bylaws relating to action required to be approved by the stockholders or
by the outstanding shares, the business and affairs of the corporation shall be
managed and all corporate powers shall be exercised by or under the direction of
the board of directors.
Section 2. Number and Qualification of Directors. The number of directors
of the corporation shall be nine (9).
Section 3. Election and Term of Office of Directors. Directors shall be
elected at the annual meeting of the stockholders. Each director, including a
director elected to fill a vacancy, shall serve for a term ending on the date of
the third annual meeting following the annual meeting at which such director was
elected and until a successor has been elected and qualified or the earlier of
his resignation or removal.
Section 4. Vacancies. Vacancies in the board of directors may be filled
by a majority of the remaining directors, though less than a quorum, or by a
sole remaining director. Each
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director elected to fill a vacancy shall hold office for the remainder of the
term of the person whom he succeeds, and until a successor has been elected and
qualified.
A vacancy or vacancies in the board of directors shall be deemed to
exist in the case of the death, retirement, resignation or removal of any
director, or if the board of directors by resolution declares vacant the office
of a director who has been declared of unsound mind by an order of court or
convicted of a felony, or if the authorized number of directors be increased, or
if the stockholders fail at any meeting of stockholders at which any director or
directors are elected, to elect the full authorized number of directors to be
voted for at that meeting.
Any director may resign or voluntarily retire upon giving written
notice to the chairman of the board, the president, the secretary or the board
of directors. Such retirement or resignation shall be effective upon the giving
of the notice, unless the notice specifies a later time for its effectiveness.
If such retirement or resignation is effective at a future time, the board of
directors may elect a successor to take office when the retirement or
resignation becomes effective.
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of his term of office.
Section 5. Place of Meetings and Telephonic Meetings. Regular meetings
of the board of directors may be held at any place within or without the State
of Delaware that has been designated from time to time by resolution of the
board. In the absence of such designation, regular meetings shall be held at the
principal executive office of the corporation. Special meetings of the board
shall be held at any place within or without the State of Delaware that has been
designated in the notice of the meeting or, if not stated in the notice or there
is no notice, at the principal executive office of the corporation. Any
meeting, regular or special, may be held by conference telephone or similar
communication equipment, so long as all directors participating in such meeting
can hear one another, and all such directors shall be deemed to be present in
person at such meeting.
Section 6. Annual Meetings. Immediately following each annual meeting
of stockholders, the board of directors shall hold a regular meeting for the
purpose of organization, any desired election of officers and transaction of
other business. Notice of this meeting shall not be required.
Section 7. Other Regular Meetings. Other regular meetings of the board
of directors shall be held at such time as shall from time to time be determined
by the board of directors. Such regular meetings may be held without notice
provided that notice of any change in the determination of time of such meeting
shall be sent to all of the directors. Notice of a change in the determination
of the time shall be given to each director in the same manner as for special
meetings of the board of directors.
Section 8. Special Meetings. Special meetings of the board of
directors for any purpose or purposes may be called at any time by the chairman
of the board or the president or any vice president or the secretary or any two
directors.
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Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by facsimile, first-class
mail or telegram, charges prepaid, addressed to each director at his or her
address as it is shown upon the records of the corporation. In case such notice
is mailed, it shall be deposited in the United States mail at least four (4)
days prior to the time of the holding of the meeting. In case such notice is
delivered personally, by telephone, facsimile or telegram, it shall be delivered
personally, or by telephone, by facsimile or to the telegraph company at least
twenty-four (24) hours prior to the time of the holding of the meeting. Any
oral notice given personally or by telephone may be communicated to either the
director or to a person at the office of the director who the person giving the
notice has reason to believe will promptly communicate it to the director. The
notice need not specify the purpose of the meeting nor the place if the meeting
is to be held at the principal executive office of the corporation.
Section 9. Quorum. A majority of the authorized number of directors
shall constitute a quorum for the transaction of business, except to adjourn as
hereinafter provided. Every act or decision done or made by a majority of the
directors present at a meeting duly held at which a quorum is present shall be
regarded as the act of the board of directors. A meeting at which a quorum is
initially present may continue to transact business notwithstanding the
withdrawal of directors, if any action taken is approved by at least a majority
of the required quorum for such meeting.
Section 10. Waiver of Notice. The transactions of any meeting of the
board of directors, however called and noticed or wherever held, shall be as
valid as though had at a meeting duly held after regular call and notice if a
quorum be present and if, either before or after the meeting, each of the
directors not present signs a written waiver of notice, a consent to holding the
meeting or an approval of the minutes thereof. The waiver of notice or consent
need not specify the purpose of the meeting. All such waivers, consents and
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting. Notice of a meeting shall also be deemed given to any
director who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to such director.
Section 11. Adjournment. A majority of the directors present, whether
or not constituting a quorum, may adjourn any meeting to another time and place.
Section 12. Notice of Adjournment. Notice of the time and place of an
adjourned meeting need not be given, unless the meeting is adjourned for more
than twenty-four (24) hours, in which case notice of such time and place shall
be given prior to the time of the adjourned meeting, in the manner specified in
Section 8 of this Article III, to the directors who were not present at the time
of the adjournment.
Section 13. Action Without Meeting. Any action required or permitted to
be taken by the board of directors may be taken without a meeting, if all
members of the board shall individually or collectively consent in writing to
such action. Such action by written consent shall have the same force and
effect as a unanimous vote of the board of directors. Such written consent or
consents shall be filed with the minutes of the proceedings of the board.
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Section 14. Fees and Compensation of Directors. Directors and members
of committees may receive such compensation, if any, for their services and such
reimbursement of expenses, as may be fixed or determined by resolution of the
board of directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise, and receiving compensation for such services.
ARTICLE IV
COMMITTEES
Section 1. Committees of Directors. The board of directors may, by
resolution adopted by a majority of the authorized number of directors,
designate one or more committees, including an executive committee, each
consisting of two or more directors, to serve at the pleasure of the board. The
board may designate one or more directors as alternate members of any committee,
who may replace any absent member at any meeting of the committee. Any such
committee, to the extent provided in the resolution of the board, shall have all
the authority of the board, except with respect to:
(a) the approval of any action which, under the General
Corporation Law of Delaware, also requires the approval of the full board of
directors, or the stockholders of the outstanding shares;
(b) the filling of vacancies on the board of directors or in any
committee;
(c) the fixing of compensation of the directors for serving on the
board or on any committee;
(d) the amendment or repeal of bylaws or the adoption of new
bylaws;
(e) the amendment or repeal of any resolution of the board of
directors which by its express terms is not so amendable or repealable;
(f) a distribution to the stockholders of the corporation, except
at a rate or in a periodic amount or within a price range determined by the
board of directors; or
(g) the appointment of any other committees of the board of
directors or the members thereof.
Section 2. Meetings and Action of Committees. Meetings and action of
committees shall be governed by, and held and taken in accordance with, the
provisions of Article III of these bylaws, Sections 5 (place of meetings), 7
(regular meetings), 8 (special meetings and notice), 9 (quorum), 10 (waiver of
notice), 11 (adjournment), 12 (notice of adjournment) and 13 (action without
meetings), with such changes in the context of those bylaws as are necessary to
substitute the committee and its members for the board of directors and its
members, except that the time of regular meetings of committees may be
determined by resolution of the board
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of directors as well as the committee, special meetings of committees may also
be called by resolution of the board of directors, and notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The board of directors
may adopt rules for the government of any committee not inconsistent with the
provisions of these bylaws.
ARTICLE V
OFFICERS
Section 1. Officers. The officers of the corporation shall be chosen
by the board of directors and shall include a chairman of the board or
president, or both, a vice president, a secretary and a chief financial officer.
The corporation may also have, at the discretion of the board of directors, a
president, one or more additional vice presidents, one or more assistant
secretaries, one or more assistant treasurers, and such other officers as may be
held by the same person.
Section 2. Election of Officers. The officers of the corporation,
except such officers as may be appointed in accordance with the provisions of
Section 3 or Section 5 of this Article V, shall be chosen annually by the board
of directors, and each shall hold his office until he shall resign or be removed
or otherwise disqualified to serve or his successor shall be appointed in
accordance with the provisions of Section 3 of this Article V. Any number of
officers may be elected and qualified.
Section 3. Subordinate Officers, etc. The board of directors may
appoint, and may empower the chairman of the board to appoint, such other
officers as the business of the corporation may require, each of whom shall hold
office for such period, have such authority and perform such duties as are
provided in the bylaws or as the board of directors may from time to time
determine.
Section 4. Removal and Resignation of Officers. Any officer may be
removed, either with or without cause, by the board of directors, at any regular
or special meeting thereof, or, except in case of an officer chosen by the board
of directors, by any officer upon whom such power of removal may be conferred by
the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any such resignation shall take effect at the date of the receipt
of such notice or at any later time specified therein; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 5. Vacancies in Office. A vacancy in any office because of
death, resignation, removal, disqualification, or any other cause shall be
filled in the manner prescribed in these bylaws for regular appointments to such
office.
Section 6. Chairman of the Board. The chairman of the board shall be
the chief executive officer of the corporation and shall, subject to the control
of the board of directors, have general supervision, direction and control of
the business and affairs of the corporation.
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Section 7. President. The president shall be the chief operating
officer of the corporation and shall exercise and perform such powers and duties
with respect to the administration of the business and affairs of the
corporation as may from time to time be assigned to him by the chairman of the
board or by the board of directors, or as may be prescribed by the bylaws.
Section 8. Vice Presidents. In the absence or disability of the
president, a vice president designated by the board of directors shall perform
all the duties of the president, and when so acting shall have all the powers
of, and be subject to all the restrictions upon, the president. The vice
presidents shall have such other powers and perform such other duties as form
time to time may be prescribed for them respectively by the board of directors
or the bylaws.
Section 9. Secretary. The secretary shall keep or cause to be kept, at
the principal executive office or such other place as the board of directors may
order, a book of minutes of all meetings and actions of directors, committees of
directors and stockholders, with the time and place of holding, whether regular
or special, and, if special, how authorized, the notice thereof given, the names
of those present at directors' and committee meetings, the number of shares
present or represented at stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the corporation's transfer agent or
registrar, as determined by resolution of the board of directors, a stock
register, or a duplicate register, showing the names of all stockholders and
their addresses, the number and classes of shares held by each, the number and
date of certificates issued for the same, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the board of directors required by the bylaws or by
law to be given, and he shall keep the seal of the corporation in safe custody,
and shall have such other powers and perform such other duties as may be
prescribed by the board of directors or by the bylaws.
Section 10. Chief Financial Officer. The chief financial officer shall
keep and maintain, or cause to be kept and maintained, adequate and correct
books and records of accounts of the properties and business transactions of the
corporation, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, retained earnings and shares. The books
of account shall be open at all reasonable times to inspection by any director.
The chief financial officer shall deposit all monies and other
valuables in the name and to the credit of the corporation with such
depositories as may be designated by the board of directors. The chief
financial officer shall disburse the funds of the corporation as may be ordered
by the board of directors, shall render to the chairman of the board and
directors, whenever they request it, an account of all of his transactions as
chief financial officer and of the financial condition of the corporation, and
shall have other powers and perform such other duties as may be prescribed by
the board of directors or the bylaws.
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Section 11. Assistant Secretaries and Assistant Treasurers. Any
assistant secretary may perform any act within the power of the secretary, and
any assistant treasurer may perform any act within the power of the chief
financial officer, subject to any limitations which may be imposed in these
bylaws or in board resolutions.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND OTHER AGENTS
Section 1. Indemnification. The corporation shall indemnify, in the
manner and to the full extent permitted by law, any person (or the estate of any
person) who was or is a party to, or is threatened to be made a party to, any
threatened, pending or completed action, suit or proceeding, whether or not by
or in the right of the corporation, and whether civil, criminal, administrative,
investigative or otherwise, by reason of the fact that such person is a director
or officer of the corporation, and at the discretion of the board of directors
may indemnify any person (or the estate of any person) who is such a party or
threatened to be made such a party by reason of the fact that such person is or
was an employee or agent of the corporation or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise. The
corporation may, to the full extent permitted by law, purchase and maintain
insurance on behalf of any such person against any liability which may be
asserted against him and may enter into contracts providing for the
indemnification of such person to the full extent permitted by law. To the full
extent permitted by law, the indemnification provided herein shall include
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement, and, in the manner provided by law, any such expenses may be paid by
the corporation in advance of the final disposition of such action, suit or
proceeding. The indemnification provided herein shall not be deemed to limit
the right of the corporation to indemnify any other person for any such expenses
to the full extent permitted by law, nor shall it be deemed exclusive of any
other rights to which any person seeking indemnification from the corporation
may be entitled under any 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.
For the purposes of this Article V1, 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 or officers so that any
person who is or was a director or officer of such constituent corporation, or
is or was serving at the request of such constituent corporation as a director
or officer of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
Article VI with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
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
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corporation" shall include service as a director or officer of the corporation
which imposes duties on, or involves services by, such director or officer 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 section.
ARTICLE VII
GENERAL CORPORATE MATTERS
Section 1. Record Date for Purposes Other Than Notice and Voting. For
purposes of determining the stockholders 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 other lawful action, the board of
directors may fix, in advance, a record date, which date shall not precede the
date upon which the resolution fixing the record date is adopted by the board of
directors, and which shall not be more than sixty (60) nor less than ten (10)
days prior to any such action, and in such case only stockholders of record on
the date so fixed are entitled to receive the dividend, distribution or
allotment of rights or to exercise the rights, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation after
the record date fixed as aforesaid, except as otherwise provided in the Delaware
General Corporation Law.
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. In order that the corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the board
of directors may fix a record date which shall not be more than ten days after
the date upon which the resolution fixing the record date is adopted by the
board of directors.
Section 2. Checks, Drafts, Evidences of Indebtedness. All checks,
drafts or other orders for payment of money, notes or other evidences of
indebtedness, issued in the name of or payable to the corporation shall be
signed or endorsed by such person or persons and in such manner as, from time to
time, shall be determined by resolution of the board of directors.
Section 3. Corporate Contracts and Instruments, How Executed. The
board of directors, except as otherwise provided in these bylaws, may authorize
any officer or officers, agent or agents, to enter into any contract or execute
any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances; and, unless so
authorized or ratified by the board of directors or within the agency power of
an officer, no officer, agent or employee shall have any power or authority to
bind the corporation by any contract or engagement or to pledge its credit or to
render it liable for any purpose or to any amount.
Section 4. Stock Certificates. A certificate or certificates for
shares of the capital stock of the corporation shall be issued to each
stockholder when any such shares are fully paid.
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All certificates shall be signed in the name of the corporation by the chairman
of the board or the president or vice president and by the chief financial
officer, the treasurer or an assistant treasurer or the secretary or any
assistant secretary, certifying the number of shares and the class or series of
shares owned by the stockholder. Any or all of the signatures on the certificate
may be facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if such person were an officer, transfer agent or registrar at the date of
issue.
Section 5. Lost Certificates. Except as hereinafter in this Section 5
provided, no new stock certificate shall be issued in lieu of an old certificate
unless the latter is surrendered to the corporation and canceled at the same
time. The board of directors may in case any stock certificate or certificate
for any other security is lost, stolen or destroyed, authorize the issuance of a
new certificate in lieu thereof, upon such terms and conditions as the board of
directors may require, including provision for indemnification of the
corporation secured by a bond or other adequate security sufficient to protect
the corporation against any claim that may be made against it, including any
expense or liability, on account of the alleged loss, theft or destruction of
such certificate or the issuance of such new certificate.
Section 6. Representation of Stock of Other Corporations. The chairman
of the board, the president, or any vice president, or any other person
authorized by resolution of the board of directors by any of the foregoing
designated officers, is authorized to vote on behalf of the corporation any and
all stock of any other corporation or corporations, foreign or domestic,
standing in the name of the corporation. The authority herein granted to said
officers to vote or represent on behalf of the corporation any and all stock by
the corporation in any other corporation or corporations may be exercised by any
such officer in person or by any person authorized to do so by proxy duly
executed by said officer.
Section 7. Construction and Definitions. Unless the context requires
otherwise, the general provisions, rules of construction, and definitions in the
Delaware General Corporation Law shall govern the construction of the bylaws.
Without limiting the generality of the foregoing, the singular number includes
the plural, the plural number includes the singular, and the term "person"
includes both a corporation and a natural person.
Section 8. Fiscal Year. The fiscal year of the corporation shall be
fixed by resolution of the board of directors.
ARTICLE VIII
AMENDMENTS
Section 1. Amendment. The bylaws, or any of them, may be rescinded,
altered, amended or repealed, and new bylaws may be made (i) by the board of
directors, by vote of a majority of the number of directors then in office as
directors, acting at any meeting of the board of directors, or (ii) by the
stockholders, by the vote of the holders of sixty-six and two-thirds percent
(66-2/3%) of the outstanding voting stock of the corporation, at any annual or
special
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meeting of stockholders, provided that notice of such proposed amendment,
modification, repeal or adoption is given in the notice of the annual or special
meeting; provided, however, that the bylaws can only be amended if such
amendment would not conflict with the certificate of incorporation. Any bylaw
made or altered by the requisite number of stockholders may be altered or
repealed by the board of directors or may be altered or repealed by the
requisite number of stockholders.
* * * *
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CERTIFICATE OF SECRETARY
I, the undersigned, do hereby certify:
(a) That I am the duly elected and acting Secretary of Vicinity
Corporation, a Delaware corporation (the "Corporation"); and
(b) That the foregoing Amended and Restated Bylaws constitute the
Amended and Restated Bylaws of the Corporation, as duly adopted by the Board of
Directors of the Corporation at a meeting duly held on January ____, 2000 and as
adopted by the holders of a majority of the Corporation's Common Stock pursuant
to a consent dated as of January ____, 2000.
IN WITNESS WHEREOF, I have hereunto subscribed my name as of this __th day
of January, 2000.
_________________________
Scott A. Shuda
Secretary
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EXHIBIT 10.16
MASTER LEASE AND FINANCING AGREEMENT
------------------------------------
This Master Lease and Financing Agreement (together with Exhibits A through
E attached hereto and hereby made a part hereof, this "Master Agreement"), dated
as of 7/27/99, is entered into by and between Compaq Capital Corporation, a
Delaware corporation ("Lessor"), and Vicinity Corporation, a California
("Lessee"). Capitalized terms used in this Master Agreement without definition
have the meanings ascribed to them in Section 31.
1. PURPOSE OF MASTER AGREEMENT.
The purpose of this Master Agreement is to set forth the general terms and
conditions upon which (a) Lessor shall lease to Lessee and Lessee shall lease
from Lessor items of Hardware, Software or both (such Hardware and Software
being collectively referred to as "Equipment", and each such lease of Equipment
being referred to as a "Lease"), and (b) Lessor shall provide financing to
Lessee (each such financing transaction being referred to as a "Financing") for
software program license fees, maintenance fees, fees for other services and
other one-time charges ("Financed Items") Lessee desires to finance hereunder.
In connection with its execution of this Master Agreement, Lessee shall deliver
to Lessor an Officer's Certificate in form and substance acceptable to Lessor,
executed by a duly authorized officer of Lessee and certifying as to, among
other things, Lessee's authority to enter into this Master Agreement and Leases
and Financings hereunder and the authority of Lessee's officers or
representatives specified therein to execute this Master Agreement and all other
Fundamental Agreements.
2. ALTERNATIVE COMMENCEMENT PROCEDURES.
Subject to the other terms and conditions contained in this Master
Agreement and the applicable Schedule or Advance Pricing Agreement, Lessee may,
at its option, enter into individual Leases and Financings with Lessor under
either or both of the following procedures:
A. TRADITIONAL PROCEDURE.
(a) Execution of Schedule. Lessor and Lessee mutually agree to enter
---------------------
into a Lease, a Financing or both by executing a Schedule in the form of Exhibit
A with such changes as Lessor and Lessee shall have agreed to as conclusively
evidenced by their execution thereof. Each such Schedule shall specifically
identify (by serial number or other identifying characteristics) the items of
Equipment to be leased under such Schedule (other than items of System Software,
which shall be deemed to be items of Software leased under the Schedule pursuant
to which the related items of Hardware are leased), and the Financed Items to e
financed under such Schedule. Each Schedule, when executed by both Lessee and
Lessor, together with this Master Agreement, shall constitute a separate and
distinct Lease, a separate and distinct Financing, or a separate and distinct
Lease and a separate and distinct Financing, as the case may be, enforceable
according to its terms. In the event of any conflict between the terms of this
Master Agreement and such Schedule, the provisions of the Schedule shall govern.
(b) Acceptable; Initial Term of Leases and Term of Financings. Lessee
---------------------------------------------------------
shall accept the Equipment subject to a Lease and the Financed Items subject to
a Financing in accordance with Section 3. The Initial Term of each Lease and,
if applicable, the Term of any
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related Financing evidenced by a Schedule executed pursuant to this Section 2.A
shall begin on the Acceptance Date of the Equipment subject to such Lease and
shall continue for the period described in the applicable Schedule.
(c) Adjustments to Schedule. Lessee acknowledges that the Total Cost
-----------------------
of Equipment and Financed Items and the related Rent payments set forth in any
Schedule executed pursuant to this Section 2.A may be estimates, and if the
final invoice from the Seller specifies a Total Cost that is more or less than
the estimated Total Cost set forth in the Schedule, Lessee hereby authorizes
Lessor to adjust the applicable Total Cost and Rent payment on the Schedule to
reflect the final invoice amount (the "Final Invoice Amount"). However, if the
Final Invoice Amount exceeds the estimated Total Cost by more than 5%, Lessor
will notify Lessee and obtain Lessee's prior written approval of the
aforementioned adjustments. If Lessee fails to so approve any such adjustments
within 15 days of Lessor's request, then the affected Schedule shall terminate
without penalty to either Lessor or Lessee and Lessee shall be solely
responsible for all obligations arising under the applicable Purchase Documents,
including, without limitation, the obligation to purchase Equipment and pay
Financed Items. All references in this Master Agreement and any Schedule to
Total Cost and Rent shall mean the amounts thereof specified in the applicable
Schedule, as adjusted pursuant to this paragraph. Lessee also acknowledges that
the Equipment and Financed Items described in a Schedule may differ from the
description of the Equipment and Financed Items set forth in the related
Acceptance Certificate and actually accepted by Lessee. Lessee hereby
authorizes Lessor to conform the description of the Equipment and Financed Items
set forth in any Schedule to the description thereof in the related Acceptance
Certificate. All references in the Master Agreement and any Schedule to the
Equipment subject to a Lease and the Financed Items subject to a Financing shall
mean the Equipment and Financed Items described in the applicable Schedule, as
conformed to the related Acceptance Certificate pursuant to this paragraph.
B. FUNDING CONSOLIDATION PROCEDURE.
(a) Execution of Advance Pricing Agreement. Lessor and Lessee
--------------------------------------
mutually agree to enter into one or more Leases, Financings or both by
executing, from time to time, an Advance Pricing Agreement in the form of
Exhibit B with such changes as Lessor and Lessee shall have agreed to as
conclusively evidenced by their execution thereof. Subject to the following
provisions of this Section 2.B, such Advance Pricing Agreement shall constitute
a commitment on the part of Lessor, during the Commitment Period specified
therein (i) to purchase Equipment of the type(s) described therein and enter
into one or more Leases of the same with Lessee at the lease rates set forth
therein, and (ii) to fund Financed Items of the type(s) described therein and
enter into one or more Financings of the same with Lessee at the financing rates
set forth therein; provided, however, that Lessor shall under no circumstances
be obligated to purchase Equipment or fund Financed Items if (x) such purchase
or funding would require Lessor to expend moneys in excess of the Amount
Available specified in the Advance Pricing Agreement less the aggregate amount
previously paid or committed to be paid by Lessor to acquire Equipment or fund
Financed Items during such Commitment Period, or (y) any Lessee Default shall
have occurred and be continuing under any Leases or Financing or any event shall
have occurred and be continuing which, with the giving of notice or the passage
of time or both, would constitute a Lessee Default under any Lease or Financing,
or (z) Lessee shall have failed to deliver to Lessor any financial statements in
accordance with the provisions of paragraph
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(f) below or any material adverse change shall have occurred in Lessee's
financial or operating condition, as determined by Lessor in its sole
discretion, after the date of the last financial statements of Lessee delivered
to Lessor prior to the execution and delivery of such Advance Pricing Agreement.
(b) Lessor's Purchase of Equipment and Funding of Financed Items.
------------------------------------------------------------
Subject to the provisions of this Section 2.B and the applicable Advance Pricing
Agreement, Lessor shall, at Lessee's request made during the Commitment Period
specified in such Advance Pricing Agreement (i) purchase Equipment of the
type(s) described therein and enter into a Lease of such Equipment with Lessee,
and (ii) fund Financed Items of the type(s) described therein and enter into a
Financing with Lessee relating to such Financed Items. Until such time as
Lessee shall have executed and delivered to Lessor a Consolidating Schedule in
accordance with paragraph (d) below, each such Lease or Financing shall be
governed by the terms of this Master Agreement, the applicable Advance Pricing
Agreement and the Acceptance Certificate executed and delivered to Lessor by
Lessee pursuant to paragraph (c) below. Each such Acceptance Certificate shall
specifically identify (by serial number or other identifying characteristics)
the items of Equipment to be leased thereunder (other than items of System
Software, which shall be deemed to be items of Software leased together with the
related items of Hardware) and the Financed Items to be financed thereunder.
Until Lessee shall have executed and delivered to Lessor a Consolidating
Schedule, each such Acceptance certificate, when executed and delivered by
Lessee and accepted by Lessor, together with this Master Agreement and the
applicable Advance Pricing Agreement, shall constitute a separate and distinct
Lease, a separate and distinct Financing, or a separate and distinct Lease and a
separate and distinct Financing, as the case may be, enforceable according to
its terms. In the event of any conflict among the terms of such documents, the
provisions of such Acceptance Certificate shall control over conflicting
provisions in such Advance Pricing Agreement or this Master Agreement and the
provisions of such Advance Pricing Agreement shall control over conflicting
provisions in this Master Agreement.
(c) Acceptance; Initial Term of Leases and Term of Financings. Lessee
---------------------------------------------------------
shall accept the Equipment subject to a Lease and the Financed Items subject to
a Financing in accordance with Section 3. The Initial Term of each Lease and,
if applicable, the Term of any related Financing evidenced by an Advance Pricing
Agreement and an Acceptance Certificate shall begin on the Acceptance Date of
the Equipment subject to such Lease and shall continue for the period determined
pursuant to such Advance Pricing Agreement. The Term of each Financing
evidenced by an Advance Pricing Agreement and an Acceptance Certificate that is
unrelated to any Lease shall begin on the Acceptance Date for the related
Financed Items and shall continue for the period determined pursuant to such
Advance Pricing Agreement.
(d) Periodic Consolidation of Leases and Financings. All Leases and
-----------------------------------------------
Financings commenced during a Consolidation Period (as specified in the
applicable Advance Pricing Agreement) pursuant to this Section 2.B shall be
consolidated into a single Schedule (a "Consolidating Schedule") in the form of
Exhibit C with such changes as Lessor and Lessee shall have agreed to as
conclusively evidenced by their execution thereof. Lessor shall prepare and
deliver to Lessee a Consolidating Schedule as of the close of each applicable
Consolidation Period. Lessee agrees to execute and deliver each Consolidating
Schedule to Lessor within 10 days after its receipt thereof from Lessor. From
and after Lessee's execution and delivery to
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Lessor of a Consolidating Schedule, the Consolidating Schedule shall supersede
the applicable Acceptance Certificates and the Advance Pricing Agreement with
respect to all Leases and Financings commenced during the Consolidation Period
to which such Consolidating Schedule relates, and all such Leases shall be
deemed to be a single, separate and distinct Lease and all such Financings shall
be deemed to be a single, separate and distinct Financing. In each case governed
by such Consolidating Schedule and this Master Agreement and enforceable in
accordance with its terms. In the event of any conflict between the terms of
this Master Agreement and such Consolidating Schedule, the provisions of the
Consolidating Schedule shall govern.
(e) Failure of Lessee to Deliver Consolidating Schedule. If Lessee
---------------------------------------------------
fails to execute and deliver to Lessor any Consolidating Schedule within 10 days
after its receipt thereof, Lessor may exercise its rights and remedies under
Section 21 and 22 of this Master Agreement arising as a result of such failure,
either immediately or at any time during the Initial Term of the Leases or the
Term of the Financings to which such Consolidating Schedule relates. No delay
in exercising such rights or remedies shall operate as a waiver thereof. Lessee
acknowledges and agrees that Rent with respect to such Leases and Financings
shall be payable in the amounts and at the times determined pursuant to the
applicable Advance Pricing Agreement and Acceptance Certificates, regardless of
whether Lessee shall have received such Consolidating Schedule from Lessor or
executed and delivered the same to Lessor as of the time any such payment is
due.
(f) Financial Statements. Lessee shall, at all times during which any
--------------------
Advance Pricing Agreement is effective, deliver to Lessor its quarterly and
annual financial statements no later than 45 days after the end of each of
Lessee's fiscal quarters or 90 days after the end of each of Lessee's fiscal
years, as applicable. Such annual financial statements shall be audited and
certified by Lessee's independent certified public accountants.
3. ACCEPTANCE OF EQUIPMENT AND FINANCED ITEMS.
(a) General. Lessee shall unconditionally and irrevocably accept all
-------
Equipment under a Lease and, if applicable, all related Financed Items subject
to a Financing as soon as such Equipment is delivered and inspected by Lessee
or, if acceptance requirements for such Equipment, related Financed Items or
both are specified in the applicable Purchase Documents, as soon as such
requirements are met. Lessee shall evidence such acceptance by executing and
delivering to Lessor a properly completed Acceptance Certificate in
substantially the form of (i) Exhibit D if the Lease or the Lease and the
related Financing, as the case may be, is evidenced by a Schedule executed
pursuant to Section 2.A, or (ii) Exhibit E if the Lease or the Lease and the
related Financing, as the case may be, is being commenced pursuant to an Advance
Pricing Agreement executed pursuant to Section 2.B. Lessee agrees (y) to
inspect all Equipment as soon as reasonably practicable after the delivery
thereof to Lessee or, if acceptance requirements for such Equipment or any
related Financed Items are specified in the applicable Purchase Documents, as
soon as reasonably practicable after being advised by the Supplier that such
requirements have been met, and (z) to complete, execute and deliver to Lessor
such Acceptance Certificate as soon as reasonably practicable after its
satisfactory completion of such inspection. In the case of a Financing of
Financed Items unrelated to any Equipment subject to a Lease, Lessee shall
unconditionally and irrevocably accept such Financed Items as soon as it shall
have become liable to pay for such Financed Items, and shall complete, execute
and deliver
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to Lessor an Acceptance Certificate in substantially the form of Exhibit D or
Exhibit E (as applicable) as soon as reasonably practicable thereafter.
(b) E-mail Acceptance. For its convenience and at its option, Lessee
-----------------
may accept Equipment and financed Items by electronic mail in accordance with
this paragraph, in lieu of the execution and physical delivery of Acceptance
Certificates provided for in paragraph (a) above. Subject to the terms and
conditions set forth below, a Valid E-mail acceptance Certificate shall
constitute an original and authentic written Acceptance Certificate, duly
executed and delivered by an authorized representative of Lessee. A "Valid E-
mail Acceptance Certificate" means an electronic facsimile of an Acceptance
Certificate in substantially the form of Exhibit D or Exhibit E (as applicable)
properly completed and sent by an Authorized Lessee Representative from his or
her Authorized Lessee E-mail Address to an Authorized Lessor E-mail Address by
an electronic mail message confirming Lessee's acceptance of the Equipment or
Financed Items described therein. Upon request, Lessor shall provide to Lessee
electronic file copies of Exhibits D and E for Lessee's use under this
paragraph. The Authorized Lessee Representatives and their corresponding
Authorized Lessee E-mail Addresses and the Lessee Acceptance Confirmation Fax
Number are as specified in Section 29 or as designated by Lessee in a written
notice executed by a duly authorized officer of Lessee and delivered to Lessor
in accordance with Section 29. The Authorized Lessor E-mail Address(es) are
specified in Section 29. Lessee may unilaterally modify any of the Authorized
Lessee Representatives and Authorized Lessee E-mail Addresses and the Lessee
Acceptance Confirmation Fax Number by written notice of the modification
executed by a duly authorized officer of Lessees and delivered to Lessor in
accordance with Section 29. Lessor may unilaterally modify any Authorized
Lessor E-mail Address by written notice of the modification executed by a duly
authorized officer of Lessor and delivered to Lessee in accordance with Section
29. Upon Lessor's receipt of a Valid E-mail Acceptance Certificate from Lessee,
Lessor shall transmit to Lessee by confirmed facsimile transmission to the
Lessee Acceptance Confirmation Fax Number, a notice acknowledging Lessor's
receipt of the Valid E-mail Acceptance Certificate from Lessee. A Valid E-mail
Acceptance Certificate shall become effective and constitute Lessee's
unconditional and irrevocable acceptance of the Equipment or Financed Items
described therein, as of the Acceptance Date specified therein, at the end of
the second business day following the day on which Lessor shall have transmitted
such notice unless Lessee shall have delivered a written notice to Lessor in
accordance with Section 29 revoking such Valid E-mail Acceptance Certificate
prior to the end of such second business day. Lessor's transmission of such
notice shall constitute Lessor's acknowledgment and acceptance of the Valid E-
mail Acceptance Certificate. Lessee expressly waives any claim or defense that
any Valid E-mail Acceptance Certificate which was sent and became effective in
accordance with the above procedures does not constitute an original and
authentic written Acceptance Certificate, duly executed and delivered by Lessee.
4. LESSEE'S END-OF-LEASE-TERM OPTIONS; AUTOMATIC EXTENSION.
Lessee shall have the following options in respect of each Lease at the end
of each of the Initial Term, any Renewal Term and any optional extension of the
Initial Term or any Renewal Term:
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A. Purchase Option. Lessee may elect, by delivering to Lessor an End-of-
Term Notice at least 90 days prior to the expiration of the Initial Term, any
Renewal Term or any optional extension of the Initial Term or any Renewal Term,
to purchase any or all Units of Equipment then subject to such Lease (other than
items of Software that may not be sold by Lessor under the terms of any
applicable License Agreement) for an amount equal to the Fair Market Value of
such Units of Equipment as of the end of the Then Applicable Term, provided no
Lessee defaults shall have occurred and be continuing. In the event of such an
election, Lessee shall pay such amount to Lessor, in immediately available
funds, on or before the last day of the Then Applicable Term. If Lessee shall
have so elected to purchase any of the Units of Equipment, shall have so paid
the applicable purchase price and shall have fulfilled the terms and conditions
of this Master Agreement, then on the last day of the Then Applicable Term (1)
the Lease with respect to such Units of Equipment shall terminate and, except as
provided in Section 27, Lessee shall be relieved of all of its obligations in
favor of Lessor with respect to such Units of Equipment, and (ii) Lessor shall
transfer all of its interest in such Units of Equipment to Lessee "AS IS, WHERE
IS," without any warranty, express or implied, from Lessor, other than the
absence of any liens or claims by or through Lessor. In the event Lessor and
Lessee are unable to agree on the Fair Market Value of any Units of Equipment,
Lessor shall, at Lessee's expense, select an independent appraiser to
conclusively determine such amount.
B. Renewal Option. Lessee may elect, by delivering to Lessor an End-of-
Term Notice at least 90 days prior to the expiration of the Initial Term, any
Renewal Term, or any optional extension of the Initial Term or any Renewal Term,
to renew the Lease with respect to any or all Units of Equipment then subject to
such Lease (other than items of Software that may not be re-released by Lessor
under the terms of any applicable License Agreement) for an amount equal to the
Fair Rental Value of such Units of Equipment as of the end of the Then
Applicable Term. In the event of such an election, Lessee shall enter into a
mutually agreeable renewal agreement with Lessor ("Renewal Agreement") on or
before the last day of the Then Applicable Term confirming the Units of
Equipment as to which the Lease is to be renewed, the period for which the Lease
is to be renewed (the "Renewal Term"), and the amount of Rent and the times at
which such Rent is to be payable during the Renewal Term. In the event Lessor
and Lessee are unable to agree on the Fair Rental Value of any Units of
Equipment, Lessor shall, at Lessee's expense, select an independent appraiser to
conclusively determine such amount.
C. Return. Lessee may elect, by delivering to Lessor an End-of-Term
Notice at least 90 days prior to the expiration of the Initial Term, any Renewal
Term or any optional extension of the Initial Term or any Renewal Term, to
return any or all of the Units of Equipment then subject to such Lease in
accordance with Section 9 of this Master Agreement.
D. Optional Extension. Lessee may elect, by omitting to deliver to Lessor
an End-of-Term Notice at least 90 days prior to the expiration of the Initial
Term or any Renewal Term, to extend the Initial Term or such Renewal Term, as
the case may be. In that event, the Initial Term or such Renewal Term shall,
without any additional notice or documentation, be automatically extended for
successive calendar months with respect to all items of Equipment then subject
to such Lease through the end of the calendar month falling at least 90 days
after the date Lessee shall have delivered to Lessor an End-of-Term Notice with
respect to such Lease. For each calendar month that the Then Applicable Term of
such Lease is so extended, Lessee shall pay to Lessor Rent in an amount equal to
the monthly Rent payment in effect immediately
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prior to such extension (or the appropriate pro rata portion of the Rent payment
then in effect in the case of Rent payable other than on a monthly basis), and
all other provisions of this Master Agreement and the applicable Schedule shall
continue to apply.
If Lessee shall have delivered to Lessor an End-of-Term Notice with respect
to a Lease, but shall have subsequently failed to comply with its obligations
arising from its elections specified therein (e.g., Lessee shall have failed, on
or before the last day of the Then Applicable Term (i) to pay Lessor the
purchase price for Equipment to be purchased in accordance with Section 4.A
above, (ii) to execute a Renewal Agreement with respect to Equipment as to which
the Lease is to be renewed in accordance with Section 4.B above, or (iii) to
return to Lessor Equipment to be returned in accordance with Section 4.C above),
then the Then Applicable Term of such Lease shall, without any additional notice
or documentation, be automatically extended for successive calendar months with
respect to all items of Equipment as to which Lessee shall have so failed to
comply with its obligations through the end of the calendar month in which
Lessee shall have complied with such obligations. For each calendar months that
the Then Applicable Term of any Lease is so extended, Lessee shall pay to Lessor
Rent in an amount equal to the monthly Rent payment in effect immediately prior
to such extension (or the appropriate pro rata portion of the Rent payment then
in effect in the case of Rent payable other than on a monthly basis), and all
other provisions of this Master Agreement and the applicable Schedule shall
continue to apply. Notwithstanding any of the provisions of this Section 4 to
the contrary, if any Lessee Default shall have occurred and be continuing at any
time during the last 90 days of the Then Applicable Term of any Lease, Lessor
may cancel any Renewal Term or optional or other automatic extension of the Then
Applicable Term immediately upon written notice to Lessee.
5. RENT; LATE CHARGES; ADVANCE RENT.
As rent ("Rent") for the Equipment under any Lease and the Financed Items
under any Financing, Lessee agrees to pay the amounts specified in the
applicable Schedule on the due dates specified in the applicable Schedule.
Lessee agrees to pay Lessor interest on any Rent payment or other amount due
hereunder that is not paid within 10 days of its due date, at the rate of 1-1/2%
per month (or such lesser rate as is the maximum rate allowable under applicable
law). Lessee shall pay to Lessor, with respect to each Lease or Financing, the
Advance Rent specified on the applicable Schedule, if any. Any payment of
Advance Rent shall be credited against the first Rent payment payable by Lessee
under the applicable Schedule and any excess Advance Rent will be credited
against the last Rent payment(s) payable by Lessee with respect to the Initial
Term of the applicable Lease or Financing. Advance Rent shall be refunded to
Lessee without interest only if Lessor declines to sign the applicable Schedule.
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6. LEASES AND FINANCINGS NON-CANCELABLE; NET LEASES; WAIVER OF DEFENSES TO
PAYMENT. IT IS SPECIFICALLY UNDERSTOOD AND AGREED THAT EACH LEASE AND FINANCING
HEREUNDER SHALL BE NON-CANCELABLE, AND THAT EACH LEASE HEREUNDER IS A NET LEASE.
LESSEE AGREES THAT IT HAS AN ABSOLUTE AND UNCONDITIONAL OBLIGATION TO PAY ALL
RENT AND OTHER AMOUNTS WHEN DUE. LESSEE IS NOT ENTITLED TO ABATE OR REDUCE RENT
OR ANY OTHER AMOUNT DUE, OR TO SET OFF ANY CHARGE AGAINST ANY SUCH AMOUNT.
LESSEE HEREBY WAIVES ANY RECOUPMENT, CROSS-CLAIM, COUNTERCLAIM OR ANY OTHER
DEFENSE AT LAW OR IN EQUITY TO ANY RENT PAYMENT OR OTHER AMOUNT DUE WITH RESPECT
TO ANY LEASE OR FINANCING, WHETHER ANY SUCH DEFENSE, ARISES OUT OF THIS MASTER
AGREEMENT, ANY SCHEDULE, ANY CLAIM BY LESSEE AGAINST LESSOR, LESSOR'S ASSIGNEES
OR SUPPLIER, OR OTHERWISE. IF THE EQUIPMENT OR ANY FINANCED ITEM IS NOT
PROPERLY INSTALLED, DOES NOT OPERATE OR INTEGRATE AS REPRESENTED OR WARRANTED BY
SUPPLIER OR IS UNSATISFACTORY FOR ANY REASON WHATSOEVER, LESSEE SHALL MAKE ANY
CLAIM ON ACCOUNT THEREOF SOLELY AGAINST SUPPLIER AND SHALL NEVERTHELESS PAY ALL
SUMS DUE WITH RESPECT TO EACH LEASE AND EACH FINANCING.
7. ASSIGNMENT OF PURCHASE DOCUMENTS.
Lessee assigns to Lessor all of Lessee's right, title and interest in and
to (a) the Equipment described in each Schedule, and (b) the Purchase Documents
relating to such Equipment. Such assignment of the Purchase Documents is an
assignment of rights only; nothing in this Master Agreement shall be deemed to
have relieved Lessee of any obligation or liability under any of the Purchase
Documents, except that, as between Lessee and Lessor, Lessor shall pay for the
Equipment within 30 days after Lessee's delivery to Lessor of a properly
completed and executed Acceptance Certificate and all other documentation
necessary to establish Lessee's acceptance of such Equipment under the related
Lease. Lessee represents and warrants that it has reviewed and approved the
Purchase Documents. In addition, if Lessor shall so request, Lessee shall
deliver to Lessor a document acceptable to Lessor whereby Seller acknowledges
and provides any required consent to such assignment. For the avoidance of
doubt, Lessee covenants and agrees that it shall at all times during the Total
Term of each Lease comply in all respects with the terms of any License
Agreement relating to any Equipment leased thereunder. IT IS ALSO SPECIFICALLY
UNDERSTOOD AND AGREED THAT NEITHER SUPPLIER NOR ANY SALESPERSON OF SUPPLIER IS
AN AGENT OF LESSOR, NOR ARE THEY AUTHORIZED TO WAIVE OR ALTER ANY TERMS OF THIS
MASTER AGREEMENT OR ANY SCHEDULE.
8. ASSIGNMENT OF SUPPLIER WARRANTIES.
To the extent permitted, Lessor hereby assigns to Lessee, for the Total
Term of any Lease, all Equipment warranties provided by any Supplier in the
applicable Purchase Documents. Lessee shall have the right to take any action
it deems appropriate to enforce such warranties provided such enforcement is
pursued in Lessee's name and at its expense. In the event Lessee is precluded
from enforcing any such warranty in its name, Lessor shall, upon
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Lessee's request, take reasonable steps to enforce such warranty. In such
circumstances, Lessee shall, promptly upon demand, reimburse Lessor for all out-
of-pocket expenses incurred by Lessor in enforcing the Supplier warranty. Any
recovery resulting from any such enforcement efforts shall be divided among
Lessor and Lessee as their interests may appear.
9. EQUIPMENT RETURN REQUIREMENTS.
On or before the last day of Total Term of each Lease (and any other time
Lessee is required to return Equipment to Lessor under the terms of this Master
Agreement or any Schedule), Lessee shall pack the Equipment to be returned to
Lessor in accordance with the manufacturer's guidelines and deliver such
Equipment to Lessor at any destination within the continental United States
designated by Lessor. In the case of any item of Software to be returned to
Lessor, Lessee shall also deliver to Lessor the original Certificate of
Authenticity issued by the licensor of such Software, if any. Alternatively,
Lessee may deliver any such Certificate of Authenticity to Lessor on or at any
time after the Acceptance Date for such Software. All dismantling, packaging,
transportation, in-transit insurance and shipping charges shall be borne by
Lessee. All Equipment shall be returned to Lessor in the same condition and
working order as when delivered to Lessee, reasonable wear and tear excepted,
and shall qualify for maintenance service by the Supplier at its then standard
rate for Equipment of that age, if available. Lessee shall be responsible for,
and shall reimburse Lessor promptly on demand for, any cost incurred by Lessor
to qualify the Equipment for the Supplier'' maintenance service or, if not
available, to return the Equipment to good working condition.
10. EQUIPMENT USE AND MAINTENANCE.
Lessee is solely responsible for the selection, installation, operation and
maintenance of the Equipment and all costs related thereto, including shipping
charges. Lessee shall at all times operate and maintain the Equipment in good
working order, repair, condition and appearance, and in accordance with the
manufacturer's specifications and recommendations. On reasonable prior notice
to Lessee, Lessor and Lessor's agents shall have the right, during Lessee's
normal business hours, to enter the premises where the Equipment is located for
the purpose of inspecting the Equipment and observing its use. If Lessor shall
have provided to Lessee any tags or identifying labels, Lessee shall, at its
expense, affix and maintain in a prominent position on each item of Equipment
such tags or labels to indicate Lessor's ownership of the Equipment. Except in
the case of PC Equipment and Software, Lessee shall, at its expense, enter into
and maintain and enforce at all times during the Total Term of each Lease a
maintenance agreement to service and maintain the related Equipment, upon terms
and with a provider reasonably acceptable to Lessor.
11. EQUIPMENT OWNERSHIP; LIENS; LOCATION.
As between Lessor and Lessee, Lessor is the sole owner of the Equipment and
has sole title thereto. Lessee shall not make any representation to any third-
party inconsistent with Lessor's sole ownership of the Equipment. Lessee
covenants that it will not pledge or encumber the Equipment or Lessor's interest
in the Equipment in any manner whatsoever nor create or permit to exist any
levy, lien or encumbrance thereof or thereon except those created by or through
Lessor. The Equipment shall remain Lessor's personal property whether or not
affixed
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to realty and shall not become a fixture or be made to become a part of
any real property on which it is placed without Lessor's prior written consent.
Lessee shall maintain the Equipment so that it may be removed from any building
in which it is placed without any damage to the building or the Equipment.
Lessee may relocate any Equipment from the Equipment Location specified in the
applicable Schedule to another of its business locations within the United
States upon prior written notice to Lessor specifying the new Equipment
Location, provided Lessee remains in possession and control of the Equipment.
12. ALTERATIONS AND ADDITIONS TO EQUIPMENT.
Lessee shall make no alterations or additions to the Equipment, except
those that (a) will not void any warranty made by the Supplier of the Equipment,
result in the creation of any security interest, lien or encumbrance on the
Equipment or impair the value or use of the Equipment either at the time made or
at the end of the Total Term of the applicable Lease, and that are readily
removable without damage to the Equipment ("Optional Additions"), or (b) are
required by any applicable law, regulation or order. All additions to the
Equipment or repairs made to the Equipment, except Optional Additions, become a
part thereof and Lessor's property at the time made; Optional Additions, which
have not been removed prior to the return of the Equipment shall become Lessor's
property upon such return.
13. INSURANCE.
Lessee agrees to keep the Equipment insured at Lessee's expense against all
risks of loss from any cause whatsoever, including without limitation, theft and
damage. Lessee agrees that such insurance shall name Lessor as a loss payee and
cover not less than the Stipulated Loss Value of the Equipment. Lessee also
agrees that it shall carry commercial general liability insurance in an amount
not less than $2,000,000 total liability per occurrence and cause Lessor and its
affiliates to be named additional insureds under such insurance. Each policy
shall provide that the insurance cannot be canceled without at least 30 days
prior written notice to Lessor. Lessee shall provide to Lessor (a) on or prior
to the Acceptance Date for each Lease, and from time to time thereafter,
certificates of insurance evidencing such insurance coverage throughout the
Total Term of each Lease, and (b) upon Lessor's request, copies of the insurance
policies. If Lessee fails to provide Lessor with such evidence, then Lessor
will have the right, but not the obligation, to purchase such insurance
protecting Lessor at Lessee's expense. Lessee's expense shall include the full
premium paid for such insurance and any customary charges, costs or fees of
Lessor. Lessee agrees to pay such amounts in substantially equal installments
allocated to each Rent payment (plus interest on such amounts at the rate of 1-
1/2 % per month or such lesser rate as is the maximum rate allowable under
applicable law).
14. RISK OF LOSS.
In the event any Casualty Loss shall occur, on the next Rent payment date
Lessee shall, at its option (a) pay Lessor the Stipulated Loss Value of the
Equipment suffering the Casualty Loss, or (b) substitute and replace each item
of Equipment suffering the Casualty Loss with an item of Substitute Equipment.
If Lessee shall elect to pay the Stipulated Loss Value of the Equipment
suffering a Casualty Loss, upon Lessor's receipt in full of such payment the
applicable Lease shall terminate as it relates to such Equipment and, except as
provided in Section 27, Lessee
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shall be relieved of all obligations under the applicable Lease as it relates to
such Equipment. If Lessee shall elect to replace Equipment suffering a Casualty
Loss with items of Substitute Equipment (i) the applicable Lease shall continue
in full force and effect without any abatement of Rent with such Substitute
Equipment thereafter being deemed to be Equipment leased thereunder, and (ii)
Lessee shall deliver to Lessor a bill of sale or other documentation, in either
case in form and substance satisfactory to Lessor, in which Lessee shall
represent and warrant that it has transferred to Lessor good and marketable
title to all Substitute Equipment, free and clear of all liens, encumbrances and
claims of others. Upon Lessor's receipt of such payment of Stipulated Loss Value
in full, or such bill of sale or other documentation, as the case may be, Lessor
shall transfer to Lessee all of Lessor's interest in the Equipment suffering the
Casualty Loss "AS IS, WHERE IS," without any warranty, express or implied, from
Lessor, other than the absence of any liens or claims by or through Lessor. In
the event of any repairable damage to any Equipment, the Lease shall continue
with respect to such Equipment without any abatement of Rent and Lessee shall at
its expense promptly cause such Equipment to be repaired to the condition it is
required to be maintained in pursuant to Section 10. Lessee shall notify Lessor
of any Casualty Loss or repairable damage to any Equipment as soon as reasonably
practicable after the dates of any such occurrence.
15. TAXES.
Lessor shall report and pay all Taxes now or hereafter imposed or assessed
by governmental body, agency or taxing authority upon the purchase, ownership,
delivery, installation, leasing, rental, use or sale of the Equipment, the Rent
or other charges payable hereunder, or otherwise upon or in connection with any
Lease or Financing, whether assessed on Lessor or Lessee, other than any such
Taxes required by law to be reported and paid by Lessee. Lessee shall promptly
reimburse Lessor for all such Taxes paid by Lessor, together with any penalties
or interest in connection therewith attributable to Lessee's acts or failure to
act, excluding (a) Taxes on or measured by the overall gross or net income or
items of tax preference of Lessor, (b) as to any Lease or the related Equipment,
Taxes attributable to the period after the return of such Equipment to Lessor,
and (c) Taxes imposed as a result of a sale or other transfer by Lessor of any
portion of its interest in any Lease or Financing or in any Equipment except for
a sale or other transfer to Lessee or a sale or other transfer occurring after
and during the continuance of any Lessee Default.
16. GENERAL INDEMNITY.
Lessee shall indemnify and hold harmless Lessor, its employees, officers,
directors, agents and assignees and, if requested by Lessor, defend Lessor, its
employees, officers, directors, agents and assignees, from and against any and
all Claims arising directly or indirectly out of or in connection with any
matter involving this Master Agreement, the Equipment or any Lease or Financing,
including but not limited to (a) the selection, manufacture, purchase,
acceptance, rejection, ownership, delivery, lease, financing, possession,
maintenance, use, condition, return or operation of any Equipment or Financed
Items or the enforcement of Lessor's rights under any Lease or Financing; (b)
any latent defect or other defect in any Equipment or Financed Item, whether or
not discoverable by Lessor or by Lessee; (c) any patent, trademark or copyright
infringement involving any Equipment or Financed Item; (d) the condition of any
Equipment or Financed Item arising or existing at any time during the Total
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Term of any Lease or the Term of any Financing; and (e) any breach by Lessee of
any representation, warranty or covenant contained in any Fundamental Agreement.
Notwithstanding the foregoing, Lessee shall have no obligation to indemnify or
defend against any Claim arising solely as a result of Lessor's gross negligence
or willful misconduct.
17. TAX BENEFIT INDEMNITY.
Each Lease is entered into on the assumption that Lessor is the owner of
the Equipment for tax purposes and is entitled to certain federal and state tax
benefits available to an owner of Equipment (collectively, "Tax Benefits"),
including without limitation, accelerated cost recovery system deductions for 5-
year property and deductions for interest incurred by Lessor to finance the
purchase of Equipment available under the Code. Lessee represents, warrants and
covenants to Lessor that (a) Lessee is not a tax-exempt entity (as defined in
Section 168(h) of the Code), (b) all Equipment will be used solely within the
United States, and (c) Lessee will take no position inconsistent with the
assumption that Lessor is the owner of the Equipment for federal and state tax
purposes. If, due to any act or omission of Lessee or any party acting through
Lessee, or the breach or inaccuracy of any representation, warranty or covenant
of Lessee contained in any Fundamental Agreement, Lessor reasonably determines
that it cannot claim, is not allowed to claim, loses or must recapture any or
all of the Tax Benefits otherwise available with respect to the Equipment
subject to any Lease (a "Tax Loss"), then Lessee shall, promptly upon demand,
pay to Lessor an amount sufficient to provide Lessor the same after-tax rate of
return and aggregate after-tax cash flow through the end of the Then Applicable
Term of such Lease that Lessor would have realized but for such Tax Loss.
18. COVENANT OF QUIET ENJOYMENT.
So long as no Lessee Default exists, and no event shall have occurred and
be continuing which, with the giving of notice or the passage of time or both,
would constitute a Lessee Default, neither Lessor nor any party acting or
claiming through Lessor, by assignment or otherwise, will disturb Lessee's quiet
enjoyment of the Equipment during the Total Term of the related Lease.
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19. DISCLAIMERS AND LESSEE WAIVERS. LESSEE LEASES THE EQUIPMENT FROM LESSOR
"AS IS, WHERE IS". IT IS SPECIFICALLY UNDERSTOOD AND AGREED THAT (A) EXCEPT AS
EXPRESSLY SET FORTH IN SECTION 18, LESSOR MAKES ABSOLUTELY NO REPRESENTATIONS OR
WARRANTIES WHATSOEVER, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY
REPRESENTATION OR WARRANTY WITH RESPECT TO THE DESIGN, COMPLIANCE WITH
SPECIFICATIONS, QUALITY, OPERATION, OR CONDITION OF ANY EQUIPMENT OR FINANCED
ITEMS (OR ANY PART THEREOF), THE MERCHANTABILITY OR FITNESS OF EQUIPMENT OR
FINANCED ITEMS FOR A PARTICULAR PURPOSE, OR ISSUES REGARDING PATENT
INFRINGEMENT, TITLE AND THE LIKE; (B) LESSOR SHALL NOT BE DEEMED TO HAVE MADE,
BE BOUND BY OR LIABLE FOR, ANY REPRESENTATION, WARRANTY OR PROMISE MADE BY THE
SUPPLIER OF ANY EQUIPMENT OR FINANCED ITEMS (EVEN IF LESSOR IS AFFILIATED WITH
SUCH SUPPLIER); (C) LESSOR SHALL NOT BE LIABLE FOR ANY FAILURE OF ANY EQUIPMENT
OR FINANCED ITEMS OR ANY DELAY IN THE DELIVERY OR INSTALLATION THEREOF; (D)
LESSEE HAS SELECTED ALL EQUIPMENT AND FINANCED ITEMS WITHOUT LESSOR'S
ASSISTANCE; AND (E) LESSOR IS NOT A MANUFACTURER OF ANY EQUIPMENT. IT IS
FURTHER AGREED THAT LESSOR SHALL HAVE NO LIABILITY TO LESSEE, LESSEE'S
CUSTOMERS, OR ANY THIRD PARTIES FOR ANY INCIDENTAL, INDIRECT, SPECIAL OR
CONSEQUENTIAL DAMAGES ARISING OUT OF THIS MASTER AGREEMENT OR ANY SCHEDULE OR
CONCERNING ANY EQUIPMENT OR FINANCED ITEMS, OR FOR ANY DAMAGES BASED ON STRICT
OR ABSOLUTE TORT LIABILITY OR, EXCEPT TO THE EXTENT CONSTITUTING A LESSOR
DEFAULT, LESSOR'S NEGLIGENCE; PROVIDED, HOWEVER, THAT NOTHING IN THIS MASTER
AGREEMENT SHALL DEPRIVE LESSEE OF ANY RIGHTS IT MAY HAVE AGAINST ANY PERSON
OTHER THAN LESSOR. LESSOR AND LESSEE AGREE THAT THE LEASES AND THE FINANCINGS
SHALL BE GOVERNED BY THE EXPRESS PROVISIONS OF THIS MASTER AGREEMENT AND THE
OTHER FUNDAMENTAL AGREEMENTS AND NOT BY CONFLICTING PROVISIONS OF ANY OTHERWISE
APPLICABLE LAW. ACCORDINGLY, TO THE EXTENT PERMITTED BY APPLICABLE LAW, LESSEE
WAIVES ANY RIGHTS AND REMEDIES CONFERRED UPON A LESSEE BY ARTICLE 2A OF THE UCC
(INCLUDING, BUT NOT LIMITED TO, LESSEE'S RIGHTS, CLAIMS AND DEFENSES UNDER UCC
SECTIONS 2A-303 AND 2A-508 THROUGH 2A-522) AND THOSE RIGHTS NOW OR HEREAFTER
CONFERRED BY STATUTE OR OTHERWISE, IN EITHER CASE THAT ARE INCONSISTENT WITH OR
THAT WOULD LIMIT OR MODIFY LESSOR'S RIGHTS SET FORTH IN THIS MASTER AGREEMENT.
20. LESSEE WARRANTIES.
Lessee represents, warrants and covenants to Lessor that: (a) ALL
EQUIPMENT WILL BE USED FOR BUSINESS PURPOSES ONLY AND NOT FOR PERSONAL, FAMILY
OR HOUSEHOLD PURPOSES; (b) Lessee is duly organized, validly existing and in
good standing under applicable law; (c) Lessee has the power and authority to
enter into each of the Fundamental Agreements; (d) all Fundamental Agreements
are enforceable against Lessee in
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accordance with their terms and do not violate or create a default under any
instrument or agreement binding on Lessee; (e) there are no pending or
threatened actions or proceedings before any court or administrative agency that
could have a material adverse effect on Lessee or any Fundamental Agreement,
unless such actions are disclosed to Lessor and consented to in writing by
Lessor; (f) Lessee shall comply in all material respects with all laws and
regulations the violation of which could have a material adverse effect upon the
Equipment or Lessee's performance of its obligations under any Fundamental
Agreement; (g) each Fundamental Agreement shall be effective against all
creditors of Lessee under applicable law, including fraudulent conveyance and
bulk transfer laws, and shall raise no presumption of fraud; and (h) all
financial statements and other related information furnished by Lessee shall be
prepared in accordance with generally accepted accounting principles and shall
fairly present Lessee's financial position as of the dates given on such
statements.
21. DEFAULT.
Any of the following shall constitute a default by Lessee (a "Lessee
Default") under this Master Agreement and all Leases and Financings: (a) Lessee
fails to pay any Rent payment or any other amount payable to Lessor under this
Master Agreement or any Schedule within 10 days after its due date; or (b)
Lessee defaults on or breaches any of the other terms and conditions of any
Material Agreement, and fails to cure such breach within 10 days after written
notice thereof from Lessor; or (c) any representation or warranty made by Lessee
in any Material Agreement proves to be incorrect in any material respect when
made or reaffirmed; or (d) Lessee or Guarantor sells or otherwise disposes of
all or substantially all of its assets, consolidates with or merges with or into
any entity or incurs a substantial amount of indebtedness other than in the
ordinary course of its business (unless consented to in advance by Lessor); or
(e) Lessee or Guarantor dissolves or otherwise terminates its existence, ceases
to do business, or becomes insolvent or fails generally to pay its debts as they
become due; or (f) any Equipment is levied against, seized or attached; or (g)
Lessee or Guarantor makes an assignment for the benefit of creditors; or (h) a
proceeding under any bankruptcy, reorganization, arrangement of debt, insolvency
or receivership law is filed by or against Lessee or Guarantor (and, if such
proceeding is involuntary, it is not dismissed within 60 days after the filing
thereof) or Lessee or Guarantor takes any action to authorize any of the
foregoing matters; or (i) any letter of credit or guaranty issued in support of
a Lease or Financing is revoked, breached, cancelled or terminated (unless
consented to in advance by Lessor); or (j) any Guarantor fails to fulfill its
obligations in favor of Lessor pursuant to its guaranty.
Any of the following shall constitute a default by Lessor (a "Lessor
Default") under this Master Agreement and (i) the applicable Lease(s) or
Financing(s) in the case of a Lessor Default described in clauses (w) or (x)
below, or (ii) all Leases and Financings in the case of a Lessor Default
described in clauses (y) or (z) below: (w) Lessor breaches its covenant of quiet
enjoyment set forth in Section 18 and fails or is unable to cure such breach
within 10 days after written notice thereof from Lessee; or (x) Lessor fails to
pay Seller (or in the case of Financed Items, Lessee or such other party as
Lessee or Seller shall have directed in writing) for any Equipment or Financed
Items within 30 days after Lessor's receipt of a properly completed and executed
Acceptance Certificate and all other documentation necessary to establish
Lessee's acceptance of such Equipment or Financed Items under a Lease or
Financing, respectively, and such failure continues for more than 10 days after
written notice thereof from Lessee; or (y)
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Lessor makes an assignment for the benefit of creditors; or (z) a proceeding
under any bankruptcy, reorganization, arrangement of debt, insolvency or
receivership law is filed by or against Lessor (and, if such proceeding is
involuntary, it is not dismissed within 60 days after the filing thereof.)
22. REMEDIES.
If a Lessee Default occurs, Lessor may, in it sole discretion, exercise one
or more of the following remedies: (a) declare all amounts due and to become
due under any or all Leases and Financings to be immediately due and payable; or
(b) terminate this Master Agreement or any Lease or Financing; or (c) take
possession of, or render unusable, any Equipment wherever the Equipment may be
located, without demand or notice and without any court order or other process
of law in accordance with Lessee's reasonable security procedures, and no such
action shall constitute a termination of any Lease; or (d) require Lessee to
deliver the Equipment to a location specified by Lessor; or (e) declare the
Stipulated Loss Value for any or all Equipment to be due and payable as
liquidated damages for loss of a bargain and not as a penalty and in lieu of any
further Rent payments under the applicable Lease or Leases; or (f) proceed by
court action to enforce performance by Lessee of any Lease or Financing and/or
to recover all damages and expenses incurred by Lessor by reason of any Lessee
Default; or (g) terminate any other agreement that Lessor may have with Lessee;
or (h) exercise any other right or remedy available to Lessor at law or in
equity. Also, Lessee shall pay Lessor all costs and expenses that Lessor may
incur to maintain, safeguard or preserve the Equipment, and other expenses
incurred by Lessor in enforcing any of the terms, conditions or provisions of
this Master Agreement (including reasonable legal fees and collection agency
costs). Upon repossession of surrender of any Equipment, Lessor shall lease,
sell or otherwise dispose of the Equipment in a commercially reasonable manner,
with or without notice and at public or private sale, and apply the net proceeds
thereof to the amounts owed to Lessor hereunder, but only after deducting (i) in
the case of a sale, the estimated Fair Market Value of the Equipment sold as of
the scheduled expiration of the Then Applicable Term of the related Lease, (ii)
in the case of a lease, the rent due for any period beyond the scheduled
expiration of the Then Applicable Term of the related Lease, and (iii) in either
case, all expenses (including reasonable legal fees and costs) reasonably
incurred by Lessor in connection therewith; provided, however, that Lessee shall
remain liable to Lessor for any deficiency that remains after any sale or lease
of such Equipment. Any proceeds of any sale or lease of such Equipment in
excess of the amounts owed to Lessor hereunder shall be retained by Lessor.
Lessee agrees that with respect to any notice of a sale required by law to be
given, 10 days' notice shall constitute reasonable notice. Upon payment of all
past due Rent and the Stipulated Loss Value as provided in clause (e) above,
together with interest at the rate of 1-1/2% per month (or such lesser rate as
is the maximum rate allowable under applicable law) from the date declared due
until paid, Lessor will transfer to Lessee all of Lessor's interest in the
Equipment for which such Rent and Stipulated Loss Value has been paid, which
transfer shall be on an "AS, WHERE IS" basis, without any warranty, express or
implied, from Lessor, other than the absence of any liens or claims by or
through Lessor. These remedies are cumulative of every other right or remedy
given hereunder or now or hereafter existing at law or in equity or by statute
or otherwise, and may be enforced concurrently therewith or from time to time.
If a Lessor Default occurs, Lessee's sole and exclusive remedy shall be to
recover by appropriate legal proceedings any direct damages suffered by Lessee
as a result of such Lessor
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Default and any reasonable and necessary expenses (including, without
limitation, court costs and reasonable legal fees) incurred by Lessee in
connection therewith.
23. PERFORMANCE OF LESSEE'S OBLIGATIONS.
If Lessee fails to perform any of its obligations hereunder, Lessor may
perform any act or make any payment that Lessor deems reasonably necessary for
the maintenance and preservation of the Equipment and Lessor's interests
therein; provided, however, that the performance of any act or payment by Lessor
shall not be deemed a waiver of, or release Lessee from, the obligation at
issue. All sums so paid by Lessor, together with expenses (including legal fees
and costs) incurred by Lessor in connection therewith, shall be paid to Lessor
by Lessee immediately upon demand.
24. TRUE LEASE; SECURITY INTEREST; MAXIMUM RATE.
Each Lease is intended to be a "Finance Lease" as defined in Article 2A of
the UCC, and Lessee hereby authorizes Lessor to file a financing statement to
give public notice of Lessor's ownership of the Equipment. Lessee, by its
execution of each Schedule, acknowledges that Lessor has informed it that (a)
the identity of Seller is set forth in the applicable Schedule, (b) Lessee is
entitled under Article 2A to the promises and warranties, including those of any
third party, provided to Lessor in connection with, or as a part of, the
applicable Purchase Documents, and (c) Lessee may communicate with Seller and
receive an accurate and complete statement of the promises and warranties,
including any disclaimers and limitations of them or of remedies. If (i)
notwithstanding the express intention of Lessor and Lessee to enter into a true
lease, any Lease is ever deemed by a court of competent jurisdiction to be a
lease intended for security, or (ii) Lessor and Lessee enter into a Lease with
the intention that it be treated as a lease intended as security by so providing
in the applicable Schedule, or (iii) Lessor and Lessee enter into a Financing,
then to secure payment and performance of Lessee's obligations under this Master
Agreement and all Leases and Financings, Lessee hereby grants Lessor a purchase
money security interest in the related Equipment and Financed Items and in all
attachments, accessories, additions, substitutions, products, replacements,
rentals and proceeds (including, without limitation, insurance proceeds) thereto
as well as security interest in any other equipment financed pursuant to this
Master Agreement or any other agreement between Lessor and Lessee (collectively,
the "Collateral"). In any such event, notwithstanding any provisions contained
in this Master Agreement or in any Schedule, neither Lessor nor any Assignee
shall be entitled to receive, collect or apply as interest any amount in excess
of the maximum rate or amount permitted by applicable law. In the event Lessor
or any Assignee ever receives, collects or applies as interest any amount in
excess of the maximum amount permitted by applicable law, such excess amount
shall be applied to the unpaid principal balance and any remaining excess shall
be refunded to Lessee. In determining whether the interest paid or payable
under any specific contingency exceeds the maximum rate or amount permitted by
applicable law, Lessor and Lessee shall, to the maximum extent permitted under
applicable law, characterize any non-principal payment as an expense or fee
rather than as interest, exclude voluntary prepayments and the effect thereof,
and spread the total amount of interest over the entire term of this Master
Agreement and all Leases and Financings.
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25. ASSIGNMENT.
Lessor shall have the unqualified right to sell, assign, pledge, transfer,
mortgage or otherwise convey any part of its interest in this Master Agreement,
any Schedule or any Equipment, in whole or in part, without prior notice to or
the consent of Lessee. If any Lease is assigned, Lessee shall (a) unless
otherwise specified by Lessor and the Assignee, pay all amounts due under the
applicable Schedule to such Assignee, notwithstanding any defense, setoff or
counterclaim whatsoever that Lessee may have against Lessor or Assignee; (b) not
permit the applicable Schedule to be amended or the terms thereof waived without
the prior written consent of the Assignee; (c) not require the Assignee to
perform any obligations of Lessor, other than those that are expressly assumed
in writing by such Assignee; and (d) execute such acknowledgements thereto as
may be requested by Lessor or the Assignee. It is further agreed that (i) each
Assignee shall be entitled to all of Lessor's rights, powers and privileges
under the applicable Lease or Financing, to the extent assigned; (ii) any
Assignee may reassign its rights and interests under the applicable Lease or
Financing with the same force and effect as the assignment described herein; and
(iii) any payments received by the Assignee from Lessee with respect to the
assigned portion of the Lease or Financing shall, to the extent thereof,
discharge the obligations of Lessee to Lessor with respect to the assigned
portion of the Lease or Financing. Lessee acknowledges that any assignment or
transfer by Lessor or any Assignee shall not materially change Lessee's
obligations under the assigned Lease or Financing.
Upon Lessor's prior written consent, which shall not be unreasonably
withheld, Lessee may sublet the Equipment to another end user other than another
leasing company or other competitor of Lessor. No such sublease shall relieve
Lessee of its obligations under the Lease and Lessee shall be responsible for
all costs and expenses associated with such sublease, including, without
limitation, additional Taxes or any Tax Loss suffered by Lessor. Lessee may
permit use of the Equipment by its affiliates or independent contractors at the
Equipment Locations provided it does not relinquish possession and control of
the Equipment. Lessee may not assign, transfer or otherwise dispose of this
Master Agreement, any Lease or Financing, any Equipment or any interest therein.
26. FURTHER ASSURANCES.
Lessee agrees to promptly execute and deliver to Lessor such further
documents and take such further action as Lessor may require in order to more
effectively carry out the intent and purpose of this Master Agreement and any
Schedule. Without limiting the generality of the foregoing, Lessee agrees (a)
to furnish to Lessor from time to time, its certified financial statements,
officer's certificates and appropriate resolutions, opinions of counsel and such
other information and documents as Lessor may reasonably request, and (b) to
execute and timely deliver to Lessor any financing statements or other documents
that Lessor deems necessary to perfect or protect Lessor's security interest in
the Collateral or to evidence Lessor's interest in the Equipment. If Lessee
fails to execute any document referred to in clause (b) of the preceding
sentence, Lessor or Lessor's agent is hereby authorized to sign and file the
same as Lessee's agent. It is also agreed that Lessor or Lessor's agent may
file as a financing statement, any lease document (or copy thereof, where
permitted by law) that Lessor deems appropriate to perfect or protect Lessor's
security interest in the Collateral or to evidence Lessor's interest in the
Equipment. Upon demand, Lessee will promptly reimburse Lessor for any filing or
recordation
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fees or expenses (including legal fees and costs) incurred by Lessor in
perfecting or protecting its interests in the Equipment.
27. TERM OF MASTER AGREEMENT; SURVIVAL.
This Master Agreement shall commence and be effective upon the execution
hereof by both parties and shall continue in effect until terminated by either
party by 30 days' prior written notice to the other. However, no termination of
this Master Agreement pursuant to the preceding sentence shall be effective with
respect to any Lease or Financing that commenced prior to such termination until
the expiration or termination of such Lease or Financing and the satisfaction by
Lessee of all of its obligations hereunder with respect thereto. All
representations, warranties and covenants made by Lessee hereunder shall survive
the termination of this Master Agreement and shall remain in full force and
effect. All of Lessor's rights, privileges and indemnities under this Master
Agreement or any Lease or Financing, to the extent they are fairly attributable
to events or conditions occurring or existing on or prior to the expiration or
termination of such Lease or Financing, shall survive such expiration or
termination and be enforceable by Lessor and Lessor's successors and assigns.
28. WAIVER OF JURY TRIAL. LESSEE AND LESSOR HEREBY EXPRESSLY WAIVE ANY RIGHT
TO DEMAND A JURY TRIAL WITH RESPECT TO ANY ACTION OR PROCEEDING INSTITUTED BY
LESSOR OR LESSEE IN CONNECTION WITH THIS MASTER AGREEMENT OR ANY FUNDAMENTAL
AGREEMENT.
29. NOTICES.
All notices, requests, demands, waivers and other communications required
or permitted to be given under this Master Agreement or any other Fundamental
Agreement shall be in writing and shall be deemed to have been duly given if
delivered personally or mailed via certified mail or a nationally recognized
overnight courier service, or sent by confirmed facsimile transmission,
addressed as follows (or such other address or fax number as either party shall
so notify the other):
If to Lessor:
- ------------
Compaq Capital Corporation
100 Woodbridge Center Drive, Suite 202
Woodbridge, New Jersey 07095
Attn: Vice President, Operations and Credit
Fax: (888) 202-4271
Authorized Lessor E-mail Address: [email protected]
-------------------------------
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If to Lessee:
- ------------
Vicinity Corporation
1135A San Antonio Road
Palo Alto, CA. 94303
Attn: Controller
Fax: (650) 237-0305
Authorized Lessee Representatives and Authorized Lessee E-mail Addresses:
______________________________________________________________
Lessee Acceptance Confirmation Fax Number:
______________________________________________________________
30. MISCELLANEOUS.
(a) Governing Law. THIS MASTER AGREEMENT AND EACH LEASE AND FINANCING SHALL BE
GOVERNED BY THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW PROVISIONS) OF THE
STATE OF NEW JERSEY.
(b) Consent to Jurisdiction. Lessor and Lessee consent to the jurisdiction of
any local, state or Federal court located within the State of New Jersey, and
waive any objection relating to improper venue or forum non conveniens to the
conduct of any proceeding in any such court.
(c) Credit Review. Lessee consents to a reasonable credit review by Lessor for
each Lease and Financing.
(d) Captions and References. The captions contained in this Master Agreement
and any Schedule are for convenience only and shall not affect the
interpretation of this Master Agreement. All references in this Master
Agreement to Sections and Exhibits refer to Sections hereof and Exhibits hereto
unless otherwise indicated.
(e) Entire Agreement; Amendments. This Master Agreement and all other
Fundamental Agreements executed by both Lessor and Lessee constitute the entire
agreement between Lessor and Lessee relating to the leasing of the Equipment and
the financing of Financed Items, and supersede all prior agreements relating
thereto, whether written or oral, and may not be amended or modified except in a
writing signed by the parties thereto.
(f) No Waiver. Any failure of Lessor to require strict performance by Lessee,
or any written waiver by Lessor of any provision hereof, shall not constitute
consent or waiver of any other breach of the same or any other provision hereof.
(g) Lessor Affiliates. Lessee understands and agrees that Compaq Capital
Corporation or any affiliate or subsidiary thereof may, as lessor, execute
Advance Pricing Agreements and Schedules under this Master Agreement, in which
event the terms and conditions of the applicable Advance Pricing Agreement or
Schedule and this Master Agreement as it relates to the lessor under such
Advance Pricing Agreement or Schedule shall be binding upon and shall inure to
the benefit of such entity executing such Advance Pricing Agreement or Schedule
as lessor, as well as any successors or assigns or such entity.
(h) Invalidity. If any provision of this Master Agreement or any Schedule
shall be prohibited by or invalid under law, such provision shall be ineffective
only to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Master Agreement
or such Schedule.
(i) Counterparts. This Master Agreement may be executed in counterparts, which
collectively shall constitute one document.
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(j) Lessor Reliance. Lessor may act in reliance upon any instruction,
instrument or signature reasonably believed by Lessor in good faith to be
genuine. Lessor may assume that any employee of Lessee who executes any
document or gives any written notice, request or instruction has the authority
to do so.
31. DEFINITIONS.
All capitalized terms used in this Master Agreement have the meanings set
forth below or in the Sections of this Master Agreement referred to below:
"Acceptance Date" means, as to any Lease or Financing, the date Lessee
shall have accepted the Equipment or Financed Items subject to such Lease or
Financing in accordance with Section 3.
"Advance Pricing Agreement" means an Advance Pricing Agreement executed by
Lessor and Lessee pursuant to Section 2.B.
"Advance Rent" means, as to any Lease, Rent paid by Lessee in advance of
the Acceptance Date for the related Equipment or otherwise intended to be
treated as "Advance Rent" under this Master Agreement and the applicable
Schedule.
"Amount Available" has the meaning specified in an Advance Pricing
Agreement.
"Assignee" means any assignee of all or any portion of Lessor's interest in
this Master Agreement, any Schedule or any Equipment, whether such assignee
received the assignment of such interest from Lessor or a previous assignee of
such interest.
"Casualty Loss" means, with respect to any Equipment, the condemnation,
taking, loss, destruction, theft or damage beyond repair of such Equipment.
"Casualty Value" means, as to any Equipment, an amount determined as of the
date of the Casualty Loss or Lessee Default in question pursuant to a "Table of
Casualty Values" attached to the applicable Schedule or, if no "Table of
Casualty Values" is attached to the applicable Schedule, an amount equal to the
sum of (i) the present value as of the date of the Casualty Loss or Lessee
Default in question (discounted at 5% per annum, compounded monthly) of all Rent
payments payable after such date through the scheduled date of expiration of the
Then Applicable Term, plus (ii) the present value as of the date of the Casualty
Loss or Lessee Default in question (discounted at 5% per annum, compounded
monthly, from the scheduled date of expiration of the Then Applicable Term) of
an amount determined by multiplying the applicable casualty percentage specified
below by the Total Cost of such Equipment. The applicable casualty percentage
shall be 35% for Equipment having an Initial Term of less than 24 months; 30%
for Equipment having the Initial Term of 24 months or greater, but less than 36
months; 25% for Equipment having an Initial Term of 36 months or greater, but
less than 48 months; and 20% for Equipment having an Initial Term of 48 months
or greater.
"Claims" means all claims, actions, suits, proceedings, costs, expenses
(including, without limitation, court costs, witness fees and attorneys' fees),
damages, obligations,
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judgments, orders, penalties, fines, injuries, liabilities and losses,
including, without limitation, actions based on Lessor's strict liability in
tort.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" has the meaning specified in Section 24.
"Commitment Period" means the period during which Lessor will purchase
Equipment and fund Financed Items and enter into a Lease or Financing of the
same with Lessee pursuant to Section 2.B and an Advance Pricing Agreement at the
rates set forth in such Advance Pricing Agreement, which period shall be
specified in such Advance Pricing Agreement.
"Consolidating Schedule" has the meaning specified in Section 2.B(d).
"Consolidation Period" has the meaning specified in an Advance Pricing
Agreement.
"Daily Rent" means, as to any Lease or Financing, an amount equal to the
per diem Rent payable under the applicable Schedule (calculated on the basis of
a 360 day year and 30 day months).
"End-of-Term Notice" means, as to any Lease, a written notice delivered by
Lessee to Lessor at least 90 days prior to the end of the Initial Term, any
Renewal Term or any optional extension of the Initial Term or any Renewal Term
setting forth Lessee's elections pursuant to Section 4 with respect to the
Equipment subject to such Lease. Each End-of-Term Notice shall specify with
particularity the Units of Equipment to be purchased by Lessee (if any), as to
which the Lease is to be renewed (if any) and that are to be returned to Lessor
(if any).
"Equipment Location" means, as to any Equipment, the address at which such
Equipment is located from time to time, as originally specified in the
applicable Schedule and as subsequently specified in a notice delivered to
Lessor pursuant to Section 11, if applicable.
"Equipment" has the meaning specified in Section 1.
"Fair Market Value" means the total price that would be paid for any
specified Equipment in an arm's length transaction between an informed and
willing buyer (other than a used equipment dealer) under no compulsion to buy
and an informed and willing seller under no compulsion to sell. Such total
price shall not be reduced by the costs of removing such Equipment from its
current location or moving it to a new location.
"Fair Rental Value" means the amount of periodic rent that would be payable
for any specified Equipment in an arm's length transaction between an informed
and willing lessee and an informed and willing lessor, neither under compulsion
to lease. Such amount shall not be reduced by the costs of removing such
Equipment from its current location or moving it to a new location.
"Final Invoice Amount" has the meaning set forth in Section 2.A (c).
"Financed Item" has the meaning specified in Section 1.
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"Financing" has the meaning specified in Section 1.
"First Payment Due" means, as to any Lease or Financing, the date the first
Rent payment with respect to the Initial Terms of such Lease or the Term of such
Financing (as applicable) is due, as determined pursuant to the terms of the
applicable Schedule.
"Fundamental Agreements" means, collectively, this Master Agreement, each
Advance Pricing Agreement, each Schedule and Acceptance Certificate and all
other related instruments and documents.
"Funding Date" means, with respect to any Financed Item, the date Lessor
makes funds available to the Seller of such Financed Item to pay for the same or
to Lessee to reimburse Lessee for its payment of the same.
"Guarantor" means any guarantor of all or any portion of Lessee's
obligations under this Master Agreement or any Lease or Financing.
"Hardware" means items of tangible equipment.
"Initial Term" means, as to any Lease, the initial term thereof as
specified in the related Schedule.
"Lease" has the meaning specified in Section 1.
"Lessee" has the meaning specified in the preamble hereof.
"Lessee Default" has the meaning specified in Section 21.
"Lessor" has the meaning specified in the preamble hereof.
"Lessor Default" has the meaning specified in Section 21.
"License Agreement" means any license agreement or other document granting
the purchaser the right to use Software or any technical information,
confidential business information or other documentation relating to Hardware or
Software, as amended, modified or supplemented by any other agreement between
the licensor and Lessor.
"Master Agreement" has the meaning specified in the preamble hereof.
"Material Agreements" means, collectively, all Fundamental Agreements, all
other material agreements by and between Lessor and Lessee, and any application
for credit, financial statement, or financial data required to be provided by
Lessee in connection with any Lease or Financing.
"Optional Additions" has the meaning specified in Section 12.
"PC Equipment" means, collectively, personal computers (e.g., workstations,
desktops and notebooks) and related items of peripheral equipment (e.g.,
monitors, printers and docking stations).
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"Purchase Documents" means, as to any Equipment, any purchase order,
contract, bill or sale, License Agreement, invoice and/or other documents that
Lessee has, at any time, approved, agreed to be bound by or entered into with
any Supplier of such Equipment relating to the purchase, ownership, use or
warranty of such Equipment.
"Renewal Agreement" has the meaning specified in Section 4.
"Renewal Term" has the meaning specified in Section 4.
"Rent" has the meaning specified in Section 5.
"Schedule" means, unless the context shall otherwise require (a) in the
case of a Lease or Financing commenced pursuant to Section 2.A, a Schedule
executed by Lessor and Lessee pursuant to Section 2.A(a), and (b) in the case of
a Lease or Financing commenced pursuant to Section 2.B, (i) prior to Lessee's
execution and delivery to Lessor of a Consolidating Schedule pursuant to Section
2.B(d) relating to such Lease or Financing, the applicable Certificate of
Acceptance together with the applicable Advance Pricing Agreement, and (ii) from
and after Lessee's execution and delivery to Lessor of a Consolidating Schedule
pursuant to Section 2.b(d) relating to such Lease or Financing, such
Consolidating Schedule.
"Seller" means, as to any Equipment, the seller of such Equipment, and as
to any Financed Item, the provider thereof, in either case as specified in the
applicable Schedule.
"Software" means copies of computer software programs owned or licensed by
Lessor.
"Stipulated Loss Value" means, as to any Equipment, an amount equal to the
sum of (i) all Rent and other amounts due and owing with respect to such
Equipment as of the date of payment of such amount, plus (ii) the Casualty Value
of such Equipment.
"Substitute Equipment" means, as to any item of Hardware or Software
subject to a Lease, a substantially equivalent or better item of Hardware or
Software having equal or greater capabilities and equal or greater Fair Market
Value manufactured or licensed by the same manufacturer or licensor as such item
of Hardware or Software subject to a Lease. The determination of whether any
item of Equipment is substantially equivalent or better than an item of
Equipment subject to a Lease shall be based on all relevant facts and
circumstances, but shall minimally require, in the case of a computer, that each
of processor, hard-drive, random access memory and CD ROM drive, if applicable,
be equivalent or better.
"Supplier" means (a) at to any Equipment, the Seller and the manufacturer
or licensor of such Equipment collectively, or where the context requires, any
of them, and (b) as to any Financed Item, the Seller thereof.
"System Software" means an item of Software that is pre-loaded on an item
of Hardware purchased by Lessor for lease hereunder for which the relevant
Purchase Documents specify no purchase price separate from the aggregate
purchase price specified for such items of Hardware and Software.
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"Taxes" means all license and registration fees and all taxes, fees,
levies, imposts, duties, assessments, charges and withholding of any nature
whatsoever, however designated (including, without limitation, any value added,
transfer, sales, use, gross receipts, business, occupation, excise, personal
property, real property, stamp or other taxes).
"Tax Benefits" has the meaning specified in Section 17.
"Tax Loss" has the meaning specified in Section 17.
"Term" means, as to any Financing, the term thereof as specified in the
related Schedule.
"Then Applicable Term" means, as to any Lease, the term of the Lease in
effect at the time of determination, whether it be the Initial Term, any Renewal
Term or any optional or other automatic extension of the Initial Term or any
Renewal Term pursuant to Section 4.
"Total Cost" means (a) as to any Lease, the total acquisition cost to
Lessor of the Equipment subject to such Lease as set forth in the applicable
Purchase Documents, including related delivery, installation, taxes and other
charges which Lessor has agreed to pay and treat as a portion of such
acquisition cost, if any, and (b) as to any Financing, the total amount of the
Financed Items subject to such Financing.
"Total Term" means, as to any Lease, the aggregate term of such Lease,
including the Initial Term, any Renewal Term and any optional or other automatic
extension of the Initial Term or any Renewal Term pursuant to Section 4.
"UCC" means the Uniform Commercial Code as enacted and in effect in any
applicable jurisdiction.
"Unit of Equipment" means, as to the Equipment leased pursuant to any
Schedule (a) each individual item of PC Equipment leased pursuant to such
Schedule, and (b) all Equipment leased pursuant to such Schedule other than PC
Equipment taken as a whole.
"Valid E-mail Acceptance Certificate" has the meaning specified in Section
3(b).
32. Lessee acknowledges that neither this Master Agreement nor any other
Fundamental Agreement may be amended or modified except by a writing signed by
Lessor and Lessee. Lessee Initials:__________________
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IN WITNESS WHEREOF, LESSOR AND LESSEE HAVE EXECUTED THIS MASTER AGREEMENT ON THE
DATES SPECIFIED BELOW:
LESSOR:
COMPAQ CAPITAL CORPORATION
BY:_______________________________________
__________________________________________
Name and Title
__________________________________________
Date
LESSEE:
VICINITY CORPORATION
BY:_______________________________________
__________________________________________
Name and Title
__________________________________________
Date
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EXHIBIT 10.17
PACIFIC ATLANTIC SYSTEMS LEASING
--------------------------------
LEASE AGREEMENT
---------------
This Lease Agreement dated April 24, 1996, is made between PACIFIC ATLANTIC
SYSTEMS LEASING, INC. with its home office at 11811 North Tatum Boulevard, Suite
2000, Phoenix, Arizona 85028-1601 ("Lessor") and Proximus Corporation with an
office at 599 N. Mathilda Avenue, Suite 200, Sunnyvale, CA 94086 ("Lessee").
The parties agree as follows:
1. LEASE
Lessor agrees to lease to Lessee, and Lessee agrees to lease from Lessor,
the equipment and/or features ("Equipment") described in Equipment Schedule(s)
referencing this Lease Agreement. Each Equipment Schedule shall constitute a
separate lease. In the event of a conflict between the terms and conditions of
this Lease Agreement and the terms and conditions of any Equipment Schedule or
any amendment, addendum, or rider thereto, the terms and conditions of such
Equipment Schedule, amendment, addendum, or rider shall prevail. Any reference
to "Lease" shall mean this Lease Agreement, the applicable Equipment Schedule,
and any amendments, addenda, or riders thereto.
2. DEFINITIONS.
(a) "Installation Date" means the date determined in accordance with the
applicable Equipment Schedule.
(b) "Commencement Date" means, as to all Equipment designated on any Equipment
Schedule, where the Installation Date for the Item of Equipment (an Item of
Equipment shall mean (i) a machine and its features, or (ii) a feature last
to be installed falls on the first day of the month, that date, or in any
other case, the first day of the month following the month in which the
Item of Equipment last to be installed was installed.
(c) "Daily Rental" means 1/30th of the amount set forth as the Monthly Rental
for each Item of Equipment on the applicable Equipment Schedule.
3. TERM OF LEASE.
The term of this Lease as to each Item of Equipment designated on any
Equipment Schedule shall commence on the Installation Date for such Item of
Equipment and shall continue for an initial period ending that number of months
from the Commencement Date as is specified on the applicable Equipment Schedule
("Initial Term"). The term of this Lease for all such Equipment shall be
automatically extended for successive three-month periods until terminated by
either party giving to the other not less than six months' prior irrevocable
written notice of termination. Any such termination shall be effective only on
the later of (a) the last day of the Initial Term or the last day of any such
successive period, or (b) the date the Equipment has been recertified for
maintenance.
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4. RENTAL.
The monthly rental ("Monthly Rental") for each Item of Equipment payable
hereunder is as set forth in the applicable Equipment Schedule. Rental for each
Item of Equipment shall begin to accrue on the Installation Date of such Item of
Equipment and shall be due and payable by Lessee in advance on the first day of
each month whether or not Lessee has received any notice that such payment is
due. If the Installation Date does not fall on the first day of the month, the
rental for that period of time from the Installation Date until the first day of
the succeeding month shall be an amount equal to the Daily Rental multiplied by
the number of days from (and including) the Installation Date to (but, not
including) the first day of the succeeding month and shall be due and payable on
the Installation Date. The Monthly Rental set forth on the applicable Equipment
Schedule is conditioned upon the federal corporate income tax rate in effect on
the Installation Date. Should the federal corporate income tax rate be
increased during the term of the applicable Equipment Schedule all Monthly
Rental payments, commencing with the first payment due after the effective date
of such tax rate increase, shall be increased so as to maintain the net economic
after-tax yield, cash flow, and rate of return Lessor originally anticipated
based on the foregoing tax rate assumption.
In addition to the Monthly Rental set forth in the Equipment Schedule(s),
Lessee shall pay to Lessor an amount equal to all taxes paid, payable, or
required to be collected by Lessor, however designated, which are levied or
based on the rental, on the Lease, or on the Equipment or its purchase, sale,
ownership, delivery, possession, use, lease, operation, control, or value
(including, without limitation, state and local privilege or excise taxes based
on gross revenue), any penalties or interest in connection therewith not arising
from negligence on the part of Lessor or taxes or amounts in lieu thereof paid
or payable by Lessor in respect of the foregoing, but excluding taxes on
Lessor's net income.
Lessor shall be responsible for the timely filing of all necessary personal
property tax returns or declarations and shall pay all personal property taxes
levied or assessed against the Equipment during the Initial Term of the
applicable Equipment Schedule, and all renewals and extensions thereof, before
the taxes become delinquent. Promptly upon presentation of evidence of
liability for personal property taxes by Lessor to Lessee, Lessee shall
reimburse Lessor for all amounts of personal property taxes due, without
proration.
Interest on any past due payments shall accrue at the rate of 1 1/2
percent per month, or if such rate shall exceed the maximum rate allowed by law,
then at such maximum rate, and shall be payable on demand. Charges for taxes,
penalties, and interest shall be promptly paid by Lessee when invoiced by
Lessor.
5. INSTALLATION, USE, DISCONTINUANCE, AND MODIFICATION OF EQUIPMENT.
(a) Lessor shall have the sole right and option to make all the
arrangements for (i) the transportation of each Item of Equipment to, and the
installation of each Item of Equipment at, the Equipment Location stated in the
applicable Equipment Schedule, and (ii) the discontinuance, disassembly,
packing, and transportation of each Item of Equipment from the Equipment
Location to a location of Lessor's choice within the continental United States
upon
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the termination of the applicable Equipment Schedule (by expiration or
otherwise) as to such Item of Equipment.
(b) Lessee shall (i) make all arrangements for rigging and drayage, if
applicable, with respect to the Equipment, and (ii) furnish suitable electric
current required to operate the Equipment and a specific area in the Equipment
Location which is suitable for the operation of the Equipment and complies with
the applicable directives issued by the manufacturer thereof and by Lessor. All
transportation (including insurance), rigging, and drayage costs with respect to
the Equipment, both on delivery to the Equipment Location and redelivery to a
location of Lessor's choice within the continental United States, and all
installation, discontinuance, disassembly, and packing costs shall be paid by
Lessee.
(c) Lessee shall have the uninterrupted right to enjoy the quiet possession
and exclusive use of the Equipment while the applicable Equipment Schedule is in
force, without limitation as to time, provided Lessee shall not be in default
hereunder.
(d) Any equipment, cards, disks, tapes, or other items not specified in the
Equipment Schedule which are used on or in connection with the Equipment must
meet the specifications of the manufacturer of the Equipment ("Manufacturer")
and shall be acquired by Lessee at its own expense.
(e) Lessee will at all times keep the Equipment in its sole possession and
control. The Equipment shall not be moved from the Equipment Location without
Lessor's prior written consent. Lessee's rights under Sections 5(f) and 6(b)
are subject to Lessor's right to match any Modification or sublease proposed by
a third party. Lessee will provide Lessor in writing with the terms of the
third party offer and Lessor shall have ten days to match the offer. Lessee
shall obtain such Modification from, or sublease the Equipment to, Lessor if
Lessor has timely matched the third party offer.
(f) Lessee may not, without Lessor's prior written consent, make
alterations in, or add features, attachments, or conversions to, or upgrade
(model or memory) the Equipment. Any such alteration, feature, attachment,
conversion, or upgrade (collectively, "Modification") not owned by Lessor and
leased to Lessee must (i) be installed by Manufacturer at Lessee's sole expense,
(ii) not interfere with the normal and satisfactory operation or maintenance of
the Equipment or with Lessee's ability to obtain and maintain the maintenance
contract required by Section 5(g) hereof, (iii) be removable at any time without
material damage to the Equipment, and (iv) by removed by Manufacturer and the
Equipment restored, at Lessee's expense, to its normal, unmodified condition,
reasonable wear and tear only excepted, no later than the termination of this
Lease as to the applicable Item of Equipment. No lien, encumbrance, or interest
may be granted by Lessee in such Modification which would impair Lessor's right,
title, and interest in the applicable Item of Equipment. Any and all parts
removed as a result of any Modification remain the property of Lessor, and may
not be assigned, transferred, or otherwise disposed of by Lessee. Lessee is
responsible for storing and safekeeping the removed parts and for their
reinstallation prior to return of the Equipment upon cancellation or termination
of the Lease. All Modifications not leased by Lessor to Lessee which are not
removed upon cancellation or termination of the Lease shall become the property
of Owner, as defined in Section 9 hereof. Manufacturer or other organization
selected by Lessee and approved in writing
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by Lessor to maintain the Equipment ("Maintenance Organization") may incorporate
engineering changes or make temporary alterations to the Equipment upon request
of Lessee. Lessee shall promptly accept and cause the installation of all
engineering and safety changes furnished without charge by Manufacturer, which
safety and engineering changes shall be and become the property of Lessor.
(g) Lessee shall, during the term of this Lease, at it own expense, enter
into and maintain in force a contract with Manufacturer or the Maintenance
Organization covering at least prime shift maintenance of each Item of
Equipment. If at any time the Equipment is not being maintained to Lessor's
satisfaction, Lessor shall have the right to require Lessee to have another
company of Lessor's choice maintain the Equipment. Such maintenance contract
shall commence upon expiration of Manufacturer's warranty period, if any,
relating to such Item of Equipment. At Lessor's request Lessee shall furnish
Lessor with an executed copy of such contract and all renewals and extensions
thereof and amendments thereto.
(h) At the termination of this Lease as to the applicable Equipment
Schedule (by expiration or otherwise), Lessee shall, at it own expense, return
the Equipment to Lessor in the same operating order, repair, condition, and
appearance as on the Installation Date, subject only to reasonable wear and tear
and to the provisions of Section 5(f) hereof, complete with all cables,
diagnostics, and logic manuals. Lessee shall be responsible to have the
Equipment including software certified as acceptable for Manufacturer's standard
maintenance contract prior to redelivery to Lessor without any reconditioning or
initial set up or license charges. In the event Lessee is unable to comply with
the foregoing, Lessee shall indemnify and hold Lessor harmless from any such
charges incurred upon a subsequent installation of the Equipment.
6. OWNERSHIP AND INSPECTION.
(a) This is a contract of lease only and Lessee shall have no equity or
property interest in the Equipment other than the rights acquired as a lessee
hereunder and the Equipment shall remain personal property regardless of the
manner in which it may be installed or attached. Lessee shall not, without
Lessor's prior written consent, install or use the Equipment in such a manner or
in such circumstances that any part of the Equipment is deemed to be an
accession to other personal property. Lessee shall, at Lessor's request, affix
to the Equipment tags, decals, or plates furnished by Lessor indicating Owner's
ownership and Lessee shall not permit their removal or concealment.
(b) Lessee shall keep the Equipment free and clear of all liens and
encumbrances except liens or encumbrances arising through the actions or
omissions of Lessor. Lessee shall not assign or otherwise encumber this Lease
or any of its rights hereunder or sublease the Equipment or any parts of the
Equipment without Lessor's prior written consent, except that Lessee, subject to
the provisions of Section 5(e) hereof, at its expense and upon prior written
notice to Lessor, may assign this Lease or sublease the Equipment to its parent
or any subsidiary corporation or to a corporation which shall have acquired all
or substantially all of the property of Lessee by merger, consolidation, or
purchase. Upon any permitted assignment or sublease, Lessee shall execute and
deliver to Lessor, or any assignee of Lessor, at Lessee's expense, such
documentation as Lessor or such assignee may require, including but not limited
to documentation to evidence and put third parties on notice of Lessor's or its
assignee's interest in
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the Equipment. No permitted assignment or sublease shall relieve Lessee of any
of its obligations hereunder.
(c) Lessor or its agents shall have free access to the Equipment at all
reasonable times for the purpose of inspection and for any other purpose
contemplated in this Lease. Lease shall make Lessee's log and maintenance
records pertaining to the Equipment available during any such inspection.
(d) Lessee shall immediately notify Lessor of all details concerning any
damage to, or loss of, the Equipment arising out of any event or occurrence
whatsoever, including, but not limited to, the alleged or apparent improper
manufacture, functioning, or operation of the Equipment.
7. WARRANTIES AND DISCLAIMER OF WARRANTIES.
(a) Lessee represents that, as of the Installation Date set forth in the
applicable Equipment Schedule, it shall have (i) thoroughly inspected the
Equipment, (ii) determined for itself that all Items of Equipment are of a size,
design, capacity, and manufacture selected by it, and (iii) satisfied itself
that the Equipment is suitable for Lessee's purposes. Lessee authorizes Lessor
to insert in each Equipment Schedule the serial numbers and other identifying
data of the Equipment.
(b) Lessee hereby covenants, represents, and warrants with respect to this
Lease and each Equipment Schedule executed hereunder as of the Installation Date
of any Item of Equipment that: (i) the execution, delivery, and performance
thereof by Lessee have been duly authorized by all necessary corporate action;
(ii) the individual executing such was duly authorized to do so; (iii) the Lease
and each Equipment Schedule constitute legal, valid, and binding agreements of
Lessee enforceable in accordance with their respective terms; and (iv) the
Equipment is personal property and when subjected to use by Lessee will not be
or become fixtures under applicable law.
(c) LESSOR SUPPLIES THE EQUIPMENT AS IS AND NOT BEING THE MANUFACTURER OF
THE EQUIPMENT, THE MANUFACTURER'S AGENT, OR THE SUPPLIER'S AGENT, MAKES NO
WARRANTY OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE EQUIPMENT'S
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, DESIGN, CONDITION, QUALITY,
CAPACITY, MATERIAL, WORKMANSHIP, CONFORMITY TO THE PROVISIONS AND SPECIFICATIONS
OF ANY PURCHASE ORDER(S) RELATING THERETO, OR AS TO PATENT INFRINGEMENT OR THE
LIKE OR ANY SOFTWARE USED IN THE EQUIPMENT, it being agreed that all such risks,
as between Lessor and Lessee, are to be borne by Lessee. Lessee agrees to look
solely to Manufacturer or to the supplier of the Equipment for any and all
warranty claims and any and all warranties made by Manufacturer or the supplier
to Lessor are hereby assigned to Lessee, to the extent permitted by Manufacturer
or the supplier, for the term of the applicable Equipment Schedule. Lessee
agrees that Lessor shall not be responsible for the delivery, installation,
maintenance, operation, or service of the Equipment or for delay or inadequacy
of any or all of the foregoing. Lessor shall not be responsible for any
general, incidental, special, or consequential loss or damage resulting from the
installation,
5
<PAGE>
operation, or use of the Equipment or otherwise (including strict liability in
tort). Lessee will defend, indemnify, and hold Lessor harmless on an after-tax
basis against any and all claims, demands, and liabilities arising out of or in
connection with the design, manufacture, possession, or operation of the
Equipment, including strict liability in tort.
8. RISK OF LOSS.
(a) Until the Equipment is returned to Lessor as provided in this Lease,
Lessee relieves Lessor of responsibility for all risks of physical damage to or
loss or destruction of the Equipment, whether or not insured against, howsoever
caused. During the term of this Lease as to any Equipment Schedule, Lessee
shall, at its expense, keep in effect all risk and public liability insurance
policies covering the Equipment designated in each Equipment Schedule. The all
risk insurance policy shall be for an amount not less than the replacement cost
of the Equipment. The public liability insurance policy shall be in such amount
as is reasonably acceptable to Lessor. Lessor, its successors and assigns,
shall be named as additional insureds and/or loss payees on such policies, which
shall be written by one or more insurance companies of recognized responsibility
reasonably acceptable to Lessor. Evidence of such insurance coverage shall be
furnished to Lessor not later than the Installation Date set forth in the
applicable Equipment Schedule and from time to time thereafter as Lessor may
demand. Such policies shall provide that no less than ten days' written notice
shall be given Lessor prior to cancellation of such policies for any reason.
Lessee hereby irrevocably appoints Lessor as Lessee's attorney-in-fact coupled
with an interest to make claim for, receive payment of, and execute any and all
documents that may be required to be provided to the insurance carrier in
substantiation of any such claim for loss or damage under said insurance
policies, and to endorse Lessee's name to any and all drafts or checks in
payment of the loss proceeds.
(b) If any Item of Equipment is rendered unusable as a result of any
physical damage to, or loss or destruction of, the Equipment, or title thereto
shall be taken by any governmental authority under power of eminent domain or
otherwise, Lessee shall give to Lessor immediate notice thereof and this Lease
shall continue in full force and effect without any abatement of rental. Lessee
shall determine, within fifteen days after the date of occurrence of any such
damage or destruction, whether such Item of Equipment can be repaired. In the
event Lessee determines that the Item of Equipment cannot be repaired or such
Item of Equipment was lost, destroyed, or title thereto taken, Lessee shall
promptly replace such Item of Equipment with identical equipment and transfer
title to such replacement equipment to Lessor free and clear of all liens,
claims, equities, and encumbrances of every kind or nature whatsoever, and this
Lease shall continue in full force and effect as though, subject to the
provisions of Section 9 hereof, such damage, loss, destruction, or taking of
title had not occurred, except that the replacement equipment shall become
Equipment for purposes of this Lease in lieu of the replaced Equipment. In the
event Lessee determines that such Item of Equipment can be repaired, Lessee
shall cause such Item of Equipment to be promptly repaired. All proceeds of
insurance received by Lessor or Lessee under the all risk insurance policy
referred to in the preceding paragraph of this Section shall be applied toward
the cost of such repair or replacement.
6
<PAGE>
9. TAX BENEFITS.
This Lease has been entered into on the basis that Lessor (and/or any
persons, firms, corporations, or other entities to which Lessor has transferred
or may transfer title to all or any portion of the Equipment) (collectively,
"Owner") shall be entitled to such deductions, credits, and other benefits as
are provided by the Internal Revenue Code of 1986, as amended or superseded from
time to time and the rules and regulations promulgated thereunder (the "Code"),
to an owner of property ("Tax Benefits"). As used herein the term "Owner" shall
mean and include Lessor in the event Lessor has not transferred title to all of
the Equipment, and the term "Lessor" shall mean and include each member of the
affiliated group of corporations with which Lessor files a consolidated return
for federal income tax purposes.
If to any extent as a result of (a) any act or failure to act by Lessee or
any person claiming by, through, or under Lessee, (b) any misrepresentation or
breach of any covenant, warranty, or agreement contained in this Lease or the
applicable Equipment Schedule, (c) any requisition of use or title to the
Equipment by any governmental entity or authority, whether by claim of right,
eminent domain, or otherwise, (d) any physical damage to, or loss or destruction
of the Equipment, (e) the substitution of all or any part of the Equipment
pursuant to Section 8(b) hereof or otherwise, (f) any assignment or sublease, or
(g) Lessee permitting the Equipment to become "tax-exempt use property" within
the meaning of the Code, Owner, in determining its income tax liability for any
year, shall (i) lose the benefit of, or shall not have, or shall not claim as a
result of a written opinion of independent tax counsel that there is not a
reasonable possibility that Owner's claiming of such Tax Benefits would be
upheld by a court if the matter were litigated, or shall lose the right to
claim, or shall be delayed in claiming, or shall suffer a deferral, diminution,
or disallowance of, or shall be required to recapture, all or any part of the
Tax Benefits, or (ii) be required to include any amount in income other than
rental payments in the times and amounts set forth in the applicable Equipment
Schedule, or (iii) have any portion of the Tax Benefits attributed to foreign
sources (any of (i)-(iii) being hereinafter referred to as a "Loss"), then
Lessee shall pay to Owner, upon demand, a sum which, after deduction therefrom
for all federal, state, and local income taxes payable by Owner with respect to
the receipt of such sum, shall be sufficient to restore Owner's net economic
after-tax yield, cash flow, and rate of return that Owner would have had if such
Loss had not occurred, plus any fines, interest, penalties, or additions to tax
fairly attributable to such Loss. For purposes of this Section a Loss shall
occur upon the earliest of (i) the happening of any event (such as any
disposition, damage, loss, destruction, or change in the use of any Item of
Equipment) which may cause such Loss, (ii) the payment by Owner to the Internal
Revenue Service of the tax increase resulting from such Loss, (iii) the
adjustment by audit or otherwise of the tax return of Owner to reflect such
Loss, or (iv) the filing of any return reflecting such Loss.
10. EVENTS OF DEFAULT AND REMEDIES.
The occurrence of any one of the following shall constitute an Event of
Default hereunder:
(a) Lessee fails to pay any installment of rent on or before the fifth day
following the date when the same becomes due and payable;
7
<PAGE>
(b) Lessee attempts to remove, sell, transfer, encumber, sublet, or part
with possession of any Item of Equipment, except as expressly permitted herein;
(c) Lessee fails to observe or perform any of the other obligations
required to be observed or performed by Lessee hereunder and such failure shall
continue uncured for ten days after written notice thereof to Lessee by Lessor;
(d) Any warranty, representation, or statement made or furnished to Lessor
by or on behalf of Lessee proves to have been false in any material respect when
made or furnished;
(e) Lessee ceases doing business as a going concern, makes an assignment
for the benefit of creditors, admits in writing its inability to pay its debts
as they become due, is generally not paying its debts as they mature, files a
voluntary petition in bankruptcy, files a petition seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar arrangement under any present or future statute, law, or
regulation or files an answer admitting the material allegations of a petition
filed against it in any such proceeding, consents to or acquiesces in the
appointment of a custodian, trustee, receiver, or liquidator of it or all or any
substantial part of its assets or properties, or if it or its shareholders shall
take any action looking to its dissolution or liquidation, or if any order for
relief is entered against Lessee under the federal bankruptcy laws;
(f) Within thirty days after the commencement of any proceedings against
Lessee seeking reorganization, arrangement, readjustment, liquidation,
dissolution, or similar relief under any present or future statute, law, or
regulation, such proceedings shall not have been dismissed, or if within thirty
days after the appointment without Lessee's consent or acquiescence of any
custodian, trustee, receiver, or liquidator of it or of all or any substantial
part of its assets and properties, such appointment shall not be vacated; or
(g) The default by Lessee under any other Equipment Schedule or other
agreement between Lessee and Lessor or any assignee of Lessor.
Upon the occurrence of an Event of Default, Lessor may at its option do any
or all of the following: (a) by notice to Lessee cancel or terminate this Lease
as to any or all Equipment Schedules; (b) whether or not this Lease is canceled
or terminated as to any or all Equipment Schedules, take possession of any or
all of the Equipment listed on any or all Equipment Schedules, wherever
situated, and for such purpose, enter upon any premises without liability for so
doing (except that Lessor shall be liable for damages resulting from the fault
or negligence of Lessor) or Lessor may cause Lessee, and Lessee hereby agrees,
to return the Equipment to Lessor as provided in the Lease; (c) recover from
Lessee, as liquidated damages for loss of a bargain and not as a penalty, an
amount equal to the present value of all monies to be paid by Lessee during the
remaining Initial Term or any successive period then in effect, discounted at
the rate of three percent per annum, which payment, together with applicable
sales or use tax, shall become immediately due and payable; or (d) sell, dispose
of, hold, use, or lease any Equipment as Lessor in its sole discretion may
determine (and Lessor shall not be obligated to give preferences to the sale,
lease, or other disposition of the Equipment, which may be either wholesale or
retail, over the sale, lease, or other disposition of similar equipment owned,
leased, or managed by Lessor). Any disposition may be at private or public
sale, in bulk or in parcels,
8
<PAGE>
with or without notice, and without having the Equipment present at the place of
sale or lease. The subsequent acceptance of payments hereunder by Lessor shall
not be deemed a waiver of any prior existing breach by Lessor shall not be
deemed a waiver of any prior existing breach by Lessee regardless of Lessor's
knowledge of such prior existing breach at the time of acceptance of such
payments. In any event, Lessee shall, without further demand, pay to Lessor an
amount equal to all sums due and payable for all periods up to and including the
date on which Lessor has declared this Least to be in default.
In the event that Lessee shall have paid to Lessor the liquidated damages
and other amounts referred to in the preceding paragraph of this Section.
Lessor hereby agrees to pay to Lessee, promptly after receipt thereof, either
(a) if Lessor re-leases the Equipment, all rentals or proceeds received from the
reletting of the Equipment during the balance of the Initial Term or an
successive period then in effect (after deduction of all expenses incurred by
Lessor), or (b) if Lessor sells the Equipment, all proceeds received from the
sale (after deduction of the estimated residual value of the Equipment as of the
end of the Initial Term or any successive period then in effect and of all
expenses incurred by Lessor), said amount never to exceed the amount of the
liquidated damages paid by Lessee. Lessee agrees that Lessor shall have no
obligation to sell the Equipment. Lessee shall in any event remain fully liable
for reasonable damages as provided by law and for all costs and expenses
incurred by Lessor on account of such default including, but not limited to, all
collection agency fees and all court costs and reasonable attorneys' fees,
whether or not suit is brought, including in-house attorneys' fees. Lessee
hereby agrees that, in any event, it will be liable for any deficiency after any
sale, lease, or other disposition by Lessor. The rights afforded Lessor
hereunder shall not be deemed to be exclusive, but shall be in addition to any
rights or remedies provided by law.
If, upon the cancellation or termination of the applicable Equipment
Schedule as to any Item of Equipment, Lessee fails or refuses to return and
deliver possession of such Item of Equipment to Lessor on the prescribed date,
in addition to all other rights and remedies available to Lessor, Lessee shall
promptly pay Lessor rent equal to the greater of the then fair market month to
month rental value or 150 percent of the current Monthly Rental for all
Equipment as shown on the applicable Equipment Schedule on a month to month
basis until all Equipment is returned to Lessor, provided Lessee shall be liable
for rent through the last day of any monthly extension. Lessee shall remain
liable for any direct damages Lessor may suffer by reason of being unable to
deliver such Item of Equipment to another party.
11. NET LEASE.
Except as otherwise specifically provided in this Lease, it is understood
and agreed that each Equipment Schedule constitutes a net lease, and that, as
between Lessor and Lessee, Lessee shall be responsible for all costs and
expenses of every nature whatsoever (including, but not limited to,
transportation, installation, deinstallation, taxes, maintenance, and insurance)
arising out of or in connection with or related to this Lease or the Equipment.
Lessee hereby agrees that in the event that Lessee fails to pay or perform any
obligation under this Lease, Lessor may, at its option, pay or perform said
obligation and any payment made or expense incurred by Lessor in connection
therewith shall become additional rent which shall be due and payable by Lessee
upon demand. All amounts payable by Lessee under any Equipment Schedule shall
be absolute and unconditional and shall not be subject to any abatement,
reduction, offset, defense,
9
<PAGE>
counterclaim, interruption, deferment, or recoupment for any reason whatsoever,
and such amounts shall be and continue to be payable in all events.
12. ASSIGNMENT.
Lessee agrees that Lessor may transfer all or part of Lessor's right,
title, and interest in, under, or to the Equipment and this Lease or any
Equipment Schedule, and any or all sums due or to become due pursuant to any of
the above, to any third party ("Assignee") for any reason. Lessee agrees that
upon receipt of written notice from Lessor of such assignment, Lessee shall
perform all of its obligations hereunder for the benefit of Assignee and, if so
directed, shall pay all sums due or to become due hereunder directly to Assignee
or to any other party designated by Assignee. Lessee hereby covenants,
represents, and warrants as follows and agrees that Assignee shall be entitled
to rely on and shall be considered a third party beneficiary of the following
covenants, representations, and warranties: (a) Lessee's obligations to Assignee
hereunder are absolute and unconditional and are not subject to any abatement,
reduction, offset, defense, counterclaim, interruption, deferment, or recoupment
available to Lessee for any reason whatsoever including, but not limited to,
operation of law, defect in the Equipment, failure of Lessor to perform any of
its obligations hereunder, any insolvency or bankruptcy of Lessor, or for any
other cause or reason whatsoever, whether similar or dissimilar to the
foregoing; (b) Lessee shall not look to Assignee to perform any of Lessor's
obligations hereunder unless Assignee specifically assumes such obligations; (c)
Lessee will not amend or modify this Lease without the prior written consent of
Assignee; and (d) Lessee will send a copy to Assignee of each notice which
Lessee sends to Lessor.
Upon receipt of notice of such transfer or assignment, Lessee agrees to
promptly execute and deliver to Lessor such documentation as Assignee may
require to secure and/or complete such transfer or assignment, including, but
not limited to, the following: (a) an acknowledgement of, or consent to, the
assignment which may require Lessee to make certain representations or
reaffirmations as to some of the basic terms and covenants contained in this
Lease; (b) a Certificate of Incumbency; (c) an opinion of counsel for Lessee
with respect to the representations and warranties set forth in Section 7(b)
above; and (d) a Certificate of Delivery and Acceptance. Such assignment shall
relieve Lessor of its obligations hereunder upon the assumption thereof in
writing by Assignee unless Lessor, Lessee, and Assignee agree otherwise, and the
rights of Lessee hereunder shall not be impaired.
13. MISCELLANEOUS.
(a) Neither this Lease, any Equipment Schedule, nor any consent or approval
provided for herein shall be binding upon Lessor unless signed on its behalf by
a duly authorized office, at its home office. This Lease shall be deemed to
have been made in the State of Arizona and shall be governed in all respects by
the laws, but not the rules relating to choice of laws, of such State. No
rights or remedies referred to in Article 2A of the Uniform Commercial Code will
be conferred on Lessee unless expressly granted in this Lease or an Equipment
Schedule.
(b) This Lease and each Equipment Schedule constitute the entire agreement
and understanding of the parties with respect to the lease of the Equipment
listed on each Equipment Schedule (notwithstanding any contrary provision
contained in any instrument submitted by
10
<PAGE>
Lessee), supersede any or all prior agreements and understandings related to the
subject matter hereof, and may not be changed orally but only by an agreement in
writing signed by both parties. Lessee's purchase order, if any, shall be used
for accounting purposes only and the provisions thereof shall be inapplicable
notwithstanding Lessor's acknowledgement thereof.
(c) Any notice, request, or other communication to either party by the
other shall be given in writing and deemed received upon the earlier of actual
receipt or three days after mailing if mailed postage prepaid to the address of
the other party as set forth herein or to such other address as such party shall
have designated by proper notice or one day after it is sent by courier or
facsimile transmission if receipt is verified by the receiving party. Notices
to Lessor shall be sent to the attention of the Manager, Contract Documents.
(d) Subject to Sections 6(b) and 12 hereof, this Lease shall be binding
upon and inure to the benefit of Lessor and Lessee and their respective
successors and assigns (including any subsequent assignee of an Assignee).
(e) No representation or statement made by any representative of either
party not contained herein shall be binding upon such party. No provision of
this Lease or any Equipment Schedule which may be deemed unenforceable shall in
any way invalidate any other provision or provisions hereof, all of which shall
remain in full force and effect. Neither any failure nor any delay on the part
of either party in exercising any of its rights hereunder shall operate as a
waiver thereof, nor shall a single or partial exercise thereof preclude any
other or further exercise or the exercise of any other right hereunder.
(f) No waiver of any of the terms and condition hereof shall be effective
unless in writing and signed by the party against whom such waiver is sought to
be enforced. Any waiver of the terms hereof shall be effective only in the
specific instance and for the specific purpose given.
(g) Lessor is hereby authorized by Lessee to cause this Lease or other
instruments, including Uniform Commercial Code financing statements, to be filed
or recorded for the purposes of evidencing and putting third parties on notice
of Lessor's or Assignee's interest in the Equipment and Lessee agrees that
Lessor or Assignee may execute such instruments for and on behalf of Lessee. In
the event for any reason whatsoever Lessee is determined to have an interest in
the Equipment other than a purely leasehold interest for the term of this Lease,
Lessee agrees to and does hereby expressly subordinate such interest to the
interests of Owner in the Equipment and to the security interest in the
Equipment of any Assignee whether such security interest is presently in
existence or hereafter acquired. Lessee shall execute all documents requested
by Owner or any Assignee to evidence such subordination.
(h) During the term of this Lease, Lessee agrees to deliver to Lessor a
copy of Lessee's annual audited financial statements within a reasonable time
after the statements are available.
(i) Lessee's covenants, representations, and warranties shall survive the
expiration, termination, or cancellation of this Lease.
(j) If Equipment delivered pursuant to any Equipment Schedule contains any
features not specified therein, Lessor reserves the right to remove or
deactivate any such features at any
11
<PAGE>
reasonable time without liability for any down time of any Item of Equipment
occasioned thereby.
(k) Lessee and Lessor acknowledge that an Equipment Schedule may include
certain software ("Software") in which Lessor and Lessee have no ownership or
other proprietary rights. Where required by the Software owner or manufacturer,
Lessee shall enter into a license or other agreement for the use of the
Software. Any Software agreement shall be separate and distinct from this Lease
and any Equipment Schedule, and Lessor and Assignee shall not have any rights or
obligations thereunder.
(l) This Lease and any Equipment Schedule may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument. To the
extent that this Lease constitutes chattel paper, no security interest in this
Lease may be created through the transfer of possession of any counterpart other
than an executed counterpart or a photostatic copy of an executed counterpart of
this Lease together with an executed Equipment Schedule marked "Counterpart No.
1 of ____."
(m) It is the intention of the parties hereto to comply with applicable
usury laws. Accordingly, it is agreed that in no event shall this Lease require
the payment or permit the collection of interest in excess of the maximum amount
permitted by law.
LESSOR: PACIFIC ATLANTIC SYSTEMS LEASING, INC. LESSEE:______________________
By:_______________________________ By:__________________________
Name:_____________________________ Name:________________________
Title:____________________________ Title:_______________________
12
<PAGE>
CERTIFICATE OF PARTIAL DELIVERY AND ACCEPTANCE
The undersigned hereby certifies to PACIFIC ATLANTIC SYSTEMS, INC.
("Lessor") that certain Item(s) of Equipment leased by the undersigned from
Lessor pursuant to Equipment Schedule No. 1A to that certain Lease Agreement
between the undersigned and Lessor dated April 24, 1996, are acceptable and
conform in all respects to the undersigned's purchase agreement with the vendor
or supplier of the Equipment.
The undersigned further certifies that Item(s) of Equipment as listed on
Attachment "A" were installed and ready for use as of 5/22/96, that billing
pursuant to Equipment Schedule No. 1 as detailed on the Pro-Rata Letter
Agreement dated April 25, 1996 is appropriate, and hereby authorizes Lessor to
pay for the respective Item(s) of Equipment.
Dated:___________________
PROXIMUS CORPORATION
By:______________________
Name:____________________
Title:_____________________
13
<PAGE>
Exhibit 23.1
The Board of Directors
Vicinity Corporation:
We consent to the use of our report dated September 22, 1999 except as to Note
11 for which the date is November 16, 1999, relating to the balance sheets of
Vicinity Corporation as of July 31, 1998 and 1999, and the related statements
of operations, redeemable convertible preferred stock and stockholders' equity
(deficit), and cash flows for each of the years in the three-year period ended
July 31, 1999 and our report dated September 22, 1999 on the related financial
statement schedule which reports are included herein, and to the reference to
our firm under the heading "Experts" in the prospectus.
KPMG LLP
Mountain View, California
December 17, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-2000
<PERIOD-START> AUG-01-1999
<PERIOD-END> OCT-31-1999
<CASH> 6,663,222
<SECURITIES> 0
<RECEIVABLES> 2,434,081
<ALLOWANCES> 95,000
<INVENTORY> 0
<CURRENT-ASSETS> 430,017
<PP&E> 2,362,975
<DEPRECIATION> 380,290
<TOTAL-ASSETS> 11,415,005
<CURRENT-LIABILITIES> 6,911,572
<BONDS> 0
0
23,655,362
<COMMON> 6,120
<OTHER-SE> (19,682,023)
<TOTAL-LIABILITY-AND-EQUITY> 11,415,005
<SALES> 2,531,506
<TOTAL-REVENUES> 2,531,506
<CGS> 1,611,322
<TOTAL-COSTS> 1,611,322
<OTHER-EXPENSES> 3,846,782
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (54,648)
<INCOME-PRETAX> (2,871,950)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,374,223)
<EPS-BASIC> (0.71)
<EPS-DILUTED> (0.71)
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