<PAGE>
As filed with the Securities and Exchange Commission on January 18, 2000
Registration No. 333-90253
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
AMENDMENT NO. 2
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...................... 6,900,000 $13.00 $89,700,000 $24,486
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Includes 900,000 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 was paid in connection with the filing of Amendment No. 1
to this registration statement on December 17, 1999. An additional amount
equal to $5,465 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.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<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 January 18, 2000
6,000,000 Shares
[LOGO OF VICINITY CORP.]
Vicinity Corporation
Common Stock
This is the initial public offering by Vicinity Corporation of shares of its
common stock.
Our common stock has been approved for quotation on the Nasdaq National Market
under the symbol "VCNT." We estimate that the initial public offering price
will be between $11.00 and $13.00 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
900,000 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............................... 31
Management............................. 50
Principal Stockholders................. 60
Certain Transactions................... 62
Description of Capital Stock........... 63
Shares Eligible for Future Sale........ 66
Underwriting........................... 68
Legal Matters.......................... 70
Experts................................ 70
Available Information.................. 70
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.
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 280 clients
with an aggregate of more than three 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. 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.
. Enable customers to find client locations via Internet-enabled
wireless devices. With our wireless BrandFinder product, users can
instantly generate information on a wide array of businesses from
banks and cash machines to restaurants, gas stations and hotels via a
Palm VII or a wireless telephone utilizing Wireless Applications
Protocol.
. 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
1
<PAGE>
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.
. 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, AltaVista, 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.......................... 6,000,000 shares
Common stock outstanding after this offering.. 25,700,956 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 25,700,956 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;
. 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 497,131 shares of common stock upon exercise of stock
options between November 1, 1999 and January 10, 2000.
The shares of common stock outstanding after this offering exclude the
following:
. 1,260,118 shares of common stock issuable upon exercise of outstanding
stock options under our stock option plans with a weighted average
exercise price of $2.81 per share; and
. approximately 900,000 shares of common stock issuable upon exercise of
stock options to be granted prior to and contemporaneously with the
closing of this offering under our 2000 Equity Participation Plan with a
weighted average exercise price of approximately $11.30 per share.
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 January 2000;
. 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 900,000 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 January 2000. 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 $12.00 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 $74,473
Working capital.................................. 2,521 4,521 70,331
Total assets..................................... 11,415 13,415 79,225
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 $71,789
</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 and have been focused on our current business strategy for only
approximately three years.
Our company was founded in October 1995, and our initial revenues were
derived from providing maps, driving directions and directory services. Not
only is our operating history short, we refocused our business strategy on our
Business Finder service in early 1997. 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.
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.
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.
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<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
and 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 131 as of January 10,
2000. 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. We are currently in
discussions with several potential partners in Asia, and we plan to offer our
services to Japan in the first half of calendar year 2000.
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 many reasons, including the following:
. 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. Market wages for employees include expectations
for significant stock-based compensation. 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 and on the increased use of the Internet by
consumers to locate our clients' products.
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 and on the increased use of the Internet by consumers to locate
our clients' products. 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 or do not use the Internet to locate our
clients' products, 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
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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 future services could be 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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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 or consumed by our operations,
the progress of our development activities and the market response to the
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. We are currently in
discussions with several partners in Asia, and we plan to offer our services in
Japan in the first half of calendar year 2000. 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 $9.16 per share less than the initial public offering
price paid, assuming an initial public offering price of $12.00 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
25,700,956 shares outstanding. Of the outstanding shares, the 6,000,000 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
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 "Shares Eligible for Future
Sale" and "Underwriting."
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 approximately one-third of our 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
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formulated by our Board of Directors and to discourage some transactions which
may involve an actual or threatened change of control of our 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 40% 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 $65.8 million ($75.9 million if the
underwriters' over-allotment option is exercised in full), assuming an initial
public offering price of $12.00 per share. We currently estimate that we will
use the net proceeds of this offering as follows:
. approximately $15-20 million to expand our sales and marketing
resources, including expanding our business in Europe and Asia;
. approximately $15-20 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.
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 $12.00 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 $74,473
======== ======== =======
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;
100,000 shares authorized pro forma as
adjusted; 6,120 shares issued and
outstanding actual; 19,235 shares issued
and outstanding pro forma; and 25,235
shares issued and outstanding pro forma as
adjusted.................................... 6 19 25
Additional paid-in capital................... (432) 26,073 91,877
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 71,789
-------- -------- -------
Total capitalization.................... $ 4,503 $ 6,503 $72,313
======== ======== =======
</TABLE>
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Dilution
Our pro forma net tangible book value as of October 31, 1999 was $5.9 million
or $0.29 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 $12.00 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 $71.8 million,
or $2.84 per share of common stock. This represents an immediate increase in
pro forma net tangible book value of $2.56 per share to existing stockholders
and an immediate dilution in pro forma net tangible book value of $9.16 per
share to new investors. The following table illustrates this per share
dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................... $12.00
Pro forma net tangible book value per share as of October 31,
1999........................................................... $0.29
Pro forma increase in net tangible book value attributable to
new investors.................................................. 2.56
-----
Pro forma net tangible book value per share after this offering... 2.84 2.84
------
Pro forma dilution per share to new investors..................... $ 9.16
======
</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 77.5% $25,460,821 26.1% $ 1.23
New investors............. 6,000,000 22.5 72,000,000 73.9 $12.00
---------- ---- ----------- ----
Total................... 26,661,575 100% $97,460,821 100%
========== ==== =========== ====
</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,
1995 Three Months Ended
(inception) Year Ended July 31, October 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 31,
1996 1997 1998 1999 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. Revenues are
recognized in accordance with Statement of Position (SOP) No. 97-2, Software
Revenue Recognition. As such, 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 had 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. We also presently expect to recognize additional
deferred stock-based compensation related to grants subsequent to October 31,
1999 of approximately $0.6 million to be recognized over four 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. This line of credit expired in August
1999. 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. This
investment could be in the form of direct investment or through the formation
of joint ventures, strategic partnerships or similar arrangements.
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
As of January 10, 2000, we had not experienced any Year 2000-related
disruption in the operation of our systems. Although most Year 2000 problems
should have become evident on January 1, 2000, additional Year 2000-related
problems may become evident only after that date. For example, some software
programs may have difficulty resolving the so-called "century leap year"
algorithm which will also occur during the Year 2000.
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.
30
<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 280 companies with an aggregate of more than
three 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 search
engine, portal and wireless companies, we use store location and product data
to offer 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,
31
<PAGE>
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 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 280 clients. Several
clients utilizing our core Web Business Finder service have recently licensed
our Telephone Business Finder or 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. We also recently entered into agreements with a leading wireless
handset manufacturer and a leading wireless carrier to provide versions of our
BrandFinder service on Internet-enabled wireless telephones. These and other
partnerships extend our clients' Web presence beyond their Web sites by
allowing product searches on portals and via Internet-enabled wireless devices
to return local stores that carry our clients' products. We intend to continue
to identify and develop mutually beneficial partnerships with search engines,
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 January 1,
2000, our services are available in 14 European nations and in nine 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 14 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, Kataweb 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 through Internet-enabled wireless
devices such as the Palm VII and WAP telephones. 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
transaction-based fees as a result of driving a consumer from a national
brand's Web site to a participating local merchant's store. 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 using the Internet, land line telephones, wireless telephones and
other wireless devices. 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
product the customer is searching for, such as a specific style of Levi 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 consumers 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
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per day. While most Business Finder applications return locations in order of
proximity, some of our clients, such as the United States Air Force, require
other orderings, or require that searches respect recruiter or 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
and 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, 14 European nations and in nine
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 caller 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 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 opt-in 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 electronic mail 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, shopping engines and wireless devices 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. In January 2000, we entered into an
agreement to provide our BrandFinder functionality to AltaVista's Shopping.com
service.
[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 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.
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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;
. 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 and wireless telephone usage. We link shoppers searching 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 approximately 1.2 million unique users and regularly serves more than
19 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.
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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 distribution outlets. These relationships
have also enabled us to significantly expand our service offerings.
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 offer
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 Business Finder and SiteMaker services. 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 Business Finder
and SiteMaker services 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
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automatically identify the wireless 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.
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.
AltaVista
AltaVista is one of the Web's leading search engines and a major portal site
known for its particularly wide search breadth and increasing emphasis on
locally-tailored content. AltaVista's Shopping.com service offers a
comprehensive online shopping experience that is referenced throughout the
AltaVista site. In January 2000, we agreed to provide our BrandFinder
functionality to AltaVista so that consumers can have a "go-local" shopping
option in many categories on Shopping.com. As a result, shoppers intending to
buy online will be presented with an in-person option from Vicinity-hosted
brand and product data, giving preference and exposure to Vicinity's corporate
clients and helping to increase traffic to our clients' real-world stores.
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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 database and, with our
services, also offer a selection of relevant real world stores near the
consumer's 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 potential 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.
Both of our 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.
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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.
Clients
We have more than 280 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 January 10, 2000.
The contract value of the Business Finder clients lost during that period would
have represented approximately 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 clicks-and-mortar strategy. With each client
relationship, we work with the client to identify 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 additional sites 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
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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 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 14 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 for the "Rechargeable" section of Eveready's
Web site. Customers are able 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. 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.
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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. Companies with which we have referral or reseller agreements
include Icon MediaLab, Aperto Multimedia, Kataweb, Price Interactive, Inc.,
Agency.com, 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 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
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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
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 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 two 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.
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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 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. and Switchboard Incorporated, both of which are
able to provide these services at very competitive prices. In December 1999,
America Online announced that it was acquiring MapQuest.com in a stock
transaction. 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 applications 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 January 10, 2000, we had 131 employees, including three 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
In May 1999, Eddie Babcock, a founder and former employee of our company,
filed a complaint against us and several of our officers in California Superior
Court for reformation of contract alleging various contract and tort causes of
action, including reformation of contract, breach of contract, fraud and
interference with economic and contractual relations and seeking declaratory
relief. In his complaint, Mr. Babcock seeks, among other things, the issuance
to him of at least 281,250 shares of common stock, an unspecified amount of
compensatory damages and punitive damages, plus attorneys' fees. In November
1999, the court stayed Mr. Babcock's claim and granted our motion to compel
arbitration. As of the date of this prospectus, Mr. Babcock has not taken
action to pursue his claim in arbitration. If and when this claim is pursued in
arbitration, we plan to vigorously defend against these allegations.
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Management
The following table sets forth, as of December 31, 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 Vice President and 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......... 31 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 Messrs. Callaghan, Geddes and Gibbons; the Class II directors
are Messrs. Nie, Sears and Ziebelman; and the Class III directors are
Messrs. Dwight, Mills and Woods. 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
53
<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.
54
<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 $2,160,000 8/19/08 $ 3,518,412 $ 5,602,484
Mary Gavin.............. 5,000 0.4 0.15 60,000 8/19/08 97,734 155,625
</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
$12.00 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.
55
<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 $2,261,000 --
David Seltzer........... 130,000 0 0 -- --
Gregory Beasley......... 0 180,000 0 2,133,000 --
Mary Gavin.............. 0 55,000 0 654,250 --
</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 $12.00 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.
56
<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 4,216,317 shares of common stock were authorized and 3,892,417 shares were
issued, none of which have subsequently been retired. No further grants will be
made under the 1996 Plan, provided that shares that remain reserved for
issuance, or which become available for issuance as a result of stock options
expiring or becoming unexercisable, under our 1996 Plan may be issued under our
2000 Equity Participation 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 and by our stockholders in January 2000 as a successor equity
plan to our 1996 Incentive Stock Option Plan. Under the 2000 Plan, a total of
1,500,000 shares of common stock have been reserved for issuance. In addition,
shares that remain reserved for issuance, or which become available for
issuance as a result of stock options expiring or becoming exercisable, under
our 1996 Plan may be issued under our 2000 Plan. Prior to and contemporaneously
with this offering, we will grant options to purchase approximately 900,000
shares of common stock 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 options or stock purchase rights after the tenth anniversary of
the date on which the 2000 Plan was adopted by our Board of Directors. 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 following which he or she will
continue to serve on 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
57
<PAGE>
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 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.
Employee Stock Purchase Plan
The Vicinity Corporation 2000 Employee Stock Purchase Plan was adopted by our
Board of Directors in December 1999 and by our stockholders in January 2000. A
total of 200,000 shares of common stock may be sold under the purchase plan. 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
12 months in duration. The offer periods start on March 1 and end on the last
day of February 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 February 28, 2001. Each offer period is comprised
of two consecutive six-month purchase periods. 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.
58
<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
purchase 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
purchase 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 purchase period or (2) the last day of the purchase 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.
59
<PAGE>
Principal Stockholders
The following table sets forth information with respect to the beneficial
ownership of our common stock as of January 10, 2000, 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 January
10, 2000, 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 19,700,956 shares and 25,700,956
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 29.4% 22.5%
Oak Investment Partners
(3)........................ 4,252,994 21.6 16.5
21st Century Internet Fund,
L.P. (4)................... 1,850,000 9.4 7.2
EnCompass Group, Inc. (5)... 1,332,000 6.8 5.2
Emerick Woods............... 755,137 3.8 2.9
Scott Young................. 240,000 1.2 *
David Seltzer............... 130,000 * *
Gregory Beasley............. 205,000 1.0 *
Mary Gavin.................. 80,000 * *
Herbert M. Dwight, Jr....... 210,000 1.1 *
Jon Callaghan (2)........... 5,788,536 29.4 22.5
Jim J. Geddes, Jr. (5)...... 200,000 1.0 *
Fred Gibbons (6)............ 108,576 * *
Peter Mills (2)............. 5,788,536 29.4 22.5
Norman Nie.................. 31,905 * *
Michael Sears............... 20,000 * *
Peter Ziebelman (4)......... 1,850,000 9.4 7.2
All directors and executive
officers as a group (18
persons)................... 10,174,154 51.6 39.6
</TABLE>
- -------------------
* Less than 1% of total.
(1) Gives effect to the shares of common stock issuable within 60 days of
January 10, 2000 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.
60
<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.
61
<PAGE>
Certain Transactions
We 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. The last of these agreements expired in
December 1999. 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 agreement expired in May 1999. In fiscal 1998 and 1999, our
revenue related to this agreement was approximately $32,000 and $160,000,
respectively. In January 2000, we entered into an agreement with AltaVista
pursuant to which we agreed to provide our BrandFinder functionality to
AltaVista. During the initial term of this agreement, we will be paid a portion
of the revenues generated from advertising sold by AltaVista on pages
displaying our content and services. We have not yet received any revenue under
this agreement. 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.
62
<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 January 10, 2000, there were 19,700,957 shares of common stock
outstanding and held of record by 131 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."
63
<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. Our Board of Directors will be divided into three classes
of directors serving staggered three-year terms. The Certificate authorizes our
Board of Directors to fill vacant directorships or increase the size of the
Board of Directors. Accordingly, even if a stockholder brings a successful
proxy contest, he or she would likely only be able to elect a minority of our
Board of Directors at any one annual meeting.
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 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 days from the date contemplated at the time
of our notice of annual meeting provided with respect to the previous year's
annual meeting of stockholders, notice by the stockholder, to be timely, must
be so received not later than 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
64
<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 American Stock Transfer & Trust Company.
65
<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 25,700,956
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 19,700,957 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. In
accordance with the lock-up agreements described below and subject to the
provisions of Rules 144, 144(k) and 701 and, in the case of shares acquired
upon the exercise of options which are not yet fully vested, vesting,
additional shares will be available for sale in the public market as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Number of Shares Date
- ---------------- ----------------------------------------------------------------------------------
<S> <C>
177,561 After the date of this prospectus
1,048,620 At various times after 90 days from the date of this prospectus (Rule 144)
18,474,775 After 180 days from the date of this prospectus (subject, in some cases, to volume
limitations)
</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 256,427 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."
66
<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. 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. 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 or strategic investment 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 large number of shares eligible for public sale after this
offering could cause our stock price to decline."
Following this offering, holders of 16,682,100 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."
67
<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........................................................... 6,000,000
=========
</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 900,000 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 18.5 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,
68
<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;
. the issuance of shares in connection with any acquisition or strategic
investment if the terms of the issuance provide that these shares
shall not be resold prior to the expiration of the 180-day lockup
period; 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.
69
<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. These 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.
70
<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 Notes 9 and 12
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
------------ ------------ ------------ ------------
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
------------ ------------ ------------ ------------
Total assets......... $ 1,821,108 $ 13,203,249 $ 11,415,005 $ 13,415,005
============ ============ ============ ============
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 -- -- --
------------ ------------ ------------ ------------
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
------------ ------------ ------------ ------------
4,136,295 8,368,956 7,435,546 7,435,546
------------ ------------ ------------ ------------
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)
------------ ------------ ------------ ------------
Total stockholders'
equity (deficit).... (10,286,765) (16,568,796) (19,675,903) 5,979,459
------------ ------------ ------------ ------------
Total liabilities and
stockholders' equity
(deficit)........... $ 1,821,108 $ 13,203,249 $ 11,415,005 $ 13,415,005
============ ============ ============ ============
</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
----------- ----------- ----------- ----------- -----------
(unaudited) (unaudited)
<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
----------- ----------- ----------- ---------- -----------
Total revenues........ 1,419,404 4,809,883 6,423,651 1,491,768 2,531,506
----------- ----------- ----------- ---------- -----------
Cost of revenues........ 1,976,653 2,847,089 3,949,081 874,236 1,611,322
----------- ----------- ----------- ---------- -----------
Gross profit (loss)... (557,249) 1,962,794 2,474,570 617,532 920,184
----------- ----------- ----------- ---------- -----------
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
----------- ----------- ----------- ---------- -----------
Total operating
expenses............. 5,789,753 4,431,385 7,938,808 1,268,995 3,846,782
----------- ----------- ----------- ---------- -----------
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)
----------- ----------- ----------- ---------- -----------
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
----------- ----------- ----------- ---------- -----------
Net loss applicable to
common stockholders.. $(6,621,474) $(2,998,581) $(6,552,893) $ (797,974) $(3,374,223)
=========== =========== =========== ========== ===========
Net loss per common
share--basic and
diluted................ $ (1.61) $ (1.00) $ (1.67) $ (0.21) $ (0.71)
----------- ----------- ----------- ---------- -----------
Weighted average
shares--basic and
diluted................ 4,101,579 2,985,614 3,913,333 3,813,186 4,744,659
=========== =========== =========== ========== ===========
</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........ -- -- -- -- -- -- --
---------- ----------- --------- ------ ----------- --------- -----------
Balances, July 31, 1998........ 7,137,250 7,971,578 3,760,081 3,761 (671,691) (2,138) --
========== =========== ========= ====== =========== ========= ===========
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........ -- -- -- -- -- -- --
---------- ----------- --------- ------ ----------- --------- -----------
Balances, July 31, 1999........ 11,217,387 21,403,089 5,287,667 5,289 (300,941) (97,652) (1,044,132)
========== =========== ========= ====== =========== ========= ===========
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)..... -- -- -- -- -- -- --
---------- ----------- --------- ------ ----------- --------- -----------
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)
------------- --------------
Balances, July 31, 1998........ (9,616,697) (10,286,765)
============= ==============
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)
------------- -------------
Balances, July 31, 1999........ (15,131,360) (16,568,796)
============= =============
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)
------------- --------------
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>
----------------------------------------------------------------
Three Months Ended
Year Ended July 31, October 31, 1999
------------------------------------- -------------------------
1997 1998 1999 1998 1999
----------- ----------- ----------- ----------- ------------
(unaudited) (unaudited)
<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) --
----------- ----------- ----------- ---------- ------------
Net cash used in
operating
activities......... (5,296,673) (1,736,087) (3,540,606) (349,338) (2,545,801)
----------- ----------- ----------- ---------- ------------
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 -- -- --
----------- ----------- ----------- ---------- ------------
Net cash provided by
(used in) investing
activities......... 218,551 (8,486) (214,351) (2,532) (544,507)
----------- ----------- ----------- ---------- ------------
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) -- -- -- --
----------- ----------- ----------- ---------- ------------
Net cash provided by
financing
activities......... 4,975,121 1,096,974 12,551,406 199,483 693,137
----------- ----------- ----------- ---------- ------------
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
----------- ----------- ----------- ---------- ------------
Cash and cash
equivalents at end of
period................. $ 911,543 $ 263,944 $ 9,060,393 $ 111,557 $ 6,663,222
=========== =========== =========== ========== ============
Supplemental disclosure
of cash flow
information:
Cash paid during the
period for interest... $ -- $ 23,520 $ 97,205 $ 43 $ 59,741
=========== =========== =========== ========== ============
Schedule of noncash
investing and financing
activities:
Equipment purchased
under capital lease... $ -- $ -- $ 823,623 $ 131,164 $ 708,424
=========== =========== =========== ========== ============
Common stock
repurchased with
forgiveness of notes
receivable............ $ 3,612 $ -- $ -- $ -- $ --
=========== =========== =========== ========== ============
Accretion on redeemable
preferred stock and
warrants.............. $ 383,379 $ 517,965 $ 1,038,230 $ 128,658 $ 502,273
=========== =========== =========== ========== ============
Common stock issued for
note receivable....... $ -- $ -- $ 95,514 $ -- $ 115,594
=========== =========== =========== ========== ============
Deferred compensation
related to stock
option grants......... $ -- $ -- $ 1,210,800 $ -- $ 1,050,425
=========== =========== =========== ========== ============
</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. Revenues are recognized in accordance with Statement of Position (SOP)
No. 97-2, Software Revenue Recognition. As such, 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 12 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) (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
----- ------ ------ ----------- -----------
7,352 10,606 12,906 10,538 15,688
===== ====== ====== =========== ===========
</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>
--------------------- -----------
July 31,
--------------------- October 31,
1998 1999 1999
---------- ---------- -----------
(unaudited)
<S> <C> <C> <C>
Cash.......................................... $ 261,221 $ 121,444 $ 277,898
Money market funds............................ 2,723 8,938,949 6,385,324
---------- ---------- ----------
$ 263,944 $9,060,393 $6,663,222
========== ========== ==========
</TABLE>
(b) Property and Equipment
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
---------------------- -----------
July 31,
---------------------- October 31,
1998 1999 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
---------- ---------- ----------
77,447 1,115,421 2,362,975
Less accumulated depreciation and
amortization............................ (11,594) (202,932) (380,290)
---------- ---------- ----------
$ 65,853 $ 912,489 $1,982,685
========== ========== ==========
</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>
---------------------------------
July 31, October 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
---------- ---------- ----------
$ 210,775 $1,245,234 $ 545,672
========== ========== ==========
</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 Liquidation Liquidation Redemption Redemption
-------------------- October 31, preference premium per price per premium
1998 1999 1999 per share share share per share
--------- ---------- ----------- ----------- ----------- ---------- ----------
(unaudited)
<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
--------- ---------- ----------
7,137,250 11,217,387 11,567,387
========= ========== ==========
</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, July 31,
------------------------ -----------------------
October 31, October 31,
1998 1999 1999 1998 1999 1999
----------- ------------ ----------- ----------- ----------- -----------
(unaudited) (unaudited)
<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
----------- ------------ ----------- ----------- ----------- -----------
$ 7,971,578 $ 32,066,788 $34,994,570 $ 7,971,578 $22,641,677 $24,857,320
=========== ============ =========== =========== =========== ===========
</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
---------- ---------- ---------
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
---------- ---------- ---------
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
---------- ---------- ---------
Balances as of July 31, 1999................ 427,867 2,064,000 $ 0.22
========== ========== =========
</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 -- --
- ------------- --------- --- ----- ------- -----
$0.10 to 1.25 2,064,000 8.7 $0.22 547,042 $0.10
============= ========= === ===== ======= =====
</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)
----------- ----------- -----------
Net loss applicable to common
stockholders - pro forma.............. $(6,626,106) $(3,015,316) $(6,589,938)
=========== =========== ===========
Basic and diluted net loss per share:
As reported.......................... $ (1.61) $ (1.00) $ (1.67)
=========== =========== ===========
Pro forma............................ $ (1.62) $ (1.00) $ (1.67)
=========== =========== ===========
</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
----------- --------- -----------
$ -- $ -- $ --
=========== ========= ===========
</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
----------- -----------
Total gross deferred tax assets before valuation
allowance......................................... 4,641,352 6,281,163
Valuation allowance.................................. (4,641,352) (6,281,163)
----------- -----------
Net deferred tax assets............................ $ -- $ --
=========== ===========
</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
- ----------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C>
2000.................................................. $ 585,420 $ 712,787
2001.................................................. 672,370 188,362
2002.................................................. 72,905 125,294
2003.................................................. -- 13,238
----------- -----------
Total minimum lease payments......................... 1,330,695 $ 1,039,681
===========
Less amount representing interest..................... (76,639)
-----------
Present value of minimum lease payments............... 1,254,055
Less current portion.................................. (730,082)
-----------
$ 523,974
===========
</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
----------
$1,082,344
==========
</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. Contingencies
In May 1999, a founder and former employee of the Company filed a complaint
against the Company and several of the Company's officers in California
Superior Court for reformation of contract alleging various contract and tort
causes of action, including reformation of contract, breach of contract, fraud
and interference with economic and contractual relations and seeking
declaratory relief. In the complaint, the founder and former employee seeks,
among other things, the issuance of at least 281,250 shares of common stock, an
unspecified amount of compensatory damages and punitive damages, plus
attorneys' fees. In November 1999, the court stayed the claim and granted the
Company's motion to compel arbitration. As of the date of this prospectus, the
founder and former employee has not taken action to pursue his claim in
arbitration. If and when this claim is pursued in arbitration, the Company
plans to vigorously defend against these allegations.
10. 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.
11. 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.
12. 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 OF VICINITY CORP.]
<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.............................................. $24,486
NASD filing fee................................................... 8,895
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..................................................... 4,119
---------
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 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 January 10, 2000, the Registrant issued 2,920,649
shares of its Common Stock to 60 individuals upon exercise of outstanding
employee incentive stock options. These sales were 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 January 10, 2000, the Registrant issued options
exercisable for 4,278,975 shares (net of cancellations) of its Common Stock
pursuant to Registrant's 1996 Incentive Stock Option Plan to 152 individuals.
Of this amount, options for 3,000,649 shares of Common Stock had been exercised
as of January 10, 2000. These grants were 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.
10.26 Vicinity Corporation Elaine Hamilton Non-Statutory Stock Option
Agreement, dated October 13, 1999, by and between Vicinity
Corporation and Elaine Hamilton.
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 14th day of January, 2000.
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 January 14, 2000
______________________________________ and Director (Principal
Emerick M. Woods Executive Officer)
/s/ David Seltzer Chief Financial Officer January 14, 2000
______________________________________ (Principal Financial and
David Seltzer Accounting Officer)
* Chairman of the Board of January 14, 2000
______________________________________ Directors
Herbert M. Dwight, Jr.
* Director January 14, 2000
______________________________________
Jonathan Callaghan
* Director January 14, 2000
______________________________________
James J. Geddes, Jr.
* Director January 14, 2000
______________________________________
Fred Gibbons
* Director January 14, 2000
______________________________________
Peter Mills
* Director January 14, 2000
______________________________________
Norman Nie
* Director January 14, 2000
______________________________________
Michael Sears
* Director January 14, 2000
______________________________________
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 Notes 9 and 12 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>
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.
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.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<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.
10.26 Vicinity Corporation Elaine Hamilton Non-Statutory Stock Option
Agreement, dated October 13, 1999, by and between Vicinity Corporation
and Elaine Hamilton.
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.
<PAGE>
EXHIBIT 1.1
DRAFT AS OF 1/13/99
VICINITY CORPORATION
6,000,000 Shares of Common Stock
Underwriting Agreement
_______________, 2000
J.P. Morgan Securities Inc.
Bear, Stearns & Co., Inc.
U.S. Bancorp Piper Jaffray Inc.
As Representatives of several
underwriters listed in Schedule I
hereto
c/o J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
Ladies and Gentlemen:
Vicinity Corporation, a Delaware corporation (the "Company"), proposes to
issue and sell to the several Underwriters listed in Schedule I hereto (the
"Underwriters"), for whom you are acting as representatives (the
"Representatives"), an aggregate of 6,000,000 shares of common stock, par value
$0.001 per share, of the Company (the "Underwritten Shares") and, for the sole
purpose of covering over-allotments in connection with the sale of the
Underwritten Shares, at the option of the Underwriters, up to an additional
900,000 shares of common stock of the Company (the "Option Shares"). The
Underwritten Shares and the Option Shares are herein referred to as the
"Shares". The shares of common stock of the Company to be outstanding after
giving effect to the sale of the Shares are herein referred to as the "Stock".
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") in accordance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "Securities Act"), a registration
statement, including a prospectus, relating to the Shares. The registration
statement as amended at the time when it shall become effective including
information (if any) deemed to be part of the registration statement at the time
of
<PAGE>
effectiveness pursuant to Rule 430A under the Securities Act, is referred to in
this Agreement as the "Registration Statement", and the prospectus in the form
first used to confirm sales of Shares is referred to in this Agreement as the
"Prospectus". If the Company has filed an abbreviated registration statement
pursuant to Rule 462(b) under the Securities Act (the "Rule 462 Registration
Statement"), then any reference herein to the term "Registration Statement"
shall be deemed to include such Rule 462 Registration Statement.
The Company hereby agrees with the Underwriters as follows:
1. The Company agrees to issue and sell the Underwritten Shares to the
several Underwriters as hereinafter provided, and each Underwriter, upon the
basis of the representations and warranties herein contained, but subject to the
conditions hereinafter stated, agrees to purchase, severally and not jointly,
from the Company the respective number of Underwritten Shares set forth opposite
such Underwriter's name in Schedule I hereto at a purchase price per share the
"Purchase Price" of $______.
In addition, the Company agrees to issue and sell the Option Shares to the
several Underwriters as hereinafter provided, and the Underwriters on the basis
of the representations and warranties herein contained, but subject to the
conditions hereinafter stated, shall have the option to purchase, severally and
not jointly, from the Company up to an aggregate of 900,000 Option Shares at the
Purchase Price, for the sole purpose of covering over-allotments (if any) in the
sale of Underwritten Shares by the several Underwriters.
If any Option Shares are to be purchased, the number of Option Shares to be
purchased by each Underwriter shall be the number of Option Shares which bears
the same ratio to the aggregate number of Option Shares being purchased as the
number of Underwritten Shares set forth opposite the name of such Under writer
in Schedule I hereto (or such number increased as set forth in Section 9 hereof)
bears to the aggregate number of Underwritten Shares being purchased from the
Company by the several Underwriters, subject, however, to such adjustments to
eliminate any fractional Shares as the Representatives in their sole discretion
shall make.
The Underwriters may exercise the option to purchase the Option Shares at
any time (but not more than once) on or before the thirtieth day following the
date of this Agreement, by written notice from the Representatives to the
Company. Such notice shall set forth the aggregate number of Option Shares as
to which the option is being exercised and the date and time when the Option
Shares are to be delivered and paid for which may be the same date and time as
the Closing Date (as hereinafter defined) but shall not be earlier than the
Closing Date nor later than the tenth full Business Day (as hereinafter defined)
after the date of such notice
2
<PAGE>
(unless such time and date are postponed in accordance with the provisions of
Section 9 hereof). Any such notice shall be given at least two Business Days
prior to the date and time of delivery specified therein.
2. The Company understands that the Underwriters intend (i) to make a
public offering of the Shares as soon after (A) the Registration Statement has
become effective and (B) the parties hereto have executed and delivered this
Agreement, as in the judgment of the Representatives is advisable and (ii)
initially to offer the Shares upon the terms set forth in the Prospectus.
3. Payment for the Shares shall be made by wire transfer in immediately
available funds to the account specified by the Company to the Representatives
in the case of the Underwritten Shares, on ___________, 2000, or at such other
time on the same or such other date, not later than the fifth Business Day
thereafter, as the Representatives and the Company may agree upon in writing or,
in the case of the Option Shares, on the date and time specified by the
Representatives in the written notice of the Underwriters' election to purchase
such Option Shares. The time and date of such payment for the Underwritten
Shares is referred to herein as the "Closing Date" and the time and date for
such payment for the Option Shares, if other than the Closing Date, are herein
referred to as the "Additional Closing Date". As used herein, the term
"Business Day" means any day other than a day on which banks are permitted or
required to be closed in New York City.
Payment for the Shares to be purchased on the Closing Date or the
Additional Closing Date, as the case may be, shall be made against delivery to
the Representatives for the respective accounts of the several Underwriters of
the Shares to be purchased on such date registered in such names and in such
denominations as the Representatives shall request in writing not later than two
full Business Days prior to the Closing Date or the Additional Closing Date, as
the case may be, with any transfer taxes payable in connection with the transfer
to the Underwriters of the Shares duly paid by the Company. The certificates
for the Shares will be made available for inspection and packaging by the
Representatives at the office of J.P. Morgan Securities Inc. set forth above not
later than 1:00 P.M., New York City time, on the Business Day prior to the
Closing Date or the Additional Closing Date, as the case may be.
4. The Company represents and warrants to each Underwriter that:
(a) no order preventing or suspending the use of any preliminary
prospectus has been issued by the Commission, and each preliminary
prospectus filed as part of the Registration Statement as originally filed
or as part of any amendment thereto, or filed pursuant to Rule 424 under
the Securities Act, complied when so filed in all material respects with
the
3
<PAGE>
Securities Act, and did not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information relating to any
Underwriter furnished to the Company in writing by such Underwriter through
the Representatives expressly for use therein;
(b) no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceeding for that purpose
has been instituted or, to the knowledge of the Company, threatened by the
Commission; and the Registration Statement and Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or
supplements thereto) comply, or will comply, as the case may be, in all
material respects with the Securities Act and do not and will not, as of
the applicable effective date as to the Registration Statement and any
amendment thereto and as of the date of the Prospectus and any amendment or
supplement thereto, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, and the Prospectus, as amended
or supplemented, if applicable, at the Closing Date or Additional Closing
Date, as the case may be, will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading; except that the foregoing representations and
warranties shall not apply to statements or omissions in the Registration
Statement or the Prospectus made in reliance upon and in conformity with
information relating to any Underwriter furnished to the Company in writing
by such Underwriter through the Representatives expressly for use therein;
(c) the financial statements, and the related notes thereto,
included in the Registration Statement and the Prospectus present fairly
the financial position of the Company as of the dates indicated and the
results of its operations and changes in its cash flows for the periods
specified; said financial statements have been prepared in conformity with
generally accepted accounting principles applied on a consistent basis, and
the supporting schedules included in the Registration Statement present
fairly the information required to be stated therein;
(d) since the respective dates as of which information is given
in the Registration Statement and the Prospectus, there has not been any
change in the capital stock or long-term debt of the Company, or any
4
<PAGE>
material adverse change, or any development involving a prospective
material adverse change, in or affecting the business, prospects,
management, financial position, stockholders' equity or results of
operations of the Company (a "Material Adverse Effect"), otherwise than as
set forth or contemplated in the Prospectus; and except as set forth or
contemplated in the Prospectus the Company has not entered into any
transaction or agreement (whether or not in the ordinary course of
business) material to the Company;
(e) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, with power and authority (corporate and
other) to own its properties and conduct its business as described in the
Prospectus, and has been duly qualified as a foreign corporation for the
transaction of business and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties, or conducts any
business, so as to require such qualification, other than where the failure
to be so qualified or in good standing would not have a Material Adverse
Effect on the Company;
(f) this Agreement has been duly authorized, executed and
delivered by the Company;
(g) the Company has an authorized capitalization as set forth in
the Prospectus and such authorized capital stock conforms as to legal
matters to the description thereof set forth in the Prospectus, and all of
the outstanding shares of capital stock of the Company have been duly
authorized and validly issued, are fully-paid and non-assessable and are
not subject to any pre-emptive or similar rights; and, except as described
in or expressly contemplated by the Prospectus, there are no outstanding
rights (including, without limitation, pre-emptive rights), warrants or
options to acquire, or instruments convertible into or exchangeable for,
any shares of capital stock or other equity interest in the Company, or any
contract, commitment, agreement, understanding or arrangement of any kind
relating to the issuance of any capital stock of the Company, any such
convertible or exchangeable securities or any such rights, warrants or
options;
(h) the Shares to be issued and sold by the Company hereunder
have been duly authorized, and, when issued and delivered to and paid for
by the Underwriters in accordance with the terms of this Agreement, will be
duly issued and will be fully paid and non-assessable and will conform to
the descriptions thereof in the Prospectus; and the issuance of the Shares
is not subject to any preemptive or similar rights;
5
<PAGE>
(i) the Company is not, nor with the giving of notice or lapse
of time or both would be, in violation of or in default under, its
Certificate of Incorporation or By-Laws or any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which the Company
is a party or by which it or any of its properties is bound, except for
violations and defaults which individually and in the aggregate would not
reasonably be expected to have a Material Adverse Effect; the issue and
sale of the Shares and the performance by the Company of its obligations
under this Agreement and the consummation of the transactions contemplated
herein will not conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage, deed
of trust, loan agreement or other agreement or instrument to which the
Company is a party or by which the Company is bound or to which any of the
property or assets of the Company is subject, nor will any such action
result in any violation of the provisions of the Certificate of
Incorporation or the By-Laws of the Company or any applicable law or
statute or any order, rule or regulation of any court or governmental
agency or body having jurisdiction over the Company or any of its
properties; and no consent, approval, authorization, order, license,
registration or qualification of or with any such court or governmental
agency or body is required for the issue and sale of the Shares or the
consummation by the Company of the transactions contemplated by this
Agreement, except such consents, approvals, authorizations, orders,
licenses, registrations or qualifications as have been obtained under the
Securities Act and as may be required under state securities or Blue Sky
Laws in connection with the purchase and distribution of the Shares by the
Underwriters;
(j) other than as set forth or contemplated in the Prospectus,
there are no legal or governmental investigations, actions, suits or
proceedings pending or, to the knowledge of the Company, threatened against
or affecting the Company or any of its properties or to which the Company
is or may be a party or to which any property of the Company is or may be
the subject which, if determined adversely to the Company, could
individually or in the aggregate have, or reasonably be expected to have, a
Material Adverse Effect and, to the best of the Company's knowledge, no
such proceedings are threatened or contemplated by governmental authorities
or threatened by others; and there are no statutes, regulations, contracts
or other documents that are required to be described in the Registration
Statement or Prospectus or to be filed as exhibits to the Registration
Statement that are not described or filed as required;
(k) the Company has good and marketable title in fee simple to
all items of real property and good and marketable title to all personal
6
<PAGE>
property owned by it, in each case free and clear of all liens,
encumbrances and defects except such as are described or referred to in the
Prospectus or such as do not materially affect the value of such property
and do not interfere with the use made or proposed to be made of such
property by the Company; and any real property and buildings held under
lease by the Company are held by it under valid, existing and enforceable
leases with such exceptions as are not material and do not interfere with
the use made or proposed to be made of such property and buildings by the
Company;
(l) no relationship, direct or indirect, exists between or among
the Company on the one hand, and the directors, officers, stockholders,
customers or suppliers of the Company on the other hand, which is required
by the Securities Act to be described in the Registration Statement and the
Prospectus which is not so described;
(m) except as disclosed in the Registration Statement no person
has the right to require the Company to register any securities for
offering and sale under the Securities Act by reason of the filing of the
Registration Statement with the Commission or the issue and sale of the
Shares;
(n) the Company is not and, after giving effect to the offering
and sale of the Shares, will not be an "investment company" or an entity
"controlled" by an "investment company", as such terms are defined in the
Investment Company Act of 1940, as amended (the "Investment Company Act");
(o) the Company has complied with all provisions of Section
517.075, Florida Statutes (Chapter 92-198, Laws of Florida) relating to
doing business with the Government of Cuba or with any person or affiliate
located in Cuba;
(p) KPMG LLP, who have certified certain financial statements of
the Company are independent public accountants as required by the
Securities Act;
(q) the Company has filed all federal, state, local and foreign
tax returns which have been required to be filed and has paid all taxes
shown thereon and all assessments received by it to the extent that such
taxes have become due and are not being contested in good faith except
where the failure to file or pay would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect; and,
except as disclosed in the Registration Statement and the Prospectus, there
is no tax deficiency which has been or might reasonably be expected to be
asserted
7
<PAGE>
or threatened against the Company except for such tax deficiencies as would
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect;
(r) the Company has not taken nor will it take, directly or
indirectly, any action designed to, or that might be reasonably expected
to, cause or result in stabilization or manipulation of the price of the
Common Stock;
(s) the Company owns, possesses or has obtained all licenses,
permits, certificates, consents, orders, approvals and other authorizations
from, and has made all declarations and filings with, all federal, state,
local and other governmental authorities (including foreign regulatory
agencies), all self-regulatory organizations and all courts and other
tribunals, domestic or foreign, necessary to own or lease, as the case may
be, and to operate its properties and to carry on its business as conducted
as of the date hereof except where the failure to own, possess, obtain or
make would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect, and the Company has not received any actual
notice of any proceeding relating to revocation or modification of any such
license, permit, certificate, consent, order, approval or other
authorization, except as described in the Registration Statement and the
Prospectus; and the Company is in compliance with all laws and regulations
relating to the conduct of its business as conducted as of the date hereof;
(t) there are no existing or, to the knowledge of the Company,
threatened labor disputes with the employees of the Company which could
reasonably be expected to have a Material Adverse Effect;
(u) to the knowledge of the Company, the Company owns, is
licensed to use or otherwise possesses rights to use the patents, licenses,
inventions, trademarks, servicemarks, trade names, copyrights and know-how
(collectively, "Intellectual Property") necessary to conduct the business
of the Company as presently conducted or proposed to be conducted, except
to the extent that the failure to own, be licensed to use or otherwise
possess rights to use such Intellectual Property would not have a Material
Adverse Effect. The Company has not received any notice of infringement of
or conflict with, and the Company has no knowledge of any infringement of
or conflict with, asserted rights of others with respect to its
Intellectual Property. The discoveries, inventions, products or processes
of the Company referred to in the Registration Statement do not, to the
knowledge of the Company, infringe or conflict with any right or patent of
a third party, or any discovery, patent, product or process which
8
<PAGE>
is the subject of a patent application filed by any third party known to
the Company which could have Material Adverse Effect. The Company is
unaware of any basis for a finding that the Intellectual Property owned or
licensed by the Company is invalid or unenforceable. The Company has no
outstanding claim or suit for, and has no knowledge of, any continuing
infringement or misappropriation by any other person of any Intellectual
Property owned or licensed by the Company.
5. The Company covenants and agrees with each of the several
Underwriters as follows:
(a) to use its best efforts to cause the Registration Statement to
become effective at the earliest possible time and, if required, to file
the final Prospectus with the Commission within the time periods specified
by Rule 424(b) and Rule 430A under the Securities Act; and to furnish
copies of the Prospectus to the Underwriters in New York City prior to
10:00 a.m., New York City time, on the Business Day next succeeding the
date of this Agreement in such quantities as the Representatives may
reasonably request;
(b) to deliver, at the expense of the Company, to the Representatives
four signed copies of the Registration Statement (as originally filed) and
each amendment thereto, in each case including exhibits, and to each other
Underwriter a conformed copy of the Registration Statement (as originally
filed) and each amendment thereto, in each case without exhibits and,
during the period mentioned in Section 5 below, to each of the Underwriters
as many copies of the Prospectus (including all amendments and supplements
thereto) as the Representatives may reasonably request;
(c) before filing any amendment or supplement to the Registration
Statement or the Prospectus, whether before or after the time the
Registration Statement becomes effective, to furnish to the Representatives
a copy of the proposed amendment or supplement for review and not to file
any such proposed amendment or supplement to which the Representatives
reasonably object;
(d) to advise the Representatives promptly, and to confirm such
advice in writing (i) when the Registration Statement has become effective,
(ii when any amendment to the Registration Statement has been filed or
becomes effective, (ii when any supplement to the Prospectus or any amended
Prospectus has been filed and to furnish the Representatives with copies
thereof, (iv) of any request by the Commission for any amendment to the
Registration Statement or any amendment or
9
<PAGE>
supplement to the Prospectus or for any additional information, (v) of the
issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or of any order preventing or suspending the
use of any preliminary prospectus or the Prospectus or the initiation or
threatening of any proceeding for that purpose, (vi of the occurrence of
any event, within the period referenced in Section 5 below, as a result of
which the Prospectus as then amended or supplemented would include an
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not
misleading, and (vi of the receipt by the Company of any notification with
respect to any suspension of the qualification of the Shares for offer and
sale in any jurisdiction or the initiation or threatening of any proceeding
for such purpose; and to use its best efforts to prevent the issuance of
any such stop order, or of any order preventing or suspending the use of
any preliminary prospectus or the Prospectus, or of any order suspending
any such qualification of the shares, or notification of any such order
thereof and, if issued, to obtain as soon as possible the withdrawal
thereof;
(e) if, during such period of time after the first date of the public
offering of the Shares as in the opinion of counsel for the Underwriters a
prospectus relating to the Shares is required by law to be delivered in
connection with sales by the Underwriters or any dealer, any event shall
occur as a result of which it is necessary to amend or supplement the
Prospectus in order to make the statements therein, in the light of the
circumstances when the Prospectus is delivered to a purchaser, not
misleading, or if it is necessary to amend or supplement the Prospectus to
comply with law, forthwith to prepare and furnish, at the expense of the
Company, to the Underwriters and to the dealers (whose names and addresses
the Representatives will furnish to the Company) to which Shares may have
been sold by the Representatives on behalf of the Underwriters and to any
other dealers upon request, such amendments or supplements to the
Prospectus as may be necessary so that the statements in the Prospectus as
so amended or supplemented will not, in the light of the circumstances when
the Prospectus is delivered to a purchaser, be misleading or so that the
Prospectus will comply with law;
(f) to endeavor to qualify the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as the Representatives
shall reasonably request and to continue such qualification in effect so
long as reasonably required for distribution of the Shares; provided that
the Company shall not be required to file a general consent to service of
process in any jurisdiction;
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(g) to make generally available to its security holders and to the
Representatives as soon as practicable an earnings statement covering a
period of at least twelve months beginning with the first fiscal quarter of
the Company occurring after the effective date of the Registration
Statement, which shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 of the Commission promulgated thereunder;
(h) for three years after the date of the Prospectus, to furnish to
the Representatives upon request copies of all reports or other
communications (financial or other) furnished to holders of the Shares, and
copies of any reports and financial statements furnished to or filed with
the Commission or any national securities exchange;
(i) for a period of 180 days after the date of the Prospectus (the
"Lockup Period") not to (i) 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 Stock or any securities convertible into or exercisable or
exchangeable for Stock or (ii enter into any swap or other agreement that
transfers, in whole or in part, any of the economic consequences of
ownership of the Stock, whether any such transaction described in clause
(i) or (ii) above is to be settled by delivery of Stock or such other
securities, in cash or otherwise without the prior written consent of J.P.
Morgan Securities, Inc., other than the Shares to be sold hereunder and any
shares of Stock of the Company issued upon the exercise of (a) options
granted under existing employee stock option plans or (b) warrants
outstanding on the date hereof. Notwithstanding the foregoing, the Company
may issue shares of Stock during the Lockup Period in connection with
acquisitions, strategic alliances or joint ventures ("Excepted
Transactions") provided that (i) the Company shall give J.P. Morgan
Securities Inc. five days prior written notice of any such issuance
describing the Excepted Transaction in reasonable detail and stating the
number of shares of stock proposed to be issued in the Excepted
Transaction, (ii) all stock issued in connection with the Excepted
Transaction shall remain subject to the restrictions of this paragraph for
the remainder of the Lockup Period and (iii) each person that is to acquire
any such stock shall sign a lockup agreement in form and substance
reasonably acceptable to J.P. Morgan Securities Inc. covering all such
stock for the remainder of the Lockup Period;
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(j) to use the net proceeds received by the Company from the sale of
the Shares pursuant to this Agreement in the manner specified in the
Prospectus under the caption "Use of Proceeds";
(k) to use its best efforts to list for quotation the Shares on the
National Association of Securities Dealers Automated Quotations National
Market (the "Nasdaq National Market");
(l) to file with the Commission such reports as may be required by
Rule 463 under the Securities Act; and
(m) whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, to pay or cause to be paid
all costs and expenses incident to the performance of its obligations
hereunder, including without limiting the generality of the foregoing, all
costs and expenses (i) incident to the preparation, issuance, execution and
delivery of the Shares, (ii incident to the preparation, printing and
filing under the Securities Act of the Registration Statement, the
Prospectus and any preliminary prospectus (including in each case all
exhibits, amendments and supplements thereto), (ii incurred in connection
with the registration or qualification of the Shares under the laws of such
jurisdictions as the Representatives may designate (including fees of
counsel for the Underwriters and its disbursements), (iv in connection with
the listing of the Shares on the Nasdaq National Market, (v) related to the
filing with, and clearance of the offering by, the National Association of
Securities Dealers, Inc., (vi in connection with the printing (including
word processing and duplication costs) and delivery of this Agreement, the
Preliminary and Supplemental Blue Sky Memoranda and the furnishing to the
Underwriters and dealers of copies of the Registration Statement and the
Prospectus, including mailing and shipping, as herein provided, (vi any
expenses incurred by the Company in connection with a "road show"
presentation to potential investors, (vi the cost of preparing stock
certificates and (ix the cost and charges of any transfer agent and any
registrar.
6. The several obligations of the Underwriters hereunder to purchase
the Shares on the Closing Date or the Additional Closing Date, as the case may
be, are subject to the performance by the Company of its obligations hereunder
and to the following additional conditions:
(a) the Registration Statement shall have become effective (or if a
post-effective amendment is required to be filed under the Securities Act,
such post-effective amendment shall have become effective) not later than
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5:00 P.M., New York City time, on the date hereof; and no stop order
suspending the effectiveness of the Registration Statement or any post-
effective amendment shall be in effect, and no proceedings for such purpose
shall be pending before or threatened by the Commission; the Prospectus
shall have been filed with the Commission pursuant to Rule 424(b) within
the applicable time period prescribed for such filing by the rules and
regulations under the Securities Act and in accordance with Section 5
hereof; and all requests for additional information shall have been
complied with to the satisfaction of the Representatives;
(b) the representations and warranties of the Company contained
herein that are qualified as to materiality, are true and correct, and all
other representations and warranties of the Company contained herein are
true and correct in all material respects, on and as of the Closing Date or
the Additional Closing Date, as the case may be, as if made on and as of
the Closing Date or the Additional Closing Date, as the case may be, and
the Company shall have complied in all material respects with all
agreements and all conditions on its part to be performed or satisfied
hereunder at or prior to the Closing Date or the Additional Closing Date,
as the case may be;
(c) since the respective dates as of which information is given in
the Prospectus there shall not have been any change in the capital stock or
long-term debt of the Company or any Material Adverse Effect, otherwise
than as set forth or contemplated in the Prospectus, the effect of which in
the judgment of the Representatives makes it impracticable or inadvisable
to proceed with the public offering or the delivery of the Shares on the
Closing Date or the Additional Closing Date, as the case may be, on the
terms and in the manner contemplated in the Prospectus; and the Company has
not sustained since the date of the latest audited financial statements
included in the Prospectus any material loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or contemplated in the
Prospectus;
(d) the Representatives shall have received on and as of the Closing
Date or the Additional Closing Date, as the case may be, a certificate of
an executive officer of the Company, with specific knowledge about the
Company's financial matters, reasonably satisfactory to the Representatives
to the effect set forth in Sections 6(a), 6(b) and 6(c) (with respect to
the respective representations, warranties, agreements and conditions of
the Company) and to the further effect that there has not oc-
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curred any Material Adverse Effect, from that set forth or contemplated in
the Registration Statement;
(e) Latham & Watkins, counsel for the Company, shall have furnished
to the Representatives their written opinion, dated the Closing Date or the
Additional Closing Date, as the case may be, in form and substance
reasonably satisfactory to the Representatives, to the effect that:
(i) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with corporate power and authority to own its properties
and conduct its business as described in the Prospectus;
(ii) based solely on certificates from public officials,
such counsel confirms that the Company is duly qualified to do
business in the State of California;
(iii) to the best of such counsel's knowledge other than as
set forth or contemplated in the Prospectus, there are no legal or
governmental proceedings pending or threatened that are required to be
described in the Registration Statement or Prospectus or to be filed
as exhibits to the Registration Statement that are not described or
filed as required;
(iv) this Agreement has been duly authorized, executed and
delivered by the Company;
(v) the authorized capital stock of the Company consists
solely of 100,000,000 shares of common stock, par value $0.001 per
share, and 5,000,000 shares of preferred stock, par value $0.001 per
share;
(vi) the shares of capital stock of the Company outstanding
prior to the issuance of the Shares to be sold by the Company have
been duly authorized and are validly issued, fully paid and non-
assessable;
(vii) the Shares to be issued and sold by the Company
hereunder have been duly authorized, and when delivered to and paid
for the Underwriters in accordance with the terms of this Agreement,
will be validly issued, fully paid and non-assessable and the issuance
of the Shares is not subject to any preemptive or similar rights;
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<PAGE>
(viii) the statements in the Prospectus under "Business --
Legal Proceedings" and "Description of Capital Stock" and in the
Registration Statement in Item 14, insofar as such statements
constitute a summary of legal matters, documents or proceedings
referred to therein, are accurate in all material respects;
(ix) the Registration Statement and the Prospectus and any
amendments and supplements thereto (other than the financial
statements and related schedules and other financial and statistical
data included therein, as to which such counsel need express no
opinion) comply as to form in all material respects with the
requirements for registration statements on Form S-1 of the Securities
Act and the rules and regulations of the Commission thereunder, and no
facts came to the attention of such counsel that caused such counsel
to believe that (other than the financial statements and related
schedules and other financial and statistical data included therein,
as to which such counsel need express no belief) the Registration
Statement and the prospectus included therein at the time the
Registration Statement became effective contained any untrue statement
of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or that the Prospectus, as amended or supplemented, if
applicable, as of its respective date and as of the date hereof,
contained any untrue statement of a material fact or omitted to state
a material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading;
(x) the issue and sale of the Shares being delivered on the
Closing Date or the Additional Closing Date, as the case may be, and
the performance by the Company of its obligations under this Agreement
and the consummation of the transactions contemplated herein will not
result in a breach of any of the terms or provisions of, or constitute
a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument included as an exhibit to
the Registration Statement to which the Company is a party or by which
the Company is bound or to which any of the property or assets of the
Company is subject which breach would reasonably be expected to result
in a Material Adverse Effect, nor will any such action result in any
violation of the provisions of the Certificate of Incorporation or the
By-Laws of the Company or any applicable law or statute of the State
of California, any federal law of the United States or the General
Corporation Law of the State of
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<PAGE>
Delaware known to such counsel to be applicable to companies in the
same line or lines of business as the Company;
(xi) no consent, approval, authorization, order or filing
with any court or governmental agency or body is required for the
issue and sale of the Shares, except such consents, approvals,
authorizations, orders, or filings as have been obtained under the
Securities Act and as may be required under state securities or Blue
Sky laws in connection with the purchase and distribution of the
Shares by the Underwriters and the filing of the Company's Restated
Certificate of Incorporation with the Secretary of State of Delaware;
and
(xii) the Company is not and, after giving effect to the
offering and sale of the Shares, will not be an "investment company"
or entity "controlled" by an "investment company", as such terms are
defined in the Investment Company Act.
In rendering such opinions, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States and
the States of California and Delaware, to the extent such counsel deems proper
and to the extent specified in such opinion, if at all, upon an opinion or
opinions (in form and substance reasonably satisfactory to Underwriters'
counsel) of other counsel reasonably acceptable to the Underwriters' counsel,
familiar with the applicable laws and (B) as to matters of fact, to the extent
such counsel deems proper, on certificates of responsible officers of the
Company and certificates or other written statements of officials of
jurisdictions having custody of documents respecting the corporate existence or
good standing of the Company. The opinion of such counsel for the Company shall
state that the opinion of any such other counsel upon which they relied is in
form satisfactory to such counsel and, in such counsel's opinion, the
Underwriters and they are justified in relying thereon. With respect to the
matters to be covered in Section 6 above counsel may state their opinion and
belief is based upon their participation in the preparation of the Registration
Statement and the Prospectus and any amendment or supplement thereto and review
and discussion of the contents thereof but is without independent check or
verification except as specified.
The opinion of Latham & Watkins described above shall be rendered to the
Underwriters at the request of the company and shall so state therein.
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<PAGE>
(f) on the effective date of the Registration Statement and the
effective date of the most recently filed post-effective amendment to the
Registration Statement and also on the Closing Date or Additional Closing
Date, as the case may be, KPMG LLP, shall have furnished to you letters,
dated the respective dates of delivery thereof, in form and substance
reasonably satisfactory to you, containing statements and information of
the type customarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain financial
information contained in the Registration Statement and the Prospectus;
(g) the Representatives shall have received on and as of the Closing
Date or Additional Closing Date, as the case may be, an opinion of Davis
Polk & Wardwell, counsel to the Underwriters, with respect to the due
authorization and valid issuance of the Shares, the Registration Statement,
the Prospectus and other related matters as the Representatives may
reasonably request, and such counsel shall have received such papers and
information as they may reasonably request to enable them to pass upon such
matters;
(h) the Shares to be delivered on the Closing Date or Additional
Closing Date, as the case may be, shall have been approved for listing on
the Nasdaq National Market, subject to official notice of issuance;
(i) on or prior to the Closing Date or Additional Closing Date, as
the case may be, the Company shall have furnished to the Representatives
such further certificates and documents as the Representatives shall
reasonably request;
(j) The "lock-up" agreements, each substantially in the form of
Exhibit A hereto, between you and certain stockholders, officers and
directors of the Company relating to sales and certain other dispositions
of shares of Stock or certain other securities, delivered to you on or
before the date hereof, shall be in full force and effect on the Closing
Date or Additional Closing Date, as the case may be.
7. The Company agrees to indemnify and hold harmless each Underwriter
and each person, if any, who controls any Underwriter within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act, from
and against any and all losses, claims, damages and liabilities (including,
without limitation, the legal fees and other expenses incurred in connection
with any suit, action or proceeding or any claim asserted) caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) or any
17
<PAGE>
preliminary prospectus, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any untrue statement or omission or alleged
untrue statement or omission made in reliance upon and in conformity with
information relating to any Underwriter furnished to the Company in writing by
such Underwriter through the Representatives expressly for use therein;
provided, however, that the foregoing indemnity with respect to any preliminary
prospectus shall not inure to the benefit of any Underwriter from whom the
person asserting any such losses, claims, damages or liabilities purchased
shares, or any person controlling such Underwriter, if a copy of the Prospectus
(as then amended or supplemented) was not sent or given by or on behalf of such
Underwriter to such persons, if required by law to have been delivered, at or
prior to the written confirmation of the sale of the shares to such person, and
if the Prospectus (as to amended or supplemented) would have cured the default
giving rise to such losses, claims, damages or liabilities.
Each Underwriter agrees, severally and not jointly, to indemnify and hold
harmless the Company, its directors, its officers who sign the Registration
Statement and each person who controls the Company within the meaning of Section
15 of the Securities Act and Section 20 of the Exchange Act to the same extent
as the foregoing indemnity from the Company to each Underwriter, but only with
reference to information relating to such Underwriter furnished to the Company
in writing by such Underwriter through the Representatives expressly for use in
the Registration Statement, the Prospectus, any amendment or supplement thereto,
or any preliminary prospectus.
If any suit, action, proceeding (including any governmental or regulatory
investigation), claim or demand shall be brought or asserted against any person
in respect of which indemnity may be sought pursuant to either of the two
preceding paragraphs, such person (the "Indemnified Person") shall promptly
notify the person against whom such indemnity may be sought (the "Indemnifying
Person") in writing, and the Indemnifying Person, upon request of the
Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may designate in such proceeding and shall pay the fees and
expenses of such counsel related to such proceeding. In any such proceeding, any
Indemnified Person shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Person
unless (i) the Indemnifying Person and the Indemnified Person shall have
mutually agreed to the contrary, (ii) the Indemnifying Person has failed within
a reasonable time to retain counsel reasonably satisfactory to the Indemnified
Person or (iii) the named parties in any such proceeding (including any
impleaded parties) include both the Indemnifying Person and the Indemnified
Person and
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<PAGE>
representation of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them. It is understood that the
Indemnifying Person shall not, in connection with any proceeding or related
proceeding in the same jurisdiction, be liable for the fees and expenses of more
than one separate firm (in addition to any local counsel) for all Indemnified
Persons, and that all such fees and expenses shall be reimbursed as they are
incurred and such control persons of Underwriters shall be designated in writing
by J.P. Morgan Securities Inc. and any such separate firm for the Company, its
directors, its officers who sign the Registration Statement and such control
persons of the Company shall be designated in writing by the Company. The
Indemnifying Person shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the Indemnifying Person agrees to
indemnify any Indemnified Person from and against any loss or liability by
reason of such settlement or judgment. Notwithstanding the foregoing sentence,
if at any time an Indemnified Person shall have requested an Indemnifying Person
to reimburse the Indemnified Person for fees and expenses of counsel as
contemplated by the second and third sentences of this paragraph, the
Indemnifying Person agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 days after receipt by such Indemnifying Person of the
aforesaid request and (ii) such Indemnifying Person shall not have reimbursed
the Indemnified Person in accordance with such request prior to the date of such
settlement. No Indemnifying Person shall, without the prior written consent of
the Indemnified Person, effect any settlement of any pending or threatened
proceeding in respect of which any Indemnified Person is or could have been a
party and indemnity could have been sought hereunder by such Indemnified Person,
unless such settlement includes an unconditional release of such Indemnified
Person from all liability on claims that are the subject matter of such
proceeding.
If the indemnification provided for in the first and second paragraphs of
this Section 7 is unavailable to an Indemnified Person or insufficient in
respect of any losses, claims, damages or liabilities referred to therein, then
each Indemnifying Person under such paragraph, in lieu of indemnifying such
Indemnified Person thereunder, shall contribute to the amount paid or payable by
such Indemnified Person as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriters on the
other hand from the offering of the Shares or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Company on the one hand and the
Underwriters on the other hand in connection with the statements or omissions
that resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The
19
<PAGE>
relative benefits received by the Company on the one hand and the Underwriters
on the other hand shall be deemed to be in the same respective proportions as
the net proceeds from the offering (before deducting expenses) received by the
Company and the total underwriting discounts and the commissions received by the
Underwriters, in each case as set forth in the table on the cover of the
Prospectus, bear to the aggregate public offering price of the Shares. The
relative fault of the Company on the one hand and the Underwriters on the other
hand shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Company
or by the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purposes) or by any other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Person as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses incurred by such Indemnified Person in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, in no event shall an
Underwriter be required to contribute any amount in excess of the amount by
which the total price at which the Shares underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages that
such Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations to
contribute pursuant to this Section 7 are several in proportion to the
respective number of Shares set forth opposite their names in Schedule I hereto,
and not joint.
The remedies provided for in this Section 7 are not exclusive and shall not
limit any rights or remedies which may otherwise be available to any indemnified
party at law or in equity.
The indemnity and contribution agreements contained in this Section 7 and
the representations and warranties of the Company set forth in this Agreement
shall remain operative and in full force and effect regardless of (i) any
termination of this Agreement, (ii) any investigation made by or on behalf of
any Underwriter or any person controlling any Underwriter or by or on behalf of
the Company, its
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officers or directors or any other person controlling the Company and (iii)
acceptance of and payment for any of the Shares.
8. Notwithstanding anything herein contained, this Agreement (or the
obligations of the several Underwriters with respect to the Option Shares) may
be terminated in the absolute discretion of the Representatives, by notice given
to the Company, if after the execution and delivery of this Agreement and prior
to the Closing Date (or, in the case of the Option Shares, prior to the
Additional Closing Date) (i) trading generally shall have been suspended or
materially limited on or by, as the case may be, any of the New York Stock
Exchange or the American Stock Exchange, or the Nasdaq National Market, (ii)
trading of any securities of or guaranteed by the Company shall have been
suspended on any exchange or in any over-the-counter market, (iii) a general
moratorium on commercial banking activities in New York shall have been declared
by either Federal or New York State authorities, or (iv) there shall have
occurred any outbreak or escalation of hostilities or any change in financial
markets or any calamity or crisis that, in the judgment of the Representatives,
is material and adverse and which, in the judgment of the Representatives, makes
it impracticable to market the Shares being delivered at the Closing Date or the
Additional Closing Date, as the case may be, on the terms and in the manner
contemplated in the Prospectus.
9. This Agreement shall become effective upon the later of (x)
execution and delivery hereof by the parties hereto and (y) release of
notification of the effectiveness of the Registration Statement (or, if
applicable, any post-effective amendment) by the Commission.
If on the Closing Date or the Additional Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase Shares
which it or they have agreed to purchase hereunder on such date, and the
aggregate number of Shares which such defaulting Underwriter or Underwriters
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate number of Shares to be purchased on such date, the other Underwriters
shall be obligated severally in the proportions that the number of Shares set
forth opposite their respective names in Schedule I bears to the aggregate
number of Underwritten Shares set forth opposite the names of all such non-
defaulting Underwriters, or in such other proportions as the Representatives may
specify, to purchase the Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date; provided
that in no event shall the number of Shares that any Underwriter has agreed to
purchase pursuant to Section 1 be increased pursuant to this Section 9 by an
amount in excess of one-tenth of such number of Shares without the written
consent of such Underwriter. If on the Closing Date or the Additional Closing
Date, as the case may be, any Underwriter or Underwriters shall fail or refuse
to purchase Shares which it or they have agreed to purchase
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hereunder on such date, and the aggregate number of Shares with respect to which
such default occurs is more than one-tenth of the aggregate number of Shares to
be purchased on such date, and arrangements satisfactory to the Representatives
and the Company for the purchase of such Shares are not made within 36 hours
after such default, this Agreement (or the obligations of the several
Underwriters to purchase the Option Shares, as the case may be) shall terminate
without liability on the part of any non-defaulting Underwriter or the Company.
In any such case either you or the Company shall have the right to postpone the
Closing Date (or, in the case of the Option Shares, the Additional Closing
Date), but in no event for longer than seven days, in order that the required
changes, if any, in the Registration Statement and in the Prospectus or in any
other documents or arrangements may be effected. Any action taken under this
paragraph shall not relieve any defaulting Underwriter from liability in respect
of any default of such Underwriter under this Agreement.
10. If this Agreement shall be terminated by the Underwriters, or any
of them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement or any condition of the Underwriters' obligations cannot be fulfilled,
the Company agrees to reimburse the Underwriters or such Underwriters as have so
terminated this Agreement with respect to themselves, severally, for all out-of-
pocket expenses (including the fees and expenses of its counsel) reasonably
incurred by the Underwriter in connection with this Agreement or the offering
contemplated hereunder.
11. This Agreement shall inure to the benefit of and be binding upon
the Company, the Underwriters, any controlling persons referred to herein and
their respective successors and assigns. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any other person, firm or
corporation any legal or equitable right, remedy or claim under or in respect of
this Agreement or any provision herein contained. No purchaser of Shares from
any Underwriter shall be deemed to be a successor by reason merely of such
purchase.
12. Any action by the Underwriters hereunder may be taken by the
Representatives jointly or by J.P. Morgan Securities Inc. on behalf of the
Underwriters, and any such action taken by the Representatives jointly or by
J.P. Morgan Securities Inc. alone shall be binding upon the Underwriters. All
notices and other communications hereunder shall be in writing and shall be
deemed to have been duly given if mailed or transmitted by any standard form of
telecommunication. Notices to the Underwriters shall be given to the
Representatives, c/o J.P. Morgan Securities Inc., 60 Wall Street, New York, New
York 10260 (telefax: 212-483-2323); Attention: Syndicate Department. Notices to
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the Company shall be given to it at Vicinity Corporation, 1135A San Antonio Rd.,
Palo Alto, CA 94303, (telefax: 650-237-0306); Attention: Scott Shuda.
13. This Agreement may be signed in counterparts, each of which shall
be an original and all of which together shall constitute one and the same
instrument.
14. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICTS
OF LAWS PROVISIONS THEREOF.
23
<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return four counterparts hereof.
Very truly yours,
VICINITY CORPORATION
By:____________________________________
Title: Chief Executive Officer
Accepted:_________, 2000
J.P. Morgan Securities Inc.
Bear, Stearns & Co., Inc.
U.S. Bancorp Piper Jaffray Inc.
Acting severally on behalf of themselves
and the several Underwriters listed
in Schedule I hereto.
By: J.P. Morgan Securities Inc.
Acting on behalf of itself and the several
Underwriters listed in Schedule I
hereto.
By:_______________________________________________________________________
Title:
24
<PAGE>
SCHEDULE I
___________ ________________
Underwriter Number of Shares
To Be Purchased
J.P. Morgan Securities Inc.................................
Bear, Stearns & Co. Inc.................................... ___________
U.S. Bancorp Piper Jaffray Inc............................. ___________
Total 6,000,000
<PAGE>
Exhibit A
---------
FORM OF LOCK-UP AGREEMENT
_________________, 1999
J.P. Morgan Securities Inc.
Bear, Stearns & Co. Inc.
U.S. Bancorp Piper Jaffray Inc.
As Representatives of the Underwriters
named in Schedule I to the
Underwriting Agreement referred to below
c/o J.P. Morgan Securities Inc.
60 Wall Street
New York, NY 10260
Re: Vicinity Corporation -- Public Offering
Ladies and Gentlemen:
The undersigned understands that you, as Representatives of the several
Underwriters, propose to enter into an Underwriting Agreement (the "Underwriting
Agreement") with Vicinity Corporation, a California corporation (the "Company"),
providing for the public offering (the "Public Offering") by the several
Underwriters named in Schedule I to the Underwriting Agreement (the
"Underwriters"), of Common Stock, $.001 par value, of the Company (the
"Securities"). Capitalized terms used herein and not otherwise defined shall
have the meanings set forth in the Underwriting Agreement.
In consideration of the Underwriters' agreement to purchase and make the
Public Offering of the Securities, and for other good and valuable consideration
receipt of which is hereby acknowledged, the undersigned hereby agrees that,
without the prior written consent of J.P. Morgan Securities Inc. on behalf of
the Underwriters, the undersigned will not, during the period ending 180 days
after the date of the prospectus relating to the Public Offering (the
"Prospectus"), (1) 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,
$.001 per share par value, of the Company (the "Common Stock") or any securities
convertible into or exercisable or exchangeable for Common Stock (including
without limitation, Common Stock which may be deemed to be beneficially owned by
the undersigned in accordance with the rules and regulations of the Securities
and Exchange Commission and
<PAGE>
securities which may be issued upon exercise of a stock option or warrant) or
(2) enter into any swap or other agreement that transfers, in whole or in part,
any of the economic consequences of ownership of the Common Stock, whether any
such transaction described in clause (1) or (2) above is to be settled by
delivery of Common Stock or such other securities, in cash or otherwise. In
addition, the undersigned agrees that, without the prior written consent of J.P.
Morgan Securities Inc. on behalf of the Underwriters, it will not, during the
period ending 180 days after the date of the Prospectus, make any demand for or
exercise any right with respect to, the registration of any shares of Common
Stock or any security convertible into or exercisable or exchangeable for Common
Stock.
In furtherance of the foregoing, the Company, and any duly appointed
transfer agent for the registration or transfer of the securities described
herein, are hereby authorized to decline to make any transfer of securities if
such transfer would constitute a violation or breach of this Letter Agreement.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to enter into this Letter Agreement. All authority
herein conferred or agreed to be conferred and any obligations of the
undersigned shall be binding upon the successors, assigns, heirs or personal
representatives of the undersigned.
The undersigned understands that, if the Underwriting Agreement does not
become effective, or if the Underwriting Agreement (other than the provisions
thereof which survive termination) shall terminate or be terminated prior to
payment for and delivery of the Common Stock to be sold thereunder, the
undersigned shall be released from all obligations under this Letter Agreement.
The undersigned understands that the Underwriters are entering into the
Underwriting Agreement and proceeding with the Public Offering in reliance upon
this Letter Agreement.
This lock-up agreement shall be governed by and construed in accordance
with the laws of the State of New York, without regard to the conflict of laws
principles thereof.
Very truly yours,
[NAME OF STOCKHOLDER]
By:_____________________________________
Name:
Title:
2
<PAGE>
Accepted as of the date first set forth above:
J.P. Morgan Securities Inc.
Bear, Stearns & Co. Inc.
U.S. Bancorp Piper Jaffray Inc.
Acting severally on behalf of themselves
and the several Underwriters
named in Schedule I to the
Underwriting Agreement
By: J.P. MORGAN SECURITIES INC.
By: ___________________________________________________________
Name:
Title:
By: BEAR, STEARNS & CO. INC.
By: ___________________________________________________________
Name:
Title:
By: U.S. BANCORP PIPER JAFFRAY
INC.
By: ___________________________________________________________
Name:
Title:
3
<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 under the name
"Vicinity Merger Sub Corporation".
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 one-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.
The members of the present Board of Directors are allocated as follows:
Jonathan Callaghan Class I
James J. Geddes, Jr. Class I
Fred Gibbons Class I
Norman Nie Class II
Michael Sears Class II
Peter Ziebelman Class II
Herbert M. Dwight, Jr. Class III
Peter Mills Class III
Emerick Woods Class III
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 Chairman of 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 this
Article 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 3.4
AMENDED AND RESTATED BYLAWS
OF
VICINITY CORPORATION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<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>
i
<PAGE>
TABLE OF CONTENTS
(Continued)
Page
----
<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>
ii
<PAGE>
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 chairman of 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
1
<PAGE>
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.
2
<PAGE>
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
3
<PAGE>
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 4.1
INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE
VICINITY CORPORATION
SEE REVERSE FOR
CERTAIN DEFINITIONS
CUSIP 925653 10 7
THIS CERTIFIES THAT
IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, $0.001 PAR VALUE, OF
VICINITY CORPORATION
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this certificate properly
endorsed. This certificate is not valid unless countersigned and registered by
the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
SECRETARY
PRESIDENT AND CEO
COUNTERSIGNED AND REGISTERED:
AMERICAN STOCK TRANSFER & TRUST COMPANY
(NEW YORK, N.Y.)
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE>
VICINITY CORPORATION
A statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights as established, from time to time, by the Certificate of
Incorporation of the Corporation and by any certificate of designation, and the
number of shares constituting each class and series and the designations
thereof, may be obtained by the holder hereof upon request and without charge
from the Corporation at its principal office.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM N as tenants in common
TEN ENT N as tenants by the entireties
JT TEN N as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT N ......................... Custodian
..............................
(Cust)
(Minor)
under Uniform Gifts to Minors
Act
.................................................................
(State)
UNIF TRF MIN ACT N ................. Custodian (until age
....................)
(Cust)
............................ under Uniform Transfers
(Minor)
to Minors Act
........................................................
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED,
hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
Shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated
THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS WRITTEN
UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
X
X
NOTICE:
Signature(s) Guaranteed
By
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP
IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE
17Ad-15.
<PAGE>
EXHIBIT 10.3
VICINITY CORPORATION
2000 EQUITY PARTICIPATION PLAN
<PAGE>
TABLE OF CONTENTS
Page
----
TABLE OF CONTENTS
Page
----
1. Purposes of the Plan......................................................1
2. DEFINITIONS...............................................................1
3. STOCK SUBJECT TO THE PLAN.................................................4
4. ADMINISTRATION OF THE PLAN................................................4
5. ELIGIBILITY...............................................................6
6. LIMITATIONS...............................................................6
7. TERM OF PLAN..............................................................6
8. TERM OF OPTION............................................................6
9. OPTION EXERCISE PRICE AND CONSIDERATION...................................7
10. EXERCISE OF OPTION........................................................8
11. NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS.................11
12. GRANTING OF OPTIONS TO INDEPENDENT DIRECTORS.............................11
13. TERMS OF OPTIONS GRANTED TO INDEPENDENT DIRECTORS........................11
14. STOCK PURCHASE RIGHTS....................................................12
15. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER OR ASSET SALE.........12
16. TIME OF GRANTING OPTIONS AND STOCK PURCHASE RIGHTS.......................15
17. AMENDMENT AND TERMINATION OF THE PLAN....................................15
18. STOCKHOLDER APPROVAL............................................... .....15
19. INABILITY TO OBTAIN AUTHORITY............................................16
20. RESERVATION OF SHARES....................................................16
21. INFORMATION TO HOLDERS AND PURCHASERS....................................16
22. INVESTMENT INTENT........................................................16
23. GOVERNING LAW............................................................17
i
<PAGE>
VICINITY CORPORATION
2000 EQUITY PARTICIPATION PLAN
1. Purposes of the Plan. The purposes of the Vicinity Corporation 2000 Equity
--------------------
Participation Plan are to attract and retain the best available personnel for
positions of substantial responsibility, to provide additional incentive to
Employees, Directors and Consultants and to promote the success of the Company's
business. Options granted under the Plan may be Incentive Stock Options or Non-
Qualified Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Acquisition" means (i) any consolidation or merger of the Company with
-----------
or into any other corporation or other entity or person in which the
stockholders of the Company prior to such consolidation or merger own less than
fifty percent (50%) of the Company's voting power immediately after such
consolidation or merger, excluding any consolidation or merger effected
exclusively to change the domicile of the Company; or (ii) a sale of all or
substantially all of the assets of the Company.
(b) "Administrator" means the Board or the Committee responsible for
-------------
conducting the general administration of the Plan, as applicable, in accordance
with Section 4 hereof.
(c) "Applicable Laws" means the requirements relating to the administration
---------------
of stock option plans under U.S. state corporate laws, U.S. federal and state
securities laws, the Code, any stock exchange or quotation system on which the
Common Stock is listed or quoted and the applicable laws of any foreign country
or jurisdiction where Options or Stock Purchase Rights are granted under the
Plan.
(d) "Board" means the Board of Directors of the Company.
-----
(e) "Code" means the Internal Revenue Code of 1986, as amended.
----
(f) "Committee" means a committee appointed by the Board in accordance with
---------
Section 4 hereof.
(g) "Common Stock" means the Common Stock of the Company, par value $.001
------------
per share.
(h) "Company" means Vicinity Corporation, a California corporation.
-------
(i) "Consultant" means any consultant or adviser if: (i) the consultant or
----------
adviser renders bona fide services to the Company; (ii) the services rendered by
the consultant or adviser are not in connection with the offer or sale of
securities in a capital-raising transaction and do not directly or indirectly
promote or maintain a market for the Company's securities; and
1
<PAGE>
(iii) the consultant or adviser is a natural person who has contracted directly
with the Company to render such services.
(j) "Director" means a member of the Board.
--------
(k) "Employee" means any person, including an Officer or Director, who is
--------
an employee (as defined in accordance with Section 3401(c) of the Code) of the
Company or any Parent or Subsidiary of the Company. A Service Provider shall not
cease to be an Employee in the case of (i) any leave of absence approved by the
Company or (ii) transfers between locations of the Company or between the
Company, its Parent, any Subsidiary, or any successor. For purposes of Incentive
Stock Options, no such leave may exceed ninety (90) days, unless reemployment
upon expiration of such leave is guaranteed by statute or contract. Neither
service as a Director nor payment of a director's fee by the Company shall be
sufficient, by itself, to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
(m) "Fair Market Value" means, as of any date, the value of a share of
-----------------
Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange or
a national market system, including, without limitation, the Nasdaq National
Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market
Value shall be the closing sales price for a share of such stock (or the closing
bid, if no sales were reported) as quoted on such exchange or system for the
last market trading day prior to the time of determination, as reported in The
Wall Street Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market Value shall be the
mean between the high bid and low asked prices for a share of the Common Stock
on the last market trading day prior to the day of determination; or
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(n) "Holder" means a person who has been granted or awarded an Option or
------
Stock Purchase Right or who holds Shares acquired pursuant to the exercise of an
Option or Stock Purchase Right.
(o) "Incentive Stock Option" means an Option intended to qualify as an
----------------------
incentive stock option within the meaning of Section 422 of the Code and which
is designated as an Incentive Stock Option by the Administrator.
(p) "Independent Director" means a Director who is not an Employee of the
--------------------
Company.
2
<PAGE>
(q) "Non-Qualified Stock Option" means an Option (or portion thereof) that
--------------------------
is not designated as an Incentive Stock Option by the Administrator, or which is
designated as an Incentive Stock Option by the Administrator but fails to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
(r) "Officer" means a person who is an officer of the Company within the
-------
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(s) "Option" means a stock option granted pursuant to the Plan.
------
(t) "Option Agreement" means a written agreement between the Company and a
----------------
Holder evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan.
(u) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(v) "Plan" means the Vicinity Corporation 2000 Equity Participation Plan.
----
(w) "Public Trading Date" means the first date upon which Common Stock of
-------------------
the Company is listed (or approved for listing) upon notice of issuance on any
securities exchange or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system.
(x) "Restricted Stock" means Shares acquired pursuant to the exercise of an
----------------
unvested Option in accordance with Section 10(h) below or pursuant to a Stock
Purchase Right granted under Section 14 below.
(y) "Rule 16b-3" means that certain Rule 16b-3 under the Exchange Act, as
----------
such Rule may be amended from time to time.
(z) "Section 16(b)" means Section 16(b) of the Exchange Act.
-------------
(aa) "Securities Act" means the Securities Act of 1933, as amended.
--------------
(bb) "Service Provider" means an Employee, Director or Consultant.
----------------
(cc) "Share" means a share of Common Stock, as adjusted in accordance with
-----
Section 15 below.
(dd) "Stock Purchase Right" means a right to purchase Common Stock pursuant
--------------------
to Section 14 below.
(ee) "Subsidiary" means a "subsidiary corporation," whether now or hereafter
----------
existing, as defined in Section 424(f) of the Code.
3
<PAGE>
3. Stock Subject to the Plan. Subject to the provisions of Section 15 of the
-------------------------
Plan, the shares of stock subject to Options or Stock Purchase Rights shall be
shares of the Company's Common Stock, par value $.001 per share. Subject to the
provisions of Section 15 of the Plan, the maximum aggregate number of Shares
which may be issued upon exercise of such Options or Stock Purchase Rights is
the sum of (i) 1,500,000 Shares, (ii) the number of Shares that remain reserved
for issuance under the Company's 1996 Incentive Stock Option Plan (the "1996
Plan") as of January 17, 2000 and (iii) the number of Shares that, after January
17, 2000 , again become available for issuance pursuant to Section 3 of the 1996
Plan as a result of stock options issued thereunder expiring or become
unexercisable for any reason before being exercised in full. Shares issued upon
exercise of Options or Stock Purchase Rights may be authorized but unissued, or
reacquired Common Stock. If an Option or Stock Purchase Right expires or becomes
unexercisable without having been exercised in full, the unpurchased Shares
which were subject thereto shall become available for future grant or sale under
the Plan (unless the Plan has terminated). Shares which are delivered by the
Holder or withheld by the Company upon the exercise of an Option or Stock
Purchase Right under the Plan, in payment of the exercise price thereof or tax
withholding thereon, may again be optioned, granted or awarded hereunder,
subject to the limitations of this Section 3. If Shares of Restricted Stock are
repurchased by the Company at their original purchase price, such Shares shall
become available for future grant under the Plan. Notwithstanding the provisions
of this Section 3, no Shares may again be optioned, granted or awarded if such
action would cause an Incentive Stock Option to fail to qualify as an Incentive
Stock Option under Code Section 422.
4. Administration of the Plan.
--------------------------
(a) Administrator. The Plan shall be administered by the Compensation
-------------
Committee of the Board (or another committee or subcommittee of the Board
designated as the Administrator under the Plan) which shall consist solely of
two or more Independent Directors each of whom is both an "outside director,"
within the meaning of Section 162(m) of the Code, and a "non-employee director"
within the meaning of Rule 16b-3. Within the scope of such authority, the Board
or the Committee may (i) delegate to a committee of one or more members of the
Board who are not Independent Directors the authority to grant awards under the
Plan to eligible persons who are either (1) not then "covered employees," within
the meaning of Section 162(m) of the Code and are not expected to be "covered
employees" at the time of recognition of income resulting from such award or (2)
not persons with respect to whom the Company wishes to comply with Section
162(m) of the Code and/or (ii) delegate to a committee of one or more members of
the Board who are not "non-employee directors," within the meaning of Rule 16b-
3, the authority to grant awards under the Plan to eligible persons who are not
then subject to Section 16 of the Exchange Act. The Board may abolish the
Committee at any time and revest in the Board the administration of the Plan.
Appointment of Committee members shall be effective upon acceptance of
appointment. Committee members may resign at any time by delivering written
notice to the Board. Vacancies in the Committee may only be filled by the Board.
(b) Powers of the Administrator. Subject to the provisions of the Plan and the
---------------------------
specific duties delegated by the Board to such Committee, and subject to
the approval of any relevant authorities, the Administrator shall have the
authority in its discretion:
4
<PAGE>
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and Stock
Purchase Rights may from time to time be granted hereunder;
(iii) to determine the number of Shares to be covered by each such
award granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions of any Option or Stock
Purchase Right granted hereunder (such terms and conditions include, but are not
limited to, the exercise price, the time or times when Options or Stock Purchase
Rights may vest or be exercised (which may be based on performance criteria),
any vesting acceleration or waiver of forfeiture restrictions, and any
restriction or limitation regarding any Option or Stock Purchase Right or the
Common Stock relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine);
(vi) to determine whether to offer to buyout a previously granted
Option as provided in subsection 10(i) and to determine the terms and conditions
of such offer and buyout (including whether payment is to be made in cash or
Shares);
(vii) to prescribe, amend and rescind rules and regulations relating
to the Plan, including rules and regulations relating to sub-plans established
for the purpose of qualifying for preferred tax treatment under foreign tax
laws;
(viii) to allow Holders to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon exercise
of an Option or Stock Purchase Right that number of Shares having a Fair Market
Value equal to the minimum amount required to be withheld based on the statutory
withholding rates for federal and state tax purposes that apply to supplemental
taxable income. The Fair Market Value of the Shares to be withheld shall be
determined on the date that the amount of tax to be withheld is to be
determined. All elections by Holders to have Shares withheld for this purpose
shall be made in such form and under such conditions as the Administrator may
deem necessary or advisable;
(ix) to amend the Plan or any Option or Stock Purchase Right granted
under the Plan as provided in Section 17; and
(x) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan and to exercise such powers and perform such acts
as the Administrator deems necessary or desirable to promote the best interests
of the Company which are not in conflict with the provisions of the Plan.
(c) Effect of Administrator's Decision. All decisions, determinations and
----------------------------------
interpretations of the Administrator shall be final and binding on all Holders.
5
<PAGE>
5. Eligibility. Non-Qualified Stock Options and Stock Purchase Rights may be
-----------
granted to Service Providers. Incentive Stock Options may be granted only to
Employees. If otherwise eligible, an Employee or Consultant who has been granted
an Option or Stock Purchase Right may be granted additional Options or Stock
Purchase Rights. Each Independent Director shall be eligible to be granted
Options at the times and in the manner set forth in Section 12.
6. Limitations.
-----------
(a) Each Option shall be designated by the Administrator in the Option
Agreement as either an Incentive Stock Option or a Non-Qualified Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of Shares subject to a Holder's Incentive Stock Options and
other incentive stock options granted by the Company, any Parent or Subsidiary,
which become exercisable for the first time during any calendar year (under all
plans of the Company or any Parent or Subsidiary) exceeds $100,000, such excess
Options or other options shall be treated as Non-Qualified Stock Options.
For purposes of this Section 6(a), Incentive Stock Options shall be taken
into account in the order in which they were granted, and the Fair Market Value
of the Shares shall be determined as of the time of grant.
(b) Neither the Plan, any Option nor any Stock Purchase Right shall confer
upon a Holder any right with respect to continuing the Holder's employment or
consulting relationship with the Company, nor shall they interfere in any way
with the Holder's right or the Company's right to terminate such employment or
consulting relationship at any time, with or without cause.
(c) No Service Provider shall be granted, in any calendar year, Options or
Stock Purchase Rights to purchase more than 1,000,000 Shares. The foregoing
limitation shall be adjusted proportionately in connection with any change in
the Company's capitalization as described in Section 15. For purposes of this
Section 6(c), if an Option is canceled in the same calendar year it was granted
(other than in connection with a transaction described in Section 15), the
canceled Option will be counted against the limit set forth in this Section
6(c). For this purpose, if the exercise price of an Option is reduced, the
transaction shall be treated as a cancellation of the Option and the grant of a
new Option.
7. Term of Plan. The Plan shall become effective upon its initial adoption by
------------
the Board and shall continue in effect until it is terminated under Section 17
of the Plan. No Options or Stock Purchase Rights may be issued under the Plan
after the tenth (10th) anniversary of the earlier of (i) the date upon which the
Plan is adopted by the Board or (ii) the date the Plan is approved by the
stockholders.
8. Term of Option. The term of each Option shall be stated in the Option
--------------
Agreement; provided, however, that the term shall be no more than ten (10) years
from the date of grant thereof. In the case of an Incentive Stock Option granted
to a Holder who, at the time the Option is granted, owns (or is treated as
owning under Code Section 424) stock representing
6
<PAGE>
more than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the term of the Option shall be five (5)
years from the date of grant or such shorter term as may be provided in the
Option Agreement.
9. Option Exercise Price and Consideration.
---------------------------------------
(a) Except as provided in Section 13, the per share exercise price for the
Shares to be issued upon exercise of an Option shall be such price as is
determined by the Administrator, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of grant of such
Option, owns (or is treated as owning under Code Section 424) stock representing
more than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the per Share exercise price shall be no
less than one hundred ten percent (110%) of the Fair Market Value per Share on
the date of grant.
(B) granted to any other Employee, the per Share exercise price
shall be no less than one hundred percent (100%) of the Fair Market Value per
Share on the date of grant.
(ii) In the case of a Non-Qualified Stock Option
(A) granted to a Service Provider who, at the time of grant of
such Option, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
exercise price shall be no less than one hundred ten percent (110%) of the Fair
Market Value per Share on the date of the grant.
(B) granted to any other Service Provider, the per Share exercise
price shall be no less than eighty-five percent (85%) of the Fair Market Value
per Share on the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted with a per
Share exercise price other than as required above pursuant to an Acquisition or
other corporate transaction.
(b) The consideration to be paid for the Shares to be issued upon exercise
of an Option, including the method of payment, shall be determined by the
Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant). Such consideration may consist of (1) cash,
(2) check, (3) with the consent of the Administrator, a full recourse promissory
note bearing interest (at no less than such rate as shall then preclude the
imputation of interest under the Code) and payable upon such terms as may be
prescribed by the Administrator, (4) with the consent of the Administrator,
other Shares which (x) in the case of Shares acquired from the Company, have
been owned by the Holder for more than six (6) months on the date of surrender,
and (y) have a Fair Market Value on the date of surrender equal
7
<PAGE>
to the aggregate exercise price of the Shares as to which such Option shall be
exercised, (5) with the consent of the Administrator, surrendered Shares then
issuable upon exercise of the Option having a Fair Market Value on the date of
exercise equal to the aggregate exercise price of the Option or exercised
portion thereof, (6) property of any kind which constitutes good and valuable
consideration, (7) with the consent of the Administrator, delivery of a notice
that the Holder has placed a market sell order with a broker with respect to
Shares then issuable upon exercise of the Options and that the broker has been
directed to pay a sufficient portion of the net proceeds of the sale to the
Company in satisfaction of the Option exercise price, provided, that payment of
such proceeds is then made to the Company upon settlement of such sale, or (8)
with the consent of the Administrator, any combination of the foregoing methods
of payment.
10. Exercise of Option.
------------------
(a) Vesting; Fractional Exercises. Except as provided in Section 13,
----------------------------
Options granted hereunder shall be vested and exercisable according to the terms
hereof at such times and under such conditions as determined by the
Administrator and set forth in the Option Agreement; provided, however, that,
except with regard to Options granted to Officers, Directors or Consultants, in
no event shall an Option granted hereunder become vested and exercisable at a
rate of less than twenty percent (20%) per year over five (5) years from the
date the Option is granted, subject to reasonable conditions, such as continuing
to be a Service Provider. An Option may not be exercised for a fraction of a
Share.
(b) Deliveries upon Exercise. All or a portion of an exercisable Option
------------------------
shall be deemed exercised upon delivery of all of the following to the Secretary
of the Company or his or her office:
(i) A written or electronic notice complying with the applicable rules
established by the Administrator stating that the Option, or a portion thereof,
is exercised. The notice shall be signed by the Holder or other person then
entitled to exercise the Option or such portion of the Option ;
(ii) Such representations and documents as the Administrator, in its
absolute discretion, deems necessary or advisable to effect compliance with
Applicable Laws. The Administrator may, in its absolute discretion, also take
whatever additional actions it deems appropriate to effect such compliance,
including, without limitation, placing legends on share certificates and issuing
stop transfer notices to agents and registrars;
(iii) Upon the exercise of all or a portion of an unvested Option
pursuant to Section 10(h), a Restricted Stock purchase agreement in a form
determined by the Administrator and signed by the Holder or other person then
entitled to exercise the Option or such portion of the Option; and
(iv) In the event that the Option shall be exercised pursuant to
Section 10(f) by any person or persons other than the Holder, appropriate proof
of the right of such person or persons to exercise the Option.
8
<PAGE>
(c) Conditions to Delivery of Share Certificates. The Company shall not be
--------------------------------------------
required to issue or deliver any certificate or certificates for Shares
purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:
(i) The admission of such Shares to listing on all stock exchanges
on which such class of stock is then listed;
(ii) The completion of any registration or other qualification of
such Shares under any state or federal law, or under the rulings or regulations
of the Securities and Exchange Commission or any other governmental regulatory
body which the Administrator shall, in its absolute discretion, deem necessary
or advisable ;
(iii) The obtaining of any approval or other clearance from any state
or federal governmental agency which the Administrator shall, in its absolute
discretion, determine to be necessary or advisable;
(iv) The lapse of such reasonable period of time following the
exercise of the Option as the Administrator may establish from time to time for
reasons of administrative convenience; and
(v) The receipt by the Company of full payment for such Shares,
including payment of any applicable withholding tax, which in the discretion of
the Administrator may be in the form of consideration used by the Holder to pay
for such Shares under Section 9(b).
(d) Termination of Relationship as a Service Provider. If a Holder ceases
-------------------------------------------------
to be a Service Provider other than by reason of the Holder's disability or
death, such Holder may exercise his or her Option within such period of time as
is specified in the Option Agreement to the extent that the Option is vested on
the date of termination (but in no event later than the expiration of the term
of the Option as set forth in the Option Agreement). In the absence of a
specified time in the Option Agreement, the Option shall remain exercisable for
three (3) months following the Holder's termination. If, on the date of
termination, the Holder is not vested as to his or her entire Option, the Shares
covered by the unvested portion of the Option immediately cease to be issuable
under the Option and shall again become available for issuance under the Plan.
If, after termination, the Holder does not exercise his or her Option within the
time period specified herein, the Option shall terminate, and the Shares covered
by such Option shall again become available for issuance under the Plan.
(e) Disability of Holder. If a Holder ceases to be a Service Provider as a
--------------------
result of the Holder's disability, the Holder may exercise his or her Option
within such period of time as is specified in the Option Agreement to the extent
the Option is vested on the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Option Agreement). In
the absence of a specified time in the Option Agreement, the Option shall remain
exercisable for twelve (12) months following the Holder's termination. If such
disability is not a "disability" as such term is defined in Section 22(e)(3) of
the Code, in the case of an Incentive Stock Option such Incentive Stock Option
shall automatically cease to be treated as an
9
<PAGE>
Incentive Stock Option and shall be treated for tax purposes as a Non-Qualified
Stock Option from and after the day which is three (3) months and one (1) day
following such termination. If, on the date of termination, the Holder is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall immediately cease to be issuable under the Option
and shall again become available for issuance under the Plan. If, after
termination, the Holder does not exercise his or her Option within the time
specified herein, the Option shall terminate, and the Shares covered by such
Option shall again become available for issuance under the Plan.
(f) Death of Holder. If a Holder dies while a Service Provider, the Option
---------------
may be exercised within such period of time as is specified in the Option
Agreement (but in no event later than the expiration of the term of such Option
as set forth in the Notice of Grant), by the Holder's estate or by a person who
acquires the right to exercise the Option by bequest or inheritance, but only to
the extent that the Option is vested on the date of death. In the absence of a
specified time in the Option Agreement, the Option shall remain exercisable for
twelve (12) months following the Holder's termination. If, at the time of death,
the Holder is not vested as to his or her entire Option, the Shares covered by
the unvested portion of the Option shall immediately cease to be issuable under
the Option and shall again become available for issuance under the Plan. The
Option may be exercised by the executor or administrator of the Holder's estate
or, if none, by the person(s) entitled to exercise the Option under the Holder's
will or the laws of descent or distribution. If the Option is not so exercised
within the time specified herein, the Option shall terminate, and the Shares
covered by such Option shall again become available for issuance under the Plan.
(g) Regulatory Extension. A Holder's Option Agreement may provide that if
--------------------
the exercise of the Option following the termination of the Holder's status as a
Service Provider (other than upon the Holder's death or Disability) would be
prohibited at any time solely because the issuance of shares would violate the
registration requirements under the Securities Act, then the Option shall
terminate on the earlier of (i) the expiration of the term of the Option set
forth in Section 8 or (ii) the expiration of a period of three (3) months after
the termination of the Holder's status as a Service Provider during which the
exercise of the Option would not be in violation of such registration
requirements.
(h) Early Exercisability. The Administrator may provide in the terms of a
--------------------
Holder's Option Agreement that the Holder may, at any time before the Holder's
status as a Service Provider terminates, exercise the Option in whole or in part
prior to the full vesting of the Option; provided, however, that subject to
Section 10(j), Shares acquired upon exercise of an Option which has not fully
vested may be subject to any forfeiture, transfer or other restrictions as the
Administrator may determine in its sole and absolute discretion.
(i) Buyout Provisions. The Administrator may at any time offer to buyout
-----------------
for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Holder at the time that such offer is made.
10
<PAGE>
(j) Repurchase Provisions. The Administrator in its discretion may provide
---------------------
that the Company may repurchase Shares acquired upon exercise of an Option upon
a Holder's termination as a Service Provider for any reason (including death or
disability) provided, however that any such repurchase right shall be set forth
in the applicable Option Agreement or in another agreement referred to in such
agreement. If the repurchase option gives the Company the right to repurchase
the Shares upon termination as a Service Provider at the original purchase price
for such Shares, then (i) the right to repurchase at the original purchase price
shall lapse at the rate of at least twenty percent (20%) of the shares per year
over five (5) years from the date the Option is granted (without respect to the
date the Option was exercised or became exercisable) and (ii) the right to
repurchase shall be exercised for cash or cancellation of purchase money
indebtedness for the shares within ninety (90) days of termination of status as
a Service Provider (or, in the case of shares issued upon exercise of Options
after such date of termination, within ninety (90) days after the date of the
exercise) or such longer period as may be agreed to by the Company and the Plan
participant.
11. Non-Transferability of Options and Stock Purchase Rights. Options and Stock
--------------------------------------------------------
Purchase Rights may not be sold, pledged, assigned, hypothecated, transferred,
or disposed of in any manner other than by will or by the laws of descent or
distribution and may be exercised, during the lifetime of the Holder, only by
the Holder.
12. Granting of Options to Independent Directors. During the term of the Plan
--------------------------------------------
and following the Public Trading Date, a person who is an Independent Director
as of the Public Trading Date, or a person who is initially elected to the Board
following the Public Trading Date and who is an Independent Director at the time
of such initial election, automatically shall be granted an Option to purchase
five thousand (5,000) shares of Common Stock (subject to adjustment as provided
in Section 15) on the date of each annual meeting of stockholders after the date
of the Board's adoption of the Plan following which the Independent Director
will continue to serve on the Board (an "Annual Option"). Members of the Board
who are employees of the Company who subsequently retire from the Company and
remain on the Board will receive, after retirement from employment with the
Company, Options as described in the preceding sentence. All the foregoing
Option grants authorized by this Section 12 are subject to stockholder approval
of the Plan.
13. Terms of Options Granted to Independent Directors. The per Share price of
-------------------------------------------------
each Option granted to an Independent Director shall equal 100% of the Fair
Market Value of a share of Common Stock on the date the Option is granted.
Annual Options (as defined in Section 12) granted to Independent Directors shall
become vested in cumulative monthly installments of 1/48 of the Shares subject
to such Option on each of the monthly anniversaries of the date of Annual Option
grant, commencing with the first such monthly anniversary, such that each Annual
Option shall be one hundred percent (100%) vested on the fourth anniversary of
the date of Annual Option grant. Subject to Section 10, the term of each Option
granted to an Independent Director shall be ten (10) years from the date the
Option is granted. No portion of an Option which is unexercisable at the time of
an Independent Director's termination of membership on the Board shall
thereafter become exercisable.
11
<PAGE>
14. Stock Purchase Rights.
---------------------
(a) Rights to Purchase. Stock Purchase Rights may be issued either alone,
------------------
in addition to, or in tandem with Options granted under the Plan and/or cash
awards made outside of the Plan. After the Administrator determines that it will
offer Stock Purchase Rights under the Plan, it shall advise the offeree in
writing of the terms, conditions and restrictions related to the offer,
including the number of Shares that such person shall be entitled to purchase,
the price to be paid, and the time within which such person must accept such
offer. The offer shall be accepted by execution of a Restricted Stock purchase
agreement in the form determined by the Administrator.
(b) Repurchase Right. Unless the Administrator determines otherwise, the
----------------
Restricted Stock purchase agreement shall grant the Company the right to
repurchase Shares acquired upon exercise of a Stock Purchase Right upon the
termination of the purchaser's status as a Service Provider for any reason. The
purchase price for Shares repurchased pursuant to the Restricted Stock purchase
agreement shall be the original price paid by the purchased and may be paid by
cancellation of any indebtedness of the purchaser to the Company. The repurchase
option shall lapse at such rate as the Administrator may determine, but in no
case at a rate of less than twenty percent (20%) per year over five (5) years
from the date of purchase.
(c) Other Provisions. The Restricted Stock purchase agreement shall contain
----------------
such other terms, provisions and conditions not inconsistent with the Plan as
may be determined by the Administrator in its sole discretion.
(d) Rights as a Shareholder. Once the Stock Purchase Right is exercised,
-----------------------
the purchaser shall have rights equivalent to those of a shareholder and shall
be a shareholder when his or her purchase is entered upon the records of the
duly authorized transfer agent of the Company. No adjustment shall be made for a
dividend or other right for which the record date is prior to the date the Stock
Purchase Right is exercised, except as provided in Section 15 of the Plan.
15. Adjustments upon Changes in Capitalization, Merger or Asset Sale.
----------------------------------------------------------------
(a) In the event that the Administrator determines that any dividend or
other distribution (whether in the form of cash, Common Stock, other securities,
or other property), recapitalization, reclassification, stock split, reverse
stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, liquidation, dissolution, or sale, transfer, exchange
or other disposition of all or substantially all of the assets of the Company,
or exchange of Common Stock or other securities of the Company, issuance of
warrants or other rights to purchase Common Stock or other securities of the
Company, or other similar corporate transaction or event, in the Administrator's
sole discretion, affects the Common Stock such that an adjustment is determined
by the Administrator to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan or with respect to any Option, Stock Purchase Right or Restricted
Stock, then the Administrator shall, in such manner as it may deem equitable,
adjust any or all of:
12
<PAGE>
(i) the number and kind of shares of Common Stock (or other
securities or property) with respect to which Options or Stock Purchase Rights
may be granted or awarded (including, but not limited to, adjustments of the
limitations in Section 3 on the maximum number and kind of shares which may be
issued and adjustments of the maximum number of Shares that may be purchased by
any Holder in any fiscal year pursuant to Section 6(c));
(ii) the number and kind of shares of Common Stock (or other
securities or property) subject to outstanding Options, Stock Purchase Rights or
Restricted Stock; and
(iii) the grant or exercise price with respect to any Option or Stock
Purchase Right.
(b) In the event of any transaction or event described in Section 15(a),
the Administrator, in its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, either by the terms of the Option, Stock
Purchase Right or Restricted Stock or by action taken prior to the occurrence of
such transaction or event and either automatically or upon the Holder's request,
is hereby authorized to take any one or more of the following actions whenever
the Administrator determines that such action is appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to be
made available under the Plan or with respect to any Option, Stock Purchase
Right or Restricted Stock granted or issued under the Plan or to facilitate such
transaction or event:
(i) To provide for either the purchase of any such Option, Stock
Purchase Right or Restricted Stock for an amount of cash equal to the amount
that could have been obtained upon the exercise of such Option or Stock Purchase
Right or realization of the Holder's rights had such Option, Stock Purchase
Right or Restricted Stock been currently exercisable or payable or fully vested
or the replacement of such Option, Stock Purchase Right or Restricted Stock with
other rights or property selected by the Administrator in its sole discretion;
(ii) To provide that such Option or Stock Purchase Right shall be
exercisable as to all shares covered thereby, notwithstanding anything to the
contrary in the Plan or the provisions of such Option or Stock Purchase Right;
(iii) To provide that such Option, Stock Purchase Right or Restricted
Stock be assumed by the successor or survivor corporation, or a parent or
subsidiary thereof, or shall be substituted for by similar options, rights or
awards covering the stock of the successor or survivor corporation, or a parent
or subsidiary thereof, with appropriate adjustments as to the number and kind of
shares and prices;
(iv) To make adjustments in the number and type of shares of Common
Stock (or other securities or property) subject to outstanding Options and Stock
Purchase Rights, and/or in the terms and conditions of (including the grant or
exercise price), and the criteria included in, outstanding Options, Stock
Purchase Rights or Restricted Stock or Options, Stock Purchase Rights or
Restricted Stock which may be granted in the future; and
13
<PAGE>
(v) To provide that immediately upon the consummation of such event,
such Option or Stock Purchase Right shall not be exercisable and shall
terminate; provided, that for a specified period of time prior to such event,
such Option or Stock Purchase Right shall be exercisable as to all Shares
covered thereby, and the restrictions imposed under an Option Agreement or
Restricted Stock purchase agreement upon some or all Shares may be terminated
and, in the case of Restricted Stock, some or all shares of such Restricted
Stock may cease to be subject to repurchase, notwithstanding anything to the
contrary in the Plan or the provisions of such Option, Stock Purchase Right or
Restricted Stock purchase agreement.
(c) Subject to Section 3, the Administrator may, in its discretion, include
such further provisions and limitations in any Option, Stock Purchase Right,
Restricted Stock agreement or certificate, as it may deem equitable and in the
best interests of the Company.
(d) If the Company undergoes an Acquisition, then any surviving corporation
or entity or acquiring corporation or entity, or affiliate of such corporation
or entity, may assume any Options, Stock Purchase Rights or Restricted Stock
outstanding under the Plan or may substitute similar stock awards (including an
award to acquire the same consideration paid to the stockholders in the
transaction described in this subsection 15(d)) for those outstanding under the
Plan. In the event any surviving corporation or entity or acquiring corporation
or entity in an Acquisition does not assume such Options, Stock Purchase Rights
or Restricted Stock or does not substitute similar stock awards for those
outstanding under the Plan, then with respect to (i) Options, Stock Purchase
Rights or Restricted Stock held by participants in the Plan whose status as a
Service Provider has not terminated prior to such event, except Independent
Directors, the vesting of such Options, Stock Purchase Rights or Restricted
Stock (and, if applicable, the time during which such awards may be exercised)
may be accelerated and made fully exercisable and all restrictions thereon shall
lapse at least ten (10) days prior to the closing of the Acquisition (and the
Options or Stock Purchase Rights terminated if not exercised prior to the
closing of such Acquisition), (ii) Options, Stock Purchase Rights or Restricted
Stock held by Independent Directors whose status as a Service Provider has not
terminated prior to such event, the vesting of such Options, Stock Purchase
Rights or Restricted Stock shall be accelerated and made fully exercisable and
all restrictions thereon shall lapse at least ten (10) days prior to the closing
of the Acquisition (and the Options or Stock Purchase Rights terminated if not
exercised prior to the closing of such Acquisition), and (iii) any other Options
or Stock Purchase Rights outstanding under the Plan, such Options or Stock
Purchase rights shall be terminated if not exercised prior to the closing of the
Acquisition.
(e) Notwithstanding the foregoing, in the event that the Company becomes a
party to a transaction that is intended to qualify for "pooling of interests"
accounting treatment and, but for one or more of the provisions of this Plan or
any Option Agreement or any Restricted Stock purchase agreement would so
qualify, then this Plan and any such agreement shall be interpreted so as to
preserve such accounting treatment, and to the extent that any provision of the
Plan or any such agreement would disqualify the transaction from pooling of
interests accounting treatment (including, if applicable, an entire Option
Agreement or Restricted Stock purchase agreement), then such provision shall be
null and void. All determinations to be made in connection with the preceding
sentence shall be made by the independent accounting
14
<PAGE>
firm whose opinion with respect to "pooling of interests" treatment is required
as a condition to the Company's consummation of such transaction.
(f) The existence of the Plan, any Option Agreement or Restricted Stock
purchase agreement and the Options or Stock Purchase Rights granted hereunder
shall not affect or restrict in any way the right or power of the Company or the
stockholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's capital
structure or its business, any merger or consolidation of the Company, any issue
of stock or of options, warrants or rights to purchase stock or of bonds,
debentures, preferred or prior preference stocks whose rights are superior to or
affect the Common Stock or the rights thereof or which are convertible into or
exchangeable for Common Stock, or the dissolution or liquidation of the Company,
or any sale or transfer of all or any part of its assets or business, or any
other corporate act or proceeding, whether of a similar character or otherwise.
16. Time of Granting Options and Stock Purchase Rights. The date of grant of an
--------------------------------------------------
Option or Stock Purchase Right shall, for all purposes, be the date on which the
Administrator makes the determination granting such Option or Stock Purchase
Right, or such other date as is determined by the Administrator. Notice of the
determination shall be given to each Employee or Consultant to whom an Option or
Stock Purchase Right is so granted within a reasonable time after the date of
such grant.
17. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time wholly or
-------------------------
partially amend, alter, suspend or terminate the Plan. However, without approval
of the Company's stockholders given within twelve (12) months before or after
the action by the Board, no action of the Board may, except as provided in
Section 15, increase the limits imposed in Section 3 on the maximum number of
Shares which may be issued under the Plan or extend the term of the Plan under
Section 7.
(b) Stockholder Approval. The Board shall obtain stockholder approval of
--------------------
any Plan amendment to the extent necessary and desirable to comply with
Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Holder,
unless mutually agreed otherwise between the Holder and the Administrator, which
agreement must be in writing and signed by the Holder and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options, Stock Purchase
Rights or Restricted Stock granted or awarded under the Plan prior to the date
of such termination.
18. Stockholder Approval. The Plan will be submitted for the approval of the
--------------------
Company's stockholders within twelve (12) months after the date of the Board's
initial adoption of the Plan. Options, Stock Purchase Rights or Restricted Stock
may be granted or awarded prior to such stockholder approval, provided that such
Options, Stock Purchase Rights and Restricted Stock shall not be exercisable,
shall not vest and the restrictions thereon shall not lapse prior to
15
<PAGE>
the time when the Plan is approved by the stockholders, and provided further
that if such approval has not been obtained at the end of said twelve-month
period, all Options, Stock Purchase Rights and Restricted Stock previously
granted or awarded under the Plan shall thereupon be canceled and become null
and void.
19. Inability to Obtain Authority. The inability of the Company to obtain
-----------------------------
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
20. Reservation of Shares. The Company, during the term of this Plan, shall at
---------------------
all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
21. Information to Holders and Purchasers. The Company shall provide to each
-------------------------------------
Holder and to each individual who acquires Shares pursuant to the Plan, not less
frequently than annually during the period such Holder or purchaser has one or
more Options or Stock Purchase Rights outstanding, and, in the case of an
individual who acquires Shares pursuant to the Plan, during the period such
individual owns such Shares, copies of annual financial statements.
Notwithstanding the preceding sentence, the Company shall not be required to
provide such statements to key employees whose duties in connection with the
Company assure their access to equivalent information.
22. Investment Intent. The Company may require a Plan participant, as a
-----------------
condition of exercising or acquiring stock under any Option or Stock Purchase
Right, (i) to give written assurances satisfactory to the Company as to the
participant's knowledge and experience in financial and business matters and/or
to employ a purchaser representative reasonably satisfactory to the Company who
is knowledgeable and experienced in financial and business matters and that he
or she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Option or Stock Purchase
Right; and (ii) to give written assurances satisfactory to the Company stating
that the participant is acquiring the stock subject to the Option or Stock
Purchase Right for the participant's own account and not with any present
intention of selling or otherwise distributing the stock. The foregoing
requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (A) the issuance of the shares upon the exercise or acquisition
of stock under the applicable Option or Stock Purchase Right has been registered
under a then currently effective registration statement under the Securities Act
or (B) as to any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the transfer
of the stock.
16
<PAGE>
23. Governing Law. The validity and enforceability of this Plan shall be
-------------
governed by and construed in accordance with the laws of the State of California
without regard to otherwise governing principles of conflicts of law.
17
<PAGE>
* * * * * * *
I hereby certify that the Plan was duly adopted by the Board of Directors
of Vicinity Corporation on __________ ___, 1999.
Executed at __________, _____________ on this ____ day of __________, 1999.
Name:_____________________________________________
Title:____________________________________________
* * * * * * *
I hereby certify that the foregoing Plan was approved by the stockholders
of Vicinity Corporation on _____________.
Executed at __________, ____________ on this ____ day of ___________, 1999.
__________________________________________________
Secretary
18
<PAGE>
EXHIBIT 10.4
VICINITY CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
Vicinity Corporation, a corporation organized under the laws of the State
of California (the "Company"), hereby adopts the Vicinity Corporation Employee
Stock Purchase Plan (the "Plan"), effective as of the Effective Date (as defined
herein).
The purposes of the Plan are as follows:
(1) To assist employees of the Company and its Subsidiary Corporations (as
defined below) in acquiring a stock ownership interest in the Company pursuant
to a plan which is intended to qualify as an "employee stock purchase plan"
within the meeting of Section 423(b) of the Internal Revenue Code of 1986, as
amended.
(2) To help employees provide for their future security and to incentivize
them to remain in the employment of the Company and its Subsidiary Corporations.
1. Definitions. Whenever any of the following terms is used in the Plan
-----------
with the first letter or letters capitalized, it shall have the following
meaning unless context clearly indicates to the contrary (such definitions to be
equally applicable to both the singular and the plural forms of the terms
defined):
(a) "Account" shall mean the account established for a Participant
under the Plan for an Offering Period.
(b) "Agent" shall mean the brokerage firm, bank or other financial
institution, entity or person(s) engaged, retained, appointed or authorized to
act as the agent of the Company or an Employee with regard to the Plan.
(c) "Authorization" shall mean a Participant's payroll deduction
authorization with respect to an Offering Period in accordance with Section 3(b)
hereof.
(d) "Base Compensation" shall mean Eligible Compensation received by an
Employee on each Payday as compensation for services to the Company or any
Parent Corporation or Subsidiary Corporation.
(e) "Board of Directors" or "Board" means the Board of Directors of the
Company.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
(g) "Committee" means the committee appointed to administer the Plan
pursuant to Section 12.
(h) "Company" means Vicinity Corporation, a California corporation.
<PAGE>
(i) "Date of Exercise" means, with respect to any Option, the last day
of each Purchase Period during any Offering Period.
(j) "Date of Grant" means, with respect to any Option, the date upon
which the Option is granted, as set forth in accordance with Section 3(a).
(k) "Effective Date" means January 1, 2000.
(l) "Eligible Compensation" means with respect to any Offering Period,
base wages or salary, commissions, overtime, bonuses, annual awards, other
incentive payments, shift premiums, and all other compensation paid in cash
during such Offering Period before deduction for any contributions to a plan
maintained by the Company or any Subsidiary Corporation and described in
Sections 401(k) or 125 of the Code. Eligible Compensation shall not include
reimbursements of expenses, allowances, long-term disability, workers'
compensation or any amounts directly or indirectly paid pursuant to the Plan or
any other stock purchase or stock option plan, or any other compensation not
included above.
(m) "Eligible Employee" means an Employee of the Company or any
Subsidiary Corporation: (i) who does not, immediately after the Option is
granted, own stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of stock of the Company, a Parent
Corporation or a Subsidiary Corporation (as determined under Section 423(b)(3)
of the Code); (ii) whose customary employment is for more than twenty (20) hours
per week; and (iii) whose customary employment is for more than five (5) months
in any calendar year. For purposes of paragraph (i), the rules of Section 424(d)
of the Code with regard to the attribution of stock ownership shall apply in
determining the stock ownership of an individual, and stock which an employee
may purchase under outstanding options shall be treated as stock owned by the
employee. During a leave of absence meeting the requirements of Treasury
Regulation Section 1.421-7(h)(2), an individual shall be treated as an employee
of the Company or Subsidiary Corporation employing such individual immediately
prior to such leave.
(n) "Employee" means any person who renders services to the Company or
a Subsidiary Corporation in the status of an employee within the meaning of Code
Section 3401(c). "Employee" shall not include any director of the Company or a
Subsidiary Corporation who does not render services to the Company or a
Subsidiary Corporation in the status of an employee within the meaning of Code
Section 3401(c).
(o) "Entry Date" means (i) the first day of any Offering Period, or
(ii) with respect to Employees who first become Eligible Employees after the
commencement of an Offering Period but before the commencement of the second
Purchase Period of such Offering Period, the first day of the Purchase Period
following the date on which such Employee becomes an Eligible Employee.
Notwithstanding the foregoing, in the event that the Fair Market Value of a
share of Stock on the first Date of Exercise during any Offering Period is less
than the Fair Market Value of a share of Stock on the Entry Date for a
Participant participating in the Offering Period as of such Date of Exercise,
the Entry Date for such Participant for the remainder of the
2
<PAGE>
Offering Period shall be the first day of the next Purchase Period immediately
following such Date of Exercise.
(p) "Initial Offering Period" means the Offering Period commencing on
the Effective Date and ending on February 28, 2001.
(q) "Offering Period" means each consecutive twelve-month period
commencing on the first day of each March and ending on the last day of each
February following the Effective Date; provided, however, that the Initial
Offering Period shall be the period commencing on the Effective Date and ending
on February 28, 2001. Options shall be granted on the Date of Grant and
exercised on the Date of Exercise, as provided in Sections 3(a) and 4(a).
(r) "Option" means an option granted under the Plan to an Eligible
Employee to purchase shares of Stock.
(s) "Option Price" means the option price determined in accordance with
Section 4(b).
(t) "Parent Corporation" means any corporation, other than the Company,
in an unbroken chain of corporations ending with the Company if, at the time of
the granting of the Option, each of the corporations other than the Company owns
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
(u) "Participant" means an Eligible Employee who has complied with the
provisions of Section 3(b) hereof.
(v) "Payday" means the regular and recurring established day for
payment of Eligible Compensation to employees of the Company or any Subsidiary
Corporation.
(w) "Plan" means the Vicinity Corporation Employee Stock Purchase Plan.
(x) "Purchase Periods" means, with respect to any Option, the two
consecutive six-month periods beginning on the Date of Grant and ending on the
last day of each Offering Period with respect to which the Option has been
granted; provided, however, that the first Purchase Period under the Plan shall
commence on the Effective Date and end on August 31, 2000, and the second
Purchase Period under the Plan shall commence on September 1, 2001 and end on
February 28, 2001.
(y) "Stock" means the shares of the Company's Common Stock, $.001 par
value.
(z) "Subsidiary Corporation" means any corporation, other than the
Company, in an unbroken chain of corporations beginning with the Company if, at
the time of the granting of the Option, each of the corporations other than the
last corporation in an unbroken chain owns
3
<PAGE>
stock possessing 50% or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
2. Stock Subject to the Plan. Subject to the provisions of Section 9
-------------------------
hereof (relating to adjustments upon changes in the Stock) and Section 11 hereof
(relating to amendments of the Plan), the Stock that may be sold pursuant to
Options granted under the Plan shall not exceed in the aggregate 200,000 shares
of Stock. The shares of Stock sold pursuant to Options granted under the Plan
may be unissued shares or treasury shares of Stock, or shares of Stock bought on
the Nasdaq National Market ("Nasdaq") or other nationally-recognized exchange,
or other market, for purposes of the Plan.
3. Grant of Options.
----------------
(a) Option Grants. The Company shall grant Options under the Plan to
-------------
all Eligible Employees in successive Offering Periods until the earlier of: (i)
the date when the number of shares of Stock available under the Plan have been
sold, or (ii) the date when the Plan is terminated. Each Employee who is an
Eligible Employee on an Entry Date for any Offering Period shall be granted an
Option with respect to such Offering Period as of such date. The Date of Grant
of an Option shall be the first day of the Offering Period with respect to which
such Option was granted. Each Option shall expire on the Date of Exercise
immediately after the automatic exercise of the Option pursuant to Section 4(a).
The number of shares of Stock subject to a Participant's Option shall
equal the payroll deductions authorized by such Participant in accordance with
subsection (b) for the Purchase Period, divided by the Option Price, except as
provided in Section 5(a); provided, however, that the maximum number of shares
of Stock that may be purchased by any Participant on a Date of Exercise shall
not exceed 5,000. The Company shall not grant an Option with respect to an
Offering Period to any individual who is not an Eligible Employee on the Entry
Date with respect to such Offering Period.
(b) Election to Participate; Payroll Deduction Authorization. Except
--------------------------------------------------------
as provided in subsection (d), an Eligible Employee shall participate in the
Plan only by means of payroll deduction. Each Eligible Employee who elects to
participate in the Plan with respect to an Offering Period shall deliver to the
Company no later than ten (10) days before his or her applicable Entry Date, a
completed and executed written payroll deduction authorization in a form
prepared by the Committee (the "Authorization"). An Eligible Employee's
Authorization shall give notice of such Eligible Employee's election to
participate in the Plan for the current or next following Offering Period (and
subsequent Offering Periods), as applicable, and shall designate a stated whole
percentage of such Eligible Employee's Base Compensation to be withheld by the
Company or Subsidiary Corporation employing such Eligible Employee on each
Payday during the Offering Period, which shall not be less than one percent
(1%), nor more than fifteen percent (15%), of Base Compensation. The Base
Compensation payable to a Participant for any Payday during and Offering Period
shall be reduced through payroll deduction in an
4
<PAGE>
amount equal to the percentage specified in the Authorization, and such amount
shall be credited to the Participant's Account under the Plan.
An Eligible Employee may change the percentage of Base Compensation
designated in the Authorization subject to the limits of this subsection, and
may suspend the Authorization, at any time during the Offering Period. Any
Authorization shall remain in effect until the Eligible Employee changes or
suspends the same pursuant to this subsection, withdraws pursuant to Section 5,
or ceases to be an Eligible Employee pursuant to Section 6.
(c) $25,000 Limitation. No Eligible Employee shall be granted an
------------------
Option under the Plan which permits his rights to purchase Stock under the Plan,
and to purchase Stock or other stock under all other employee stock purchase
plans of the Company, any Parent Corporation or any Subsidiary Corporation
subject to the Section 423, to accrue at a rate which exceeds $25,000 of fair
market value of such Stock or other stock (determined at the time the Option is
granted) for each calendar year in which the Option is outstanding at any time.
For purpose of the limitation imposed by this subsection, the right to
purchase Stock or other stock under an Option or other option accrues when the
Option or other option (or any portion thereof) first becomes exercisable during
the calendar year, the right to purchase Stock or other stock under an Option or
other option accrues at the rate provided in the Option or other option, but in
no case may such rate exceed $25,000 of the fair market value of such Stock or
other stock (determined at the time such Option or other option is granted) for
any one calendar year, and a right to purchase Stock or other stock which has
accrued under an Option or other option may not be carried over to any Option or
other option. This limitation shall be applied in accordance with Section
423(b)(8) of the Code and the Treasury Regulations thereunder.
(d) Leaves of Absence. During a leave of absence meeting the
-----------------
requirements of Treasury Regulation Section 1.421-7(h)(2), a Participant may
continue to participate in the Plan by making cash payments to the Company on
each Payday equal to the amount of the Participant's payroll deductions under
the Plan for the Payday immediately preceding the first day of such
Participant's leave of absence.
4. Exercise of Options; Option Price.
---------------------------------
(a) Option Exercise. Each Participant automatically and without any
---------------
act on such Participant's part shall be deemed to have exercised such
Participant's Option on the Date of Exercise to the extent that the balance then
in the Participant's Account is sufficient to purchase, at the Option Price,
whole shares of the Stock subject to the Option. Fractional shares of Stock
shall not be sold pursuant to an Option.
(b) Option Price Defined. The option price per share of Stock (the
--------------------
"Option Price") to be paid by a Participant upon the exercise of the
Participant's Option shall be equal to 85% of the lesser of: (i) the Fair Market
Value of a share of Stock on the Date of Exercise or (ii) the Fair Market Value
of a share of Stock on the Participant's Entry Date for the Offering Period. The
Fair Market Value of a share of Stock as of a given date shall be: (A) the
closing price of a
5
<PAGE>
share of Stock on the principal exchange on which the Stock is then trading, if
any, on such date, or, if shares of Stock were not traded on such date, then on
the next preceding trading day during which a sale occurred; (B) if the Stock is
not traded on an exchange, but is quoted on Nasdaq or a successor quotation
system, (X) the last sales price (if the Stock is then listed as a National
Market Issue under the NASD National Market System) or (Y) the mean between the
closing representative bid and asked prices (in all other cases) for a share of
Stock on such date, or, if shares of Stock were not traded on such date, then on
the next preceding trading day during which a sale occurred, as reported by
Nasdaq or such successor quotation system; (iii) if the Stock is not publicly
traded on an exchange and not quoted on Nasdaq or a successor quotation system,
the mean between the closing bid and asked prices for a share of Stock on such
date, or, if shares of Stock were not traded on such date, then on the next
preceding trading day during which a sale occurred, as determined in good faith
by the Committee; or (iv) if the Stock is not publicly traded, the fair market
value of a share of Stock established by the Committee acting in good faith.
(c) Book Entry/Share Certificates. As soon as practicable after the
-----------------------------
exercise of any Option by a Participant, the Company shall issue the shares of
Stock purchased upon such exercise to such Participant and such shares shall be
held in the custody of the Agent for the benefit of the Participant. The Company
or the Agent shall make an entry on its books and records indicating that the
shares of Stock purchased in connection with such exercise have been duly issued
as of that date to such Participant. A Participant shall have the right at any
time to request in writing a certificate or certificates for all or a portion of
the whole shares of Stock purchased hereunder. Upon receipt of a Participant's
written request for any such certificate, the Company shall (or shall cause the
Agent to), within fifteen (15) days after the date of such receipt, deliver any
such certificate to the Participant. Nothing in this subsection (c) shall
prohibit the sale or other disposition by a Participant of shares of Stock
purchased hereunder. In the event the Company is required to obtain authority
from any commission or agency to issue any certificate or certificates for
shares of Stock purchased hereunder, the Company shall seek to obtain such
authority as soon as reasonably practicable.
(d) Pro Rata Allocations. If the total number of shares of Stock for
--------------------
which Options are to be exercised on any date exceeds the number of shares of
Stock remaining unsold under the Plan (after deduction for all shares of Stock
for which Options have theretofore been exercised), the Committee shall make a
pro rata allocation of the available remaining shares of Stock in as nearly a
uniform manner as shall be practicable and the balance of the amount credited to
the Account of each Participant which has not been applied to the purchase of
shares of Stock shall be paid to such Participant in one lump sum in cash within
sixty (60) days after the Date of Exercise, without any interest thereon.
(e) Information Statement. The Company shall provide each
---------------------
Participant whose Option is exercised with an information statement in
accordance with Section 6039(a) of the Code and the Treasury Regulations
thereunder. The Company shall maintain a procedure for identifying certificates
of shares of Stock sold upon the exercise of Options in accordance with Section
6039(b) of the Code.
6
<PAGE>
5. Withdrawal from the Plan.
------------------------
(a) Withdrawal Election. Any Participant may withdraw from
-------------------
participation under the Plan at any time, except that no Participant may
withdraw during the last ten (10) days of any Purchase Period. A Participant
electing to withdraw from the Plan must deliver to the Company a notice of
withdrawal in a form prepared by the Committee (the "Withdrawal Election") not
later than ten (10) days prior to the Date of Exercise for such Purchase Period.
Upon receipt of a Participant's Withdrawal Election, the Company or Subsidiary
Corporation employing the Participant shall pay to the Participant the amount
credited to the Participant's Account in one lump sum in cash within sixty (60)
days, without any interest thereon. Upon receipt of a Participant's Withdrawal
Election by the Company, the Participant shall cease to participate in the Plan
and the Participant's Option for such Offering Period shall terminate.
(b) Eligibility following Withdrawal. A Participant who withdraws
--------------------------------
from the Plan with respect to a Purchase Period, and who is still an Eligible
Employee, may elect to participate again in the Plan for any subsequent Offering
Period by delivering to the Company an Authorization pursuant to Section 3(b).
6. Termination of Employment.
-------------------------
(a) Termination of Employment Other than by Death. If the employment
---------------------------------------------
of a Participant with the Company and the Subsidiary Corporation terminates
other than by death, the Participant's participation in the Plan automatically
and without any act on the Participant's part shall terminate as of the date of
the termination of the Participant's employment. As soon as practicable after
such a termination of employment, the Company or Subsidiary Corporation
employing the Participant shall pay to the Participant the amount of the balance
in the Participant's Account, without any interest thereon. Upon a Participant's
termination of employment covered by this subsection, the Participant's
Authorization and Option under the Plan shall terminate.
(b) Termination By Death. If the employment of a Participant is
--------------------
terminated by the Participant's death, the executor of the Participant's will or
the administrator of the Participant's estate, by written notice to the Company,
may request payment of the balance in the Participant's Account, in which event
the Company or Subsidiary Corporation employing the Participant shall make such
payment, without any interest thereon as soon as practicable after receiving
such notice. Upon receipt of such notice, the Participant's Authorization and
Option under the Plan shall terminate. If the Company does not receive such
notice prior to the next Date of Exercise, the Participant's Option shall be
deemed to have been exercised on such Date of Exercise.
7. Restriction upon Assignment. An Option granted under the Plan shall
---------------------------
not be transferable other than by will or the laws of descent and distribution,
and is exercisable during the Participant's lifetime only by the Participant.
Except as provided in Section 6(b) hereof, an Option may not be exercised to any
extent except by the Participant. The Company shall not recognize and shall be
under no duty to recognize any assignment or alienation of the
7
<PAGE>
Participant's interest in the Plan, the Participant's Option or any rights under
the Participant's Option.
8. No Rights of Stockholders until Shares Issued. With respect to shares
---------------------------------------------
of Stock subject to an Option, a Participant shall not be deemed to be a
stockholder of the Company, and the Participant shall not have any of the rights
or privileges of a stockholder, until such shares have been issued to the
Participant or his or her nominee following exercise of the Participant's
Option. No adjustments shall be made for dividends (ordinary or extraordinary,
whether in cash securities, or other property) or distribution or other rights
for which the record date occurs prior to the date of such issuance, except as
otherwise expressly provided herein.
9. Changes in the Stock; Adjustments of an Option. Whenever any change
----------------------------------------------
is made in the Stock or to Options outstanding under the Plan, by reason of a
stock split, stock dividend, recapitalization or other subdivision, combination,
or reclassification of shares, appropriate action shall be taken by the
Committee to adjust accordingly the number of shares of Stock subject to the
Plan and the number and the Option Price of shares of Stock subject to the
Options outstanding under the Plan to preserve, but not increase, the rights of
Participants hereunder.
10. Use of Funds; no Interest Paid. All funds received or held by the
------------------------------
Company under the Plan shall be included in the general funds of the Company
free of any trust or other restriction and may be used for any corporate
purpose. No interest will be paid to any Participant or credited to any
Participant's Account with respect to such funds.
11. Amendment or Termination of the Plan. The Board of Directors may
------------------------------------
amend, suspend, or terminate the Plan at any time and from time to time,
provided that approval by a vote of the holders of the outstanding shares of the
Company's capital stock entitled to vote shall be required to amend the Plan to:
(a) change the number of shares of Stock that may be sold pursuant to Options
under the Plan, (b) decrease the Option Price below a price computed in the
manner stated in Section 4(b), (c) alter the requirements for eligibility to
participate in the Plan, or (d) in any manner that would cause the Plan to no
longer be an "employee stock purchase plan" within the meaning of Section 423(b)
of the Code.
12. Administration by Committee; Rules and Regulations.
--------------------------------------------------
(a) Appointment of Committee. The Plan shall be administered by the
------------------------
Committee, which shall be composed of not less than two members of the Board of
Directors, none of whom shall be eligible to serve on the Committee, unless such
member is then a "non-employee director" within the meaning of Rule 16b-3 which
has been adopted by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended. Each member of the Committee shall serve for a
term commencing on a date specified by the Board of Directors and continuing
until the member dies or resigns or is removed from office by the Board of
Directors. The Committee at its option may utilize the services of an agent to
assist in the administration of the Plan including establishing and maintaining
an individual securities account under the Plan for each Participant.
8
<PAGE>
(b) Duties and Powers of Committee. It shall be the duty of the
------------------------------
Committee to conduct the general administration of the Plan in accordance with
the provisions of the Plan. The Committee shall have the power to interpret the
Plan and the terms of the Options and to adopt such rules for the
administration, interpretation, and application of the Plan as are consistent
therewith and to interpret, amend or revoke any such rules. In its absolute
discretion, the Board may at any time and from time to time exercise any and all
rights and duties of the Committee under the Plan.
(c) Majority Rule. The Committee shall act by a majority of its
-------------
members in office. The Committee may act either by vote at a meeting or by a
memorandum or other written instrument signed by a majority of the Committee.
(d) Compensation; Professional Assistance; Good Faith Actions. All
---------------------------------------------------------
expenses and liabilities incurred by members of the Committee in connection with
the administration of the Plan shall be borne by the Company. The Committee may,
with the approval of the Board, employ attorneys, consultants, accountants,
appraisers, brokers or other persons. The Committee, the Company and its
officers and directors shall be entitled to rely upon the advice, opinions or
valuations of any such persons. All actions taken and all interpretations and
determinations made by the Committee in good faith shall be final and binding
upon all Participants, the Company and all other interested persons. No member
of the Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or the Options, and
all members of the Committee shall be fully protected by the Company in respect
to any such action, determination, or interpretation.
13. No Rights as an Employee. Nothing in the Plan shall be construed to
------------------------
give any person (including any Eligible Employee or Participant) the right to
remain in the employ of the Company, a Parent Corporation or a Subsidiary
Corporation or to affect the right of the Company, any Parent Corporation or any
Subsidiary Corporation to terminate the employment of any person (including any
Eligible Employee or Participant) at any time, with or without cause.
14. Merger, Acquisition or Liquidation of the Company. In the event of the
-------------------------------------------------
merger or consolidation of the Company into another corporation, the acquisition
by another corporation of all or substantially all of the Company's assets or
50% or more of the Company's then outstanding voting stock, the liquidation or
dissolution of the Company or any other reorganization of the Company, the Date
of Exercise with respect to outstanding Options shall be the business day
immediately preceding the effective date of such merger, consolidation,
acquisition, liquidation, dissolution, or reorganization unless the Committee
shall, in its sole discretion, provide for the assumption or substitution of
such Options in a manner complying with Section 424(a) of the Code.
15. Term; Approval by Stockholders. Subject to approval by the
------------------------------
stockholders of the Company in accordance with this Section, the Plan shall be
in effect for a term of ten (10) years commencing on the date of the initial
adoption of the Plan by the Board, unless sooner terminated in accordance with
Section 11. No Option may be granted during any period of suspension of the Plan
or after termination of the Plan. The Plan shall be submitted for the
9
<PAGE>
approval of the Company's stockholders within twelve (12) months after the date
of the Board of Directors' adoption of the Plan. Options may be granted prior to
such stockholder approval; provided, however, that such Options shall not be
exercisable prior to the time when the Plan is approved by the stockholders; and
provided, further, that if such approval has not been obtained by the end of
said 12-month period, all Options previously granted under the Plan shall
thereupon expire.
16. Effect upon Other Plans. The adoption of the Plan shall not affect any
-----------------------
other compensation or incentive plans in effect for the Company, any Parent
Corporation or any Subsidiary Corporation. Nothing in this Plan shall be
construed to limit the right of the Company, any Parent Corporation or any
Subsidiary Corporation to: (a) establish any other forms of incentives or
compensation for employees of the Company, any Parent Corporation or any
Subsidiary Corporation or (b) grant or assume options otherwise than under this
Plan in connection with any proper corporate purpose, including, but not by way
of limitation, the grant or assumption of options in connection with the
acquisition, by purchase, lease, merger, consolidation or otherwise, of the
business, stock or assets of any corporation, firm or association.
17. Conditions to Issuance of Stock Certificates. The Company shall not be
--------------------------------------------
required to issue or deliver any certificate or certificates for shares of Stock
purchased upon the exercise of Options prior to fulfillment of all the following
conditions:
(a) The admission of such shares to listing on all stock exchanges, if
any, on which is then listed; and
(b) The completion of any registration or other qualification of such
shares under any state or federal law or under the rulings or regulations of the
Securities and Exchange Commission or any other governmental regulatory body,
which the Committee shall, in its absolute discretion, deem necessary or
advisable; and
(c) The obtaining of any approval or other clearance from any state or
federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable; and
(d) The payment to the Company of all amounts which it is required to
withhold under federal, state or local law upon exercise of the Option; and
(e) The lapse of such reasonable period of time following the exercise
of the Option as the Committee may from time to time establish for reasons of
administrative convenience.
18. Notification of Disposition. Each Participant shall give prompt
---------------------------
notice to the Company of any disposition or other transfer of any shares of
Stock purchased upon exercise of an Option if such disposition or transfer is
made: (a) within two (2) years from the Date of Grant of the Option or (b)
within one (1) year after the transfer of such shares of Stock to such
Participant upon exercise of such Option. Such notice shall specify the date of
such disposition
10
<PAGE>
or other transfer and the amount realized, in cash, other property, assumption
of indebtedness or other consideration, by the Participant in such disposition
or other transfer.
19. Notices. Any notice to be given under the terms of the Plan to the
-------
Company shall be addressed to the Company in care of its Secretary and any
notice to be given to any Eligible Employee or Participant shall be addressed to
such Employee at such Employee's last address as reflected in the Company's
records. By a notice given pursuant to this Section, either party may designate
a different address for notices to be given to it, him or her. Any notice which
is required to be given to an Eligible Employee or a Participant shall, if the
Eligible Employee or Participant is then deceased, be given to the Eligible
Employee's or Participant's personal representative if such representative has
previously informed the Company of his status and address by written notice
under this Section. Any notice shall have been deemed duly given if enclosed in
a properly sealed envelope or wrapper addressed as aforesaid at the time it is
deposited (with postage prepaid) in a post office or branch post office
regularly maintained by the United States Postal Service.
20. Headings. Headings are provided herein for convenience only and are
--------
not to serve as a basis for interpretation or construction of the Plan.
I hereby certify that the foregoing Plan was adopted by the Board of
Directors of Vicinity Corporation on _________________, 1999.
Executed as of this ____ day of __________, 2000.
__________________________________
I hereby certify that the foregoing Plan was approved by the stockholders
of Vicinity Corporation on _____________, 2000.
Executed at San Jose, California on this ___ day of _________, 2000.
__________________________________
11
<PAGE>
EXHIBIT 10.26
VICINITY CORPORATION
ELAINE HAMILTON
NON-STATUTORY STOCK OPTION AGREEMENT
AGREEMENT made this 13th day of October 1999 by and between Vicinity
Corporation, a corporation organized and existing under the laws of the State of
California (the "Company"), and Elaine Hamilton (the "Optionee").
RECITALS
--------
A. The Company's Board of Directors (the "Board") has entered into
this Non-Statutory Stock Option Agreement (the "Agreement") for the purpose of
attracting and retaining the services of Optionee who is in a position to
contribute to the management, growth and financial success of the Company or its
parent or subsidiary corporations.
B. The granted option is intended to be a non-statutory stock option
which does not satisfy the requirements of Section 422 of the Internal Revenue
Code.
C. For purposes of this Agreement, the following definitions shall be
in effect:
"Affiliate" shall mean an entity other than a Subsidiary in which
---------
the Company owns an equity interest.
"Board" shall mean the board of directors of the Company.
-----
"Code" shall mean the Internal Revenue Code of 1986, as amended.
----
"Common Stock" shall mean the common stock of the Company, par
------------
value $.001 per share.
"Continuous Status as an Employee" shall mean the absence of any
--------------------------------
interruption or termination of service as an Employee. Continuous Status
as an Employee shall not be considered interrupted in the case of sick
leave, military leave, or any other leave of absence approved by the Board,
provided that such leave is for a period of not more than 90 days or
reemployment upon the expiration of such leave is guaranteed by contract or
stature.
"Employee" shall mean any person (including the Optionee)
--------
employed by the Company or any Parent, Subsidiary or Affiliate of the
Company. The Optionee shall be deemed an Employee until the Optionee's
employment is terminated by either the Company or the Optionee.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.
<PAGE>
"Fair Market Value" shall mean the fair market value per share of
-----------------
Common Stock on any date in question shall be determined in accordance with
the following provisions:
(i) If the Common Stock is not at the time listed or
admitted to trading on any stock exchange but is traded on the Nasdaq
National Market, then the market value shall be the closing selling
price per share of Common Stock on the date in question, as such
prices are reported by the National Association of Securities Dealers
on the Nasdaq National Market or any successor system. If there is no
reported closing selling price on the date in question, then the
closing selling price on the last preceding date for which such
quotation exists shall be determinative of fair market value.
(ii) If the Common Stock is at the time listed or admitted
to trading on any stock exchange, then the fair market value shall be
the closing selling price per share of Common Stock on the date in
question on the stock exchange serving as the primary market for the
Common Stock, as such price is officially quoted in the composite tape
of transactions on such exchange. If there is no reported sale of
Common Stock on such exchange on the date in question, then the fair
market value shall be the closing selling price on the exchange on the
last preceding date for which such quotation exists.
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in
good faith by the Board.
"Option" shall mean a non-qualified stock option granted pursuant
------
to this Agreement.
"Parent" shall mean a "parent corporation," whether now or
------
hereafter existing, as defined in Section 424(e) of the Code.
"Subsidiary" shall mean a "subsidiary corporation," whether now
----------
or hereafter existing, as defined in Section 424(f) of the Code.
TERMS
-----
1. Reservation of Shares. The stock issuable under this Agreement
---------------------
shall be shares of authorized but unissued Common Stock. The Company, shall,
until the Expiration Date, reserve and keep available such number of shares of
Common Stock as shall be sufficient to satisfy the requirements of this
Agreement. The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any shares of Common Stock
hereunder, shall relieve the Company of any liability in respect of the failure
to issue or sell such shares as to which such requisite authority shall not have
been obtained.
2
<PAGE>
2. Grant of Option. Pursuant to the provisions of this paragraph set
---------------
forth below, there is hereby granted to the Optionee, on October 13, 1999 (the
"Grant Date"), an Option to purchase up to 75,000 shares of Common Stock (the
"Option Shares") upon the terms and conditions set forth in this Agreement. The
Option Shares shall be purchasable in accordance with such terms and conditions
at the purchase price of $3.00 per share (the "Option Price").
The terms of the Option granted under this Agreement shall be as
follows:
(a) the Option shall be exercisable only while the Optionee
remains an Employee;
(b) the Option may be exercised immediately, in whole or in part,
conditioned upon Optionee entering into a Restricted Stock Purchase Agreement in
the form attached hereto as Exhibit B with respect to any unvested Option
---------
Shares. The Option Shares shall vest and/or be released from the Company's
repurchase option, as set forth in the Restricted Stock Purchase Agreement, in
accordance with the following schedule (the "Vesting Schedule"):
Twelve and one-half percent (12.5%) of the Option Shares shall vest on
April 13, 2000 (the "Vesting Commencement Date"), and an additional one
forty-second (1/42nd) of the Option Shares shall vest on the first day
of each month thereafter.
3. Option Term. The Option shall have a maximum term of ten (10) years
-----------
measured from the Vesting Commencement Date and shall accordingly expire at the
close of business on April 13, 2010 (the "Expiration Date"), unless sooner
terminated in accordance with this Paragraph 5.C, Paragraph 6 and Paragraph 8 of
this Agreement.
4. Limited Transferability. The Option shall not be transferable or
-----------------------
assignable by the Optionee except for a transfer of the Option by will or by the
laws of inheritance following the Optionee's death. Accordingly, the Option may
be exercised, during the Optionee's lifetime, only by the Optionee. Any attempt
to assign, pledge, transfer, and hypothecate or otherwise dispose of the Option,
and any levy of execution, attachment or similar process on the Option, shall be
null and void. The terms of this Option shall be binding upon the executors,
administrators, heirs, successors and assigns of Optionee.
5. Exercise of Options.
-------------------
A. Except as provided in this paragraph and Paragraph 5.B below,
the Option shall become exercisable for the Option Shares in a series of
installments as follows:
(i) The Option shall become exercisable according to the Vesting
Schedule set forth above. Alternatively, at the election of the Optionee, the
Option may be exercised in whole or in part at any time as to Option Shares
which have not yet vested. For purposes of this Agreement, Option Shares shall
vest based on the continued employment or consulting relationship of Optionee
with the Company. Vested Option Shares shall not be
3
<PAGE>
subject to the Company's repurchase right (as set forth in the Restricted Stock
Purchase Agreement attached hereto as Exhibit B).
---------
(ii) As a condition to exercising the Option for unvested Option
Shares, the Optionee shall execute the Restricted Stock Purchase Agreement
attached hereto as Exhibit B.
---------
(iii) The Option may not be exercised for a fraction of a share
of Common Stock.
(iv) In the event of Optionee's death, disability or other
termination of the employment or consulting relationship, the exercisability of
the Option is governed by the provisions of this Paragraph 5 and Paragraph 6
below.
(v) In no event may this Option be exercised after the
Expiration Date.
B. Should the Optionee die or become permanently disabled (as
defined in Section 22(e)(3) of the Internal Revenue Code) while serving as an
Employee, then the Option shall accelerate in full and become exercisable for
all of the Option Shares subject to the Option at the time of such death or
permanent disability.
C. Once the Option becomes exercisable for one or more installments
of the Option Shares, those installments shall accumulate, and the Option shall
remain exercisable for the accumulated installments until the Expiration Date or
sooner termination of the option term under Paragraph 6 or Paragraph 8 of this
Agreement.
D. The Option shall not become exercisable for any additional
Option Shares following the Optionee's cessation of service as an Employee.
6. Termination of Employment. Should the Optionee's service as an
-------------------------
Employee terminate while the Option remains outstanding, then the option term
specified in Paragraph 2 of this Agreement shall terminate (and this Option
shall cease to be exercisable) prior to the Expiration Date in accordance with
the following provisions.
A. Should Optionee's Continuous Status as an Employee terminate as
a result of her disability, Optionee may, but only within six (6) months from
the date of such termination, exercise the Option to the extent the Option was
vested at the date of such termination. To the extent that Optionee was not
vested in the Option at the date of termination, or if Optionee does not
exercise such Option within the time specified herein, the Option shall
terminate.
B. Should the Optionee's Continuous Status as an Employee terminate
as a result of her death, the Option may be exercised as at any time within
twelve (12) months following the date of death, by Optionee's estate or by a
person who acquired the right to exercise
4
<PAGE>
the Option by bequest or inheritance, but only to the extent Optionee could
exercise the Option at the date of death.
C. In no event may the Option be exercised at any time after the
specified Expiration Date.
D. Upon the Optionee's termination of employment for any reason,
the Option shall immediately terminate and cease to be outstanding with respect
to any and all Option Shares for which the Option is not otherwise at that time
exercisable in accordance with the normal exercise provisions of Paragraphs 5.A
and 5.B or the special acceleration provisions of Paragraph 7 of this Agreement.
E. The Board shall have full power and authority to extend the
period of time for which the Option is to remain exercisable following the
Optionee's termination of Continuous Status as an Employee or death from the
limited period in effect under this Paragraph 5 to such greater period of time
as the Board shall deem appropriate; provided, however, that in no event shall
-------- -------
such Option be exercisable after the Expiration Date.
F. The Board shall have complete discretion, exercisable either on
the date first written above or at any time while the Option remains
outstanding, to permit the Option to be exercised, during the limited period of
exercisability provided under this Paragraph 5, not only with respect to the
number of shares for which the Option is exercisable at the time of Optionee's
termination of Continuous Status as an Employee but also with respect to one or
more subsequent installments of purchasable shares for which the Option would
otherwise have been exercisable had such termination not occurred.
7. Adjustments Upon Changes in Capitalization. The number of shares of
------------------------------------------
Common Stock covered by the Option as well as the price per share of Common
Stock covered by the Option, shall be proportionately adjusted for any increase
or decrease in the number of issued shares of Common Stock resulting from a
stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
8. Adjustments Upon Merger, Dissolution or Liquidation.
---------------------------------------------------
A. In the event of a merger of the Company with or into another
corporation, or the sale of substantially all of the assets of the Company, the
Option may be assumed or an equivalent option or right may be substituted by the
successor corporation or a Parent or Subsidiary of the successor corporation.
In the event that the successor corporation
5
<PAGE>
does not agree to assume the Option or to substitute an equivalent option or
right, the Option shall become fully vested and exercisable, including as to
Option Shares as to which it would not otherwise be exercisable. If the Option
becomes fully vested and exercisable in the event of a merger or sale of assets,
the Board shall notify the Optionee that the Option shall be fully exercisable
for a period of fifteen (15) days from the date of such notice, and the Option
will terminate upon the expiration of such period. For the purposes of this
Paragraph 8, the Option shall be considered assumed if, following the merger or
sale of assets, the option or right confers the right to purchase, for each
share of Common Stock subject to the Option immediately prior to the merger or
sale of assets, the consideration (whether stock, cash, or other securities or
property) received in the merger or sale of assets by holders of Common Stock
for each share of Common Stock held on the effective date of the transaction
(and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding shares of
Common Stock); provided, however, that if such consideration received in the
merger or sale of assets was not solely common stock of the successor or its
Parent, the Board may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Option, for each
share of Common Stock subject to the Option, to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.
B. In the event of the proposed dissolution or liquidation of the
Company, the Board shall notify the Optionee at least fifteen (15) days prior to
such proposed action. To the extent it has not been previously exercised, the
Option will terminate immediately prior to the consummation of such proposed
action.
9. Privilege of Stock Ownership. The Optionee shall not have any
----------------------------
stockholder rights with respect to the Option Shares until such individual shall
have exercised the Option and paid the Option Price for the purchased shares.
10. Manner of Exercising Option.
---------------------------
A. In order to exercise the Option for one or more Option Shares,
the Optionee (or in the case of exercise after the Optionee's death, the
Optionee's executor, administrator, heir or legatee, as the case may be) must
take the following actions:
(i) Execute and deliver to the Secretary of the Company a
written notice of exercise (the "Exercise Notice"), in substantially the form of
Exhibit A attached hereto, in which there is specified the number of Option
- ---------
Shares for which the Option is exercised.
(ii) Pay the aggregate Option Price for the purchased shares
in cash or check made payable to the Company's order;
(iii) Furnish to the Company appropriate documentation that the
person or persons exercising the Option (if other than the Optionee) have the
right to exercise the Option.
6
<PAGE>
(iv) Execute and deliver to the Company such representations
and documents as the Board, in its absolute discretion, deems necessary or
advisable to effect compliance with all applicable provisions of the Securities
Act of 1933, as amended, and any other federal or state securities laws or
regulations. The Board may, in its absolute discretion, also take whatever
additional actions it deems appropriate to effect such compliance including,
without limitation, placing legends on share certificates and issuing stop-
transfer notices to agents and registrars.
B. For purposes of this Agreement, the Exercise Date shall be the
date on which the Exercise Notice shall have been delivered to the Company.
Except to the extent the sale and remittance procedure specified above may be
utilized in connection with the exercise of the Option, payment of the Option
Price for the purchased shares must accompany such notice.
C. As soon as practical after the exercise of the Option in
accordance with the provisions of this Agreement, the Company shall mail or
deliver to or on behalf of the Optionee (or to the other person or persons
exercising the Option) a stock certificate representing the purchased shares.
11. Company Rights of First Refusal and Repurchase on Option Shares.
---------------------------------------------------------------
The Options Shares issuable upon exercise of the Option are subject to certain
rights of first refusal and repurchase in favor of the Company as set forth in
Sections 4 and 5 of the Exercise Notice (attached hereto as Exhibit A)
---------
and, in the event this Option is exercised for unvested Option Shares, Section 1
of the Restricted Stock Purchase Agreement attached hereto as Exhibit B.
---------
12. Lockup Agreement. In consideration of the granting of this Option
----------------
to Optionee and regardless of whether or not Optionee exercises the Option,
Optionee agrees, upon the request of the Company or the underwriters managing
the initial firmly underwritten public offering of the Company's securities, not
to sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any of the Option Shares, any of the Common Stock or any
derivative security thereof (other than those included in the registration
statement filed with the Securities and Exchange Commission in connection with
such public offering) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed 180
days) from the effective date of such registration as the Company or such
underwriters may specify.
13. Withholding Taxes. As a condition to the exercise of the Option
-----------------
granted hereunder, the Optionee shall make such arrangements as the Board may
require for the satisfaction of any federal, state, local or foreign withholding
tax obligations that may arise in connection with the exercise, receipt or
vesting of the Option. The Company shall not be required to issue any shares
under this Agreement until such obligations are satisfied.
14. Tax Consequences. Set forth below is a brief summary as of the
----------------
date of this Option of some of the federal and state tax consequences of
exercise of this Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE
7
<PAGE>
TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX
ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
A. Exercise of Nonstatutory Stock Option. There may be a regular
-------------------------------------
federal income tax liability and state income tax liability upon the exercise of
a Nonstatutory Stock Option. Optionee will be treated as having received
compensation income (taxable at ordinary income tax rates) equal to the excess,
if any, of the Fair Market Value of the Shares on the date of exercise over the
Exercise Price. The Company will be required to withhold from Optionee's
compensation or collect from Optionee and pay to the applicable taxing
authorities an amount in cash equal to a percentage of this compensation income
at the time of exercise, and may refuse to honor the exercise and refuse to
deliver Shares if such withholding amounts are not delivered at the time of
exercise. If the Optionee is subject to Section 16 of the Exchange Act, the date
of income recognition may be deferred for up to six months.
B. Disposition of Shares. If Option Shares are held for at least
---------------------
one year, any gain realized on disposition of the Shares will be treated as
long-term capital gain for federal and state income tax purposes.
C. Section 83(b) Election for Unvested Shares Purchased Pursuant
-------------------------------------------------------------
to Nonqualified Stock Options. With respect to the exercise of the Option for
- -----------------------------
unvested Shares, an election may be filed by the Optionee with the Internal
Revenue Service and, if necessary, the proper state taxing authorities, within
------
30 days of the purchase of the Shares, electing pursuant to Section 83(b) of the
- -------
Code (and similar state tax provisions if applicable) to be taxed currently on
any difference between the purchase price of the Option Shares and their Fair
Market Value on the date of purchase. This will result in a recognition of
taxable income to the Optionee on the date of exercise, measured by the excess,
if any, of the fair market value of the Shares, at the time the Option is
exercised over the purchase price for the Shares. Absent such an election,
taxable income will be measured and recognized by Optionee at the time or times
on which the Company's Repurchase Option lapses. Optionee is strongly encouraged
to seek the advice of his or her own tax consultants in connection with the
purchase of the Shares and the advisability of filing of the election under
Section 83(b) and similar tax provisions. OPTIONEE ACKNOWLEDGES THAT IT IS
OPTIONEE'S SOLE RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION
UNDER SECTION 83(b), EVEN IF OPTIONEE REQUESTS THE COMPANY OR ITS REPRESENTATIVE
TO MAKE THIS FILING ON OPTIONEE'S BEHALF.
8
<PAGE>
15. Legality of Issuance. Option Shares shall be issued pursuant to
--------------------
the exercise of an Option and the issuance and delivery of such shares pursuant
thereto shall comply with all relevant provisions of law, including, without
limitation, (i) the Securities Act of 1933, as amended, the Exchange Act, the
rules and regulations promulgated thereunder, and the requirements of any stock
exchange upon which the shares may then be listed, and (ii) and any rule under
Part 207 of Title 12 of the Code of Federal Regulations as promulgated by the
Federal Reserve Board, and shall be further subject to the approval of counsel
for the Company with respect to such compliance.
As a condition to the exercise of the Option, the Company may require
the Optionee (or such other person permitted to exercise the Option) to
represent and warrant at the time of any such exercise that the shares are being
purchased only for investment and without any present intention to sell or
distribute any such shares if, in the opinion of counsel for the Company, such a
representation is required by any of the aforementioned relevant provisions of
law.
16. Information to Optionee. The Company shall provide Optionee, not
-----------------------
less frequently than annually, copies of annual franchise statements. The
Company shall also provide such statements to Optionee after exercise of the
Option while Optionee owns shares of Common Stock acquired pursuant to such
exercise.
17. No Employment Rights. Neither the action of the Company in
--------------------
entering into this Agreement, nor any action taken by the Board hereunder, nor
any provision of this Agreement shall be construed so as to grant the Optionee
the right to remain in the employ or service of the Company (or any Parent or
Subsidiary corporation) for any period of specific duration, and the Company (or
any Parent or Subsidiary corporation retaining the services of the Optionee) may
terminate the Optionee's employment or service at any time and for any reason,
with or without cause.
18. Use of Proceeds. Any cash proceeds received by the Company from
---------------
the sale of shares pursuant to the Option granted pursuant to this Agreement
shall be used for general corporate purposes.
19. Binding Effect. Subject to the limitations set forth in Paragraph
--------------
4 of this Agreement, this Agreement shall be binding upon, and shall inure to
the benefit of, (i) the executors, administrators, heirs, legal representatives
and assigns of the Optionee and (ii) the successors and assigns of the Company.
20. No Impairment of Rights. Nothing in this Agreement shall be deemed
-----------------------
to impair or otherwise restrict the rights of the Company or the stockholders to
remove the Optionee from the Board at any time pursuant to the provisions of
applicable law.
21. Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of California applicable to contracts
entered into and wholly to be performed within the State of California by
residents of such State.
9
<PAGE>
22. Notices. All notices and other communications under this Agreement
-------
shall be in writing. Unless and until the Optionee is notified in writing to the
contrary, all notices, communications and documents directed to the Company and
related to this Agreement, if not delivered by hand, shall be mailed, addressed
as follows:
Vicinity Corporation
1135A San Antonio Road
Palo Alto, California 94303
Attention: Secretary
Unless and until the Company is notified in writing to the contrary,
all notices, communications and documents intended for the Optionee and related
to this Agreement, if not delivered by hand, shall be mailed to the Optionee's
last known address as shown on the Company's books.
Notices and communications shall be mailed by first class mail,
postage prepaid; documents shall be mailed by registered mail, return receipt
requested, postage prepaid. All mailings and deliveries related to this
Agreement shall be deemed received only when actually received, unless properly
mailed by registered mail, return receipt requested, in which event they shall
be deemed received two (2) days after the date of mailing.
23. Construction. The Option evidenced hereby is issued pursuant to
------------
this Agreement and shall be subject to the express terms and provisions of this
Agreement.
10
<PAGE>
IN WITNESS WHEREOF, Vicinity Corporation has caused this Agreement to
be executed on its behalf by its duly-authorized officer and the Optionee has
executed this Agreement, all on the day and year first above written.
VICINITY CORPORATION
By _____________________________________
Title: _________________________________
ELAINE HAMILTON
________________________________________
Address: _______________________________
________________________________________
________________________________________
11
<PAGE>
EXHIBIT A
---------
EXERCISE NOTICE
Vicinity Corporation
1135A San Antonio Road
Palo Alto, CA 94303
Attention: Secretary
1. Exercise of Option. Effective as of today, ___________, ____, the
------------------
undersigned Elaine Hamilton ("Optionee") hereby elects to exercise Optionee's
--------
option to purchase _________ shares of the Common Stock (the "Shares") of
------
Vicinity Corporation (the "Company") under and pursuant to the Nonstatutory
-------
Stock Option Agreement dated _______ (the "Option Agreement").
----------------
2. Representations of Optionee. Optionee acknowledges that Optionee
---------------------------
has received, read and understood the Option Agreement and agrees to abide by
and be bound by their terms and conditions.
3. Rights as Shareholder. Until the stock certificate evidencing
---------------------
such Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a shareholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is a date prior to such date the stock
certificate is issued, except as provided in Paragraphs 7 and 8 of the Option
Agreement.
Optionee shall enjoy rights as a shareholder until such time as
Optionee disposes of the Shares or the Company and/or its assignee(s) exercises
the Right of First Refusal or Right of Repurchase hereunder. Upon such
exercise, Optionee shall have no further rights as a holder of the Shares so
purchased except the right to receive payment for the Shares so purchased in
accordance with the provisions of this Agreement, and Optionee shall forthwith
cause the certificate(s) evidencing the Shares so purchased to be surrendered to
the Company for transfer or cancellation.
4. Company's Right of First Refusal. Before any Shares held by
--------------------------------
Optionee or any transferee (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift or
- -------
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section (the "Right of First Refusal").
----------------------
(a) Notice of Proposed Transfer. The Holder of the Shares shall
---------------------------
deliver to the Company a written notice (the "Notice") stating: (i) the
------
Holder's bona fide
A-1
<PAGE>
intention to sell or otherwise transfer such Shares; (ii) the name of each
proposed purchaser or other transferee ("Proposed Transferee"); (iii) the
-------------------
number of Shares to be transferred to each Proposed Transferee; and (iv) the
bona fide cash price or other consideration for which the Holder proposes to
transfer the Shares (the "Offered Price"), and the Holder shall offer the Shares
-------------
at the Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within thirty
----------------------------------
(30) days after receipt of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection (c)
below.
(c) Purchase Price. The purchase price ("Purchase Price") for the
-------------- --------------
Shares purchased by the Company or its assignee(s) under this Section shall be
the Offered Price. If the Offered Price includes consideration other than cash,
the cash equivalent value of the non-cash consideration shall be determined by
the Board of Directors of the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the
-------
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding indebtedness of the Holder to the Company
(or, in the case of repurchase by an assignee, to the assignee), or by any
combination thereof within thirty-five (35) days after receipt of the Notice or
in the manner and at the times set forth in the Notice.
(e) Holder's Right to Transfer. If all of the Shares proposed in the
--------------------------
Notice to be transferred to a given Proposed Transferee are not purchased by the
Company and/or its assignee(s) as provided in this Section, then the Holder may
sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within sixty (60) days after the date of the Notice and provided
further that any such sale or other transfer is effected in accordance with any
applicable securities laws and the Proposed Transferee agrees in writing that
the provisions of this Section shall continue to apply to the Shares in the
hands of such Proposed Transferee. If the Shares described in the Notice are
not transferred to the Proposed Transferee within such period, a new Notice
shall be given to the Company, and the Company and/or its assignees shall again
be offered the Right of First Refusal before any Shares held by the Holder may
be sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Notwithstanding anything
--------------------------------------
to the contrary contained in this Section, the transfer of any or all of the
Shares during Optionee's lifetime or on Optionee's death by will or intestacy to
Optionee's immediate family or a trust for the benefit of Optionee's immediate
family shall be exempt from the provisions of this Section provided that the
Company is notified in writing of said transfer within thirty (30) days of said
transfer. "Immediate Family" as used herein shall mean spouse, lineal
----------------
descendant or antecedent, father, mother, brother or sister. In such case, the
transferee or other recipient shall receive and hold the Shares so transferred
subject to the provisions of this Section and Section 5 below, and
A-2
<PAGE>
there shall be no further transfer of such Shares except in accordance with the
terms of this Section or Section 5 below.
(g) Termination of Right of First Refusal. The Right of First Refusal
-------------------------------------
shall terminate as to any Shares upon the closing of: (i) the first sale of
Common Stock of the Company to the general public pursuant to a registration
statement filed with and declared effective by the Securities and Exchange
Commission under the Securities Act of 1933, as amended; (ii) the sale of all or
substantially all of the assets of the Company; or (iii) the merger,
consolidation or other reorganization of the Company with or into any other
corporation or corporations in which the holders of the capital stock of the
Company immediately prior to such transaction hold less than fifty percent (50%)
of the voting securities of the surviving corporation after such transaction.
5. Company's Right of Repurchase. Upon termination of Optionee's
-----------------------------
Continuous Status as an Employee or Consultant, the Company or its assignee(s)
shall have a right to repurchase all the Shares then owned by Optionee,
Optionee's Immediate Family pursuant to Section 4(f) above or a trust for the
benefit of Optionee's Immediate Family pursuant to Section 4(f) above (each of
which are sometimes referred to herein as the "Owner") on the terms and
-----
conditions set forth in this Section (the "Right of Repurchase").
-------------------
(a) Exercise of Right of Repurchase. At any time within the period
-------------------------------
from the date of the termination of Optionee's Continuous Status as an Employee
and up to and through the second business day following three (3) months after
such termination (unless Paragraph 6.A of the Stock Option Agreement applies, in
which case the period shall commence on the date of termination and end on the
second business day following six (6) months after such termination; or unless
Paragraph 6.B of the Stock Option Agreement applies, in which case the period
shall commence on the date of termination and end on the second business day
following twelve (12) months after such termination), the Company and/or its
assignee(s) may, by sending written notice to the Owner (the "Company Notice"),
--------------
elect to purchase all, but not less than all, of the Shares then owned by the
Owner, at the Repurchase Price determined in accordance with subsection (b)
below.
(b) Purchase Price. The purchase price ("Repurchase Price") for
-------------- ----------------
the Shares purchased by the Company or its assignee(s) under this Section shall
be equal to the Fair Market Value per share of the Common Stock multiplied by
the number of Shares then owned by the Owner that are subject to the Right of
Repurchase.
(c) Payment. Payment of the Repurchase Price shall be made, at the
-------
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding indebtedness of the Owner to the Company, or
by any combination thereof within thirty (30) days after the date of the Company
Notice.
(d) Exception for Certain Changes in Status. Notwithstanding
---------------------------------------
anything to the contrary contained in this Section, in the event of Optionee's
change in status from Consultant to Employee or Employee to Consultant, the
provisions of this Section shall not apply.
A-3
<PAGE>
(e) Termination of Right of Repurchase. The Right of Repurchase
----------------------------------
shall terminate as to any Shares upon the closing of: (i) the first sale of
Common Stock of the Company to the general public pursuant to a registration
statement filed with and declared effective by the Securities and Exchange
Commission under the Securities Act of 1933, as amended; (ii) the sale of all or
substantially all of the assets of the Company; or (iii) the merger,
consolidation or other reorganization of the Company with or into any other
corporation or corporations in which the holders of the capital stock of the
Company immediately prior to such transaction hold less than fifty percent (50%)
of the voting securities of the surviving corporation after such transaction.
6. Tax Consultation. Optionee understands that Optionee may suffer
----------------
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
7. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
(a) Legends. Optionee understands and agrees that the Company
-------
shall cause the legends set forth below or legends substantially equivalent
thereto, to be placed upon any certificate(s) evidencing ownership of the Shares
together with any other legends that may be required by the Company or by state
or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE
OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND RIGHTS OF FIRST REFUSAL AND
REPURCHASE HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN
THE EXERCISE NOTICE BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF
THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL
OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS, RIGHTS OF FIRST
REFUSAL AND REPURCHASE ARE BINDING ON TRANSFEREES OF THESE SHARES.
(b) Stop-Transfer Notices. Optionee agrees that, in order to
---------------------
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop
A-4
<PAGE>
transfer" instructions to its transfer agent, if any, and that, if the Company
transfers its own securities, it may make appropriate notations to the same
effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
8. Successors and Assigns. The Company may assign any of its rights
----------------------
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Optionee and his or her heirs, executors, administrators, successors and
assigns.
9. Interpretation. Any dispute regarding the interpretation of this
--------------
Agreement shall be submitted by Optionee or by the Company forthwith to the
Company's Board of Directors, which shall review such dispute at its next
regular meeting. The resolution of such a dispute by the Board or committee
shall be final and binding on the Company and on Optionee.
10. Governing Law; Severability. This Agreement shall be governed by
---------------------------
and construed in accordance with the laws of the State of California excluding
that body of law pertaining to conflicts of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.
11. Notices. Any notice required or permitted hereunder shall be given
-------
in writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.
12. Further Instruments. The parties agree to execute such further
-------------------
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
13. Delivery of Payment. Optionee herewith delivers to the Company
-------------------
the full Exercise Price for the Shares.
14. Entire Agreement. The Notice of Grant and the Option Agreement
----------------
are incorporated herein by reference. This Agreement, the Option Agreement, and
the Restricted Stock Purchase Agreement constitute the entire agreement of the
parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee.
A-5
<PAGE>
<TABLE>
<S> <C>
Submitted by: Accepted by:
OPTIONEE: Elaine Hamilton VICINITY CORPORATION
By:
- ----------------------------- ---------------------
(Signature) Its:
---------------------
SPOUSE OF OPTIONEE (if any)
- ---------------------------
- ------------------------------
(Signature)
Address Address
- ------- -------
- ------------------------------ 1135A San Antonio Road
- ------------------------------ Palo Alto, CA 94303
</TABLE>
A-6
<PAGE>
EXHIBIT B
---------
RESTRICTED STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made between Elaine Hamilton (the "Purchaser") and
---------
VICINITY CORPORATION (the "Company") as of _____________, 20__.
-------
RECITALS
--------
(A) Pursuant to the exercise of the stock option granted to Purchaser
pursuant to the Nonstatutory Stock Option Agreement (the "Option Agreement")
----------------
dated [ _______ ] by and between the Company and Purchaser with respect to such
grant, which Option Agreement is hereby incorporated by reference, Purchaser has
elected to purchase _____________________ of those shares which have not become
vested under the vesting schedule set forth in the Option Agreement ("Unvested
--------
Shares"). The Unvested Shares and the shares subject to the Option Agreement
- ------
which have become vested are sometimes collectively referred to herein as the
"Shares."
- -------
(B) As required by the Option Agreement, as a condition to Purchaser's
election to exercise the option, Purchaser must execute this Restricted Stock
Purchase Agreement, which sets forth the rights and obligations of the parties
with respect to Shares acquired upon exercise of the Option.
1. Repurchase Option.
-----------------
(a) If Purchaser's employment or consulting relationship with the
Company is terminated for any reason, including for cause, death, and
disability, the Company shall have the right and option to purchase from
Purchaser, or Purchaser's personal representative, as the case may be, all of
the Purchaser's Unvested Shares as of the date of such termination at the price
paid by the Purchaser for such Shares (the "Repurchase Option").
(b) Upon the occurrence of a termination, the Company may exercise its
Repurchase Option by delivering personally or by registered mail, to Purchaser
(or his transferee or legal representative, as the case may be), within ninety
(90) days of the termination, a notice in writing indicating the Company's
intention to exercise the Repurchase Option and setting forth a date for closing
not later than thirty (30) days from the mailing of such notice. The closing
shall take place at the Company's office. At the closing, the holder of the
certificates for the Unvested Shares being transferred shall deliver the stock
certificate or certificates evidencing the Unvested Shares, and the Company
shall deliver the purchase price therefor.
(c) At its option, the Company may elect to make payment for the
Unvested Shares to a bank selected by the Company. The Company shall avail
itself of this option by a notice in writing to Purchaser stating the name and
address of the bank, date of closing, and waiving the closing at the Company's
office.
B-1
<PAGE>
(d) If the Company does not elect to exercise the Repurchase Option
conferred above by giving the requisite notice within ninety (90) days following
the termination, the Repurchase Option shall terminate.
2. Transferability of the Shares; Escrow.
-------------------------------------
(a) Purchaser hereby authorizes and directs the secretary of the
Company, or such other person designated by the Company, to transfer the
Unvested Shares as to which the Repurchase Option has been exercised from
Purchaser to the Company.
(b) To insure the availability for delivery of Purchaser's Unvested
Shares upon repurchase by the Company pursuant to the Repurchase Option under
Section 1, Purchaser hereby appoints the secretary, or any other person
designated by the Company as escrow agent, as its attorney-in-fact to sell,
assign and transfer unto the Company, such Unvested Shares, if any, repurchased
by the Company pursuant to the Repurchase Option and shall, upon execution of
this Agreement, deliver and deposit with the secretary of the Company, or such
other person designated by the Company, the share certificates representing the
Unvested Shares, together with the stock assignment duly endorsed in blank,
attached hereto as Exhibit C. The Unvested Shares and stock assignment shall be
---------
held by the secretary in escrow, pursuant to the Joint Escrow Instructions of
the Company and Purchaser attached as Exhibit D hereto, until the Company
---------
exercises its purchase right as provided in Section 1, until such Unvested
Shares are vested, or until such, time as this Agreement no longer is in effect.
As a further condition to the Company's obligations under this Agreement, the
spouse of the Purchaser, if any, shall execute and deliver to the Company the
Consent of Spouse attached hereto as Exhibit E. Upon vesting of the Unvested
---------
Shares, the escrow agent shall promptly deliver to the Purchaser the certificate
or certificates representing such Shares in the escrow agent's possession
belonging to the Purchaser, and the escrow agent shall be discharged of all
further obligations hereunder; provided, however, that the escrow agent shall
nevertheless retain such certificate or certificates as escrow agent if so
required pursuant to other restrictions imposed pursuant to this Agreement.
(c) The Company, or its designee, shall not be liable for any act it
may do or omit to do with respect to holding the Shares in escrow and while
acting in good faith and in the exercise of its judgment.
(d) Transfer or sale of the Shares is subject to restrictions on
transfer imposed by any applicable state and federal securities laws. Any
transferee shall hold such Shares subject to all the provisions hereof and the
Exercise Notice executed by the Purchaser with respect to any Unvested Shares
purchased by Purchaser and shall acknowledge the same by signing a copy of this
Agreement.
(e) The Repurchase Option shall terminate in accordance with the
Vesting Schedule in Optionee's Stock Option Agreement.
3. Ownership, Voting Rights, Duties. This Agreement shall not affect
--------------------------------
in any way the ownership, voting rights or other rights or duties of Purchaser,
except as specifically provided herein.
B-2
<PAGE>
4. Legends. The share certificate evidencing the Shares issued
-------
hereunder shall be endorsed with the following legend (in addition to any legend
required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND RIGHTS OF FIRST REFUSAL AND
REPURCHASE HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN
THE EXERCISE NOTICE BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF
THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL
OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS, RIGHTS OF FIRST
REFUSAL AND REPURCHASE ARE BINDING ON TRANSFEREES OF THESE SHARES.
5. Adjustment for Stock Split. All references to the number of
--------------------------
Shares and the purchase price of the Shares in this Agreement shall be
appropriately adjusted to reflect any stock split, stock dividend or other
change in the Shares which may be made by the Company after the date of this
Agreement.
6. Notices. Notices required hereunder shall be given in person or
-------
by registered mail to the address of Purchaser shown on the records of the
Company, and to the Company at their respective principal executive offices.
7. Survival of Terms. This Agreement shall apply to and bind
-----------------
Purchaser and the Company and their respective permitted assignees and
transferees, heirs, legatees, executors, administrators and legal successors.
8. Section 83(b) Elections.
(a) Election for Unvested Shares Purchased Pursuant to Nonqualified
---------------------------------------------------------------
Stock Options. Purchaser hereby acknowledges that he or she has been informed
- -------------
that, with respect to the exercise of a nonqualified stock option for Unvested
Shares, that unless an election is filed by the Purchaser with the Internal
Revenue Service and, if necessary, the proper state taxing authorities, within
------
30 days of the purchase of the Shares, electing pursuant to Section 83(b) of the
- -------
Code (and similar state tax provisions if applicable) to be taxed currently on
any difference between the purchase price of the Shares and their Fair Market
Value on the date of purchase, there will be a recognition of taxable income to
the Optionee, measured by the excess, if any, of the fair market value of the
Shares, at the time the Company's Repurchase Option lapses over the purchase
price for the Shares. Optionee represents that Optionee has consulted any tax
consultant(s) Optionee deems advisable in connection with the purchase of the
Shares or the filing of the Election under Section 83(b) and similar tax
provisions.
PURCHASER ACKNOWLEDGES THAT IT IS PURCHASER'S SOLE RESPONSIBILITY AND
NOT THE COMPANY'S TO FILE TIMELY THE ELECTION
B-3
<PAGE>
UNDER SECTION 83(b), EVEN IF PURCHASER REQUESTS THE COMPANY OR ITS
REPRESENTATIVE TO MAKE THIS FILING ON PURCHASER'S BEHALF.
9. Representations. Purchaser has reviewed with his own tax advisors
---------------
the federal, state, local and foreign tax consequences of this investment and
the transactions contemplated by this Agreement. Purchaser is relying solely on
such advisors and not on any statements or representations of the Company or any
of its agents. Purchaser understands that he (and not the Company) shall be
responsible for his own tax liability that may arise as a result of this
investment or the transactions contemplated by this Agreement.
10. Governing Law. This Agreement shall be governed by and construed
-------------
and enforced in accordance with applicable state laws.
Purchaser represents that he has read this Agreement and is familiar
with its terms and provisions. Purchaser hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Board upon any
questions arising under this Agreement.
IN WITNESS WHEREOF, this Agreement is deemed made as of the date first
set forth above.
"COMPANY"
VICINITY CORPORATION
By: _________________________________________
Title: ______________________________________
"PURCHASER"
_____________________________________________
Elaine Hamilton
Address: ____________________________________
____________________________________
Soc. Sec. No.: ______________________________
B-4
<PAGE>
EXHIBIT C
---------
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, _________________________________, hereby sell,
assign and transfer unto _______________ (______) shares of the Common Stock of
Vicinity Corporation standing in my name of the books of said corporation
represented by Certificate No. _________________ herewith and do hereby
irrevocably constitute and appoint ___________________________________________
______________________________________________________________ to transfer the
said stock on the books of the within named corporation with full power of
substitution in the premises.
This Stock Assignment may be used only in accordance with the
Restricted Stock Purchase Agreement between Vicinity Corporation and the
undersigned dated _________, 19___.
Dated: ___________, 19___
Signature: ____________________________
INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
"repurchase option, "as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
C-1
<PAGE>
EXHIBIT D
---------
JOINT ESCROW INSTRUCTIONS
____________, 19____
Vicinity Corporation
1135A San Antonio Road
Palo Alto, CA 94303
Attention: Secretary
Dear Secretary:
As Escrow Agent for both Vicinity Corporation (the "Company"), and the
-------
undersigned purchaser of stock of the Company (the "Purchaser"), you are hereby
---------
authorized and directed to hold the documents delivered to you pursuant to the
terms of that certain Restricted Stock Purchase Agreement ("Agreement") between
---------
the Company and the undersigned, in accordance with the following instructions:
1. In the event the Company and/or any assignee of the Company
(referred to collectively for convenience herein as the "Company") exercises the
-------
Company's repurchase option set forth in the Agreement, the Company shall give
to Purchaser and you a written notice specifying the number of shares of stock
to be purchased, the purchase price, and the time for a closing hereunder at the
principal office of the Company. Purchaser and the Company hereby irrevocably
authorize and direct you to close the transaction contemplated by such notice in
accordance with the terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, or some combination thereof) for the number of shares of stock
being purchased pursuant to the exercise of the Company's repurchase option.
3. Purchaser irrevocably authorizes the Company to deposit with you
any certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with any applicable state blue sky
authority of any required applications for consent to, or notice of transfer of,
the securities. Subject to the provisions of this Paragraph 3, Purchaser shall
exercise all rights and privileges of a shareholder of the Company while the
stock is held by you.
D-1
<PAGE>
4. Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's repurchase option has been exercised, you
will deliver to Purchaser a certificate or certificates representing so many
shares of stock as are not then subject to the Company's repurchase option.
Within 120 days after cessation of Purchaser's continuous employment by or
consulting services to the Company, or any parent or subsidiary of the Company,
you will deliver to Purchaser a certificate or certificates representing the
aggregate number of shares held or issued pursuant to the Agreement and not
purchased by the Company or its assignees pursuant to exercise of the Company's
repurchase option.
5. If at the time of termination of this escrow you should have in
your possession any documents, securities, or other property belonging to
Purchaser, you shall deliver all of the same to Purchaser and shall be
discharged of all further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as
are specifically set forth herein and may rely and shall be protected in relying
or refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties. You
shall not be personally liable for any act you may do or omit to do hereunder as
Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith,
and any act done or omitted by you pursuant to the advice of your own attorneys
shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all
warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law and are hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case you obey or comply with any such order, judgment or decree, you
shall not be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under the
Statute of Limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel and other
experts as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
D-2
<PAGE>
12. Your responsibilities as Escrow Agent hereunder shall terminate
if you shall cease to be an officer or agent of the Company or if you shall
resign by written notice to each party. In the event of any such termination,
the Company shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in
connection with these Joint Escrow Instructions or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities held by you hereunder, you are authorized and directed to retain in
your possession without liability to anyone all or any part of said securities
until such disputes shall have been settled either by mutual written agreement
of the parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
15. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail with
postage and fees prepaid, addressed to each of the other parties hereunto
entitled at the following addresses or at such other addresses as a party may
designate by ten days' advance written notice to each of the other parties
hereto.
COMPANY: Corporate Secretary
Vicinity Corporation
1135A San Antonio Road
Palo Alto, CA 94303
Attention: Secretary
PURCHASER: Elaine Hamilton
-------------------------
-------------------------
ESCROW AGENT: Vicinity Corporation
1135A San Antonio Road
Palo Alto, CA 94303
Attention: Secretary
16. By signing these Joint Escrow Instructions, you become a party
hereto only for the purpose of said Joint Escrow Instructions; you do not become
a party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit of
the parties hereto, and their respective successors and permitted assigns.
D-3
<PAGE>
18. These Joint Escrow Instructions shall be governed by, and
construed and enforced in accordance with, the laws of the State of California.
VICINITY CORPORATION
By: __________________________
Title: _______________________
______________________________
Elaine Hamilton
Escrow Agent:
VICINITY CORPORATION
By: __________________________
Title: Secretary
D-4
<PAGE>
EXHIBIT E
---------
CONSENT OF SPOUSE
I, _______________________________, spouse of
_____________________________, have read and approve the foregoing Agreement.
In consideration of granting of the right to my spouse to purchase shares of
Vicinity Corporation, as set forth in the Agreement, I hereby appoint my spouse
as my attorney-in-fact in respect to the exercise of any rights under the
Agreement and agree to be bound by the provisions of the Agreement insofar as I
may have any rights in said Agreement or any shares issued pursuant thereto
under the community property laws or similar laws relating to marital property
in effect in the state of our residence as of the date of the signing of the
foregoing Agreement.
Dated: _______________, 19___
________________________________
________________________________
[Print Name]
E-1
<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 Notes
9 and 12 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
January 14, 1999
