<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 3, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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IPASS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7389 93-1214598
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
3800 BRIDGE PARKWAY
REDWOOD SHORES, CA 94065
(650) 232-4100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MICHAEL H. MANSOURI
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
3800 BRIDGE PARKWAY
REDWOOD SHORES, CA 94065
(650) 232-4100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
ALAN C. MENDELSON, ESQ.
BRETT D. WHITE, ESQ.
COOLEY GODWARD LLP
FIVE PALO ALTO SQUARE
3000 EL CAMINO REAL
PALO ALTO, CA 94306-2155
(650) 843-5000
JAMES S. SCOTT, SR., ESQ.
SHEARMAN & STERLING
599 LEXINGTON AVENUE
NEW YORK, NY 10022
(212) 848-4000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), 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,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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<S> <C> <C>
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PROPOSED MAXIMUM
TITLE OF SECURITIES AGGREGATE AMOUNT OF
TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
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Common Stock, $.001 par value.................... $100,000,000 $264,000
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</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457(o) under the Securities Act.
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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE.
THIS PRELIMINARY PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN
OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE
IS NOT PERMITTED.
Subject to Completion. Dated , 2000.
Shares
iPASS INC.
Common Stock
-------------------------
This is an initial public offering of common stock of iPass Inc. All of the
shares of common stock are being sold by iPass.
Prior to this offering, there has been no public market for the common
stock. The initial public offering price of the common stock is expected to be
between $ and $ per share. iPass has applied for quotation of the common
stock on the Nasdaq National Market under the symbol "IPAS."
See "Risk Factors" beginning on page 7 to read about factors you should
consider before buying shares of the common stock.
-------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER REGULATORY
BODY HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Initial public offering price............................... $ $
Underwriting discount....................................... $ $
Proceeds, before expenses, to iPass......................... $ $
</TABLE>
To the extent that the underwriters sell more than shares of
common stock, the underwriters have the option to purchase up to an additional
shares from iPass at the initial public offering price less the
underwriting discount.
-------------------------
The underwriters expect to deliver the shares against payment in New York,
New York on , 2000.
GOLDMAN, SACHS & CO.
CHASE H&Q
AMERITRADE
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Prospectus dated , 2000.
[iPass Logo]
<PAGE> 3
INSIDE FRONT COVER
"iPass is the Internet Passport to Global Remote Access For Business"
INSIDE FRONT SPREAD
Headline: Global Presence.
Graphic of our Global Virtual Network. Footprint showing our Points of
Presence and Transaction Centers.
Headline: Global Remote Access Model
Graphical representation of how our remote access services work.
[iPass Logo]
INSIDE BACK COVER
Headline: iPass Connect Dialer.
Graphical screen shot of our application software program that enables our
end users to access our services.
<PAGE> 4
PROSPECTUS SUMMARY
This summary does not contain all of the information that you should
consider before investing in our common stock. You should read the entire
prospectus carefully, especially the risks of investing in the common stock
discussed in the "Risk Factors" section.
OUR BUSINESS
Our global virtual network provides people with secure, low-cost access to
their corporate networks or the Internet from virtually anywhere in the world.
Corporations utilize our services to enable their employees to remotely access
the Internet and their corporate networks on a global basis. Network service
providers, such as long-distance and local telephone companies and Internet
service providers, use our global virtual network to extend their service
offering to areas of the world where they do not have network coverage.
Today, our remote access platform enables users of electronic devices, such
as computers and personal digital assistants, to access corporate networks and
the Internet from more than 150 countries through a local telephone connection.
In the future, we expect that our remote access platform will provide this
access to corporations and network service providers through a variety of access
technologies, including wireless technologies.
We have designed our remote access and settlement platform to provide users
with reliable, secure and low-cost access and settlement solutions. This
platform is comprised of three elements:
- SERVICE AGREEMENTS with over 80 access providers. These agreements
provide us with capacity on the providers' networks and over 5,000
network access points where users can connect to the providers' networks;
- PROPRIETARY SOFTWARE consisting of an integrated set of software
applications designed to ensure secure access to the network, enhance the
flow of traffic on the network and collect information about each user's
connection; and
- NETWORK MONITORING TECHNOLOGY, which operates 24-hours-a day,
7-days-a-week, to monitor and control the quality of our network and to
provide our customers with information on network usage.
These elements combine to create our global virtual network.
We generate our revenues today by providing remote Internet access.
Industry analysts estimate that there will be approximately 137 million remote
workers worldwide by 2003. We primarily bill for our services based on the
length of time that each user spends on the network. In 1999, total network
usage was approximately 3.6 million hours. Usage in the fourth quarter of 1999
amounted to approximately 1.7 million hours, as compared to approximately
305,000 hours in the same quarter of 1998. Going forward, we intend to use our
core technology to provide internetwork settlement services, enabling network
service providers to more efficiently integrate and manage disparate networks
and ultimately to enhance their service offerings.
Our customers consist of:
- network service providers; and
- communication solutions providers that bundle our service with other
communication services and offer them to corporate end users.
We have developed business relationships with leading technology companies,
including Check Point, Cisco, Lucent, Microsoft and Nortel, to integrate our
software with their products in order to facilitate the use of our global
virtual network.
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OUR STRATEGY
The key elements of our business strategy include the following:
REINFORCE OUR POSITION AS A LEADING GLOBAL VIRTUAL NETWORK PROVIDER BY
- continuing to enhance the geographic scope and redundancy of our global
virtual network;
- building iPass brand awareness among both network service providers and
end users; and
- continuing to integrate our services with complementary products and
services offered by leading technology providers.
EXPAND OUR OFFERING OF REMOTE INTERNET ACCESS PRODUCTS AND SERVICES TO NEW AND
EXISTING CUSTOMERS BY
- supporting additional remote access technologies such as wireless;
- developing new communications services such as service quality management
and network optimization services; and
- facilitating the adoption of our proprietary software by network service
providers for use in managing and integrating their own network
facilities.
EXTEND OUR DISTRIBUTION CHANNELS GLOBALLY BY
- building on existing relationships with network service providers and
communication solutions providers globally; and
- establishing new relationships with communication solutions providers in
Europe and Asia to target corporations based within these regions.
DEVELOP NEW USES FOR OUR NETWORK AND SETTLEMENT TECHNOLOGY BY
- utilizing our extensive global virtual network and settlement competency
to provide new Internet-based applications, such as settlement for
Internet Protocol-based voice communications, referred to as Voice over
IP, and e-commerce micro-payment settlement.
CORPORATE INFORMATION
We were incorporated in California in July 1996, and re-incorporated in
Delaware in , 2000. Our corporate headquarters are located at 3800
Bridge Parkway, Redwood Shores, California 94065. Our telephone number is (650)
232-4100. Our corporate website address is www.ipass.com. Information contained
on our website does not constitute part of this prospectus.
iPass(TM), iPass Connect(TM) and the iPass logo are our trademarks. iPass
and the iPass logo are the subject of pending trademark applications in the
United States and other countries.
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THE OFFERING
Common Stock offered by us............... shares
Common Stock to be outstanding after the
offering................................. shares
Use of proceeds.......................... General corporate purposes, including
working capital and the funding of
operating losses.
Nasdaq National Market symbol............ IPAS
In the above table and throughout this prospectus, unless otherwise
indicated, the number of shares of common stock that will be outstanding after
the offering is based on the number of shares of common stock outstanding as of
December 31, 1999, plus the automatic conversion of 26,728,647 outstanding
shares of our preferred stock into common stock. However, the number of shares
of common stock outstanding as of December 31, 1999 excludes:
- 2,887,234 shares of common stock issuable upon the exercise of stock
options. These options have a weighted average exercise price of $0.82
per share and individual exercise prices ranging from $0.02 to $3.41 per
share; and
- 294,273 shares of common stock issuable upon the exercise of warrants.
These warrants have a weighted average exercise price of $2.56 per share
and individual exercise prices ranging from $1.44 to $3.41 per share.
Unless otherwise indicated, this summary and all information in this
prospectus assumes our reincorporation in Delaware prior to the closing of this
offering and no exercise of the underwriters' over-allotment option.
-------------------------
You should rely only on the information contained in this document. We have
not authorized anyone to provide you with information that is different. This
document may only be used where it is legal to sell these securities. The
information in this document may only be accurate on the date of this document
regardless of the time of delivery of the prospectus or of any sale of the
common stock.
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SUMMARY FINANCIAL INFORMATION
You should read the following summary financial data along with our
financial statements and accompanying notes and "Management Discussion and
Analysis of Financial Condition and Results of Operations," all of which appear
later in this prospectus.
<TABLE>
<CAPTION>
JULY 11, 1996
(INCEPTION) YEAR
THROUGH ENDED DECEMBER 31,
DECEMBER 31, --------------------------------
1996 1997 1998 1999
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(IN THOUSANDS, EXCEPT OPERATING DATA)
(UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING STATEMENT DATA:
Revenues.......................................... $ -- $ 812 $ 3,895 $ 14,319
----- -------- -------- ----------
Costs and Expenses
Cost of revenues................................ 9 714 2,680 8,697
Network operations.............................. 41 670 755 3,066
Research and development........................ 322 994 1,176 2,107
Sales and marketing............................. 383 2,716 4,340 9,141
General and administrative...................... 128 1,309 1,546 4,191
Severance....................................... -- -- -- 2,015
Amortization of deferred stock compensation..... -- -- -- 3,580
----- -------- -------- ----------
Total costs and expenses........................ 883 6,403 10,497 32,797
----- -------- -------- ----------
Operating Loss............................... (883) (5,591) (6,602) (18,478)
----- -------- -------- ----------
Total other income (expense)...................... 1 4 260 104
----- -------- -------- ----------
Net loss.......................................... $(882) $ (5,587) $ (6,342) $ (18,374)
===== ======== ======== ==========
OTHER OPERATING DATA:
Total network usage hours......................... -- 144,000 746,000 3,567,000
</TABLE>
The as adjusted balance sheet data below reflects the receipt and
application of the net proceeds from the sale of the shares of common
stock in this offering at the assumed initial public offering price of $ per
share after deducting underwriting discounts and commissions and estimated
offering expenses and the conversion of all outstanding preferred stock into
common stock. See "Use of Proceeds" and "Capitalization."
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
------------------------
ACTUAL AS ADJUSTED
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(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $15,178 $
Working capital............................................. 11,349
Total assets................................................ 24,257
Long-term obligations, less current portion................. 2,820 2,820
Total stockholders' equity.................................. 11,982
</TABLE>
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<PAGE> 8
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. Additional risks and uncertainties not presently known to
us or that we think are unimportant may also impair our business operations.
If any of the following risks actually occur, our business, financial
condition or results of operations could be harmed. In that case, the trading
price of our common stock could decline.
RISKS RELATING TO IPASS
IF REMOTE INTERNET ACCESS AND INTERNETWORK SETTLEMENT SERVICES DO NOT ACHIEVE
BROAD MARKET ACCEPTANCE, WE MAY NOT BECOME PROFITABLE.
Our business is dependent upon a large number of remote corporate workers
using our remote Internet access. If remote Internet access and internetwork
settlement services do not gain broad market acceptance, demand for our services
will not be sufficient for us to become profitable. Remote Internet access has
only been commercially available recently, and internetwork settlement services
generally do not exist today. Market acceptance of remote Internet access and
internetwork settlement services depends on a number of factors, including:
- the quality and functionality of these services and competing services;
- the efficiency and cost of such services compared to competing services;
and
- the availability of security products to ensure data privacy over the
public networks.
WE HAVE INCURRED SIGNIFICANT OPERATING LOSSES AND EXPECT TO INCUR SIGNIFICANT
OPERATING LOSSES IN THE FUTURE.
We cannot assure you that our business will ever be profitable. We have
experienced significant and increasing operating losses each quarter since our
inception and expect to incur substantial additional operating losses for at
least the next two years, primarily as a result of expected increases in
operations support and sales and marketing expenses. We experienced net losses
of approximately $5.6 million in 1997, $6.3 million in 1998 and $18.4 million in
1999, from revenues of $0.8 million, $3.9 million and $14.3 million,
respectively. We have also experienced negative cash flows in each year since
our inception in 1996. In addition, our future minimum commitments under all of
our leases are approximately $51.4 million, and our future minimum commitments
for access are approximately $34.3 million. If revenues do not meet the levels
we anticipate or if our costs and expenses exceed our expectations, we may not
become profitable and the price of our common stock may be harmed.
Our business is also characterized by a long sales cycle between the time a
potential customer is contacted and a new customer relationship is established,
and between the time new end users are brought into the systems and we begin to
realize significant associated revenues. As a result, we typically incur
substantial sales costs before we recognize any related revenues, which
increases the volatility of our results because we may have high costs without
associated offsetting revenues. In addition, we expect that the price we charge
our customers for our services will decrease over time. If the costs associated
with the long sales cycle increase, or if we are unable to generate associated
offsetting revenues, our operating results will be harmed.
IF WE ARE UNABLE TO DEVELOP AND INTRODUCE NEW SERVICES, WE MAY NOT ACHIEVE OR
MAINTAIN PROFITABILITY.
We have generated substantially all of our revenue from the sale of remote
Internet access. In order to realize our potential, we will need to continue to
enhance our existing services and to develop and introduce new and complementary
services. If we do not succeed in introducing, marketing and managing the
installation and implementation of new services and distribution channels in a
timely manner, our competitive position could be harmed.
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Even if we succeed in developing and establishing new services, we do not
know if they will achieve market acceptance or support adequate pricing levels
or generate revenues sufficient for us to become profitable. Further, we do not
know whether third-party developers of Internet communications applications will
be willing to develop new applications that interface with our platform, or that
we will be able to develop any applications of this type ourselves.
THE LOSS OF ANY ONE OF OUR PRINCIPAL INTERNET ACCESS PROVIDERS WOULD
SUBSTANTIALLY REDUCE OUR ABILITY TO DELIVER INTERNET ACCESS.
Many of our approximately 5,000 network access points are provided by a
relatively small number of large access providers. We rely on these providers to
supply a significant percentage of our remote Internet access time. In 1999, we
purchased approximately 80% of our remote Internet access time from three access
providers. If any one of these access providers experiences network interruption
or failure or we otherwise do not have this access, our services could
experience significant disruption. In addition, the contracts we have entered
into with some of these access providers contain minimum commitments, which
require us to pay for a set amount of access time, which, in some instances we
have not, or in the future may not, fully utilize. Furthermore, upon the
occurrence of any of the following events, our business may be negatively
impacted:
- an increase in rates charged for services provided to us by our access
providers;
- a refusal by the access providers to renew our contracts;
- a denial of Internet access by the access provider;
- a change of the terms of the services provided to us due to an
acquisition of our access providers by another entity that increases our
rates, terminates our contract, or denies us Internet access; or
- a termination of the operations of an access provider.
THERE ARE CERTAIN COUNTRIES IN WHICH WE HAVE ONLY ONE INTERNET ACCESS PROVIDER.
THE LOSS OF THE SUPPLIERS IN THESE COUNTRIES WOULD SUBSTANTIALLY DIMINISH OUR
ABILITY TO DELIVER GLOBAL INTERNET ACCESS.
In 90 countries we have only one Internet access provider. The network
usage provided in these 90 countries represented 6.0% of our total network usage
for 1999. In particular, one of our access providers provides us with access in
83 of these countries. The network usage provided to us by this access provider
represented 3.8% of our total network usage for 1999. If this access provider
were to terminate its arrangements with us, we would be forced to enter into
arrangements with a large number of local access providers, which may be costly
and time consuming, and we may not be able to enter into these arrangements. In
addition, in some cases due to government regulation, only one provider is
allowed to furnish services in a country. If this provider were to terminate its
agreement with us, we would no longer be able to provide Internet access in that
country. In the event of the termination of our arrangements with our access
providers in countries where we have only one provider, our customers may stop
using our services. In addition, our reputation as a global access company may
suffer, which would reduce our ability to maintain our existing, and generate
new, customers.
OUR OPERATING RESULTS MAY BE VOLATILE AND FAILURE TO MEET FINANCIAL OR OTHER
EXPECTATIONS MAY DISAPPOINT SECURITIES ANALYSTS OR INVESTORS AND RESULT IN A
DECLINE IN OUR STOCK PRICE.
We expect that our operating results and rate of growth will fluctuate
significantly in the future as a result of many factors, including:
- unanticipated increases in operating and marketing expenses;
- changes in pricing rates to our customers;
- unexpected cancellations by customers; and
- the decreased demand for remote access during November and December and
other fluctuations in demand for Internet remote access.
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Any of these events may cause our revenues or other results for that
quarter to fall below expectations of securities analysts. If revenue declines
in a quarter, our earnings will decline because many of our expenses are
relatively fixed. In addition, our historical growth rate has been substantial,
and this growth rate may not be sustainable, even in the short term. In any of
these events, the market price of our common stock may fall abruptly and
significantly. Because our revenue and operating results are difficult to
predict, we believe that period-to-period comparisons of our results of
operations are not a good indication of our future performance.
THE END USERS OF OUR SERVICES REQUIRE A HIGH DEGREE OF RELIABILITY IN THE
DELIVERY OF OUR SERVICES, AND IF WE CANNOT MEET THEIR EXPECTATIONS, DEMAND FOR
OUR PRODUCTS AND SERVICES WILL DECLINE.
Our success depends, in large part, on our ability to provide reliable
remote Internet access, uninterrupted operation of our network and software
infrastructure, and a satisfactory experience for our customers' end users. To
achieve these objectives, we depend on the quality and performance of our
products and services, the responsiveness of our technical support staff and the
capacity, reliability and security of our network operations and the reliability
and security of our suppliers' network and facilities. Due to the high level of
performance required for communications traffic, any failure to deliver a
satisfactory experience to users, whether or not caused by our own failure, and
any failure to provide accurate settlement data, could reduce demand for our
services.
ONE CUSTOMER ACCOUNTS FOR A SUBSTANTIAL PORTION OF OUR REVENUE, THE LOSS OF
WHICH WOULD SUBSTANTIALLY REDUCE OUR REVENUE.
Our contracts with our customers generally may be terminated upon six
months written notice by either party for any reason, or shorter for cause. Our
largest customer accounted for 18.8% of our revenue in 1999. If we were to lose
this customer, or if the revenue generated from this customer decreases
substantially, our operating results will be negatively affected.
IF NETWORK SERVICE PROVIDERS DO NOT SUCCESSFULLY MARKET OUR REMOTE INTERNET
ACCESS SERVICES TO THEIR SUBSCRIBERS OR CORPORATE END USERS, THEN OUR SERVICES
WILL NOT ACHIEVE WIDESPREAD MARKET ACCEPTANCE.
Our business depends on the efforts and success of network service
providers and communication solutions providers in marketing remote Internet
access and internetwork settlement services to their customers. If our customers
fail to market our services effectively, our revenues would be reduced. Our own
ability to promote those services is often limited. The Internet-based services
we provide are relatively new and have not achieved widespread market
acceptance. Network service providers and communication solutions providers may
be reluctant to promote our services until they gain greater commercial
acceptance, which may never occur.
WE FACE SIGNIFICANT COMPETITION IN THE CORPORATE REMOTE ACCESS MARKET, WHICH
COULD MAKE IT MORE DIFFICULT FOR US TO SUCCEED.
We face significant competition in corporate remote access and internetwork
settlement services markets. We face direct competition from other remote
network service providers, including GRIC Communications, Inc. We also compete
with network service providers including AT&T Corp., Equant Networking Services,
Inc., GTE Internetworking Incorporated and MCI WorldCom, Inc., including through
its subsidiary UUNET Technologies, Inc. Some of these network service providers
also provide access to us. We could also potentially face competition from
emerging, wireless based network service providers targeting the traveling
business communities.
Many of our competitors have substantially greater resources, larger
customer bases, longer operating histories, greater name recognition and more
established relationships in the industry than we have. Our customers are
generally free to use competing services, and the costs of switching are low, so
we could face significant customer and end user losses or be required to reduce
the fees we charge. Any of our competitors may combine or form strategic
partnerships, gaining competitive advantages as a result. Our
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competitors may be able to develop and market products and services that are
superior to our own in terms of features, quality, pricing or other factors. In
addition, our competitors may be able to bundle or package remote access
services with their other offerings, which we cannot do. In that event, our
services may not achieve the market acceptance necessary for us to succeed. See
"Business -- Competition" for a more complete description of the risks we face.
BECAUSE MUCH OF OUR BUSINESS IS INTERNATIONAL, WE ENCOUNTER SPECIAL PAYMENT AND
OTHER DIFFICULTIES, WHICH MAY REDUCE OUR PROFITABILITY.
We generate the majority of our revenues from business conducted
internationally. Although we currently bill for our services in U.S. dollars,
our international operations subject our business to specific risks. These risks
include:
- longer payment cycles for foreign customers, including delays due to
currency controls and fluctuations;
- the impact of changes in foreign currency exchange rates on the
attractiveness of our pricing;
- potentially high taxes in foreign countries; and
- difficulties complying with Internet-related regulations in foreign
jurisdictions.
We are also exposed to general geopolitical risks, such as political and
economic instability and changes in diplomatic and trade relationships. Any of
these factors could negatively impact our business.
IF WE DO NOT RAISE ADDITIONAL CAPITAL OR GENERATE THE SIGNIFICANT CAPITAL
NECESSARY TO FUND OR EXPAND OUR OPERATIONS, WE MAY NOT BE ABLE TO CONTINUE OUR
OPERATIONS.
We will require substantial amounts of additional finances to continue our
operations as currently contemplated and to expand our operations. We require
the proceeds of this offering to continue operations through the remainder of
2000. At December 31, 1999, we had an accumulated deficit of approximately $31.2
million. For the year ending December 31, 1999, we sustained a net loss of
approximately $18.4 million. The report of independent public accountants on our
financial statements includes an explanatory paragraph describing uncertainties
concerning our ability to continue as a going concern. We anticipate that our
existing capital resources, together with the proceeds of this offering, will be
adequate to fund our currently planned operations for at least two years.
However, we premise this expectation on our current operating plan, which may
change as a result of many factors. Consequently, we may need additional funding
sooner than anticipated. Our future capital requirements will depend on many
factors, including:
- the rate at which we can obtain new customers;
- the rate at which end users adopt our technology;
- competing technological developments;
- the cost of developing new services; and
- other factors which may not be within our control.
We currently have no committed sources of capital. To the extent operating
and capital resources are insufficient to meet future requirements, we will have
to raise additional funds to continue the development and commercialization of
our services. These funds may not be available on favorable terms, or at all.
Without additional funding, we may be required to delay, reduce the scope of or
eliminate one or more of our development programs, or to discontinue our
operations.
OUR FUTURE SUCCESS DEPENDS ON OUR ABILITY TO ATTRACT, RETAIN AND MOTIVATE HIGHLY
SKILLED MANAGEMENT PERSONNEL AND OTHER EMPLOYEES.
Our future success depends on our ability to attract, retain and motivate
key management personnel and highly skilled employees. Our business is located
in Silicon Valley in California, where demand for
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personnel with these skills is extremely high and is likely to remain high. As a
result, competition for, and retention of, personnel, particularly for employees
with technical expertise, is intense. Additionally, it is often more difficult
to attract management personnel and highly skilled employees once a company's
stock is publicly traded because the exercise price of equity awards such as
stock options are based on the public market, which is highly volatile. If we
are unable to attract, retain and motivate sufficient number of qualified
employees, our ability to conduct and expand our business could be seriously
reduced. Our expected business needs require that we increase the number of such
personnel dramatically in the near future. The inability to attract and retain
and hire qualified personnel could also hinder the planned expansion of our
business.
IF WE ARE UNABLE TO EFFECTIVELY MANAGE OUR PLANNED EXPANSION, OUR BUSINESS MAY
BE ADVERSELY IMPACTED.
We have experienced and expect to continue to experience rapid growth,
which has placed, and could continue to place, a significant strain on our
network operations, internal controls, product development and other managerial,
operating and financial resources. We expect the number of employees, including
management-level employees, to continue to increase for the foreseeable future.
To effectively manage our planned expansion, we must continue to improve our
operational and financial systems and managerial controls and procedures, which
include the following:
- managing our research and development efforts;
- expanding the capacity and performance of our network and software
infrastructure;
- developing our administrative, accounting and management information
systems and controls;
- effectively maintaining coordination among our various departments; and
- recruiting and retaining many more employees.
If we do not manage our planned expansion effectively, our business would be
harmed.
LITIGATION ARISING OUT OF INTELLECTUAL PROPERTY INFRINGEMENT OR OTHER COMMERCIAL
DISPUTES COULD BE EXPENSIVE AND DISRUPT OUR BUSINESS.
We cannot be certain that our products do not, or will not, infringe upon
patents, trademarks, copyrights or other intellectual property rights held by
third parties. In addition, since we rely on third parties to help us develop,
market and support our product and service offerings, we cannot assure you that
litigation will not arise from disputes involving those third parties. From time
to time we have been, and we expect to continue to be, involved in disputes with
these third parties. We may incur substantial expenses in defending against
these claims, regardless of their merit. Successful claims against us may result
in substantial monetary liability, significantly impact our results of
operations in one or more quarters or materially disrupt the conduct of our
business. See "Business -- Intellectual Property" for a more detailed
description of our intellectual property.
RISKS RELATED TO OUR INDUSTRY
SECURITY CONCERNS MAY DETER THE USE OF THE INTERNET FOR CORPORATE
COMMUNICATIONS, WHICH WOULD REDUCE DEMAND FOR OUR PRODUCTS AND SERVICES.
The secure transmission of confidential information over public networks is
a significant barrier to widespread adoption of the Internet as a business
medium. The Internet is a public network and information is sent over this
network from many sources. Advances in computer capabilities, new discoveries in
the field of code breaking or other developments could result in compromised
security on our network or the networks of others. Security and authentication
concerns with respect to the transmission over the Internet of confidential
information, such as corporate access passwords, and the ability of unauthorized
computer users, so-called hackers, to penetrate online security systems may
reduce the demand for our services. Furthermore, any well-publicized compromises
of confidential information could reduce demand for Internet-based
communications and our products and services.
11
<PAGE> 13
GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES REGARDING THE INTERNET COULD HARM
OUR BUSINESS.
At present, Internet-based communication services are not subject to fees
that the U.S. Federal Communications Commission generally imposes on entities
that use the local telephone network to access customers. Internet-based
communication services also are generally not subject to other federal fees or
taxes imposed to support programs such as universal telephone service. Changes
in the rules or regulations of the U.S. Federal Communications Commission or in
applicable federal communications laws to impose such fees or taxes could add
significant new costs to our operations, and we are not certain how those
increased costs could affect demand for our services.
Any new law or regulation pertaining to Internet-based communication
services, or the application or interpretation of existing laws, could decrease
the demand for our services, increase our cost of doing business or otherwise
harm our business. There is, and will likely continue to be, an increasing
number of laws and regulations pertaining to the Internet. These laws or
regulations may relate to taxation and the quality of products and services.
Furthermore, the applicability to the Internet of existing laws governing
intellectual property ownership and infringement, copyright, trademark, trade
secret, obscenity, libel, employment, personal privacy and other issues is
uncertain and developing. In addition, we are not certain how our business may
be affected by the application of existing laws governing issues such as
property ownership, copyrights, encryption and other intellectual property
issues, taxation, and export or import matters. The vast majority of these laws
were adopted prior to the advent of the Internet. As a result, they may not
contemplate or address the unique issues of the Internet and related
technologies. Changes in laws intended to address these issues could create
uncertainty in the Internet market. These uncertainties could reduce demand for
our services or increase the cost of doing business through litigation costs or
increased service delivery costs.
RISKS RELATED TO THIS OFFERING
THERE ARE FACTORS THAT MAY PREVENT NEW INVESTORS FROM INFLUENCING SIGNIFICANT
CORPORATE DECISIONS.
Following this offering, our directors, entities affiliated with our
directors and our executive officers will beneficially own, in the aggregate
approximately % of our outstanding common stock. These stockholders as a group
will be able to substantially influence our management and our affairs. If
acting together, they could influence most matters requiring the approval by our
stockholders, including the election of directors, any merger, consolidation or
sale of all or substantially all of our assets or any other significant
corporate transaction. The concentration of ownership may also delay or prevent
a change of control of iPass at a premium price if these stockholders oppose it.
See the "Principal Stockholders" section for details on our stock ownership.
In addition, provisions in our certificate of incorporation and bylaws may
have the effect of delaying or preventing an acquisition or merger in which we
are not the surviving company or where a transaction changes our management.
These provisions of our certificate of incorporation and bylaws:
- authorize the board to issue preferred stock without stockholder
approval;
- prohibit cumulative voting in the election of directors;
- require that only one third of the members of the Board be elected each
year;
- limit the persons who may call special meetings of stockholders; and
- establish advance notice requirements for nominations for the election of
the board of directors or for proposing matters that can be acted on by
stockholders at stockholder meetings.
In addition, because we are incorporated in Delaware, we are governed by
the provisions of Section 203 of the Delaware General Corporation Law. These
provisions may prohibit large stockholders, in particular those owning 15% or
more of the outstanding voting stock, from consummating a merger or combination
including us. These provisions could limit the price that investors might be
willing to pay in the future for our common stock.
12
<PAGE> 14
THERE IS A LARGE NUMBER OF SHARES THAT MAY BE SOLD IN THE MARKET FOLLOWING THIS
OFFERING, WHICH MAY DEPRESS THE MARKET PRICE OF OUR COMMON STOCK.
Sales of a substantial number of shares of our common stock in the public
market following this offering could cause the market price of our common stock
to decline. If there are more shares of our common stock offered for sale than
investors are willing to purchase, then the market price of our common stock may
decline to a price at which buyers are willing to purchase the offered shares of
common stock and investors remain willing to sell the shares. The number of
shares of common stock available for sale in the public market is limited by
restrictions under federal securities law and under lock-up agreements that our
stockholders have entered into with the underwriters and with us. Those lock-up
agreements restrict our stockholders from selling, pledging or otherwise
disposing of their shares for a period of 180 days after the date of this
prospectus without the prior written consent of Goldman, Sachs & Co. However,
Goldman, Sachs & Co. may, in its sole discretion, release all or any portion of
the common stock from the restrictions of the lock-up agreements at any time.
The following table indicates approximately when the 39,828,928 shares of our
common stock that are not being sold in the offering, but which were outstanding
as of December 31, 1999, will be eligible for sale into the public market:
<TABLE>
<CAPTION>
DAYS AFTER SHARES
THE EFFECTIVE DATE ELIGIBLE FOR SALE COMMENT
------------------ ----------------- -------
<S> <C> <C>
On Effectiveness Shares not locked-up and saleable under Rule 144
90 days Shares not locked-up and saleable under Rules 144 and 701
180 days 37,205,289 Lock-up released: shares saleable under Rules 144 and 701
</TABLE>
Additionally, of the 2,887,234 shares that may be issued upon the exercise
of options outstanding as of December 31, 1999, approximately 861,256 shares
will be vested and eligible for sale 180 days after the date of this prospectus.
For a further description of the eligibility of shares for sale into the public
market following the offering, see "Shares Eligible for Future Sale."
OUR STOCK PRICE MAY BE SUBJECT TO WIDE FLUCTUATIONS DUE TO MARKET CONDITIONS,
WHICH INCREASES YOUR RISKS OF HOLDING OUR STOCK.
The market price for our common stock may be subject to wide fluctuations
as a result of market conditions, many of which are beyond our control. These
factors include:
- announcements of technological innovations by us or our competitors;
- announcements of new products or services by us or our competitors;
- investor perception of us, the market for Internet-based communications
services or the Internet as a business medium;
- changes in financial estimates by securities analysts; and
- general economic and market conditions.
NOTE REGARDING FORWARD-LOOKING STATEMENTS AND MARKET DATA
This prospectus contains forward-looking statements. These statements
relate to future events or our future financial performance. We have attempted
to identify forward-looking statements by terminology including "anticipate,"
"believe," "can," "continue," "could," "estimate," "expect," "intend," "may,"
"plan," "potential," "predict," "should" or "will" or the negative of these
terms or other comparable terminology. These statements are only predictions and
involve known and unknown risks, uncertainties and other factors, including the
risks outlined under "Risk Factors," that may cause the future achievements to
be materially different from the expectations expressed or implied by these
forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results. We do not intend
to update any of the forward-looking statements after the date of this
prospectus if they prove different from actual results.
13
<PAGE> 15
This prospectus includes statistical data and forecasts concerning the
Internet-based communications industry that we have obtained from industry
publications. These publications generally indicate that they have obtained
information from sources that they believe are reliable but that they do not
guarantee the accuracy and completeness of the information. In particular, we do
not know what rates of general economic growth were assumed in preparing the
forecasts. Forecasts of developing industries, such as ours, are not based upon
sophisticated analysis of a substantial amount of historical data as is the case
for more mature industries. Often, interviews with corporate leaders in
developing industries, such as ours, form the basis for much statistical data
and forecasts. Thus, statistical data and forecasts for developing industries,
such as ours, are much less likely to be accurate. We also have not sought the
consent of any of these sources to refer to their data in this prospectus.
14
<PAGE> 16
USE OF PROCEEDS
We estimate that the net proceeds to us from the sale of the shares being
offered will be $ million, assuming an initial public offering price of
$ per share, after deducting the underwriting discount and estimated
offering expenses payable by us. We intend to use the proceeds for working
capital and general corporate purposes, including to fund operating losses.
We may also use a portion of the net proceeds to acquire complementary
technologies or businesses; however, we currently have no commitments or
agreements and are not involved in any negotiations regarding acquisition
transactions. Pending the application of the net proceeds of this offering, we
intend to invest the net proceeds in interest-bearing, investment grade
securities.
DIVIDEND POLICY
We have never paid or declared any cash dividends. We currently expect to
retain future earnings, if any, to finance the growth and development of our
business and, therefore, do not anticipate paying cash dividends in the
foreseeable future.
15
<PAGE> 17
CAPITALIZATION
The following table sets forth our cash and capitalization as of December
31, 1999:
- on an actual basis;
- on a pro-forma basis to reflect the conversion upon the closing of this
offering of all outstanding shares of preferred stock into 26,728,647
shares of common stock; and
- on a pro forma as adjusted basis to reflect the sale of the common stock
in this offering at the assumed initial public offering price of
$ per share, after deducting underwriting discounts and
commissions and estimated offering expenses.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT
SHARE AMOUNTS)
<S> <C> <C> <C>
Cash, and cash equivalents.................................. $ 15,178 $ 15,178 $
======== ======== ========
Long-term obligations, less current portion................. 2,820 2,820 2,820
Stockholders' Equity:
Convertible Preferred Stock; 30,000,000 shares authorized,
26,728,647 shares and no shares issued and outstanding
actual and pro forma; 5,000,000 shares undesignated and
authorized, no shares issued and outstanding pro forma
as adjusted............................................ 37,087 -- --
Common Stock: 60,000,000 shares authorized, 13,100,281
issued and outstanding actual; 120,000,000 shares
authorized, 39,828,928 shares and shares
issued and outstanding pro forma and pro forma as
adjusted............................................... 21,023 58,110
Warrants.................................................... 174 174 174
Notes Receivable from Stockholders.......................... (2,129) (2,129) (2,129)
Deferred Stock Compensation................................. (12,945) (12,945) (12,945)
Accumulated Deficit......................................... (31,228) (31,228) (31,228)
-------- -------- --------
Total Stockholders' Equity............................. 11,982 11,982
-------- -------- --------
Total Capitalization................................. $ 14,802 $ 14,802 $
======== ======== ========
</TABLE>
16
<PAGE> 18
DILUTION
Our net tangible book value as of December 31, 1999 was $12.0 million, or
$0.30 per share. Net tangible book value per share represents the amount of our
total tangible assets, reduced by the amount of our total liabilities, and then
divided by the total number of shares of common stock outstanding after giving
effect to the automatic conversion of all shares of outstanding preferred stock.
Dilution in net tangible book value per share represents the difference between
the amount paid per share by purchasers of shares of common stock in this
offering and the net tangible book value per share of common stock immediately
after the completion of this offering. After giving effect to the sale of the
shares of common stock offered by us at an assumed initial public
offering price of $ per share, and after deducting an assumed underwriting
discount and estimated offering expenses payable by us, our net tangible book
value at December 31, 1999 would have been $ million or $ per share of
common stock. This represents an immediate increase in net tangible book value
of $ per share to existing stockholders and an immediate dilution of $
per share to new investors purchasing shares at the initial offering price. The
following table illustrates this dilution on a per share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Net tangible book value per share before the offering..... $ 0.30
Increase per share attributable to new investors..........
-----------
Net tangible book value per share after the offering........
-----------
Dilution per share to new investors......................... $
===========
</TABLE>
The following table sets forth, as of December 31, 1999, the difference
between the number of shares of common stock purchased from us (assuming the
conversion of our preferred stock), the total consideration paid and the average
price per share paid by the existing stockholders and by the new investors at
the assumed initial public offering price of $ per share for shares
purchased in this offering before deducting underwriting discounts and
commissions and estimated offering expenses:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............... 39,828,928 % $58,110,000 % $1.46
New investors.......................
----------- ----- ----------- -----
Total.......................... 100.0% 100.0%
=========== ===== =========== =====
</TABLE>
In addition, as of December 31, 1999, 3,181,507 shares of common stock were
issuable upon exercise of outstanding options and warrants. The exercise price
of the outstanding options range from $0.02 to $3.41 per share. The exercise
price of the outstanding warrants range from $1.44 to $3.41 per share. To the
extent these options or warrants are exercised, you will experience further
dilution.
Moreover, the number of shares available for issuance under our stock
option and employee stock purchase plans will automatically increase without
stockholder approval. Furthermore, we may choose to raise additional capital due
to market conditions or strategic considerations even if we believe we have
sufficient funds for our current or future operating plans. To the extent that
additional capital is raised through the sale of equity or convertible debt
securities, the issuance of these securities could result in further dilution to
our stockholders.
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<PAGE> 19
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
our Financial Statements and the notes thereto, and with Management's Discussion
and Analysis of Financial Conditions and Results of Operations included in the
back of this prospectus. The financial statement data for the years ended 1997,
1998 and 1999 are derived from our audited financial statements included in the
back of this prospectus. Pro forma basic net loss per share gives effect to the
conversion of all of our preferred stock into common stock, which will occur at
the closing of this offering.
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
JULY 11, 1996
(INCEPTION)
THROUGH YEAR ENDED DECEMBER 31,
DECEMBER 31, ---------------------------------------
1996 1997 1998 1999
------------- ---------- ---------- -----------
(UNAUDITED) (IN THOUSANDS, EXCEPT SHARE AND PER
SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Revenues:........................................ $ -- $ 812 $ 3,895 $ 14,319
---------- ---------- ---------- -----------
Costs and Expenses
Cost of revenues............................... 9 714 2,680 8,697
Network operations............................. 41 670 755 3,066
Research and development....................... 322 994 1,176 2,107
Sales and marketing............................ 383 2,716 4,340 9,141
General and administrative..................... 128 1,309 1,546 4,191
Severance...................................... -- -- -- 2,015
Amortization of deferred stock compensation.... -- -- -- 3,580
---------- ---------- ---------- -----------
Total costs and expenses....................... 883 6,403 10,497 32,797
---------- ---------- ---------- -----------
Operating Loss................................. (883) (5,591) (6,602) (18,478)
---------- ---------- ---------- -----------
Other income (expense)
Interest income and other, net................. 2 43 417 338
Interest expense............................... (1) (39) (157) (234)
---------- ---------- ---------- -----------
Total other income (expense)................. 1 4 260 104
---------- ---------- ---------- -----------
Net loss......................................... $ (882) $ (5,587) $ (6,342) $ (18,374)
========== ========== ========== ===========
Basic and diluted net loss per share............. $ (0.81) $ (1.25) $ (1.12) $ (2.46)
========== ========== ========== ===========
Shares used in computing basic and diluted net
loss per share................................. 1,085,711 4,480,525 5,647,886 7,465,417
========== ========== ========== ===========
Pro forma basic net loss per share (unaudited)... $ (0.62)
===========
Shares used in computing pro forma net loss per
share (unaudited).............................. 29,817,931
===========
</TABLE>
18
<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read together with our financial
statements and related notes included later in this prospectus. This discussion
contains forward-looking statements that involve risks and uncertainties. Our
actual results may differ materially from those anticipated in these
forward-looking statements as a result of factors including, but not limited to,
those set forth under "Risk Factors" and elsewhere in this prospectus.
OVERVIEW
We provide our services to corporations and to network service providers.
Our remote access platform currently enables users of electronic devices, such
as computers and personal digital assistants, to access corporate data networks
and the Internet from more than 150 countries through a local telephone
connection. We expect that in the future our remote access platform will provide
access to corporations and network service providers through a variety of access
technologies, including wireless technologies.
We generate and recognize the majority of our revenue based on the length
of time that each user spends on our network. In some instances, we charge our
customers a start-up fee which we amortize and recognize over the initial term
of the agreement, typically one year. In 1999, total network usage was
approximately 3.6 million hours, of which approximately 1.7 million hours were
in the fourth quarter. In the fourth quarter of 1999, we generated revenue of
approximately $5.7 million. To date, we have derived substantially all of our
revenues from providing remote Internet access. Although we plan to introduce
additional settlement services to network service providers in the future, we
expect that for the foreseeable future we will continue to derive the largest
part of our revenues from providing remote Internet access.
We have incurred substantial losses since our inception as a result of
expenses associated with developing and marketing our global virtual network and
related technologies and services. As of December 31, 1999, we had an
accumulated deficit of approximately $31.2 million. We anticipate that our
operating expenses will increase substantially in the future as we continue to
expand our network and related infrastructure, develop and market additional
services and expand our operations. Accordingly, we expect to incur additional
losses for at least the next two years, and we cannot assure you that we will
achieve or sustain profitability. In addition, we expect the net proceeds from
this offering will enable us to continue our operations for at least the next
two years.
19
<PAGE> 21
RESULTS OF OPERATIONS
The following table sets forth the percentage of total revenues represented
by certain items in our Statement of Operations for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1997 1998 1999
------ ------ ------
<S> <C> <C> <C>
Revenues.................................................... 100.0% 100.0% 100.0%
------ ------ ------
Costs and Expenses
Cost of revenues....................................... 87.9 68.8 60.7
Network operations..................................... 82.5 19.4 21.4
Research and development............................... 122.4 30.2 14.7
Sales and marketing.................................... 334.4 111.4 63.8
General and administrative............................. 161.2 39.7 29.3
Severance.............................................. -- -- 14.1
Amortization of deferred stock compensation............ -- -- 25.0
------ ------ ------
Total costs and expenses............................. 788.4 269.5 229.0
------ ------ ------
Operating loss.............................................. (688.4) (169.5) (129.0)
------ ------ ------
Other income (expense)
Interest income and other.............................. 5.3 10.7 2.4
Interest expense....................................... (4.8) (4.0) (1.7)
------ ------ ------
Total other income, net.............................. 0.5 6.7 0.7
------ ------ ------
Net loss............................................. (687.9)% (162.8)% (128.3)%
====== ====== ======
</TABLE>
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
REVENUES. Our total revenues, which were derived principally from providing
remote Internet access services, increased from $812,000 in 1997 to $3.9 million
in 1998, and increased further to $14.3 million in 1999. These increases were
due to higher volumes of remote Internet access hours.
Of total revenues, revenues related to start-up fees were $33,000 and
$219,000 for 1998 and 1999, respectively. We had no revenues from start-up fees
in 1997. The deferred revenue related to start-up fees was $211,000 at December
31, 1999.
Four customers represented 19.5%, 16.4%, 13.7% and 12.1% of total revenues
in 1997. No individual customer represented 10% or more of total revenues in
1998, and one customer represented 18.8% of total revenues in 1999.
International revenues, which are revenues generated from customers
domiciled outside the United States, accounted for approximately 66.2%, 68.6%
and 55.5% of total revenues in 1997, 1998 and 1999, respectively. In 1997,
revenues from customers domiciled in Singapore, Hong Kong and Australia
represented 19.3%, 17.1% and 13.8% of total revenues, respectively. In 1998,
revenues from customers domiciled in Hong Kong and Singapore represented 10.1%
and 10.0% of total revenues. No individual foreign country represented 10% or
more of total revenues in 1999. All of our revenues to date have been
denominated in U.S. dollars, although in the future some portion of revenues may
be denominated in foreign currencies.
COSTS AND EXPENSES
COST OF REVENUES. Our cost of revenues consists of the charges, principally
by the hour, that we pay to our access providers for Internet access. Cost of
revenues increased from $714,000 in 1997 to $2.7 million in 1998, and increased
further to $8.7 million in 1999. These increases were due to higher volumes of
remote Internet access hours. As a percentage of our total revenues, the cost of
revenues represented 87.9%, 68.8% and 60.7% in 1997, 1998 and 1999,
respectively.
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<PAGE> 22
Our total revenues included contractual minimum revenues of $276,000 and
$324,000 in 1998 and 1999, respectively, derived under a contract to provide
remote Internet access services that were never used by a customer. This
contract commenced in 1998 and expired in 1999. There were no remote Internet
access costs associated with these revenues. Absent these minimum revenues, the
cost of revenues as a percentage of total revenues would have been 74.1% and
62.1% in 1998 and 1999, respectively.
The decrease in costs of revenues as a percentage of revenues from 1997 to
1998 was due principally to payments of minimum access fees and fixed charges in
1997 as we were establishing our remote Internet access network, and to a lesser
extent due to reducing access costs as we added lower-cost access providers to
the network. The decrease in costs of revenues as a percentage of revenues from
1998 to 1999 was principally due to reduced access costs as we continued to add
lower-cost access providers to the network and, to a lesser extent, due to
reduced access costs resulting from renegotiation of certain access provider
contracts.
NETWORK OPERATIONS EXPENSES. Our network operations expenses consist
primarily of salaries and benefits for our network, customer support, access
management and management information services personnel, outside consultants
and the depreciation of our network equipment. Network operations expenses
increased from $670,000 in 1997 to $755,000 in 1998, and increased further to
$3.1 million in 1999. These increases were related to increases of the number of
access providers and network access points, providing customer support to a
larger customer base and to supporting higher volumes of hours. As a percentage
of our total revenues, network operations expenses represented 82.5%, 19.4% and
21.4% in 1997, 1998 and 1999, respectively. We expect that our network
operations expenses will continue to increase, both in absolute dollars and as a
percentage of revenues, as we expand our global virtual network.
RESEARCH AND DEVELOPMENT EXPENSES. Our research and development expenses
consist of salaries, benefits and recruiting costs of our research and
development personnel and outside consultants. Research and development expenses
increased from $994,000 in 1997 to $1.2 million in 1998, and increased further
to $2.1 million in 1999. These increases were related to the expansion of our
remote Internet access network and related services. As a percentage of our
total revenues, research and development expenses represented 122.4%, 30.2% and
14.7% in 1997, 1998 and 1999, respectively.
SALES AND MARKETING EXPENSES. Our sales and marketing expenses consist
primarily of salaries, benefits and commissions of sales and marketing
personnel, advertising and promotion expenses, and pre-sales support costs.
Sales and marketing expenses increased from $2.7 million in 1997 to $4.3 million
in 1998, and increased further to $9.1 million in 1999. As a percentage of our
total revenues, sales and marketing expenses represented 334.4%, 111.4% and
63.8% in 1997, 1998 and 1999, respectively. These increases in absolute dollars
were primarily related to our expansion of our sales and marketing organization,
particularly in the United States and Asia. In the future we anticipate that we
will make even more significant investments in sales and marketing, including
expansion in Europe and Asia.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased from $1.3 million in 1997 to $1.5 million in 1998, and increased
further to $4.2 million in 1999. As a percentage of our total revenues, general
and administrative expenses represented 161.2%, 39.7% and 29.3% in 1997, 1998
and 1999, respectively. The increase in absolute dollars from 1997 to 1998 and
from 1998 to 1999 was related to the recruiting and hiring of additional
personnel, including key executives, and the expansion of our operations. The
increase from 1998 to 1999 also included $300,000 related to fees related to the
acquisition of new office leases and lease abandonment costs related to our
previous office lease.
SEVERANCE EXPENSES. In 1999, we recorded $2.0 million of severance costs
related principally to the accelerated vesting of certain stock options and, to
a lesser extent, cash severance payments to our founder and former chief
executive officer in September 1999.
AMORTIZATION OF DEFERRED STOCK COMPENSATION. This expense consists of the
amortization of deferred stock compensation resulting from the grant of stock
options or shares of restricted stock at exercise or sale prices subsequently
deemed to be less than the fair value of the common stock on the grant date. At
December 31, 1999, deferred stock compensation, which is a component of
stockholders'
21
<PAGE> 23
equity, was $12.9 million. This amount is being amortized, using the method
outlined in FASB Interpretation No. 28, over the vesting periods of the
applicable stock options and restricted shares, typically four years. We expect
to incur amortization of deferred stock compensation expense of at least $6.9
million in 2000, $3.6 million in 2001, $1.8 million in 2002, and $604,000 in
2003. The amount of deferred stock compensation expense to be recorded in future
periods could decrease if options for which accrued but unvested compensation
has been recorded are forfeited.
INTEREST INCOME AND OTHER. Interest income and other represents interest
income on cash balances. Interest income and other increased from $43,000 in
1997 to $416,000 in 1998 and decreased to $337,000 in 1999. These fluctuations
were due to changes in our average cash balances during these periods.
INTEREST EXPENSE. Interest expense consists of interest paid on our
equipment financing and subordinated debt as well as amortization of unamortized
loan discount associated with the fair value of warrants issued in connection
with our financing activities. Interest expense increased from $39,000 in 1997
to $157,000 in 1998, and increased further to $234,000 in 1999. As a percentage
of our total revenues, interest expense represented 4.8%, 4.0% and 1.7% in 1997,
1998 and 1999, respectively.
INCOME TAXES. As of December 31, 1999, we had approximately $22.5 million
of federal and state net operating loss carryforwards which expire at various
dates through the year 2019 to the extent that they are not utilized. We have
not recognized any benefit from these net operating loss carryforwards because
of uncertainty surrounding their realization. The amount of net operating losses
that we can utilize in any given year may be limited upon the occurrence of
certain events, including significant changes in ownership interests, such as
this offering.
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<PAGE> 24
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth certain unaudited statements of operations
data for each of the eight quarters in the period ended December 31, 1999. In
our opinion, this information has been presented on the same basis as the
audited financial statements appearing elsewhere in this prospectus, and all
necessary adjustments, consisting only of normal recurring adjustments, have
been included in the amounts stated below to present fairly the unaudited
quarterly results when read in conjunction with the audited financial statements
and related notes. The operating results for any quarter should not be relied
upon as necessarily indicative of results for any future period. We expect our
quarterly operating results to fluctuate in future periods due to a variety of
reasons, including those specifically discussed in "Our operating results may be
volatile and failure to meet financial expectations may disappoint securities
analysts or investors and result in a decline in our stock price" in the Risk
Factors section. This table also includes certain other operating data.
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED
-------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT 30, DEC 31, MARCH 31, JUNE 30, SEPT 30, DEC 31,
1998 1998 1998 1998 1999 1999 1999 1999
--------- -------- -------- ------- --------- -------- -------- -------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues............................... $ 448 $ 720 $ 1,180 $ 1,547 $ 1,969 $ 2,811 $ 3,879 $ 5,660
------- ------- ------- ------- ------- ------- ------- -------
Costs and Expenses:
Cost of Revenues..................... 365 574 850 891 1,124 1,602 2,413 3,558
Operations support................... 188 165 185 217 388 515 863 1,299
Research and development............. 251 264 322 339 376 427 475 829
Sales and marketing.................. 858 977 1,184 1,321 1,385 1,497 2,370 3,888
General and administrative........... 355 380 333 477 431 996 1,089 1,676
Severance............................ -- -- -- -- -- -- 2,015 --
Amortization of deferred stock
compensation....................... -- -- -- -- 57 610 1,153 1,760
------- ------- ------- ------- ------- ------- ------- -------
Total costs and expenses......... 2,017 2,360 2,874 3,245 3,761 5,647 10,378 13,010
------- ------- ------- ------- ------- ------- ------- -------
Operating loss......................... (1,569) (1,640) (1,694) (1,698) (1,792) (2,836) (6,499) (7,350)
------- ------- ------- ------- ------- ------- ------- -------
Other income (expense)
Interest income and other............ 139 114 96 68 43 26 42 225
Interest expense..................... (55) (39) (33) (30) (28) (28) (78) (100)
------- ------- ------- ------- ------- ------- ------- -------
Total other income (expense)..... 84 75 63 38 15 (2) (36) 125
------- ------- ------- ------- ------- ------- ------- -------
Net Loss......................... $(1,485) $(1,565) $(1,631) $(1,660) $(1,777) $(2,838) $(6,535) $(7,225)
======= ======= ======= ======= ======= ======= ======= =======
Total network usage hours.............. 87 132 222 305 369 524 937 1,737
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
We have funded our operations, capital expenditures and interest expenses
since inception primarily through a series of preferred stock financings. Since
our inception in July 1996, we have completed five issuances of convertible
preferred stock providing aggregate net proceeds of approximately $37.1 million.
In addition, in the second half of 1999, we raised $4.0 million from a debt
issuance. As of December 31, 1999, we had cash and cash equivalents of $15.2
million.
Net cash used in operating activities was $4.8 million for 1997, $6.2
million for 1998 and $12.1 million for 1999. Net cash used in operating
activities for the two years ended December 31, 1997 and 1998 primarily resulted
from net losses in the respective periods. Net cash used in operating activities
for 1999 primarily resulted from a net loss for the year, coupled with $1.6
million of cash used in office lease deposit, offset in part by $3.6 million of
amortization of deferred stock compensation, $2.2 million of non-cash stock
compensation expense and a $1.3 million increase in other net operating
liabilities.
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<PAGE> 25
Net cash used in investing activities was $267,000 for 1997, $302,000 for
1998 and $2.1 million for 1999. Of this amount, $267,000, $302,000 and $1.3
million in 1997, 1998 and 1999, respectively, were related principally to
purchases of computer equipment to support our growth in revenues and employee
base. Additionally, in 1999, we used $376,000 for furniture deposits for our new
headquarters and $400,000 for a loan to our chief executive officer.
Net cash provided by financing activities was $15.2 million for 1997 and
$24.2 million for 1999. Cash provided by financing activities was primarily from
proceeds of the sale of our preferred stock and, to a lesser extent, proceeds
from equipment lease financing and other debt financing. For 1998, cash used in
financing activities was $381,000, primarily as a result of payments on capital
lease financing of $565,000, offset in part by $169,000 of proceeds from
equipment lease financing.
We have signed contracts with our three largest access providers under
which we have minimum annual access purchase commitments as follows:
<TABLE>
<CAPTION>
YEAR ENDING ANNUAL
DECEMBER 31, COMMITMENT
------------ --------------
(IN THOUSANDS)
<S> <C>
2000....................................... $ 8,679
2001....................................... 9,479
2002....................................... 9,988
2003....................................... 5,695
2004....................................... 459
-------
$34,300
=======
</TABLE>
We lease our real estate under non-cancelable operating leases that expire
at various dates through February 2010. Future minimum payments under all leases
as of December 31, 1999 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING ANNUAL
DECEMBER 31, COMMITMENT
------------ --------------
(IN THOUSANDS)
<S> <C>
2000....................................... $ 3,641
2001....................................... 4,500
2002....................................... 4,674
2003....................................... 4,848
2004 and thereafter........................ 33,733
-------
$51,396
=======
</TABLE>
We believe that the net proceeds of this offering, together with our
existing cash and cash equivalents, will be sufficient to meet our anticipated
cash needs for working capital, operating expenses and capital expenditures for
at least the next two years. Thereafter, we may need to raise additional funds
to support our working capital requirements or for other purposes and may seek
to raise additional funds through public or private debt, equity financing or
from other sources. We cannot assure you that additional financing will be
available to us on favorable terms, if at all. If adequate funds are not
available on acceptable terms, we may be unable to develop new or enhanced
services, take advantage of future opportunities, or respond to competitive
pressures or unanticipated requirements, which could harm our business.
RECENT PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which requires
companies to record derivative financial instruments on the balance sheet as
assets or liabilities, measured at fair value. In June 1999, the FASB deferred
the effective date of SFAS No. 133 to be effective for all fiscal quarters of
all fiscal years beginning after June 15, 2000. Because we do not currently hold
any derivative instruments and do not engage in
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<PAGE> 26
hedging activities, we do not believe that the application of SFAS No. 133 will
have a material impact on our financial position or results of operations.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The primary objective of our investment activities is to preserve principal
while at the same time maximizing the income we receive from our investments
without significantly increasing risk. Some of the securities that we invest in
may have market risk. This means that a change in prevailing interest rates may
cause the value of the investment to fluctuate. For example, if we hold a
security that was issued with a fixed interest rate at the then-prevailing rate
and the prevailing interest rate later rises, the value of our investment will
probably decline. To reduce this risk in the future, we intend to maintain our
portfolio of cash equivalents and short-term investments in a variety of
securities, including commercial paper, money market funds, government and
non-government debt securities. The average duration of all of our investments
in 1999 was less than one year. Due to the short term nature of these
investments, we believe we have no material exposure to interest rate risk
arising from our investments. Therefore, no quantitative tabular disclosure is
required.
All contracts and transactions to date have been denominated or made in
U.S. dollars.
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<PAGE> 27
BUSINESS
OVERVIEW
Our global virtual network provides people with secure, low-cost access to
their corporate networks or the Internet from virtually anywhere in the world.
We provide remote Internet access services to corporations and to network
service providers. Our remote access platform enables users of electronic
devices, such as computers and personal digital assistants, to access corporate
data networks and the Internet from more than 5,000 network access points in
more than 150 countries through a local telephone connection. In the future, we
expect that our remote access platform will provide this access to corporations
and network service providers through a variety of access technologies,
including wireless technologies.
We have designed our remote access and settlement platform to provide users
with reliable, secure and low-cost access and settlement solutions. This
platform is comprised of three elements:
- SERVICE AGREEMENTS with over 80 access providers, including Equant, GTE
Internetworking and UUNET;
- PROPRIETARY SOFTWARE consisting of an integrated set of software
applications which is designed to ensure secure access to the network,
enhance the flow of traffic on the network, and collect information about
each user's connection; and
- NETWORK MONITORING TECHNOLOGY, which operates 24-hours-a day,
7-days-a-week, to monitor and control the quality of our network and to
provide our customers with information on network usage.
INDUSTRY BACKGROUND
THE REMOTE INTERNET ACCESS MARKET. The convergence of Internet-based
communications and traditional telecommunications markets and the on-going
global deregulation of the communications industry have created significant
opportunities for providers of Internet-based services. Technological
improvements have enabled the telecommunications industry to utilize Internet
protocol, commonly referred to as "IP," to transport data over the Internet.
With the availability of security products that enhance data privacy over the
Internet, virtual private networks, referred to as "VPNs," are becoming a viable
alternative to private data networks for corporate remote networking solutions.
VPNs are software applications designed to establish secure connections between
two parties via the public Internet and maintain the same level of security as
in private networks. VPN solutions are being offered by network service
providers typically as components within packages, including consulting
services, software and Internet access. According to Infonetics, the market for
VPN services will be $29.8 billion in 2003.
Remote Internet access enables corporations, network service providers and
communication solutions providers to utilize the public Internet to provide end
users access to their corporate network or the Internet from remote locations.
Providing these services over the Internet can offer novel features,
functionality, greater efficiencies and lower associated costs than traditional
solutions.
Industry analysts expect demand for a wide variety of IP-based
communications services, such as remote Internet access, to increase. The rapid
growth of mobile business users and the prevalence of e-mail as a medium of
information exchange have driven the demand for remote Internet access. As the
workforce becomes increasingly mobile, companies must provide their mobile users
with access to the Internet and to critical applications and services residing
on their corporate network. According to industry analysts' estimates, there
will be approximately 137 million remote access workers worldwide by 2003.
Today, remote access is provided over the traditional telephone network or
over the Internet. The following are the three most common currently available
methods:
- THE IN-HOUSE TRADITIONAL TELEPHONE-BASED NETWORK METHOD utilizes
internally managed modem banks, telephone lines, toll-free access numbers
and remote access servers. End users access the network by placing a long
distance or toll-free call to their corporate networks. The primary
advantage of this method is the relatively low entry costs associated
with this small-scale
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deployment. The primary disadvantage of this method is the requirement
for additional support staff and the deployment of additional dedicated
remote access servers, modem banks and multiple telephone lines as the
number of users increase. In addition, the long distance telephone or
toll-free telephone calls for remote access are substantially more
expensive than local telephone calls. Furthermore, dependency on the
telephone infrastructure for reliable data transport may be problematic
in areas where quality long-distance toll connections are unavailable.
- THE OUTSOURCED, CARRIER-BASED PRIVATE REMOTE ACCESS NETWORK METHOD
utilizes outsourced modem banks, telephone lines, and private data
network services. This method typically provides remote access to a
predetermined, fixed coverage area. The services are generally billed on
a fixed basis, rather than on a usage basis, and are relatively
expensive. The outsourced carrier model is typically suitable for
organizations with predictable usage and predefined geographic locations.
- THE OUTSOURCED, INTERNET-BASED VPN METHOD utilizes VPN technology to
provide secure remote access. This method provides a reliable and
cost-effective alternative for small and large organizations with
predictable or unpredictable usage and geographic needs. The requirements
for this method include dedicated Internet access from the corporate
site, the appropriate VPN technology and a network service provider with
local Internet access in the areas in which remote access is desired. The
costs to the organization may be substantially less than the currently
available alternative methods, particularly for international access.
THE INTERNETWORK SETTLEMENT SERVICES MARKET. The greatest challenge faced
by corporations, network service providers and communication solutions providers
in meeting remote access needs is providing consistent, high quality service
across a very broad geographic area. Organizations have traditionally addressed
the problem by building additional infrastructure. To reduce capital
expenditures and to speed the expansion of their networks, many providers
partner and share networks with other providers to enable broader Internet
access coverage. At the same time, the number of network service providers and
communication solutions providers has grown substantially. As the number of
relationships among network service providers and their customers increases,
complexity increases significantly, particularly in the following areas:
- the validation of suppliers and services;
- authorization of individual transactions;
- equitable recording of events;
- facilitation of payment; and
- collection of funds.
In addition, the consolidation among network service providers creates a
need for them to quickly integrate services to provide a seamless network to
offer customers an array of services without incurring significant capital
costs.
As the number of Internet-based transactions increases, we believe that the
need for a trusted third party to settle these transactions becomes critical. In
the banking industry, ATM networks such as Cirrus and Plus have been created to
provide settlement services among the various member banks. In these systems,
the participants depend on a trusted third party organization to provide
settlement services among the multiple entities involved in the transaction.
Similarly, as the number of network service providers and communication
solutions providers continues to grow, we believe that the need for secure,
low-cost and reliable third party settlement services will be essential. We
believe no such services have been widely accepted.
THE IPASS SOLUTION
Our global virtual network provides people with secure, low-cost access to
their corporate networks or the Internet from virtually anywhere in the world.
It also allows network service providers to connect their
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<PAGE> 29
facilities, however limited, to a global network, enabling them to expand the
breadth and reach of services they can offer their customers.
End users of the iPass solution connect to the network via a local
telephone call, rather than placing a long-distance or toll-free call to their
home city or the nearest city where their network service provider has
facilities. The iPass network provides full Internet access as though the users
were connected through their home providers, and can also connect users to their
corporate networks through the Internet using VPN technology. The iPass solution
operates independently of whatever VPN technology corporations choose, providing
a secure and robust communications link.
Today, most end-users use a computer, connected by a local telephone line,
to access our global virtual network. In the future, as other devices and access
technologies, such as mobile telephones and personal digital assistants, become
more widely used for Internet access, we expect these devices also could be
connected to our global virtual network.
The proprietary software that we use to operate the iPass network can also
be used by network service providers to integrate and manage their own
telecommunications networks. This software enables disparate networks to operate
in unison. The software also facilitates monitoring of network status, optimizes
traffic routing, and provides detailed reporting of network usage for settlement
and billing purposes. The information generated by this monitoring can also be
useful to corporate information technology managers seeking to configure their
networks efficiently.
Our global virtual network is a powerful platform with which to provide
global remote Internet access as well as future settlement services for
Internet-based transactions, such as telephone calls, Voice over IP, or
e-commerce. Its features include:
- GLOBAL PRESENCE: Our global virtual network currently includes our 5,000
network access points and four transaction processing centers worldwide.
Geographically diverse centers ensure efficient, redundant transaction
processing.
- AUTHENTICATION: Our global virtual network is designed to ensure secure
access, establishing the identity of each user and tailoring users'
access privileges accordingly.
- TRANSACTION-BASED REPORTING: Our global virtual network creates
"call-detail records" for each instance of network usage, capturing user,
date, time, duration of usage, and other parameters. This type of
transaction-data reporting is the foundation of any settlement system.
- EXTENSIVE CUSTOMER BASE: The utility of any settlement platform is driven
by the number of parties it can link. With over 650 network service
providers using our global virtual network today, settlement customers
will have access to a broad base of counterparties.
STRATEGY
Our objective is to be the premier global provider of remote Internet
access and settlement services. The key elements of our strategy to achieve this
objective include:
REINFORCE OUR POSITION AS A LEADING GLOBAL VIRTUAL NETWORK PROVIDER. We
seek to enhance the geographic scope and redundancy of our global virtual
network. We believe we can build and maintain the iPass brand awareness among
both network service providers and end-users through the promotion of our logo,
marketing campaigns, integration with our communication solutions providers and
co-branding our dialer software. We also plan to continue integrating our
services with complementary products and services offered by leading technology
providers, including Cisco Systems Inc. and Lucent Technologies, Inc., to
reinforce our leadership position.
EXPAND OUR SERVICE OFFERING TO NEW AND EXISTING CUSTOMERS. Currently, our
remote access platform enables users of electronic devices, such as computers
and personal data assistants, to access corporate data networks and the Internet
through a local telephone connection from more than 150 countries. In the
future, we plan to expand our services to support additional access technologies
such as wireless technologies. In addition to our remote Internet access
services, we believe that by developing new
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<PAGE> 30
communications services to offer users of our global virtual network, such as
service quality management and network optimization services, we will be able to
better service our existing customers as well as reach new customers. We also
seek to assist network service providers in managing their network with our
proprietary software.
EXTEND OUR DISTRIBUTION CHANNELS GLOBALLY. Our customers consist of network
service providers and communication solutions providers. Network service
providers use our services to provide remote global Internet access to their
customers in areas of the world where do not have coverage. Communication
solutions providers bundle our services with other services and resell them. We
seek to build on our existing relationships with network service providers and
communication solutions providers to expand the reach and scope of our customer
base. In addition, we also plan to establish new relationships with
communication solution providers in Europe and Asia in order to target corporate
end users within these regions.
DEVELOP NEW APPLICATIONS AND USES FOR OUR GLOBAL VIRTUAL NETWORK. Our
internetwork settlement services have been designed to enable facilities-based
network providers to better integrate and enhance their service offerings. In
the future, we plan to utilize our global virtual network and extensive
settlement competency to provide settlement for new Internet-based applications,
such as Internet Protocol-based voice communications, referred to as Voice over
IP, and e-commerce micro-payment settlement.
TECHNOLOGY
We implement our core technology through five principal systems:
- Remote corporate users and customers of Internet service providers
connect to an access provider using our dialer software, which we refer
to as "iPassConnect" on their computer;
- The access provider's network includes our authentication and settlement
software, which we call "NetServer";
- NetServer communicates with one of the centrally located iPass servers,
which are part of our authentication and settlement technology and which
we refer to as "transaction centers";
- The transaction center communicates with the end user's company or
network service provider via our authentication and settlement software,
which we call "RoamServer"; and
- The transaction center communicates with a settlement system which is
integrated with iPass' back-office infrastructure.
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The interaction of these technologies enables our remote Internet access
service as illustrated in the diagram below:
[REMOTE ACCESS MODEL DIAGRAM]
[Graphic demonstrating the process by which iPass technology enables a
remote user to connect to his or her corporate site or to access the Internet.]
ACCESS TECHNOLOGIES. The iPassConnect dialer is a software application
installed on the end user's computer which allows an end user to connect,
through one of over 5,000 dial-in phone numbers located in the dialer phonebook,
to our global virtual network. The dialer software includes a database of cities
and access telephone numbers. The user indicates the city in which he or she is
located, and then selects a local network access point or chooses to have the
dialer select one automatically. Network service providers, communication
solutions providers and corporations can easily co-brand the iPassConnect
dialer. iPassConnect is presently available for Windows 95, 98 and NT. The iPass
Dial "wizard" is available for the Macintosh and provides functionality similar
to iPassConnect. We also have dialer software that works with Microsoft's
Connection Manager.
The iPassConnect dialer software is integrated with our Service Quality
Management, or "SQM," system, our dialer software and phonebook customization
tools, and our automatic phonebook generation and update system. This
integration allows us to enhance network performance by routing traffic to the
most reliable and least-costly dial-in phone numbers in the dialer phonebook. To
achieve this, the iPassConnect dialer logs dial-in successes and failures for
every dial-in attempt made by an end user along with their connection
experience. When an end user successfully connects to the Internet using
iPassConnect, the log of dial-in successes and failures is forwarded to the SQM
system. We use this information to measure the quality of the different dial-in
phone numbers and as one input for the phonebook generation tool. The phonebook
generation tool, in turn, automatically prioritizes the dialer phonebook,
placing the highest quality, lowest price dial-in phone numbers among the first
numbers to be called in areas where we have more than one dial-in phone number.
iPassConnect automatically downloads the updated dialer phonebook each time it
connects to the Internet. The iPass Dial "wizard" for Macintosh cannot currently
be used in conjunction with the SQM system.
NETWORK AUTHENTICATION AND ROUTING TECHNOLOGIES. Our network authentication
and routing technologies are designed to provide secure authentication for
global remote Internet access. We accomplish this through three of our principal
systems: NetServer, transaction centers and RoamServer.
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When a remote end user dials into an access provider, NetServer securely
routes the authentication request to one of iPass' transaction centers. The
transaction center identifies the end user's network service provider and then
routes the authentication request to the RoamServer at the end user's company or
network service provider. When RoamServer receives this authentication request
from the transaction center, it asks the authentication server of the company or
network service provider to authenticate the request for access by verifying the
end user name and password.
The result of the authentication request is then securely returned by way
of the transaction center to the original requesting NetServer at the access
provider. The end user is granted Internet access if the authentication request
has been verified by the end user's company or network service provider.
Our network authentication and routing technologies support a variety of
industry-standard authentication, authorization and accounting protocols. Once
the end user has been granted access to the Internet, our technologies record
the amount of time spent online but do not carry the actual Internet traffic.
SETTLEMENT TECHNOLOGIES. Our settlement system collects call detail records
from our transaction centers and converts the records to a common internal
format which is then published to a database. At the close of each billing
cycle, our settlement system takes the aggregated information and produces the
invoices and usage records for both our access providers and our customers. We
are able to generate standard financial reporting and forecasting along with
reports on network usage.
Our near real-time settlement system is extremely flexible and supports
pricing models based on total usage, fixed price or a price per transaction.
Because of the flexibility of the settlement architecture, we believe we can
support emerging standards such as the Open Settlement Protocol and new service
offerings such as settlement for micro-payments and Voice over IP, SQM data and
additional remote access technologies, such as wireless data, in one coherent
system.
STANDARDS. We participate in standards groups and activities related to our
core technologies and technologies we believe will directly affect our current
remote Internet access business as well as future transaction-based and mobile
access services. We participate in ongoing Open Settlement Protocol development
efforts to ensure that our network architecture remains compliant with this
protocol and that we have the ability to make technical contributions regarding
the appropriate evolution and deployment of Open Settlement Protocol. In
addition, we participate in working groups concerned with authentication
protocols for remote, mobile and network access.
SERVICES
The services we currently offer to corporations, communications carriers
and communication solutions partners are as follows:
IPASS INTERNET ROAMING. iPass Internet Roaming primarily targets network
service providers. These services are designed to enable network service
providers to extend the geographic reach of their networks. When a subscriber
accesses the Internet outside of the primary coverage area of his or her network
service provider, our global virtual network is utilized to provide access. We
typically bill the network service provider on a per-minute basis for usage of
our network. The network service provider determines pricing to its customers.
IPASS CORPORATE ACCESS. iPass Corporate Access is targeted to businesses
with traveling employees. This service replaces our customers' traditional
telephone-based solutions, which rely on modem banks, toll-free numbers, long
distance calls and public telephone networks, with an Internet-based VPN
solution. We offer iPass Corporate Access in several pricing packages. The most
common package is usage-based, which provides access to an unlimited number of
corporate users and is billed on a per-minute basis for actual use. We also
offer fixed rate packages, which offer groups of fifty users remote access in
the United States at a fixed monthly price per user. Usage outside the United
States is billed on a per-minute basis.
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The advantages of iPass Internet Roaming and iPass Corporate Access for a
corporation or network service provider include:
- GLOBAL COVERAGE. Our global virtual network spans over 5,000 network
access points in more than 150 countries;
- OPEN HARDWARE AND SOFTWARE PLATFORM. Users can access the Internet using
any IP-based technology, and can run any third-party or proprietary
communications software over their iPass connection;
- DETAILED USAGE REPORTING AND INTERNETWORK SETTLEMENT. Each network
service provider receives detailed time, duration, quality and other
information regarding their customers' connection to our global virtual
network. This information can form the basis of any settlement and
billing system;
- OUTSOURCING OF NETWORK AGREEMENTS. Our global virtual network serves as
the "hub" that links multiple local networks to create one global
network. Our service eliminates the need for each carrier to negotiate
agreements with every other carrier in the global network. With iPass,
each carrier simply signs the iPass service agreement and joins a
worldwide network or Internet service provider;
- 24 HOURS-A-DAY, 7 DAYS-A-WEEK NETWORK MONITORING AND MANAGEMENT. The
iPass network is managed from four network operating centers that route
traffic and monitor network status; and
- LOW COST. Users place a local, rather than toll free or long-distance,
call to access the Internet.
IPASS GLOBALNET CARRIER SERVICES. iPass GlobalNet Carrier Services
primarily target telecommunications carriers with multiple networks to utilize
our core settlement technologies. These services enable carriers to expand their
Internet access offerings to subscribers by facilitating the integration of
multiple networks, such as those gained through acquisition. iPass GlobalNet
Carrier Services are a relatively new set of services that we are actively
marketing. We did not generate revenue from these services in 1999.
The advantages of iPass GlobalNet Carrier Services to network service
providers include:
- TIME TO MARKET. iPass GlobalNet Carrier Services facilitate the
integration of multiple networks, enabling network service providers to
offer products and services without the delay and high cost of building
new applications;
- COMMON AUTHENTICATION AND BILLING. The iPass settlement system provides
secure authentication and the ability to track detailed usage across
multiple networks, including dial-in locations and session time. Billing
information from the carrier's extended network is combined into a
single, common billing record; and
- CONSISTENT USER EXPERIENCE. Subscribers can use the same dialer software,
user ID and password for access anywhere on the carrier's extended
network, typically identical to their LAN-based e-mail accounts. This
reduces support costs and allows carriers to deliver a simple, integrated
Internet access offering to customers.
TECHNOLOGY RELATIONSHIPS
We have a variety of technology relationships with technology companies.
These relationships include bundling of iPass software with other products,
joint testing and documenting of VPN solutions, participation in standards
development, co-marketing and joint selling. Because our services often are sold
as part of a broader remote access solution, we believe that relationships with
companies which offer related products improves our market reach. In addition,
bundling our software with leading companies increases our brand recognition. We
have relationships with companies including:
- 3Com Corporation
- Check Point Software Technologies
- Cisco Systems, Inc.
- Lucent Technologies, Inc.
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- Microsoft Corporation
- Sun Microsystems, Inc.
CUSTOMERS
Our customers consist of network service providers and communication
solutions providers. As of December 31, 1999, over 650 network service providers
and over 250 corporations were using our global virtual network. Fiberlink
Communications Corporation represented 18.8% of our revenue in 1999.
SALES AND MARKETING
We primarily sell our services indirectly through channels including
network service providers and communication solutions providers. This strategy
allows us to build a distribution channel that covers multiple geographies and
industry segments without incurring the cost of maintaining a full direct sales
force.
Our value-added resellers are typically resellers of VPN products or other
related networking products. They have existing corporate relationships suitable
for cross-selling our services, and can bundle our services with their core
offerings to attract new customers. Once a customer has signed a contract for
iPass services, we have a post-sales team that works with communication
solutions partners and customers to ensure successful installation and roll-out
of services and software.
We maintain sales offices or personnel in a number of metropolitan
locations in the United States. We also have international locations and
personnel in Australia, England, Hong Kong, Japan and Singapore.
We focus our marketing efforts on creating awareness for our services and
their applications, educating potential customers and generating new sales
opportunities. We conduct a variety of marketing programs to educate our target
market and enhance brand awareness, including managing and maintaining our web
site, advertising, press relations, telemarketing, direct marketing, seminars
and trade shows, as well as establishing and maintaining close relationships
with recognized industry leaders. In addition to our marketing and sales staff,
we rely on our executive and operations personnel, including the staff of our
network operations center, to identify sales opportunities within existing
customer accounts and to provide quality customer service.
OPERATIONS
As of December 31, 1999, our global virtual network offered over 5,000
network access points in more than 150 countries. To ensure the quality of the
iPass network, we monitor the performance of each network access point to
identify the best quality network access points. Based on this data, we
prioritize and remove any poor quality network access points from the
iPassConnect phonebook and from the network.
One of the key advantages of our solutions is our system-wide redundancy.
This is accomplished as follows:
PROVIDER-REDUNDANT NETWORK COVERAGE. Instead of relying on a single network
service provider in most countries, we work with multiple providers in key
locations to ensure that a provider outage does not prevent customers from
obtaining service.
REDUNDANT IPASS TRANSACTION CENTERS. Our transaction centers are designed
to ensure continued operations in the event of a disruption to one or more
center. If a disruption in one center occurs, all traffic is automatically
re-routed to other iPass transaction centers.
IPASS NETWORK OPERATIONS CENTER SUPPORT. The iPass Network Operations team
backs up our services 24-hours-a-day, 7-days-a-week. The iPass Network
Operations team continuously monitors the status of the network and performs
proactive testing and troubleshooting of key network elements. At our iPass
operations centers we also track and measure the performance of every network
service provider and alert customers of changes in network status.
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<PAGE> 35
COMPETITION
We compete based on a number of factors, including coverage, reliability,
quality of service, ease of implementation, use and cost. There are low barriers
to entry to new or existing businesses seeking to offer services on the
Internet. As a result, our business environment is intensely competitive, highly
fragmented and rapidly changing. Competition can come from many sources. We
presently compete directly with GRIC Communications, Inc. in the market for
remote Internet access and related settlement services. MCI WorldCom, Inc. and
other large telecommunication companies, such as AT&T Corp., may compete, or
have the ability and resources to compete, in each of our markets.
Many of our competitors may have substantially greater financial, technical
and marketing resources, larger customer bases, longer operating histories,
greater name recognition and more established relationships in the industry than
we have. In addition, a number of these competitors may merge or form strategic
partnerships. As a result, certain of these competitors may be able to offer, or
bring to market earlier, services that are superior to our own in terms of
features, quality, pricing or other factors. Our failure to compete successfully
in any of the markets in which we compete could harm our business.
RESEARCH AND DEVELOPMENT
At our research and development center in Redwood Shores, California, we
employ engineers with expertise in software, web, database, Internet
authentication, Internet security, and large scalable systems. Our research and
development expenses were $1.0 million, $1.2 million and $2.1 million, in 1997,
1998 and 1999, respectively. Our research and development efforts are focused on
improving and enhancing our existing service offerings as well as developing new
products and services.
INTELLECTUAL PROPERTY
We rely on a combination of trademark, copyright and trade secret laws and
restrictions on disclosure to protect our intellectual property rights. We also
enter into confidentiality and proprietary rights agreements with our employees
and consultants and other third parties and control access to software,
documentation and other proprietary information. We have applied for one U.S.
patent relating to our service. We do not have any issued patents. We have also
filed for federal trademark registration for the "iPass" mark in the United
States and have initiated the registration process in sixteen other countries,
including Canada, China and Japan, as well as the European Community. Our
software, Web pages and marketing materials are protected under copyright law.
However, we cannot be certain that the steps we have taken to protect our
intellectual property rights will be adequate or that third parties will not
infringe or misappropriate our proprietary rights. We also cannot be sure that
competitors will not independently develop technologies that are substantially
equivalent or superior to the proprietary technologies employed in our
Internet-based services. If we fail to protect our proprietary rights
adequately, our competitors could offer similar services, potentially harming
our competitive position and decreasing our revenues in the United States and
other jurisdictions.
In addition, in recent years, there has been significant litigation in the
United States involving patents and other intellectual property rights,
including among companies in the Internet industry. We cannot be certain that
our business activities will not infringe on the proprietary rights of others,
or that other parties will not assert infringement claims against us. Any claim
of infringement of proprietary rights of others, even if ultimately decided in
our favor, could result in substantial costs and diversion of resources. If a
claim is asserted that we infringed the intellectual property of a third party,
we may be required to seek licenses to that technology. We cannot be sure that
licenses to third-party technology will be available to us at a reasonable cost,
or at all. If we were unable to obtain a license on reasonable terms, we could
be forced to cease using the third-party technology.
EMPLOYEES
As of December 31, 1999, we had 127 employees, consisting of 36 in network
and operations, 20 in research and development, 55 in sales and marketing and 16
in finance and administration. Our future performance depends, in significant
part, on our ability to hire additional personnel and retain and motivate
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<PAGE> 36
existing personnel in key areas such as engineering, technical support, sales
and senior management. The competition for qualified individuals in the Silicon
Valley area of Northern California, and in the Internet field in particular, is
intensely competitive. We cannot assure you that we will be able to attract,
motivate and retain enough qualified employees in the future. However, we
consider our relationship with our employees to be good.
FACILITIES
We lease approximately 96,000 square feet of space in Redwood Shores,
California under a lease that expires in 2010. We also lease sales and support
offices in other parts of the United States and abroad. We believe that these
facilities will be adequate for our needs for at least the next several years.
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<PAGE> 37
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Michael H. Mansouri....................... 48 Chairman of the Board, President and Chief Executive
Officer
Donald C. McCauley........................ 48 Vice President and Chief Financial Officer
Roy Albert................................ 41 Vice President of Development
Ronald G. Calandra........................ 44 Vice President of Operations
Anurag Lal................................ 35 Vice President of Business Development
Eric V. Lee............................... 45 Vice President of Sales
Deborah L. Sellers........................ 34 Vice President of Carrier Services
John S. Alsop............................. 46 Director
John D. Beletic(2)........................ 48 Director
Peter G. Bodine(2)........................ 37 Director
Seth D. Neiman(1)......................... 45 Director
Arthur C. Patterson(1).................... 56 Director
George M. Tronsrue III(1)(2).............. 43 Director
</TABLE>
- -------------------------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
MICHAEL H. MANSOURI has served as our President and Chief Executive Officer
since June 1999 and as Chairman of the Board since October 1999. From January
1999 to June 1999, Mr. Mansouri served as Chief Operating Officer of Broadband
Services of Telco Communications Group Inc., a subsidiary of Teleglobe
Communications Corporation, a global Internet network provider. From May 1998 to
December 1998, Mr. Mansouri served as President of Hedron Communications, a
consulting services company. Previously, from April 1997 to May 1998, Mr.
Mansouri was Corporate Officer and Vice President of Marketing at Intermedia
Communication, Inc., an integrated communications provider. From August 1995 to
March 1997, Mr. Mansouri served as Executive Vice President and General Manager,
Advanced Data Services at American Communications Services, Inc., now e.spire
Communications, Inc., a communication services provider. Mr. Mansouri held
several senior level positions during ten years at Sprint International
Corporation, now Global One, a voice, data, Internet and networking services
provider, in the areas of international multimedia services, global value added
systems, and business development.
DONALD C. MCCAULEY has served as our Vice President and Chief Financial
Officer since August 1999. From July 1997 to April 1999, Mr. McCauley served as
Senior Vice President and Chief Financial Officer of Presidium, Inc., a national
insurance services firm. From March 1994 to November 1997, Mr. McCauley served
as Vice President and Chief Financial Officer of Verity, Inc., a leading
provider of enterprise intranet and Internet knowledge retrieval solutions in
Sunnyvale, California. Mr. McCauley is a certified public accountant.
ROY ALBERT has served as our Vice President of Development since September
1999. From March 1999 to September 1999, Mr. Albert served as Vice President of
Engineering of General Magic, Inc., a voice-enabled service and technology
provider. From September 1998 to March 1999, Mr. Albert served as Senior
Director of Engineering of General Magic, Inc. From September 1997 to August
1998, Mr. Albert served as Director of Engineering, Network Services, of General
Magic, Inc. From January 1995 to September 1997, Mr. Albert held several
positions at Centigram Communications Corporation, an integrated enhanced
services systems developer, where he served as Director of Custom Development,
Director of Systems Architecture and Chief Architect.
RONALD G. CALANDRA has served as our Vice President of Operations since
December 1998. From June 1990 to November 1998, Mr. Calandra served as Senior
Vice President of Network Engineering for Visa International, an operator of
consumer payment systems and merchant transaction processing. At Visa
International, Mr. Calandra was also Vice President of Host Systems Planning,
where he managed Visa's
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<PAGE> 38
worldwide main frame and mid range processing. He also served as Director of
Processor Planning and Automation, where he directed groups responsible for
software development, capacity planning, budgeting, acquisition, performance,
hardware design and implementation, and data center automation.
ANURAG LAL has served as our Vice President of Business Development since
November 1999. From June 1999 to October 1999, Mr. Lal served as Vice President
of Internet & Multimedia Services for BT Worldwide, the international division
of British Telecommunications plc., the United Kingdom's dominant telecom
provider. Prior to his work at BT Worldwide, Mr. Lal served as Director of
Custom Network Solutions and then as Vice President of Data and Internet Product
Management & Marketing for e.spire Communications, Inc., a communications
services provider, from May 1996 to May 1999. Mr. Lal also served as Group
Manager, Multimedia Application Services for Sprint International Communications
Corporation, a telecommunications provider, now Global One, from 1991 to 1996.
ERIC V. LEE has served as our Vice President of Sales since June 1998. From
July 1996 to May 1998, Mr. Lee served as Vice President of Sales and Marketing
Operations for Silicon Graphics, Inc., a high-performance computing technology
and software provider. Previously, he was Director of Direct and Channel Sales.
He also held numerous leadership positions at International Business Machines
Corporation, a computer hardware, software and peripherals provider, including
serving as Manager of Western Area Software Marketing.
DEBORAH L. SELLERS has served as our Vice President of Carrier Services
since July 1999. From October 1994 to July 1999, Ms. Sellers served as Vice
President of Wholesale Sales at e.spire Communications, Inc., a communications
services provider. In addition to her experience with e.spire Communications,
Inc., Ms. Sellers has held senior sales positions with NEC America, an advanced
communications products developer, Metropolitan Fiber Systems and Cable and
Wireless Communications, Inc.
JOHN S. ALSOP has served as a member of our board of directors since July
1996 and is a co-founder of iPass. He currently serves as the President and
Chief Executive Officer of BorderWare Technologies Inc., a developer of Internet
security software located in Mississauga, Ontario, Canada. From July 1996 to
July 1997, Mr. Alsop served as Chief Technical Officer designing the network
architecture and settlement system used to implement the services of iPass. From
1986 to June 1998, Mr. Alsop served as President of Sea Change Corporation, a
privately held Canadian Internet product developer and distributor. In 1993, Mr.
Alsop was the founding President of Border Network Technologies Inc., a
developer of Internet firewall products.
JOHN D. BELETIC has served as a member of our board of directors since
November 1999. Mr. Beletic currently serves as the Chairman and Chief Executive
Officer of WebLink Wireless, Inc., a communications services company. Mr.
Beletic joined WebLink Wireless, Inc. in 1992 after serving as a venture partner
with Morgan Stanley Venture Capital. From 1986 to 1991, Beletic served as
President and Chief Executive Officer of Dallas-based Tigon Voice Messaging
Network, a voice mail service provider. Mr. Beletic serves on the boards of
Tessco Technologies Incorporated and Triton PCS Holdings, Inc., a digital
wireless technology provider.
PETER G. BODINE has served as a member of our board of directors since
November 1998. Mr. Bodine has served as an Executive Vice President of Asia
Pacific Ventures since December 1992 and as a General Partner of APV Technology
Partners since December 1994. Mr. Bodine serves as a member of the board of
directors of Fatbrain.com, Inc., an on-line seller of professional books and
training manuals, ShareWare, Inc., a semiconductors and network software
provider, 800.com., an Internet retailer for consumer electronics,
OnePipeline.com, a web-based system provider for real estate and mortgage
professionals, STSN, a technology and information service provider for the
hospitality industry and BuyHold.com., an on-line service that provides access
to the stock market.
SETH D. NEIMAN has served as a member of our board of directors since
December 1996. Since August 1994, Mr. Neiman has held various positions at
Crosspoint Venture Partners, a venture capital firm, and has been a partner of
Crosspoint since January 1996. From September 1991 to July 1994, Mr. Neiman
served as a Vice President of Engineering at Coactive Networks, Inc., a local
area networks company.
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<PAGE> 39
Mr. Neiman serves on the board of Brocade Communications Systems, Inc., a
framework for networking servers and a storage systems provider, where he is
Chairman, on the board of Foundry Networks, Inc. and on the board of Avanex
Corporation, a photonic processors manufacturer.
ARTHUR C. PATTERSON has served as a member of our board of directors since
December 1996. Mr. Patterson is a founder and general partner of Accel Partners,
a venture capital firm. Mr. Patterson also serves as a director of Portal
Software, Inc., an Internet billing company, Actuate Software Corporation, an
enterprise reporting software company, as well as several private enterprise
software and communications companies.
GEORGE M. TRONSRUE, III has served as a member of our board of directors
since October 1999. Mr. Tronsrue serves as Chairman and Chief Executive Officer
of Burst Networks, Inc. Mr. Tronsrue previously served as the President and
Chief Operating Officer of Nextlink Communications, Inc., a communications
services provider via fiber optic facilities. Prior to joining Nextlink, Mr.
Tronsrue held senior management positions with American Communication Services,
Inc., now e.spire Communications, Inc., Teleport Communications Group Inc., now
part of AT&T Corp., a telecommunications provider of long distance, wireless
phone service, Internet access, and local and international phone services for
businesses, MFS Communications Company, Inc., now part of MCI Worldcom, Inc., a
telecommunications provider of long distance and wireless phone service and
Internet access, and MCI, now part of MCI Worldcom, Inc.
BOARD COMPOSITION
We currently have seven directors. Upon the closing of this offering, the
terms of office of the board of directors will be divided into three classes. As
a result, a portion of our board of directors will be elected each year. The
division of the three classes, the initial directors and their respective
election dates are as follows:
- the class I directors will be Michael Mansouri and John Alsop, and their
term will expire at the annual meeting of stockholders to be held in
2001;
- the class II directors will be Seth Neiman, Arthur Patterson and Peter
Bodine, and their term will expire at the annual meeting of stockholders
to be held in 2002; and
- the class III directors will be John Beletic and George Tronsrue, and
their term will expire at the annual meeting of stockholders to be held
in 2003.
At each annual meeting of stockholders after the initial classification,
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 their election. In addition, our certificate of incorporation provides
that the authorized number of directors may be changed only by resolution of the
board of directors. 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 the directors. This
classification of the board of directors may have the effect of delaying or
preventing changes in our control or management.
BOARD COMMITTEES OF THE BOARD OF DIRECTORS
- AUDIT COMMITTEE. Our audit committee reviews our internal accounting
procedures and consults with and reviews the services provided by our
independent auditors. Current members of our audit committee are John
Beletic, George Tronsrue and Peter Bodine.
- COMPENSATION COMMITTEE. Our compensation committee reviews and recommends
general policy relating to compensation and benefits of our officers and
employees. The compensation committee also administers the issuance of
stock options and other awards under our stock plans. Current members of
the compensation committee are Arthur Patterson, Seth Neiman and George
Tronsrue.
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<PAGE> 40
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As noted above, the compensation committee of the board consists of Messrs.
Patterson, Neiman, Tronsrue. None of our executive officers serves as members of
the board of directors or compensation committee of any entity that has one or
more executive officers who serve on our board or compensation committee.
DIRECTOR COMPENSATION
Our directors are reimbursed for certain reasonable expenses incurred in
attending board or committee meetings. In addition, in 1999 each of John Beletic
and George Tronsrue received an option to purchase 120,000 shares of our common
stock at exercise prices of $2.00 and $1.50 per share, respectively, in
connection with their attendance at our board of directors and committee
meetings. The other non-employee directors will receive an option to purchase
40,000 shares of our common stock at the close of this offering. Any new
non-employee directors will also receive options to purchase 40,000 shares of
our common stock when they join the board and all non-employee directors will
receive annual grants of an option to purchase 15,000 shares of our common stock
thereafter. Grants to non-employee directors will be at an exercise price of the
fair market value of our common stock on the date of grant. See "Employee
Benefits Plan -- 2000 Equity Incentive Plan."
EMPLOYMENT AGREEMENTS
MICHAEL MANSOURI EMPLOYMENT AGREEMENT. In May 10, 1999, we entered into an
employment agreement with Michael H. Mansouri, our Chairman of the Board of
Directors, President and Chief Executive Officer under which Mr. Mansouri is
compensated at $275,000 a year. Mr. Mansouri's employment with us will last
until the earliest date on which any of the following events may occur:
- his death, disability or resignation from iPass;
- his termination by us for cause; or
- his termination by us without cause.
Except in connection with a termination for cause, on the account of death
or disability, or a voluntary termination by Mr. Mansouri other than for good
reason, we have agreed to provide Mr. Mansouri with the following termination
benefits upon termination of employment:
- an amount equal to one year's base salary and target bonus at the time of
termination shall be paid to Mr. Mansouri in twelve equal monthly
installments; and
- all of the unvested options held by Mr. Mansouri on the date of his
termination that would have vested over the succeeding twelve month
period shall vest on the dates on which such shares would have become
vested had Mr. Mansouri remained employed by us for such twelve month
period and will remain exercisable for a period specified in the options.
If there is a change in control and Mr. Mansouri's employment is terminated
without cause or if Mr. Mansouri terminates his employment for good reason upon
or within thirteen months after the change of control, then all of the unvested
shares and options held by Mr. Mansouri on the date of the change in control
that are scheduled to vest over the succeeding twenty four month period shall
immediately vest and any unexercised options shall remain exercisable for the
period specified in such options.
The employment agreement also provides for an annual bonus, the target of
which is $175,000 per anniversary year. In addition, we paid Mr. Mansouri a
signing bonus in the amount of $110,000. Additionally, we provided Mr. Mansouri
the following relocation benefits:
- reimbursement for moving and travel expenses; and
- a relocation bridge loan of $400,000 to purchase a residence in the San
Francisco Bay Area.
EXECUTIVE OFFICER EMPLOYMENT AGREEMENTS. Each of our executive officers has
signed offer letters. These offer letters provide for salary, an annual bonus
based upon the successful completion of quarterly
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<PAGE> 41
objectives and stock options as well as other customary benefits and terms. In
addition, if there is a change in control of iPass, and the officer's employment
is terminated without cause, or if the officer terminates his employment for
good reason upon or within twelve months after the change of control, then all
of the unvested stock options held by that officer, automatically accelerates by
twenty four months from the date of the change of control.
SEPARATION AGREEMENTS
CHRISTOPHER MOORE SEPARATION AGREEMENT. In August 1999, we entered into a
separation agreement with Christopher Moore in connection with the termination
of his services as President and Chief Executive Officer, in which we provided
to Mr. Moore as part of his termination benefits the following:
- An amount equal to one year's base salary and target bonus at the time of
termination of $275,000; and
- Vesting of all of the shares subject to option held by Mr. Moore on the
date of such termination that would have vested over the succeeding
twelve month period had Mr. Moore remained employed by us for such twelve
month period, which equaled 512,457 shares.
In connection with Mr. Moore's termination, we also entered into a
consulting agreement with Mr. Moore, in which Mr. Moore agreed to provide
consulting services to us until January 1, 2000, in exchange for a consulting
fee of $68,750.
ROBERT C. SCHOETTLE SEPARATION AGREEMENT. In October 1999, we entered into
a separation and release agreement with Robert C. Schoettle, our former Vice
President of Marketing, in which we provided Mr. Schoettle with severance
benefits, including a one-time cash payment to Mr. Schoettle of $51,250.
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<PAGE> 42
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation
received for services rendered to us by our Chief Executive Officers who served
in 1999 and our four other most highly compensated executive officers who earned
more than $100,000 during the year ended December 31, 1999.
<TABLE>
<CAPTION>
ANNUAL LONG-TERM COMPENSATION AWARDS
COMPENSATION ---------------------------------
------------------- SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS UNDERLYING OPTIONS COMPENSATION
--------------------------- -------- -------- ------------------ ------------
<S> <C> <C> <C> <C>
Michael H. Mansouri(1).................. $273,061 $129,465 2,269,323 $104,525
Chairman of the Board, President
and Chief Executive Officer
Christopher W. Moore(2)................. $136,458 $ 46,875 -- $275,000
Former President and Chief Executive
Officer
Ronald G. Calandra...................... $183,333 $ 52,531 100,000 --
Vice President of Operations
Jalal Farhat(3)......................... $151,538 $ 50,250 -- --
Former Vice President of Engineering
Eric V. Lee............................. $207,500 $ 96,750 -- --
Vice President of Sales
Robert C. Schoettle(4).................. $165,625 $ 29,625 -- $ 51,250
Former Vice President of Marketing
</TABLE>
- -------------------------
(1) Mr. Mansouri's bonus includes $110,000 as a signing bonus. The amount under
"All Other Compensation" is for relocation expenses.
(2) Mr. Moore's employment with iPass terminated in September 1999. The amount
under "All Other Compensation" is for severance payments.
(3) Mr. Farhat's employment with iPass terminated in October 1999.
(4) Mr. Schoettle ceased to be an executive officer of iPass in October 1999.
The amount under "All Other Compensation" is for severance payments.
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<PAGE> 43
OPTION GRANTS TABLE
The following table sets forth information regarding stock options granted
to our Chief Executive Officers who served in 1999 and our four other most
highly compensated executive officers during the year ended December 31, 1999.
The exercise price for each option was equal to the fair market value of our
common stock on the date of grant as determined by the board of directors.
Percentage of total options as set forth below was calculated based on an
aggregate of 449,250 shares of common stock granted under the 1997 Stock Option
Plan, 2,888,586 shares of common stock granted under the 1999 Stock Option Plan,
and 2,269,323 shares of common stock granted under the Interim 1999 Stock Option
Plan in fiscal 1999. The potential realizable value as set forth below was
calculated based on the ten-year term of the option and assumed rates of stock
appreciation of 5% and 10%, compounded annually from the date the options were
granted to their expiration date based on the assumed public offering price of
and common stock of $ per share. The actual value, if any, the executive
officers listed on this table or any other individual may realize will depend on
the excess of the stock price over the exercise price on the date the option is
exercised. We cannot assure you that the actual value per share realized by
these executive officers or by all stockholders will approximate the potential
realizable values set forth in the table.
<TABLE>
<CAPTION>
POTENTIAL
PERCENTAGE REALIZABLE VALUE
NUMBER OF OF TOTAL AT ASSUMED
SECURITIES OPTIONS ANNUAL RATES OF
UNDERLYING GRANTED EXERCISE STOCK PRICE
OPTIONS DURING PRICE PER EXPIRATION APPRECIATION FOR
GRANTED FISCAL 1999 SHARE DATE OPTION TERM
------------ ----------- --------- ---------- ----------------
NAME 5% 10%
---- ------------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
Michael H. Mansouri............... 2,269,323 40.5% $0.1433 06/30/09
Christopher W. Moore.............. -- -- -- -- -- --
Ronald G. Calandra................ 100,000 1.8% $ 1.00 08/19/09 -- --
Jalal Farhat...................... -- -- -- -- -- --
Eric V. Lee....................... -- -- -- -- -- --
Robert C. Schoettle............... -- -- -- -- -- --
</TABLE>
The options listed in the table above were exercised and the shares issued
upon exercise are subject to a repurchase right by us if the optionholder ceases
to provide services for us or our affiliates, which repurchase right lapses over
a four-year period, with the repurchase right with respect to 25% of the shares
lapsing after one year and 2.083% lapsing monthly thereafter. See "-- Employee
Benefit Plans" for a description of the material terms of these options.
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<PAGE> 44
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
The following table provides summary information concerning the shares of
our common stock acquired by exercise of outstanding stock options during 1999
held by our Chief Executive Officers who served in 1999 and our four other most
highly compensated officers as of December 31, 1999. Options granted to purchase
shares of our common stock under our 1997 Stock Option Plan, the 1999 Stock
Option Plan and the 1999 Interim Stock Option Plan are generally immediately
exercisable by certain optionees but are subject to a right of repurchase
pursuant to the vesting schedule of each specific grant. The repurchase option
generally lapses over a four year period with 25% lapsing after the first year
and 2.083% lapsing monthly thereafter. In the event that a purchaser ceases to
provide service to us or our affiliates, we have the right to repurchase any of
that person's unvested shares of common stock at the original option price.
Amounts shown in the value realized column were calculated based on the
difference between the option exercise price and the assumed initial public
offering price of $ per share of common stock without taking into account
any taxes that may be payable in connection with the transaction, multiplied by
the number of shares of common stock underlying the option. Exercise prices
ranged from $0.0167 to $1.00.
<TABLE>
<CAPTION>
SHARES
ACQUIRED ON VALUE
NAME EXERCISE REALIZED
---- ----------- --------
<S> <C> <C>
Michael H. Mansouri(1)...................................... 2,269,323
Christopher W. Moore(2)..................................... 2,236,179
Ronald G. Calandra(3)....................................... 424,000
Jalal Farhat(4)............................................. 369,000
Eric V. Lee(5).............................................. 546,000
Robert C. Schoettle(6)...................................... 546,000
</TABLE>
- -------------------------
(1) The repurchase option relating to these shares lapses in its entirety on May
10, 2004.
(2) The repurchase option relating to these shares lapses in its entirety on
August 1, 2000.
(3) The repurchase option relating to 324,000 of these shares lapses in its
entirety on December 8, 2002, and the repurchase option on the remaining
100,000 shares lapses on August 19, 2004.
(4) We repurchased 138,375 of these shares in connection with Mr. Farhat's
termination of employment.
(5) The repurchase option relating to these shares lapses in its entirety on
June 28, 2002.
(6) We repurchased 318,500 of these shares in connection with Mr. Schoettle's
termination of employment in February 2000.
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<PAGE> 45
EMPLOYEE BENEFIT PLANS
Since 1997, we have established three equity incentive plans under which we
may offer incentive stock options, nonstatutory stock options, restricted stock
and stock bonuses to employees, officers, non-employee directors and
consultants. The plans are intended to help us retain the services of
individuals who can operate and grow our business and align their interests with
those of our shareholders. We also sponsor a 401(k) plan, a defined contribution
plan intended to qualify under Section 401(a) of the Internal Revenue Code of
1986, as amended.
2000 EQUITY INCENTIVE PLAN
Our board of directors adopted our 2000 plan in March 2000, and our
stockholders approved the 2000 plan in 2000. The 2000 plan will be
effective on the effective date of this offering. At that time, no further
option grants will be made under the 1999 Interim Stock Option Plan or 1999
Stock Option Plan.
SHARE RESERVE. A total of 7,000,000 shares of our common stock has been
reserved for issuance under the 2000 plan. On each January 1, beginning January
1, 2002, the share reserve will increase by the least of the following:
- 4.5% of our total outstanding common stock;
- 2,500,000 shares of our common stock; or
- a lesser amount as determined by our board of directors.
When a stock award expires or is terminated before it is exercised, the
shares not acquired pursuant to the stock awards shall again become available
for issuance under the 2000 plan.
ELIGIBILITY. The 2000 plan permits the grant of options to employees,
directors and consultants. Options may be either incentive stock options, or
ISOs, within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended, or nonstatutory stock options, or NSOs. In addition, the 2000 plan
permits the grant of stock bonuses and rights to purchase restricted stock.
In general, the stock options granted under the 2000 plan may not exceed 10
years. An optionholder may not transfer a stock option other than by will or the
law of descent or distribution. The exercise price for an ISO cannot be less
than 100% of the fair market value of the common stock on the date of grant. The
exercise price for NSOs cannot be less than 85% of the fair market value of the
common stock on the date of grant. In the event the optionholder is a 10%
stockholder, then the exercise price per share of an ISO cannot be less than
110% of the fair market value of common stock on the date of grant.
EFFECT OF A CHANGE IN CONTROL. In the event of a change in control in the
beneficial ownership of iPass, all outstanding stock awards under the 2000
equity incentive plan either will be assumed, continued or substituted for by
any surviving entity. If the surviving entity determines not to assume, continue
or substitute for these awards, the vesting provisions of such stock awards will
be accelerated and the stock awards will terminate upon the change of control if
not previously exercised. In certain change in control circumstances, the
vesting provisions of the outstanding stock awards will be accelerated
automatically. Furthermore, if a holder of a stock award is terminated due to a
constructive termination or involuntarily terminated without cause within 1
month before or 13 months after a change in control, the vesting of that
holder's stock awards will be accelerated.
ADDITIONAL PROVISIONS. Under the 2000 plan, the Board has the authority to
grant to an optionholder the right to exercise his or her unvested stock options
subject to the Company's right to repurchase the purchased shares if the
optionholder terminates his or her services to the Company prior to satisfying
the vesting requirements for the stock options. The Board also has the authority
under the 2000 plan to grant to an optionholder the right to a reload feature
under which if he or she exercises an outstanding option by tendering shares of
the Company's stock that he or she owned, the optionholder will automatically be
granted a new option to purchase the same number of shares of stock that he or
she tendered. The exercise price for the new stock options will be the fair
market value of the Company's common stock at the time the optionholder receives
the new stock options.
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<PAGE> 46
NON-EMPLOYEE DIRECTOR STOCK OPTION GRANTS. The 2000 Plan provides for
automatic stock option grants to non-employee directors on our board of
directors. After the offering, each person who is not an employee of iPass who
is first elected or appointed to the board of directors will be granted an
initial grant on the date of his or her election or appointment to purchase
40,000 shares of our common stock at the fair market value of the common stock
on that grant date. On the date of the offering, non-employee directors of our
board of directors who have not previously been granted options to purchase our
common stock will receive an initial stock option grant as if he or she were
first elected or appointed to our board directors after the offering.
After the offering, each person who is a non-employee director on the day
after each annual stockholders' meeting, shall, on that date, be granted an
annual stock option grant to purchase fifteen thousand shares of our common
stock at the fair market value of our common stock on that grant date.
Individuals who have not served on our board of directors for the entire period
preceding the annual stockholders' meeting shall be reduced, pro-rata, for each
full quarter the person did not serve on our board of directors prior to the
stockholders' meeting.
The non-employee director stock options will have a maximum term of ten
years and generally must be exercised prior to the earliest of eighteen months
following the death of the non-employee directors, twelve months from the
termination of service on our board of directors by the non-employee director
due to a disability, three months from the termination of the service of
non-employee director for any other reason, or the expiration of the original
term of the stock options. The non-employee directors become vested in each
initial stock option grant one-third each year of service on our board of
directors from the stock option grant date so that the directors will become
vested fully after three years of service on our board of directors after the
grant. The non-employee directors become vested in each annual stock option
grant one-twelfth each month of service on our board of directors from the stock
option grant date so that the directors will become vested fully after twelve
months of service on our board of directors after the grant. If there is a
change of control as described above, the directors will become fully vested in
their unvested portion of their stock options and the options will be
exercisable for a period of the shorter of twelve months following the
termination of their service on our board of directors or the original term of
the stock options. The stock options shall not be transferable except as
otherwise provided in a stock option agreement to the extent permitted by
federal securities laws and regulations.
ADDITIONAL PROVISIONS. Under the 2000 plan, the Board has the authority to
accelerate the vesting of outstanding stock options.
2000 EMPLOYEE STOCK PURCHASE PLAN
Our board of directors adopted the 2000 employee stock purchase plan in
March 2000, and our stockholders approved the 2000 stock purchase plan in March
2000.
SHARE RESERVE. A total of 700,000 shares of common stock have been
authorized for issuance under the 2000 purchase plan. On each January 1,
beginning with January 1, 2002, the share reserve will increase by the least of
the following:
- 1% of our total outstanding common stock;
- 700,000 shares of our common stock; or
- a lesser amount as determined by the board of directors.
The purchase plan is intended to qualify as an employee stock purchase plan
within the meaning of Section 423 of the Internal Revenue Code of 1986, as
amended. Under the purchase plan, eligible employees will be able to purchase
common stock at a discount price in periodic offerings. The purchase plan will
commence on the effective date of this offering.
ELIGIBILITY. All employees are eligible to participate in the purchase plan
so long as they are employed by us, or a subsidiary designated by our board of
directors, for at least 20 hours per week and are customarily employed by us, or
a subsidiary designated by the board of directors, for at least five months per
calendar year. Any employee who is a 5% stockholder is not eligible to
participate in the purchase plan.
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<PAGE> 47
Under the purchase plan, employees who participate in an offering may have
up to 15% of their earnings for the period of that offering withheld. The amount
withheld is used on each purchase date of the offering period to purchase shares
of common stock. The price paid for common stock on the purchase dates will
equal the lower of 85% of the fair market value of the common stock on the first
day of the offering period or 85% of the fair market value of the common stock
on the purchase date. Employees may end their participation in the offering at
any time during the offering period, and participation ends automatically on
termination of employment.
The purchase plan is administered by our board of directors. Our board of
directors may delegate authority to administer the purchase plan to a committee.
Subject to the terms of the plan, our board of directors or the committee
determines when and how rights to purchase shares will be granted and the
provisions of each offering of rights. Under the plan, we may specify offerings
with duration on not more than 27 months, and may specify shorter purchase
periods within each offering. The first offering will begin on the effective
date of this offering and be approximately 12 months in duration, with purchases
occurring every six months. Subsequent offerings will be six months in duration.
EFFECT OF A CHANGE IN CONTROL. Upon a change in control of the beneficial
ownership of iPass, our board of directors has discretion to provide that each
right to purchase common stock will be assumed or an equivalent right be
substituted by the successor entity, or our board of directors may provide for
all sums collected by payroll deductions to be applied to purchase stock
immediately prior to the effective date of the change in control transaction.
OTHER PROVISIONS. Our board of directors has the authority to amend or
terminate the purchase plan; provided, however, that no amendment or termination
of the purchase plan may adversely affect any outstanding rights to purchase
common stock. Amendments generally will be submitted for stockholder approval
only to the extent required by law.
INTERIM 1999 STOCK OPTION PLAN
ELIGIBILITY. In April 1999, our board of directors adopted the Interim 1999
Stock Option Plan, and, in July 1999, the shareholders approved the Interim 1999
Stock Option Plan. The Interim 1999 Stock Option Plan will terminate in April
2009 unless it is terminated earlier by our board of directors. The Interim 1999
Stock Option Plan provides for the grant of stock options to employees
(including officers), including incentive stock options, as defined under the
Internal Revenue Code of 1986, as amended, and nonstatutory stock options.
SHARE RESERVE. An aggregate of 2,269,323 shares of common stock currently
is authorized for issuance under the Interim 1999 Stock Option Plan. As of
December 31, 1999, options to purchase a total of 1,261,314 shares of our common
stock were held by all participants under the Interim 1999 Stock Option Plan,
and no options to purchase shares remained available for grant. Shares subject
to stock options that have expired or otherwise terminated without having been
exercised in full again become available for the grant of awards under the
Interim 1999 Stock Option Plan.
SECTION 162(m). When we become subject to Section 162(m) of the Internal
Revenue Code of 1986, as amended (which denies a deduction to publicly held
corporations for certain compensation paid to specified employees in a taxable
year to the extent that the compensation exceeds $1 million), no person may be
granted options under the Interim 1999 Stock Option Plan covering more than
500,000 shares of common stock in any calendar year.
EFFECT OF A CHANGE IN CONTROL. In the event of certain changes in control,
all outstanding options under the Interim 1999 Stock Option Plan either will be
assumed, continue or substituted for by any surviving entity. If the surviving
entity determines not to assume or substitute for such options, the vesting of
the stock options for employees then performing services for the Company who
have provided less than twelve months of service will be accelerated up to
twelve months, and such vested stock options will be terminated upon the change
in control if not previously exercised.
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<PAGE> 48
ADDITIONAL PROVISIONS. Under the Interim 1999 Stock Option Plan, the Board
has the authority to grant to an optionholder the right to exercise his or her
unvested stock options subject to the Company's right to repurchase the
purchased shares if the optionholder terminates his or her services to the
Company prior to satisfying the vesting requirements for the stock options. The
Board also has the authority under the Interim 1999 Stock Option Plan to grant
to an optionholder the right to a reload feature under which if he or she
exercises an outstanding option by tendering shares of the Company's stock that
he or she owned, the optionholder will automatically be granted a new option to
purchase the same number of shares of stock that he or she tendered. The
exercise price for the new stock options will be the fair market value of the
Company's common stock at the time the optionholder receives the new stock
options. Also under the Interim 1999 Stock Option Plan, the Board has the
authority to accelerate the vesting of outstanding stock options.
1999 STOCK OPTION PLAN
ELIGIBILITY. In June 1999, our board of directors adopted, and the
shareholders approved, the 1999 Stock Option Plan. The plan was amended in
December, 1999. The 1999 Stock Option Plan will terminate in July 2009 unless it
is terminated earlier by the board of directors. The 1999 Stock Option Plan
provides for the grant of the following types of stock:
- incentive stock options, as defined under the Internal Revenue Code of
1986, as amended, which may be granted solely to employees (including
officers); and
- nonstatutory stock options which may be granted to employees (including
officers), non-employee directors and consultants.
SHARE RESERVE. An aggregate of 3,482,877 shares of common stock currently
are authorized for issuance under the 1999 Stock Option Plan. As of December 31,
1999, options to purchase a total of 1,625,920 shares of our common stock were
held by all participants under the 1999 Stock Option Plan and options to
purchase 1,856,957 shares remained available for grant. Shares subject to stock
options that have expired or otherwise terminated without having been exercised
in full again become available for the grant of stock options under the 1999
Stock Option Plan. Shares issued under the 1999 Stock Option Plan may be
previously unissued shares or reacquired shares bought on the market or
otherwise.
SECTION 162(M). When we become subject to Section 162(m) of the Internal
Revenue Code of 1986, as amended, which denies a deduction to publicly held
corporations for certain compensation paid to specified employees in a taxable
year to the extent that the compensation exceeds $1 million, no person may be
granted options under the 1999 Stock Option Plan covering more than 500,000
shares of common stock in any calendar year. Under its general authority to
grant options, our board of directors has the implicit authority to reprice
outstanding options or to offer optionees the opportunity to replace outstanding
options with new options for the same or a different number of shares. Both the
original and new options will count toward the Section 162(m) limitation.
EFFECT OF A CHANGE IN CONTROL. In the event of certain changes in control,
all outstanding options under the 1999 Stock Option Plan either will be assumed,
continued or substituted for by any surviving entity. If the surviving entity
determines not to assume, continue or substitute for such awards stock options
outstanding that have not been exercised prior to the change of control awards
will be terminated upon the change in control.
ADDITIONAL PROVISIONS. Under the 1999 Stock Option Plan, the Board has the
authority to grant to an optionholder the right to exercise his or her unvested
stock options subject to the Company's right to repurchase the purchased shares
if the optionholder terminates his or her services to the Company prior to
satisfying the vesting requirements for the stock options. The Board also has
the authority under the 1999 Stock Option Plan to grant to an optionholder the
right to a reload feature under which if he or she exercises an outstanding
option by tendering shares of the Company's stock that he or she owned, the
optionholder will automatically be granted a new option to purchase the same
number of shares of stock that he or she tendered. The exercise price for the
new stock options will be the fair market value of the
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<PAGE> 49
Company's common stock at the time the optionholder receives the new stock
options. Also under the 1999 Stock Option Plan, the Board has the authority to
accelerate the vesting of outstanding stock options.
1997 STOCK OPTION PLAN
ELIGIBILITY. In February 1997, our board of directors adopted the iPass
Inc. 1997 Stock Option Plan, and in March 1997 the shareholders approved the
1997 Stock Option Plan. The 1997 Stock Option Plan will terminate in March 2007,
unless it is terminated earlier by the board of directors. The 1997 Stock Option
Plan provides for the grant of stock awards, which are:
- incentive stock options, as defined under the Internal Revenue Code of
1986, as amended, which incentive stock options may be granted solely to
employees (including officers); and
- nonstatutory stock options which may be granted to employees (including
officers), non-employee directors and consultants.
SHARE RESERVE. An aggregate of 6,639,480 shares of common stock currently
are authorized for issuance under the incentive plan. As of December 31 1999,
options to purchase a total of 1,261,314 shares of our common stock were held by
all participants under the 1997 Stock Option Plan, and the board has voted not
to grant any further stock options under the 1997 Stock Option Plan. Shares
subject to stock options that have expired or otherwise terminated without
having been exercised in full again become available for the grant of awards
under the plan. Shares issued under the 1997 Stock Option plan may be previously
unissued shares or reacquired shares bought on the market or otherwise.
SECTION 162(m). When we become subject to Section 162(m) of the Internal
Revenue Code of 1986, as amended, which denies a deduction to publicly held
corporations for certain compensation paid to specified employees in a taxable
year to the extent that the compensation exceeds $1 million, no person may be
granted options under the 1997 Stock Option Plan covering more than 500,000
shares of common stock in any calendar year.
EFFECT OF A CHANGE IN CONTROL. In the event of certain changes in control,
all outstanding options under the 1997 Stock Option Plan either will be assumed
or substituted for by any surviving entity. If the surviving entity determines
not to assume or substitute for such awards, the vesting of the stock options
for employees, directors or consultants then performing services for the Company
who have provided less than twelve months of service will be accelerated up to
twelve months and such vested stock awards will be terminated upon the change in
control if not previously exercised.
ADDITIONAL PROVISIONS. Under the 1997 Stock Option Plan, the Board has the
authority to grant to an optionholder the right to exercise his or her unvested
stock options subject to the Company's right to repurchase the purchased shares
if the optionholder terminates his or her services to the Company prior to
satisfying the vesting requirements for the stock options. Also under the 1997
Stock Option Plan, the Board has the authority to accelerate the vesting of
outstanding stock options.
401(K) PLAN
We sponsor a 401(k) plan, a defined contribution plan intended to qualify
under Section 401(a) of the Internal Revenue Code of 1986, as amended. All
employees are eligible to participate. Participants may make pre-tax
contributions to the 401(k) plan of up to 25% of their eligible earnings,
subject to a statutorily prescribed annual limit ($10,500 in calendar year
2000). Under the 401(k) plan, each employee is fully vested in his or her
deferred salary contributions. Employee contributions are held and invested by
the 401(k) plan's trustee.
Each participant's contributions, and the corresponding investment
earnings, are generally not taxable to the participants until withdrawn.
Individual participants may direct the trustee to invest their accounts in
authorized investment alternatives.
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<PAGE> 50
CERTAIN TRANSACTIONS
EMPLOYMENT AND SEPARATION AGREEMENTS
In May 1999, we entered into an employment agreement with Michael H.
Mansouri, our President, Chief Executive Officer and Chairman of the Board. This
agreement is discussed in more detail in "Management -- Employment Agreements."
In August 1999, we entered into a separation agreement with Christopher
Moore, our former President and Chief Executive Officer. This agreement is
discussed in more detail in "Management -- Separation Agreements."
In October 1999, we entered into a separation agreement with Robert C.
Schoettle, our former Vice President of Marketing. This agreement is discussed
in more detail in "Management -- Separation Agreements."
Our senior executives officers have signed offer letters. These letters are
discussed in more detail in "Management -- Employment Agreements."
SHAREHOLDERS AGREEMENT
In connection with our Series E preferred stock financing, we entered into
the Amended and Restated Shareholders Agreement with certain common and
preferred stockholders of iPass to provide for the future voting of such
holders' shares regarding the election of our directors for John Alsop or one
nominee of the proxyholder of the shares held by Jamboree Investments, Inc. and
Peapod Distribution Ltd. and for one nominee of Thomvest Holdings Inc. to serve
on our board of directors. The Voting Agreement terminates on the closing date
of this offering.
INVESTOR RIGHTS AGREEMENT
In connection with our Series E preferred stock financing, we entered into
the Amended and Restated Investor Rights Agreement with our founders and our
preferred shareholders. The Investor Rights Agreement provided these
stockholders rights relating to the registration of their stock with the
Securities and Exchange Commission. These rights have been waived as to this
offering by the founding shareholders and the holders of preferred stock. In
addition, the Investors Rights Agreement grants these investors a right of first
refusal to participate in future issuances of equity securities by iPass. This
offering is not covered by this right of first refusal, and the right of first
refusal terminates on the closing date of this offering. The other registration
rights will survive this offering and will terminate no later than five years
after the closing date of this offering.
CO-SALE AGREEMENT
In connection with our Series E preferred stock financing, we entered into
an Amended and Restated Co-Sale Rights Agreement with the founders of iPass and
the holders of our Series B, Series C, Series D and Series E preferred stock.
The Co-Sale Agreement provides that each holder has a right to participate on a
pro rata basis in the sale of any shares of our capital stock by any other party
to the Co-Sale Agreement unless such proposed sale is a sale between parties, a
sale or series of sales that amounts to 150,000 shares of capital stock held by
a party or a transfer for estate planning purposes. The Co-Sale Agreement
terminates on the closing date of this offering.
INDEMNIFICATION AGREEMENTS
We intend to enter into indemnification agreements with our directors and
officers for the indemnification of these persons to the full extent permitted
by law. We also intend to execute these agreements with our future directors and
officers.
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<PAGE> 51
LOAN TO EXECUTIVE OFFICER
In November 1999, we granted to Michael H. Mansouri a $400,000 relocation
loan. Upon the earliest of several events to occur, as provided for in Mr.
Mansouri's employment agreement, but no later than three years from Mr.
Mansouri's employment date, the loan becomes due and payable. The loan is
secured by a second deed of trust on Mr. Mansouri's principal residence as well
as by pledges of Mr. Mansouri's shares of our common stock. As permitted by
Treasury Regulations for employee-relocation mortgage loans, this loan is
non-interest bearing. See "Management -- Employment Agreements -- Michael
Mansouri Employment Agreement."
STOCK SALES
The following executive officers, directors or holders of more than 5%
percent of our securities purchased shares of our stock in the amounts set forth
below.
<TABLE>
<CAPTION>
SHARES OF PREFERRED STOCK
COMMON ---------------------------------------------------------------
STOCK SERIES A SERIES B SERIES C SERIES D SERIES E
----------- --------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
Michael H. Mansouri............. 2,269,323 -- -- -- -- --
Christopher W. Moore............ 2,517,279 -- -- -- -- --
Ronald G. Calandra.............. 424,000 -- -- -- -- --
Jalal Farhat.................... 230,625 -- -- -- -- --
Eric V. Lee..................... 546,000 -- -- -- -- --
Robert C. Schoettle............. 546,000 -- -- -- -- --
5% STOCKHOLDERS
Accel Partners.................. -- -- 3,386,409 1,629,561 1,514,562 762,090
APV Technology Partners......... -- -- 753,579 362,124 1,741,068 514,131
Crosspoint Venture Partners..... -- -- 3,386,409 1,629,561 1,514,562 2,202,798
Jamboree Investments, Inc....... 2,842,107 712,893 -- -- -- --
Thomvest Holdings Inc........... -- -- -- -- 1,740,948 501,408
PER SHARE PRICE................. $ 0.0167 to
$ 1.00 $ 0.3333 $ 0.299 $ 0.6213 $ 1.436 $ 3.412
DATE OF PURCHASE................ 8/29/96 to 09/13/99 to
09/27/96 10/25/96 11/27/96 06/11/97 12/31/97 11/10/99
</TABLE>
All future transactions, including loans, between iPass and its officers,
directors, principal stockholders and their affiliates will be approved by a
majority of the board of directors, including a majority of the independent and
disinterested directors in these transactions.
RESTRICTED STOCK PURCHASE
In October 1999, the Board of Directors approved a compensatory restricted
stock grant of 110,334 shares of the Company's common stock at a purchase price
of $1.50 per share. These shares are subject to repurchase by the Company at the
original purchase price. The repurchase right lapses 25% after the first year of
service, and ratably for an additional 36 months. As of December 31, 1999, no
shares of common stock have been repurchased.
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<PAGE> 52
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of our outstanding common stock as of December 31, 1999,
and as adjusted to reflect the sale of our common stock by this prospectus, by:
- our Chief Executive Officers who served in 1999 and each of our four
other most highly compensated executive officers;
- each director;
- each stockholder who is known by us to own beneficially 5% or more of our
common stock; and
- all directors and officers as a group.
Percentage of ownership in the following table is calculated based on
39,828,928 shares of common stock outstanding as of December 31, 1999 and
shares of common stock outstanding after completion of this offering.
Except as indicated in the footnotes to the table, the persons named in the
table have sole voting and investment power with respect to all shares of common
stock shown as beneficially owned by them, subject to any community property
laws. Unless otherwise indicated, the address of each of the individuals named
in the table is: 3800 Bridge Parkway, Redwood Shores, California 94065.
<TABLE>
<CAPTION>
BENEFICIALLY OWNED
SHARES IPASS --------------------------------
MAY REPURCHASE PERCENT
WITHIN 60 DAYS -------------------
NAME AND ADDRESS NUMBER OF OF DECEMBER 31, BEFORE AFTER
OF BENEFICIAL OWNER SHARES 1999(1) TOTAL OFFERING OFFERING
------------------- ---------- --------------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Michael H. Mansouri................... 2,269,323 2,269,323 -- -- --
Christopher W. Moore.................. 2,517,279 279,522 2,237,757 5.6%
Seth D. Neiman(2)..................... 8,733,330 -- 8,733,330 21.9%
Crosspoint Venture Partners(3)........ 8,733,330 -- 8,733,330 21.9%
Arthur C. Patterson(4)................ 7,292,622 -- 7,292,622 18.3%
Accel Partners(5)..................... 7,292,622 -- 7,292,622 18.3%
John S. Alsop(6)...................... 3,555,000 -- 3,555,000 8.9%
Jamboree Investments, Inc.(7)......... 3,555,000 -- 3,555,000 8.9%
Peter G. Bodine(8).................... 3,370,902 -- 3,370,902 8.5%
APV Technology Partners(9)............ 3,370,902 -- 3,370,902 8.5%
Thomvest Holdings Inc.(10)............ 2,242,356 -- 2,242,356 5.6%
Eric V. Lee........................... 546,000 318,500 227,500 *
Robert C. Schoettle................... 546,000 318,500 227,500 *
Ronald G. Calandra.................... 424,000 329,500 94,500 *
Jalal Farhat.......................... 230,625 -- 230,625 *
George M. Tronsrue, III(11)........... 120,000 110,000 10,000 *
John D. Beletic(12)................... 120,000 112,500 7,500 *
All directors and executive officers
as a group (16 persons)(13)......... 30,612,081 4,624,845 25,987,236 65.2%
</TABLE>
- -------------------------
* Less than 1%.
(1) The unvested portion of the shares of common stock is subject to a right of
repurchase, at the original option price, in the event the holder ceases to
provide services to iPass and its affiliates or upon a change of control of
iPass.
(2) Mr. Neiman is a partner of Crosspoint Venture Partners. Crosspoint Venture
Partners beneficially owns all 8,733,330 shares, of which Crosspoint
Venture Partners 1996 owns 6,530,532 shares and Crosspoint Venture Partners
LS 1997 Fund owns 2,202,798 shares. Mr. Neiman has sole voting power and
shared investment power over these shares. Mr. Neiman disclaims beneficial
ownership in
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<PAGE> 53
these shares except to the extent of his pecuniary interest therein. The address
for Mr. Neiman is Crosspoint Venture Partners.
(3) See footnote (2). The address for Crosspoint Venture Partners is The
Pioneer Hotel Building, 2925 Woodside Rd., Woodside, CA 94062.
(4) Mr. Patterson is a General Partner of Accel Partners. Accel Partners owns
7,292,622 shares, of which Accel V L.P. owns 5,877,853 shares, Accel
Internet/Strategic Technology Fund L.P. owns 787,603 shares, Accel
Investors '96 L.P. owns 350,044 shares, Accel Keiretsu V L.P. owns 116,683
shares, and Ellmore C. Patterson Partners own 160,439 shares. Accel V
Associates L.L.C. is the General Partner of Accel V L.P. ("A5") and has the
sole voting and investment power. Arthur C. Patterson, ACP Family
Partnership L.P., James R. Swartz, James W. Breyer, The Breyer 1995 Trust
dated 10/4/95, Eugene D. Hill, Swartz Family Partnership L.P., Luke B.
Evnin, J. Peter Wagner, and G. Carter Sednaoui are the Managing Members of
Accel V Associates L.P. and share powers. Accel Internet/Strategic
Technology Fund Associates L.L.C. ("AISTFA") is the General Partner of
Accel Internet/Strategic Technology Fund L.P. ("AISTF") and has the sole
voting and investment power. Mr. Patterson, ACP Family Partnership L.P.,
James R. Swartz, James W. Breyer, Eugene D. Hill, Swartz Family Partnership
L.P., Luke B. Evnin, J. Peter Wagner, and G. Carter Sednaoui are the
Managing Members of AISTFA and share such powers. Accel Keiretsu V
Associates L.L.C. is the General Partner of Accel Keiretsu V L.P. ("AK5")
and has the sole voting and investment power. Mr. Patterson, James R.
Swartz, James W. Breyer, Eugene D. Hill, Luke B. Evnin, J. Peter Wagner,
and G. Carter Sednaoui are the Managing Members of Accel Keiretsu V
Associates L.L.C. and share such powers. Mr. Patterson, James R. Swartz,
James W. Breyer, Luke B. Evnin, Eugene D. Hill, J. Peter Wagner, and G.
Carter Sednaoui are the General Partners of Accel Investors '96 L.P. and
therefore share the voting and investment powers. Mr. Patterson is the sole
General Partner of Ellmore C. Patterson Partners, and therefore has sole
voting and investment power. Mr. Patterson disclaims beneficial ownership
in these shares except to the extent of his pecuniary interest therein. The
address for Mr. Patterson is Accel Partners.
(5) See footnote (4). The address for Accel Partners is 428 University Ave.,
Palo Alto, CA 94301.
(6) Jamboree Investments, Inc. beneficially owns all 3,555,000 shares. Jamboree
Investments, Inc. is owned by three trusts over which Mr. Alsop is a
beneficiary of one of these trusts. Mr. Alsop disclaims beneficial
ownership in these shares except to the extent of his equity interest
therein. The address for Mr. Alsop is Borderware Technologies, Inc., 90
Burnhamthorpe Rd. West, Suite 1402, Mississauga, Ontario L5B3L3 Canada.
(7) See footnote (6). The address of Jamboree Investments, Inc. is care of
Alpha & Omega Law Chambers Top Floor, Atlantic Building, Shallow Draught,
Bridgetown, Barbados.
(8) Mr. Bodine is a Managing Member of APV Technology Partners. APV Technology
Partners beneficially owns all 3,370,902 shares of which APV Technology
Partners, L.P. owns 948,372 shares, APV Technology Partners II, L.P. owns
2,128,401 shares, APV Technology Partners U.S., L.P. owns 237,096 shares,
and WPS, L.L.C. owns 57,033 shares. Mr. Bodine has shared voting and
investment powers over these shares. Mr. Bodine disclaims beneficial
ownership in these shares except to the extent of his pecuniary interest
therein. The address for Mr. Bodine is APV Technology Partners.
(9) See footnote (8). The address for APV Technology Partners is 535
Middlefield Rd., Suite #150, Menlo Park, CA 94025.
(10) The address for Thomvest Holdings Inc. is 65 Queen St. West, Suite 2400,
Toronto, Canada M5H2M8.
(11) The address for Mr. Tronsrue is 330 289th Place NE, Carnation, WA 98014.
(12) The address for Mr. Beletic is WebLink Wireless, Inc., 3333 Lee Parkway,
Suite 100, Dallas, TX 75219.
(13) See notes (1) - (12) above.
52
<PAGE> 54
DESCRIPTION OF CAPITAL STOCK
Upon completion of this offering and the filing of our restated certificate
of incorporation immediately following the closing of this offering, our
authorized capital stock will consist of 120,000,000 shares of common stock,
$0.001 par value, and 5,000,000 shares of undesignated preferred stock, $0.001
par value. The following description of our capital stock does not purport to be
complete and is subject to, and qualified in its entirety by, our certificate of
incorporation and bylaws, which we have included as exhibits to the registration
statement of which this prospectus forms a part.
COMMON STOCK
As of December 31, 1999, there were 39,828,928 shares of common stock and
preferred stock outstanding, held of record by 103 stockholders. These amounts
assume the conversion of all outstanding shares of preferred stock into common
stock, which is to occur upon the closing of this offering. In addition, as of
December 31, 1999, there were 2,887,234 shares of common stock subject to
outstanding options. Upon completion of this offering, there will be
shares of common stock outstanding, assuming no exercise of
outstanding stock options or warrants or the underwriters' over-allotment
option.
Each share of common stock entitles its holder to one vote on all matters
to be voted upon by stockholders. Subject to preferences that may apply to any
outstanding preferred stock, holders of common stock may receive ratably any
dividends that the board of directors may declare out of funds legally available
for that purpose. In the event of our liquidation, dissolution or winding up,
the holders of common stock are entitled to share ratably in all assets
remaining after payment of liabilities and any liquidation preference of
preferred stock that may be outstanding. The common stock has no preemptive
rights, conversion rights or other subscription rights or redemption or sinking
fund provisions. The shares of common stock that we will issue upon completion
of this offering will be fully paid and non-assessable.
PREFERRED STOCK
Our board of directors have the authority, without further action by the
stockholders, to issue up to 5,000,000 shares of preferred stock in one or more
series. Our board may designate the rights, preferences, privileges and
restrictions of the preferred stock, including dividend rights, conversion
rights, voting rights, terms of redemption, liquidation preference, sinking fund
terms and number of shares constituting any series or the designation of any
series. The issuance of preferred stock could have the effect of restricting
dividends on the common stock, diluting the voting power of the common stock,
impairing the liquidation rights of the common stock or delaying or preventing a
change in control. We have no present plans to issue any shares of preferred
stock after the completion of this offering.
WARRANTS
As of December 31, 1999, a warrant to purchase 82,587 shares of common
stock was outstanding at an exercise price of $1.44 per share. This warrant
expires upon the earlier of December 31, 2004 or three years after the
completion of this offering. The warrant contains provisions for the adjustment
of the exercise price and the aggregate number of shares that may be issued upon
the exercise of the warrant if a merger of or sale of assets, reclassification
of shares, subdivision or combination of shares, stock dividend, and certain
dilutive issuances occurs.
As of December 31, 1999, an aggregate of warrants to purchase 211,686
shares of common stock was outstanding at a weighted average exercise price of
$3.00 per share. These warrants expire on July 19, 2008. The warrants contain
provisions for the adjustment of the exercise price and the aggregate number of
shares that may be issued upon the exercise of the warrant if a stock dividend,
stock split, reorganization, reclassification or consolidation occurs.
REGISTRATION RIGHTS
On the date 180 days after the completion of this offering, the holders of
26,728,647 shares of common stock or their transferees will be entitled to
rights to register these shares under the Securities Act
53
<PAGE> 55
of 1933. If we propose to register any of our securities under the Securities
Act, either for our own account or for the account of other securities holders,
the holders of these shares will be entitled to notice of the registration and
will be entitled to include, at our expense, their shares of common stock. In
addition, the holders of these shares may require us, at our expense and on not
more than two occasions at any time beginning on October 1, 2001, to file a
registration statement under the Securities Act covering their shares of common
stock, and we will be required to use our best efforts to have the registration
statement declared effective. Further, the holders may require us, at our
expense for the first three of these registrations, to register their shares on
Form S-3 when this form becomes available. These rights shall terminate on the
earlier of five years after the effective date of this offering, or when a
holder is able to sell all its shares pursuant to Rule 144 under the Securities
Act in any 90-day period. Attached to these registration rights are conditions
and limitations, including the right of the underwriters to limit the number of
shares included in the registration statement.
ANTI-TAKEOVER PROVISIONS
DELAWARE LAW. We are subject to Section 203 of the Delaware General
Corporation Law, which regulates acquisitions of some Delaware corporations. In
general, Section 203 prohibits, with some exceptions, a publicly held Delaware
corporation from engaging in a business combination with an interested
stockholder for a period of three years following the date the person becomes an
interested stockholder, unless:
- our board of directors approved the business combination or the
transaction in which the person became an interested stockholder prior to
the date the person attained this status;
- upon consummation of the transaction that resulted in the person becoming
an interested stockholder, the person owned at least 85% of our voting
stock outstanding at the time the transaction commenced, excluding shares
owned by persons who are directors and also officers and by employee
stock plans in which employee participants do not have the right to
determine confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer; or
- on or subsequent to the date the person became an interested stockholder,
our board of directors approved the business combination and the
stockholders other than the interested stockholder authorized the
transaction at an annual or special meeting of stockholders by the
affirmative vote of at least 66 2/3% of the outstanding stock not owned
by the interested stockholder.
Section 203 defines a "business combination" to include:
- any merger or consolidation involving us and the interested stockholder;
- any sale, transfer, pledge or other disposition involving the interested
stockholder of 10% or more of our assets;
- in general, any transaction that results in the issuance or transfer by
us of any of our stock to the interested stockholder;
- any transaction involving the corporation that has the effect of
increasing the proportionate share of our stock owned by the interested
stock holders; or
- the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through us.
In general, Section 203 defines an "interested stockholder" as any person
who, together with the person's affiliates and associates, owns, or within three
years prior to the determination of interested stockholder status did own, 15%
or more of a corporation's voting stock.
CERTIFICATE OF INCORPORATION AND BYLAW PROVISIONS. Our certificate of
incorporation and bylaws include a number of provisions that may have the effect
of deterring hostile takeovers or delaying or preventing changes in control or
management of iPass. First, our certificate of incorporation provides that all
stockholder actions upon completion of this offering must be effected at a duly
called meeting of holders
54
<PAGE> 56
and not by a consent in writing. Second, our bylaws provide that special
meetings of the holders may be called only by the chairman of the board of
directors, the chief executive officer, or our board of directors pursuant to a
resolution adopted by a majority of the total number of authorized directors.
Third, our certificate of incorporation provides that our board of directors can
issue up to 5,000,000 shares of preferred stock, as described under
"-- Preferred Stock" above. Fourth, our certificate of incorporation and the
bylaws provide for a classified board of directors, in which approximately
one-third of the directors would be elected each year. Consequently, any
potential acquiror would need to successfully complete two proxy contests in
order to take control of the board of directors. Finally, our bylaws establish
procedures, including advance notice procedures with regard to the nomination of
candidates for election as directors and stockholder proposals. These provisions
of our certificate of incorporation and bylaws could discourage potential
acquisition proposals and could delay or prevent a change in control or
management of iPass.
CALIFORNIA LAW. We are currently subject to Section 2115 of the California
Corporations Code. Section 2115 provides that, regardless of a company's legal
domicile, provisions of California corporate law relating to shareholder rights,
election and removal of directors and distributions to shareholders will apply
to that company if the company meets the requirements of Section 2115. We will
not be subject to Section 2115 if: we are qualified for trading as a national
market security on the Nasdaq National Market, and we have at least 800
stockholders of record as of the record date of our most recent annual meeting,
or during any income year less than 50% of our outstanding voting securities are
held of record by persons having addresses in California.
Our certificate of incorporation includes a provision requiring cumulative
voting for directors whenever Section 2115 of the California Corporations Code
applies to us. Under cumulative voting, a minority stockholder holding a
sufficient percentage of a class of shares may be able to ensure the election of
one or more directors.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is . The transfer
agent's address is .
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock.
Future sales of substantial amounts of our common stock in the public market
could adversely affect prevailing market prices. After any restrictions on sale
lapse, or sales of substantial amounts of our common stock in the public market
or the perception that such sales may occur, could adversely affect the
prevailing market price of the common stock and impair our ability to raise
equity capital in the future.
Upon completion of the offering, we will have outstanding
shares of common stock, outstanding options to purchase 2,887,234 shares of
common stock and outstanding warrants to purchase 294,273 shares of common
stock, assuming no additional option or warrant grants or exercises after
December 31, 1999. Of the shares sold in the offering,
shares will be subject to the lock-up agreements described below
assuming that we sell all shares reserved under our directed share program to
the entities or persons for whom these shares have been reserved. We expect that
the remaining shares, plus any shares issued upon exercise of the
underwriters' over-allotment option, will be freely tradable without restriction
under the Securities Act, unless purchased by our "affiliates" as that term is
defined in Rule 144 under the Securities Act. In general, affiliates include
officers, directors and 10% or greater stockholders.
The remaining 39,828,928 shares outstanding and 2,887,234 shares and
294,273 shares subject to outstanding options and warrants respectively are
"restricted securities" within the meaning of Rule 144. Restricted securities
may be sold in the public market only if the sale is registered or if it
qualifies for an exemption from registration, such as under Rule 144, 144(k) or
701 promulgated under the Securities Act, which are summarized below. Sales of
restricted securities in the public market, or the availability of such shares
for sale, could adversely affect the market price of the common stock.
55
<PAGE> 57
As a result of contractual restrictions described below and the provisions
of Rules 144, 144(k) and 701, 37,205,289 restricted shares will be available for
sale in the public market beginning 180 days after the effective date of the
registration statement of which this prospectus forms a part.
LOCK-UP AGREEMENTS
Our directors, officers, employees and various other stockholders, who
together hold substantially all of our securities, have entered into lock-up
agreements in connection with this offering. These lock-up agreements generally
provide that these holders will not offer, sell, contract to sell, grant any
option to purchase or otherwise dispose of our common stock or any securities
exercisable for or convertible into our common stock owned by them for a period
of 180 days after the date of this prospectus without the prior written consent
of the representatives of the underwriters of this offering. The lock-up
agreements executed by our employees and directors also cover any shares they
may acquire through our directed share program. Notwithstanding possible earlier
eligibility for sale under the provisions of Rules 144, 144(k) and 701, shares
subject to lock-up agreements may not be sold until these agreements expire or
are waived by the representatives of the underwriters of this offering.
RULE 144
In general, under Rule 144 as currently in effect, after the expiration of
the lock-up agreements, a person who has beneficially owned restricted
securities for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of:
- one percent of the number of shares of common stock then outstanding,
which will equal approximately shares immediately after this
offering; and
- the average weekly trading volume of our common stock during the four
calendar weeks preceding the sale.
Sales under Rule 144 are also subject to requirements with respect to
manner of sale, notice and the availability of current public information about
us.
RULE 144(K)
Under Rule 144(k), a person who is not deemed to have been our affiliate at
any time during the three months preceding a sale, and who has beneficially
owned the shares proposed to be sold for at least two years, may sell these
shares without complying with the manner of sale, public information, volume
limitation or notice requirements of Rule 144.
RULE 701
Rule 701, as currently in effect, permits our employees, officers,
directors or consultants who purchased shares pursuant to a written compensatory
plan or contract to resell such shares in reliance upon Rule 144, but without
compliance with certain restrictions. Rule 701 provides that affiliates may sell
their Rule 701 shares under Rule 144 ninety days after effectiveness without
complying with the holding period requirement and that non-affiliates may sell
such shares in reliance on Rule 144 ninety days after effectiveness without
complying with the holding period, public information, volume limitation or
notice requirements of Rule 144.
REGISTRATION RIGHTS
On the date 180 days after the completion of this offering, the holders of
26,728,647 shares of our common stock will have rights to require us to register
their shares under the Securities Act. Upon the effectiveness of a registration
statement covering these shares, the shares would become freely tradable.
56
<PAGE> 58
STOCK OPTIONS
We intend to file a registration statement under the Securities Act after
the effective date of this offering to register shares to be issued pursuant to
our employee benefit plans. As a result, any options or rights exercised under
the 1997, 1999 Stock Option Plan, 1999 Interim Stock Option Plan, the 2000
Equity Incentive Plan, the 2000 Employee Stock Purchase Plan and the 2000
Non-Employee Directors' Stock Option Plan will also be freely tradable in the
public market. However, shares held by affiliates will still be subject to the
volume limitation, manner of sale, notice and public information requirements of
Rule 144, unless otherwise resalable under Rule 701. As of December 31, 1999, we
had granted options to purchase 2,887,234 shares of common stock that had not
been exercised, of which options to purchase 134,885 shares were exercisable. In
addition, as of that date we had reserved 730,291 shares for possible future
issuance under our 1999 Stock Option Plan.
VALIDITY OF COMMON STOCK
The validity of the common stock offered hereby will be passed upon for
iPass by Cooley Godward LLP, Palo Alto, California and for the underwriters by
Shearman & Sterling, New York, New York and Menlo Park, California. As of the
date of this prospectus, partners and associates of Cooley Godward own an
aggregate of 14,655 shares of our common stock through investment partnerships.
EXPERTS
The financial statements and schedules included in this prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports. Reference is made to this report, which incudes
an explanatory paragraph with respect to the uncertainty regarding iPass'
ability to continue as a going concern as discussed in Note 1 to the financial
statements.
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the common stock
offered in this offering. This prospectus does not contain all of the
information set forth in the registration statement and the exhibits and
schedule thereto. For further information with respect to us and the common
stock offered in this offering, we refer you to the registration statement and
to the attached exhibits and schedules. Statements made in this prospectus
concerning the contents of any document referred to in this prospectus are not
necessarily complete. With respect to each such document filed as an exhibit to
the registration statement, we refer you to the exhibit for a more complete
description of the matter involved.
The reports and other information we file with the SEC can be inspected and
copied at the public reference facilities that the SEC maintains at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's regional
offices located at 7 World Trade Center, 13th Floor, New York, New York 10048,
and Suite 140, Citicorp Center, 50 West Madison Street, Chicago, Illinois 60661.
Copies of these materials can be obtained at prescribed rates from the Public
Reference Section of the SEC at the principal offices of the SEC, 450 Fifth
Street, N.W., Washington, D.C. 20549. You may obtain information regarding the
operation of the public reference room by calling 1(800) SEC-0330. The SEC also
maintains a web site (http://www.sec.gov) that makes available the reports and
other information we have filed with the SEC.
57
<PAGE> 59
UNDERWRITING
iPass and the underwriters named below (the "Underwriters") have entered
into an underwriting agreement with respect to the shares being offered. Subject
to certain conditions, each Underwriter has severally agreed to purchase the
number of shares indicated in the following table. Goldman, Sachs & Co., Chase
Securities, Inc. and Advanced Clearing, Inc. are the representatives of the
Underwriters.
<TABLE>
<CAPTION>
Underwriters Number of Shares
------------ ----------------
<S> <C>
Goldman, Sachs & Co. .......................................
Chase Securities, Inc.......................................
Advanced Clearing, Inc. ....................................
--------
Total.....................................................
========
</TABLE>
If the Underwriters sell more shares than the total number set forth in the
table above, the Underwriters have an option to buy up to an additional
shares from iPass to cover such sales. They may exercise that option
for 30 days. If any shares are purchased pursuant to this option, the
Underwriters will severally purchase shares in approximately the same proportion
as set forth in the table above.
The following table shows the per share and total underwriting discounts
and commissions to be paid to the Underwriters by iPass. Such amounts are shown
assuming both no exercise and full exercise of the Underwriters' option to
purchase additional shares.
<TABLE>
<CAPTION>
Paid by iPass
-------------
No Exercise Full Exercise
----------- -------------
<S> <C> <C>
Per Share................................................... $ $
Total....................................................... $ $
</TABLE>
Shares sold by the Underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus. Any
shares sold by the Underwriters to securities dealers may be sold at a discount
of up to $ per share from the initial public offering price. Any such
securities dealers may resell any shares purchased from the Underwriters to
certain other brokers or dealers at a discount of up to $ per share from the
initial public offering price. If all the shares are not sold at the initial
public offering price, the representatives may change the offering price and the
other selling terms.
iPass has agreed with the Underwriters not to dispose of or hedge any of
its common stock or securities convertible into or exchangeable for shares of
Common Stock during the period from the date of this prospectus continuing
through the date 180 days after the date of this prospectus, except with the
prior written consent of Goldman, Sachs & Co. This agreement does not apply to
any existing employee benefit plans. See "Shares Available for Future Sale" for
a discussion of certain transfer restrictions.
Prior to the offering, there has been no public market for the shares. The
initial public offering price will be negotiated among iPass and the
representatives. Among the factors to be considered in determining the initial
public offering price of the shares, in addition to prevailing market
conditions, will be iPass' historical performance, estimates of the business
potential and earnings prospects of iPass, an assessment of iPass' management
and the consideration of the above factors in relation to market valuation of
companies in related businesses.
The common stock will be quoted on the Nasdaq Stock Market under the symbol
"IPAS".
In connection with the offering, the Underwriters may purchase and sell
shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by
short sales. Short sales involve the sale by the Underwriters of a greater
number of shares than they are required to purchase in the offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the common stock while
the offering is in progress.
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<PAGE> 60
The Underwriters also may impose a penalty bid. This occurs when a
particular Underwriter repays to the Underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares sold
by or for the account of such Underwriter in stabilizing or short covering
transactions.
These activities by the Underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the open
market. If these activities are commenced, they may be discontinued by the
Underwriters at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.
iPass currently anticipates that it will undertake a directed share
program, pursuant to which it will direct the underwriters to reserve up to
shares of common stock for sale at the initial public offering price
to directors, officers, employees and friends through a directed share program.
The number of shares of common stock available for sale to the general public in
the public offering will be reduced to the extent these persons purchase these
reserved shares. Any shares not so purchased will be offered by the underwriters
to the general public on the same basis as other shares offered hereby.
The Underwriters do not expect sales to discretionary accounts to exceed
five percent of the total number of shares offered.
iPass estimates that its share of the total expenses of the offering,
excluding underwriting discounts and commissions, will be approximately
$ .
iPass has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
59
<PAGE> 61
IPASS INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Public Accountants.................... F-2
Balance Sheets.............................................. F-3
Statements of Operations.................................... F-4
Statements of Stockholders' Equity.......................... F-5
Statements of Cash Flows.................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 62
After the reincorporation discussed in Note 10 to iPass Inc.'s financial
statements, we expect to be in a position to render the following audit report:
San Jose, California Arthur Andersen LLP
March 1, 2000
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of iPass Inc.:
We have audited the accompanying balance sheets of iPass Inc. (a Delaware
corporation) as of December 31, 1998 and 1999, and the related statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 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 auditing standards generally
accepted in the United States. 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 iPass Inc. as of December
31, 1998 and 1999, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1999 in conformity with
accounting principles generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations
and has projected net cash flows used in operations over the next twelve months
to exceed net current assets as of December 31, 1999, which raise substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 1. The financial statements
do not include any adjustments relating to the recoverability and classification
of asset carrying amounts or the amount and classification of liabilities that
might result should the Company be unable to continue as a going concern.
San Jose, California
March 1, 2000
F-2
<PAGE> 63
iPASS INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
EQUITY AT
DECEMBER 31,
DECEMBER 31, 1999
---------------------------- (NOTE 8)
1998 1999 (UNAUDITED)
------------ ------------ -------------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents....................... $ 5,165,673 $ 15,178,092
Accounts receivable, net of allowance for
doubtful accounts of $284,523 in 1998 and
$781,570 in 1999............................. 1,137,194 4,747,525
Prepaid expenses and other current assets....... 33,682 877,951
------------ ------------
Total current assets......................... 6,336,549 20,803,568
Property and equipment, net....................... 392,279 1,410,070
Other assets...................................... 220,586 2,043,389
------------ ------------
Total Assets...................................... $ 6,949,414 $ 24,257,027
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of loans payable................ $ 431,262 $ 1,551,080
Accounts payable................................ 1,180,505 4,788,751
Accrued liabilities............................. 1,050,866 3,115,227
------------ ------------
Total current liabilities.................... 2,662,633 9,455,058
Loans payable, net of current portion............. 628,110 2,819,790
------------ ------------
Total liabilities............................ 3,290,743 12,274,848
------------ ------------
Commitments (Note 5)
Stockholders' Equity:
Convertible preferred stock, no par value,
aggregate liquidating preference of
$37,275,653
Authorized -- 30,000,000 shares in 1998 and
1999, 5,000,000 shares undesignated and
authorized pro forma;
Outstanding -- 20,664,849 shares in 1998,
26,728,647 shares in 1999 and none pro
forma...................................... 16,422,629 37,086,921 $ --
Common stock, no par value
Authorized -- 60,000,000 shares in 1998 and
1999, 120,000,000 shares pro forma;
Outstanding -- 7,756,032 shares in 1998,
13,100,281 shares in 1999 and 39,828,928
pro forma.................................. 140,189 21,022,708 58,109,629
Warrants........................................ 0 173,708 173,708
Notes receivable from stockholders.............. (50,395) (2,128,500) (2,128,500)
Deferred stock compensation..................... 0 (12,944,530) (12,944,530)
Accumulated deficit............................. (12,853,752) (31,228,128) (31,228,128)
------------ ------------ ------------
Total stockholders' equity................... 3,658,671 11,982,179 $ 11,982,179
------------ ------------ ============
Total Liabilities and Stockholders' Equity........ $ 6,949,414 $ 24,257,027
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 64
iPASS INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Revenues................................................ $ 812,171 $ 3,895,254 $ 14,319,137
----------- ----------- ------------
Costs and Expenses
Cost of revenues...................................... 713,694 2,680,322 8,697,253
Network operations (excluding amortization of deferred
stock compensation of $418,756 in 1999)............ 670,066 754,713 3,065,419
Research and development (excluding amortization of
deferred stock compensation of $202,068 in 1999)... 994,172 1,176,193 2,107,079
Sales and marketing (excluding amortization of
deferred stock compensation of $641,214 in 1999)... 2,715,883 4,340,199 9,140,506
General and administrative (excluding amortization of
deferred stock compensation of $2,318,425 in
1999).............................................. 1,309,197 1,545,398 4,191,198
Severance............................................. -- -- 2,014,960
Amortization of deferred stock compensation........... -- -- 3,580,463
----------- ----------- ------------
Total costs and expenses......................... 6,403,012 10,496,825 32,796,878
----------- ----------- ------------
Operating loss................................... (5,590,841) (6,601,571) (18,477,741)
----------- ----------- ------------
Other income (expense)
Interest income and other............................. 42,924 416,227 344,313
Interest expense...................................... (38,872) (156,887) (240,948)
----------- ----------- ------------
Total other income (expense)..................... 4,052 259,340 103,365
----------- ----------- ------------
Net loss................................................ $(5,586,789) $(6,342,231) $(18,374,376)
=========== =========== ============
Basic and diluted net loss per common share............. $ (1.25) $ (1.12) $ (2.46)
=========== =========== ============
Shares used in computing basic and diluted net loss per
common share.......................................... 4,480,525 5,647,886 7,465,417
=========== =========== ============
Pro forma basic and diluted net loss per common share
(unaudited)........................................... $ (0.62)
============
Shares used in computing pro forma basic and diluted net
loss per common share (unaudited)..................... 29,817,931
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 65
IPASS INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED NOTES
STOCK COMMON STOCK RECEIVABLE DEFERRED
------------------------ ------------------------ FROM STOCK
SHARES AMOUNT SHARES AMOUNT WARRANTS STOCKHOLDERS COMPENSATION
---------- ----------- ---------- ----------- -------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31,
1996......................... 9,115,605 $ 2,703,802 4,215,792 $ 70,263 $ -- $ (51,927) $ --
Issuance of Series C preferred
stock at $0.62 per share, net
of issuance cost of
$47,329...................... 3,621,246 2,197,844 -- -- -- -- --
Issuance of Series D preferred
stock at $1.44 per share, net
of issuance cost of
$29,021...................... 8,077,998 11,570,983 -- -- -- -- --
Repurchase of Series A
preferred stock at $0.62 per
share........................ (150,000) (50,000) -- -- -- -- --
Exercises of stock options.... -- -- 3,421,554 73,040 -- (68,788) --
Repurchase of unvested common
stock........................ -- -- -- -- -- 51,927 --
Net loss...................... -- -- -- -- -- -- --
---------- ----------- ---------- ----------- -------- ----------- ------------
BALANCE, DECEMBER 31,
1997......................... 20,664,849 16,422,629 7,637,346 143,303 -- (68,788) --
Exercises of stock options.... -- -- 354,996 11,064 -- -- --
Repurchase of unvested common
stock........................ -- -- (236,310) (14,178) -- 18,393 --
Net loss...................... -- -- -- -- -- -- --
---------- ----------- ---------- ----------- -------- ----------- ------------
BALANCES, DECEMBER 31, 1998... 20,664,849 16,422,629 7,756,032 140,189 -- (50,395) --
Issuance of Series E preferred
stock at $3.412 per share,
net of issuance cost of
$25,387...................... 6,063,798 20,664,292 -- -- -- -- --
Exercises of stock options.... -- -- 5,532,313 1,918,299 -- (2,091,230) --
Repurchase of unvested common
stock........................ -- -- (365,064) (6,084) -- 13,125 --
Shares issued under restricted
stock plan................... -- -- 177,000 265,500 -- -- --
Fair value of stock options
for accelerated vesting...... -- -- -- 1,777,460 -- -- --
Fair value of options issued
for services rendered........ -- -- -- 402,351 -- -- --
Warrants issued............... -- -- -- -- 173,708 -- --
Deferred stock-based
compensation................. -- -- -- 16,524,993 -- -- (16,524,993)
Amortization of stock-based
compensation................. -- -- -- -- -- -- 3,580,463
Net loss...................... -- -- -- -- -- -- --
---------- ----------- ---------- ----------- -------- ----------- ------------
BALANCES, DECEMBER 31, 1999... 26,728,647 $37,086,921 13,100,281 $21,022,708 173,708 $(2,128,500) $(12,944,530)
========== =========== ========== =========== ======== =========== ============
<CAPTION>
ACCUMULATED STOCKHOLDERS'
DEFICIT EQUITY
------------ -------------
<S> <C> <C>
BALANCE, DECEMBER 31,
1996......................... $ (881,532) $ 1,840,606
Issuance of Series C preferred
stock at $0.62 per share, net
of issuance cost of
$47,329...................... -- 2,197,844
Issuance of Series D preferred
stock at $1.44 per share, net
of issuance cost of
$29,021...................... -- 11,570,983
Repurchase of Series A
preferred stock at $0.62 per
share........................ (43,200) (93,200)
Exercises of stock options.... -- 4,252
Repurchase of unvested common
stock........................ -- 51,927
Net loss...................... (5,586,789) (5,586,789)
------------ ------------
BALANCE, DECEMBER 31,
1997......................... (6,511,521) 9,985,623
Exercises of stock options.... -- 11,064
Repurchase of unvested common
stock........................ -- 4,215
Net loss...................... (6,342,231) (6,342,231)
------------ ------------
BALANCES, DECEMBER 31, 1998... (12,853,752) 3,658,671
Issuance of Series E preferred
stock at $3.412 per share,
net of issuance cost of
$25,387...................... -- 20,664,292
Exercises of stock options.... -- (172,931)
Repurchase of unvested common
stock........................ -- 7,041
Shares issued under restricted
stock plan................... -- 265,500
Fair value of stock options
for accelerated vesting...... -- 1,777,460
Fair value of options issued
for services rendered........ -- 402,351
Warrants issued............... -- 173,708
Deferred stock-based
compensation................. -- --
Amortization of stock-based
compensation................. -- 3,580,463
Net loss...................... (18,374,376) (18,374,376)
------------ ------------
BALANCES, DECEMBER 31, 1999... $(31,228,128) $ 11,982,179
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 66
iPASS INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss.................................................. $(5,586,789) $(6,342,231) $(18,374,376)
Adjustments to reconcile net loss to net cash used in
operating activities:
Amortization of deferred stock compensation for
employees............................................. -- -- 3,580,463
Other stock compensation expense....................... -- -- 2,179,811
Depreciation and amortization.......................... 81,398 144,544 335,957
Provision for doubtful accounts........................ 175,775 113,384 586,867
Changes in Operating Assets and Liabilities:
Accounts receivable.................................. (379,927) (1,046,426) (4,197,198)
Prepaid expenses and other assets.................... (206,104) (19,104) (1,891,062)
Accounts payable..................................... 598,597 447,774 3,608,246
Accrued liabilities.................................. 482,039 501,722 2,064,361
----------- ----------- ------------
Net cash used in operating activities............. (4,835,011) (6,200,337) (12,106,931)
----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment........................ (266,672) (301,542) (1,329,622)
Increase in other assets.................................. -- -- (376,010)
Loan to chief executive officer........................... -- -- (400,000)
----------- ----------- ------------
Net cash used in investing activities............. (266,672) (301,542) (2,105,632)
----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loan and capital lease financing............ 1,495,000 169,150 3,942,074
Issuance of warrants...................................... -- -- 173,708
Payments on loan and capital lease financing.............. (39,592) (565,186) (654,702)
Proceeds from issuance of preferred stock, net............ 13,768,827 -- 20,664,292
Proceeds from issuance of common stock.................... 4,252 11,064 92,569
Proceeds from repayment of notes receivable from
shareholders........................................... 51,927 4,215 7,041
Repurchase of Series A preferred stock.................... (93,200) -- --
----------- ----------- ------------
Net cash provided by (used in) financing
activities..................................... 15,187,214 (380,757) 24,224,982
----------- ----------- ------------
Net Increase (Decrease) in Cash and Cash Equivalents........ 10,085,531 (6,882,636) 10,012,419
Cash and Cash Equivalents at Beginning of Period............ 1,962,778 12,048,309 5,165,673
----------- ----------- ------------
Cash and Cash Equivalents at End of Period.................. $12,048,309 $ 5,165,673 $ 15,178,092
=========== =========== ============
Cash paid for Interest...................................... $ 38,871 $ 156,887 $ 209,877
=========== =========== ============
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Issuance of notes receivable for exercise of stock
options................................................... $ 68,788 $ -- $ 2,091,230
=========== =========== ============
Cancellation of notes receivable for stock repurchase....... $ -- $ 14,178 $ 6,084
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 67
IPASS INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. ORGANIZATION AND OPERATIONS:
iPass Inc. (the "Company") was incorporated in July 1996 to provide remote
Internet access and settlement services. The Company provides these services to
corporations and to network service providers, which include long-distance and
local telephone companies and internet service providers. Today, the Company's
remote access platform enables users of electronic devices, such as computers
and personal digital assistants, to access corporate data networks and the
Internet in more than 150 countries through a local telephone connection. In the
future, the Company expects that its remote access platform will provide access
to corporations and network service providers through a variety of access
technologies, such as wireless technologies.
The Company is subject to the risks associated with early stage technology
companies. These risks include, but are not limited to: history of losses,
limited operating history, dependence on a smaller number of key individuals,
customers and suppliers, competition from larger, more established companies,
the continued need for additional financing, the impact of rapid technological
changes and changes in customer demand/requirements. There is no assurance that
the Company's efforts will be successful.
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the financial
statements, during the years ended December 31, 1997, 1998 and 1999, the Company
incurred losses of $5,586,789, $6,342,231, and $18,374,376. As of December 31,
1999, the Company's projected net cash flows used in operations over the next
twelve months is expected to exceed net current assets as of December 31, 1999.
These factors, among others, indicate that the Company may be unable to
continue as a going concern for a reasonable period of time.
The financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern. The Company's continuation as a going
concern is dependent upon its ability to (a) generate sufficient cash flow to
meet its obligations on a timely basis, (b) obtain additional financing as may
be required, and (c) ultimately attain profitability. The Company is in the
process of filing a registration statement with the Securities and Exchange
Commission to register shares of its common stock in connection with a proposed
initial public offering ("IPO"). The Company plans to raise cash through the IPO
in an amount that will enable it to fund operations through December 31, 2000
and beyond.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
USE OF ESTIMATES IN PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
F-7
<PAGE> 68
IPASS INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
CASH AND CASH EQUIVALENTS
The Company considers cash investments with an original maturity of 90 days
or less to be cash equivalents. Cash and cash equivalents consist solely of
funds held in general checking accounts and money market accounts.
CONCENTRATION OF RISK
Substantially all of the Company's cash and cash equivalents are held by
one financial institution in money market funds and on-demand deposit accounts.
The Company provides credit to its customers in the normal course of
business, performs ongoing credit evaluations of its customers and maintains
allowances for doubtful accounts. As of December 31, 1999, 16.6% of accounts
receivable were concentrated with one customer. No individual customer
represented 10.0% or more of accounts receivable at December 31, 1998.
The Company's purchases of Internet access time are concentrated with three
suppliers that provided the following percentages of cost of revenue for the
three years ended December 31, 1999:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
--------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Access provider A................................... 68.8% 55.3% 36.8%
Access provider B................................... 13.9% 17.5% 27.1%
Access provider C................................... -- -- 16.6%
</TABLE>
If any one of these suppliers' experiences network interruption or failure,
the Company's services could experience significant disruption and could
adversely impact the Company's operations. In addition, the contracts the
Company has entered into with some of these access providers contain minimum
commitments, which require payment for a set amount of access time.
FAIR VALUE OF FINANCIAL INSTRUMENTS
For certain financial instruments, including cash and cash equivalents,
accounts receivable, accounts payable and accrued liabilities, recorded amounts
approximate fair value due to the relatively short maturity period. Based on
interest rates available to the Company for debt with comparable maturities, the
carrying values of the Company's loans payable approximate fair values.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are depreciated using the
straight-line method over the estimated useful lives of three years. All repairs
and maintenance costs are expensed as incurred.
Leasehold improvements are amortized over the shorter of the useful life or
the lease term.
The Company periodically evaluates the carrying amount of its long-lived
assets for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. The Company has
determined that no such impairments have occurred during the years ended
December 31, 1997, 1998 and 1999.
F-8
<PAGE> 69
IPASS INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
OTHER ASSETS
During 1999, the Company made a deposit and prepayment, in total, of
approximately $1.4 million for its new headquarters' lease and related
furniture, respectively. The pre-payment of approximately $400,000 will be
reclassified to property and equipment upon delivery of the furniture.
The Company entered into a $400,000 note receivable with an executive for
relocation costs during 1999. The note is non-interest bearing, as permitted by
Treasury Regulation for employee-relocation mortgage loan. The note is secured
by a second Deed of Trust on the property purchased by the executive as well as
a stock pledge agreement, and is due and payable in a single payment upon the
earliest of several events to occur (as defined), but no later than three years
from the date the executive commenced employment with the Company.
STOCK-BASED COMPENSATION
The Company adopted the disclosure provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
No. 123"). In accordance with the provisions of SFAS No. 123, the Company
applies Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees" ("APB No. 25"), and the related interpretations in accounting for
stock options issued to employees through its stock option plans. The Company
follows the provisions of SFAS No. 123 in accounting for options granted to
consultants and non-employees.
STOCK SPLIT
In September 1999, the Company completed a 3-for-1 stock split of all
common and preferred stock outstanding. The effect of this split has been
retroactively reflected in the accompanying financial statements.
REVENUE RECOGNITION
The Company derives revenues primarily from the time that each end user
spends on the Company's network. Revenues are generated when customers' end
users initiate remote Internet access services. Cost of revenues represents the
amounts paid to access providers' networks for the completion of services
provided. The Company recognizes revenue and related costs at the time services
are rendered to users. The Company has minimum purchase commitments with some
access providers that it expects to utilize provided the access providers
maintain the required pricing under the contracts. Costs of minimum purchase
contracts are recognized as the greater of the minimum commitment actual time
purchased. All revenues and costs are denominated in U.S. dollars.
As part of the standard agreement to provide services, the Company provides
its customers with software, which is made up of a remote-dialer and a remote
access application, that is necessary to access the network and settlement
system. An upfront charge is assessed for the license and setup of the software.
In accordance with Statement of Position No. 97-2, "Software Revenue
Recognition" ("SOP 97-2"), this revenue is recognized ratably over the initial
term of the agreement, typically one year, starting upon the delivery of the
application products. Revenues recognized from these services amounted to
approximately $0, $33,000 and $219,000 for the years ended December 31, 1997,
1998 and 1999. Deferred revenue at December 31, 1998 and 1999 was $67,000 and
$211,000, and is included within accrued liabilities in the accompanying balance
sheets.
For the year ended December 31, 1997, Customers A, B, C and D represented
$157,945, $133,318, $111,485 and $97,873 of total revenues. No individual
customer represented 10% or more
F-9
<PAGE> 70
IPASS INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
of total revenues for the year ended December 31, 1998, and Customer E
represented $3,158,089 of total revenues for the year ended December 31, 1999.
SALES AND MARKETING
Advertising and promotional costs are expensed as incurred. Advertising and
promotional costs for the years ended December 31, 1997, 1998 and 1999 were
approximately $1,000, $13,000, and $607,000, respectively.
RESEARCH AND DEVELOPMENT
Research and development expenditures consisting of primarily payroll
costs, other direct costs and overhead are charged to operations as incurred.
Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of
Computer Software to be Sold, Leased or Otherwise Marketed," requires
capitalization of certain software development costs subsequent to the
establishment of technological feasibility. Based on the Company's product
development process, technological feasibility is established upon completion of
a working model. Costs incurred by the Company between completion of the working
model and the point at which the product is ready for general release have been
insignificant.
Research and development costs to date also include expenses incurred by
the Company to develop and maintain software developed for internal use such as
the Company's network monitoring technology. The Company applies the provisions
of SOP 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use", to these costs and capitalizes only the costs
incurred subsequent to the time that it is probable that software development
efforts will be completed and the software will be used to perform the function
intended. Due to the unique nature of the Company's software development effort,
the Company is not able to meet this criteria until the development effort is
almost complete. To date, the amount of expenses that meet this criteria have
not been material.
COMPUTATION OF BASIC AND DILUTED NET LOSS PER COMMON SHARE AND PRO FORMA BASIC
AND DILUTED NET LOSS PER COMMON SHARE
Basic net loss per common share has been computed using the
weighted-average number of shares of common stock outstanding during the period,
less shares subject to repurchase. The Company has excluded all convertible
preferred stock, warrants for convertible preferred stock, outstanding stock
options and shares subject to repurchase from the calculation of diluted net
loss per common share because all such securities are anti-dilutive for all
periods presented. The total number of shares excluded from diluted net loss per
share relating to these securities was approximately 11,914,000 shares,
23,579,000 shares and 26,959,000 shares for 1997, 1998 and 1999, respectively.
Unaudited pro forma basic and diluted net loss per common share is
calculated assuming the conversion of redeemable convertible preferred stock
into an equivalent number of shares of common stock, as if the shares had
converted on the dates of their issuances.
F-10
<PAGE> 71
IPASS INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
The following is a reconciliation of shares used in the calculation of
basic and diluted and pro forma basic and diluted net loss per common share:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Net loss....................................... $(5,586,789) $(6,342,231) $(18,374,376)
=========== =========== ============
Weighted average shares of common stock
outstanding.................................. 4,924,949 7,715,932 10,550,572
Less: weighted average shares of common stock
subject to repurchase........................ (444,424) (2,068,046) (3,085,155)
----------- ----------- ------------
Weighted average shares used in computing basic
and diluted net loss per common share........ 4,480,525 5,647,886 7,465,417
=========== =========== ============
Basic and diluted net loss per common share.... $ (1.25) $ (1.12) $ (2.46)
=========== =========== ============
Shares used in computing basic and diluted net
loss per common share........................ 7,465,417
Adjustment to reflect the effect of the assumed
conversion of redeemable convertible
preferred stock (unaudited).................. 22,352,514
------------
Shares used in computing pro forma basic and
diluted net loss per common share
(unaudited).................................. 29,817,931
============
Pro forma basic and diluted net loss per common
share (unaudited)............................ $ (0.62)
============
</TABLE>
Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
No. 98, common stock and convertible preferred stock issued or granted for
nominal consideration prior to the anticipated effective date of the IPO must be
included in the calculation of basic and diluted net loss per common share as if
such stock had been outstanding for all periods. To date, the Company has not
had any issuances or grants for nominal consideration.
COMPREHENSIVE LOSS
Comprehensive loss includes foreign currency translation gains and losses
and other unrealized gains and losses excluded from net loss and reflected
instead in equity. As the Company does not have any items of other comprehensive
loss, comprehensive loss for each of the three years in the period ended
December 31, 1999 equals net loss.
SEGMENT REPORTING
For all periods presented, the Company is organized and operates in one
operating segment to provide global remote Internet access services to private
and business customers.
International revenue accounted for approximately $537,222, $1,277,824 and
$7,529,762 for the years ended December 31, 1997, 1998 and 1999. For the year
ended December 31, 1997, Singapore, Hong Kong and Australia had revenues of
$156,848, $138,493 and $112,152. For the year ended December 31, 1998, Hong Kong
and Singapore had revenues of $393,127 and $389,593. No individual country
represented 10% or more of total revenues for the year ended December 31, 1999.
Nearly all of the Company's long-lived assets are located in the United
States.
F-11
<PAGE> 72
IPASS INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which requires companies to record
derivative financial instruments on the balance sheet as assets or liabilities,
measured at fair value. In June 1999, the FASB deferred the effective date of
SFAS No. 133 to be effective for all quarters of all fiscal years beginning
after June 15, 2000. Because the Company does not currently hold any derivative
instruments and does not engage in hedging activities, management believes that
the application of SFAS No. 133 will not have a material impact on the Company's
financial position or results of operations.
3. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1998 1999
--------- ----------
<S> <C> <C>
Equipment......................................... $ 583,366 $1,549,203
Furniture and fixtures............................ 12,623 157,188
Purchased software................................ 22,919 155,776
Leasehold improvements............................ -- 86,363
--------- ----------
618,908 1,948,530
Less: Accumulated depreciation and amortization... (226,629) (538,460)
--------- ----------
Fixed assets, net................................. $ 392,279 $1,410,070
========= ==========
</TABLE>
Depreciation and amortization expense for the years ended December 31,
1997, 1998 and 1999 was $81,398, $144,544 and $311,831.
4. LOANS PAYABLE:
At December 31, 1998 and 1999, loans payable consisted of the following:
<TABLE>
<CAPTION>
1998 1999
---------- ----------
<S> <C> <C>
1997 Loan Payable................................. $ 158,367 $ 63,347
1997 Subordinated Loan............................ 751,305 474,217
Capitalized Lease................................. 149,700 193,042
1999 Subordinated Loan............................ -- 3,789,846
---------- ----------
Total loans payable............................... 1,059,372 4,520,452
Less: current portion............................. 431,262 1,608,983
---------- ----------
Long-term portion................................. $ 628,110 $2,911,469
========== ==========
</TABLE>
In January 1997, the Company entered into a loan payable agreement ("1997
Loan Payable"). The loan payable is secured by substantially all the Company's
assets and provides for borrowings of up to $500,000. The loan shall be repaid
in thirty-six equal monthly installments of principal, plus interest, commencing
on August 30, 1997. Interest on the borrowings is payable monthly at the bank's
base rate plus three percent (11.75% at December 31, 1999).
In November 1997, the Company entered into a subordinated loan agreement
("1997 Subordinated Loan") with a lender for borrowings of up to $1,000,000 in
minimum draws of $250,000. Each draw is payable in 42 equal monthly installments
of principal, plus interest at 11.75%.
F-12
<PAGE> 73
IPASS INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
The Company also has outstanding borrowings under a capital lease ("Capital
Lease") with a lender at interest rates varying from 7.00% to 8.40%. Minimum
future lease payments under all capital lease arrangements are $209,000, of
which $16,000 represents interest.
The 1997 Subordinated Loan provides for the issuance of warrants of Series
D preferred stock. On December 31, 1997, the Company issued 82,587 warrants with
an exercise price of $1.436 that expire seven years from the grant date or three
years from the effective date of the Company's IPO, whichever is shorter. The
fair value of each warrant grant was estimated on the date of grant using the
Black-Scholes pricing model with the following weighted average assumptions:
risk-free interest rate of 5.75%; expected dividend yield of 0%; expected lives
of 42 months; expected volatility of 70%. The calculated fair value of the
warrants was not material to the Company's financial statements.
In July 1999, the Company entered into an additional subordinated loan
agreement ("1999 Subordinated Loan") with a lender for borrowings of up to
$4,000,000. Borrowings are payable in 36 equal installments of principal, plus
interest at rates ranging from 12.86% to 13.53%. In conjunction with this
agreement, as of December 31, 1999, the Company had outstanding warrants to
purchase an aggregate of 87,924 and 123,762 of Series E convertible preferred
stock at exercise prices of $2.424 and $3.412 per share, respectively. These
warrants are immediately exercisable and expire at the later of seven years from
the date of grant or three years after the closing of the Company's IPO. The
fair value of the warrants granted was determined to be approximately $174,000
on the date of grant using the Black-Scholes pricing model with the following
assumptions: risk-free rate of 6.00%; expected dividend yields of 0%; expected
lives of 24 months; and expected volatility of 80%. This amount has been
recognized as a loan discount and is recorded as additional interest expense
over the term of the loan agreement. The Company had $150,000 in unamortized
discount as of December 31, 1999 and interest expense included $24,000 in
amortization of loan discount during 1999.
Principal payments under all of the Company's debt agreements outstanding
at December 31, 1999, are due as follows:
<TABLE>
<S> <C>
2000............................ $1,608,983
2001............................ 1,601,043
2002............................ 1,243,283
2003............................ 67,143
----------
$4,520,452
==========
</TABLE>
Loans payable at December 31, 1999 comprised:
<TABLE>
<CAPTION>
LOANS PAYABLE,
UNAMORTIZED NET OF UNAMORTIZED
LOANS PAYABLE DISCOUNT DISCOUNT
------------- ----------- ------------------
<S> <C> <C> <C>
Current portion.......... $1,608,983 $ (57,903) $1,551,080
Long-term portion........ 2,911,469 (91,679) 2,819,790
---------- --------- ----------
Total loans payable.... $4,520,452 $(149,582) $4,370,870
========== ========= ==========
</TABLE>
F-13
<PAGE> 74
IPASS INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
5. COMMITMENTS:
The Company leases its facilities under non-cancelable operating leases
that expire at various dates through February 2010. Future minimum payments
under all leases as of December 31, 1999 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------------------------
<S> <C>
2000........................ $ 3,640,750
2001........................ 4,499,712
2002........................ 4,673,894
2003........................ 4,848,077
2004 and thereafter......... 33,733,325
-----------
$51,395,758
===========
</TABLE>
Rent expense under operating leases for the years ended December 31, 1997,
1998 and 1999 was approximately $459,000, $423,000 and $531,000, respectively.
As of December 31, 1999, the Company had committed to purchase minimum
levels of time from three of its access providers. Future minimum purchase
commitments under all agreements are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
- ------------------------------
<S> <C>
2000........................ $ 8,679,167
2001........................ 9,479,167
2002........................ 9,987,500
2003........................ 5,695,833
2004........................ 458,333
-----------
$34,300,000
===========
</TABLE>
6. 401(K) PLAN:
Substantially all of the Company's employees are eligible to participate in
the iPass 401(k) Plan, which provides for discretionary Company matching
contributions. There were no matching contributions for the years ended December
31, 1997, 1998 and 1999.
7. INCOME TAXES:
The Company accounts for income taxes by recognizing deferred tax
liabilities and assets for the expected future tax consequences of events that
have been included in the financial statements or
F-14
<PAGE> 75
IPASS INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
tax returns. The following is a summary of the significant components of the
Company's net deferred tax asset as of December 31, 1998 and 1999:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1998 1999
----------- ------------
<S> <C> <C>
Net operating loss carryforwards.............. $ 4,662,700 $ 9,177,700
Reserves and accruals......................... 287,700 903,700
Capitalized start-up costs for tax............ 127,600 220,700
Capitalized trademarks and patents............ 52,000 124,300
Research and development credits.............. 20,700 20,700
----------- ------------
5,150,700 10,447,100
Valuation allowance........................... (5,150,700) (10,447,100)
----------- ------------
Net deferred income tax asset................. $ -- $ --
=========== ============
</TABLE>
As of December 31, 1999, the Company has cumulative net operating loss
carryforwards for federal and state income tax reporting purposes of
approximately $22.5 million, which expire in various periods through 2019. Under
current tax law, net operating loss carryforwards available in any given year
may be limited upon the occurrence of certain events, including significant
changes in ownership interests, such as an IPO.
A valuation allowance has been recorded for the entire deferred tax asset
as a result of uncertainties, regarding realization of the asset, including
limited operating history of the Company, the lack of profitability to date and
the uncertainty over future operating profitability and taxable income.
As of December 31, 1998 and 1999, the Company had no significant deferred
tax liabilities.
8. CONVERTIBLE PREFERRED STOCK:
Convertible preferred stock comprised the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1998 1999
----------- -----------
<S> <C> <C>
Series A, 1,439,208 shares authorized, 1,439,208
shares issued and outstanding in 1998 and 1999... $ 449,836 $ 449,836
Series B, 7,526,397 shares authorized, 7,526,397
shares issued and outstanding in 1998 and 1999... 2,203,966 2,203,966
Series C, 3,621,246 shares authorized, 3,621,246
shares issued and outstanding in 1998 and 1999... 2,197,844 2,197,844
Series D, 9,000,000 shares authorized, 8,077,998
shares issued and outstanding in 1998 and 1999... 11,570,983 11,570,983
Series E, 6,500,000 shares authorized, no shares
issued and outstanding in 1998 and 6,063,798
shares issued and outstanding in 1999............ -- 20,664,292
----------- -----------
$16,422,629 $37,086,921
=========== ===========
</TABLE>
F-15
<PAGE> 76
IPASS INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
The Company has authorized the issuance of up to 30,000,000 shares of
convertible preferred stock. The rights and preferences of the outstanding
Series A, B, C, D and E preferred stock are as follows:
DIVIDENDS
The holders of Series A, B, C, D and E preferred stock are entitled to
receive non-cumulative dividends at an annual rate of 8% of original issue
price. The original issue price of the Series A Preferred, Series B Preferred,
Series C Preferred, Series D Preferred and Series E Preferred is $0.33, $0.30,
$0.62, $1.44 and $3.41, respectively. Such dividends shall be payable only when
and as declared by the Board of Directors. No dividends shall be payable on any
common stock until dividends to Series A, B, C, D and E preferred stock have
been paid or declared by the Board of Directors. As of December 31, 1999, no
dividends have been declared.
LIQUIDATION PREFERENCE
In the event of any liquidation, dissolution or winding up of the Company,
holders of Series A, B, C, D and E preferred stock are entitled to receive, in
preference to holders of common stock, the amount of $0.33, $0.30, $0.62, $1.44
and $3.41 per share, respectively, plus all declared but unpaid dividends. Such
amounts will be adjusted for any stock split, stock dividends and
recapitalizations. If such amounts are not available to sufficiently satisfy the
full preferential amount, the entire assets of the Company will be distributed
among the holders of the preferred stock at the time outstanding, ratably in
proportion to the full amounts to which they would otherwise be respectively
entitled. As of December 31, 1999, the aggregate liquidation preferences were
$37,275,653, which includes no undeclared dividends.
VOTING RIGHTS
The holders of the Series A, B, C, D and E preferred stock are entitled to
the number of votes equal to the number of shares of common stock into which
such preferred stock is convertible.
CONVERSION
Each share of Series A preferred stock is convertible into one share of
common stock at (a) the option of the holder at any time after the date of
issuance of such shares (b) the date specified by affirmative election of at
least one-half ( 1/2) of outstanding Series A preferred shareholders or (c) the
consummation of the Company's sale of common stock in an underwritten public
offering. Each share of Series B, C, D and E preferred stock is convertible into
one share of common stock at (a) the option of the holder at any time after the
date of issuance of such shares (b) the date specified by affirmative election
of at least two-thirds ( 2/3) of outstanding Series B, Series C, Series D or
Series E preferred shareholders, or (c) the consummation of the Company's sale
of common stock in an underwritten public offering which results in gross cash
proceeds to the Company of at least $25,000,000 and with an offering price to
the public of at least $10.00 per share. The conversion rates of preferred stock
are subject to adjustment for dilution, including, but not limited to, stock
splits, stock dividends and stock combinations.
PRO FORMA STOCKHOLDERS' EQUITY (UNAUDITED)
The board of directors has authorized the filing of a registration
statement with the Securities and Exchange Commission to register shares of its
common stock in connection with a proposed IPO. If the IPO is consummated under
the terms presently anticipated, all of the outstanding redeemable
F-16
<PAGE> 77
IPASS INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
convertible preferred stock at December 31, 1999 will be converted into
26,728,647 shares of common stock upon the closing of the IPO. The effect of the
conversion has been reflected as unaudited pro forma stockholders' equity in the
accompanying balance sheet as of December 31, 1999.
9. COMMON STOCK:
At December 31, 1999, the Company had reserved the following shares of
authorized but unissued common stock for future issuance:
<TABLE>
<S> <C>
Conversion of Series A Preferred Stock Outstanding......... 1,439,208
Conversion of Series B Preferred Stock Outstanding......... 7,526,397
Conversion of Series C Preferred Stock Outstanding......... 3,621,246
Conversion of Series D Preferred Stock Outstanding......... 8,077,998
Conversion of Series E Preferred Stock Outstanding......... 6,063,798
Conversion of stock warrants outstanding................... 294,273
Stock Option outstanding and available for grant........... 3,684,191
----------
Total Shares Reserved.................................... 30,707,111
==========
</TABLE>
REPURCHASE OF STOCK
The Company has sold an aggregate of 8,242,548 shares of common stock to
certain employees and board members in connection with their employment and
service arrangements. These shares are subject to stock repurchase agreements
whereby the Company has the right to repurchase unvested shares at the original
price per share upon termination of the employment or service agreements. The
repurchase right generally lapses 25% after the first year of service and
ratably for an additional thirty six months for employees, or ratably over forty
eight months for directors. The Company repurchased 236,310 and 365,064 shares
of unvested common stock during 1998 and 1999, respectively, in exchange for
cancellation of $14,178 and $6,064, respectively, of notes receivable from
shareholders. The Company had 4,414,323 shares of common stock subject to
repurchase at a weighted average exercise price of $0.45 as of December 31,
1999.
In 1997, the Company repurchased and retired 150,000 shares of Series A
convertible preferred stock for $0.62 per share.
STOCK OPTION PLANS
In February 1997, the Company adopted the 1997 Stock Option Plan ("1997
Plan"). In June 1999, the Company adopted two option plans, the 1999 Stock
Option Plan ("1999 Plan") and the 1999 Interim Stock Option Plan ("1999 Interim
Plan"). The 1997 Plan, the 1999 Plan and the 1999 Interim Plan shall herein be
referred to as the Plans, collectively. Under the Plans, as amended, the Company
is authorized to issue 12,391,680 shares thereunder to employees, directors, and
consultants and the Board of Directors may grant incentive and nonqualified
stock options to employees, directors, and consultants of the Company. The
exercise price per share for a non-statutory stock option cannot be less than
85% of the fair market value, as determined by the Board of Directors, on the
date of grant. The exercise price per share for incentive stock options cannot
be less than the fair market value, as determined by the Board of Directors, on
the date of
F-17
<PAGE> 78
IPASS INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
grant. Options generally vest over a four-year period and generally expire ten
years after the date of grant. Stock option activity under the Plans during
1997, 1998 and 1999 is summarized below:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------
OPTIONS WEIGHTED AVERAGE
AVAILABLE SHARES EXERCISE PRICE
---------- ---------- ----------------
<S> <C> <C> <C>
Balance at December 31, 1996................ -- -- $ --
Authorized................................ 7,572,357 -- --
Granted................................... (5,452,713) 5,452,713 0.02
Exercised................................. -- (3,421,554) 0.02
Cancelled................................. 655,359 (655,359) 0.02
---------- ----------
Balance at December 31, 1997................ 2,775,003 1,375,800 $0.03
Granted................................... (2,410,728) 2,410,728 0.14
Exercised................................. -- (354,996) 0.03
Cancelled................................. 247,106 (247,106) 0.08
Repurchased............................... 236,310 -- 0.06
---------- ----------
Balance at December 31, 1998................ 847,691 3,184,426 $0.11
Authorized................................ 4,819,323 -- --
Granted................................... (5,607,159) 5,607,159 0.73
Exercised................................. -- (5,598,979) 0.36
Cancelled................................. 305,372 (305,372) 0.19
Repurchased............................... 365,064 -- 0.02
---------- ----------
Balance at December 31, 1999................ 730,291 2,887,234 $0.82
========== ==========
Exercisable at December 31, 1997............ 137,250 $0.04
Exercisable at December 31, 1998............ 355,359 $0.06
Exercisable at December 31, 1999............ 134,885 $0.29
</TABLE>
The following table summarizes the options outstanding at December 31,
1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ---------------------------------------------------------------- ---------------------
WEIGHTED WEIGHTED
NUMBER AVERAGE WEIGHTED AVERAGE
OF REMAINING AVERAGE NUMBER EXERCISE
EXERCISE PRICE SHARES YEARS EXERCISE PRICE OF SHARES PRICE
-------------- --------- --------- -------------- --------- --------
<S> <C> <C> <C> <C> <C>
$0.02 - $0.06......... 333,442 7.47 $0.04 56,969 $0.03
0.14 - 0.40......... 1,402,772 9.06 0.17 60,451 0.14
1.00 - 1.50......... 727,555 9.77 1.35 12,000 1.00
2.00 - 3.41......... 423,465 9.93 2.69 5,465 3.11
--------- -------
2,887,234 9.19 $0.82 134,885 $0.29
========= =======
</TABLE>
The weighted-average grant-date fair value of options granted during fiscal
years 1997, 1998 and 1999 was $0.01, $0.02 and $3.07, respectively. The fair
value of each option grant was estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions used for grants in 1997, 1998 and 1999: risk-free interest rates
ranging from 4.2% - 6.0%; expected dividend yield of 0%; and expected life of
two years. Because the Company has been a non-public entity during the reporting
periods, it has omitted expected volatility in determining the fair value for
its options.
The Company accounts for the Plans under APB No. 25, under which no
compensation expense is recognized when the grant price equals the fair value at
date of grant. Had compensation expense
F-18
<PAGE> 79
IPASS INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
for the Plans been determined consistent with SFAS No. 123, the Company's net
loss and basic and diluted net loss per common share would have increased to the
following pro forma amounts:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Net loss:
As reported.................................. $(5,586,789) $(6,342,231) $(18,374,376)
Pro forma.................................... $(5,587,864) $(6,345,621) $(18,510,397)
Basic and diluted net loss per common share:
As reported.................................. $ (1.25) $ (1.12) $ (2.46)
Pro forma.................................... $ (1.25) $ (1.12) $ (2.48)
</TABLE>
At December 31, 1999, 4,414,323 shares issued upon exercise of stock
options were subject to repurchase by the Company at original cost.
DEFERRED STOCK COMPENSATION
In connection with the issuance of certain stock options to employees
during 1999, the Company has recorded deferred stock compensation in the
aggregate amount of approximately $16,525,000, representing the difference
between the deemed fair value of the Company's common stock and the exercise
price of stock options at the date of grant. The Company is amortizing the
deferred stock compensation expense over the vesting period of four years using
the method outlined in FASB Interpretation No. 28. Amortization of deferred
compensation expense for 1999 was approximately $3,580,000. In addition, the
Company recorded approximately $1,777,000 in severance costs during 1999 from
the accelerated vesting of certain stock options previously granted to
employees, as well as approximately $402,000 for options that vested for
non-employees.
The total unearned stock-based compensation recorded for all options
through December 31, 1999 will be amortized as follows: $3,580,000 for the year
ended December 31, 1999, $6,888,000 for the year ending December 31, 2000,
$3,616,000 for the year ending December 31, 2001, $1,837,000 for the year ending
December 31, 2002 and $604,000 for the year ending December 2003. The amount of
deferred stock compensation expense to be recorded in future periods could
decrease if options, for which accrued but unvested compensation has been
recorded, are forfeited.
RESTRICTED STOCK PURCHASE
In October 1999, the Board of Directors approved a compensatory restricted
stock grant of 110,334 shares of the Company's common stock at a purchase price
of $1.50 per share. These shares are subject to repurchase by the Company at the
original purchase price. The repurchase right lapses 25% after the first year of
service, and ratably for an additional 36 months. As of December 31, 1999, no
shares of common stock have been repurchased.
10. SUBSEQUENT EVENT
On March 1, 2000 the Board of Directors approved, subject to stockholder
approval,
- the reincorporation into Delaware by way of a merger with a newly formed
wholly-owned Delaware subsidiary of the Company.
- an increase in the authorized shares of common stock to 120,000,000 and
the creation of newly undesignated preferred stock totaling 5,000,000
upon the reincorporation of the Company in Delaware.
F-19
<PAGE> 80
- ------------------------------------------------------
- ------------------------------------------------------
No dealer, salesperson or other person is authorized to give any information
or to represent anything not contained in this prospectus. You must not rely on
any unauthorized information or representations. This prospectus is an offer to
sell only the shares offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information contained in this
prospectus is current only as of its date.
-------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary.................. 3
Risk Factors........................ 7
Note Regarding Forward-Looking
Statements and Market Data........ 13
Use of Proceeds..................... 15
Dividend Policy..................... 15
Capitalization...................... 16
Dilution............................ 17
Selected Financial Data............. 18
Management's Discussion and Analysis
of Financial Condition and Results
of Operations..................... 19
Business............................ 26
Management.......................... 36
Executive Compensation.............. 41
Employee Benefit Plans.............. 44
Certain Transactions................ 49
Principal Stockholders.............. 51
Description of Capital Stock........ 53
Shares Eligible for Future Sale..... 55
Validity of Common Stock............ 57
Experts............................. 57
Additional Information.............. 57
Underwriting........................ 58
Index to Consolidated Financial
Statements........................ F-1
</TABLE>
-------------------------
Through and including , 2000 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to a dealer's obligation to deliver a prospectus when acting
as an underwriter and with respect to an unsold allotment or subscription.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
Shares
IPASS INC.
Common Stock
-------------------------
[IPASS LOGO]
-------------------------
GOLDMAN, SACHS & CO.
CHASE H&Q
AMERITRADE
Representatives of the Underwriters
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 81
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by iPass in connection with the sale of the
Common Stock being registered. All the amounts shown are estimates except for
the registration fee, the NASD filing fee and the Nasdaq National Market
application fee.
<TABLE>
<S> <C>
Registration fee............................................ $
NASD filing fee............................................. $
Nasdaq National Market application fee...................... $
Blue sky qualification fee and expenses..................... $
Printing and engraving expenses............................. $
Legal fees and expenses..................................... $
Accounting fees and expenses................................ $
Transfer agent and registrar fees........................... $
Miscellaneous............................................... $
-------
Total..................................................... $
=======
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
As permitted by Delaware law, our amended and restated certificate of
incorporation provides that no director of ours will be personally liable to us
or our stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability:
- for any breach of duty of loyalty to us or to our stockholders;
- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
- under Section 174 of the Delaware General Corporation Law; or
- for any transaction from which the director derived an improper personal
benefit.
Our amended and restated certificate of incorporation further provides that
we must indemnify our directors and executive officers and may indemnify its
other officers and employees and agents to the fullest extent permitted by
Delaware law. We believe that indemnification under our amended and restated
certificate of incorporation covers negligence and gross negligence on the part
of indemnified parties.
We have entered into indemnification agreements with each of our directors
and officers. These agreements, among other things, require us to indemnify each
director and officer for some expenses including attorneys' fees, judgments,
fines and settlement amounts incurred by any of these persons in any action or
proceeding, including any action by or in the right of iPass, arising out of
person's services as our director or officer, any subsidiary of ours or any
other company or enterprise to which the person provides services at our
request.
The underwriting agreement will provide for indemnification by the
underwriters of iPass, our directors, our officers who sign the registration
statement, and our controlling persons for some liabilities, including
liabilities arising under the Securities Act.
II-1
<PAGE> 82
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since January 1, 1997, we has sold and issued the following unregistered
securities:
(1) From January 1997 through December 31, 1999, we have granted stock
options to purchase 13,580,934 shares of common stock, at a weighted
average exercise price of $0.348, to employees, consultants and directors
pursuant to its 1997 Stock Option Plan, 1999 Interim Stock Option Plan and
1999 Stock Option Plan, 1,180,837 shares have been cancelled or have lapsed
without being exercised, 9,485,863 shares have been exercised in common
stock, no shares of which have been repurchased and 2,914,234 shares remain
outstanding.
(2) In October 1999, the Board of Directors approved a compensatory
restricted stock grant of 110,334 shares of our common stock at a purchase
price of $1.50 per share. These shares are subject to repurchase by us at
the original purchase price. The repurchase right lapses 25% after the
first year of service, and ratably for an additional 36 months. As of
December 31, 1999, no shares of common stock have been repurchased.
(3) In June 11, 1997, we issued an aggregate of 3,621,246 shares of
Series C preferred stock. Shares of Series C preferred stock are
convertible into shares of common stock at the rate of one share of common
stock for each share of Series C preferred stock outstanding.
(4) In December 31, 1997, we issued an aggregate of 8,077,998 shares
of Series D preferred stock. Shares of Series D preferred stock are
convertible into shares of common stock at the rate of one share of common
stock for each share of Series D preferred stock outstanding.
(5) In September 13, 1999, we issued an aggregate of 5,477,574 shares
of Series E preferred stock. Shares of Series E preferred stock are
convertible into shares of common stock at the rate of one share of common
stock for each share of Series E preferred stock outstanding.
(6) In December 31, 1997, we issued a warrant to purchase 82,587
shares of Series D preferred stock to Comdisco, Inc. at an exercise price
of $1.44 per share. Shares of Series D preferred stock are convertible into
shares of common stock at the rate of one share of common stock for each
share of Series D preferred stock outstanding.
(7) In July 19, 1999, we issued a warrants to purchase 211,686 shares
of Series E preferred stock to Comdisco, Inc. and MMC/Meier Mitchell
Partnership No. 1 at a weighted average exercise price of $2.43 per share.
Shares of Series D preferred stock are convertible into shares of common
stock at the rate of one share of common stock for each share of Series D
preferred stock outstanding.
The sales and issuances of securities described in paragraph (1) and (2)
above were deemed to be exempt from registration under the Securities Act by
virtue of Rule 701 promulgated thereunder in that they were offered and sold
either pursuant to a written compensatory benefit plan or pursuant to a written
contract relating to compensation, as provided by Rule 701.
The sale and issuance of securities described in paragraphs (3) through (7)
above were deemed to be exempt from registration under the Securities Act by
virtue of Section 4(2), or Regulation D promulgated thereunder.
II-2
<PAGE> 83
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 Restated Certificate of Incorporation of Registrant.
3.2 Form of Restated Certificate of Incorporation of Registrant
to be filed upon the closing of the offering made pursuant
to this Registration Statement.
3.3 Bylaws of the Registrant, as currently in effect.
4.1* Specimen Common Stock Certificate.
4.2 Reference is made to Exhibits 3.2 and 3.3.
5.1* Opinion of Cooley Godward LLP.
10.1 Amended and Restated Investor Rights Agreement dated
September 13, 1999 between Registrant and holders of the
Registrant's founders and Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock.
10.2 Amended and Restated Shareholders Agreement dated September
13, 1999 between Registrant and holders of the Registrant's
founders and Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock
and Series E Preferred Stock.
10.3 Form of Indemnity Agreement.
10.4 1997 Stock Option Plan and forms of related agreements.
10.5 1999 Interim Stock Option Plan and forms of related
agreements.
10.6 1999 Stock Option Plan and form of related agreements.
10.7 2000 Equity Incentive Plan and form of related agreement.
10.8 2000 Employee Stock Purchase Plan.
10.9 Lease Agreement, dated October 26, 1999, between Registrant
and Westport Joint Venture.
10.10** Dial Up Network Services Agreement by and between the
Registrant and GTE Internetworking Incorporated dated
October 15, 1996.
10.11** [Reserved]
10.12** [Reserved]
10.13** [Reserved]
10.14** Solution Partner Reseller Agreement by and between the
Registrant and Fiberlink Communications dated September 4,
1998.
10.15 Employment Agreement, dated May 10, 1999, between Registrant
and Michael H. Mansouri.
10.16 Separation Agreement, dated August 19, 1999, between
Registrant and Christopher J. Moore.
10.17 Form of Offer Letter to senior executive officers.
10.18 Separation Agreement, dated October 29, 1999, between the
Registrant and Robert C. Schoettle.
23.1 Consent of Arthur Andersen LLP, Independent Public
Accountants.
23.2 Consent of Cooley Godward LLP (included in Exhibit 5.1).
24.1 Power of Attorney. Reference is made to the signature page.
27.1 Financial Data Schedule.
</TABLE>
- -------------------------
* To be filed by amendment.
** Confidential treatment has been requested for a portion of this exhibit.
(b) FINANCIAL STATEMENT SCHEDULES.
II-3
<PAGE> 84
All schedules are omitted because they are not required, they are not
applicable or the information is already included in the financial statements or
notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) That for purposes of determining any liability under the
Securities Act, the information omitted from the form of this prospectus
filed as part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time it was declared
effective.
(2) That for purposes of determining any liability under the
Securities Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of the securities at that
time shall be deemed to be the initial bona fide offering thereof.
(3) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referenced in Item 15
of this Registration Statement or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission this
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against these 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 a director, officer, or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether the indemnification by it is against
public policy as expressed in the Securities Act of 1933, and will be
governed by the final adjudication of this issue.
(4) To provide to the Underwriters at the closing specified in the
Underwriting Agreement certificates in the denomination and registered in
the names required by the Underwriters to permit prompt delivery to each
purchaser.
II-4
<PAGE> 85
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the city of Redwood Shores, in the
County of San Mateo, State of California, on the 3rd day of March, 2000.
IPASS INC.
By: /s/ MICHAEL H. MANSOURI
------------------------------------
Michael H. Mansouri
Chairman, President and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Michael
H. Mansouri and Donald C. McCauley his true and lawful attorney-in-fact and
agent, each acting alone, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
or all amendments (including post-effective amendments and registration
statements filed pursuant to Rule 462) to the Registration Statement on Form
S-1, and to any registration statement filed under Securities and Exchange
Commission Rule 462, and to file the same, with all exhibits thereto, and all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorney-in-fact and agent, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ MICHAEL H. MANSOURI Chairman of the Board of March 3, 2000
- ----------------------------------------------------- Directors, President, Chief
Michael H. Mansouri Executive Officer (principal
executive officer)
/s/ DONALD C. MCCAULEY Vice President and Chief March 3, 2000
- ----------------------------------------------------- Financial Officer (principal
Donald C. McCauley financial and accounting
officer)
/s/ JOHN S. ALSOP Director March 3, 2000
- -----------------------------------------------------
John S. Alsop
/s/ ARTHUR C. PATTERSON Director March 3, 2000
- -----------------------------------------------------
Arthur C. Patterson
/s/ PETER G. BODINE Director March 3, 2000
- -----------------------------------------------------
Peter G. Bodine
</TABLE>
II-5
<PAGE> 86
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ SETH D. NEIMAN Director March 3, 2000
- -----------------------------------------------------
Seth D. Neiman
/s/ GEORGE M. TRONSRUE, III Director March 3, 2000
- -----------------------------------------------------
George M. Tronsrue, III
/s/ JOHN D. BELETIC Director March 3, 2000
- -----------------------------------------------------
John D. Beletic
</TABLE>
II-6
<PAGE> 87
After the reincorporation discussed in Note 10 to iPass Inc.'s financial
statements, we expect to be in a position to render the following audit report:
San Jose, California Arthur Andersen LLP
March 1, 2000
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To the Board of Directors and Stockholders of
iPass Inc.:
We have audited in accordance with generally accepted auditing standards,
the financial statements of iPass Inc. (a Delaware corporation) included in this
registration statement and have issued our report thereon dated March 1, 2000.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed on page S-2 is the
responsibility of the Company's management, is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
San Jose, California
March 1, 2000
S-1
<PAGE> 88
IPASS INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT ADDITIONS BALANCE AT
THE BEGINNING CHARGED TO END OF THE
OF THE YEAR EXPENSES DEDUCTIONS YEAR
------------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts:
Year ended December 31, 1997........... $ -- $ 176 $ 1 $ 175
Year ended December 31, 1998........... $ 175 $ 114 $ 4 $ 285
Year ended December 31, 1997........... $ 285 $ 587 $ 90 $ 782
</TABLE>
S-2
<PAGE> 89
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Restated Certificate of Incorporation of Registrant.
3.2 Form of Restated Certificate of Incorporation of Registrant
to be filed upon the closing of the offering made pursuant
to this Registration Statement.
3.3 Bylaws of the Registrant, as currently in effect.
4.1* Specimen Common Stock Certificate.
4.2 Reference is made to Exhibits 3.2 and 3.3.
5.1* Opinion of Cooley Godward LLP.
10.1 Amended and Restated Investor Rights Agreement dated
September 13, 1999 between Registrant and holders of the
Registrant's founders and Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock.
10.2 Amended and Restated Shareholders Agreement dated September
13, 1999 between Registrant and holders of the Registrant's
founders and Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock
and Series E Preferred Stock.
10.3 Form of Indemnity Agreement.
10.4 1997 Stock Option Plan and forms of related agreements.
10.5 1999 Interim Stock Option Plan and forms of related
agreements.
10.6 1999 Stock Option Plan and form of related agreements.
10.7 2000 Equity Incentive Plan and form of related agreement.
10.8 2000 Employee Stock Purchase Plan.
10.9 Lease Agreement, dated October 26, 1999, between Registrant
and Westport Joint Venture.
10.10** Dial Up Network Services Agreement by and between the
Registrant and GTE Internetworking Incorporated dated
October 15, 1996.
10.11** [Reserved]
10.12** [Reserved]
10.13** [Reserved]
10.14** Solution Partner Reseller Agreement by and between the
Registrant and Fiberlink Communications dated September 4,
1998.
10.15 Employment Agreement, dated May 10, 1999, between Registrant
and Michael H. Mansouri.
10.16 Separation Agreement, dated August 19, 1999, between
Registrant and Christopher J. Moore.
10.17 Form of Offer Letter to senior executive officers.
10.18 Separation Agreement, dated October 29, 1999, between the
Registrant and Robert C. Schoettle.
23.1 Consent of Arthur Andersen LLP, Independent Public
Accountants.
23.2 Consent of Cooley Godward LLP (included in Exhibit 5.1).
24.1 Power of Attorney. Reference is made to the signature page.
27.1 Financial Data Schedule.
</TABLE>
- -------------------------
* To be filed by amendment.
** Confidential treatment has been requested for a portion of this exhibit.
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
iPASS INC.
I.
The name of this corporation is iPass Inc.
II.
The address of the registered office of the corporation in the State of
Delaware is 9 Lookerman Street, City of Dover, County of Kent, and the name of
the registered agent of the corporation in the State of Delaware at such address
is the National Registered Agents.
III.
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
the State of Delaware.
IV.
A. This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the corporation is authorized to issue is one hundred and twenty
million (120,000,000) shares. Ninety million (90,000,000) shares shall be Common
Stock, each having a par value of one-tenth of one cent ($.001). Thirty million
(30,000,000) shares shall be Preferred Stock, each having a par value of
one-tenth of one cent ($.001).
B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, by filing a certificate (a
"Preferred Stock Designation") pursuant to the Delaware General Corporation Law
("DGCL"), to fix or alter from time to time the designation, powers, preferences
and rights of the shares of each such series and the qualifications, limitations
or restrictions of any wholly unissued series of Preferred Stock, and to
establish from time to time the number of shares constituting any such series or
any of them; and to increase or decrease the number of shares of any series
subsequent to the issuance of shares of that series, but not below the number of
shares of such series then outstanding. In case the number of shares of any
series shall be decreased in accordance with the foregoing sentence, the shares
constituting such decrease shall resume the status that they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
C. One Million Four Hundred Thirty-Nine Thousand Two Hundred Eight
(1,439,208) of the authorized shares of Preferred Stock are hereby designated
"Series A Preferred Stock" (the "Series A Preferred"). Seven Million Five
Hundred Twenty-Six Thousand Three Hundred Ninety-Seven (7,526,397) shares of the
authorized shares of Preferred Stock are
2.
<PAGE> 2
hereby designated "Series B Preferred Stock" (the "Series B Preferred"). Three
Million Six Hundred Twenty-One Thousand Two Hundred Forty-Six (3,621,246) shares
of the authorized shares of Preferred Stock are hereby designated "Series C
Preferred Stock" (the "Series C Preferred"). Nine Million (9,000,000) shares of
the authorized shares of Preferred Stock are hereby designated "Series D
Preferred Stock" (the "Series D Preferred"). Six Million Five Hundred Thousand
(6,500,000) shares of the authorized Preferred Stock are hereby designated
"Series E Preferred Stock" (the "Series E Preferred"). One million nine hundred
thirteen thousand one hundred and forty nine (1,913,149) shares of the
authorized Preferred Stock remain undesignated (the "Undesignated Preferred").
The Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred, Series E Preferred and Undesignated Preferred are collectively
referred to as the "Preferred Stock."
D. The respective rights, preferences, privileges, restrictions and other
matters relating to the Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred and Series E Preferred are as follows:
1. DIVIDEND RIGHTS.
a. Holders of the Preferred Stock, in preference to the
holders of any other stock of the Company ("Junior Stock"), shall be entitled to
receive, when and as declared by the Board of Directors, but only out of funds
that are legally available therefor, cash dividends at the rate of eight percent
(8%) of the "Original Issue Price" per annum on each outstanding share of the
Preferred Stock (as adjusted for any stock dividends, combinations, splits
recapitalization and the like with respect to such shares (other than the
September 1999 Stock Split)). The Original Issue Price of the Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred and Series
E Preferred shall be $0.333, $0.299, $0.621, $1.436 and $3.412, respectively.
Such dividends shall be payable only when, as and if declared by the Board of
Directors and shall be non-cumulative. Any dividends paid by the Company at less
than a full dividend, as provided herein, shall be made ratably among the Series
A Preferred, Series B Preferred, Series C Preferred, Series D Preferred and
Series E Preferred based on the ratio of the dividend to the applicable original
Issue Price for the Series A Preferred, Series B Preferred, Series C Preferred,
Series D Preferred and Series E Preferred.
b. So long as any shares of Preferred Stock shall be
outstanding, no dividend, whether in cash or property, shall be paid or
declared, nor shall any other distribution be made, on any Junior Stock, nor
shall any shares of any Junior Stock of the Company be purchased, redeemed, or
otherwise acquired for value by the Company (except for acquisitions of Common
Stock by the Company pursuant to agreements which permit the Company to
repurchase such shares upon termination of services to the Company or in
exercise of the Company's right of first refusal upon a proposed transfer) until
all dividends (set forth in Section l(a) above) on the Preferred Stock shall
have been paid or declared and set apart. In the event dividends are paid on any
share of Common Stock, an additional dividend shall be paid with respect to all
outstanding shares of Preferred Stock in an amount equal per share (on an
as-if-converted to Common Stock basis) to the amount paid or set aside for each
share of Common Stock. The provisions of this Section l(b) shall not, however,
apply to (i) a dividend payable in Common Stock, (ii) the acquisition of shares
of any Junior Stock in exchange for shares of any other Junior Stock, or (iii)
any repurchase of any outstanding securities of the Company that is
3.
<PAGE> 3
unanimously approved by the Company's Board of Directors and approved by the
holders of the Preferred Stock pursuant to Section 2(b)(iii) below. The holders
of the Preferred Stock expressly waive their rights, if any, as described in
California Corporations Code Sections 502, 503 and 506 as they relate to
repurchase of shares upon termination of employment.
2. VOTING RIGHTS.
a. GENERAL RIGHTS. Except as otherwise provided herein or as
required by law, the Preferred Stock shall be voted equally with the shares of
the Common Stock of the Company and not as a separate class, at any annual or
special meeting of shareholders of the Company, and may act by written consent
in the same manner as the Common Stock, in either case upon the following basis:
each holder of shares of the Preferred Stock shall be entitled to such number of
votes as shall be equal to the whole number of shares of Common Stock into which
such holder's aggregate number of shares of the Preferred Stock are convertible
(pursuant to Section 5 hereof) immediately after the close of business on the
record date fixed for such meeting or the effective date of such written
consent.
b. SEPARATE VOTE OF SERIES A PREFERRED, SERIES B PREFERRED,
SERIES C PREFERRED, SERIES D PREFERRED AND SERIES E PREFERRED. For so long as at
least 300,000 shares of Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred or Series E Preferred or any combination thereof
(subject to adjustment for any stock split, reverse stock split or other similar
event affecting the Series A Preferred, Series B Preferred, Series C Preferred,
Series D Preferred or Series E Preferred (other than the September 1999 Stock
Split) (an "Adjustment Event")) remain outstanding, in addition to any other
vote or consent required herein or by law, the vote or written consent of the
holders of more than fifty percent (50%) of the outstanding Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred and Series E
Preferred, voting together and not as a separate class, shall be necessary for
effecting or validating the following actions:
(i) Any amendment, alteration, or repeal of any
provision of the Restated Articles or the Bylaws of the Company;
(ii) Any authorization or any designation, whether by
reclassification or otherwise, of any new class or series of stock or any other
securities convertible into equity securities of the Company ranking on a parity
with or senior to the Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred or Series E Preferred;
(iii) Any repurchase of the Company's outstanding
securities (except for acquisitions of Common Stock by the Company pursuant to
agreements which permit the Company to repurchase such shares upon termination
of services to the Company or in exercise of the Company's right of first
refusal upon a proposed transfer) or payment of any dividend with respect to
Junior Stock; and
(iv) Any agreement by the Company or its shareholders
regarding an Asset Transfer or Acquisition (each as defined in Section 3(c)).
c. ELECTION OF BOARD OF DIRECTORS. For so long as at least
600,000 shares of Series B Preferred remain outstanding (subject to adjustment
for any Adjustment Event
4.
<PAGE> 4
affecting the Series B Preferred) (i) the holders of Series B Preferred, voting
as a separate class, shall be entitled to elect two (2) members of the Company's
Board of Directors at each meeting or pursuant to each consent of the Company's
shareholders for the election of directors, and to remove from office any of
such directors and to fill any vacancy caused by the resignation, death or
removal of any of such directors; (ii) the holders of Common Stock, voting as a
separate class, shall be entitled to elect one (1) member of the Board of
Directors at each meeting or pursuant to each consent of the Company's
shareholders for the election of directors, and to remove from office such
director and to fill any vacancy caused by the resignation, death or removal of
such director; (iii) the holders of Series A Preferred, voting as a separate
class, shall be entitled to elect one (1) member of the Board of Directors at
each meeting or pursuant to each consent of the Company's shareholders for the
election of directors, and to remove from office such director and to fill any
vacancy caused by the resignation, death or removal of such director. For so
long as at least 600,000 shares of Series D Preferred remain outstanding
(subject to adjustment for any Adjustment Event affecting the Series D
Preferred) (i) the holders of Series D Preferred, voting as a separate class,
shall be entitled to elect one (1) member of the Company's Board of Directors at
each meeting or pursuant to each consent of the Company's shareholders for the
election of directors, and to remove from office any of such director and to
fill any vacancy caused by the resignation, death or removal of any of such
director. The holders of Common Stock, Series A Preferred, Series B Preferred,
Series C Preferred, Series D Preferred and Series E Preferred, voting together
as a class, shall collectively be entitled to elect all remaining members of the
Board of Directors.
3. LIQUIDATION RIGHTS.
a. Upon any liquidation, dissolution, or winding up of the
Company, whether voluntary or involuntary, before any distribution or payment
shall be made to the holders of any Junior Stock, the holders of Preferred Stock
shall be entitled to be paid out of the assets of the Company an amount per
share of Preferred Stock equal to the applicable Original Issue Price plus all
declared and unpaid dividends on such shares of the Preferred Stock (as adjusted
for any stock dividends, combinations, splits, recapitalization and the like
with respect to such shares (other than the September 1999 Stock Split)) for
each share of Preferred Stock held by them.
b. After the payment of the full liquidation preference of the
Preferred Stock as set forth in Section 3(a) above, the remaining assets of the
Company legally available for distribution, if any, shall be distributed ratably
to the holders of the Common Stock.
c. The following events shall be considered a liquidation
under Section 3(a):
(i) any consolidation or merger of the Company with or
into any other corporation or other entity or person, or any other corporate
reorganization, in which the shareholders of the Company immediately prior to
such consolidation, merger or reorganization, own less than 50% of the Company's
voting power immediately after such consolidation, merger or reorganization, or
any transaction or series of related transactions in which in excess of fifty
percent (50%) of the Company's voting power is transferred (an "Acquisition");
or
5.
<PAGE> 5
(ii) a sale, lease or other disposition of all or
substantially all of the assets of the Company (an "Asset Transfer").
d. If, upon any liquidation, distribution, or winding up, the
assets of the Company shall be insufficient to make payment in full to all
holders of Preferred Stock of the liquidation preference set forth in Section
3(a), then such assets shall be distributed among the holders of the Preferred
Stock at the time outstanding, ratably in proportion to the full amounts to
which they would otherwise be respectively entitled.
4. REDEMPTION.
The Preferred Stock shall not be redeemable by the Company.
5. CONVERSION RIGHTS.
The holders of the Preferred Stock shall have the following
rights with respect to the conversion of the Preferred Stock into shares of
Common Stock (the "Conversion Rights"):
a. OPTIONAL CONVERSION. Subject to and in compliance with the
provisions of this Section 5, any shares of Preferred Stock may, at the option
of the holder, be converted at any time into fully-paid and nonassessable shares
of Common Stock. The number of shares of Common Stock to which a holder of
Preferred Stock shall be entitled upon conversion shall be the product obtained
by multiplying the applicable conversion rate then in effect (determined as
provided in Section 5(b)) by the number of shares of Preferred Stock being
converted.
b. CONVERSION RATE. The conversion rate in effect at any time
for conversion of the Series A Preferred (the "Series A Preferred Conversion
Rate") shall be the quotient obtained by dividing the Original Issue Price of
the Series A Preferred by the "Series A Preferred Conversion Price," calculated
as provided in Section 5(c). The conversion rate in effect at any time for
conversion of shares of Series B Preferred (the "Series B Conversion Rate")
shall be the quotient obtained by dividing the Original Issue Price of Series B
Preferred by the "Series B Conversion Price," calculated as provided in Section
5(c) below. The conversion rate in effect at any time for conversion of shares
of Series C Preferred (the "Series C Conversion Rate") shall be the quotient
obtained by dividing the Original Issue Price of Series C Preferred by the
"Series C Conversion Price," as calculated as provided in Section 5(c) below.
The conversion rate in effect at any time for conversion of shares of Series D
Preferred (the "Series D Conversion Rate") shall be the quotient obtained by
dividing the Original Issue Price of Series D Preferred by the "Series D
Conversion Price," as calculated as provided in Section 5(c) below. The
conversion rate in effect at any time for conversion of shares of Series E
Preferred (the "Series E Conversion Rate") shall be the quotient obtained by
dividing the Original Issue Price of Series E Preferred by the "Series E
Conversion Price," as calculated as provided in Section 5(c) below. Each of the
Series A Conversion Rate, Series B Conversion Rate, Series C Conversion Rate,
Series D Conversion Rate and Series E Conversion Rate may be referred to herein
as the "Conversion Rate" with respect to such series of Preferred Stock).
6.
<PAGE> 6
c. CONVERSION PRICE. The conversion price for the Series A
Preferred (the "Series A Preferred Conversion Price") shall initially be the
Original Issue Price of the Series A Preferred. The conversion price for the
Series B Preferred (the "Series B Conversion Price") shall initially be the
Original Issue Price of the Series B Preferred. The Conversion Price for the
Series C Preferred (the "Series C Conversion Price") shall initially be the
Original Issue Price of the Series C Preferred. The Conversion Price for the
Series D Preferred (the "Series D Conversion Price") shall initially be the
Original Issue Price of the Series D Preferred. The Conversion Price for the
Series E Preferred (the "Series E Conversion Price") shall initially be the
Original Issue Price of the Series E Preferred. Each of the Series A Conversion
Price, Series B Conversion Price, Series C Conversion Price, Series D Conversion
Price and Series E Conversion Price may be referred to herein as the "Conversion
Price" with respect to such series of Preferred Stock. Such initial Conversion
Price shall be adjusted from time to time in accordance with this Section 5. All
references to the Conversion Price herein shall mean the Conversion Price as so
adjusted.
d. MECHANICS OF CONVERSION. Each holder of Preferred Stock who
desires to convert the same into shares of Common Stock pursuant to this Section
5 shall surrender the certificate or certificates therefor, duly endorsed, at
the office of the Company or any transfer agent for the Preferred Stock, and
shall give written notice to the Company at such office that such holder elects
to convert the same. Such notice shall state the number of shares of Preferred
Stock being converted. Thereupon, the Company shall promptly issue and deliver
at such office to such holder a certificate or certificates for the number of
shares of Common Stock to which such holder is entitled and shall promptly pay
in cash or, to the extent sufficient funds are not then legally available
therefor, in Common Stock (at the Common Stock's fair market value determined by
the Board of Directors as of the date of such conversion), any declared and
unpaid dividends on the shares of Preferred Stock being converted. Such
conversion shall be deemed to have been made at the close of business on the
date of such surrender of the certificates representing the shares of Preferred
Stock to be converted, and the person entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder of such shares of Common Stock on such date.
e. ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Company shall at any time or from time to time after the Original Issue Date of
a series of Preferred Stock (as defined below) effect a subdivision of the
outstanding Common Stock without a corresponding subdivision of such series of
Preferred Stock, the Conversion Price of such series of Preferred Stock in
effect immediately before that subdivision shall be proportionately decreased.
Conversely, if the Company shall at any time or from time to time after the
Original Issue Date of a series of Preferred Stock combine the outstanding
shares of Common Stock into a smaller number of shares without a corresponding
combination of such series of Preferred Stock, the Conversion Price of such
series of Preferred Stock in effect immediately before the combination shall be
proportionately increased. Any adjustment under this Section 5(e) shall become
effective at the close of business on the date the subdivision or combination
becomes effective. The Original Issue Date of a series of Preferred Stock is the
date upon which the Company first issued a share of such series of Preferred
Stock. No adjustment under this Section 5(e) shall result from the September
1999 Stock Split.
7.
<PAGE> 7
f. ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND DISTRIBUTIONS. If
the Company at any time or from time to time after the Original Issue Date of a
series of Preferred Stock makes, or fixes a record date for the determination of
holders of Common Stock entitled to receive, a dividend or other distribution
payable in additional shares of Common Stock, in each such event the Conversion
Price of such series of Preferred Stock that is then in effect shall be
decreased as of the time of such issuance or, in the event such record date is
fixed, as of the close of business on such record date, by multiplying the such
Conversion Price then in effect by a fraction (1) the numerator of which is the
total number of shares of Common Stock issued and outstanding immediately prior
to the time of such issuance or the close of business on such record date, and
(2) the denominator of which is the total number of shares of Common Stock
issued and outstanding immediately prior to the time of such issuance or the
close of business on such record date plus the number of shares of Common Stock
issuable in payment of such dividend or distribution; provided, however, that if
such record date is fixed and such dividend is not fully paid or if such
distribution is not fully made on the date fixed therefor, such Conversion Price
shall be recomputed accordingly as of the close of business on such record date
and thereafter such Conversion Price shall be adjusted pursuant to this Section
5(f) to reflect the actual payment of such dividend or distribution.
g. ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. If the
Company at any time or from time to time after the Original Issue Date of a
series of Preferred Stock makes, or fixes a record date for the determination of
holders of Common Stock entitled to receive, a dividend or other distribution
payable in securities of the Company other than shares of Common Stock, in each
such event provision shall be made so that the holders of such Preferred Stock
shall receive upon conversion thereof, in addition to the number of shares of
Common Stock receivable thereupon, the amount of other securities of the Company
which they would have received had their Preferred Stock been converted into
Common Stock on the date of such event and had they thereafter, during the
period from the date of such event to and including the conversion date,
retained such securities receivable by them as aforesaid during such period,
subject to all other adjustments called for during such period under this
Section 5 with respect to the rights of the holders of such Preferred Stock or
with respect to such other securities by their terms.
h. ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION.
If at any time or from time to time after the Original Issue Date, the Common
Stock issuable upon the conversion of a series of Preferred Stock is changed
into the same or a different number of shares of any class or classes of stock,
whether by recapitalization, reclassification or otherwise (other than an
Acquisition or Asset Transfer as defined in Section 3(c) or a subdivision or
combination of shares or stock dividend or a reorganization, merger,
consolidation or sale of assets provided for elsewhere in this Section 5), in
any such event each holder of such Preferred Stock shall have the right
thereafter to convert such stock into the kind and amount of stock and other
securities and property receivable upon such recapitalization, reclassification
or other change by holders of the maximum number of shares of Common Stock into
which such shares of Preferred Stock could have been converted immediately prior
to such recapitalization, reclassification or change, all subject to further
adjustment as provided herein or with respect to such other securities or
property by the terms thereof.
8.
<PAGE> 8
i. REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF
ASSETS. If at any time or from time to time after the Original Issue Date of a
series of Preferred Stock, there is a capital reorganization of the Common Stock
(other than an Acquisition or Asset Transfer as defined in Section 3(c) or a
recapitalization, subdivision, combination, reclassification, exchange or
substitution of shares provided for elsewhere in this Section 5), as a part of
such capital reorganization, provision shall be made so that the holders of such
series of Preferred Stock shall thereafter be entitled to receive upon
conversion of such Preferred Stock the number of shares of stock or other
securities or property of the Company to which a holder of the number of shares
of Common Stock deliverable upon conversion would have been entitled on such
capital reorganization, subject to adjustment in respect of such stock or
securities by the terms thereof. In any such case, appropriate adjustment shall
be made in the application of the provisions of this Section 5 with respect to
the rights of the holders of such Preferred Stock after the capital
reorganization to the end that the provisions of this Section 5 (including
adjustment of the applicable Conversion Price then in effect and the number of
shares issuable upon conversion of the Preferred Stock) shall be applicable
after that event and be as nearly equivalent as practicable.
j. CERTIFICATE OF ADJUSTMENT. In each case of an adjustment or
readjustment of the Conversion Price of a series of Preferred Stock, if such
series of Preferred Stock is then convertible pursuant to this Section 5, the
Company, at its expense, shall compute such adjustment or readjustment in
accordance with the provisions hereof and prepare a certificate showing such
adjustment or readjustment, and shall mail such certificate, by first class
mail, postage prepaid, to each registered holder of such Preferred Stock at the
holder's address as shown in the Company's books. The certificate shall set
forth such adjustment or readjustment, showing in detail the facts upon which
such adjustment or readjustment is based, including a statement of the
Conversion Price at the time in effect and shall be certified as true and
correct by the Chief Financial Officer of the Company.
k. NOTICES OF RECORD DATE. Upon (i) any taking by the Company
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend or
other distribution, or (ii) any Acquisition (as defined in Section 3(c)) or
other capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company, any merger or
consolidation of the Company with or into any other corporation, or any Asset
Transfer (as defined in Section 3(c)), or any voluntary or involuntary
dissolution, liquidation or winding up of the Company, the Company shall mail to
each holder of Preferred Stock at least twenty (20) days prior to the record
date specified therein a notice specifying (1) the date on which any such record
is to be taken for the purpose of such dividend or distribution and a
description of such dividend or distribution, (2) the date on which any such
Acquisition, reorganization, reclassification, transfer, consolidation, merger,
Asset Transfer, dissolution, liquidation or winding up is expected to become
effective, and (3) the date, if any, that is to be fixed as to when the holders
of record of Common Stock (or other securities) shall be entitled to exchange
their shares of Common Stock (or other securities) for securities or other
property deliverable upon such Acquisition, reorganization, reclassification,
transfer, consolidation, merger, Asset Transfer, dissolution, liquidation or
winding up.
9.
<PAGE> 9
l. AUTOMATIC CONVERSION.
(i) Each share of Series A Preferred shall automatically
be converted into shares of Common Stock, based on the then-effective Series A
Preferred Conversion Price, (A) at any time upon the affirmative election of the
holders of at least a majority of the outstanding shares of the Series A
Preferred, or (B) immediately upon the closing of a firmly underwritten public
offering pursuant to an effective registration statement under the Securities
Act of 1933, as amended, covering the offer and sale of Common Stock for the
account of the Company. Each share of Series B Preferred, Series C Preferred,
Series D Preferred or Series E Preferred shall automatically be converted into
shares of Common Stock, based on the then-effective Conversion Price of such
series, (A) at any time upon the affirmative election of the holders of at least
66-2/3% of the outstanding shares of the applicable series of Series B
Preferred, Series C Preferred, Series D Preferred or Series E Preferred, as the
case may be, or (B) immediately upon the closing of a firmly underwritten public
offering pursuant to an effective registration statement under the Securities
Act of 1933, as amended, covering the offer and sale of Common Stock for the
account of the Company in which (i) the per share price is at least $10.00, and
(ii) the gross cash proceeds to the Company (before underwriting discounts,
commissions and fees) are at least $25,000,000. Upon such automatic conversion,
any declared and unpaid dividends shall be paid in accordance with the
provisions of Section 5(d).
(ii) Upon the occurrence of the event specified in
paragraph (1) above, the outstanding shares of Preferred Stock shall be
converted automatically without any further action by the holders of such shares
and whether or not the certificates representing such shares are surrendered to
the Company or its transfer agent; provided, however, that the Company shall not
be obligated to issue certificates evidencing the shares of Common Stock
issuable upon such conversion unless the certificates evidencing such shares of
Preferred Stock are either delivered to the Company or its transfer agent as
provided below, or the holder notifies the Company or its transfer agent that
such certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Company to indemnify the Company from any loss incurred by
it in connection with such certificates. Upon the occurrence of such automatic
conversion of the Preferred Stock, the holders of the Preferred Stock shall
surrender the certificates representing such shares at the office of the Company
or any transfer agent for the Preferred Stock. Thereupon, there shall be issued
and delivered to such holder promptly at such office and in its name as shown on
such surrendered certificate or certificates, a certificate or certificates for
the number of shares of Common Stock into which the shares of Preferred Stock
surrendered were convertible on the date on which such automatic conversion
occurred, and any declared and unpaid dividends shall be paid in accordance with
the provisions of Section 5(d).
m. FRACTIONAL SHARES. No fractional shares of Common Stock
shall be issued upon conversion of Preferred Stock. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
Preferred Stock by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion would
result in the issuance of any fractional share, the Company shall, in lieu of
issuing any fractional share, pay cash equal to the product of such fraction
multiplied by the Common Stock's fair market value (as determined by the Board)
on the date of conversion.
n. RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company
shall at all times reserve and keep available out of its authorized but unissued
shares of Common
10.
<PAGE> 10
Stock, solely for the purpose of effecting the conversion of the shares of the
Preferred Stock, such number of its shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all outstanding shares of the
Preferred Stock. If at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of the Preferred Stock, the Company will take such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose.
o. NOTICES. Any notice required by the provisions of this
Section 5 shall be in writing and shall be deemed effectively given: (i) upon
personal delivery to the party to be notified, (ii) when sent by confirmed telex
or facsimile if sent during normal business hours of the recipient; if not, then
on the next business day, (iii) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or (iv)
one (1) day after deposit with a nationally recognized overnight courier,
specifying next day delivery, with written verification of receipt. All notices
shall be addressed to each holder of record at the address of such holder
appearing on the books of the Company.
p. PAYMENT OF TAXES. The Company will pay all taxes (other
than taxes based upon income) and other governmental charges that may be imposed
with respect to the issue or delivery of shares of Common Stock upon conversion
of shares of Preferred Stock, excluding any tax or other charge imposed in
connection with any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that in which the shares of Preferred Stock so
converted were registered.
q. NO DILUTION OR IMPAIRMENT. Without the consent of the
holders of the then outstanding Preferred Stock, as required under Section 2(b),
the Company shall not amend its Restated Articles of Incorporation or
participate in any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or take any other voluntary action, for
the purpose of avoiding or seeking to avoid the observance or performance of any
of the terms to be observed or performed hereunder by the Company, but shall at
all times in good faith assist in carrying out all such action as may be
reasonably necessary or appropriate in order to protect the conversion rights of
the holders of the Preferred Stock against dilution or other impairment.
6. NO REISSUANCE OF PREFERRED STOCK. No share or shares of Preferred
Stock acquired by the Company by reason of redemption, purchase, conversion or
otherwise shall be reissued; and in addition, the Articles of Incorporation
shall be appropriately amended to effect the corresponding reduction in the
Company's authorized stock.
7. NO PREEMPTIVE RIGHTS. Shareholders shall have no preemptive
rights except as granted by the Company pursuant to written agreements.
V.
For the management of the business and for the conduct of the affairs of
the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its
11.
<PAGE> 11
directors and of its stockholders or any class thereof, as the case may be, it
is further provided that:
A.
1. MANAGEMENT OF BUSINESS
The management of the business and the conduct of the affairs
of the corporation shall be vested in its Board of Directors. The number of
directors that shall constitute the whole Board of Directors shall be fixed
exclusively by one or more resolutions adopted by the Board of Directors;
provided, however, that for so long as at least 600,000 shares of Series B
Preferred remain outstanding (subject to adjustment for any Adjustment Event
affecting the Series B Preferred), or at least 600,000 shares of Series D
Preferred remain outstanding (subject to adjustment for any Adjustment Event
affecting the Series D Preferred), the number of directors that shall constitute
the whole Board of Directors shall not be less than five (5).
2. BOARD OF DIRECTORS
a. Subject to the rights of the holders of any series of
Preferred Stock to elect additional directors under specified circumstances,
following the closing of the initial public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the "Act"),
covering the offer and sale of Common Stock to the public (the "Initial Public
Offering"), the directors shall be divided into three classes designated as
Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors. At the first annual meeting of stockholders following the closing
of the Initial Public Offering, the term of office of the Class I directors
shall expire and Class I directors shall be elected for a full term of three
years. At the second annual meeting of stockholders following the Initial Public
Offering, the term of office of the Class II directors shall expire and Class II
directors shall be elected for a full term of three years. At the third annual
meeting of stockholders following the Initial Public Offering, the term of
office of the Class III directors shall expire and Class III directors shall be
elected for a full term of three years. At each succeeding annual meeting of
stockholders, directors shall be elected for a full term of three years to
succeed the directors of the class whose terms expire at such annual meeting.
During such time or times that the corporation is subject to Section 2115(b) of
the California General Corporation Law ("CGCL"), this Section A.2.a of this
Article V shall become effective and be applicable only when the corporation is
a "listed" corporation within the meaning of Section 301.5 of the CGCL.
b. In the event that the corporation is subject to Section
2115(b) of the CGCL AND is not a "listed" corporation or ceases to be a
"listed" corporation under Section 301.5 of the CGCL, Section A. 2. a. of
this Article V shall not apply and all directors shall be shall be elected at
each annual meeting of stockholders to hold office until the next annual
meeting.
c. No person entitled to vote at an election for directors may
cumulate votes to which such person is entitled, unless, at the time of such
election, the
12.
<PAGE> 12
corporation is subject to Section 2115(b) of the CGCL AND is not a "listed"
corporation or ceases to be a "listed" corporation under Section 301.5 of the
CGCL. During this time, every stockholder entitled to vote at an election for
directors may cumulate such stockholder's votes and give one candidate a number
of votes equal to the number of directors to be elected multiplied by the number
of votes to which such stockholder's shares are otherwise entitled, or
distribute the stockholder's votes on the same principle among as many
candidates as such stockholder thinks fit. No stockholder, however, shall be
entitled to so cumulate such stockholder's votes unless (i) the names of such
candidate or candidates have been placed in nomination prior to the voting and
(ii) the stockholder has given notice at the meeting, prior to the voting, of
such stockholder's intention to cumulate such stockholder's votes. If any
stockholder has given proper notice to cumulate votes, all stockholders may
cumulate their votes for any candidates who have been properly placed in
nomination. Under cumulative voting, the candidates receiving the highest number
of votes, up to the number of directors to be elected, are elected.
Notwithstanding the foregoing provisions of this section, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
3. REMOVAL OF DIRECTORS
Removal of directors shall be governed as provided in the
Bylaws of the corporation.
4. VACANCIES
a. Subject to the rights of the holders of any series of
Preferred Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, and not by the stockholders. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term of
the director for which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified.
b. If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in offices as aforesaid, which election shall be governed by Section 211 of the
DGCL.
13.
<PAGE> 13
c. At any time or times that the corporation is subject to
Section 2115(b) of the CGCL, if, after the filling of any vacancy by the
directors then in office who have been elected by stockholders shall constitute
less than a majority of the directors then in office, then:
(i) Any holder or holders of an aggregate of five
percent (5%) or more of the total number of shares at the time outstanding
having the right to vote for those directors may call a special meeting of
stockholders; or
(ii) The Superior Court of the proper county shall, upon
application of such stockholder or stockholders, summarily order a special
meeting of stockholders, to be held to elect the entire board, all in accordance
with Section 305(c) of the CGCL. The term of office of any director shall
terminate upon that election of a successor.
B.
1. BYLAW AMENDMENTS
Subject to paragraph (h) of Section 43 of the Bylaws, the
Bylaws may be altered or amended or new Bylaws adopted by the affirmative vote
of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of
all of the then-outstanding shares of the voting stock of the corporation
entitled to vote. The Board of Directors shall also have the power to adopt,
amend, or repeal Bylaws.
2. BALLOTS
The directors of the corporation need not be elected by
written ballot unless the Bylaws so provide.
3. ACTION BY STOCKHOLDERS
No action shall be taken by the stockholders of the
corporation except at an annual or special meeting of stockholders called in
accordance with the Bylaws or by written consent of stockholders in accordance
with the Bylaws prior to the closing of the Initial Public Offering and
following the closing of the Initial Public Offering no action shall be taken by
the stockholders by written consent. Advance notice of stockholder nominations
for the election of directors and of business to be brought by stockholders
before any meeting of the stockholders of the corporation shall be given in the
manner provided in the Bylaws of the corporation.
4. ADVANCE NOTICE
Advance notice of stockholder nominations for the election of directors and of
business to be brought by stockholders before any meeting of the stockholders of
the corporation shall be given in the manner provided in the Bylaws of the
corporation.
14.
<PAGE> 14
VI.
A. The liability of the directors for monetary damages shall be
eliminated to the fullest extent under applicable law.
B. Any repeal or modification of this Article VI shall be prospective and
shall not affect the rights under this Article VI in effect at the time of the
alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VII.
A. The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, except as provided in paragraph B. of this
Article VII, and all rights conferred upon the stockholders herein are granted
subject to this reservation.
B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the voting stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then-outstanding shares of the voting stock, voting together
as a single class, shall be required to alter, amend or repeal Articles V, VI,
and VII.
15.
<PAGE> 1
EXHIBIT 3.2
FORM OF AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
iPASS INC.
I.
The name of this corporation is iPASS INC.
II.
The address of the registered office of the corporation in the State of
Delaware is 9 East Loockerman Street, City of Dover, County of Kent, and the
name of the registered agent of the corporation in the State of Delaware at such
address is National Registered Agents, Inc.
III.
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
IV.
A. This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the corporation is authorized to issue is One Hundred Twenty
Five Million (125,000,000) shares. One Hundred Twenty Million (120,000,000)
shares shall be Common Stock, each having a par value of one tenth of one cent
($.001). Five Million (5,000,000) shares shall be Preferred Stock, each having a
par value of one tenth of one cent ($.001).
B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, by filing a certificate (a
"Preferred Stock Designation") pursuant to the Delaware General Corporation Law,
to fix or alter from time to time the designation, powers, preferences and
rights (voting or otherwise) granted upon, and the qualifications, limitations
or restrictions of, any wholly unissued series of Preferred Stock, and to
establish from time to time the number of shares constituting any such series or
any of them; and to increase or decrease the number of shares of any series
subsequent to the issuance of shares of that series, but not below the number of
shares of such series then outstanding. In case the number of shares of any
series shall be decreased in accordance with the foregoing sentence, the shares
constituting such decrease shall resume the status that they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
<PAGE> 2
V.
For the management of the business and for the conduct of the affairs
of the corporation, and in further definition, limitation and regulation of the
powers of the corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A.
1. MANAGEMENT OF BUSINESS.
The management of the business and the conduct of the
affairs of the corporation shall be vested in its Board of Directors. The number
of directors which shall constitute the whole Board of Directors shall be fixed
exclusively by one or more resolutions adopted by the Board of Directors.
2. BOARD OF DIRECTORS.
a. Subject to the rights of the holders of any series
of Preferred Stock to elect additional directors under specified circumstances,
following the closing of the initial public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the "Act"),
covering the offer and sale of Common Stock to the public (the "Initial Public
Offering"), the directors shall be divided into three classes designated as
Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors. At the first annual meeting of stockholders following the closing
of the Initial Public Offering, the term of office of the Class I directors
shall expire and Class I directors shall be elected for a full term of three
years. At the second annual meeting of stockholders following the Initial Public
Offering, the term of office of the Class II directors shall expire and Class II
directors shall be elected for a full term of three years. At the third annual
meeting of stockholders following the Initial Public Offering, the term of
office of the Class III directors shall expire and Class III directors shall be
elected for a full term of three years. At each succeeding annual meeting of
stockholders, directors shall be elected for a full term of three years to
succeed the directors of the class whose terms expire at such annual meeting.
During such time or times that the corporation is subject to Section 2115(b) of
the California General Corporation Law ("CGCL"), this Section A.2.a of this
Article V shall become effective and be applicable only when the corporation is
a "listed" corporation within the meaning of Section 301.5 of the CGCL.
b. In the event that the corporation is subject to
Section 2115(b) of the CGCL AND is not a "listed" corporation or ceases to be a
"listed" corporation under Section 301.5 of the CGCL, Section A. 2. a. of this
Article V shall not apply and all directors shall be shall be elected at each
annual meeting of stockholders to hold office until the next annual meeting.
<PAGE> 3
c. No person entitled to vote at an election for
directors may cumulate votes to which such person is entitled, unless, at the
time of such election, the corporation is subject to Section 2115(b) of the CGCL
AND is not a "listed" corporation or ceases to be a "listed" corporation under
Section 301.5 of the CGCL. During this time, every stockholder entitled to vote
at an election for directors may cumulate such stockholder's votes and give one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which such stockholder's shares are
otherwise entitled, or distribute the stockholder's votes on the same principle
among as many candidates as such stockholder thinks fit. No stockholder,
however, shall be entitled to so cumulate such stockholder's votes unless (i)
the names of such candidate or candidates have been placed in nomination prior
to the voting and (ii) the stockholder has given notice at the meeting, prior to
the voting, of such stockholder's intention to cumulate such stockholder's
votes. If any stockholder has given proper notice to cumulate votes, all
stockholders may cumulate their votes for any candidates who have been properly
placed in nomination. Under cumulative voting, the candidates receiving the
highest number of votes, up to the number of directors to be elected, are
elected.
Notwithstanding the foregoing provisions of this section, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
3. REMOVAL OF DIRECTORS. Removal of directors shall be
governed as provided in the Bylaws of the corporation.
4. VACANCIES
a. Subject to the rights of the holders of any series
of Preferred Stock, any vacancies on the Board of Directors resulting from
death, resignation, disqualification, removal or other causes and any newly
created directorships resulting from any increase in the number of directors,
shall, unless the Board of Directors determines by resolution that any such
vacancies or newly created directorships shall be filled by the stockholders,
except as otherwise provided by law, be filled only by the affirmative vote of a
majority of the directors then in office, even though less than a quorum of the
Board of Directors, and not by the stockholders. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the director for which the vacancy was created or occurred and
until such director's successor shall have been elected and qualified.
b. If at the time of filling any vacancy or any newly
created directorship, the directors then in office shall constitute less than a
majority of the whole board (as constituted immediately prior to any such
increase), the Delaware Court of Chancery may, upon application of any
stockholder or stockholders holding at least ten percent (10%) of the total
number of the shares at the time outstanding having the right to vote for such
directors, summarily order an election to be held to fill any such vacancies or
newly created directorships,
<PAGE> 4
or to replace the directors chosen by the directors then in offices as
aforesaid, which election shall be governed by Section 211 of the DGCL.
c. At any time or times that the corporation is
subject to Section 2115(b) of the CGCL, if, after the filling of any vacancy by
the directors then in office who have been elected by stockholders shall
constitute less than a majority of the directors then in office, then:
(i) Any holder or holders of an aggregate of
five percent (5%) or more of the total number of shares at the time outstanding
having the right to vote for those directors may call a special meeting of
stockholders; or
(ii) The Superior Court of the proper county
shall, upon application of such stockholder or stockholders, summarily order a
special meeting of stockholders, to be held to elect the entire board, all in
accordance with Section 305(c) of the CGCL. The term of office of any director
shall terminate upon that election of a successor.
B.
1. BYLAW AMENDMENTS
Subject to paragraph (h) of Section 43 of the Bylaws,
the Bylaws may be altered or amended or new Bylaws adopted by the affirmative
vote of at least sixty-six and two-thirds percent (66-2/3%) of the voting power
of all of the then-outstanding shares of the voting stock of the corporation
entitled to vote. The Board of Directors shall also have the power to adopt,
amend, or repeal Bylaws.
2. BALLOTS.
The directors of the corporation need not be elected
by written ballot unless the Bylaws so provide.
3. ACTION BY STOCKHOLDERS.
No action shall be taken by the stockholders of the
corporation except at an annual or special meeting of stockholders called in
accordance with the Bylaws or by written consent of stockholders in accordance
with the Bylaws prior to the closing of the Initial Public Offering and
following the closing of the Initial Public Offering no action shall be taken by
the stockholders by written consent.
4. ADVANCE NOTICE.
Advance notice of stockholder nominations for the
election of directors and of business to be brought by stockholders before any
meeting of the stockholders of the corporation shall be given in the manner
provided in the Bylaws of the corporation.
<PAGE> 5
VI.
A. The liability of the directors for monetary damages shall be
eliminated to the fullest extent under applicable law.
B. Any repeal or modification of this Article VI shall be prospective
and shall not affect the rights under this Article VI in effect at the time of
the alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VII.
A. The corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, except as provided in paragraph B. of this
Article VII, and all rights conferred upon the stockholders herein are granted
subject to this reservation.
B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then-outstanding shares of the voting stock, voting together
as a single class, shall be required to alter, amend or repeal Articles V, VI
and VII.
<PAGE> 1
EXHIBIT 3.3
BYLAWS
OF
iPASS INC.
--------------------------------------------------
(A DELAWARE CORPORATION)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I OFFICES ................................................................................. 1
Section 1. Registered Office .............................................................. 1
Section 2. Other Offices .................................................................. 1
ARTICLE II CORPORATE SEAL ......................................................................... 1
Section 3. Corporate Seal ................................................................. 1
ARTICLE III STOCKHOLDERS' MEETINGS ................................................................ 1
Section 4. Place Of Meetings .............................................................. 1
Section 5. Annual Meetings ................................................................ 1
Section 6. Special Meetings ............................................................... 3
Section 7. Notice Of Meetings ............................................................. 4
Section 8. Quorum ......................................................................... 5
Section 9. Adjournment And Notice Of Adjourned Meetings ................................... 5
Section 10. Voting Rights ................................................................. 5
Section 11. Joint Owners Of Stock ......................................................... 6
Section 12. List Of Stockholders .......................................................... 6
Section 13. Action Without Meeting ........................................................ 6
Section 14. Organization .................................................................. 7
ARTICLE IV DIRECTORS .............................................................................. 7
Section 15. Number And Term Of Office ..................................................... 7
Section 16. Powers ........................................................................ 8
Section 17. Classes of Directors .......................................................... 8
Section 18. Vacancies ..................................................................... 9
Section 19. Resignation ................................................................... 10
Section 20. Removal ....................................................................... 10
Section 21. Meetings ...................................................................... 10
Section 22. Quorum And Voting ............................................................. 11
Section 23. Action Without Meeting ........................................................ 11
Section 24. Fees And Compensation ......................................................... 12
Section 25. Committees .................................................................... 12
Section 26. Organization .................................................................. 13
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ARTICLE V OFFICERS ................................................................................ 13
Section 27. Officers Designated ........................................................... 13
Section 28. Tenure And Duties Of Officers ................................................. 13
Section 29. Delegation Of Authority ....................................................... 15
Section 30. Resignations .................................................................. 15
Section 31. Removal ....................................................................... 15
ARTICLE VI EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE
CORPORATION .......................................................................... 15
Section 32. Execution Of Corporate Instruments ............................................ 15
Section 33. Voting Of Securities Owned By The Corporation ................................. 15
ARTICLE VII SHARES OF STOCK ....................................................................... 16
Section 34. Form And Execution Of Certificates ............................................ 16
Section 35. Lost Certificates ............................................................. 16
Section 36. Transfers ..................................................................... 16
Section 37. Fixing Record Dates ........................................................... 17
Section 38. Registered Stockholders ....................................................... 18
ARTICLE VIII OTHER SECURITIES OF THE CORPORATION .................................................. 18
Section 39. Execution Of Other Securities ................................................. 18
ARTICLE IX DIVIDENDS .............................................................................. 18
Section 40. Declaration Of Dividends ...................................................... 18
Section 41. Dividend Reserve .............................................................. 19
ARTICLE X FISCAL YEAR ............................................................................. 19
Section 42. Fiscal Year ................................................................... 19
ARTICLE XI INDEMNIFICATION ........................................................................ 19
Section 43. Indemnification Of Directors, Executive Officers, Other Officers,
Employees And Other Agents .................................................. 19
ARTICLE XII NOTICES ............................................................................... 22
Section 44. Notices ....................................................................... 22
ARTICLE XIII AMENDMENTS ........................................................................... 24
Section 45. Amendments .................................................................... 24
ARTICLE XIV LOANS TO OFFICERS ..................................................................... 24
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Section 46. Loans To Officers ............................................................. 24
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iii.
<PAGE> 5
BYLAWS
OF
iPASS INC.
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the corporation in
the State of Delaware shall be in the City of Dover, County of Kent.
SECTION 2. OTHER OFFICES. The corporation shall also have and maintain an
office or principal place of business at such place as may be fixed by the Board
of Directors, and may also have offices at such other places, both within and
without the State of Delaware as the Board of Directors may from time to time
determine or the business of the corporation may require.
ARTICLE II
CORPORATE SEAL
SECTION 3. CORPORATE SEAL. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate
Seal-Delaware." Said seal may be used by causing it or a facsimile thereof
to be impressed or affixed or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS' MEETINGS
SECTION 4. PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
SECTION 5. ANNUAL MEETINGS.
(a) The annual meeting of the stockholders of the corporation, for
the purpose of election of directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors. 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:
(i) pursuant to the corporation's notice of meeting of stockholders; (ii) by or
at the direction of the Board of Directors; or (iii) by any stockholder of the
corporation who was a stockholder of record at the time of giving of notice
provided for in the following paragraph,
1.
<PAGE> 6
who is entitled to vote at the meeting and who complied with the notice
procedures set forth in Section 5.
(b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. For
nominations or other business to be properly brought before an annual meeting by
a stockholder pursuant to clause (c) of Section 5(a) of these Bylaws, (i) the
stockholder must have given timely notice thereof in writing to the Secretary of
the corporation, (ii) such other business must be a proper matter for
stockholder action under the Delaware General Corporation Law ("DGCL"), (iii) if
the stockholder, or the beneficial owner on whose behalf any such proposal or
nomination is made, has provided the corporation with a Solicitation Notice (as
defined in this Section 5(b)), such stockholder or beneficial owner must, in the
case of a proposal, have delivered a proxy statement and form of proxy to
holders of at least the percentage of the corporation's voting shares required
under applicable law to carry any such proposal, or, in the case of a nomination
or nominations, have delivered a proxy statement and form of proxy to holders of
a percentage of the corporation's voting shares reasonably believed by such
stockholder or beneficial owner to be sufficient to elect the nominee or
nominees proposed to be nominated by such stockholder, and must, in either case,
have included in such materials the Solicitation Notice, and (iv) if no
Solicitation Notice relating thereto has been timely provided pursuant to this
section, the stockholder or beneficial owner proposing such business or
nomination must not have solicited a number of proxies sufficient to have
required the delivery of such a Solicitation Notice under this Section 5. To be
timely, a stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the ninetieth (90th) day nor earlier than the close of business on
the one hundred twentieth (120th) day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
date of the annual meeting is advanced more than thirty (30) days prior to or
delayed by more than thirty (30) days after the anniversary of the preceding
year's annual meeting, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the one hundred twentieth
(120th) day prior to such annual meeting and not later than the close of
business on the later of the ninetieth (90th) day prior to such annual meeting
or the tenth (10th) day following the day on which public announcement of the
date of such meeting is first made. 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 proposed to nominate for
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 Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "1934 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, (ii) the class and number of shares of the corporation which are owned
beneficially and of record by such stockholder and such beneficial owner, and
(iii)
2.
<PAGE> 7
whether either such stockholder or beneficial owner intends to deliver a proxy
statement and form of proxy to holders of, in the case of the proposal, at least
the percentage of the corporation's voting shares required under applicable law
to carry the proposal or, in the case of a nomination or nominations, a
sufficient number of holders of the corporation's voting shares to elect such
nominee or nominees (an affirmative statement of such intent, a "Solicitation
Notice").
(c) Notwithstanding anything in the second sentence of Section 5(b)
of these Bylaws 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 naming all of the nominees for director or specifying the
size of the increased Board of Directors made by the corporation at least one
hundred (100) days prior to the first anniversary of the preceding year's annual
meeting, a stockholder's notice required by this Section 5 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 tenth (10th) day following the day on which such public
announcement is first made by the corporation.
(d) Only such persons who are nominated in accordance with the
procedures set forth in this Section 5 shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders as shall
have been brought before the meeting in accordance with the procedures set forth
in this Section 5. Except as otherwise provided by law, the Chairman of the
meeting shall have the power and duty to determine whether a nomination or any
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 these Bylaws and, if
any proposed nomination or business is not in compliance with these Bylaws, to
declare that such defective proposal or nomination shall not be presented for
stockholder action at the meeting and shall be disregarded.
(e) Notwithstanding the foregoing provisions of this Section 5, in
order to include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholders' meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Nothing in these Bylaws shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the corporation proxy statement pursuant to
Rule 14a-8 under the 1934 Act.
(f) For purposes of this Section 5, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service or in a document publicly filed by the
corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the 1934 Act.
SECTION 6. SPECIAL MEETINGS.
(a) Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, or (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board of
Directors for adoption).
3.
<PAGE> 8
At any time or times that the corporation is subject to Section 2115(b) of the
California General Corporation Law ("CGCL"), stockholders holding five percent
(5%) or more of the outstanding shares shall have the right to call a special
meeting of stockholders only as set forth in Section 18(c) herein.
(b) If a special meeting is properly called by any person or persons
other than the Board of Directors, the request shall be in writing, specifying
the general nature of the business proposed to be transacted, and shall be
delivered personally or sent by registered mail or by telegraphic or other
facsimile transmission to the Chairman of the Board of Directors, the Chief
Executive Officer, or the Secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
Board of Directors shall determine the time and place of such special meeting,
which shall be held not less than thirty-five (35) nor more than one hundred
twenty (120) days after the date of the receipt of the request. Upon
determination of the time and place of the meeting, the officer receiving the
request shall cause notice to be given to the stockholders entitled to vote, in
accordance with the provisions of Section 7 of these Bylaws. If the notice is
not given within one hundred (100) days after the receipt of the request, the
person or persons properly requesting the meeting may set the time and place of
the meeting and give the notice. Nothing contained in this paragraph (b) shall
be construed as limiting, fixing, or affecting the time when a meeting of
stockholders called by action of the Board of Directors may be held.
(c) Nominations of persons for election to the Board of Directors
may be made at a special meeting of stockholders at which directors are to be
elected pursuant to the corporation's notice of meeting (i) by or at the
direction of the Board of Directors or (ii) by any stockholder of the
corporation who is a stockholder of record at the time of giving notice provided
for in these Bylaws who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this Section 6(c). 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 Section 5(b) of these Bylaws shall be delivered
to the Secretary at the principal executive offices of the corporation not
earlier than the close of business on the one hundred twentieth (120th) day
prior to such special meeting and not later than the close of business on the
later of the ninetieth (90th) day prior to such meeting or the tenth (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.
SECTION 7. NOTICE OF MEETINGS. Except as otherwise provided by law or the
Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
attends a meeting for the express purpose of
4.
<PAGE> 9
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Any stockholder so
waiving notice of such meeting shall be bound by the proceedings of any such
meeting in all respects as if due notice thereof had been given.
SECTION 8. QUORUM. At all meetings of stockholders, except where otherwise
provided by statute or by the Certificate of Incorporation, or by these Bylaws,
the presence, in person or by proxy duly authorized, of the holders of a
majority of the outstanding shares of stock entitled to vote shall constitute a
quorum for the transaction of business. In the absence of a quorum, any meeting
of stockholders may be adjourned, from time to time, either by the chairman of
the meeting or by vote of the holders of a majority of the shares represented
thereat, but no other business shall be transacted at such meeting. The
stockholders present at a duly called or convened meeting, at which a quorum is
present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by statute, the Certificate of Incorporation or these Bylaws,
in all matters other than the election of directors, the affirmative vote of the
majority of shares present in person or represented by proxy at the meeting and
entitled to vote on the subject matter shall be the act of the stockholders.
Except as otherwise provided by statute, the Certificate of Incorporation or
these Bylaws, directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. Where a separate vote by a class or classes
or series is required, except where otherwise provided by the statute or by the
Certificate of Incorporation or these Bylaws, a majority of the outstanding
shares of such class or classes or series, present in person or represented by
proxy, shall constitute a quorum entitled to take action with respect to that
vote on that matter and, except where otherwise provided by the statute or by
the Certificate of Incorporation or these Bylaws, the affirmative vote of the
majority (plurality, in the case of the election of directors) of the votes cast
by the holders of shares of such class or classes or series shall be the act of
such class or classes or series.
SECTION 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes. When a meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting, the corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
(30) days or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 10. VOTING RIGHTS. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote shall have the right to do so either in person or by an
agent or agents authorized by a proxy granted in accordance with Delaware law.
An agent so appointed need not be a stockholder. No proxy shall be voted after
three (3) years from its date of creation unless the proxy provides for a longer
period.
5.
<PAGE> 10
SECTION 11. JOINT OWNERS OF STOCK. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the DGCL, Section 217(b). If the instrument filed with the
Secretary shows that any such tenancy is held in unequal interests, a majority
or even-split for the purpose of subsection (c) shall be a majority or
even-split in interest.
SECTION 12. LIST OF STOCKHOLDERS. The Secretary shall prepare and make, at
least ten (10) days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at said meeting, arranged in alphabetical order,
showing the address of each stockholder and the number of shares registered in
the name of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not specified, at the place where
the meeting is to be held. The list shall be produced and kept at the time and
place of meeting during the whole time thereof and may be inspected by any
stockholder who is present.
SECTION 13. ACTION WITHOUT MEETING.
(a) Unless otherwise provided in the Certificate of Incorporation,
any action required by statute to be taken at any annual or special meeting of
the stockholders, or any action which may be taken at any annual or special
meeting of the stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted.
(b) Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty (60) days of
the earliest dated consent delivered to the corporation in the manner herein
required, written consents signed by a sufficient number of stockholders to take
action are delivered to the corporation by delivery to its registered office in
the State of Delaware, its principal place of business or an officer or agent of
the corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to a corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
(c) Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented
6.
<PAGE> 11
in writing and who, if the action had been taken at a meeting, would have been
entitled to notice of the meeting if the record date for such meeting had been
the date that written consents signed by a sufficient number of stockholders to
take action were delivered to the corporation as provided in Section 228 (c) of
the DGCL. If the action which is consented to is such as would have required the
filing of a certificate under any section of the DGCL if such action had been
voted on by stockholders at a meeting thereof, then the certificate filed under
such section shall state, in lieu of any statement required by such section
concerning any vote of stockholders, that written consent has been given in
accordance with Section 228 of the DGCL.
(d) Notwithstanding the foregoing, no such action by written consent
may be taken following the closing of the initial public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "1933 Act"), covering the offer and sale of Common Stock of the corporation
(the "Initial Public Offering").
SECTION 14. ORGANIZATION.
(a) At every meeting of stockholders, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the President,
or, if the President is absent, a chairman of the meeting chosen by a majority
in interest of the stockholders entitled to vote, present in person or by proxy,
shall act as chairman. The Secretary, or, in his absence, an Assistant Secretary
directed to do so by the President, shall act as secretary of the meeting.
(b) The Board of Directors of the corporation shall be entitled to
make such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.
ARTICLE IV
DIRECTORS
SECTION 15. NUMBER AND TERM OF OFFICE. The authorized number of directors
of the corporation shall be fixed in accordance with the Certificate of
Incorporation. Directors need not be stockholders unless so required by the
Certificate of Incorporation. If for any cause, the directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter
7.
<PAGE> 12
as convenient at a special meeting of the stockholders called for that purpose
in the manner provided in these Bylaws.
SECTION 16. POWERS. The powers of the corporation shall be exercised, its
business conducted and its property controlled by the Board of Directors, except
as may be otherwise provided by statute or by the Certificate of Incorporation.
SECTION 17. CLASSES OF DIRECTORS.
(a) Subject to the rights of the holders of any series of Preferred
Stock to elect additional directors under specified circumstances, following the
closing of the Initial Public Offering, the directors shall be divided into
three classes designated as Class I, Class II and Class III, respectively.
Directors shall be assigned to each class in accordance with a resolution or
resolutions adopted by the Board of Directors. At the first annual meeting of
stockholders following the closing of the Initial Public Offering, the term of
office of the Class I directors shall expire and Class I directors shall be
elected for a full term of three years. At the second annual meeting of
stockholders following the Initial Public Offering, the term of office of the
Class II directors shall expire and Class II directors shall be elected for a
full term of three years. At the third annual meeting of stockholders following
the Initial Public Offering, the term of office of the Class III directors shall
expire and Class III directors shall be elected for a full term of three years.
At each succeeding annual meeting of stockholders, directors shall be elected
for a full term of three years to succeed the directors of the class whose terms
expire at such annual meeting. During such time or times that the corporation is
subject to Section 2115(b) of the CGCL, this Section 17(a) shall become
effective and apply only when the corporation is a "listed" corporation within
the meaning of Section 301.5 of the CGCL.
(b) In the event that the corporation is unable to have a classified
Board of Directors under applicable law(1), Section 17(a) of these Bylaws shall
not apply and all directors shall be elected at each annual meeting of
stockholders to hold office until the next annual meeting.
(c) No stockholder entitled to vote at an election for directors may
cumulate votes to which such stockholder is entitled, unless, at the time of the
election, the corporation (i) is subject to Section 2115(b) of the CGCL and (ii)
is not or ceases to be a "listed" corporation under Section 301.5 of the CGCL.
During this time, every stockholder entitled to vote at an election for
directors may cumulate such stockholder's votes and give one candidate a number
of votes equal to the number of directors to be elected multiplied by the number
of votes to which such stockholder's shares are otherwise entitled, or
distribute the stockholder's votes on the same principle among as many
candidates as such stockholder thinks fit. No stockholder, however, shall be
entitled to so cumulate such stockholder's votes unless (i) the names of such
candidate or candidates have been placed in nomination prior to the voting and
(ii) the stockholder has given notice at the meeting, prior to the voting, of
such stockholder's intention to cumulate such stockholder's votes. If any
stockholder has given proper notice to cumulate votes, all
<PAGE> 13
stockholders may cumulate their votes for any candidates who have been properly
placed in nomination. Under cumulative voting, the candidates receiving the
highest number of votes, up to the number of directors to be elected, are
elected.
Notwithstanding the foregoing provisions of this section, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
SECTION 18. VACANCIES.
(a) Unless otherwise provided in the Certificate of Incorporation,
any vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other causes and any newly created directorships
resulting from any increase in the number of directors shall, unless the Board
of Directors determines by resolution that any such vacancies or newly created
directorships shall be filled by stockholders, be filled only by the affirmative
vote of a majority of the directors then in office, even though less than a
quorum of the Board of Directors. Any director elected in accordance with the
preceding sentence shall hold office for the remainder of the full term of the
director for which the vacancy was created or occurred and until such director's
successor shall have been elected and qualified. A vacancy in the Board of
Directors shall be deemed to exist under this Section 18 in the case of the
death, removal or resignation of any director.
(b) If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in offices as aforesaid, which election shall be governed by Section 211 of the
DGCL.
(c) At any time or times that the corporation is subject to Section
2115(b) of the CGCL, if, after the filling of any vacancy, the directors then in
office who have been elected by stockholders shall constitute less than a
majority of the directors then in office, then
(1) Any holder or holders of an aggregate of five percent (5%)
or more of the total number of shares at the time outstanding having the right
to vote for those directors may call a special meeting of stockholders; or
(2) The Superior Court of the proper county shall, upon
application of such stockholder or stockholders, summarily order a special
meeting of stockholders, to be held to elect the entire board, all in accordance
with Section 305(c) of the CGCL. The term of office of any director shall
terminate upon that election of a successor.
9.
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SECTION 19. RESIGNATION. Any director may resign at any time by delivering
his written resignation to the Secretary, such resignation to specify whether it
will be effective at a particular time, upon receipt by the Secretary or at the
pleasure of the Board of Directors. If no such specification is made, it shall
be deemed effective at the pleasure of the Board of Directors. When one or more
directors shall resign from the Board of Directors, effective at a future date,
a majority of the directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote thereon
to take effect when such resignation or resignations shall become effective, and
each Director so chosen shall hold office for the unexpired portion of the term
of the Director whose place shall be vacated and until his successor shall have
been duly elected and qualified.
SECTION 20. REMOVAL.
(a) During such time or times that the corporation is subject to
Section 2115(b) of the CGCL, the Board of Directors or any individual director
may be removed from office at any time without cause by the affirmative vote of
the holders of at least a majority of the outstanding shares entitled to vote on
such removal; provided, however, that unless the entire Board is removed, no
individual director may be removed when the votes cast against such director's
removal, or not consenting in writing to such removal, would be sufficient to
elect that director if voted cumulatively at an election which the same total
number of votes were cast (or, if such action is taken by written consent, all
shares entitled to vote were voted) and the entire number of directors
authorized at the time of such director's most recent election were then being
elected.
(b) Following any date on which the corporation is no longer subject
to Section 2115(b) of the CGCL and subject to any limitations imposed by law,
the Board of Directors or any individual director may be removed from office at
any time without cause by the affirmative vote of the holders of at least a
majority of the outstanding shares entitled to vote on such removal.
SECTION 21. MEETINGS.
(a) ANNUAL MEETINGS. The annual meeting of the Board of Directors
shall be held immediately before or after the annual meeting of stockholders and
at the place where such meeting is held. No notice of an annual meeting of the
Board of Directors shall be necessary and such meeting shall be held for the
purpose of electing officers and transacting such other business as may lawfully
come before it.
(b) REGULAR MEETINGS. Unless otherwise restricted by the Certificate
of Incorporation, regular meetings of the Board of Directors may be held at any
time or date and at any place within or without the State of Delaware which has
been designated by the Board of Directors and publicized among all directors. No
formal notice shall be required for regular meetings of the Board of Directors.
(c) SPECIAL MEETINGS. Unless otherwise restricted by the Certificate
of Incorporation, special meetings of the Board of Directors may be held at any
time and place
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within or without the State of Delaware whenever called by the Chairman of the
Board, the President or any two of the directors
(d) TELEPHONE MEETINGS. Any member of the Board of Directors, or of
any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.
(e) NOTICE OF MEETINGS. Notice of the time and place of all special
meetings of the Board of Directors shall be orally or in writing, by telephone,
including a voice messaging system or other system or technology designed to
record and communicate messages, facsimile, telegraph or telex, or by electronic
mail or other electronic means, during normal business hours, at least
twenty-four (24) hours before the date and time of the meeting, or sent in
writing to each director by first class mail, charges prepaid, at least three
(3) days before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
(f) WAIVER OF NOTICE. The transaction of all business at any meeting
of the Board of Directors, or any committee thereof, however called or noticed,
or wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum be present and if, either before or after
the meeting, each of the directors not present shall sign a written waiver of
notice. All such waivers shall be filed with the corporate records or made a
part of the minutes of the meeting.
SECTION 22. QUORUM AND VOTING.
(a) Unless the Certificate of Incorporation requires a greater
number and except with respect to indemnification questions arising under
Section 43 hereof, for which a quorum shall be one-third of the exact number of
directors fixed from time to time in accordance with the Certificate of
Incorporation, a quorum of the Board of Directors shall consist of a majority of
the exact number of directors fixed from time to time by the Board of Directors
in accordance with the Certificate of Incorporation; provided, however, at any
meeting whether a quorum be present or otherwise, a majority of the directors
present may adjourn from time to time until the time fixed for the next regular
meeting of the Board of Directors, without notice other than by announcement at
the meeting.
(b) At each meeting of the Board of Directors at which a quorum is
present, all questions and business shall be determined by the affirmative vote
of a majority of the directors present, unless a different vote be required by
law, the Certificate of Incorporation or these Bylaws.
SECTION 23. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all
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members of the Board of Directors or committee, as the case may be, consent
thereto in writing, and such writing or writings are filed with the minutes of
proceedings of the Board of Directors or committee.
SECTION 24. FEES AND COMPENSATION. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
SECTION 25. COMMITTEES.
(a) EXECUTIVE COMMITTEE. The Board of Directors may appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and provided
in the resolution of the Board of Directors shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, and may authorize the seal of the corporation to
be affixed to all papers which may require it; but no such committee shall have
the power or authority in reference to (i) approving or adopting, or
recommending to the stockholders, any action or matter expressly required by the
DGCL to be submitted to stockholders for approval, or (ii) adopting, amending or
repealing any bylaw of the corporation.
(b) OTHER COMMITTEES. The Board of Directors may, from time to time,
appoint such other committees as may be permitted by law. Such other committees
appointed by the Board of Directors shall consist of one (1) or more members of
the Board of Directors and shall have such powers and perform such duties as may
be prescribed by the resolution or resolutions creating such committees, but in
no event shall any such committee have the powers denied to the Executive
Committee in these Bylaws.
(c) TERM. Each member of a committee of the Board of Directors shall
serve a term on the committee coexistent with such member's term on the Board of
Directors. The Board of Directors, subject to any requirements of any
outstanding series of preferred Stock and the provisions of subsections (a) or
(b) of this Bylaw, may at any time increase or decrease the number of members of
a committee or terminate the existence of a committee. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation from the committee or from the Board of Directors. The Board of
Directors may at any time for any reason remove any individual committee member
and the Board of Directors may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee, and, in addition, in the absence or disqualification of any
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
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(d) MEETINGS. Unless the Board of Directors shall otherwise provide,
regular meetings of the Executive Committee or any other committee appointed
pursuant to this Section 25 shall be held at such times and places as are
determined by the Board of Directors, or by any such committee, and when notice
thereof has been given to each member of such committee, no further notice of
such regular meetings need be given thereafter. Special meetings of any such
committee may be held at any place which has been determined from time to time
by such committee, and may be called by any director who is a member of such
committee, upon written notice to the members of such committee of the time and
place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat, except when the director
attends such special meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. A majority of the authorized number of
members of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of such committee.
SECTION 26. ORGANIZATION. At every meeting of the directors, the Chairman
of the Board of Directors, or, if a Chairman has not been appointed or is
absent, the President (if a director), or if the President is absent, the most
senior Vice President (if a director), or, in the absence of any such person, a
chairman of the meeting chosen by a majority of the directors present, shall
preside over the meeting. The Secretary, or in his absence, any Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.
ARTICLE V
OFFICERS
SECTION 27. OFFICERS DESIGNATED. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer and the
Controller, all of whom shall be elected at the annual organizational meeting of
the Board of Directors. The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such
other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the officers
of the corporation shall be fixed by or in the manner designated by the Board of
Directors.
SECTION 28. TENURE AND DUTIES OF OFFICERS.
(a) GENERAL. All officers shall hold office at the pleasure of the
Board of Directors and until their successors shall have been duly elected and
qualified, unless sooner removed. Any officer elected or appointed by the Board
of Directors may be removed at any
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time by the Board of Directors. If the office of any officer becomes vacant for
any reason, the vacancy may be filled by the Board of Directors.
(b) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of
the Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers, as the Board of Directors
shall designate from time to time. If there is no President, then the Chairman
of the Board of Directors shall also serve as the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 28.
(c) DUTIES OF PRESIDENT. The President shall preside at all meetings
of the stockholders and at all meetings of the Board of Directors, unless the
Chairman of the Board of Directors has been appointed and is present. Unless
some other officer has been elected Chief Executive Officer of the corporation,
the President shall be the chief executive officer of the corporation and shall,
subject to the control of the Board of Directors, have general supervision,
direction and control of the business and officers of the corporation. The
President shall perform other duties commonly incident to his office and shall
also perform such other duties and have such other powers, as the Board of
Directors shall designate from time to time.
(d) DUTIES OF VICE PRESIDENTS. The Vice Presidents may assume and
perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time.
(e) DUTIES OF SECRETARY. The Secretary shall attend all meetings of
the stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers, as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
(f) DUTIES OF CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall keep or cause to be kept the books of account of the corporation in a
thorough and proper manner and shall render statements of the financial affairs
of the corporation in such form and as often as required by the Board of
Directors or the President. The Chief Financial Officer, subject to the order of
the Board of Directors, shall have the custody of all funds and securities of
the corporation. The Chief Financial Officer shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time. The President may direct the Treasurer or any Assistant Treasurer,
or the Controller or any Assistant Controller to assume and
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perform the duties of the Chief Financial Officer in the absence or disability
of the Chief Financial Officer, and each Treasurer and Assistant Treasurer and
each Controller and Assistant Controller shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time.
SECTION 29. DELEGATION OF AUTHORITY. The Board of Directors may from time
to time delegate the powers or duties of any officer to any other officer or
agent, notwithstanding any provision hereof.
SECTION 30. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
SECTION 31. REMOVAL. Any officer may be removed from office at any time,
either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES
OWNED BY THE CORPORATION
SECTION 32. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
All checks and drafts drawn on banks or other depositaries on funds to the
credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
SECTION 33. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person
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authorized so to do by resolution of the Board of Directors, or, in the absence
of such authorization, by the Chairman of the Board of Directors, the Chief
Executive Officer, the President, or any Vice President.
ARTICLE VII
SHARES OF STOCK
SECTION 34. FORM AND EXECUTION OF CERTIFICATES. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman of the Board of Directors, or the President
or any Vice President and by the Treasurer or Assistant Treasurer or the
Secretary or Assistant Secretary, certifying the number of shares owned by him
in the corporation. Any or all of the signatures on the certificate may be
facsimiles. In case any officer, transfer agent, or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue. Each certificate shall state
upon the face or back thereof, in full or in summary, all of the powers,
designations, preferences, and rights, and the limitations or restrictions of
the shares authorized to be issued or shall, except as otherwise required by
law, set forth on the face or back a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, designations,
preferences and relative, participating, optional, or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Within a reasonable time after
the issuance or transfer of uncertificated stock, the corporation shall send to
the registered owner thereof a written notice containing the information
required to be set forth or stated on certificates pursuant to this section or
otherwise required by law or with respect to this section a statement that the
corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences and relative participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of certificates representing stock of the same class and series shall be
identical.
SECTION 35. LOST CERTIFICATES. A new certificate or certificates shall be
issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to agree to indemnify the corporation in such manner as it shall
require or to give the corporation a surety bond in such form and amount as it
may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen,
or destroyed.
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SECTION 36. TRANSFERS.
(a) Transfers of record of shares of stock of the corporation shall
be made only upon its books by the holders thereof, in person or by attorney
duly authorized, and upon the surrender of a properly endorsed certificate or
certificates for a like number of shares.
(b) The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the DGCL.
SECTION 37. FIXING RECORD DATES.
(a) In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall, subject to applicable law, not be more than sixty (60) nor less than ten
(10) days before the date of such meeting. If no record date is fixed by the
Board of Directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
(b) Prior to the Initial Public Offering, in order that the
corporation may determine the stockholders entitled to consent to corporate
action in writing without a meeting, the Board of Directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which date
shall not be more than ten (10) days after the date upon which the resolution
fixing the record date is adopted by the Board of Directors. Any stockholder of
record seeking to have the stockholders authorize or take corporate action by
written consent shall, by written notice to the Secretary, request the Board of
Directors to fix a record date. The Board of Directors shall promptly, but in
all events within ten (10) days after the date on which such a request is
received, adopt a resolution fixing the record date. If no record date has been
fixed by the Board of Directors within ten (10) days of the date on which such a
request is received, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors is required by applicable law, shall be the first date
on which a signed written consent setting forth the action taken or proposed to
be taken is delivered to the corporation by delivery to its registered office in
the State of Delaware, its principal place of business or an officer or agent of
the corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board of Directors and prior action by
the Board of Directors is required by law, the record date for determining
stockholders entitled to consent to
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corporate action in writing without a meeting shall be at the close of business
on the day on which the Board of Directors adopts the resolution taking such
prior action.
(c) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty (60)
days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
SECTION 38. REGISTERED STOCKHOLDERS. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
SECTION 39. EXECUTION OF OTHER SECURITIES. All bonds, debentures and other
corporate securities of the corporation, other than stock certificates (covered
in Section 34), may be signed by the Chairman of the Board of Directors, the
President or any Vice President, or such other person as may be authorized by
the Board of Directors, and the corporate seal impressed thereon or a facsimile
of such seal imprinted thereon and attested by the signature of the Secretary or
an Assistant Secretary, or the Chief Financial Officer or Treasurer or an
Assistant Treasurer; provided, however, that where any such bond, debenture or
other corporate security shall be authenticated by the manual signature, or
where permissible facsimile signature, of a trustee under an indenture pursuant
to which such bond, debenture or other corporate security shall be issued, the
signatures of the persons signing and attesting the corporate seal on such bond,
debenture or other corporate security may be the imprinted facsimile of the
signatures of such persons. Interest coupons appertaining to any such bond,
debenture or other corporate security, authenticated by a trustee as aforesaid,
shall be signed by the Treasurer or an Assistant Treasurer of the corporation or
such other person as may be authorized by the Board of Directors, or bear
imprinted thereon the facsimile signature of such person. In case any officer
who shall have signed or attested any bond, debenture or other corporate
security, or whose facsimile signature shall appear thereon or on any such
interest coupon, shall have ceased to be such officer before the bond, debenture
or other corporate security so signed or attested shall have been delivered,
such bond, debenture or other corporate security nevertheless may be adopted by
the corporation and issued and delivered as though the person who signed the
same or whose facsimile signature shall have been used thereon had not ceased to
be such officer of the corporation.
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ARTICLE IX
DIVIDENDS
SECTION 40. DECLARATION OF DIVIDENDS. Dividends upon the capital stock of
the corporation, subject to the provisions of the Certificate of Incorporation
and applicable law, if any, may be declared by the Board of Directors pursuant
to law at any regular or special meeting. Dividends may be paid in cash, in
property, or in shares of the capital stock, subject to the provisions of the
Certificate of Incorporation and applicable law.
SECTION 41. DIVIDEND RESERVE. Before payment of any dividend, there may be
set aside out of any funds of the corporation available for dividends such sum
or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
FISCAL YEAR
SECTION 42. FISCAL YEAR. The fiscal year of the corporation shall be fixed
by resolution of the Board of Directors.
ARTICLE XI
INDEMNIFICATION
SECTION 43. INDEMNIFICATION OF DIRECTORS, EXECUTIVE OFFICERS, OTHER
OFFICERS, EMPLOYEES AND OTHER AGENTS.
(a) DIRECTORS AND EXECUTIVE OFFICERS. The corporation shall
indemnify its directors and executive officers (for the purposes of this Article
XI, "executive officers" shall have the meaning defined in Rule 3b-7 promulgated
under the 1934 Act) to the fullest extent not prohibited by the DGCL or any
other applicable law; provided, however, that the corporation may modify the
extent of such indemnification by individual contracts with its directors and
executive officers; and, provided, further, that the corporation shall not be
required to indemnify any director or executive officer in connection with any
proceeding (or part thereof) initiated by such person unless (i) such
indemnification is expressly required to be made by law, (ii) the proceeding was
authorized by the Board of Directors of the corporation, (iii) such
indemnification is provided by the corporation, in its sole discretion, pursuant
to the powers vested in the corporation under the DGCL or any other applicable
law or (iv) such indemnification is required to be made under subsection (d).
(b) EMPLOYEES AND OTHER AGENTS. The corporation shall have power to
indemnify its other officers, employees and other agents as set forth in the
DGCL or any other applicable law. The Board of Directors shall have the power to
delegate the determination of
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whether indemnification shall be given to any such person except executive
officers to such officers or other persons as the Board of Directors shall
determine.
(c) EXPENSES. The corporation shall advance to any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or executive
officer, of the corporation, or is or was serving at the request of the
corporation as a director or executive officer of another corporation,
partnership, joint venture, trust or other enterprise, prior to the final
disposition of the proceeding, promptly following request therefor, all expenses
incurred by any director or executive officer in connection with such proceeding
upon receipt of an undertaking by or on behalf of such person to repay said
amounts if it should be determined ultimately that such person is not entitled
to be indemnified under this Section 43 or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Section 43, no advance shall be made by the corporation to
an executive officer of the corporation (except by reason of the fact that such
executive officer is or was a director of the corporation in which event this
paragraph shall not apply) in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, if a determination is reasonably and
promptly made (i) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to the proceeding, or (ii) if such
quorum is not obtainable, or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, that
the facts known to the decision-making party at the time such determination is
made demonstrate clearly and convincingly that such person acted in bad faith or
in a manner that such person did not believe to be in or not opposed to the best
interests of the corporation.
(d) ENFORCEMENT. Without the necessity of entering into an express
contract, all rights to indemnification and advances to directors and executive
officers under this Bylaw shall be deemed to be contractual rights and be
effective to the same extent and as if provided for in a contract between the
corporation and the director or executive officer. Any right to indemnification
or advances granted by this Section 43 to a director or executive officer shall
be enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. In connection with any claim for indemnification, the
corporation shall be entitled to raise as a defense to any such action that the
claimant has not met the standards of conduct that make it permissible under the
DGCL or any other applicable law for the corporation to indemnify the claimant
for the amount claimed. In connection with any claim by an executive officer of
the corporation (except in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
executive officer is or was a director of the corporation) for advances, the
corporation shall be entitled to raise a defense as to any such action clear and
convincing evidence that such person acted in bad faith or in a manner that such
person did not believe to be in or not opposed to the best interests of the
corporation, or with respect to any criminal action or proceeding that such
person acted without reasonable cause to believe that his conduct was lawful.
Neither the failure of the corporation (including its Board of Directors,
independent legal counsel or its stockholders) to
20.
<PAGE> 25
have made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because he has
met the applicable standard of conduct set forth in the DGCL or any other
applicable law, nor an actual determination by the corporation (including its
Board of Directors, independent legal counsel or its stockholders) that the
claimant has not met such applicable standard of conduct, shall be a defense to
the action or create a presumption that claimant has not met the applicable
standard of conduct. In any suit brought by a director or executive officer to
enforce a right to indemnification or to an advancement of expenses hereunder,
the burden of proving that the director or executive officer is not entitled to
be indemnified, or to such advancement of expenses, under this Section 43 or
otherwise shall be on the corporation.
(e) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person by
this Bylaw shall not be exclusive of any other right which such person may have
or hereafter acquire under any applicable statute, provision of the Certificate
of Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its directors,
officers, employees or agents respecting indemnification and advances, to the
fullest extent not prohibited by the Delaware General Corporation Law, or by any
other applicable law.
(f) SURVIVAL OF RIGHTS. The rights conferred on any person by this
Bylaw shall continue as to a person who has ceased to be a director, officer,
employee or other agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.
(g) INSURANCE. To the fullest extent permitted by the DGCL or any
other applicable law, the corporation, upon approval by the Board of Directors,
may purchase insurance on behalf of any person required or permitted to be
indemnified pursuant to this Section 43.
(h) AMENDMENTS. Any repeal or modification of this Section 43 shall
only be prospective and shall not affect the rights under this Bylaw in effect
at the time of the alleged occurrence of any action or omission to act that is
the cause of any proceeding against any agent of the corporation.
(i) SAVING CLAUSE. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and executive officer to
the full extent not prohibited by any applicable portion of this Section 43 that
shall not have been invalidated, or by any other applicable law. If this Section
43 shall be invalid due to the application of the indemnification provisions of
another jurisdiction, then the corporation shall indemnify each director and
executive officer to the full extent under any other applicable law.
(j) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the
following definitions shall apply:
(1) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement,
21.
<PAGE> 26
arbitration and appeal of, and the giving of testimony in, any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative.
(2) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of any
nature or kind incurred in connection with any proceeding.
(3) The term the "corporation" shall include, in addition to
the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Section 43 with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(4) References to a "director," "executive officer,"
"officer," "employee," or "agent" of the corporation shall include, without
limitation, situations where such person is serving at the request of the
corporation as, respectively, a director, executive officer, officer, employee,
trustee or agent of another corporation, partnership, joint venture, trust or
other enterprise.
(5) References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on
a person with respect to an employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with respect to
an employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Section 43.
ARTICLE XII
NOTICES
SECTION 44. NOTICES.
(a) NOTICE TO STOCKHOLDERS. Whenever, under any provisions of these
Bylaws, notice is required to be given to any stockholder, it shall be given in
writing, timely and duly deposited in the United States mail, postage prepaid,
and addressed to his last known post office address as shown by the stock record
of the corporation or its transfer agent.
(b) NOTICE TO DIRECTORS. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by overnight
delivery service, facsimile, telex
22.
<PAGE> 27
or telegram, except that such notice other than one which is delivered
personally shall be sent to such address as such director shall have filed in
writing with the Secretary, or, in the absence of such filing, to the last known
post office address of such director.
(c) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by a
duly authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.
(d) TIME NOTICES DEEMED GIVEN. All notices given by mail or by
overnight delivery service, as above provided, shall be deemed to have been
given as at the time of mailing, and all notices given by facsimile, telex or
telegram shall be deemed to have been given as of the sending time recorded at
time of transmission.
(e) METHODS OF NOTICE. It shall not be necessary that the same
method of giving notice be employed in respect of all directors, but one
permissible method may be employed in respect of any one or more, and any other
permissible method or methods may be employed in respect of any other or others.
(f) FAILURE TO RECEIVE NOTICE. The period or limitation of time
within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such director to receive such
notice.
(g) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL. Whenever
notice is required to be given, under any provision of law or of the Certificate
of Incorporation or Bylaws of the corporation, to any person with whom
communication is unlawful, the giving of such notice to such person shall not be
required and there shall be no duty to apply to any governmental authority or
agency for a license or permit to give such notice to such person. Any action or
meeting which shall be taken or held without notice to any such person with whom
communication is unlawful shall have the same force and effect as if such notice
had been duly given. In the event that the action taken by the corporation is
such as to require the filing of a certificate under any provision of the DGCL,
the certificate shall state, if such is the fact and if notice is required, that
notice was given to all persons entitled to receive notice except such persons
with whom communication is unlawful.
(h) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever notice is
required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person
23.
<PAGE> 28
shall not be required. Any action or meeting which shall be taken or held
without notice to such person shall have the same force and effect as if such
notice had been duly given. If any such person shall deliver to the corporation
a written notice setting forth his then current address, the requirement that
notice be given to such person shall be reinstated. In the event that the action
taken by the corporation is such as to require the filing of a certificate under
any provision of the DGCL, the certificate need not state that notice was not
given to persons to whom notice was not required to be given pursuant to this
paragraph.
ARTICLE XIII
AMENDMENTS
SECTION 45. AMENDMENTS. Subject to paragraph (h) of Section 43 of the
Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by the
affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then-outstanding shares of the voting stock of the
corporation entitled to vote. The Board of Directors shall also have the power
to adopt, amend, or repeal Bylaws.
ARTICLE XIV
LOANS TO OFFICERS
SECTION 46. LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in these Bylaws shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
24.
<PAGE> 1
EXHIBIT 10.1
IPASS INC.
AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
SEPTEMBER 13, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 1. GENERAL................................................ 1
1.1 Definitions............................................ 1
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER................. 3
2.1 Restrictions on Transfer............................... 3
2.2 Demand Registration.................................... 4
2.3 Piggyback Registrations................................ 5
2.4 Form S-3 Registration.................................. 6
2.5 Expenses of Registration............................... 7
2.6 Obligations of the Company............................. 7
2.7 Termination of Registration Rights..................... 9
2.8 Delay of Registration; Furnishing Information.......... 9
2.9 Indemnification........................................ 9
2.10 Assignment of Registration Rights...................... 11
2.11 Amendment of Registration Rights....................... 11
2.12 Limitation on Subsequent Registration Rights........... 12
2.13 "Market Stand-Off" Agreement........................... 12
2.14 Rule 144 Reporting..................................... 12
SECTION 3. COVENANTS OF THE COMPANY............................... 13
3.1 Basic Financial Information and Reporting.............. 13
3.2 Inspection Rights...................................... 13
3.3 Confidentiality of Records............................. 14
3.4 Reservation of Common Stock............................ 14
3.5 Stock Vesting.......................................... 14
3.6 Key Man Insurance...................................... 14
3.7 Proprietary Information and Inventions Agreement....... 14
3.8 Real Property Holding Corporation...................... 14
3.9 Termination of Covenants............................... 15
SECTION 4. RIGHTS OF FIRST REFUSAL................................ 15
4.1 Subsequent Offerings................................... 15
4.2 Exercise of Rights..................................... 15
4.3 Issuance of Equity Securities to Other Persons......... 15
4.4 Termination of Rights of First Refusal................. 16
</TABLE>
i.
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
4.5 Transfer of Rights of First Refusal.................... 16
4.6 Excluded Securities.................................... 16
SECTION 5. MISCELLANEOUS.......................................... 17
5.1 Governing Law.......................................... 17
5.2 Survival............................................... 17
5.3 Successors and Assigns................................. 17
5.4 Severability........................................... 17
5.5 Amendment and Waiver................................... 17
5.6 Delays or Omissions.................................... 17
5.7 Notices................................................ 18
5.8 Attorneys' Fees........................................ 18
5.9 Titles and Subtitles................................... 18
5.10 Counterparts........................................... 18
5.11 Aggregation of Stock................................... 18
</TABLE>
ii.
<PAGE> 4
iPASS INC.
AMENDED AND RESTATED
INVESTOR RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT (the "Agreement")
is entered into as of September 13, 1999, by and among iPASS INC., a California
corporation (the "Company") and the purchasers of the Company's Preferred Stock
("Preferred Stock") set forth on Exhibit A ("Schedule of Holders of Preferred
Stock") hereto and the founders set forth on Exhibit B ("Schedule of Founders")
hereto (the "Founders"). The purchasers of the Preferred Stock and the Founders
shall be referred to hereinafter as the "Investors" and each individually as an
"Investor."
RECITALS
WHEREAS, that certain Amended and Restated Investor Rights Agreement
dated as of December 31, 1997, by and among the Company and certain shareholders
of the Company (the "Prior Investors") (the "Prior Agreement"), provides for the
rights and obligations of the Company and such shareholders with respect to
registration rights, information rights and other rights; and
WHEREAS, in connection with the Company's issuance of shares of Series
E Preferred Stock pursuant to the Series E Preferred Stock Purchase Agreement of
even date herewith (the "Series E Purchase Agreement"), between the Company and
certain investors (the "Series E Investors"), the Company and the Prior
Investors wish to amend and restate the Prior Agreement to include the Series E
Investors as parties thereto (to the extent they are not already parties) and to
include such investors within the rights and obligations thereof.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Prior Investors hereby agree that the Prior
Agreement shall be superseded and replaced in its entirety by this Agreement,
and the parties hereto further agree as follows:
SECTION 1. GENERAL.
1.1 DEFINITIONS. As used in this Agreement the following terms
shall have the following respective meanings:
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FORM S-3" means such form under the Securities Act as in
effect on the date hereof or any successor registration form under the
Securities Act subsequently adopted by the SEC which permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.
1.
<PAGE> 5
"HOLDER" means any person owning of record Shares or
Registrable Securities that have not been sold to the public or any assignee of
record of such Registrable Securities in accordance with Section 2.10 hereof.
"INITIAL OFFERING" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act.
"REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.
"REGISTRABLE SECURITIES" means (i) Common Stock of the Company
issued or issuable upon conversion of the Shares, (ii) Common Stock held by the
Founders as of the date of this Agreement as set forth on Exhibit B and any
Common Stock acquired by the Founders after the date of this Agreement, and
(iii) any Common Stock of the Company issued as (or issuable upon the conversion
or exercise of any warrant, right or other security which is issued as) a
dividend or other distribution with respect to, or in exchange for or in
replacement of, such above-described securities. Notwithstanding the foregoing,
Registrable Securities shall not include any securities sold by a person to the
public either pursuant to a registration statement or Rule 144 or sold in a
private transaction in which the transferror's rights under Article II of this
Agreement are not assigned.
"REGISTRABLE SECURITIES THEN OUTSTANDING" shall be the number
of shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (1) are then issued and
outstanding or (2) are issuable pursuant to then exercisable or convertible
securities.
"REGISTRATION EXPENSES" shall mean all expenses incurred by
the Company in complying with Sections 2.2, 2.3 and 2.4 hereof, including,
without limitation, all registration and filing fees, printing expenses, fees
and disbursements of counsel for the Company, reasonable fees and disbursements
not to exceed Ten Thousand Dollars ($10,000) of a single special counsel for the
Holders, blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company).
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SELLING EXPENSES" shall mean all underwriting discounts and
selling commissions applicable to the sale.
"SHARES" shall mean the Preferred Stock set forth on Exhibit A
hereto.
"SEC" or "COMMISSION" means the Securities and Exchange
Commission.
2.
<PAGE> 6
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER.
2.1 RESTRICTIONS ON TRANSFER.
(a) Each Holder agrees not to make any disposition of all or
any portion of the Shares or Registrable Securities unless and until:
(i) There is then in effect a registration statement under
the Securities Act covering such proposed disposition and such disposition is
made in accordance with such registration statement; or
(ii) (A) The transferee has agreed in writing to be bound
by the terms of this Agreement, (B) such Holder shall have notified the Company
of the proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (C) if
reasonably requested by the Company, such Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
(iii) Notwithstanding the provisions of paragraphs (i) and
(ii) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by a Holder which is (A) a partnership to its partners
or former partners in accordance with partnership interests, (B) a corporation
to its shareholders in accordance with their interest in the corporation, (C) a
limited liability company to its members or former members in accordance with
their interest in the limited liability company, or (D) to the Holder's family
member or trust for the benefit of an individual Holder, provided the transferee
will be subject to the terms of this Agreement to the same extent as if he were
an original Holder hereunder.
(b) Each certificate representing Shares or Registrable
Securities shall (unless otherwise permitted by the provisions of the Agreement)
be stamped or otherwise imprinted with a legend substantially similar to the
following (in addition to any legend required under applicable state securities
laws or as provided elsewhere in this Agreement):
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, ASSIGNED,
PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER
THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT
SUCH REGISTRATION IS NOT REQUIRED.
(c) The Company shall be obligated to reissue promptly
unlegended certificates at the request of any holder thereof if the holder shall
have obtained an opinion of counsel (which counsel may be counsel to the
Company) reasonably acceptable to the Company
3.
<PAGE> 7
to the effect that the securities proposed to be disposed of may lawfully be so
disposed of without registration, qualification or legend.
(d) Any legend endorsed on an instrument pursuant to
applicable state securities laws and the stop-transfer instructions with respect
to such securities shall be removed upon receipt by the Company of an order of
the appropriate blue sky authority authorizing such removal.
2.2 DEMAND REGISTRATION.
(a) Subject to the conditions of this Section 2.2, if the
Company shall receive a written request from the Holders (excluding the Holders
set forth on Exhibit B) of more than thirty percent (30%) of the Registrable
Securities then outstanding (the "Initiating Holders") that the Company file a
registration statement under the Securities Act covering the registration of
Registrable Securities having an aggregate offering price to the public in
excess of $7,500,000 (a "Qualified Public Offering"), then the Company shall,
within thirty (30) days of the receipt thereof, give written notice of such
request to all Holders, and subject to the limitations of this Section 2.2, use
its best efforts to effect, as soon as practicable, the registration under the
Securities Act of all Registrable Securities that the Holders request to be
registered.
(b) If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 2.2 and the Company shall include such information in the written
notice referred to in Section 2.2(a). In such event, the right of any Holder to
include its Registrable Securities in such registration shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting (unless otherwise mutually
agreed by a majority in interest of the Initiating Holders and such Holder) to
the extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by a majority in interest of the Initiating Holders (which
underwriter or underwriters shall be reasonably acceptable to the Company).
Notwithstanding any other provision of this Section 2.2, if the underwriter
advises the Company that marketing factors require a limitation of the number of
securities to be underwritten (including Registrable Securities) then the
Company shall so advise all Holders of Registrable Securities which would
otherwise be underwritten pursuant hereto, and the number of shares that may be
included in the underwriting shall be allocated to the Holders of such
Registrable Securities on a pro rata basis based on the number of Registrable
Securities held by all such Holders (including the Initiating Holders). Any
Registrable Securities excluded or withdrawn from such underwriting shall be
withdrawn from the registration.
(c) The Company shall not be required to effect a registration
pursuant to this Section 2.2:
(i) prior to the earlier of (i) October 1, 2001, or (ii)
one year after the Initial Offering of the Company's Common Stock; or
4.
<PAGE> 8
(ii) after the Company has effected two (2) registrations
pursuant to this Section 2.2, and such registrations have been declared or
ordered effective; or
(iii) during the period starting with the date of filing
of, and ending on the date one hundred eighty (180) days following the effective
date of the registration statement pertaining to the Initial Offering; provided
that the Company makes reasonable good faith efforts to cause such registration
statement to become effective;
(iv) if within thirty (30) days of receipt of a written
request from Initiating Holders pursuant to Section 2.2(a), the Company gives
notice to the Holders of the Company's bona fide intention to make its Initial
Offering within ninety (90) days and makes reasonable efforts to cause such
registration to become effective; or
(v) if the Company shall furnish to Holders requesting a
registration statement pursuant to this Section 2.2, a certificate signed by the
Chairman of the Board stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company and
its shareholders for such registration statement to be effected at such time, in
which event the Company shall have the right to defer such filing for a period
of not more than ninety (90) days after receipt of the request of the Initiating
Holders; provided that such right to delay a request shall be exercised by the
Company not more than once in any twelve (12) month period.
2.3 PIGGYBACK REGISTRATIONS. The Company shall notify all Holders
of Registrable Securities in writing at least thirty (30) days prior to the
filing of any registration statement under the Securities Act for purposes of a
public offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to employee benefit
plans or with respect to corporate reorganizations or other transactions under
Rule 145 of the Securities Act) and will afford each such Holder an opportunity
to include in such registration statement all or part of such Registrable
Securities held by such Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by it
shall, within fifteen (15) days after the above-described notice from the
Company, so notify the Company in writing. Such notice shall state the intended
method of disposition of the Registrable Securities by such Holder. If a Holder
decides not to include all of its Registrable Securities in any registration
statement thereafter filed by the Company, such Holder shall nevertheless
continue to have the right to include any Registrable Securities in any
subsequent registration statement or registration statements as may be filed by
the Company with respect to offerings of its securities, all upon the terms and
conditions set forth herein.
(a) UNDERWRITING. If the registration statement under which
the Company gives notice under this Section 2.3 is for an underwritten offering,
the Company shall so advise the Holders of Registrable Securities. In such
event, the right of any such Holder to be included in a registration pursuant to
this Section 2.3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the
5.
<PAGE> 9
Company. Notwithstanding any other provision of the Agreement, if the
underwriter determines in good faith that marketing factors require a limitation
of the number of shares to be underwritten, the number of shares that may be
included in the underwriting shall be allocated, first, to the Company; second,
to the Holders on a pro rata basis based on the total number of Registrable
Securities held by the Holders; and third, to any shareholder of the Company
(other than a Holder) on a pro rata basis. No such reduction shall reduce the
securities being offered by the Company for its own account to be included in
the registration and underwriting, and in no event shall the amount of
securities of the selling Holders included in the registration be reduced below
thirty percent (30%) of the total amount of securities included in such
registration, unless such offering is the Initial Offering and such registration
does not include shares of any other selling shareholders, in which event any or
all of the Registrable Securities of the Holders may be excluded in accordance
with the immediately preceding sentence. In no event will shares of any other
selling shareholder be included in such registration which would reduce the
number of shares which may be included by Holders without the written consent of
Holders of not less than a majority of the Registrable Securities proposed to be
sold in the offering.
(b) RIGHT TO TERMINATE REGISTRATION. The Company shall have
the right to terminate or withdraw any registration initiated by it under this
Section 2.3 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration. The Registration
Expenses of such withdrawn registration shall be borne by the Company in
accordance with Section 2.5 hereof.
2.4 FORM S-3 REGISTRATION. In case the Company shall receive from
the Holder or Holders of more than twenty percent (20%) of the Registrable
Securities then outstanding a written request or requests that the Company
effect a registration on Form S-3 (or any successor to Form S-3) or any similar
short-form registration statement and any related qualification or compliance
with respect to all or a part of the Registrable Securities owned by such Holder
or Holders, the Company will:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders of Registrable
Securities; and
(b) as soon as practicable, effect such registration and all
such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such Holder's
or Holders' Registrable Securities as are specified in such request, together
with all or such portion of the Registrable Securities of any other Holder or
Holders joining in such request as are specified in a written request given
within fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 2.4:
(i) if Form S-3 (or any successor or similar form) is not
available for such offering by the Holders, or
(ii) if the Holders, together with the holders of any
other securities of the Company entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities (if any) at an
aggregate price to the public of less than $500,000, or
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(iii) if the Company shall furnish to the Holders a
certificate signed by the Chairman of the Board of Directors of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its shareholders
for such Form S-3 Registration to be effected at such time, in which event the
Company shall have the right to defer the filing of the Form S-3 registration
statement for a period of not more than ninety (90) days after receipt of the
request of the Holder or Holders under this Section 2.4: provided, that such
right to delay a request shall be exercised by the Company not more than once in
any twelve (12) month period, or
(iv) if the Company has, within the six (6) month period
preceding the date of such request, already effected a registration on Form S-3
for the Holders pursuant to this Section 2.4, or
(v) in any particular jurisdiction in which the Company
would be required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a Form
S-3 registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt of
the request or requests of the Holders. All such Registration Expenses incurred
in connection with registrations requested pursuant to this Section 2.4 after
the first three (3) registrations shall be paid by the selling Holders pro rata
in proportion to the number of shares sold by each.
2.5 EXPENSES OF REGISTRATION. Except as specifically provided
herein, all Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.2, any registration under
Section 2.3 and the first three (3) registrations under Section 2.4 herein shall
be borne by the Company. All Selling Expenses incurred in connection with any
registrations hereunder, shall be borne by the Holders of the securities so
registered pro rata on the basis of the number of shares so registered. The
Company shall not, however, be required to pay for expenses of any registration
proceeding begun pursuant to Section 2.2 or 2.4, the request of which has been
subsequently withdrawn by the Initiating Holders unless (a) the withdrawal is
based upon material adverse information concerning the Company of which the
Initiating Holders were not aware at the time of such request or (b) the Holders
of a majority of Registrable Securities agree to forfeit their right to one
requested registration pursuant to Section 2.2 or Section 2.4, as applicable, in
which event such right shall be forfeited by all Holders. If the Holders are
required to pay the Registration Expenses, such expenses shall be borne by the
holders of securities (including Registrable Securities) requesting such
registration in proportion to the number of shares for which registration was
requested. If the Company is required to pay the Registration Expenses of a
withdrawn offering pursuant to clause (a) above, then the Holders shall not
forfeit their rights pursuant to Section 2.2 or Section 2.4 to a demand
registration.
2.6 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
7.
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(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use all reasonable efforts to
cause such registration statement to become effective, and, upon the request of
the Holders of a majority of the Registrable Securities registered thereunder,
keep such registration statement effective for up to ninety (90) days or, if
earlier, until the Holder or Holders have completed the distribution related
thereto.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable
Securities owned by them.
(d) Use all reasonable efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Furnish, at the request of a majority of the Holders
participating in the registration, on the date that such Registrable Securities
are delivered to the underwriters for sale, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering and reasonably satisfactory to a majority in interest of the Holders
requesting registration, addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Securities and (ii) a letter
dated as of such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of the Holders requesting
8.
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registration, addressed to the underwriters, if any, and if permitted by
applicable accounting standards, to the Holders requesting registration of
Registrable Securities.
2.7 TERMINATION OF REGISTRATION RIGHTS. All registration rights
granted under this Article II shall terminate and be of no further force and
effect five (5) years after the date of the Company's Initial Offering. In
addition, a Holder's registration rights shall expire if (i) the Company has
completed its Initial Offering and is subject to the provisions of the Exchange
Act, and (ii) all Registrable Securities held by and issuable to such Holder may
be sold under Rule 144(k) during any ninety (90) day period.
2.8 DELAY OF REGISTRATION; FURNISHING INFORMATION.
(a) No Holder shall have any right to obtain or seek an
injunction restraining or otherwise delaying any such registration as the result
of any controversy that might arise with respect to the interpretation or
implementation of this Article II.
(b) It shall be a condition precedent to the obligations of
the Company to take any action pursuant to Section 2.2, 2.3 or 2.4 that the
selling Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them and the intended method of
disposition of such securities as shall be required to effect the registration
of their Registrable Securities.
(c) The Company shall have no obligation with respect to any
registration requested pursuant to Section 2.2 or Section 2.4 if the number of
shares or the anticipated aggregate offering price of the Registrable Securities
to be included in the registration does not equal or exceed the number of shares
or the anticipated aggregate offering price required to originally trigger the
Company's obligation to initiate such registration as specified in Section 2.2
or Section 2.4, whichever is applicable.
2.9 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Sections 2.2, 2.3 or 2.4:
(a) To the extent permitted by law, the Company will
indemnify, defend and hold harmless each Holder, the partners, officers,
directors and legal counsel of each Holder, any underwriter (as defined in the
Securities Act) for such Holder and each person, if any, who controls such
Holder or underwriter within the meaning of the Securities Act or the Exchange
Act, against any losses, claims, damages, or liabilities (joint or several) to
which they may become subject under the Securities Act, the Exchange Act or
other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"Violation") by the Company: (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law in connection with the offering
9.
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covered by such registration statement; and the Company will reimburse each such
Holder, partner, officer or director, underwriter or controlling person for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided however, that the indemnity agreement contained in this Section 2.9(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company, which consent shall not be unreasonably withheld, nor shall the Company
be liable in any such case for any such loss, claim, damage, liability or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by such Holder, partner, officer,
director, underwriter or controlling person of such Holder.
(b) To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as to
which such registration qualifications or compliance is being effected,
indemnify, defend and hold harmless the Company, each of its directors, its
officers, and legal counsel and each person, if any, who controls the Company
within the meaning of the Securities Act, any underwriter and any other Holder
selling securities under such registration statement or any of such other
Holder's partners, directors or officers or any person who controls such Holder,
against any losses, claims, damages or liabilities (joint or several) to which
the Company or any such director, officer, controlling person, underwriter or
other such Holder, or partner, director, officer or controlling person of such
other Holder may become subject under the Securities Act, the Exchange Act or
other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Holder under an instrument duly executed by such Holder and
stated to be specifically for use in connection with such registration; and each
such Holder will reimburse any legal or other expenses reasonably incurred by
the Company or any such director, officer, controlling person, underwriter or
other Holder, or partner, officer, director or controlling person of such other
Holder in connection with investigating or defending any such loss, claim,
damage, liability or action if it is judicially determined that there was such a
Violation; provided, however, that the indemnity agreement contained in this
Section 2.9(b) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Holder, which consent shall not be unreasonably withheld;
provided further, that in no event shall any indemnity under this Section 2.9
exceed the net proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 2.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential
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<PAGE> 14
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action, if materially prejudicial to its ability to defend such action,
shall relieve such indemnifying party of any liability to the indemnified party
under this Section 2.9, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 2.9.
(d) If the indemnification provided for in this Section 2.9 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; provided, that in no event shall any contribution by a
Holder hereunder exceed the proceeds from the offering received by such Holder.
(e) The obligations of the Company and Holders under this
Section 2.9 shall survive completion of any offering of Registrable Securities
in a registration statement. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect to such
claim or litigation.
2.10 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Article II may be
assigned by a Holder to a transferee or assignee of Registrable Securities which
(i) is a subsidiary, parent, general partner, limited partner or retired partner
of a Holder, (ii) is a Holder's family member or trust for the benefit of an
individual Holder, or (iii) acquires at least three hundred thousand (300,000)
shares of Registrable Securities (as adjusted for stock splits and combinations
(other than the 3-for-1 stock split effected in September 1999 (the "September
1999 Stock Split"); provided, however, (A) the transferor shall, within ten (10)
days after such transfer, furnish to the Company written notice of the name and
address of such transferee or assignee and the securities with respect to which
such registration rights are being assigned and (B) such transferee shall agree
to be subject to all restrictions set forth in this Agreement.
2.11 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this
Article II may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Holders of
at least a majority of the Registrable Securities then outstanding. Any
amendment or
11.
<PAGE> 15
waiver effected in accordance with this Section 2.11 shall be binding upon each
Holder and the Company. By acceptance of any benefits under this Article II,
Holders of Registrable Securities hereby agree to be bound by the provisions
hereunder.
2.12 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. After the date
of this Agreement, the Company shall not, without the prior written consent of
the Holders of a majority of the Registrable Securities, enter into any
agreement with any holder or prospective holder of any securities of the Company
that would grant such holder registration rights senior or equal to those
granted to the Holders hereunder.
2.13 "MARKET STAND-OFF" AGREEMENT. If requested by the Company or
the representative of the underwriters of Common Stock (or other securities) of
the Company, each Holder shall not sell or otherwise transfer or dispose of any
Common Stock (or other securities) of the Company held by such Holder (other
than those included in the registration) for a period specified by the
representative of the underwriters not to exceed one hundred eighty (180) days
following the effective date of a registration statement of the Company filed
under the Securities Act with respect to the Initial Offering and with respect
to any other offering in which such Holders of Registrable Securities are
included, provided that all officers and directors of the Company enter into
similar agreements.
The obligations described in this Section 2.13 shall not apply
to a registration relating solely to employee benefit plans on Form S-1 or Form
S-8 or similar forms that may be promulgated in the future, or a registration
relating solely to a Commission Rule 145 transaction on Form S-4 or similar
forms that may be promulgated in the future. The Company may impose
stop-transfer instructions with respect to the shares of Common Stock (or other
securities) subject to the foregoing restriction until the end of said one
hundred eighty (180) day period.
2.14 RULE 144 REPORTING. With a view to making available to the
Holders the benefits of certain rules and regulations of the SEC which may
permit the sale of the Registrable Securities to the public without
registration, the Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms
are understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public;
(b) File with the SEC, in a timely manner, all reports and
other documents required of the Company under the Exchange Act;
(c) So long as a Holder owns any Registrable Securities,
furnish to such Holder forthwith upon request: a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144 of
the Securities Act, and of the Exchange Act (at any time after it has become
subject to such reporting requirements); a copy of the most recent annual or
quarterly report of the Company; and such other reports and documents as a
Holder may reasonably request in availing itself of any rule or regulation of
the SEC allowing it to sell any such securities without registration.
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SECTION 3. COVENANTS OF THE COMPANY.
3.1 BASIC FINANCIAL INFORMATION AND REPORTING.
(a) The Company will maintain true books and records of
account in which full and correct entries will be made of all its business
transactions pursuant to a system of accounting established and administered in
accordance with generally accepted accounting principles consistently applied,
and will set aside on its books all such proper accruals and reserves as shall
be required under generally accepted accounting principles consistently applied.
(b) As soon as practicable after the end of each fiscal year
of the Company, and in any event within one hundred twenty (120) days
thereafter, the Company will furnish each Investor a consolidated balance sheet
of the Company, as at the end of such fiscal year, and a consolidated statement
of income and a consolidated statement of cash flows of the Company, for such
year, all prepared in accordance with generally accepted accounting principles
consistently applied and setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail. Such financial
statements shall be accompanied by a report and opinion thereon by independent
auditors selected by the Company's Board of Directors.
(c) The Company will furnish each Investor, as soon as
practicable after the end of the first, second and third quarterly accounting
periods in each fiscal year of the Company, and in any event within ninety (90)
days thereafter, a consolidated balance sheet of the Company as of the end of
each such quarterly period, and a consolidated statement of income and a
consolidated statement of cash flows of the Company for such period and for the
current fiscal year to date, prepared in accordance with generally accepted
accounting principles, with the exception that no notes need be attached to such
statements and year-end audit adjustments may not have been made.
(d) So long as an Investor (with its affiliates) shall own not
less than five hundred thousand (500,000) shares of Registrable Securities (as
adjusted for stock splits and combinations (other than the September 1999 Stock
Split)) (a "Major Investor"), the Company will furnish each such Major Investor
(i) at least thirty (30) days prior to the beginning of each fiscal year an
annual budget and operating plan for such fiscal year (and as soon as available,
any subsequent revisions thereto); and (ii) as soon as practicable after the end
of each month, and in any event within twenty (20) days thereafter, a
consolidated balance sheet of the Company as of the end of each such month, and
a consolidated statement of income and a consolidated statement of cash flows of
the Company for such month and for the current fiscal year to date, including a
comparison to plan figures for such period, prepared in accordance with
generally accepted accounting principles consistently applied, with the
exception that no notes need be attached to such statements and year-end audit
adjustments may not have been made.
3.2 INSPECTION RIGHTS. Each Major Investor shall have the right to
visit and inspect any of the properties of the Company or any of its
subsidiaries, and to discuss the affairs, finances and accounts of the Company
or any of its subsidiaries with its officers, and to review such information as
is reasonably requested all at such reasonable times and as often as may be
reasonably requested; provided, however, that the Company shall not be obligated
under this
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Section 3.2 with respect to information which the Board of Directors determines
in good faith is confidential and creates a conflict of interest with such Major
Investor.
3.3 CONFIDENTIALITY OF RECORDS. Each Investor, other than Intel
Corporation, agrees to use, and to use its best efforts to insure that its
authorized representatives use, the same degree of care as such Investor uses to
protect its own confidential information to keep confidential any information
furnished to it which the Company identifies as being confidential or
proprietary (so long as such information is not in the public domain), except
that such Investor may disclose such proprietary or confidential information to
any partner, subsidiary or parent of such Investor for the purpose of evaluating
its investment in the Company as long as such partner, subsidiary or parent is
advised of the confidentiality provisions of this Section 3.3. With respect to
Intel Corporation, the Company's confidential and proprietary information shall
be governed by that certain Corporate Non-Disclosure Agreement No. 7541436
between the Company and Intel Corporation dated as of October 14, 1998.
3.4 RESERVATION OF COMMON STOCK. The Company will at all times
reserve and keep available, solely for issuance and delivery upon the conversion
of the Preferred Stock, all Common Stock issuable from time to time upon such
conversion.
3.5 STOCK VESTING. Unless otherwise approved by the Board of
Directors, all stock options and other stock equivalents issued after the date
of this Agreement to employees, directors, consultants and other service
providers shall be subject to vesting as follows: (i) twenty-five percent (25%)
of such stock shall vest at the end of the first year following the earlier of
the date of issuance or such person's services commencement date with the
Company, and (ii) seventy-five percent (75%) of such stock shall vest monthly
over the remaining three (3) years. With respect to any shares of stock
purchased by any such person, the Company's repurchase option shall provide that
upon such person's termination of employment or service with the Company, with
or without cause, the Company or its assignee (to the extent permissible under
applicable securities laws and other laws) shall have the option to purchase at
cost any unvested shares of stock held by such person.
3.6 KEY MAN INSURANCE. Subject to the approval of the Board of
Directors, the Company will use reasonable efforts to obtain and maintain in
full force and effect term life insurance in the amount of one million
($1,000,000) dollars on the life of Michael Mansouri, naming the Company as
beneficiary.
3.7 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT. The Company
shall require all employees and consultants to execute and deliver a Proprietary
Information and Inventions Agreement in substantially the form attached to the
Purchase Agreement.
3.8 REAL PROPERTY HOLDING CORPORATION. The Company covenants that
it will operate in a manner such that it will not become a "United States real
property holding corporation" as that term is defined in Section 897(c)(2) of
the Internal Revenue Code of 1986, as amended, and the regulations thereunder
("FIRPTA"). The Company agrees to make determinations as to its status as a
USRPHC, and will file statements concerning those determinations with the
Internal Revenue Service, in the manner and at the times required under Reg.
Section 1.897-2(h), or any supplementary or successor provision thereto. Within
30 days of a
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request from an Investor or any of its partners, the Company will inform the
requesting party, in the manner set forth in Reg. Section 1.897- 2(h)(1)(iv) or
any supplementary or successor provision thereto, whether that party's interest
in the Company constitutes a United States real property interest (within the
meaning of Internal Revenue Code Section 897(c)(1) and the regulations
thereunder) and whether the Company has provided to the Internal Revenue Service
all required notices as to its USRPHC status.
3.9 TERMINATION OF COVENANTS. All covenants of the Company
contained in Article III of this Agreement shall expire and terminate as to each
Investor on the effective date of the registration statement pertaining to the
Initial Offering.
SECTION 4. RIGHTS OF FIRST REFUSAL.
4.1 SUBSEQUENT OFFERINGS. Each Investor shall have a right of
first refusal to purchase its pro rata share of all Equity Securities, as
defined below, that the Company may, from time to time, propose to sell and
issue after the date of this Agreement, other than the Equity Securities
excluded by Section 4.6 hereof. Each Investor's pro rata share is equal to the
ratio of (A) the number of shares of the Company's Common Stock (including all
shares of Common Stock issued or issuable upon conversion of the Shares) which
such Investor is deemed to be a holder immediately prior to the issuance of such
Equity Securities to (B) the total number of shares of the Company's outstanding
Common Stock (including all shares of Common Stock issued or issuable upon
conversion of the Shares or upon the exercise of any outstanding warrants or
options) immediately prior to the issuance of the Equity Securities. The term
"Equity Securities" shall mean (i) any Common Stock, Preferred Stock or other
security of the Company, (ii) any security convertible, with or without
consideration, into any Common Stock, Preferred Stock or other security
(including any option to purchase such a convertible security), (iii) any
security carrying any warrant or right to subscribe to or purchase any Common
Stock, Preferred Stock or other security or (iv) any such warrant or right.
4.2 EXERCISE OF RIGHTS. If the Company proposes to issue any
Equity Securities, it shall give each Investor written notice of its intention,
describing the Equity Securities, the price and the terms and conditions upon
which the Company proposes to issue the same. Each Investor shall have fifteen
(15) days from the giving of such notice to agree to purchase its pro rata share
of the Equity Securities for the price and upon the terms and conditions
specified in the notice by giving written notice to the Company and stating
therein the quantity of Equity Securities to be purchased. Notwithstanding the
foregoing, the Company shall not be required to offer or sell such Equity
Securities to any Investor who would cause the Company to be in violation of
applicable federal securities laws by virtue of such offer or sale.
4.3 ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. If not all of
the Investors elect to purchase their pro rata share of the Equity Securities,
then the Company shall promptly notify in writing the Investors who do so elect
and shall offer such Investors the right to acquire such unsubscribed shares.
The Investors shall have five (5) days after receipt of such notice to notify
the Company of its election to purchase all or a portion thereof of the
unsubscribed shares. If the Investors fail to exercise in full the rights of
first refusal, the Company shall have ninety (90) days thereafter to sell the
Equity Securities in respect of which the Investor's rights were not exercised,
at a price and upon general terms and conditions materially no more favorable to
the
15.
<PAGE> 19
purchasers thereof than specified in the Company's notice to the Investors
pursuant to Section 4.2 hereof. If the Company has not sold such Equity
Securities within ninety (90) days of the notice provided pursuant to Section
4.2, the Company shall not thereafter issue or sell any Equity Securities,
without first offering such securities to the Investors in the manner provided
above.
4.4 TERMINATION OF RIGHTS OF FIRST REFUSAL. The rights of first
refusal established by this Article IV shall not apply to, and shall terminate
upon the effective date of the registration statement pertaining to the
Company's Initial Offering.
4.5 TRANSFER OF RIGHTS OF FIRST REFUSAL. The rights of first
refusal of each Investor under this Article IV may be transferred to the same
parties, subject to the same restrictions as any transfer of registration rights
pursuant to Section 2.10.
4.6 EXCLUDED SECURITIES. The rights of first refusal established
by this Article IV shall have no application to any of the following Equity
Securities:
(a) shares of Common Stock (and/or options, warrants or other
Common Stock purchase rights issued pursuant to such options, warrants or other
rights) issued or to be issued to employees, officers or directors of, or
consultants or advisors to the Company or any subsidiary, pursuant to stock
purchase or stock option plans or other arrangements that are approved by the
Board of Directors;
(b) stock issued pursuant to any rights or agreements
outstanding as of the date of this Agreement, options and warrants outstanding
as of the date of this Agreement; and stock issued pursuant to any such rights
or agreements granted after the date of this Agreement, provided that the rights
of first refusal established by this Article IV applied with respect to the
initial sale or grant by the Company of such rights or agreements;
(c) any Equity Securities issued for consideration other than
cash pursuant to a merger, consolidation, acquisition or similar business
combination;
(d) shares of Common Stock issued in connection with any stock
split, stock dividend or recapitalization by the Company;
(e) shares of Common Stock issued upon conversion of the
Shares;
(f) any Equity Securities issued pursuant to any equipment
leasing arrangement, or debt financing from a bank or similar financial
institution approved by the Board of Directors;
(g) any Equity Securities that are issued by the Company
pursuant to a registration statement filed under the Securities Act; and
(h) shares of the Company's Common Stock or Preferred Stock
issued in connection with strategic transactions involving the Company and other
entities, including (A) joint ventures, manufacturing, marketing or distribution
arrangements or (B) technology transfer or development arrangements; provided
that such strategic transactions and the issuance of shares therein, have been
approved by the Company's Board of Directors.
16.
<PAGE> 20
SECTION 5. MISCELLANEOUS.
5.1 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.
5.2 SURVIVAL. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by any Holder and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
5.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities from time to time;
provided, however, that prior to the receipt by the Company of adequate written
notice of the transfer of any Registrable Securities specifying the full name
and address of the transferee, the Company may deem and treat the person listed
as the holder of such shares in its records as the absolute owner and holder of
such shares for all purposes, including the payment of dividends or any
redemption price.
5.4 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
5.5 AMENDMENT AND WAIVER.
(a) Except as otherwise expressly provided, this Agreement may
be amended or modified only upon the written consent of the Company and the
holders of at least two-thirds (66 2/3%) of the Registrable Securities.
(b) Except as otherwise expressly provided, the obligations of
the Company and the rights of the Holders under this Agreement may be waived
only with the written consent of the holders of at least a majority of the
Registrable Securities.
(c) Notwithstanding the foregoing, this Agreement may be
amended with only the written consent of the Company to include additional
purchasers of Shares as "Investors," "Holders" and parties hereto.
5.6 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under the Agreement or
any waiver on such
17.
<PAGE> 21
Holder's part of any provisions or conditions of this Agreement must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement, by law, or otherwise
afforded to Holders, shall be cumulative and not alternative.
5.7 NOTICES. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given: (i) upon personal delivery to
the party to be notified, (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (iii) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (iv) one (1) day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the
party to be notified at the address as set forth on the signature pages hereof
or Exhibit A hereto or at such other address as such party may designate by ten
(10) days advance written notice to the other parties hereto.
5.8 ATTORNEYS' FEES. In the event that any dispute among the
parties to this Agreement should result in litigation, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
5.9 TITLES AND SUBTITLES. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
5.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
5.11 AGGREGATION OF STOCK. All shares of the Preferred Stock held
or acquired by affiliated entities or persons shall be aggregated together for
the purpose of determining the availability of any rights under this Agreement.
[THIS SPACE INTENTIONALLY LEFT BLANK]
18.
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have executed this AMENDED AND
RESTATED INVESTOR RIGHTS AGREEMENT as of the date set forth in the first
paragraph hereof.
COMPANY: INVESTORS:
IPASS INC. CROSSPOINT VENTURE PARTNERS 1996
By: /s/ Michael Mansouri By: /s/ Seth Neiman
---------------------------- ---------------------------------------
Printed Name: Michael Mansouri Printed Name:
------------------ -----------------------------
Title: President and CEO Title:
------------------------- ------------------------------------
CROSSPOINT VENTURE PARTNERS LS 1997 FUND
By: /s/ Seth Neiman
---------------------------------------
Printed Name:
-----------------------------
Title:
------------------------------------
APV TECHNOLOGY PARTNERS II, L.P.
By: APV Management Co. II, L.L.C.,
Managing General Partner
By: /s/ Peter G. Bodine
---------------------------------------
Managing Member
Printed Name: Peter G. Bodine
-----------------------------
APV TECHNOLOGY PARTNERS US, L.P.
By: APV Management Co., L.L.C.
Managing General Partner
By: /s/ Peter G. Bodine
---------------------------------------
Managing Member
Printed Name: Peter G. Bodine
-----------------------------
iPass, Inc.
Amended and Restated Investor Rights Agreement
Signature Page
19
<PAGE> 23
APV TECHNOLOGY PARTNERS, L.P.
By: APV Management Co., L.L.C.
Managing General Partner
By: /s/ Peter G. Bodine
---------------------------------------
Managing Member
Printed Name: Peter G. Bodine
-----------------------------
WPS, L.L.C.
By: /s/ Peter G. Bodine
---------------------------------------
Managing Member
Printed Name: Peter G. Bodine
-----------------------------
ACCEL V L.P.
By: Accel V Associates L.L.C.
Its General Partner
By: /s/ G. Carter Sednaoui
---------------------------------------
Managing Member
Printed Name: G. Carter Sednaoui
-----------------------------
ACCEL INTERNET/STRATEGIC
TECHNOLOGY FUND L.P.
By: Accel Internet/Strategic
Technology Fund Associates L.L.C.
Its General Partner
By: /s/ G. Carter Sednaoui
---------------------------------------
Managing Member
Printed Name: G. Carter Sednaoui
-----------------------------
iPass, Inc.
Amended and Restated Investor Rights Agreement
Signature Page
20
<PAGE> 24
ACCEL KEIRETSU V L.P.
By: Accel Keiretsu V Associates L.L.C.
Its General Partner
By: /s/ G. Carter Sednaoui
---------------------------------------
Managing Member
Printed Name: G. Carter Sednaoui
-----------------------------
ACCEL INVESTORS '96 L.P.
By: /s/ G. Carter Sednaoui
---------------------------------------
Its General Partner
Printed Name: G. Carter Sednaoui
-----------------------------
ELLMORE C. PATTERSON PARTNERS
By: /s/ Arthur Patterson
---------------------------------------
General Partner
Printed Name: Arthur C. Patterson
-----------------------------
INTEL CORPORATION
By: /s/ Arvind Sodhani
---------------------------------------
Arvind Sodhani
Vice President and Treasurer
CELEBRITY SOFTWARE LIMITED
By:
---------------------------------------
Printed Name:
-----------------------------
Title:
------------------------------------
iPass, Inc.
Amended and Restated Investor Rights Agreement
Signature Page
21
<PAGE> 25
JAMBOREE INVESTMENTS, INC.
By: /s/ JOHN ALSOP
---------------------------------------
Printed Name: John Alsop
-----------------------------
Title:
------------------------------------
PEAPOD GROUP LIMITED
By: /s/ LAWRENCE MORRICE
---------------------------------------
Printed Name: Lawrence Stuart Morrice
-----------------------------
Title: Director
------------------------------------
KAREN CHAKMAKIAN
By: /s/ KAREN CHAKMAKIAN
---------------------------------------
Printed Name:
-----------------------------
Title:
------------------------------------
PETER COX
By: /s/ PETER COX
---------------------------------------
Printed Name: Peter Cox
-----------------------------
Title:
------------------------------------
iPass, Inc.
Amended and Restated Investor Rights Agreement
Signature Page
22
<PAGE> 26
CHRISTOPHER W. MOORE
By: /s/ CHRISTOPHER MOORE
---------------------------------------
Printed Name:
-----------------------------
Title:
------------------------------------
THOMVEST HOLDINGS INC.
By: /s/ WILLIAM T. DODDS
---------------------------------------
Printed Name: William T. Dodds
-----------------------------
Title: Vice President and Secretary
------------------------------------
1267104 ONTARIO LTD.
By: /s/ TAYLOR THOMSON
---------------------------------------
Printed Name: Taylor Thomson
-----------------------------
Title: President
------------------------------------
COMDISCO, INC.
By: /s/ JAMES LABE
---------------------------------------
Printed Name: James P. Labe
-----------------------------
Title: President, Comdisco Ventures
Division
------------------------------------
iPass, Inc.
Amended and Restated Investor Rights Agreement
Signature Page
23
<PAGE> 27
INTEL CORPORATION
By:
---------------------------------------
Printed Name:
-----------------------------
Title:
------------------------------------
MERITECH CAPITAL PARTNERS L.P.
By: Meritech Capital Associates L.L.C.
It's General Partner
By: Meritech Management Associates
L.L.C.
a Managing Member
By:
--------------------------------------
Paul Madera, a Managing Partner
MERITECH CAPITAL AFFILIATES L.P.
By: Meritech Capital Associates L.L.C.
It's General Partner
By: Meritech Management Associates
L.L.C.
a Managing Member
By:
--------------------------------------
Paul Madera, a Managing Partner
GC & H INVESTMENTS
By: /s/ JOHN L. CARDOZA
---------------------------------------
Printed Name: John L. Cardoza
-----------------------------
Title: Executive Partner
------------------------------------
iPass, Inc.
Amended and Restated Investor Rights Agreement
Signature Page
24
<PAGE> 1
EXHIBIT 10.2
IPASS INC.
AMENDED AND RESTATED SHAREHOLDERS AGREEMENT
THIS AMENDED AND RESTATED SHAREHOLDERS AGREEMENT (the "Agreement") is
made and entered into as of September 13, 1999, by and among IPASS INC., a
California corporation (the Company"), those certain holders of the Company's
Common Stock and Series A Preferred Stock listed on Exhibit A hereto (the "Key
Shareholders") and the individuals or entities listed on Exhibit B hereto (the
"Investors"). As used herein, the term "Holder" shall mean a Key Shareholder or
an Investor and the term "Holders" shall mean the Key Shareholders and Investors
collectively.
WITNESSETH:
WHEREAS, that certain Amended and Restated Shareholders Agreement dated
as of December 31, 1997, by and among the Company and certain shareholders of
the Company (the "Prior Investors") (the "Prior Agreement"), provides for the
voting of certain shares of the Company's capital stock in connection with the
election of directors; and
WHEREAS, in connection with the Company's issuance of shares of Series
E Preferred Stock pursuant to the Series E Preferred Stock Purchase Agreement of
even date herewith (the "Series E Purchase Agreement"), between the Company and
certain investors (the "Series E Investors"), the Company and the Prior
Investors wish to amend and restate the Prior Agreement to include the Series E
Investors as parties hereto (to the extent they are not already parties) and to
provide for the voting of shares of the Company's capital stock with respect to
the director allocated to the Series E Preferred Stock.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company and the Prior Investors hereby agree that the Prior
Agreement shall be superseded and replaced in its entirety by this Agreement,
and the parties hereto further agree as follows:
ARTICLE 1
AMENDMENT AND RESTATEMENT
1.1 AMENDMENT AND RESTATEMENT. Effective upon the closing of the
sale and issuance of the Series E Preferred Stock (the "Series E Preferred")
pursuant to the Series E Purchase Agreement, all provisions of, and rights
granted and covenants made in, the Prior Agreement are hereby waived, released
and terminated in their entirety and shall have no further force or effect
whatsoever. The rights and covenants contained in this Agreement set forth the
sole and entire agreement among the Company, the Prior Investors and the
Investors on the subject matter hereof and supersede any and all rights granted
or covenants made under the Prior Agreement.
1.
<PAGE> 2
ARTICLE 2
VOTING
2.1 SHARES. Each of the Holders agrees to hold all shares of
voting capital stock of the Company registered in its respective name or
beneficially owned by it as of the date hereof, and any and all other securities
of the Company legally or beneficially acquired by each of the Holders after the
date hereof, (hereinafter collectively referred to as the "Shares") subject to,
and to vote the Shares in accordance with, the provisions of this Agreement.
2.2 VOTING.
(a) At each election of directors in which the holders of the
Company's Common Stock are entitled to elect directors of the Company, the Key
Shareholders holding any shares of the Common Stock shall vote their respective
shares of the Company's voting stock for Michael Mansouri to serve on the
Company's Board of Directors.
(b) At each election of directors in which the holders of the
Company's Series A Preferred Stock are entitled to elect directors of the
Company, the Key Shareholders holding any shares of Series A Preferred Stock
shall vote their respective shares of the Company's voting stock for John Alsop
or one (1) nominee of the proxyholder of the shares of the Company held by
Jamboree Investments, Inc. ("Jamboree")(the "Proxyholder") and Peapod
Distribution Ltd. to serve on the Company's Board of Directors. Notwithstanding
the foregoing, the Proxyholder and Peapod Distribution Ltd. shall not nominate
Richard Earle to serve on the Company's Board of Directors.
(c) At each election of directors in which the holders of
Common Stock and Preferred Stock, voting together as a single class, are
collectively entitled to elect directors of the Company, the Key Shareholders
and Investors shall vote their respective shares of the Company's voting stock
for a nominee of the Board of Directors who (i) is not an employee of the
Company, (ii) possesses relevant industry experience and (iii) who is mutually
acceptable to the Key Shareholders and the Investors.
(d) At each election of directors in which the holders of the
Company's Series D Preferred Stock are entitled to elect a director of the
Company, the Key Shareholders and the Investors holding any shares of Series D
Preferred Stock shall vote their respective shares of the Company's Series D
Preferred Stock for one (1) nominee of Thomvest Holdings Inc. to serve on the
Company's Board of Directors.
(e) In the event of any vacancy on the Board of Directors, the
Holders agree to vote their shares in such a way as to maintain the composition
of the Board as set forth above.
2.3 LEGEND.
(a) There shall be imprinted or otherwise placed, on
certificates representing the Shares the following restrictive legend (the
"Legend"):
2.
<PAGE> 3
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
TERMS AND CONDITIONS OF A SHAREHOLDERS AGREEMENT WHICH PLACES CERTAIN
RESTRICTIONS ON THE VOTING OF THE SHARES REPRESENTED HEREBY. ANY PERSON
ACCEPTING ANY INTEREST IN SUCH SHARES SHALL BE DEEMED TO AGREE TO AND
SHALL BECOME BOUND BY ALL THE PROVISIONS OF SUCH AGREEMENT. A COPY OF
SUCH SHAREHOLDERS AGREEMENT WILL BE FURNISHED TO THE RECORD HOLDER OF
THIS CERTIFICATE WITHOUT CHARGE UPON WRITTEN REQUEST TO IPASS INC. AT
ITS PRINCIPAL PLACE OF BUSINESS."
(b) The Company agrees that, during the term of this
Agreement, it will not remove, and will not permit to be removed (upon
registration of transfer, reissuance of otherwise), the Legend from any such
certificate and will place or cause to be placed the Legend on any new
certificate issued to represent the Shares theretofore represented by a
certificate carrying the Legend.
2.4 SUCCESSORS. The provisions of this Agreement shall be binding
upon the successors in interest to any of the Shares. The Company shall not
permit the transfer of any of the Shares on its books or issue a new certificate
representing any of the Shares unless and until the person to whom such security
is to be transferred shall have executed a written agreement, substantially in
the form of this Agreement, pursuant to which such person becomes a party to
this Agreement and agrees to be bound by all the provisions hereof as if such
person were a Holder.
2.5 OTHER RIGHTS. Except as provided by this Agreement, each
Holder shall exercise the full rights of a shareholder with respect to the
Shares.
ARTICLE 3
TERMINATION
3.1 This Agreement shall continue in full force and effect from
the date hereof through the earliest of the following dates, on which it shall
terminate in its entirety:
(a) the date of the closing of a firmly underwritten public
offering of the Company's Common Stock pursuant to a registration statement
filed with, and declared effective under the Securities Act of 1933, as amended;
or
(b) ten (10) years from the date of this Agreement; or
(c) the date as of which the parties hereto terminate this
Agreement by written consent of all Holders.
3.
<PAGE> 4
ARTICLE 4
MISCELLANEOUS
4.1 OWNERSHIP. Each Holder represents and warrants to the Company
and the other Holders that (i) it now owns the Shares, free and clear of liens
or encumbrances, and has not, prior to or on the date of this Agreement,
executed or delivered any proxy or entered into any other voting agreement or
similar arrangement other than one which has expired or terminated prior to the
date hereof, and (ii) such Holder has full power and capacity to execute,
deliver and perform this Agreement, which has been duly executed and delivered
by, and evidences the valid and binding obligation of, Holder enforceable in
accordance with its terms.
4.2 FURTHER ACTION. If and whenever the Shares are sold, the
Holders or the personal representative of the Holders shall do all things and
execute and deliver all documents and make all transfers, and cause any
transferee of the Shares to do all things and execute and deliver all documents,
as may be necessary to consummate such sale consistent with this Agreement.
4.3 SPECIFIC PERFORMANCE. The parties hereto hereby declare that
it is impossible to measure in money the damages which will accrue to a party
hereto or their assigns by reason of a failure to perform any of the obligations
under this Agreement and agree that the terms of this Agreement shall be
specifically enforceable. If any party hereto or its assigns institutes any
action or proceeding to specifically enforce the provisions hereof, any party
against whom such action or proceeding is brought hereby waives the claim or
defense therein that such party has an adequate remedy at law, and such party
shall not offer in any such action or proceeding the claim or defense that such
remedy at law exists.
4.4 GOVERNING LAW. This Agreement, and the rights of the parties
hereto, shall be governed by and construed in accordance with the laws of the
State of California as such laws apply to agreements among California residents
made and to be performed entirely within the State of California.
4.5 AMENDMENT. This Agreement may be amended only by an instrument
in writing signed by (i) the Company, (ii) the persons holding more than fifty
percent (50%) in interest of the Shares held by the Key Shareholders, and (iii)
the persons holding more than fifty percent (50%) in the interest of the Shares
held by the Investors.
4.6 SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable, the validity and enforceability of the remaining
provisions of this Agreement shall not be affected thereby.
4.7 SUCCESSORS. This Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective assigns, administrators,
executors and other legal representatives.
4.8 ADDITIONAL SHARES. In the event that subsequent to the date of
this Agreement any shares or other securities (other than any shares or
securities of another corporation issued to
4.
<PAGE> 5
the Company's shareholders pursuant to a plan of merger) are issued on, or in
exchange for, any of the Shares by reason of any stock dividend, stock split,
consolidation of shares, reclassification or consolidation involving the
Company, such shares or securities shall be deemed to be the Shares for purposes
of this Agreement.
4.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original but all of which together
shall constitute one and the same agreement.
4.10 WAIVER. No waivers of any breach of this Agreement extended by
any party hereto to any other party shall be construed as a waiver of any rights
or remedies of any other party hereto or with respect to any subsequent breach.
4.11 ATTORNEY'S FEES. In the event that any suit or action is
instituted to enforce any provision in this Agreement, the prevailing party
shall be entitled to all costs and expenses of maintaining such suit or action,
including reasonable attorneys' fees.
4.12 AGGREGATION OF STOCK. All shares of the Preferred Stock held
or acquired by affiliated entities or persons shall be aggregated together for
the purpose of determining the availability of any rights under this Agreement.
[THIS SPACE INTENTIONALLY LEFT BLANK]
5.
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this AMENDED AND
RESTATED SHAREHOLDERS AGREEMENT as of the date first above written.
COMPANY: KEY SHAREHOLDERS:
IPASS INC. CELEBRITY SOFTWARE LIMITED
By: /s/MICHAEL MANSOURI By:
-----------------------
Michael Mansouri Printed Name:
President and Chief
Executive Officer Title:
/s/ CHRISTOPHER W. MOORE
----------------------------------------
CHRISTOPHER W. MOORE
/s/ KAREN CHAKAMAKIAN
----------------------------------------
KAREN CHAKAMAKIAN
JAMBOREE INVESTMENTS, INC.
By: /s/ JOHN ALSOP
----------------------------------------
Printed Name: JOHN ALSOP
--------------------------
Title:
---------------------------------
PEAPOD GROUP LIMITED
By:/s/ LAWRENCE STUART MORRICE
----------------------------------------
Printed Name: LAWRENCE STUART MORRICE
--------------------------
Title:
---------------------------------
/s/ PETER COX
----------------------------------------
PETER COX
iPass Inc.
Amended and Restated Shareholders Agreement
Signature Page
6.
<PAGE> 7
INVESTORS:
ACCEL INTERNET/STRATEGIC TECHNOLOGY
FUND L.P.
By: Accel Internet/Strategic Technology
Fund Associates L.L.C.
Its General Partner
By: /s/ G. CARTER SEDNAOUI
------------------------------------
Managing Member
Printed Name: G. Carter Sednaoui
--------------------------
ACCEL INVESTORS '96 L.P.
By: /s/ G. CARTER SEDNAOUI
------------------------------------
General Partner
Printed Name: G. Carter Sednaoui
--------------------------
ACCEL KEIRETSU V L.P.
By: Accel Keiretsu V Associates L.L.C.
Its General Partner
By: /s/ G. CARTER SEDNAOUI
------------------------------------
Managing Member
Printed Name: G. Carter Sednaoui
--------------------------
iPass Inc.
Amended and Restated Shareholders Agreement
Signature Page
7.
<PAGE> 8
ACCEL V L.P.
By: Accel V Associates L.L.C.
Its General Partner
By: /s/ G. CARTER SEDNAOUI
------------------------------------
Managing Member
Printed Name: G. Carter Sednaoui
--------------------------
ELLMORE C. PATTERSON PARTNERS
By: /s/ ARTHUR C. PATTERSON
------------------------------------
General Partner
Printed Name: Arthur C. Patterson
--------------------------
INTEL CORPORATION
By: /s/ ARVIND SODHANI
------------------------------------
Printed Name: Arvind Sodhani
--------------------------
Title: Vice President and Treasurer
---------------------------------
MERITECH CAPITAL PARTNERS L.P.
By: Meritech Capital Associates L.L.C.
Its General Partner
By:Meritech Management Associates L.L.C.
a Managing Member
By: /s/ PAUL MADERA
------------------------------------
Paul Madera, a Managing Member
MERITECH CAPITAL AFFILIATES L.P.
By: Meritech Capital Associates L.L.C.
Its General Partner
By:Meritech Management Associates L.L.C.
a Managing Member
By: /s/ PAUL MADERA
------------------------------------
Paul Madera, a Managing Member
iPass Inc.
Amended and Restated Shareholders Agreement
Signature Page
8.
<PAGE> 9
APV TECHNOLOGY PARTNERS US, L.P.
By: APV Management Co., L.L.C.
Managing General Partner
By: /s/ PETER G. BODINE
------------------------------------
Managing Member
Printed Name: Peter G. Bodine
--------------------------
APV TECHNOLOGY PARTNERS, L.P.
By: APV Management Co., L.L.C.
Managing General Partner
By: /s/ PETER G. BODINE
------------------------------------
Managing Member
Printed Name: Peter G. Bodine
--------------------------
APV TECHNOLOGY PARTNERS II, L.P.
By: APV Management Co. II, L.L.C.
General Partner
By: /s/ PETER G. BODINE
------------------------------------
Printed Name: Peter G. Bodine
--------------------------
WPS, L.L.C.
By: /s/ PETER G. BODINE
------------------------------------
Managing Member
Printed Name: Peter G. Bodine
--------------------------
iPass Inc.
Amended and Restated Shareholders Agreement
Signature Page
9.
<PAGE> 10
COMDISCO, INC.
By: /s/ JAMES P. LABE
-----------------------------------
Printed Name: James P. Labe, President
-------------------------
Title: Comdisco Venture Division
--------------------------------
THOMVEST HOLDINGS, INC.
By: /s/ WILLIAM T. DODDS
-----------------------------------
Printed Name: William T. Dodds
-------------------------
Title: Vice President & Secretary
--------------------------------
1267104 ONTARIO LTD.
By: /s/ TAYLOR THOMPSON
-----------------------------------
Printed Name: Taylor L. Thompson
-------------------------
Title: President
--------------------------------
CROSSPOINT VENTURE PARTNERS 1996
By: /s/ SETH NEIMAN
-----------------------------------
Printed Name:
-------------------------
Title:
--------------------------------
CROSSPOINT VENTURE PARTNERS LS 1997
FUND
By: /s/ SETH NEIMAN
-----------------------------------
Printed Name:
-------------------------
Title:
--------------------------------
iPass Inc.
Amended and Restated Shareholders Agreement
Signature Page
10.
<PAGE> 11
GC&H INVESTMENTS
By: /s/ John L. Cardoza
----------------------------------
Printed Name: John L. Cardoza
------------------------
Title: Executive Partner
-------------------------------
iPass Inc.
Amended and Restated Shareholders Agreement
Signature Page
11.
<PAGE> 1
EXHIBIT 10.3
FORM OF INDEMNITY AGREEMENT
THIS AGREEMENT is made and entered into this _____ day of
________________, 2000 by and between iPASS INC., a Delaware corporation (the
"Corporation"), and __________ ("Agent").
RECITALS
WHEREAS, Agent performs a valuable service to the Corporation in his
capacity as _______ of the Corporation;
WHEREAS, the stockholders of the Corporation have adopted bylaws (the
"Bylaws") providing for the indemnification of the directors, officers,
employees and other agents of the Corporation, including persons serving at the
request of the Corporation in such capacities with other corporations or
enterprises, as authorized by the Delaware General Corporation Law, as amended
(the "Code");
WHEREAS, the Bylaws and the Code, by their non-exclusive nature, permit
contracts between the Corporation and its agents, officers, employees and other
agents with respect to indemnification of such persons; and
WHEREAS, in order to induce Agent to continue to serve as _________ of
the Corporation, the Corporation has determined and agreed to enter into this
Agreement with Agent;
NOW, THEREFORE, in consideration of Agent's continued service as
________ after the date hereof, the parties hereto agree as follows:
AGREEMENT
1. SERVICES TO THE CORPORATION. Agent will serve, at the will of the
Corporation or under separate contract, if any such contract exists, as
__________ of the Corporation or as a director, officer or other fiduciary of an
affiliate of the Corporation (including any employee benefit plan of the
Corporation) faithfully and to the best of his ability so long as he is duly
elected and qualified in accordance with the provisions of the Bylaws or other
applicable charter documents of the Corporation or such affiliate; provided,
however, that Agent may at any time and for any reason resign from such position
(subject to any contractual obligation that Agent may have assumed apart from
this Agreement) and that the Corporation or any affiliate shall have no
obligation under this Agreement to continue Agent in any such position.
2. INDEMNITY OF AGENT. The Corporation hereby agrees to hold harmless
and indemnify Agent to the fullest extent authorized or permitted by the
provisions of the Bylaws and the Code, as the same may be amended from time to
time (but, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than the Bylaws or the Code permitted
prior to adoption of such amendment).
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3. ADDITIONAL INDEMNITY. In addition to and not in limitation of the
indemnification otherwise provided for herein, and subject only to the
exclusions set forth in Section 4 hereof, the Corporation hereby further agrees
to hold harmless and indemnify Agent:
(a) against any and all expenses (including attorneys' fees),
witness fees, damages, judgments, fines and amounts paid in settlement and any
other amounts that Agent becomes legally obligated to pay because of any claim
or claims made against or by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative (including an action by or in the right of the
Corporation) to which Agent is, was or at any time becomes a party, or is
threatened to be made a party, by reason of the fact that Agent is, was or at
any time becomes a director, officer, employee or other agent of Corporation, or
is or was serving or at any time serves at the request of the Corporation as a
director, officer, employee or other agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise; and
(b) otherwise to the fullest extent as may be provided to
Agent by the Corporation under the non-exclusivity provisions of the Code and
the Bylaws.
4. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to
Section 3 hereof shall be paid by the Corporation:
(a) on account of any claim against Agent solely for an
accounting of profits made from the purchase or sale by Agent of securities of
the Corporation pursuant to the provisions of Section 16(b) of the Securities
Exchange Act of 1934 and amendments thereto or similar provisions of any
federal, state or local statutory law;
(b) on account of Agent's conduct that is established by a
final judgment as knowingly fraudulent or deliberately dishonest or that
constituted willful misconduct;
(c) on account of Agent's conduct that is established by a
final judgment as constituting a breach of Agent's duty of loyalty to the
Corporation or resulting in any personal profit or advantage to which Agent was
not legally entitled;
(d) for which payment is actually made to Agent under a valid
and collectible insurance policy or under a valid and enforceable indemnity
clause, bylaw or agreement, except in respect of any excess beyond payment under
such insurance, clause, bylaw or agreement;
(e) if indemnification is not lawful (and, in this respect,
both the Corporation and Agent have been advised that the Securities and
Exchange Commission believes that indemnification for liabilities arising under
the federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication); or
(f) in connection with any proceeding (or part thereof)
initiated by Agent, or any proceeding by Agent against the Corporation or its
directors, officers, employees or other agents, unless (i) such indemnification
is expressly required to be made by law, (ii) the
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proceeding was authorized by the Board of Directors of the Corporation, (iii)
such indemnification is provided by the Corporation, in its sole discretion,
pursuant to the powers vested in the Corporation under the Code, or (iv) the
proceeding is initiated pursuant to Section 9 hereof.
5. CONTINUATION OF INDEMNITY. All agreements and obligations of the
Corporation contained herein shall continue during the period Agent is a
director, officer, employee or other agent of the Corporation (or is or was
serving at the request of the Corporation as a director, officer, employee or
other agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) and shall continue thereafter so long as Agent
shall be subject to any possible claim or threatened, pending or completed
action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative, by reason of the fact that Agent was serving in
the capacity referred to herein.
6. PARTIAL INDEMNIFICATION. Agent shall be entitled under this
Agreement to indemnification by the Corporation for a portion of the expenses
(including attorneys' fees), witness fees, damages, judgments, fines and amounts
paid in settlement and any other amounts that Agent becomes legally obligated to
pay in connection with any action, suit or proceeding referred to in Section 3
hereof even if not entitled hereunder to indemnification for the total amount
thereof, and the Corporation shall indemnify Agent for the portion thereof to
which Agent is entitled.
7. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30) days
after receipt by Agent of notice of the commencement of any action, suit or
proceeding, Agent will, if a claim in respect thereof is to be made against the
Corporation under this Agreement, notify the Corporation of the commencement
thereof; but the omission so to notify the Corporation will not relieve it from
any liability which it may have to Agent otherwise than under this Agreement.
With respect to any such action, suit or proceeding as to which Agent notifies
the Corporation of the commencement thereof:
(a) the Corporation will be entitled to participate therein at
its own expense;
(b) except as otherwise provided below, the Corporation may,
at its option and jointly with any other indemnifying party similarly notified
and electing to assume such defense, assume the defense thereof, with counsel
reasonably satisfactory to Agent. After notice from the Corporation to Agent of
its election to assume the defense thereof, the Corporation will not be liable
to Agent under this Agreement for any legal or other expenses subsequently
incurred by Agent in connection with the defense thereof except for reasonable
costs of investigation or otherwise as provided below. Agent shall have the
right to employ separate counsel in such action, suit or proceeding but the fees
and expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of Agent unless (i)
the employment of counsel by Agent has been authorized by the Corporation, (ii)
Agent shall have reasonably concluded, and so notified the Corporation, that
there is an actual conflict of interest between the Corporation and Agent in the
conduct of the defense of such action or (iii) the Corporation shall not in fact
have employed counsel to assume the defense of such action, in each of which
cases the fees and expenses of Agent's separate counsel shall be at the
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expense of the Corporation. The Corporation shall not be entitled to assume the
defense of any action, suit or proceeding brought by or on behalf of the
Corporation or as to which Agent shall have made the conclusion provided for in
clause (ii) above; and
(c) the Corporation shall not be liable to indemnify Agent
under this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent, which shall not be unreasonably withheld.
The Corporation shall be permitted to settle any action except that it shall not
settle any action or claim in any manner which would impose any penalty or
limitation on Agent without Agent's written consent, which may be given or
withheld in Agent's sole discretion.
8. EXPENSES. The Corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all expenses
incurred by Agent in connection with such proceeding upon receipt of an
undertaking by or on behalf of Agent to repay said amounts if it shall be
determined ultimately that Agent is not entitled to be indemnified under the
provisions of this Agreement, the Bylaws, the Code or otherwise.
9. ENFORCEMENT. Any right to indemnification or advances granted by
this Agreement to Agent shall be enforceable by or on behalf of Agent in any
court of competent jurisdiction if (i) the claim for indemnification or advances
is denied, in whole or in part, or (ii) no disposition of such claim is made
within ninety (90) days of request therefor. Agent, in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. It shall be a defense to any action for which a claim
for indemnification is made under Section 3 hereof (other than an action brought
to enforce a claim for expenses pursuant to Section 8 hereof, provided that the
required undertaking has been tendered to the Corporation) that Agent is not
entitled to indemnification because of the limitations set forth in Section 4
hereof. Neither the failure of the Corporation (including its Board of Directors
or its stockholders) to have made a determination prior to the commencement of
such enforcement action that indemnification of Agent is proper in the
circumstances, nor an actual determination by the Corporation (including its
Board of Directors or its stockholders) that such indemnification is improper
shall be a defense to the action or create a presumption that Agent is not
entitled to indemnification under this Agreement or otherwise.
10. SUBROGATION. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Agent, who shall execute all documents required and shall
do all acts that may be necessary to secure such rights and to enable the
Corporation effectively to bring suit to enforce such rights.
11. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Agent by this
Agreement shall not be exclusive of any other right which Agent may have or
hereafter acquire under any statute, provision of the Corporation's Certificate
of Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.
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12. SURVIVAL OF RIGHTS.
(a) The rights conferred on Agent by this Agreement shall
continue after Agent has ceased to be a director, officer, employee or other
agent of the Corporation or to serve at the request of the Corporation as a
director, officer, employee or other agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise and shall inure
to the benefit of Agent's heirs, executors and administrators.
(b) The Corporation shall require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform if no such succession
had taken place.
13. SEPARABILITY. Each of the provisions of this Agreement is a
separate and distinct agreement and independent of the others, so that if any
provision hereof shall be held to be invalid for any reason, such invalidity or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof. Furthermore, if this Agreement shall be invalidated in its
entirety on any ground, then the Corporation shall nevertheless indemnify Agent
to the fullest extent provided by the Bylaws, the Code or any other applicable
law.
14. GOVERNING LAW. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Delaware.
15. AMENDMENT AND TERMINATION. No amendment, modification, termination
or cancellation of this Agreement shall be effective unless in writing signed by
both parties hereto.
16. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute but one and the same
Agreement. Only one such counterpart need be produced to evidence the existence
of this Agreement.
17. HEADINGS. The headings of the sections of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.
18. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (i)
upon delivery if delivered by hand to the party to whom such communication was
directed or (ii) upon the third business day after the date on which such
communication was mailed if mailed by certified or registered mail with postage
prepaid:
(a) If to Agent, at the address indicated on the signature
page hereof.
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(b) If to the Corporation, to:
iPass Inc.
3800 Bridge Parkway
Redwood Shores, CA 94065
or to such other address as may have been furnished to Agent by the Corporation.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.
iPASS INC.
By:
Michael H. Mansouri
President and Chief Executive Officer
AGENT
By:
Name:
Address:
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EXHIBIT 10.4
I-PASS ALLIANCE INC.
1997 STOCK OPTION PLAN
ADOPTED FEBRUARY 26, 1997
APPROVED BY SHAREHOLDERS MARCH 17, 1997
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company, and its Affiliates,
may be given an opportunity to purchase stock of the Company.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company or
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.
(c) The Company intends that the Options issued under the Plan shall,
in the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either Incentive Stock Options or Nonstatutory Stock Options. All Options shall
be separately designated Incentive Stock Options or Nonstatutory Stock Options
at the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(e) "COMPANY" means I-PASS ALLIANCE INC., a California corporation.
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(f) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(g) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means
that the service of an individual to the Company, whether as an Employee ,
Director or Consultant, is not interrupted or terminated. The Board or the chief
executive officer of the Company may determine, in that party's sole discretion,
whether Continuous Status as an Employee , Director or Consultant shall be
considered interrupted in the case of: (i) any leave of absence approved by the
Board or the chief executive officer of the Company, including sick leave,
military leave, or any other personal leave; or (ii) transfers between the
Company, Affiliates or their successors.
(h) "COVERED EMPLOYEE" means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to stockholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.
(i) "DIRECTOR" means a member of the Board.
(j) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(l) "FAIR MARKET VALUE" means, as of any date, the value of the common
stock of the Company determined as follows and in each case in a manner
consistent with Section 260.140.50 of Title 10 of the California Code of
Regulations.
(1) If the common stock is listed on any established stock exchange
or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair
Market Value of a share of common stock shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or market (or the exchange or market with the greatest volume of
trading in the Company's common stock) on the last market trading day prior to
the day of determination, as reported in The Wall Street Journal or such other
source as the Board deems reliable.
(2) In the absence of such markets for the common stock, the Fair
Market Value shall be determined in good faith by the Board.
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(m) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(n) "LISTING DATE" means the first date upon which any security 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 if
such securities exchange or interdealer quotation system has been certified in
accordance with the provisions of Section 25100(o) of the California Corporate
Securities Law of 1968.
(o) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S K promulgated pursuant to the Securities Act
("Regulation S-K")), does not possess an interest in any other transaction as to
which disclosure would be required under Item 404(a) of Regulation S-K, and is
not engaged in a business relationship as to which disclosure would be required
under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a
"non-employee director" for purposes of Rule 16b-3.
(p) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.
(q) "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.
(r) "OPTION" means a stock option granted pursuant to the Plan.
(s) "OPTION AGREEMENT" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.
(t) "OPTIONEE" means a person to whom an Option is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding Option.
(u) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
the Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the
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Company or an "affiliated corporation" at any time, and is not currently
receiving direct or indirect remuneration from the Company or an "affiliated
corporation" for services in any capacity other than as a Director, or (ii) is
otherwise considered an "outside director" for purposes of Section 162(m) of the
Code.
(v) "PLAN" means this 1996 Stock Option Plan.
(w) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3 as in effect with respect to the Company at the time discretion is
being exercised regarding the Plan.
(x) "SECURITIES ACT" means the Securities Act of 1933, as amended.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible
under the Plan shall be granted Options; when and how each Option shall be
granted; whether an Option will be an Incentive Stock Option or a Nonstatutory
Stock Option; the provisions of each Option granted (which need not be
identical), including the time or times such Option may be exercised in whole or
in part; and the number of shares for which an Option shall be granted to each
such person.
(2) To construe and interpret the Plan and Options granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Option Agreement, in a
manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.
(3) To amend the Plan or an Option as provided in Section 11.
(4) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company.
(c) The Board may delegate administration of the Plan to a committee of
the Board composed of not fewer than two (2) members (the "Committee"), all of
the members of which Committee may be, in the discretion of the Board,
Non-Employee Directors and/or Outside Directors. If administration is delegated
to a Committee, the Committee shall have, in connection with the administration
of the Plan, the powers
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theretofore possessed by the Board, including the power to delegate to a
subcommittee of two (2) or more Outside Directors any of the administrative
powers the Committee is authorized to exercise (and references in this Plan to
the Board shall thereafter be to the Committee or such a subcommittee), subject,
however, to such resolutions, not inconsistent with the provisions of the Plan,
as may be adopted from time to time by the Board. The Board may abolish the
Committee at any time and revest in the Board the administration of the Plan.
Additionally, prior to the Listing Date, and notwithstanding anything to the
contrary contained herein, the Board may delegate administration of the Plan to
any person or persons and the term "Committee" shall apply to any person or
persons to whom such authority has been delegated. Notwithstanding anything in
this Section 3 to the contrary, the Board or the Committee may delegate to a
committee of two or more members of the Board the authority to grant Options to
eligible persons who (1) are not then subject to Section 16 of the Exchange Act
and/or (2) are either (i) not then Covered Employees and are not expected to be
Covered Employees at the time of recognition of income resulting from such
Option, or (ii) not persons with respect to whom the Company wishes to comply
with Section 162(m) of the Code.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 10 relating to adjustments
upon changes in stock, the stock that may be sold pursuant to Options shall not
exceed in the aggregate Two Million Five Hundred Twenty Four Thousand One
Hundred Nineteen (2,524,119) shares of the Company's common stock. If any Option
shall for any reason expire or otherwise terminate, in whole or in part, without
having been exercised in full, the stock not purchased under such Option shall
revert to and again become available for issuance under the Plan. (b) The stock
subject to the Plan may be unissued shares or reacquired shares, bought on the
market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to Employees.
Nonstatutory Stock Options may be granted only to Employees, Directors or
Consultants.
(b) No person shall be eligible for the grant of an Option if, at the
time of grant, such person owns (or is deemed to own pursuant to Section 424(d)
of the Code) stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or of any of its Affiliates
unless the exercise price of such Option is at least one hundred ten percent
(110%) of the Fair Market Value of such stock at the date of grant and the
Option is not exercisable after the expiration of five (5) years from the date
of grant.
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(c) Subject to the provisions of Section 10 relating to adjustments
upon changes in stock, no person shall be eligible to be granted Options
covering more than Five Hundred Thousand (500,000) shares of the Company's
common stock in any calendar year. This subsection 5(c) shall not apply prior to
the Listing Date and, following the Listing Date, shall not apply until (i) the
earliest of: (A) the first material modification of the Plan (including any
increase to the number of shares reserved for issuance under the Plan in
accordance with Section 4); (B) the issuance of all of the shares of common
stock reserved for issuance under the Plan; (C) the expiration of the Plan; or
(D) the first meeting of stockholders at which directors are to be elected that
occurs after the close of the third calendar year following the calendar year in
which occurred the first registration of an equity security under Section 12 of
the Exchange Act; or (ii) such other date required by Section 162(m) of the Code
and the rules and regulations promulgated thereunder.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(b) PRICE. The exercise price of each Incentive Stock Option shall be
not less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted; the exercise price of
each Nonstatutory Stock Option shall be not less than eighty five percent (85%)
of the Fair Market Value of the stock subject to the Option on the date the
Option is granted. Notwithstanding the foregoing, an Option (whether an
Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an
exercise price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another option
in a manner satisfying the provisions of Section 424(a) of the Code.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other common stock of the Company, (B)
according to a deferred payment or other arrangement (which may include, without
limiting the generality of the foregoing, the use of other common stock of the
Company) with the person to whom the Option is granted or to whom the Option is
transferred pursuant to subsection 6(d), or (C) in any other form
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of legal consideration that may be acceptable to the Board. In the case of any
deferred payment arrangement, interest shall be compounded at least annually and
shall be charged at the minimum rate of interest necessary to avoid the
treatment as interest, under any applicable provisions of the Code, of any
amounts other than amounts stated to be interest under the deferred payment
arrangement.
(d) TRANSFERABILITY. An Option shall not be transferable except by will
or by the laws of descent and distribution, and shall be exercisable during the
lifetime of the person to whom the Option is granted only by such person. The
person to whom the Option is granted may, by delivering written notice to the
Company, in a form satisfactory to the Company, designate a third party who, in
the event of the death of the Optionee, shall thereafter be entitled to exercise
the Option.
(e) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The vesting provisions of
individual Options may vary, but for all Options granted to persons who are not
Officers, Directors or Consultants of the Company, will provide for vesting of
at least twenty percent (20%) per year of the total number of shares subject to
the Option. The provisions of this subsection 6(e) are subject to any Option
provisions governing the minimum number of shares as to which an Option may be
exercised.
(f) SECURITIES LAW COMPLIANCE. The Company may require any Optionee, or
any person to whom an Option is transferred under subsection 6(d), as a
condition of exercising any such Option, (1) to give written assurances
satisfactory to the Company as to the Optionee'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; and (2) to give written assurances satisfactory to the
Company stating that such person is acquiring the stock subject to the Option
for such person'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 (i) the issuance of
the shares upon the exercise of the Option has been registered under a then
currently effective registration statement under the Securities Act, or (ii) as
to any particular requirement, a determination is made
7.
<PAGE> 8
by counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws. The Company may require
the Optionee to provide such other representations, written assurances or
information which the Company shall determine is necessary, desirable or
appropriate to comply with applicable securities and other laws as a condition
of granting an Option to such Optionee or permitting the Optionee to exercise
such Option. 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.
(g) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event an Optionee's Continuous Status as an Employee,
Director or Consultant terminates (other than upon the Optionee's death or
disability), the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it as of the date of termination) but only
within such period of time ending on the earlier of (i) the date three (3)
months following the termination of the Optionee's Continuous Status as an
Employee, Director or Consultant, or such longer or shorter period, which shall
not be less than thirty (30) days, specified in the Option Agreement, or (ii)
the expiration of the term of the Option as set forth in the Option Agreement.
Notwithstanding the foregoing, if an Optionee's Continuous Status as an
Employee, Director or Consultant is terminated for cause, then the Option shall
terminate on the date of such cessation of services. If, at the date of
termination, the Optionee is not entitled to exercise his or her entire Option,
the shares covered by the unexercisable portion of the Option shall revert to
and again become available for issuance under the Plan. If, after termination,
the Optionee does not exercise his or her Option within the time specified in
the Option Agreement, the Option shall terminate, and the shares covered by such
Option shall revert to and again become available for issuance under the Plan.
(h) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous
Status as an Employee, Director or Consultant terminates as a result of the
Optionee's disability, the Optionee may exercise his or her Option (to the
extent that the Optionee was entitled to exercise it as of the date of
termination), but only within such period of time ending on the earlier of (i)
the date twelve (12) months following such termination (or such longer or
shorter period, which in no event shall be less than six (6) months, specified
in the Option Agreement), or (ii) the expiration of the term of the Option as
set forth in the Option Agreement. If, at the date of termination, the Optionee
is not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
8.
<PAGE> 9
(i) DEATH OF OPTIONEE. In the event of the death of an Optionee during,
or within a period specified in the Option Agreement after the termination of,
the Optionee's Continuous Status as an Employee, Director or Consultant, the
Option may be exercised (to the extent the Optionee was entitled to exercise the
Option as of the date of death) by the Optionee's estate, by a person who
acquired the right to exercise the Option by bequest or inheritance or by a
person designated to exercise the option upon the Optionee's death pursuant to
subsection 6(d), but only within the period ending on the earlier of (i) the
date eighteen (18) months following the date of death (or such longer or shorter
period, which in no event shall be less than six (6) months, specified in the
Option Agreement), or (ii) the expiration of the term of such Option as set
forth in the Option Agreement. If, at the time of death, the Optionee was not
entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after death, the Option is not exercised within
the time specified herein, the Option shall terminate, and the shares covered by
such Option shall revert to and again become available for issuance under the
Plan.
(j) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased shall be subject to a repurchase right in favor of the Company, with
the repurchase price to be equal to the original purchase price of the stock, or
to any other restriction the Board determines to be appropriate; provided,
however, that (i) the right to repurchase at the original purchase price shall
lapse at a minimum rate of twenty percent (20%) per year over five (5) years
from the date the Option was granted, and (ii) such right shall be exercisable
only within (A) the ninety (90) day period following the termination of
employment or the relationship as a Director or Consultant, or (B) such longer
period as may be agreed to by the Company and the Optionee (for example, for
purposes of satisfying the requirements of Section 1202(c)(3) of the Code
(regarding "qualified small business stock")), and (iii) such right shall be
exercisable only for cash or cancellation of purchase money indebtedness for the
shares. Notwithstanding the foregoing, with respect to Options granted to
Officers, Directors and Consultants, the right to repurchase vested shares may
be subject to different terms. Should the right of repurchase be assigned by the
Company, the assignee shall pay the Company cash equal to the difference between
the original purchase price and the stock's Fair Market Value if the original
purchase price is less than the stock's Fair Market Value.
(k) RIGHT OF REPURCHASE. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to
repurchase all or any part of the vested shares exercised pursuant to the
Option; provided, however, that (i) such repurchase right shall be exercisable
only within (A) the ninety (90) day period following
9.
<PAGE> 10
the termination of employment or the relationship as a Director or Consultant,
or (B) such longer period as may be agreed to by the Company and the Optionee
(for example, for purposes of satisfying the requirements of Section 1202(c)(3)
of the Code (regarding "qualified small business stock")), (ii) such repurchase
right shall be exercisable for less than all of the vested shares only with the
Optionee's consent, and (iii) such right shall be exercisable only for cash or
cancellation of purchase money indebtedness for the shares at a repurchase price
equal to the greater of (A) the stock's Fair Market Value at the time of such
termination or (B) the original purchase price paid for such shares by the
Optionee. Notwithstanding the foregoing, with respect to Options granted to
Officers, Directors and Consultants, the right to repurchase vested shares may
be subject to different terms. Should the right of repurchase be assigned by the
Company, the assignee shall pay the Company cash equal to the difference between
the original purchase price and the stock's Fair Market Value if the original
purchase price is less than the stock's Fair Market Value.
(l) RIGHT OF FIRST REFUSAL. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to exercise
a right of first refusal following receipt of notice from the Optionee of the
intent to transfer all or any part of the shares exercised pursuant to the
Option.
(m) WITHHOLDING. To the extent provided by the terms of an Option
Agreement, the Optionee may satisfy any federal, state or local tax withholding
obligation relating to the exercise of such Option by any of the following means
or by a combination of such means: (1) tendering a cash payment; (2) authorizing
the Company to withhold shares from the shares of the common stock otherwise
issuable to the Optionee as a result of the exercise of the Option; or (3)
delivering to the Company owned and unencumbered shares of the common stock of
the Company.
7. COVENANTS OF THE COMPANY.
(a) During the terms of the Options, the Company shall keep available
at all times the number of shares of stock required to satisfy such Options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Options; provided, however,
that this undertaking shall not require the Company to register under the
Securities Act either the Plan, any Option or any stock issued or issuable
pursuant to any such Option. If, after reasonable efforts, the Company is unable
to obtain from any such regulatory commission or agency the authority which
counsel for the Company deems necessary for the lawful issuance and sale of
stock under the Plan, the Company shall be relieved from any liability for
failure
10.
<PAGE> 11
to issue and sell stock upon exercise of such Options unless and until such
authority is obtained.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.
9. MISCELLANEOUS.
(a) Subject to any applicable provisions of the California Corporate
Securities Law of 1968 and related regulations relied upon as a condition of
issuing securities pursuant to the Plan, the Board shall have the power to
accelerate the time at which an Option may first be exercised or the time during
which an Option or any part thereof will vest pursuant to subsection 6(e),
notwithstanding the provisions in the Option stating the time at which it may
first be exercised or the time during which it will vest.
(b) Neither an Optionee nor any person to whom an Option is transferred
under subsection 6(d) shall be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares subject to such Option unless and
until such person has satisfied all requirements for exercise of the Option
pursuant to its terms.
(c) Throughout the term of any Option, the Company shall deliver to the
holder of such Option, not later than one hundred twenty (120) days after the
close of each of the Company's fiscal years during the Option term, a balance
sheet and an income statement. This section shall not apply (i) after the
Listing Date, or (ii) when issuance is limited to key employees whose duties in
connection with the Company assure them access to equivalent information.
(d) Nothing in the Plan or any instrument executed or Option granted
pursuant thereto shall confer upon any Employee, Director,Consultant or Optionee
any right to continue in the employ of the Company or any Affiliate (or to
continue acting as a Director or Consultant) or shall affect the right of the
Company or any Affiliate to terminate the employment of any Employee, with or
without cause, to remove any Director as provided in the Company's By-Laws and
the provisions of the General Corporation Law of the State of California, or to
terminate the relationship of any Consultant subject to the terms of that
Consultant's agreement with the Company or Affiliate to which such Consultant is
providing services.
(e) To the extent that the aggregate Fair Market Value (determined at
the time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions
11.
<PAGE> 12
thereof which exceed such limit (according to the order in which they were
granted) shall be treated as Nonstatutory Stock Options.
(f) (1) The Board or the Committee shall have the authority to effect,
at any time and from time to time (i) the repricing of any outstanding Options
under the Plan and/or (ii) with the consent of the affected holders of Options,
the cancellation of any outstanding Options and the grant in substitution
therefor of new Options under the Plan covering the same or different numbers of
shares of common stock, but having an exercise price per share not less than
eighty-five percent (85%) of the Fair Market Value (one hundred percent (100%)
of the Fair Market Value in the case of an Incentive Stock Option or, in the
case of a ten percent (10%) stockholder (as defined in subsection 5(b)), not
less than one hundred and ten percent (110%) of the Fair Market Value) per share
of common stock on the new grant date.
(2) Shares subject to an Option canceled under this subsection 9(f)
shall continue to be counted, for the applicable period in which it was granted,
against the maximum award of Options permitted to be granted pursuant to
subsection 5(c) of the Plan. The repricing of an Option under this subsection
9(f), resulting in a reduction of the exercise price, shall be deemed to be a
cancellation of the original Option and the grant of a substitute Option; in the
event of such repricing, both the original and the substituted Options shall be
counted for the applicable period against the maximum awards of Options
permitted to be granted pursuant to subsection 5(c) of the Plan. The provisions
of this subsection 9(f)(2) shall be applicable only to the extent required by
Section 162(m) of the Code.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject
to any Option (through merger, consolidation, reorganization, recapitalization,
stock dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the type(s) and maximum
number of securities subject to the Plan pursuant to subsection 4(a) and the
maximum number of securities subject to award to any person during any calendar
year pursuant to subsection 5(c), and the outstanding Options will be
appropriately adjusted in the type(s) and number of securities and price per
share of stock subject to such outstanding Options. Such adjustments shall be
made by the Board or Committee, the determination of which shall be final,
binding and conclusive. (The conversion of any convertible securities of the
Company shall not be treated as a "transaction not involving the receipt of
consideration by the Company.")
12.
<PAGE> 13
(b) In the event of: (1) a dissolution, liquidation, or sale of all or
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; or (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, then: (i) any surviving or acquiring corporation shall assume
Options outstanding under the Plan or shall substitute similar options
(including an option to acquire the same consideration paid to stockholders in
the transaction described in this Subsection 10(b)) for those outstanding under
the Plan, or (ii) in the event any surviving or acquiring corporation refuses to
assume such Options or to substitute similar options for those outstanding under
the Plan, (A) with respect to Options held by persons then performing services
as Employees, Directors or Consultants who have been performing such services
for less than twelve (12) months, and subject to any applicable provisions of
the California Corporate Securities Law of 1968 and related regulations relied
upon as a condition of issuing securities pursuant to the Plan, the vesting of
such Options and the time during which such Options may be exercised shall be
accelerated prior to such event as follows: the number of Options that would
have vested upon the first anniversary of vesting commencement date shall be
divided by twelve (12) and subsequently multiplied by the number of complete
months, measured from the vesting commencement date, that the Optionee has
rendered service to the Company. Such Options shall terminate if not exercised
after such acceleration and at or prior to such event, and (B) with respect to
any other Options outstanding under the Plan, such Options shall be terminated
if not exercised prior to such event.
11. AMENDMENT OF THE PLAN AND OPTIONS.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 10 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(1) Increase the number of shares reserved for Options under the
Plan;
(2) Modify the requirements as to eligibility for participation in
the Plan (to the extent such modification requires stockholder approval in order
for the Plan to satisfy the requirements of Section 422 of the Code); or
(3) Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to satisfy the requirements of
Section 422 of the Code or to comply with the requirements of Rule 16b 3.
13.
<PAGE> 14
(b) The Board may in its sole discretion submit any other amendment to
the Plan for stockholder approval, including, but not limited to, amendments to
the Plan intended to satisfy the requirements of Section 162(m) of the Code and
the regulations promulgated thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide Optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under it into
compliance therewith.
(d) Rights and obligations under any Option granted before amendment of
the Plan shall not be impaired by any amendment of the Plan unless (i) the
Company requests the consent of the person to whom the Option was granted and
(ii) such person consents in writing.
(e) The Board at any time, and from time to time, may amend the terms
of any one or more Options; provided, however, that the rights and obligations
under any Option shall not be impaired by any such amendment unless (i) the
Company requests the consent of the person to whom the Option was granted and
(ii) such person consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on December 12, 2006, which shall be
within ten (10) years from the date the Plan is adopted by the Board or approved
by the stockholders of the Company, whichever is earlier. No Options may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Option granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan, except
with the written consent of the person to whom the Option was granted.
13. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no
Options granted under the Plan shall be exercised unless and until the Plan has
been approved by the stockholders of the Company, which approval shall be within
twelve (12) months before or after the date the Plan is adopted by the Board,
and, if required, an appropriate permit has been issued by the Commissioner of
Corporations of the State of California.
14.
<PAGE> 15
NONSTATUTORY STOCK OPTION
_________________________, Optionee:
I-PASS ALLIANCE INC. (the "Company"), pursuant to its 1997 Stock Option
Plan (the "Plan"), has granted to you, the optionee named above, an option to
purchase shares of the common stock of the Company ("Common Stock"). This option
is not intended to qualify as and will not be treated as an "incentive stock
option" within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code").
The grant hereunder is in connection with and in furtherance of the
Company's compensatory benefit plan for participation of the Company's employees
(including officers), directors or consultants and is intended to comply with
the provisions of Rule 701 promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Act"). The grant of this
option and the issuance of shares upon the exercise of this option are also
intended to be exempt from the securities qualification requirements of the
California Corporations Code pursuant to Section 25102(o) of that code. Defined
terms not explicitly defined in this agreement but defined in the Plan shall
have the same definitions as in the Plan.
The details of your option are as follows:
1. TOTAL NUMBER OF SHARES SUBJECT TO THIS OPTION. The total number of
shares of Common Stock subject to this option is ____________________
(__________).
2. VESTING. Subject to the limitations contained herein, twenty-five
percent (25%) of the shares will vest (become exercisable) on ____________, 19__
and one-thirty-sixth (1/36) of the remaining shares will vest _______ shares for
each full month after _____________, 19__, for the next 36 months until either
(i) you cease to provide services to the Company for any reason, or (ii) this
option becomes fully vested.
3. EXERCISE PRICE AND METHOD OF PAYMENT.
(a) EXERCISE PRICE. The exercise price of this option is five cents
($0.05) per share, being not less than 100% of the fair market value of the
Common Stock on the date of grant of this option.
(b) METHOD OF PAYMENT. Payment of the exercise price per share is due
in full upon exercise of all or any part of each installment which has accrued
to you. You may elect, to the extent permitted by applicable statutes and
regulations, to make payment of the exercise price under one of the following
alternatives:
(i) Payment of the exercise price per share in cash (including
check) at the time of exercise;
1.
<PAGE> 16
(ii) Payment pursuant to a program developed under Regulation T as
promulgated by the Federal Reserve Board which, prior to the issuance of Common
Stock, results in either the receipt of cash (or check) by the Company or the
receipt of irrevocable instructions to pay the aggregate exercise price to the
Company from the sales proceeds; or
(iii) Payment by a combination of the methods of payment permitted
by subparagraph 3(b)(i) and 3(b)(ii) above.
4. EXERCISE PRIOR TO VESTING PERMITTED.
(a) CONDITIONS OF EARLY EXERCISE. Subject to the provisions of this
option you may elect at any time during your Continuous Status as an Employee,
Director or Consultant with the Company or an Affiliate of the Company, to
exercise the option as to any part or all of the shares subject to this option
at any time during the term hereof, including without limitation, a time prior
to the date of earliest exercise ("vesting") stated in paragraph 2 hereof;
provided, however, that:
(i) a partial exercise of this option shall be deemed to cover
first vested shares and then the earliest vesting installment of unvested
shares;
(ii) any shares so purchased from installments which have not
vested as of the date of exercise shall be subject to the purchase option in
favor of the Company as described in the Early Exercise Stock Purchase Agreement
attached hereto; and
(iii) you shall enter into an Early Exercise Stock Purchase
Agreement in the form attached hereto with a vesting schedule that will result
in the same vesting as if no early exercise had occurred.
(b) EXPIRATION OF EARLY EXERCISE ELECTION. The election provided in
this paragraph 4 to purchase shares upon the exercise of this option prior to
the vesting dates shall cease upon termination of your Continuous Status as an
Employee, Director or Consultant with the Company or an Affiliate of the Company
and may not be exercised after the date thereof.
5. WHOLE SHARES. This option may not be exercised for any number of shares
which would require the issuance of anything other than whole shares.
6. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary
contained herein, this option may not be exercised unless the shares issuable
upon exercise of this option are then registered under the Act or, if such
Shares are not then so registered, the Company has determined that such exercise
and issuance would be exempt from the registration requirements of the Act.
2.
<PAGE> 17
7. TERM. The term of this option commences on __________, 19__, the date
of grant and expires on _______________________ (the "Expiration Date," which
date shall be no more than ten (10) years from the date this option is granted),
unless this option expires sooner as set forth below or in the Plan. In no event
may this option be exercised on or after the Expiration Date. This option shall
terminate prior to the Expiration Date as follows: thirty (30) days after the
termination of your Continuous Status as an Employee, Director or Consultant
with the Company or an Affiliate of the Company for any reason or for no reason
unless:
(a) such termination of Continuous Status as an Employee, Director or
Consultant is due to your disability (within the meaning of Section 422(c)(6) of
the Code), in which event the option shall expire on the earlier of the
Expiration Date set forth above or twelve (12) months following such termination
of Continuous Status as an Employee, Director or Consultant; or
(b) such termination of Continuous Status as an Employee, Director or
Consultant is due to your death or your death occurs within thirty (30) days
following your termination for any other reason, in which event the option shall
expire on the earlier of the Expiration Date set forth above or twelve (12)
months after your death; or
(c) during any part of such thirty (30)-day period the option is not
exercisable solely because of the condition set forth in paragraph 5 above, in
which event the option shall not expire until the earlier of the Expiration Date
set forth above or until it shall have been exercisable for an aggregate period
of thirty (30) days after the termination of Continuous Status as an Employee,
Director or Consultant; or
(d) exercise of the option within thirty (30) days after termination of
your Continuous Status as an Employee, Director or Consultant with the Company
or with an Affiliate of the Company would result in liability under section
16(b) of the Securities Exchange Act of 1934 (the "Exchange Act), in which case
the option will expire on the earlier of (i) the Expiration Date set forth
above, (ii) the tenth (10th) day after the last date upon which exercise would
result in such liability or (iii) six (6) months and ten (10) days after the
termination of your Continuous Status as an Employee, Director or Consultant
with the Company or an Affiliate of the Company.
However, this option may be exercised following termination of
Continuous Status as an Employee, Director or Consultant only as to that number
of shares as to which it was exercisable on the date of termination of
Continuous Status as an Employee, Director or Consultant under the provisions of
paragraph 2 of this option.
8. EXERCISE.
3.
<PAGE> 18
(a) This option may be exercised, to the extent specified above, by
delivering a notice of exercise (in a form designated by the Company) together
with the exercise price to the Secretary of the Company, or to such other person
as the Company may designate, during regular business hours, together with such
additional documents as the Company may then require pursuant to subsection 6(f)
of the Plan.
(b) By exercising this option you agree that:
(i) as a precondition to the completion of any exercise of this
option, the Company may require you to enter an arrangement providing for the
cash payment by you to the Company of any tax withholding obligation of the
Company arising by reason of: (1) the exercise of this option; (2) the lapse of
any substantial risk of forfeiture to which the shares are subject at the time
of exercise; or (3) the disposition of shares acquired upon such exercise. You
also agree that any exercise of this option has not been completed and that the
Company is under no obligation to issue any Common Stock to you until such an
arrangement is established or the Company's tax withholding obligations are
satisfied, as determined by the Company; and
(ii) the Company (or a representative of the underwriters) may, in
connection with the first underwritten registration of the offering of any
securities of the Company under the Act, require that you not sell or otherwise
transfer or dispose of any shares of Common Stock or other securities of the
Company during such period (not to exceed one hundred eighty (180) days)
following the effective date (the "Effective Date") of the registration
statement of the Company filed under the Act as may be requested by the Company
or the representative of the underwriters. You further agree that the Company
may impose stop-transfer instructions with respect to securities subject to the
foregoing restrictions until the end of such period.
9. TRANSFERABILITY. This option is not transferable, except by will or by
the laws of descent and distribution, and is exercisable during your life only
by you or pursuant to a qualified domestic relations order satisfying the
requirements of Rule 16b-3 of the Exchange Act (a "QDRO"), and is exercisable
during your life only by you or a transferee pursuant to a QDRO. Notwithstanding
the foregoing, by delivering written notice to the Company, in a form
satisfactory to the Company, you may designate a third party who, in the event
of your death, shall thereafter be entitled to exercise this option.
10. OPTION NOT A SERVICE CONTRACT. This option is not an employment
contract and nothing in this option shall be deemed to create in any way
whatsoever any obligation on your part to continue in the employ of the Company,
or of the Company to continue your employment with the Company. In addition,
nothing in this option shall obligate the Company or any Affiliate of the
Company, or their respective shareholders, Board of Directors, officers, or
employees to continue any relationship which you might have as a Director or
Consultant for the Company or Affiliate of the Company.
4.
<PAGE> 19
11. NOTICES. Any notices provided for in this option or the Plan shall be
given in writing and shall be deemed effectively given upon receipt or, in the
case of notices delivered by the Company to you, five (5) days after deposit in
the United States mail, postage prepaid, addressed to you at the address
specified below or at such other address as you hereafter designate by written
notice to the Company.
12. GOVERNING PLAN DOCUMENT. This option is subject to all the provisions
of the Plan, a copy of which is attached hereto and its provisions are hereby
made a part of this option, including without limitation the provisions of
Section 6 of the Plan relating to option provisions, and is further subject to
all interpretations, amendments, rules and regulations which may from time to
time be promulgated and adopted pursuant to the Plan. In the event of any
conflict between the provisions of this option and those of the Plan, the
provisions of the Plan shall control.
13. RIGHT OF FIRST REFUSAL. The shares acquired upon exercise of this
option shall be subject to the right of first refusal provisions set forth in
the Company's bylaws, such bylaws being open to inspection by any stockholder or
optionholder of the Company.
Dated the ____ day of __________________, 19__.
Very truly yours,
I-PASS ALLIANCE INC.
By
--------------------------------------
Duly authorized on behalf
of the Board of Directors
ATTACHMENTS:
1997 Stock Option Plan
Form of Early Exercise Stock Purchase Agreement
Notice of Exercise
Memorandum Explaining Section 83(b) Election
Section 83(b) Election
5.
<PAGE> 20
The undersigned:
(a) Acknowledges receipt of the foregoing option and the attachments
referenced therein and understands that all rights and liabilities with respect
to this option are set forth in the option and the Plan; and
(b) Acknowledges that as of the date of grant of this option, it sets
forth the entire understanding between the undersigned optionee and the Company
and its Affiliates regarding the acquisition of stock in the Company and
supersedes all prior oral and written agreements on that subject with the
exception of (i) the options previously granted and delivered to the undersigned
under stock option plans of the Company, and (ii) the following agreements only:
NONE
--------------------
(Initial)
OTHER
---------------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
OPTIONEE
Address:
------------------------------
------------------------------
6.
<PAGE> 21
INCENTIVE STOCK OPTION
___________________, Optionee:
iPASS INC. (the "Company"), pursuant to its 1997 Stock Option Plan (the
"Plan"), has granted to you, the optionee named above, an option to purchase
shares of the Company's common stock ("Common Stock"). This option is intended
to qualify as an "incentive stock option" within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code").
The grant hereunder is in connection with and in furtherance of the
Company's compensatory benefit plan for participation of the Company's employees
(including officers), directors or consultants and is intended to comply with
the provisions of (i) Rule 701 promulgated by the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Securities Act")
and (ii) Section 25102(o) of the California Corporations Code. Defined terms not
explicitly defined in this agreement but defined in the Plan shall have the same
definitions as in the Plan.
The details of your option are as follows:
1. TOTAL NUMBER OF SHARES SUBJECT TO THIS OPTION. The total
number of shares of Common Stock subject to this option is
___________________(________).
2. VESTING. Subject to the limitations contained herein, 25% of
the option shares will vest (become exercisable) on _____________, 19__, and
1/36 of the remaining shares will vest on the __ day of each month after
____________, 19__, for the next 36 months until either (i) you cease to provide
services to the Company for any reason, or (ii) this option becomes fully vested
on _____________, 20__.
3. EXERCISE PRICE AND METHOD OF PAYMENT.
(a) EXERCISE PRICE. The exercise price of this option is
________ cents ($0.__) per share, being not less than the Fair Market Value of
the Common Stock on the date of grant of this option.
(b) METHOD OF PAYMENT. Payment of the exercise price per share
is due in full upon exercise of all or any part of each installment which has
accrued to you. You may elect, to the extent permitted by applicable statutes
and regulations, to make payment of the exercise price under one of the
following alternatives:
(i) Payment of the exercise price per share in cash
(including check) at the time of exercise;
1.
<PAGE> 22
(ii) Payment pursuant to a program developed under
Regulation T as promulgated by the Federal Reserve Board which, prior to the
issuance of Common Stock, results in either the receipt of cash (or check) by
the Company or the receipt of irrevocable instructions to pay the aggregate
exercise price to the Company from the sales proceeds; or
(iii) Payment by a combination of the methods of payment
permitted by subparagraphs 3(b)(i) and 3(b)(ii) above.
4. EXERCISE PRIOR TO VESTING PERMITTED.
(a) CONDITIONS OF EARLY EXERCISE. Subject to the provisions of
this option you may elect at any time during your Continuous Status as an
Employee, Director or Consultant with the Company or an Affiliate of the
Company, to exercise the option as to any part or all of the shares subject to
this option at any time during the term hereof, including without limitation, a
time prior to the date of earliest exercise ("vesting") stated in paragraph 2
hereof; provided, however, that:
(i) a partial exercise of this option shall be deemed to
cover first vested shares and then the earliest vesting installment of unvested
shares;
(ii) any shares so purchased from installments which have
not vested as of the date of exercise shall be subject to the purchase option in
favor of the Company as described in the Early Exercise Stock Purchase Agreement
attached hereto;
(iii) you shall enter into an Early Exercise Stock
Purchase Agreement in the form attached hereto with a vesting schedule that will
result in the same vesting as if no early exercise had occurred; and
(iv) to the extent that this option becomes exercisable
under this agreement and the aggregate fair market value of any shares subject
to incentive stock options granted to you by the Company or any Affiliate of the
Company (valued as of their grant date) which would become exercisable for the
first time during any calendar year exceeds $100,000, then the aggregate fair
market value exceeding this $100,000 limit shall be treated as having been
granted under the terms of a nonstatutory stock option which is not intended to
satisfy the requirements of Section 422 of the Code.
(b) EXPIRATION OF EARLY EXERCISE ELECTION. The election
provided in this paragraph 4 to purchase shares upon the exercise of this option
prior to the vesting dates shall cease upon termination of your Continuous
Status as an Employee, Director or Consultant with the Company or an Affiliate
of the Company and may not be exercised after the date thereof.
2.
<PAGE> 23
5. WHOLE SHARES. This option may not be exercised for any number
of shares which would require the issuance of anything other than whole shares.
6. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the
contrary contained herein, this option may not be exercised unless the shares
issuable upon exercise of this option are then registered under the Securities
Act or, if such shares are not then so registered, the Company has determined
that such exercise and issuance would be exempt from the registration
requirements of the Securities Act.
7. TERM. The term of this option commences on _____________,
19__, the date of grant, and expires on ______________, 200_ (the "Expiration
Date"), which date shall be no more than ten (10) years from date this option is
granted, unless this option expires sooner as set forth below or in the Plan. In
no event may this option be exercised on or after the Expiration Date. This
option shall terminate prior to the Expiration Date as follows: thirty (30) days
after the termination of your Continuous Status as an Employee, Director or
Consultant with the Company or an Affiliate of the Company unless one of the
following circumstances exists:
(a) Your termination of Continuous Status as an Employee,
Director or Consultant is due to your disability. This option will then expire
on the earlier of the Expiration Date set forth above or twelve (12) months
following such termination of Continuous Status as an Employee, Director or
Consultant. You should be aware that if your disability is not considered a
permanent and total disability within the meaning of Section 422(c)(6) of the
Code, and you exercise this option more than three (3) months following the date
of your termination of employment, your exercise will be treated for tax
purposes as the exercise of a "nonstatutory stock option" instead of an
"incentive stock option" under the federal tax laws.
(b) Your termination of Continuous Status as an Employee,
Director or Consultant is due to your death or your death occurs within thirty
(30) days following your termination of Continuous Status as an Employee,
Director or Consultant for any other reason. This option will then expire on the
earlier of the Expiration Date set forth above or twelve (12) months after your
death.
(c) If during any part of such thirty (30)-day period you may
not exercise your option solely because of the condition set forth in paragraph
6 above, then your option will not expire until the earlier of the Expiration
Date set forth above or until this option shall have been exercisable for an
aggregate period of thirty (30) days after your termination of Continuous Status
as an Employee, Director or Consultant.
(d) If your exercise of the option within thirty (30) days
after termination of your Continuous Status as an Employee, Director or
Consultant with the Company or with an Affiliate of the Company would result in
liability under Section 16(b) of the
3.
<PAGE> 24
Securities Exchange Act of 1934, as amended, then your option will expire on the
earlier of (i) the Expiration Date set forth above, (ii) the tenth (10th) day
after the last date upon which exercise would result in such liability or (iii)
six (6) months and ten (10) days after the termination of your Continuous Status
as an Employee, Director or Consultant with the Company or an Affiliate of the
Company.
However, this option may be exercised following termination of
Continuous Status as an Employee, Director or Consultant only as to that number
of shares as to which it was exercisable on the date of termination of
Continuous Status as an Employee, Director or Consultant under the provisions of
paragraph 2 of this option.
In order to obtain the federal income tax advantages associated with an
"incentive stock option," the Code requires that at all times beginning on the
date of grant of the option and ending on the day three (3) months before the
date of the option's exercise, you must be an employee of the Company or an
Affiliate of the Company, except in the event of your death or permanent and
total disability. The Company has provided for continued vesting or extended
exercisability of your option under certain circumstances for your benefit, but
cannot guarantee that your option will necessarily be treated as an "incentive
stock option" if you provide services to the Company or an Affiliate of the
Company as a consultant or exercise your option more than three (3) months after
the date your employment with the Company and all Affiliates of the Company
terminates.
8. EXERCISE.
(a) This option may be exercised, to the extent specified
above, by delivering a notice of exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require pursuant
to subsection 6(f) of the Plan.
(b) By exercising this option you agree that:
(i) as a precondition to the completion of any exercise of
this option, the Company may require you to enter an arrangement providing for
the payment by you to the Company of any tax withholding obligation of the
Company arising by reason of (1) the exercise of this option; (2) the lapse of
any substantial risk of forfeiture to which the shares are subject at the time
of exercise; or (3) the disposition of shares acquired upon such exercise;
(ii) you will notify the Company in writing within fifteen
(15) days after the date of any disposition of any of the shares of the Common
Stock issued upon exercise of this option that occurs within two (2) years after
the date of this option
4.
<PAGE> 25
grant or within one (1) year after such shares of Common Stock are transferred
upon exercise of this option; and
(iii) the Company (or a representative of the
underwriters) may, in connection with the first underwritten registration of the
offering of any securities of the Company under the Securities Act, require that
you not sell or otherwise transfer or dispose of any shares of Common Stock or
other securities of the Company during such period (not to exceed one hundred
eighty (180) days) following the effective date (the "Effective Date") of the
registration statement of the Company filed under the Securities Act as may be
requested by the Company or the representative of the underwriters. You further
agree that the Company may impose stop-transfer instructions with respect to
securities subject to the foregoing restrictions until the end of such period.
9. TRANSFERABILITY. This option is not transferable, except by
will or by the laws of descent and distribution, and is exercisable during your
life only by you. Notwithstanding the foregoing, by delivering written notice to
the Company, in a form satisfactory to the Company, you may designate a third
party who, in the event of your death, shall thereafter be entitled to exercise
this option.
10. OPTION NOT A SERVICE CONTRACT. This option is not an
employment contract and nothing in this option shall be deemed to create in any
way whatsoever any obligation on your part to continue in the employ of the
Company, or of the Company to continue your employment with the Company. In
addition, nothing in this option shall obligate the Company or any Affiliate of
the Company, or their respective shareholders, Board of Directors, officers or
employees to continue any relationship which you might have as a Director or
Consultant for the Company or Affiliate of the Company.
11. NOTICES. Any notices provided for in this option or the Plan
shall be given in writing and shall be deemed effectively given upon receipt or,
in the case of notices delivered by the Company to you, five (5) days after
deposit in the United States mail, postage prepaid, addressed to you at the
address specified below or at such other address as you hereafter designate by
written notice to the Company.
12. GOVERNING PLAN DOCUMENT. This option is subject to all the
provisions of the Plan, a copy of which is attached hereto and its provisions
are hereby made a part of this option, including without limitation the
provisions of Section 6 of the Plan relating to option provisions, and is
further subject to all interpretations, amendments, rules and regulations which
may from time to time be promulgated and adopted pursuant to the Plan. In the
event of any conflict between the provisions of this option and those of the
Plan, the provisions of the Plan shall control.
13. RIGHT OF FIRST REFUSAL. The shares acquired upon exercise of
this option shall be subject to the right of first refusal provisions set forth
in the Company's
5.
<PAGE> 26
bylaws, such bylaws being open to inspection by any stockholder or optionholder
of the Company.
Dated the day of , 19 .
------ ---------------- ---
Very truly yours,
iPASS INC.
By
------------------------------------------
Duly authorized on behalf
of the Board of Directors
ATTACHMENTS:
1997 Stock Option Plan
Form of Early Exercise Stock Purchase Agreement
Notice of Exercise
Memorandum Explaining Section 83(b) Election
Section 83(b) Election
6.
<PAGE> 27
The undersigned:
(a) Acknowledges receipt of the foregoing option and the attachments
referenced therein and understands that all rights and liabilities with respect
to this option are set forth in the option and the Plan; and
(b) Acknowledges that as of the date of grant of this option, it sets
forth the entire understanding between the undersigned optionee and the Company
and its Affiliates regarding the acquisition of stock in the Company and
supersedes all prior oral and written agreements on that subject with the
exception of (i) the options previously granted and delivered to the undersigned
under stock option plans of the Company, and (ii) the following agreements only:
NONE
-------------------
(Initial)
OTHER
-----------------------------------
-----------------------------------
-----------------------------------
--------------------------------------
OPTIONEE
Address:
-----------------------------
-----------------------------
7.
<PAGE> 28
NOTICE OF EXERCISE
IPass Inc.
- -------------
Mountain View, California
-------
Date of Exercise:
---------
Ladies and Gentlemen:
This constitutes notice under my stock option that I elect to purchase the
number of shares for the price set forth below.
<TABLE>
<CAPTION>
Type of option: Incentive
<S> <C>
Stock option dated:
---------
Number of shares as
to which option is
exercised:
---------
Certificates to be
issued in name of:
---------
Total exercise price: $
---------
Cash payment delivered
herewith: $
---------
</TABLE>
By this exercise, I agree (i) to provide such additional documents as
you may require pursuant to the terms of the Company's 1997 Stock Option Plan,
(ii) to provide for the payment by me to you (in the manner designated by you)
of your withholding obligation, if any, relating to the exercise of this option,
and (iii) to notify you in writing within fifteen (15) days after the date of
any disposition of any of the shares of Common Stock issued upon exercise of
this option that occurs within two (2) years after the date of grant of this
option or within one (1) year after such shares of Common Stock are issued upon
exercise of this option.
I hereby make the following certifications and representations with
respect to the number of shares of Common Stock (the "Shares"), which are being
acquired by me for my own account upon exercise of the Option as set forth
above:
8.
<PAGE> 29
I acknowledge that the Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and are deemed to
constitute "restricted securities" under Rule 701 and Rule 144 promulgated under
the Securities Act. I warrant and represent to the Company that I have no
present intention of distributing or selling said Shares, except as permitted
under the Act and any applicable state securities laws.
I further acknowledge that I will not be able to resell the Shares for
at least ninety (90) days after the stock of the Company becomes publicly traded
(i.e., subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended) under Rule 701 and that more
restrictive conditions apply to affiliates of the Company under Rule 144.
I further acknowledge that all certificates representing any of the
Shares subject to the provisions of the Option shall have endorsed thereon
appropriate legends reflecting the foregoing limitations, as well as any legends
reflecting restrictions pursuant to the Company's Articles of Incorporation,
Bylaws and/or applicable securities laws.
I further agree that, if required by the Company (or a representative
of the underwriters) in connection with the first underwritten registration of
the offering of any securities of the Company under the Securities Act, I will
not sell or otherwise transfer or dispose of any shares of Common Stock or other
securities of the Company during such period (not to exceed one hundred eighty
(180) days following the effective date of the registration statement of the
Company filed under the Securities Act as may be requested by the Company or the
representative of the underwriters. I further agree that the Company may impose
stop transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such period.
Very truly yours,
----------------------------------------
9.
<PAGE> 1
EXHIBIT 10.5
EXHIBIT A
iPASS INC.
INTERIM 1999 STOCK OPTION PLAN
ADOPTED APRIL 22, 1999
APPROVED BY SHAREHOLDERS ___________, 1999
TERMINATION DATE APRIL 21, 2009
1. PURPOSES.
(a) ELIGIBLE OPTION RECIPIENTS. The persons eligible to receive Options
are the Employees of the Company and its Affiliates.
(b) AVAILABLE OPTIONS. The purpose of the Plan is to provide a means by
which eligible recipients of Options may be given an opportunity to benefit from
increases in value of the Common Stock through the granting of the following
Options: (i) Incentive Stock Options and (ii) Nonstatutory Stock Options.
(c) GENERAL PURPOSE. The Company, by means of the Plan, seeks to retain
the services of the group of persons eligible to receive Options, to secure and
retain the services of new members of this group and to provide incentives for
such persons to exert maximum efforts for the success of the Company and its
Affiliates.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation
of the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a committee of one or more members of the Board
appointed by the Board in accordance with subsection 3(c).
(e) "COMMON STOCK" means the common stock of the Company.
(f) "COMPANY" means iPass Inc., a California corporation.
(g) "CONSULTANT" means any person, including an advisor, (i) engaged by
the Company or an Affiliate to render consulting or advisory services and who is
compensated for such services or (ii) who is a member of the Board of Directors
of an Affiliate. However, the term "Consultant" shall not include either
Directors who are not compensated by the Company
1
<PAGE> 2
for their services as Directors or Directors who are merely paid a director's
fee by the Company for their services as Directors.
(h) "CONTINUOUS SERVICE" means that the Participant's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director will not
constitute an interruption of Continuous Service. The Board or the chief
executive officer of the Company, in that party's sole discretion, may determine
whether Continuous Service shall be considered interrupted in the case of any
leave of absence approved by that party, including sick leave, military leave or
any other personal leave.
(i) "COVERED EMPLOYEE" means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to shareholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.
(j) "DIRECTOR" means a member of the Board of Directors of the Company.
(k) "DISABILITY" means (i) before the Listing Date, the inability of a
person, in the opinion of a qualified physician acceptable to the Company, to
perform the major duties of that person's position with the Company or an
Affiliate of the Company because of the sickness or injury of the person and
(ii) after the Listing Date, the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.
(l) "EMPLOYEE" means any person employed by the Company or an
Affiliate. Mere service as a Director or payment of a director's fee by the
Company or an Affiliate shall not be sufficient to constitute "employment" by
the Company or an Affiliate.
(m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(n) "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market,
the Fair Market Value of a share of Common Stock shall be the closing sales
price for such stock (or the closing bid, if no sales were reported) as quoted
on such exchange or market (or the exchange or market with the greatest volume
of trading in the Common Stock) on the last market trading day prior to the day
of determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable.
2
<PAGE> 3
(ii) In the absence of such markets for the Common Stock, the
Fair Market Value shall be determined in good faith by the Board.
(iii) Prior to the Listing Date, the value of the Common Stock
shall be determined in a manner consistent with Section 260.140.50 of Title 10
of the California Code of Regulations.
(o) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(p) "LISTING DATE" means the first date upon which any security 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 if
such securities exchange or interdealer quotation system has been certified in
accordance with the provisions of Section 25100(o) of the California Corporate
Securities Law of 1968.
(q) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or a subsidiary, does
not receive compensation (directly or indirectly) from the Company or its parent
or a subsidiary for services rendered as a consultant or in any capacity other
than as a Director (except for an amount as to which disclosure would not be
required under Item 404(a) of Regulation S-K promulgated pursuant to the
Securities Act ("Regulation S-K")), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.
(r) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.
(s) "OFFICER" means (i) before the Listing Date, any person designated
by the Company as an officer and (ii) on and after the Listing Date, 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.
(t) "OPTION" means an Incentive Stock Option or a Nonstatutory Stock
Option granted pursuant to the Plan.
(u) "OPTION AGREEMENT" means a written agreement between the Company
and an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.
(v) "OPTIONHOLDER" means a person to whom an Option is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding
Option.
3
<PAGE> 4
(w) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
Treasury Regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(x) "PARTICIPANT" means a person to whom a Option is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding
Option.
(y) "PLAN" means this iPass Inc. Interim 1999 Stock Option Plan.
(z) "RULE 16B-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.
(aa) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(bb) "TEN PERCENT SHAREHOLDER" means a person who owns (or is deemed to
own pursuant to Section 424(d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of any of its Affiliates.
3. ADMINISTRATION.
(a) ADMINISTRATION BY BOARD. The Board shall administer the Plan unless
and until the Board delegates administration to a Committee, as provided in
subsection 3(c). Any interpretation of the Plan by the Board and any decision by
the Board under the Plan shall be final and binding on all persons.
(b) POWERS OF BOARD. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons
eligible under the Plan shall be granted Options; when and how each Option shall
be granted; what type of Option shall be granted; the provisions of each Option
granted (which need not be identical), including the time or times when a person
shall be permitted to receive Common Stock pursuant to a Option; and the number
of shares of Common Stock with respect to which a Option shall be granted to
each such person.
(ii) To construe and interpret the Plan and Options granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Option Agreement, in a
manner and to the extent it shall deem necessary or expedient to make the Plan
fully effective.
4
<PAGE> 5
(iii) To amend the Plan or a Option as provided in Section 11.
(iv) Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to promote the best interests of
the Company which are not in conflict with the provisions of the Plan.
(c) DELEGATION TO COMMITTEE.
(i) GENERAL. The Board may delegate administration of the Plan
to a Committee or Committees of one (1) or more members of the Board, and the
term "Committee" shall apply to any person or persons to whom such authority has
been delegated. If administration is delegated to a Committee, the Committee
shall have, in connection with the administration of the Plan, the powers
theretofore possessed by the Board, including the power to delegate to a
subcommittee any of the administrative powers the Committee is authorized to
exercise (and references in this Plan to the Board shall thereafter be to the
Committee or subcommittee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board. The Board may abolish the Committee at any time and revest in
the Board the administration of the Plan.
(ii) COMMITTEE COMPOSITION WHEN COMMON STOCK IS PUBLICLY
TRADED. At such time as the Common Stock is publicly traded, in the discretion
of the Board, a Committee may consist solely of two or more Outside Directors,
in accordance with Section 162(m) of the Code, and/or solely of two or more
Non-Employee Directors, in accordance with Rule 16b-3. Within the scope of such
authority, the Board or the Committee may (1) delegate to a committee of one or
more members of the Board who are not Outside Directors the authority to grant
Options to eligible persons who are either (a) not then Covered Employees and
are not expected to be Covered Employees at the time of recognition of income
resulting from such Option or (b) not persons with respect to whom the Company
wishes to comply with Section 162(m) of the Code and/or) (2) delegate to a
committee of one or more members of the Board who are not Non-Employee Directors
the authority to grant Options to eligible persons who are not then subject to
Section 16 of the Exchange Act.
4. SHARES SUBJECT TO THE PLAN.
(a) SHARE RESERVE. Subject to the provisions of Section 11 relating to
adjustments upon changes in Common Stock, the Common Stock that may be issued
pursuant to Options shall not exceed in the aggregate seven hundred fifty-six
thousand four hundred forty-one (756,441) shares of Common Stock.
(b) REVERSION OF SHARES TO THE SHARE RESERVE. If any Option shall for
any reason expire or otherwise terminate, in whole or in part, without having
been exercised in full, the shares of Common Stock not acquired under such
Option shall revert to and again become available for issuance under the Plan.
(c) SOURCE OF SHARES. The shares of Common Stock subject to the Plan
may be unissued shares or reacquired shares, bought on the market or otherwise.
5
<PAGE> 6
(d) SHARE RESERVE LIMITATION. Prior to the Listing Date and to the
extent then required by Section 260.140.45 of Title 10 of the California Code of
Regulations, the total number of shares of Common Stock issuable upon exercise
of all outstanding Options and the total number of shares of Common Stock
provided for under any stock bonus or similar plan of the Company shall not
exceed the applicable percentage as calculated in accordance with the conditions
and exclusions of Section 260.140.45 of Title 10 of the California Code of
Regulations, based on the shares of Common Stock of the Company that are
outstanding at the time the calculation is made.
5. ELIGIBILITY.
(a) ELIGIBILITY FOR SPECIFIC OPTIONS. Incentive Stock Options and
Nonstatutory Stock Options may be granted to Employees.
(b) TEN PERCENT SHAREHOLDERS.
(i) A Ten Percent Shareholder shall not be granted an
Incentive Stock Option unless the exercise price of such Option is at least one
hundred ten percent (110%) of the Fair Market Value of the Common Stock at the
date of grant and the Option is not exercisable after the expiration of five (5)
years from the date of grant.
(ii) Prior to the Listing Date, a Ten Percent Shareholder
shall not be granted a Nonstatutory Stock Option unless the exercise price of
such Option is at least (i) one hundred ten percent (110%) of the Fair Market
Value of the Common Stock at the date of grant or (ii) such lower percentage of
the Fair Market Value of the Common Stock at the date of grant as is permitted
by Section 260.140.41 of Title 10 of the California Code of Regulations at the
time of the grant of the Option.
(iii) Prior to the Listing Date, a Ten Percent Shareholder
shall not be granted a restricted option unless the purchase price of the
restricted stock is at least (i) one hundred percent (100%) of the Fair Market
Value of the Common Stock at the date of grant or (ii) such lower percentage of
the Fair Market Value of the Common Stock at the date of grant as is permitted
by Section 260.140.41 of Title 10 of the California Code of Regulations at the
time of the grant of the Option.
(c) SECTION 162(m) LIMITATION. Subject to the provisions of Section 11
relating to adjustments upon changes in the shares of Common Stock, no Employee
shall be eligible to be granted Options covering more than seven hundred
fifty-six thousand four hundred forty-one (756,441) shares of Common Stock
during any calendar year. This subsection 5(c) shall not apply prior to the
Listing Date and, following the Listing Date, this subsection 5(c) shall not
apply until (i) the earliest of: (1) the first material modification of the Plan
(including any increase in the number of shares of Common Stock reserved for
issuance under the Plan in accordance with Section 4); (2) the issuance of all
of the shares of Common Stock reserved for issuance under the Plan; (3) the
expiration of the Plan; or (4) the first meeting of shareholders at which
Directors are to be elected that occurs after the close of the third calendar
year following the calendar year in which occurred the first registration of an
equity security under Section 12 of
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the Exchange Act; or (ii) such other date required by Section 162(m) of the Code
and the rules and regulations promulgated thereunder.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and, if certificates are issued, a separate certificate or certificates
will be issued for shares of Common Stock purchased on exercise of each type of
Option. The provisions of separate Options need not be identical, but each
Option shall include (through incorporation of provisions hereof by reference in
the Option or otherwise) the substance of each of the following provisions:
(a) TERM. Subject to the provisions of subsection 5(b) regarding Ten
Percent Shareholders, no Option granted prior to the Listing Date shall be
exercisable after the expiration of ten (10) years from the date it was granted,
and no Incentive Stock Option granted on or after the Listing Date shall be
exercisable after the expiration of ten (10) years from the date it was granted.
(b) EXERCISE PRICE OF AN INCENTIVE STOCK OPTION. Subject to the
provisions of subsection 5(b) regarding Ten Percent Shareholders, the exercise
price of each Incentive Stock Option shall be not less than one hundred percent
(100%) of the Fair Market Value of the Common Stock subject to the Option on the
date the Option is granted. Notwithstanding the foregoing, an Incentive Stock
Option may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.
(c) EXERCISE PRICE OF A NONSTATUTORY STOCK OPTION. Subject to the
provisions of subsection 5(b) regarding Ten Percent Shareholders, the exercise
price of each Nonstatutory Stock Option granted prior to the Listing Date shall
be not less than eighty-five percent (85%) of the Fair Market Value of the
Common Stock subject to the Option on the date the Option is granted. The
exercise price of each Nonstatutory Stock Option granted on or after the Listing
Date shall be not less than eighty-five percent (85%) of the Fair Market Value
of the Common Stock subject to the Option on the date the Option is granted.
Notwithstanding the foregoing, a Nonstatutory Stock Option may be granted with
an exercise price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another option
in a manner satisfying the provisions of Section 424(a) of the Code.
(d) CONSIDERATION. The purchase price of Common Stock acquired pursuant
to an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii) at
the discretion of the Board at the time of the grant of the Option (or
subsequently in the case of a Nonstatutory Stock Option) (1) by delivery to the
Company of other Common Stock, (2) according to a deferred payment or other
similar arrangement with the Optionholder or (3) in any other form of legal
consideration that may be acceptable to the Board; provided, however, that at
any time that the Company is incorporated in
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<PAGE> 8
Delaware, payment of the Common Stock's "par value," as defined in the Delaware
General Corporation Law, shall not be made by deferred payment.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
(e) TRANSFERABILITY OF AN INCENTIVE STOCK OPTION. An Incentive Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding the foregoing, the Optionholder may,
by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.
(f) TRANSFERABILITY OF A NONSTATUTORY STOCK OPTION. A Nonstatutory
Stock Option granted prior to the Listing Date shall not be transferable except
by will or by the laws of descent and distribution and, to the extent provided
in the Option Agreement, to such further extent as permitted by Section
260.140.41(d) of Title 10 of the California Code of Regulations at the time of
the grant of the Option, and shall be exercisable during the lifetime of the
Optionholder only by the Optionholder. A Nonstatutory Stock Option granted on or
after the Listing Date shall be transferable to the extent provided in the
Option Agreement. If the Nonstatutory Stock Option does not provide for
transferability, then the Nonstatutory Stock Option shall not be transferable
except by will or by the laws of descent and distribution and shall be
exercisable during the lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing, the Optionholder may, by delivering written
notice to the Company, in a form satisfactory to the Company, designate a third
party who, in the event of the death of the Optionholder, shall thereafter be
entitled to exercise the Option.
(g) VESTING GENERALLY. The total number of shares of Common Stock
subject to an Option may, but need not, vest and therefore become exercisable in
periodic installments that may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem appropriate. The vesting provisions of individual Options may vary. The
provisions of this subsection 6(g) are subject to any Option provisions
governing the minimum number of shares of Common Stock as to which an Option may
be exercised.
(h) TERMINATION OF CONTINUOUS SERVICE. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise such Option as of the date of
termination) but only within such period of time ending on the earlier of (i)
the date three (3) months following the termination of the Optionholder's
Continuous Service (or such longer or shorter period specified in the Option
Agreement, which period shall not be less than thirty (30) days for Options
granted prior to the Listing Date unless such termination is for cause), or (ii)
the expiration of the term of the Option as set forth in the Option Agreement.
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<PAGE> 9
If, after termination, the Optionholder does not exercise his or her Option
within the time specified in the Option Agreement, the Option shall terminate.
(i) EXTENSION OF TERMINATION DATE. An Optionholder's Option Agreement
may also provide that if the exercise of the Option following the termination of
the Optionholder's Continuous Service (other than upon the Optionholder's death
or Disability) would be prohibited at any time solely because the issuance of
shares of Common Stock would violate the registration requirements under the
Securities Act, then the Option shall terminate on the earlier of (i) the
expiration of the term of the Option set forth in subsection 6(a) or (ii) the
expiration of a period of three (3) months after the termination of the
Optionholder's Continuous Service during which the exercise of the Option would
not be in violation of such registration requirements.
(j) DISABILITY OF OPTIONHOLDER. In the event that an Optionholder's
Continuous Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise such Option as of the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period specified in
the Option Agreement, which period shall not be less than six (6) months for
Options granted prior to the Listing Date) or (ii) the expiration of the term of
the Option as set forth in the Option Agreement. If, after termination, the
Optionholder does not exercise his or her Option within the time specified
herein, the Option shall terminate.
(k) DEATH OF OPTIONHOLDER. In the event (i) an Optionholder's
Continuous Service terminates as a result of the Optionholder's death or (ii)
the Optionholder dies within the period (if any) specified in the Option
Agreement after the termination of the Optionholder's Continuous Service for a
reason other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise such Option as of the date of death) by
the Optionholder's estate, by a person who acquired the right to exercise the
Option by bequest or inheritance or by a person designated to exercise the
option upon the Optionholder's death pursuant to subsection 6(e) or 6(f), but
only within the period ending on the earlier of (1) the date eighteen (18)
months following the date of death (or such longer or shorter period specified
in the Option Agreement, which period shall not be less than six (6) months for
Options granted prior to the Listing Date) or (2) the expiration of the term of
such Option as set forth in the Option Agreement. If, after death, the Option is
not exercised within the time specified herein, the Option shall terminate.
(l) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the Optionholder's
Continuous Service terminates to exercise the Option as to any part or all of
the shares of Common Stock subject to the Option prior to the full vesting of
the Option. Subject to the "Repurchase Limitation" in subsection 10(h), any
unvested shares of Common Stock so purchased may be subject to a repurchase
option in favor of the Company or to any other restriction the Board determines
to be appropriate.
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<PAGE> 10
(m) RIGHT OF REPURCHASE. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to
repurchase all or any part of the vested shares of Common Stock acquired by the
Optionholder pursuant to the exercise of the Option.
(n) RIGHT OF FIRST REFUSAL. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to exercise
a right of first refusal following receipt of notice from the Optionholder of
the intent to transfer all or any part of the shares of Common Stock received
upon the exercise of the Option. Except as expressly provided in this subsection
6(o), such right of first refusal shall otherwise comply with any applicable
provisions of the Bylaws of the Company.
(o) RE-LOAD OPTIONS. Without in any way limiting the authority of the
Board to make or not to make grants of Options hereunder, the Board shall have
the authority (but not an obligation) to include as part of any Option Agreement
a provision entitling the Optionholder to a further Option (a "Re-Load Option")
in the event the Optionholder exercises the Option evidenced by the Option
Agreement, in whole or in part, by surrendering other shares of Common Stock in
accordance with this Plan and the terms and conditions of the Option Agreement.
Any such Re-Load Option shall (i) provide for a number of shares of Common Stock
equal to the number of shares of Common Stock surrendered as part or all of the
exercise price of such Option; (ii) have an expiration date which is the same as
the expiration date of the Option the exercise of which gave rise to such
Re-Load Option; and (iii) have an exercise price which is equal to one hundred
percent (100%) of the Fair Market Value of the Common Stock subject to the
Re-Load Option on the date of exercise of the original Option. Notwithstanding
the foregoing, a Re-Load Option shall be subject to the same exercise price and
term provisions heretofore described for Options under the Plan.
Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board may designate at the time of the grant
of the original Option; provided, however, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred thousand
dollar ($100,000) annual limitation on the exercisability of Incentive Stock
Options described in subsection 10(d) and in Section 422(d) of the Code. There
shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option shall
be subject to the availability of sufficient shares of Common Stock under
subsection 4(a) and the "Section 162(m) Limitation" on the grants of Options
under subsection 5(c) and shall be subject to such other terms and conditions as
the Board may determine which are not inconsistent with the express provisions
of the Plan regarding the terms of Options.
7. COVENANTS OF THE COMPANY.
(a) AVAILABILITY OF SHARES. During the terms of the Options, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Options.
(b) SECURITIES LAW COMPLIANCE. The Company shall seek to obtain from
each regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Options and to issue and sell shares of
Common Stock upon exercise of the
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<PAGE> 11
Options; provided, however, that this undertaking shall not require the Company
to register under the Securities Act the Plan, any Option or any Common Stock
issued or issuable pursuant to any such Option. If, after reasonable efforts,
the Company is unable to obtain from any such regulatory commission or agency
the authority which counsel for the Company deems necessary for the lawful
issuance and sale of Common Stock under the Plan, the Company shall be relieved
from any liability for failure to issue and sell Common Stock upon exercise of
such Options unless and until such authority is obtained.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of Common Stock pursuant to Options shall
constitute general funds of the Company.
9. MISCELLANEOUS.
(a) ACCELERATION OF EXERCISABILITY AND VESTING. The Board shall have
the power to accelerate the time at which a Option may first be exercised or the
time during which a Option or any part thereof will vest in accordance with the
Plan, notwithstanding the provisions in the Option stating the time at which it
may first be exercised or the time during which it will vest.
(b) SHAREHOLDER RIGHTS. No Participant shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares of
Common Stock subject to such Option unless and until such Participant has
satisfied all requirements for exercise of the Option pursuant to its terms.
(c) NO EMPLOYMENT OR OTHER SERVICE RIGHTS. Nothing in the Plan or any
instrument executed or Option granted pursuant thereto shall confer upon any
Participant any right to continue to serve the Company or an Affiliate in the
capacity in effect at the time the Option was granted or shall affect the right
of the Company or an Affiliate to terminate (i) the employment of an Employee
with or without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant's agreement with the Company
or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the
Company or an Affiliate, and any applicable provisions of the corporate law of
the state in which the Company or the Affiliate is incorporated, as the case may
be.
(d) INCENTIVE STOCK OPTION $100,000 LIMITATION. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of Common Stock
with respect to which Incentive Stock Options are exercisable for the first time
by any Optionholder during any calendar year (under all plans of the Company and
its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options.
(e) INVESTMENT ASSURANCES. The Company may require a Participant, as a
condition of exercising or acquiring Common Stock under any Option, (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
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<PAGE> 12
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; and
(ii) to give written assurances satisfactory to the Company stating that the
Participant is acquiring Common Stock subject to the Option for the
Participant's own account and not with any present intention of selling or
otherwise distributing the Common Stock; and (iii) to provide additional
representations which the Company determines is desirable for confirming
compliance with applicable governing law, including but not limited to
securities laws. The foregoing requirements, and any assurances given pursuant
to such requirements, shall be inoperative if (i) the issuance of the shares of
Common Stock upon the exercise or acquisition of Common Stock under the Option
has been registered under a then currently effective registration statement
under the Securities Act or (ii) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the Common Stock.
(f) WITHHOLDING OBLIGATIONS. To the extent provided by the terms of a
Option Agreement, the Participant may satisfy any federal, state or local tax
withholding obligation relating to the exercise or acquisition of Common Stock
under a Option by any of the following means (in addition to the Company's right
to withhold from any compensation paid to the Participant by the Company) or by
a combination of such means: (i) tendering a cash payment; (ii) authorizing the
Company to withhold shares of Common Stock from the shares of Common Stock
otherwise issuable to the Participant as a result of the exercise or acquisition
of Common Stock under the Option; provided, however, that no shares are withheld
with a value exceeding the minimum amount of tax required to be withheld by law;
or (iii) delivering to the Company owned and unencumbered shares of Common
Stock.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) CAPITALIZATION ADJUSTMENTS. If any change is made in the Common
Stock subject to the Plan, or subject to any Option, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number of securities subject to the Plan
pursuant to subsection 4(a) and the maximum number of securities subject to
award to any person pursuant to subsection 5(c), and the outstanding Options
will be appropriately adjusted in the class(es) and number of securities and
price per share of Common Stock subject to such outstanding Options. The Board
shall make such adjustments, and its determination shall be final, binding and
conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a transaction "without receipt of consideration" by the
Company.)
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(b) CHANGE IN CONTROL. In the event of (i) a dissolution or
liquidation, (ii) a sale, lease or other disposition of all or substantially all
of the assets of the Company, (iii) a merger or consolidation in which the
Company is not the surviving corporation or (iv) a reverse merger in which the
Company is the surviving corporation but the shares of Common Stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise, then any
surviving corporation or acquiring corporation shall assume or continue any
Options outstanding under the Plan or shall substitute similar options
(including an award to acquire the same consideration paid to the shareholders
in the transaction described in this subsection 10(b)) for those outstanding
under the Plan. In the event any surviving corporation or acquiring corporation
refuses to assume or continue such Options or to substitute similar options for
those outstanding under the Plan, then with respect to Options held by
Participants whose Continuous Service has not terminated and who have been
performing such services for less than twelve (12) months, and subject to any
applicable provisions of the California Corporate Securities Law of 1968 and
related regulations relied upon as a condition of issuing securities pursuant to
the Plan, the vesting of such Options (and, if applicable, the time during which
such Options may be exercised) shall be accelerated prior to such event as
follows: the number of Options that would have vested upon the first anniversary
of the vesting commencement date shall be divided by twelve (12) and
subsequently multiplied by the number of complete months, measured from the
vesting commencement date, that the Optionholder has rendered services to the
Company. Such Options shall terminate if not exercised (if applicable) after
acceleration and at or prior to such event, and with respect to any other
Options outstanding under the Plan, such Options shall terminate if not
exercised (if applicable) prior to such event.
11. AMENDMENT OF THE PLAN AND OPTIONS.
(a) AMENDMENT OF PLAN. The Board at any time, and from time to time,
may amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in Common Stock, no amendment shall be effective unless
approved by the shareholders of the Company to the extent shareholder approval
is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3
or any Nasdaq or securities exchange listing requirements.
(b) SHAREHOLDER APPROVAL. The Board may, in its sole discretion, submit
any other amendment to the Plan for shareholder approval, including, but not
limited to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.
(c) CONTEMPLATED AMENDMENTS. It is expressly contemplated that the
Board may amend the Plan in any respect the Board deems necessary or advisable
to provide eligible Employees with the maximum benefits provided or to be
provided under the provisions of the Code and the regulations promulgated
thereunder relating to Incentive Stock Options and/or to bring the Plan and/or
Incentive Stock Options granted under it into compliance therewith.
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(d) NO IMPAIRMENT OF RIGHTS. Rights under any Option granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Participant and (ii) the Participant
consents in writing.
(e) AMENDMENT OF OPTIONS. The Board at any time, and from time to time,
may amend the terms of any one or more Options; provided, however, that the
rights under any Option shall not be impaired by any such amendment unless (i)
the Company requests the consent of the Participant and (ii) the Participant
consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) PLAN TERM. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on the day before the tenth
(10th) anniversary of the date the Plan is adopted by the Board or approved by
the shareholders of the Company, whichever is earlier. No Options may be granted
under the Plan while the Plan is suspended or after it is terminated.
(b) NO IMPAIRMENT OF RIGHTS. Suspension or termination of the Plan
shall not impair rights and obligations under any Option granted while the Plan
is in effect except with the written consent of the Participant.
13. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no
Option shall be exercised (or, in the case of a stock bonus, shall be granted)
unless and until the Plan has been approved by the shareholders of the Company,
which approval shall be within twelve (12) months before or after the date the
Plan is adopted by the Board.
14. CHOICE OF LAW.
The law of the State of California shall govern all questions
concerning the construction, validity and interpretation of this Plan, without
regard to such state's conflict of laws rules.
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INCENTIVE STOCK OPTION
__________________, Optionholder:
IPASS INC. (the "Company"), pursuant to its Interim 1999 Stock Option
Plan (the "Plan"), has granted to you, the optionholder named above, an option
to purchase shares of the Company's common stock ("Common Stock"). This option
is intended to qualify as an "incentive stock option" within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
The grant hereunder is in connection with and in furtherance of the
Company's compensatory benefit plan for participation of the Company's employees
(including officers) and is intended to comply with the provisions of (i) Rule
701 promulgated by the Securities and Exchange Commission under the Securities
Act of 1933, as amended (the "Securities Act") and (ii) Section 25102(f) of the
California Corporations Code. Defined terms not explicitly defined in this
agreement but defined in the Plan shall have the same definitions as in the
Plan.
The details of your option are as follows:
1. TOTAL NUMBER OF SHARES SUBJECT TO THIS OPTION. The total number of
shares of Common Stock subject to this option is _______________________________
(__________)
2. VESTING. Subject to the limitations contained herein, 25% of the
option shares will vest (become exercisable) on ________________, and 1/36 of
the remaining shares will vest on the ____ day of each month after
________________, for the next 36 months until either (i) you cease to provide
services to the Company for any reason, or (ii) this option becomes fully vested
on May 10, 2004.
3. EXERCISE PRICE AND METHOD OF PAYMENT.
(a) EXERCISE PRICE. The exercise price of this option is
_____________ ($____) per share, being not less than the Fair Market Value of
the Common Stock on the date of grant of this option.
(b) METHOD OF PAYMENT. Payment of the exercise price per share is
due in full upon exercise of all or any part of each installment which has
accrued to you. You may elect, to the extent permitted by applicable statutes
and regulations, to make payment of the exercise price under one of the
following alternatives:
(i) Payment of the exercise price per share in cash
(including check) at the time of exercise;
(ii) Payment pursuant to a program developed under
Regulation T as promulgated by the Federal Reserve Board which, prior to the
issuance of Common Stock, results in either the receipt of cash (or check) by
the Company or the receipt of irrevocable instructions to pay the aggregate
exercise price to the Company from the sales proceeds;
1.
<PAGE> 16
(iii) Payment pursuant to the following deferred payment
alternative:
(1) Not less than one hundred percent (100%) of the aggregate exercise
price, plus accrued interest, shall be due four (4) years from date of exercise
or, except as otherwise provided in the Executive Employment Agreement and the
Secured Promissory Note between Optionholder and Company, at the Company's
election, upon termination of your Continuous Service;
(2) Interest shall be compounded at least annually and shall be charged at
the minimum rate of interest necessary to avoid the treatment as interest, under
any applicable provisions of the Code, of any portion of any amounts other than
amounts stated to be interest under the deferred payment arrangement;
(3) At any time that the Company is incorporated in Delaware, payment of the
Common Stock's "par value," as defined in the Delaware General Corporation Law,
shall be made in cash and not by deferred payment; and
(4) In order to elect the deferred payment alternative, you must, as a part
of your written notice of exercise, give notice of the election of this payment
alternative and, in order to secure the payment of the deferred exercise price
to the Company hereunder, if the Company so requests, you must tender to the
Company a promissory note and a security agreement covering the purchased shares
of Common Stock, both in form and substance satisfactory to the Company, or such
other or additional documentation as the Company may request;
or
(iv) Payment by a combination of the methods of payment
permitted by subparagraphs 3(b)(i), 3(b)(ii) and 3(b)(iii) above.
4. EXERCISE PRIOR TO VESTING PERMITTED.
(a) CONDITIONS OF EARLY EXERCISE. Subject to the provisions of
this option you may elect at any time during your Continuous Status as an
Employee, Director or Consultant with the Company or an Affiliate of the
Company, to exercise the option as to any part or all of the shares subject to
this option at any time during the term hereof, including without limitation, a
time prior to the date of earliest exercise ("vesting") stated in paragraph 2
hereof; provided, however, that:
(i) a partial exercise of this option shall be deemed to
cover first vested shares and then the earliest vesting installment of unvested
shares;
(ii) any shares so purchased from installments which have
not vested as of the date of exercise shall be subject to the purchase option in
favor of the Company as described in the Early Exercise Stock Purchase Agreement
attached hereto;
(iii) you shall enter into an Early Exercise Stock
Purchase Agreement in the form attached hereto with a vesting schedule that will
result in the same vesting as if no early exercise had occurred; and
2.
<PAGE> 17
(iv) to the extent that this option becomes exercisable
under this agreement and the aggregate fair market value of any shares subject
to incentive stock options granted to you by the Company or any Affiliate of the
Company (valued as of their grant date) which would become exercisable for the
first time during any calendar year exceeds $100,000, then the aggregate fair
market value exceeding this $100,000 limit shall be treated as having been
granted under the terms of a nonstatutory stock option which is not intended to
satisfy the requirements of Section 422 of the Code.
(b) EXPIRATION OF EARLY EXERCISE ELECTION. The election provided
in this paragraph 4 to purchase shares upon the exercise of this option prior to
the vesting dates shall cease upon termination of your Continuous Status as an
Employee, Director or Consultant with the Company or an Affiliate of the Company
and may not be exercised after the date thereof.
5. WHOLE SHARES. This option may not be exercised for any number of
shares which would require the issuance of anything other than whole shares.
6. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary
contained herein, this option may not be exercised unless the shares issuable
upon exercise of this option are then registered under the Securities Act or, if
such shares are not then so registered, the Company has determined that such
exercise and issuance would be exempt from the registration requirements of the
Securities Act.
7. TERM. The term of this option commences on _____________, the date of
grant, and expires on ____________ (the "Expiration Date"), which date shall be
no more than ten (10) years from date this option is granted, unless this option
expires sooner as set forth below or in the Plan. In no event may this option be
exercised on or after the Expiration Date. This option shall terminate prior to
the Expiration Date as follows: thirty (30) days after the termination of your
Continuous Status as an Employee, Director or Consultant with the Company or an
Affiliate of the Company unless one of the following circumstances exists:
(a) Your termination of Continuous Status as an Employee,
Director or Consultant is due to your disability. This option will then expire
on the earlier of the Expiration Date set forth above or twelve (12) months
following such termination of Continuous Status as an Employee, Director or
Consultant. You should be aware that if your disability is not considered a
permanent and total disability within the meaning of Section 422(c)(6) of the
Code, and you exercise this option more than three (3) months following the date
of your termination of employment, your exercise will be treated for tax
purposes as the exercise of a "nonstatutory stock option" instead of an
"incentive stock option" under the federal tax laws.
(b) Your termination of Continuous Status as an Employee,
Director or Consultant is due to your death or your death occurs within thirty
(30) days following your termination of Continuous Status as an Employee,
Director or Consultant for any other reason. This option will then expire on the
earlier of the Expiration Date set forth above or twelve (12) months after your
death.
(c) If during any part of such thirty (30)-day period you may not
exercise your option solely because of the condition set forth in paragraph 6
above, then your option will not
3.
<PAGE> 18
expire until the earlier of the Expiration Date set forth above or until this
option shall have been exercisable for an aggregate period of thirty (30) days
after your termination of Continuous Status as an Employee, Director or
Consultant.
(d) If your exercise of the option within thirty (30) days after
termination of your Continuous Status as an Employee, Director or Consultant
with the Company or with an Affiliate of the Company would result in liability
under Section 16(b) of the Securities Exchange Act of 1934, as amended, then
your option will expire on the earlier of (i) the Expiration Date set forth
above, (ii) the tenth (10th) day after the last date upon which exercise would
result in such liability or (iii) six (6) months and ten (10) days after the
termination of your Continuous Status as an Employee, Director or Consultant
with the Company or an Affiliate of the Company.
However, this option may be exercised following termination of
Continuous Status as an Employee, Director or Consultant only as to that number
of shares as to which it was exercisable on the date of termination of
Continuous Status as an Employee, Director or Consultant under the provisions of
paragraph 2 of this option.
In order to obtain the federal income tax advantages associated with an
"incentive stock option," the Code requires that at all times beginning on the
date of grant of the option and ending on the day three (3) months before the
date of the option's exercise, you must be an employee of the Company or an
Affiliate of the Company, except in the event of your death or permanent and
total disability. The Company has provided for continued vesting or extended
exercisability of your option under certain circumstances for your benefit, but
cannot guarantee that your option will necessarily be treated as an "incentive
stock option" if you provide services to the Company or an Affiliate of the
Company as a consultant or exercise your option more than three (3) months after
the date your employment with the Company and all Affiliates of the Company
terminates.
8. EXERCISE.
(a) This option may be exercised, to the extent specified above,
by delivering a notice of exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require pursuant
to subsection 9(e) of the Plan.
(b) By exercising this option you agree that:
(i) as a precondition to the completion of any exercise of
this option, the Company may require you to enter an arrangement providing for
the payment by you to the Company of any tax withholding obligation of the
Company arising by reason of (1) the exercise of this option; (2) the lapse of
any substantial risk of forfeiture to which the shares are subject at the time
of exercise; or (3) the disposition of shares acquired upon such exercise;
(ii) you will notify the Company in writing within fifteen
(15) days after the date of any disposition of any of the shares of the Common
Stock issued upon exercise
4.
<PAGE> 19
of this option that occurs within two (2) years after the date of this option
grant or within one (1) year after such shares of Common Stock are transferred
upon exercise of this option; and
(iii) the Company (or a representative of the
underwriters) may, in connection with the first underwritten registration of the
offering of any securities of the Company under the Securities Act, require that
you not sell or otherwise transfer or dispose of any shares of Common Stock or
other securities of the Company during such period (not to exceed one hundred
eighty (180) days) following the effective date (the "Effective Date") of the
registration statement of the Company filed under the Securities Act as may be
requested by the Company or the representative of the underwriters. You further
agree that the Company may impose stop-transfer instructions with respect to
securities subject to the foregoing restrictions until the end of such period.
9. TRANSFERABILITY. This option is not transferable, except by will or
by the laws of descent and distribution, and is exercisable during your life
only by you. Notwithstanding the foregoing, by delivering written notice to the
Company, in a form satisfactory to the Company, you may designate a third party
who, in the event of your death, shall thereafter be entitled to exercise this
option.
10. OPTION NOT A SERVICE CONTRACT. This option is not an employment
contract and nothing in this option shall be deemed to create in any way
whatsoever any obligation on your part to continue in the employ of the Company,
or of the Company to continue your employment with the Company. In addition,
nothing in this option shall obligate the Company or any Affiliate of the
Company, or their respective shareholders, Board of Directors, officers or
employees to continue any relationship which you might have as a Director or
Consultant for the Company or Affiliate of the Company.
11. NOTICES. Any notices provided for in this option or the Plan shall
be given in writing and shall be deemed effectively given upon receipt or, in
the case of notices delivered by the Company to you, fifteen (15) days after
deposit in the United States mail, postage prepaid, addressed to you at the
address specified below or at such other address as you hereafter designate by
written notice to the Company.
12. GOVERNING PLAN DOCUMENT. This option is subject to all the
provisions of the Plan, a copy of which is attached hereto and its provisions
are hereby made a part of this option, including without limitation the
provisions of Section 6 of the Plan relating to option provisions, and is
further subject to all interpretations, amendments, rules and regulations which
may from time to time be promulgated and adopted pursuant to the Plan. In the
event of any conflict between the provisions of this option and those of the
Plan, the provisions of the Plan shall control.
13. RIGHT OF FIRST REFUSAL. The shares acquired upon exercise of this
option shall be subject to the right of first refusal provisions set forth in
the Company's bylaws, such bylaws being open to inspection by any stockholder or
optionholder of the Company.
Dated the ____ day of ____________, 1999.
5.
<PAGE> 20
Very truly yours,
IPASS INC.
By
---------------------------
Duly authorized on behalf
of the Board of Directors
ATTACHMENTS:
Interim 1999 Stock Option Plan
Form of Early Exercise Stock Purchase Agreement
Notice of Exercise
Memorandum Explaining Section 83(b) Election
Section 83(b) Election
6.
<PAGE> 21
The undersigned:
(a) Acknowledges receipt of the foregoing option and the attachments
referenced therein and understands that all rights and liabilities with respect
to this option are set forth in the option and the Plan; and
(b) Acknowledges that as of the date of grant of this option, it sets
forth the entire understanding between the undersigned optionholder and the
Company and its Affiliates regarding the acquisition of stock in the Company and
supersedes all prior oral and written agreements on that subject with the
exception of (i) the options previously granted and delivered to the undersigned
under stock option plans of the Company, and (ii) the following agreements only:
- -------------------------
- -------------------------
OPTIONHOLDER
----------------------------
7.
<PAGE> 22
NOTICE OF EXERCISE
iPass Inc.
650 Castro Street, Suite 500
Mountain View, California 94041
Date of Exercise: _______________, 1999
Ladies and Gentlemen:
This constitutes notice under my stock option that I elect to purchase the
number of shares for the price set forth below.
Type of option: INCENTIVE
Stock option dated: ---------------------------
Number of shares as to which
option is exercised: ---------------------------
Certificates to be
issued in name of: ---------------------------
Total exercise price: $
--------------------------
Cash payment delivered herewith: $
--------------------------
By this exercise, I agree (i) to provide such additional documents as
you may require pursuant to the terms of the Company's Interim 1999 Stock Option
Plan, (ii) to provide for the payment by me to you (in the manner designated by
you) of your withholding obligation, if any, relating to the exercise of this
option, and (iii) to notify you in writing within fifteen (15) days after the
date of any disposition of any of the shares of Common Stock issued upon
exercise of this option that occurs within two (2) years after the date of grant
of this option or within one (1) year after such shares of Common Stock are
issued upon exercise of this option.
I hereby make the following certifications and representations with
respect to the number of shares of Common Stock (the "Shares"), which are being
acquired by me for my own account upon exercise of the Option as set forth
above:
I acknowledge that I am aware of the Company's business affairs and
financial condition and have acquired sufficient information about the Company
to reach an informed and knowledgeable decision to acquire the Shares. I am not
purchasing the Shares pursuant to any publication of any advertisement
soliciting the purchase of securities of the Company. I am
<PAGE> 23
purchasing the Shares for investment in my own account only and not with a view
to, or for resale in connection with, any "distribution" thereof within the
meaning of the Securities Act of 1933, as amended (the "Securities Act").
I further acknowledge that the Shares have not been registered under the
Securities Act by reason of a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of my investment intent
as expressed above.
I further acknowledge that I will not be able to resell the Shares for
at least ninety (90) days after the stock of the Company becomes publicly traded
(i.e., subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended) under Rule 701 and that more
restrictive conditions apply to affiliates of the Company under Rule 144. I
further acknowledge and understand that the Company is under no obligation to
register the Shares.
I further acknowledge that all certificates representing any of the
Shares subject to the provisions of the Option shall have endorsed thereon
appropriate legends reflecting the foregoing limitations, as well as any legends
reflecting restrictions pursuant to the Company's Articles of Incorporation,
Bylaws and/or applicable securities laws.
I further acknowledge and represent that I have either (i) preexisting
personal or business relationships with the Company or any of its officers,
directors or controlling persons, or (ii) the capacity to protect my own
interests in connection with the purchase of the Shares by virtue of my business
or financial expertise or that of my professional advisors who are unaffiliated
with and who are not compensated by the Company or any of its affiliates,
directly or indirectly.
I further agree that, if required by the Company (or a representative of
the underwriters) in connection with the first underwritten registration of the
offering of any securities of the Company under the Securities Act, I will not
sell or otherwise transfer or dispose of any shares of Common Stock or other
securities of the Company during such period (not to exceed one hundred eighty
(180) days following the effective date of the registration statement of the
Company filed under the Securities Act as may be requested by the Company or the
representative of the underwriters. I further agree that the Company may impose
stop transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such period.
Very truly yours,
-----------------------------
9.
<PAGE> 24
NONSTATUTORY STOCK OPTION
______________________, Optionholder:
IPASS INC. (the "Company"), pursuant to its Interim 1999 Stock Option
Plan (the "Plan"), has granted to you, the optionholder named above, an option
to purchase shares of the Company's common stock ("Common Stock"). This option
is not intended to qualify as and will not be treated as an "incentive stock
option" within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code").
The grant hereunder is in connection with and in furtherance of the
Company's compensatory benefit plan for participation of the Company's employees
(including officers), directors or consultants and is intended to comply with
the provisions of (i) Rule 701 promulgated by the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Securities Act")
and (ii) Section 25102(f) of the California Corporations Code. Defined terms not
explicitly defined in this agreement but defined in the Plan shall have the same
definitions as in the Plan.
The details of your option are as follows:
1. TOTAL NUMBER OF SHARES SUBJECT TO THIS OPTION. The total number of
shares of Common Stock subject to this option is _______________________________
(________).
2. VESTING. Subject to the limitations contained herein, 25% of the
option shares will vest (become exercisable) on __________________, and 1/36 of
the remaining shares will vest on the ____ day of each month after
________________, for the next 36 months until either (i) you cease to provide
services to the Company for any reason, or (ii) this option becomes fully vested
on _________________.
3. EXERCISE PRICE AND METHOD OF PAYMENT.
(a) EXERCISE PRICE. The exercise price of this option is
__________________ ($_______) per share, being not less than the Fair Market
Value of the Common Stock on the date of grant of this option.
(b) METHOD OF PAYMENT. Payment of the exercise price per share is
due in full upon exercise of all or any part of each installment which has
accrued to you. You may elect, to the extent permitted by applicable statutes
and regulations, to make payment of the exercise price under one of the
following alternatives:
(i) Payment of the exercise price per share in cash
(including check) at the time of exercise;
(ii) Payment pursuant to a program developed under
Regulation T as promulgated by the Federal Reserve Board which, prior to the
issuance of Common Stock,
1.
<PAGE> 25
results in either the receipt of cash (or check) by the Company or the receipt
of irrevocable instructions to pay the aggregate exercise price to the Company
from the sales proceeds;
(iii) Payment pursuant to the following deferred payment
alternative:
(1) Not less than one hundred percent (100%) of the aggregate exercise
price, plus accrued interest, shall be due four (4) years from date of exercise
or, except as otherwise provided in the Executive Employment Agreement and the
Secured Promissory Note between Optionholder and Company, at the Company's
election, upon termination of your Continuous Service;
(2) Interest shall be compounded at least annually and shall be charged at
the minimum rate of interest necessary to avoid the treatment as interest, under
any applicable provisions of the Code, of any portion of any amounts other than
amounts stated to be interest under the deferred payment arrangement;
(3) At any time that the Company is incorporated in Delaware, payment of the
Common Stock's "par value," as defined in the Delaware General Corporation Law,
shall be made in cash and not by deferred payment; and
(4) In order to elect the deferred payment alternative, you must, as a part
of your written notice of exercise, give notice of the election of this payment
alternative and, in order to secure the payment of the deferred exercise price
to the Company hereunder, if the Company so requests, you must tender to the
Company a promissory note and a security agreement covering the purchased shares
of Common Stock, both in form and substance satisfactory to the Company, or such
other or additional documentation as the Company may request;
or
(iv) Payment by a combination of the methods of payment
permitted by subparagraphs 3(b)(i), 3(b)(ii) and 3(b)(iii) above.
4. EXERCISE PRIOR TO VESTING PERMITTED.
(a) CONDITIONS OF EARLY EXERCISE. Subject to the provisions of
this option you may elect at any time during your Continuous Status as an
Employee, Director or Consultant with the Company or an Affiliate of the
Company, to exercise the option as to any part or all of the shares subject to
this option at any time during the term hereof, including without limitation, a
time prior to the date of earliest exercise ("vesting") stated in paragraph 2
hereof; provided, however, that:
(i) a partial exercise of this option shall be deemed to
cover first vested shares and then the earliest vesting installment of unvested
shares;
(ii) any shares so purchased from installments which have
not vested as of the date of exercise shall be subject to the purchase option in
favor of the Company as described in the Early Exercise Stock Purchase Agreement
attached hereto; and
2.
<PAGE> 26
(iii) you shall enter into an Early Exercise Stock
Purchase Agreement in the form attached hereto with a vesting schedule that will
result in the same vesting as if no early exercise had occurred.
(b) EXPIRATION OF EARLY EXERCISE ELECTION. The election provided
in this paragraph 4 to purchase shares upon the exercise of this option prior to
the vesting dates shall cease upon termination of your Continuous Status as an
Employee, Director or Consultant with the Company or an Affiliate of the Company
and may not be exercised after the date thereof.
5. WHOLE SHARES. This option may not be exercised for any number of
shares which would require the issuance of anything other than whole shares.
6. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary
contained herein, this option may not be exercised unless the shares issuable
upon exercise of this option are then registered under the Securities Act or, if
such shares are not then so registered, the Company has determined that such
exercise and issuance would be exempt from the registration requirements of the
Securities Act.
7. TERM. The term of this option commences on _______________, the date
of grant, and expires on _________________ (the "Expiration Date"), which date
shall be no more than ten (10) years from date this option is granted, unless
this option expires sooner as set forth below or in the Plan. In no event may
this option be exercised on or after the Expiration Date. This option shall
terminate prior to the Expiration Date as follows: thirty (30) days after the
termination of your Continuous Status as an Employee, Director or Consultant
with the Company or an Affiliate of the Company unless one of the following
circumstances exists:
(a) Your termination of Continuous Status as an Employee,
Director or Consultant is due to your disability. This option will then expire
on the earlier of the Expiration Date set forth above or twelve (12) months
following such termination of Continuous Status as an Employee, Director or
Consultant.
(b) Your termination of Continuous Status as an Employee,
Director or Consultant is due to your death or your death occurs within thirty
(30) days following your termination of Continuous Status as an Employee,
Director or Consultant for any other reason. This option will then expire on the
earlier of the Expiration Date set forth above or twelve (12) months after your
death.
(c) If during any part of such thirty (30)-day period you may not
exercise your option solely because of the condition set forth in paragraph 6
above, then your option will not expire until the earlier of the Expiration Date
set forth above or until this option shall have been exercisable for an
aggregate period of thirty (30) days after your termination of Continuous Status
as an Employee, Director or Consultant.
(d) If your exercise of the option within thirty (30) days after
termination of your Continuous Status as an Employee, Director or Consultant
with the Company or with an Affiliate of the Company would result in liability
under Section 16(b) of the Securities Exchange Act of 1934, as amended, then
your option will expire on the earlier of (i) the Expiration Date set
3.
<PAGE> 27
forth above, (ii) the tenth (10th) day after the last date upon which exercise
would result in such liability or (iii) six (6) months and ten (10) days after
the termination of your Continuous Status as an Employee, Director or Consultant
with the Company or an Affiliate of the Company.
However, this option may be exercised following termination of
Continuous Status as an Employee, Director or Consultant only as to that number
of shares as to which it was exercisable on the date of termination of
Continuous Status as an Employee, Director or Consultant under the provisions of
paragraph 2 of this option.
8. EXERCISE.
(a) This option may be exercised, to the extent specified above,
by delivering a notice of exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require pursuant
to subsection 9(e) of the Plan.
(b) By exercising this option you agree that:
(i) as a precondition to the completion of any exercise of
this option, the Company may require you to enter an arrangement providing for
the payment by you to the Company of any tax withholding obligation of the
Company arising by reason of (1) the exercise of this option; (2) the lapse of
any substantial risk of forfeiture to which the shares are subject at the time
of exercise; or (3) the disposition of shares acquired upon such exercise; and
(ii) the Company (or a representative of the underwriters)
may, in connection with the first underwritten registration of the offering of
any securities of the Company under the Securities Act, require that you not
sell or otherwise transfer or dispose of any shares of Common Stock or other
securities of the Company during such period (not to exceed one hundred eighty
(180) days) following the effective date (the "Effective Date") of the
registration statement of the Company filed under the Securities Act as may be
requested by the Company or the representative of the underwriters. You further
agree that the Company may impose stop-transfer instructions with respect to
securities subject to the foregoing restrictions until the end of such period.
9. TRANSFERABILITY. This option is not transferable, except by will or
by the laws of descent and distribution, and is exercisable during your life
only by you. Notwithstanding the foregoing, by delivering written notice to the
Company, in a form satisfactory to the Company, you may designate a third party
who, in the event of your death, shall thereafter be entitled to exercise this
option.
10. OPTION NOT A SERVICE CONTRACT. This option is not an employment
contract and nothing in this option shall be deemed to create in any way
whatsoever any obligation on your part to continue in the employ of the Company,
or of the Company to continue your employment with the Company. In addition,
nothing in this option shall obligate the Company or any Affiliate of the
Company, or their respective shareholders, Board of Directors, officers or
4.
<PAGE> 28
employees to continue any relationship which you might have as a Director or
Consultant for the Company or Affiliate of the Company.
11. NOTICES. Any notices provided for in this option or the Plan shall
be given in writing and shall be deemed effectively given upon receipt or, in
the case of notices delivered by the Company to you, fifteen (15) days after
deposit in the United States mail, postage prepaid, addressed to you at the
address specified below or at such other address as you hereafter designate by
written notice to the Company.
12. GOVERNING PLAN DOCUMENT. This option is subject to all the
provisions of the Plan, a copy of which is attached hereto and its provisions
are hereby made a part of this option, including without limitation the
provisions of Section 6 of the Plan relating to option provisions, and is
further subject to all interpretations, amendments, rules and regulations which
may from time to time be promulgated and adopted pursuant to the Plan. In the
event of any conflict between the provisions of this option and those of the
Plan, the provisions of the Plan shall control.
13. RIGHT OF FIRST REFUSAL. The shares acquired upon exercise of this
option shall be subject to the right of first refusal provisions set forth in
the Company's bylaws, such bylaws being open to inspection by any stockholder or
optionholder of the Company.
Dated the ____ day of _________, 1999.
Very truly yours,
IPASS INC.
By
--------------------------
Duly authorized on behalf
of the Board of Directors
ATTACHMENTS:
Interim 1999 Stock Option Plan
Form of Early Exercise Stock Purchase Agreement
Notice of Exercise
Memorandum Explaining Section 83(b) Election
Section 83(b) Election
5.
<PAGE> 29
The undersigned:
(a) Acknowledges receipt of the foregoing option and the attachments
referenced therein and understands that all rights and liabilities with respect
to this option are set forth in the option and the Plan; and
(b) Acknowledges that as of the date of grant of this option, it sets
forth the entire understanding between the undersigned optionholder and the
Company and its Affiliates regarding the acquisition of stock in the Company and
supersedes all prior oral and written agreements on that subject with the
exception of (i) the options previously granted and delivered to the undersigned
under stock option plans of the Company, and (ii) the following agreements only:
---------------------
---------------------
OPTIONHOLDER
----------------------------
<PAGE> 30
NOTICE OF EXERCISE
iPass Inc.
650 Castro Street, Suite 500
Mountain View, California 94041
Date of Exercise: ___________, 1999
Ladies and Gentlemen:
This constitutes notice under my stock option that I elect to purchase the
number of shares for the price set forth below.
Type of option: NONSTATUTORY
Stock option dated: --------------------------
Number of shares as to which
option is exercised: --------------------------
Certificates to be
issued in name of: --------------------------
Total exercise price: $
--------------------------
Cash payment delivered herewith: $
--------------------------
By this exercise, I agree (i) to provide such additional documents as
you may require pursuant to the terms of the Company's Interim 1999 Stock Option
Plan, and (ii) to provide for the payment by me to you (in the manner designated
by you) of your withholding obligation, if any, relating to the exercise of this
option.
I hereby make the following certifications and representations with
respect to the number of shares of Common Stock (the "Shares"), which are being
acquired by me for my own account upon exercise of the Option as set forth
above:
I acknowledge that I am aware of the Company's business affairs and
financial condition and have acquired sufficient information about the Company
to reach an informed and knowledgeable decision to acquire the Shares. I am not
purchasing the Shares pursuant to any publication of any advertisement
soliciting the purchase of securities of the Company. I am purchasing the Shares
for investment in my own account only and not with a view to, or for resale in
connection with, any "distribution" thereof within the meaning of the Securities
Act of 1933, as amended (the "Securities Act").
7.
<PAGE> 31
I further acknowledge that the Shares have not been registered under the
Securities Act by reason of a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of my investment intent
as expressed above.
I further acknowledge that I will not be able to resell the Shares for
at least ninety (90) days after the stock of the Company becomes publicly traded
(i.e., subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended) under Rule 701 and that more
restrictive conditions apply to affiliates of the Company under Rule 144. I
further acknowledge and understand that the Company is under no obligation to
register the Shares.
I further acknowledge that all certificates representing any of the
Shares subject to the provisions of the Option shall have endorsed thereon
appropriate legends reflecting the foregoing limitations, as well as any legends
reflecting restrictions pursuant to the Company's Articles of Incorporation,
Bylaws and/or applicable securities laws.
I further acknowledge and represent that I have either (i) preexisting
personal or business relationships with the Company or any of its officers,
directors or controlling persons, or (ii) the capacity to protect my own
interests in connection with the purchase of the Shares by virtue of my business
or financial expertise or that of my professional advisors who are unaffiliated
with and who are not compensated by the Company or any of its affiliates,
directly or indirectly.
I further agree that, if required by the Company (or a representative of
the underwriters) in connection with the first underwritten registration of the
offering of any securities of the Company under the Securities Act, I will not
sell or otherwise transfer or dispose of any shares of Common Stock or other
securities of the Company during such period (not to exceed one hundred eighty
(180) days following the effective date of the registration statement of the
Company filed under the Securities Act as may be requested by the Company or the
representative of the underwriters. I further agree that the Company may impose
stop transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such period.
Very truly yours,
-----------------------------
8.
<PAGE> 1
EXHIBIT 10.6
iPASS INC.
1999 STOCK OPTION PLAN
ADOPTED: JUNE 30, 1999
APPROVED BY SHAREHOLDERS: JULY 22, 1999
TERMINATION DATE: JUNE 29, 2009
1. PURPOSES.
(a) ELIGIBLE OPTION RECIPIENTS. The persons eligible to receive Options
are the Employees, Directors and Consultants of the Company and its Affiliates.
(b) AVAILABLE OPTIONS. The purpose of the Plan is to provide a means by
which eligible recipients of Options may be given an opportunity to benefit from
increases in value of the Common Stock through the granting of the following
Options: (i) Incentive Stock Options and (ii) Nonstatutory Stock Options.
(c) GENERAL PURPOSE. The Company, by means of the Plan, seeks to retain
the services of the group of persons eligible to receive Options, to secure and
retain the services of new members of this group and to provide incentives for
such persons to exert maximum efforts for the success of the Company and its
Affiliates.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation
of the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CAUSE" means the occurrence of any of the following (and only the
following): (i) conviction of the terminated Participant of any felony involving
fraud or act of dishonesty against the Company or its Affiliates; (ii) conduct
by the terminated Participant which, based upon good faith and reasonable
factual investigation and determination of the Company (or, if the terminated
Participant is an Officer, of the Board), demonstrates gross unfitness to serve;
or (iii) intentional, material violation by the terminated Participant of any
statutory or fiduciary duty of the terminated Participant to the Company or its
Affiliates. In addition, if the terminated Participant is not an Officer, Cause
also shall include poor performance of the terminated Participant's services for
the Company or its Affiliates as determined by the Company following (A) written
notice to the Participant describing the nature of such deficiency and (B) the
Participant's failure to cure such deficiency within thirty (30) days following
receipt of the such written notice.
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(d) "CODE" means the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" means a committee of one or more members of the Board
appointed by the Board in accordance with subsection 3(c).
(f) "COMMON STOCK" means the common stock of the Company.
(g) "COMPANY" means iPass Inc., a California corporation.
(h) "CONSULTANT" means any person, including an advisor, (i) engaged by
the Company or an Affiliate to render consulting or advisory services and who is
compensated for such services or (ii) who is a member of the Board of Directors
of an Affiliate. However, the term "Consultant" shall not include either
Directors who are not compensated by the Company for their services as Directors
or Directors who are merely paid a director's fee by the Company for their
services as Directors.
(i) "CONTINUOUS SERVICE" means that the Participant's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director will not
constitute an interruption of Continuous Service. The Board or the chief
executive officer of the Company, in that party's sole discretion, may determine
whether Continuous Service shall be considered interrupted in the case of any
leave of absence approved by that party, including sick leave, military leave or
any other personal leave.
(j) "COVERED EMPLOYEE" means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to shareholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.
(k) "DIRECTOR" means a member of the Board of Directors of the Company.
(l) "DISABILITY" means the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.
(m) "EMPLOYEE" means any person employed by the Company or an
Affiliate. Mere service as a Director or payment of a director's fee by the
Company or an Affiliate shall not be sufficient to constitute "employment" by
the Company or an Affiliate.
(n) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
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(o) "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock determined as follows and in each case in a manner consistent with Section
260.140.50 of Title 10 of the California Code of Regulations:
(i) If the Common Stock is listed on any established stock exchange
or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair
Market Value of a share of Common Stock shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or market (or the exchange or market with the greatest volume of
trading in the Common Stock) on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable.
(ii) In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.
(p) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(q) "LISTING DATE" means the first date upon which any security 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.
(r) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or a subsidiary, does
not receive compensation (directly or indirectly) from the Company or its parent
or a subsidiary for services rendered as a consultant or in any capacity other
than as a Director (except for an amount as to which disclosure would not be
required under Item 404(a) of Regulation S-K promulgated pursuant to the
Securities Act ("Regulation S-K")), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.
(s) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.
(t) "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.
(u) "OPTION" means an Incentive Stock Option or a Nonstatutory Stock
Option granted pursuant to the Plan.
(v) "OPTION AGREEMENT" means a written agreement between the Company
and an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.
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(w) "OPTIONHOLDER" means a person to whom an Option is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding
Option.
(x) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
Treasury Regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(y) "PARTICIPANT" means a person to whom a Option is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding
Option.
(z) "PLAN" means this iPass Inc. 1999 Stock Option Plan.
(aa) "RULE 16B-3" means Rule 16b-3 promulgated under the Exchange Act
or any successor to Rule 16b-3, as in effect from time to time.
(bb) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(cc) "TEN PERCENT SHAREHOLDER" means a person who owns (or is deemed to
own pursuant to Section 424(d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of any of its Affiliates.
3. ADMINISTRATION.
(a) ADMINISTRATION BY BOARD. The Board shall administer the Plan unless
and until the Board delegates administration to a Committee, as provided in
subsection 3(c). Any interpretation of the Plan by the Board and any decision by
the Board under the Plan shall be final and binding on all persons.
(b) POWERS OF BOARD. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons eligible
under the Plan shall be granted Options; when and how each Option shall be
granted; what type or combination of types of Option shall be granted; the
provisions of each Option granted (which need not be identical), including the
time or times when a person shall be permitted to receive Common Stock pursuant
to a Option; and the number of shares of Common Stock with respect to which a
Option shall be granted to each such person.
(ii) To construe and interpret the Plan and Options granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any
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Option Agreement, in a manner and to the extent it shall deem necessary or
expedient to make the Plan fully effective.
(iii) To amend the Plan or a Option as provided in Section 11.
(iv) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) DELEGATION TO COMMITTEE.
(i) GENERAL. The Board may delegate administration of the Plan to a
Committee or Committees of one (1) or more members of the Board, and the term
"Committee" shall apply to any person or persons to whom such authority has been
delegated. If administration is delegated to a Committee, the Committee shall
have, in connection with the administration of the Plan, the powers theretofore
possessed by the Board, including the power to delegate to a subcommittee any of
the administrative powers the Committee is authorized to exercise (and
references in this Plan to the Board shall thereafter be to the Committee or
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
(ii) COMMITTEE COMPOSITION WHEN COMMON STOCK IS PUBLICLY TRADED. At
such time as the Common Stock is publicly traded, in the discretion of the
Board, a Committee may consist solely of two or more Outside Directors, in
accordance with Section 162(m) of the Code, and/or solely of two or more
Non-Employee Directors, in accordance with Rule 16b-3. Within the scope of such
authority, the Board or the Committee may (1) delegate to a committee of one or
more members of the Board who are not Outside Directors the authority to grant
Options to eligible persons who are either (a) not then Covered Employees and
are not expected to be Covered Employees at the time of recognition of income
resulting from such Option or (b) not persons with respect to whom the Company
wishes to comply with Section 162(m) of the Code and/or) (2) delegate to a
committee of one or more members of the Board who are not Non-Employee Directors
the authority to grant Options to eligible persons who are not then subject to
Section 16 of the Exchange Act.
4. SHARES SUBJECT TO THE PLAN.
(a) SHARE RESERVE. Subject to the provisions of Section 10 relating to
adjustments upon changes in Common Stock, the Common Stock that may be issued
pursuant to Options shall not exceed in the aggregate eight hundred fifty
thousand (850,000) shares of Common Stock.
(b) REVERSION OF SHARES TO THE SHARE RESERVE. If any Option shall for
any reason expire or otherwise terminate, in whole or in part, without having
been exercised in full, the shares of Common Stock not acquired under such
Option shall revert to and again become available for issuance under the Plan.
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(c) SOURCE OF SHARES. The shares of Common Stock subject to the Plan
may be unissued shares or reacquired shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) ELIGIBILITY FOR SPECIFIC OPTIONS. Incentive Stock Options may be
granted only to Employees. Options other than Incentive Stock Options may be
granted to Employees, Directors and Consultants.
(b) TEN PERCENT SHAREHOLDERS. A Ten Percent Shareholder shall not be
granted an Incentive Stock Option unless the exercise price of such Option is at
least one hundred ten percent (110%) of the Fair Market Value of the Common
Stock at the date of grant and the Option is not exercisable after the
expiration of five (5) years from the date of grant.
(c) SECTION 162(M) LIMITATION. Subject to the provisions of Section 10
relating to adjustments upon changes in the shares of Common Stock, no Employee
shall be eligible to be granted Options covering more than five hundred thousand
(500,000) shares of Common Stock during any calendar year. This subsection 5(c)
shall not apply prior to the Listing Date and, following the Listing Date, this
subsection 5(c) shall not apply until (i) the earliest of: (1) the first
material modification of the Plan (including any increase in the number of
shares of Common Stock reserved for issuance under the Plan in accordance with
Section 4); (2) the issuance of all of the shares of Common Stock reserved for
issuance under the Plan; (3) the expiration of the Plan; or (4) the first
meeting of shareholders at which Directors are to be elected that occurs after
the close of the third calendar year following the calendar year in which
occurred the first registration of an equity security under Section 12 of the
Exchange Act; or (ii) such other date required by Section 162(m) of the Code and
the rules and regulations promulgated thereunder.
(d) CONSULTANTS.
(i) Prior to the Listing Date, a Consultant shall not be eligible
for the grant of a Option if, at the time of grant, either the offer or the sale
of the Company's securities to such Consultant is not exempt under Rule 701 of
the Securities Act ("Rule 701") because of the nature of the services that the
Consultant is providing to the Company, or because the Consultant is not a
natural person, or as otherwise provided by Rule 701, unless the Company
determines that such grant need not comply with the requirements of Rule 701 and
will satisfy another exemption under the Securities Act as well as comply with
the securities laws of all other relevant jurisdictions.
(ii) From and after the Listing Date, a Consultant shall not be
eligible for the grant of a Option if, at the time of grant, a Form S-8
Registration Statement under the Securities Act ("Form S-8") is not available to
register either the offer or the sale of the Company's securities to such
Consultant because of the nature of the services that the Consultant is
providing to the Company, or because the Consultant is not a natural person, or
as otherwise provided by the rules governing the use of Form S-8, unless the
Company determines both (i) that such grant (A) shall be registered in another
manner under the Securities Act (e.g., on a
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Form S-3 Registration Statement) or (B) does not require registration under the
Securities Act in order to comply with the requirements of the Securities Act,
if applicable, and (ii) that such grant complies with the securities laws of all
other relevant jurisdictions.
(iii) As of April 7, 1999 Rule 701 and Form S-8 generally are
available to consultants and advisors only if (i) they are natural persons; (ii)
they provide bona fide services to the issuer, its parents, its majority-owned
subsidiaries or majority-owned subsidiaries of the issuer's parent; and (iii)
the services are not in connection with the offer or sale of securities in a
capital-raising transaction, and do not directly or indirectly promote or
maintain a market for the issuer's securities.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and, if certificates are issued, a separate certificate or certificates
will be issued for shares of Common Stock purchased on exercise of each type of
Option. The provisions of separate Options need not be identical, but each
Option shall include (through incorporation of provisions hereof by reference in
the Option or otherwise) the substance of each of the following provisions:
(a) TERM. Subject to the provisions of subsection 5(b) regarding Ten
Percent Shareholders, no Incentive Stock Option shall be exercisable after the
expiration of ten (10) years from the date it was granted.
(b) EXERCISE PRICE OF AN INCENTIVE STOCK OPTION. Subject to the
provisions of subsection 5(b) regarding Ten Percent Shareholders, the exercise
price of each Incentive Stock Option shall be not less than one hundred percent
(100%) of the Fair Market Value of the Common Stock subject to the Option on the
date the Option is granted. Notwithstanding the foregoing, an Incentive Stock
Option may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.
(c) EXERCISE PRICE OF A NONSTATUTORY STOCK OPTION. The exercise price
of each Nonstatutory Stock Option shall be not less than eighty-five percent
(85%) of the Fair Market Value of the Common Stock subject to the Option on the
date the Option is granted. Notwithstanding the foregoing, a Nonstatutory Stock
Option may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.
(d) CONSIDERATION. The purchase price of Common Stock acquired pursuant
to an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii) at
the discretion of the Board at the time of the grant of the Option (or
subsequently in the case of a Nonstatutory Stock Option) (1) by delivery
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to the Company of other Common Stock, (2) according to a deferred payment or
other similar arrangement with the Optionholder or (3) in any other form of
legal consideration that may be acceptable to the Board; provided, however, that
at any time that the Company is incorporated in Delaware, payment of the Common
Stock's "par value," as defined in the Delaware General Corporation Law, shall
not be made by deferred payment.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
(e) TRANSFERABILITY OF AN INCENTIVE STOCK OPTION. An Incentive Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding the foregoing, the Optionholder may,
by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.
(f) TRANSFERABILITY OF A NONSTATUTORY STOCK OPTION. A Nonstatutory
Stock Option shall be transferable to the extent provided in the Option
Agreement. If the Nonstatutory Stock Option does not provide for
transferability, then the Nonstatutory Stock Option shall not be transferable
except by will or by the laws of descent and distribution and shall be
exercisable during the lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing, the Optionholder may, by delivering written
notice to the Company, in a form satisfactory to the Company, designate a third
party who, in the event of the death of the Optionholder, shall thereafter be
entitled to exercise the Option.
(g) VESTING GENERALLY. The total number of shares of Common Stock
subject to an Option may, but need not, vest and therefore become exercisable in
periodic installments that may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem appropriate. The vesting provisions of individual Options may vary. The
provisions of this subsection 6(g) are subject to any Option provisions
governing the minimum number of shares of Common Stock as to which an Option may
be exercised.
(h) MINIMUM VESTING PRIOR TO THE LISTING DATE. Notwithstanding the
foregoing subsection 6(g), to the extent that the following restrictions on
vesting are required by Section 260.140.41(f) of Title 10 of the California Code
of Regulations at the time of the grant of the Option, then:
(i) Options granted prior to the Listing Date to an Employee who is
not an Officer, Director or Consultant shall provide for vesting of the total
number of shares of Common Stock at a rate of at least twenty percent (20%) per
year over five (5) years from the date the Option was granted, subject to
reasonable conditions such as continued employment; and
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(ii) Options granted prior to the Listing Date to Officers,
Directors or Consultants may be made fully exercisable, subject to reasonable
conditions such as continued employment, at any time or during any period
established by the Company.
(i) TERMINATION OF CONTINUOUS SERVICE. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise such Option as of the date of
termination) but only within such period of time ending on the earlier of (i)
the date three (3) months following the termination of the Optionholder's
Continuous Service (or such longer or shorter period specified in the Option
Agreement), or (ii) the expiration of the term of the Option as set forth in the
Option Agreement. Notwithstanding the foregoing, if an Optionholder's Continuous
Service as an Employee, Director or Consultant is terminated for Cause, then the
Option shall terminate on the date of such cessation of services. If, after
termination, the Optionholder does not exercise his or her Option within the
time specified in the Option Agreement, the Option shall terminate.
(j) EXTENSION OF TERMINATION DATE. An Optionholder's Option Agreement
may also provide that if the exercise of the Option following the termination of
the Optionholder's Continuous Service (other than for Cause or upon the
Optionholder's death or Disability) would be prohibited at any time solely
because the issuance of shares of Common Stock would violate the registration
requirements under the Securities Act, then the Option shall terminate on the
earlier of (i) the expiration of the term of the Option set forth in subsection
6(a) or (ii) the expiration of a period of three (3) months after the
termination of the Optionholder's Continuous Service during which the exercise
of the Option would not be in violation of such registration requirements.
(k) DISABILITY OF OPTIONHOLDER. In the event that an Optionholder's
Continuous Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise such Option as of the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period specified in
the Option Agreement) or (ii) the expiration of the term of the Option as set
forth in the Option Agreement. If, after termination, the Optionholder does not
exercise his or her Option within the time specified herein, the Option shall
terminate.
(l) DEATH OF OPTIONHOLDER. In the event (i) an Optionholder's
Continuous Service terminates as a result of the Optionholder's death or (ii)
the Optionholder dies within the period (if any) specified in the Option
Agreement after the termination of the Optionholder's Continuous Service for a
reason other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise such Option as of the date of death) by
the Optionholder's estate, by a person who acquired the right to exercise the
Option by bequest or inheritance or by a person designated to exercise the
option upon the Optionholder's death pursuant to subsection 6(e) or 6(f), but
only within the period ending on the earlier of (1) the date eighteen (18)
months following the date of death (or such longer or shorter period specified
in the Option Agreement) or (2) the expiration of the term of such Option as set
forth in the Option
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Agreement. If, after death, the Option is not exercised within the time
specified herein, the Option shall terminate.
(m) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the Optionholder's
Continuous Service terminates to exercise the Option as to any part or all of
the shares of Common Stock subject to the Option prior to the full vesting of
the Option. Any unvested shares of Common Stock so purchased may be subject to a
repurchase option in favor of the Company or to any other restriction the Board
determines to be appropriate.
(n) RIGHT OF REPURCHASE. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to
repurchase all or any part of the vested shares of Common Stock acquired by the
Optionholder pursuant to the exercise of the Option; provided, however, that (i)
such repurchase right shall be exercisable only with (A) the ninety (90) day
period following the termination of Continuous Service, or (B) such longer
period as may be agreed to by the Company and the Optionholder (for example, for
purposes of satisfying the requirements of Section 1202(c)(3) of the Code
(regarding "qualified small business stock")), (ii) such repurchase right shall
be exercisable for less than all of the vested shares only with the
Optionholder's consent, and (iii) such right shall be exercisable only for cash
or cancellation of purchase money indebtedness for the shares at a repurchase
price equal to the greater of (A) the stock's Fair Market Value at the time of
such termination or (B) the original purchase price paid for such shares by the
Optionholder. Notwithstanding the foregoing, the right to repurchase vested
shares may be subject to different terms in the Board's discretion. Should the
right of repurchase be assigned by the Company, the assignee shall pay the
Company cash equal to the difference between the original purchase price and the
stock's Fair Market Value if the original purchase price is less than the
stock's Fair Market Value.
(o) RIGHT OF FIRST REFUSAL. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to exercise
a right of first refusal following receipt of notice from the Optionholder of
the intent to transfer all or any part of the shares of Common Stock received
upon the exercise of the Option. Except as expressly provided in this subsection
6(n), such right of first refusal shall otherwise comply with any applicable
provisions of the Bylaws of the Company.
(p) RE-LOAD OPTIONS. Without in any way limiting the authority of the
Board to make or not to make grants of Options hereunder, the Board shall have
the authority (but not an obligation) to include as part of any Option Agreement
a provision entitling the Optionholder to a further Option (a "Re-Load Option")
in the event the Optionholder exercises the Option evidenced by the Option
Agreement, in whole or in part, by surrendering other shares of Common Stock in
accordance with this Plan and the terms and conditions of the Option Agreement.
Any such Re-Load Option shall (i) provide for a number of shares of Common Stock
equal to the number of shares of Common Stock surrendered as part or all of the
exercise price of such Option; (ii) have an expiration date which is the same as
the expiration date of the Option the exercise of which gave rise to such
Re-Load Option; and (iii) have an exercise price which is equal to one hundred
percent (100%) of the Fair Market Value of the Common Stock
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subject to the Re-Load Option on the date of exercise of the original Option.
Notwithstanding the foregoing, a Re-Load Option shall be subject to the same
exercise price and term provisions heretofore described for Options under the
Plan.
Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board may designate at the time of the grant
of the original Option; provided, however, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred thousand
dollar ($100,000) annual limitation on the exercisability of Incentive Stock
Options described in subsection 10(d) and in Section 422(d) of the Code. There
shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option shall
be subject to the availability of sufficient shares of Common Stock under
subsection 4(a) and the "Section 162(m) Limitation" on the grants of Options
under subsection 5(c) and shall be subject to such other terms and conditions as
the Board may determine which are not inconsistent with the express provisions
of the Plan regarding the terms of Options.
7. COVENANTS OF THE COMPANY.
(a) AVAILABILITY OF SHARES. During the terms of the Options, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Options.
(b) SECURITIES LAW COMPLIANCE. The Company shall seek to obtain from
each regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Options and to issue and sell shares of
Common Stock upon exercise of the Options; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Option or any Common Stock issued or issuable pursuant to any such
Option. If, after reasonable efforts, the Company is unable to obtain from any
such regulatory commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of Common Stock under the Plan,
the Company shall be relieved from any liability for failure to issue and sell
Common Stock upon exercise of such Options unless and until such authority is
obtained.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of Common Stock pursuant to Options shall
constitute general funds of the Company.
9. MISCELLANEOUS.
(a) ACCELERATION OF EXERCISABILITY AND VESTING. The Board shall have
the power to accelerate the time at which a Option may first be exercised or the
time during which a Option or any part thereof will vest in accordance with the
Plan, notwithstanding the provisions in the Option stating the time at which it
may first be exercised or the time during which it will vest.
(b) SHAREHOLDER RIGHTS. No Participant shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares of
Common Stock subject to such
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Option unless and until such Participant has satisfied all requirements for
exercise of the Option pursuant to its terms.
(c) NO EMPLOYMENT OR OTHER SERVICE RIGHTS. Nothing in the Plan or any
instrument executed or Option granted pursuant thereto shall confer upon any
Participant any right to continue to serve the Company or an Affiliate in the
capacity in effect at the time the Option was granted or shall affect the right
of the Company or an Affiliate to terminate (i) the employment of an Employee
with or without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant's agreement with the Company
or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the
Company or an Affiliate, and any applicable provisions of the corporate law of
the state in which the Company or the Affiliate is incorporated, as the case may
be.
(d) INCENTIVE STOCK OPTION $100,000 LIMITATION. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of Common Stock
with respect to which Incentive Stock Options are exercisable for the first time
by any Optionholder during any calendar year (under all plans of the Company and
its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options.
(e) INVESTMENT ASSURANCES. The Company may require a Participant, as a
condition of exercising or acquiring Common Stock under any Option, (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; and (ii) to give written assurances satisfactory
to the Company stating that the Participant is acquiring Common Stock subject to
the Option for the Participant's own account and not with any present intention
of selling or otherwise distributing the Common Stock. The foregoing
requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (A) the issuance of the shares of Common Stock upon the exercise
or acquisition of Common Stock under the Option 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 Common Stock.
(f) WITHHOLDING OBLIGATIONS. To the extent provided by the terms of a
Option Agreement, the Participant may satisfy any federal, state or local tax
withholding obligation relating to the exercise or acquisition of Common Stock
under a Option by any of the following means (in addition to the Company's right
to withhold from any compensation paid to the Participant by the Company) or by
a combination of such means: (i) tendering a cash payment; (ii) authorizing the
Company to withhold shares of Common Stock from the shares of Common
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<PAGE> 13
Stock otherwise issuable to the participant as a result of the exercise or
acquisition of Common Stock under the Option; provided, however, that no shares
are withheld with a value exceeding the minimum amount of tax required to be
withheld by law; or (iii) delivering to the Company owned and unencumbered
shares of Common Stock.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) CAPITALIZATION ADJUSTMENTS. If any change is made in the Common
Stock subject to the Plan, or subject to any Option, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number of securities subject to the Plan
pursuant to subsection 4(a) and the maximum number of securities subject to
award to any person pursuant to subsection 5(c), and the outstanding Options
will be appropriately adjusted in the class(es) and number of securities and
price per share of Common Stock subject to such outstanding Options. The Board
shall make such adjustments, and its determination shall be final, binding and
conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a transaction "without receipt of consideration" by the
Company.)
(b) CHANGE IN CONTROL--DISSOLUTION OR LIQUIDATION. In the event of a
dissolution or liquidation of the Company, then all outstanding Options shall
terminate immediately prior to such event.
(c) CHANGE IN CONTROL--ASSET SALE, MERGER, CONSOLIDATION OR REVERSE
MERGER. In the event of (i) a sale, lease or other disposition of all or
substantially all of the assets of the Company, (ii) a merger or consolidation
in which the Company is not the surviving corporation or (iii) a reverse merger
in which the Company is the surviving corporation but the shares of Common Stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise, then any surviving corporation or acquiring corporation shall assume
or continue any Options outstanding under the Plan or shall substitute similar
Options (including an award to acquire the same consideration paid to the
shareholders in the transaction described in this subsection 10(c)) for those
outstanding under the Plan. In the event any surviving corporation or acquiring
corporation refuses to assume or continue such Options or to substitute similar
Options for those outstanding under the Plan, then with respect to Options
outstanding under the Plan, such Options shall terminate if not exercised prior
to such event.
11. AMENDMENT OF THE PLAN AND OPTIONS.
(a) AMENDMENT OF PLAN. The Board at any time, and from time to time,
may amend the Plan. However, except as provided in Section 10 relating to
adjustments upon changes in Common Stock, no amendment shall be effective unless
approved by the shareholders of the Company to the extent shareholder approval
is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3
or any Nasdaq or securities exchange listing requirements.
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(b) SHAREHOLDER APPROVAL. The Board may, in its sole discretion, submit
any other amendment to the Plan for shareholder approval, including, but not
limited to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.
(c) CONTEMPLATED AMENDMENTS. It is expressly contemplated that the
Board may amend the Plan in any respect the Board deems necessary or advisable
to provide eligible Employees with the maximum benefits provided or to be
provided under the provisions of the Code and the regulations promulgated
thereunder relating to Incentive Stock Options and/or to bring the Plan and/or
Incentive Stock Options granted under it into compliance therewith.
(d) NO IMPAIRMENT OF RIGHTS. Rights under any Option granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Participant and (ii) the Participant
consents in writing.
(e) AMENDMENT OF OPTIONS. The Board at any time, and from time to time,
may amend the terms of any one or more Options; provided, however, that the
rights under any Option shall not be impaired by any such amendment unless (i)
the Company requests the consent of the Participant and (ii) the Participant
consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) PLAN TERM. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on the day before the tenth
(10th) anniversary of the date the Plan is adopted by the Board or approved by
the shareholders of the Company, whichever is earlier. No Options may be granted
under the Plan while the Plan is suspended or after it is terminated.
(b) NO IMPAIRMENT OF RIGHTS. Suspension or termination of the Plan
shall not impair rights and obligations under any Option granted while the Plan
is in effect except with the written consent of the Participant.
13. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no
Option shall be exercised (or, in the case of a stock bonus, shall be granted)
unless and until the Plan has been approved by the shareholders of the Company,
which approval shall be within twelve (12) months before or after the date the
Plan is adopted by the Board.
14. CHOICE OF LAW.
The law of the State of California shall govern all questions
concerning the construction, validity and interpretation of this Plan, without
regard to such state's conflict of laws rules.
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<PAGE> 15
iPASS INC.
1999 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
(INCENTIVE AND NONSTATUTORY STOCK OPTIONS)
Pursuant to your Stock Option Grant Notice ("Grant Notice") and this
Stock Option Agreement, iPass, Inc. (the "Company") has granted you an option
under its 1999 Stock Option Plan (the "Plan") to purchase the number of shares
of the Company's Common Stock indicated in your Grant Notice at the exercise
price indicated in your Grant Notice. Defined terms not explicitly defined in
this Stock Option Agreement but defined in the Plan shall have the same
definitions as in the Plan.
The details of your option are as follows:
1. VESTING. Subject to the limitations contained herein, your
option will vest as provided in your Grant Notice, provided that vesting will
cease upon the termination of your Continuous Service.
2. NUMBER OF SHARES AND EXERCISE PRICE. The number of shares of
Common Stock subject to your option and your exercise price per share referenced
in your Grant Notice may be adjusted from time to time for Capitalization
Adjustments, as provided in the Plan.
3. EXERCISE PRIOR TO VESTING ("EARLY EXERCISE"). If permitted in
your Grant Notice (i.e., the "Exercise Schedule" indicates that "Early Exercise"
of your option is permitted) and subject to the provisions of your option, you
may elect at any time that is both (i) during the period of your Continuous
Service and (ii) during the term of your option, to exercise all or part of your
option, including the nonvested portion of your option; provided, however, that:
(a) a partial exercise of your option shall be deemed to cover
first vested shares of Common Stock and then the earliest vesting installment of
unvested shares of Common Stock;
(b) any shares of Common Stock so purchased from installments
that have not vested as of the date of exercise shall be subject to the purchase
option in favor of the Company as described in the Company's form of Early
Exercise Stock Purchase Agreement;
(c) you shall enter into the Company's form of Early Exercise
Stock Purchase Agreement with a vesting schedule that will result in the same
vesting as if no early exercise had occurred; and
(d) if your option is an incentive stock option, then, as
provided in the Plan, to the extent that the aggregate Fair Market Value
(determined at the time of grant) of the shares of Common Stock with respect to
which your option plus all other incentive stock options you hold are
exercisable for the first time by you during any calendar year (under all plans
of the
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<PAGE> 16
Company and its Affiliates) exceeds one hundred thousand dollars ($100,000),
your option(s) or portions thereof that exceed such limit (according to the
order in which they were granted) shall be treated as nonstatutory stock
options.
4. METHOD OF PAYMENT. Payment of the exercise price is due in
full upon exercise of all or any part of your option. You may elect to make
payment of the exercise price in cash or by check or in any other manner
PERMITTED BY YOUR GRANT NOTICE, which may include one or more of the following:
(a) In the Company's sole discretion at the time your option
is exercised and provided that at the time of exercise the Common Stock is
publicly traded and quoted regularly in The Wall Street Journal, pursuant to a
program developed under Regulation T as promulgated by the Federal Reserve Board
that, prior to the issuance of Common Stock, results in either the receipt of
cash (or check) by the Company or the receipt of irrevocable instructions to pay
the aggregate exercise price to the Company from the sales proceeds.
(b) Provided that at the time of exercise the Common Stock is
publicly traded and quoted regularly in The Wall Street Journal, by delivery of
already-owned shares of Common Stock either that you have held for the period
required to avoid a charge to the Company's reported earnings (generally six
months) or that you did not acquire, directly or indirectly from the Company,
that are owned free and clear of any liens, claims, encumbrances or security
interests, and that are valued at Fair Market Value on the date of exercise.
"Delivery" for these purposes, in the sole discretion of the Company at the time
you exercise your option, shall include delivery to the Company of your
attestation of ownership of such shares of Common Stock in a form approved by
the Company. Notwithstanding the foregoing, you may not exercise your option by
tender to the Company of Common Stock to the extent such tender would violate
the provisions of any law, regulation or agreement restricting the redemption of
the Company's stock.
(c) Pursuant to the following deferred payment alternative:
(i) Not less than one hundred percent (100%) of the
aggregate exercise price, plus accrued interest, shall be due four (4) years
from date of exercise or, at the Company's election, upon termination of your
Continuous Service.
(ii) Interest shall be compounded at least annually and
shall be charged at the minimum rate of interest necessary to avoid the
treatment as interest, under any applicable provisions of the Code, of any
portion of any amounts other than amounts stated to be interest under the
deferred payment arrangement.
(iii) At any time that the Company is incorporated in
Delaware, payment of the Common Stock's "par value," as defined in the Delaware
General Corporation Law, shall be made in cash and not by deferred payment.
(iv) In order to elect the deferred payment alternative,
you must, as a part of your written notice of exercise, give notice of the
election of this payment alternative and,
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<PAGE> 17
in order to secure the payment of the deferred exercise price to the Company
hereunder, if the Company so requests, you must tender to the Company a
promissory note and a security agreement covering the purchased shares of Common
Stock, both in form and substance satisfactory to the Company, or such other or
additional documentation as the Company may request.
5. WHOLE SHARES. You may exercise your option only for whole
shares of Common Stock.
6. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the
contrary contained herein, you may not exercise your option unless the shares of
Common Stock issuable upon such exercise are then registered under the
Securities Act or, if such shares of Common Stock are not then so registered,
the Company has determined that such exercise and issuance would be exempt from
the registration requirements of the Securities Act. The exercise of your option
must also comply with other applicable laws and regulations governing your
option, and you may not exercise your option if the Company determines that such
exercise would not be in material compliance with such laws and regulations.
7. TERM. The term of your option commences on the Date of Grant
and expires upon the EARLIEST of the following:
(a) immediately upon termination of your Continuous Service
for Cause;
(b) three (3) months after the termination of your Continuous
Service for any reason other than your Disability, death or Cause, provided that
if during any part of such three-(3-) month period your option is not
exercisable solely because of the condition set forth in the preceding paragraph
relating to "Securities Law Compliance," your option shall not expire until the
earlier of the Expiration Date or until it shall have been exercisable for an
aggregate period of three (3) months after the termination of your Continuous
Service;
(c) twelve (12) months after the termination of your
Continuous Service due to your Disability;
(d) eighteen (18) months after your death if you die either
during your Continuous Service or within three (3) months after your Continuous
Service terminates;
(e) the Expiration Date indicated in your Grant Notice; or
(f) the tenth (10th) anniversary of the Date of Grant.
If your option is an incentive stock option, note that, to obtain the
federal income tax advantages associated with an "incentive stock option," the
Code requires that at all times beginning on the date of grant of your option
and ending on the day three (3) months before the date of your option's
exercise, you must be an employee of the Company or an Affiliate, except in the
event of your death or Disability. The Company has provided for extended
exercisability of your option under certain circumstances for your benefit but
cannot guarantee that your option
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<PAGE> 18
will necessarily be treated as an "incentive stock option" if you continue to
provide services to the Company or an Affiliate as a Consultant or Director
after your employment terminates or if you otherwise exercise your option more
than three (3) months after the date your employment terminates.
8. EXERCISE.
(a) You may exercise the vested portion of your option (and
the unvested portion of your option if your Grant Notice so permits) during its
term by delivering a Notice of Exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require.
(b) By exercising your option you agree that, as a condition
to any exercise of your option, the Company may require you to enter into an
arrangement providing for the payment by you to the Company of any tax
withholding obligation of the Company arising by reason of (1) the exercise of
your option, (2) the lapse of any substantial risk of forfeiture to which the
shares of Common Stock are subject at the time of exercise, or (3) the
disposition of shares of Common Stock acquired upon such exercise.
(c) If your option is an incentive stock option, by exercising
your option you agree that you will notify the Company in writing within fifteen
(15) days after the date of any disposition of any of the shares of the Common
Stock issued upon exercise of your option that occurs within two (2) years after
the date of your option grant or within one (1) year after such shares of Common
Stock are transferred upon exercise of your option.
(d) By exercising your option you agree that the Company (or a
representative of the underwriter(s)) may, in connection with the first
underwritten registration of the offering of any securities of the Company under
the Securities Act, require that you not sell, dispose of, transfer, make any
short sale of, grant any option for the purchase of, or enter into any hedging
or similar transaction with the same economic effect as a sale, any shares of
Common Stock or other securities of the Company held by you, for a period of
time specified by the underwriter(s) (not to exceed one hundred eighty (180)
days) following the effective date of the registration statement of the Company
filed under the Securities Act. You further agree to execute and deliver such
other agreements as may be reasonably requested by the Company and/or the
underwriter(s) that are consistent with the foregoing or that are necessary to
give further effect thereto. In order to enforce the foregoing covenant, the
Company may impose stop-transfer instructions with respect to your shares of
Common Stock until the end of such period.
9. TRANSFERABILITY. Your option is not transferable, except by
will or by the laws of descent and distribution, and is exercisable during your
life only by you. Notwithstanding the foregoing, by delivering written notice to
the Company, in a form satisfactory to the Company, you may designate a third
party who, in the event of your death, shall thereafter be entitled to exercise
your option.
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<PAGE> 19
10. RIGHT OF FIRST REFUSAL. Shares of Common Stock that you
acquire upon exercise of your option are subject to any right of first refusal
that may be described in the Company's bylaws in effect at such time the Company
elects to exercise its right. The Company's right of first refusal shall expire
on the Listing Date.
11. RIGHT OF REPURCHASE. To the extent provided in the Company's
bylaws as amended from time to time, the Company shall have the right to
repurchase all or any part of the shares of Common Stock you acquire pursuant to
the exercise of your option.
12. OPTION NOT A SERVICE CONTRACT. Your option is not an
employment or service contract, and nothing in your option shall be deemed to
create in any way whatsoever any obligation on your part to continue in the
employ of the Company or an Affiliate, or of the Company or an Affiliate to
continue your employment. In addition, nothing in your option shall obligate the
Company or an Affiliate, their respective shareholders, Boards of Directors,
Officers or Employees to continue any relationship that you might have as a
Director or Consultant for the Company or an Affiliate.
13. WITHHOLDING OBLIGATIONS.
(a) At the time you exercise your option, in whole or in part,
or at any time thereafter as requested by the Company, you hereby authorize
withholding from payroll and any other amounts payable to you, and otherwise
agree to make adequate provision for (including by means of a "cashless
exercise" pursuant to a program developed under Regulation T as promulgated by
the Federal Reserve Board to the extent permitted by the Company), any sums
required to satisfy the federal, state, local and foreign tax withholding
obligations of the Company or an Affiliate, if any, which arise in connection
with your option.
(b) Upon your request and subject to approval by the Company,
in its sole discretion, and compliance with any applicable conditions or
restrictions of law, the Company may withhold from fully vested shares of Common
Stock otherwise issuable to you upon the exercise of your option a number of
whole shares of Common Stock having a Fair Market Value, determined by the
Company as of the date of exercise, not in excess of the minimum amount of tax
required to be withheld by law. If the date of determination of any tax
withholding obligation is deferred to a date later than the date of exercise of
your option, share withholding pursuant to the preceding sentence shall not be
permitted unless you make a proper and timely election under Section 83(b) of
the Code, covering the aggregate number of shares of Common Stock acquired upon
such exercise with respect to which such determination is otherwise deferred, to
accelerate the determination of such tax withholding obligation to the date of
exercise of your option. Notwithstanding the filing of such election, shares of
Common Stock shall be withheld solely from fully vested shares of Common Stock
determined as of the date of exercise of your option that are otherwise issuable
to you upon such exercise. Any adverse consequences to you arising in connection
with such share withholding procedure shall be your sole responsibility.
(c) You may not exercise your option unless the tax
withholding obligations of the Company and/or any Affiliate are satisfied.
Accordingly, you may not be able to exercise
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<PAGE> 20
your option when desired even though your option is vested, and the Company
shall have no obligation to issue a certificate for such shares of Common Stock
or release such shares of Common Stock from any escrow provided for herein.
14. NOTICES. Any notices provided for in your option or the Plan
shall be given in writing and shall be deemed effectively given upon receipt or,
in the case of notices delivered by mail by the Company to you, five (5) days
after deposit in the United States mail, postage prepaid, addressed to you at
the last address you provided to the Company.
15. GOVERNING PLAN DOCUMENT. Your option is subject to all the
provisions of the Plan, the provisions of which are hereby made a part of your
option, and is further subject to all interpretations, amendments, rules and
regulations which may from time to time be promulgated and adopted pursuant to
the Plan. In the event of any conflict between the provisions of your option and
those of the Plan, the provisions of the Plan shall control.
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<PAGE> 1
EXHIBIT 10.7
iPASS INC.
2000 EQUITY INCENTIVE PLAN
ADOPTED ______, 2000
APPROVED BY STOCKHOLDERS _______, 2000
TERMINATION DATE: _______, 2010
1. PURPOSES.
(a) ELIGIBLE STOCK AWARD RECIPIENTS. The persons eligible to receive
Stock Awards are the Employees, Directors and Consultants of the Company and its
Affiliates.
(b) AVAILABLE STOCK AWARDS. The purpose of the Plan is to provide a
means by which eligible recipients of Stock Awards may be given an opportunity
to benefit from increases in value of the Common Stock through the granting of
the following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) stock bonuses and (iv) rights to acquire restricted stock.
(c) GENERAL PURPOSE. The Company, by means of the Plan, seeks to retain
the services of the group of persons eligible to receive Stock Awards, to secure
and retain the services of new members of this group and to provide incentives
for such persons to exert maximum efforts for the success of the Company and its
Affiliates.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation
of the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a committee of one or more members of the Board
appointed by the Board in accordance with subsection 3(c).
(e) "COMMON STOCK" means the common stock of the Company.
(f) "COMPANY" means iPass Inc., a Delaware corporation.
(g) "CONSULTANT" means any person, including an advisor, (i) engaged by
the Company or an Affiliate to render consulting or advisory services and who is
compensated for such services or (ii) who is a member of the Board of Directors
of an Affiliate. However, the term "Consultant" shall not include either
Directors who are not compensated by the Company for their services as Directors
or Directors who are merely paid a director's fee by the Company for their
services as Directors.
1.
<PAGE> 2
(h) "CONTINUOUS SERVICE" means that the Participant's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director will not
constitute an interruption of Continuous Service. The Board or the chief
executive officer of the Company, in that party's sole discretion, may determine
whether Continuous Service shall be considered interrupted in the case of any
leave of absence approved by that party, including sick leave, military leave or
any other personal leave.
(i) "COVERED EMPLOYEE" means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to Stockholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.
(j) "DIRECTOR" means a member of the Board of Directors of the Company.
(k) "DISABILITY" means the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.
(l) "EMPLOYEE" means any person employed by the Company or an
Affiliate. Mere service as a Director or payment of a director's fee by the
Company or an Affiliate shall not be sufficient to constitute "employment" by
the Company or an Affiliate.
(m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(n) "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair
Market Value of a share of Common Stock shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or market (or the exchange or market with the greatest volume of
trading in the Common Stock) on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable.
(ii) In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.
(o) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(p) "IPO Date" means the effective date of the registration statement
of the Company's initial public offering of its common stock under the
Securities Act.
(q) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or a subsidiary, does
not receive compensation
2.
<PAGE> 3
(directly or indirectly) from the Company or its parent or a subsidiary for
services rendered as a consultant or in any capacity other than as a Director
(except for an amount as to which disclosure would not be required under Item
404(a) of Regulation S-K promulgated pursuant to the Securities Act ("Regulation
S-K")), does not possess an interest in any other transaction as to which
disclosure would be required under Item 404(a) of Regulation S-K and is not
engaged in a business relationship as to which disclosure would be required
under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a
"non-employee director" for purposes of Rule 16b-3.
(r) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.
(s) "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.
(t) "OPTION" means an Incentive Stock Option or a Nonstatutory Stock
Option granted pursuant to the Plan.
(u) "OPTION AGREEMENT" means a written agreement between the Company
and an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.
(v) "OPTIONHOLDER" means a person to whom an Option is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding
Option.
(w) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
Treasury Regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(x) "PARTICIPANT" means a person to whom a Stock Award is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Stock Award.
(y) "PLAN" means this iPass Inc. 2000 Equity Incentive Plan.
(z) "RULE 16B-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.
(aa) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(bb) "STOCK AWARD" means any right granted under the Plan, including an
Option, a stock bonus and a right to acquire restricted stock.
3.
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(bb) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
(cc) "TEN PERCENT SHAREHOLDER" means a person who owns (or is deemed to
own pursuant to Section 424(d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of any of its Affiliates.
3. ADMINISTRATION.
(a) ADMINISTRATION BY BOARD. The Board shall administer the Plan unless
and until the Board delegates administration to a Committee, as provided in
subsection 3(c).
(b) POWERS OF BOARD. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; what type or combination of types of Stock Award shall be
granted; the provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be permitted to
receive Common Stock pursuant to a Stock Award; and the number of shares of
Common Stock with respect to which a Stock Award shall be granted to each such
person.
(ii) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(iii) To amend the Plan or a Stock Award as provided in Section 13.
(iv) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) DELEGATION TO COMMITTEE.
(i) GENERAL. The Board may delegate administration of the Plan to a
Committee or Committees of one (1) or more members of the Board, and the term
"Committee" shall apply to any person or persons to whom such authority has been
delegated. If administration is delegated to a Committee, the Committee shall
have, in connection with the administration of the Plan, the powers theretofore
possessed by the Board, including the power to delegate to a subcommittee any of
the administrative powers the Committee is authorized to exercise (and
references in this Plan to the Board shall thereafter be to the Committee or
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
4.
<PAGE> 5
(ii) COMMITTEE COMPOSITION WHEN COMMON STOCK IS PUBLICLY TRADED. At
such time as the Common Stock is publicly traded, in the discretion of the
Board, a Committee may consist solely of two or more Outside Directors, in
accordance with Section 162(m) of the Code, and/or solely of two or more
Non-Employee Directors, in accordance with Rule 16b-3. Within the scope of such
authority, the Board or the Committee may (1) delegate to a committee of one or
more members of the Board who are not Outside Directors the authority to grant
Stock Awards to eligible persons who are either (a) not then Covered Employees
and are not expected to be Covered Employees at the time of recognition of
income resulting from such Stock Award or (b) not persons with respect to whom
the Company wishes to comply with Section 162(m) of the Code and/or) (2)
delegate to a committee of one or more members of the Board who are not
Non-Employee Directors the authority to grant Stock Awards to eligible persons
who are not then subject to Section 16 of the Exchange Act.
(d) EFFECT OF BOARD'S DECISION. All determinations, interpretations and
constructions made by the Board in good faith shall not be subject to review by
any person and shall be final, binding and conclusive on all persons.
4. SHARES SUBJECT TO THE PLAN.
(a) SHARE RESERVE. Subject to the provisions of Section 12 relating to
adjustments upon changes in Common Stock, the Common Stock that may be issued
pursuant to Stock Awards shall not exceed in the aggregate Seven Million
(7,000,000) shares of Common Stock, plus an annual increase to be added each
January 1, beginning January 1, 2002, equal to the lesser of Two Million Five
Hundred Thousand (2,500,000) shares or four and-a-half percent (4.5%) of the
total number of shares of Common Stock outstanding on such January 1.
Notwithstanding the foregoing, the Board may designate a smaller number of
shares of Common Stock to be added to the share reserve as of a particular
January 1.
(b) REVERSION OF SHARES TO THE SHARE RESERVE. If any Stock Award shall
for any reason expire or otherwise terminate, in whole or in part, without
having been exercised in full, the shares of Common Stock not acquired under
such Stock Award shall revert to and again become available for issuance under
the Plan.
(c) SOURCE OF SHARES. The shares of Common Stock subject to the Plan
may be unissued shares or reacquired shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) ELIGIBILITY FOR SPECIFIC STOCK AWARDS. Incentive Stock Options may
be granted only to Employees. Stock Awards other than Incentive Stock Options
may be granted to Employees, Directors and Consultants.
5.
<PAGE> 6
(b) TEN PERCENT STOCKHOLDERS. A Ten Percent Shareholder shall not be
granted an Incentive Stock Option unless the exercise price of such Option is at
least one hundred ten percent (110%) of the Fair Market Value of the Common
Stock at the date of grant and the Option is not exercisable after the
expiration of five (5) years from the date of grant.
(c) SECTION 162(m) LIMITATION. Subject to the provisions of Section 12
relating to adjustments upon changes in the shares of Common Stock, no Employee
shall be eligible to be granted Options covering more than two million
(2,000,000) shares of Common Stock during any calendar year.
(d) CONSULTANTS.
(i) A Consultant shall not be eligible for the grant of a Stock
Award if, at the time of grant, a Form S-8 Registration Statement under the
Securities Act ("Form S-8") is not available to register either the offer or the
sale of the Company's securities to such Consultant because of the nature of the
services that the Consultant is providing to the Company, or because the
Consultant is not a natural person, or as otherwise provided by the rules
governing the use of Form S-8, unless the Company determines both (i) that such
grant (A) shall be registered in another manner under the Securities Act (e.g.,
on a Form S-3 Registration Statement) or (B) does not require registration under
the Securities Act in order to comply with the requirements of the Securities
Act, if applicable, and (ii) that such grant complies with the securities laws
of all other relevant jurisdictions.
(ii) Form S-8 generally is available to consultants and advisors
only if (i) they are natural persons; (ii) they provide bona fide services to
the issuer, its parents, its majority-owned subsidiaries or majority-owned
subsidiaries of the issuer's parent; and (iii) the services are not in
connection with the offer or sale of securities in a capital-raising
transaction, and do not directly or indirectly promote or maintain a market for
the issuer's securities.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and, if certificates are issued, a separate certificate or certificates
will be issued for shares of Common Stock purchased on exercise of each type of
Option. The provisions of separate Options need not be identical, but each
Option shall include (through incorporation of provisions hereof by reference in
the Option or otherwise) the substance of each of the following provisions:
(a) TERM. Subject to the provisions of subsection 5(b) regarding Ten
Percent Stockholders, no Incentive Stock Option shall be exercisable after the
expiration of ten (10) years from the date it was granted.
(b) EXERCISE PRICE OF AN INCENTIVE STOCK OPTION. Subject to the
provisions of subsection 5(b) regarding Ten Percent Stockholders, the exercise
price of each Incentive Stock Option shall be not less than one hundred percent
(100%) of the Fair Market Value of the Common Stock subject to the Option on the
date the Option is granted. Notwithstanding the foregoing, an Incentive Stock
Option may be granted with an exercise price lower than that set
6.
<PAGE> 7
forth in the preceding sentence if such Option is granted pursuant to an
assumption or substitution for another option in a manner satisfying the
provisions of Section 424(a) of the Code.
(c) EXERCISE PRICE OF A NONSTATUTORY STOCK OPTION. The exercise price
of each Nonstatutory Stock Option shall be not less than eighty-five percent
(85%) of the Fair Market Value of the Common Stock subject to the Option on the
date the Option is granted. Notwithstanding the foregoing, a Nonstatutory Stock
Option may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.
(d) CONSIDERATION. The purchase price of Common Stock acquired pursuant
to an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii) at
the discretion of the Board at the time of the grant of the Option (or
subsequently in the case of a Nonstatutory Stock Option) (1) by delivery to the
Company of other Common Stock, (2) according to a deferred payment or other
similar arrangement with the Optionholder or (3) in any other form of legal
consideration that may be acceptable to the Board. Unless otherwise specifically
provided in the Option, the purchase price of Common Stock acquired pursuant to
an Option that is paid by delivery to the Company of other Common Stock
acquired, directly or indirectly from the Company, shall be paid only by shares
of the Common Stock of the Company that have been held for more than six (6)
months (or such longer or shorter period of time required to avoid a charge to
earnings for financial accounting purposes). At any time that the Company is
incorporated in Delaware, payment of the Common Stock's "par value," as defined
in the Delaware General Corporation Law, shall not be made by deferred payment.
In the case of any deferred payment arrangement, interest shall be compounded at
least annually and shall be charged at the minimum rate of interest necessary to
avoid the treatment as interest, under any applicable provisions of the Code, of
any amounts other than amounts stated to be interest under the deferred payment
arrangement.
(e) TRANSFERABILITY OF AN INCENTIVE STOCK OPTION. An Incentive Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding the foregoing, the Optionholder may,
by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.
(f) TRANSFERABILITY OF A NONSTATUTORY STOCK OPTION. A Nonstatutory
Stock Option shall be transferable to the extent provided in the Option
Agreement. If the Nonstatutory Stock Option does not provide for
transferability, then the Nonstatutory Stock Option shall not be transferable
except by will or by the laws of descent and distribution and shall be
exercisable during the lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing, the Optionholder may, by delivering written
notice to the Company, in a form satisfactory to the Company, designate a third
party who, in the event of the death of the Optionholder, shall thereafter be
entitled to exercise the Option.
7.
<PAGE> 8
(g) VESTING GENERALLY. The total number of shares of Common Stock
subject to an Option may, but need not, vest and therefore become exercisable in
periodic installments that may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem appropriate. The vesting provisions of individual Options may vary. The
provisions of this subsection 6(g) are subject to any Option provisions
governing the minimum number of shares of Common Stock as to which an Option may
be exercised.
(h) TERMINATION OF CONTINUOUS SERVICE. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise such Option as of the date of
termination) but only within such period of time ending on the earlier of (i)
the date three (3) months following the termination of the Optionholder's
Continuous Service (or such longer or shorter period specified in the Option
Agreement), or (ii) the expiration of the term of the Option as set forth in the
Option Agreement. If, after termination, the Optionholder does not exercise his
or her Option within the time specified in the Option Agreement, the Option
shall terminate.
(i) EXTENSION OF TERMINATION DATE. An Optionholder's Option Agreement
may also provide that if the exercise of the Option following the termination of
the Optionholder's Continuous Service (other than upon the Optionholder's death
or Disability) would be prohibited at any time solely because the issuance of
shares of Common Stock would violate the registration requirements under the
Securities Act, then the Option shall terminate on the earlier of (i) the
expiration of the term of the Option set forth in subsection 6(a) or (ii) the
expiration of a period of three (3) months after the termination of the
Optionholder's Continuous Service during which the exercise of the Option would
not be in violation of such registration requirements.
(j) DISABILITY OF OPTIONHOLDER. In the event that an Optionholder's
Continuous Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise such Option as of the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period specified in
the Option Agreement) or (ii) the expiration of the term of the Option as set
forth in the Option Agreement. If, after termination, the Optionholder does not
exercise his or her Option within the time specified herein, the Option shall
terminate.
(k) DEATH OF OPTIONHOLDER. In the event (i) an Optionholder's
Continuous Service terminates as a result of the Optionholder's death or (ii)
the Optionholder dies within the period (if any) specified in the Option
Agreement after the termination of the Optionholder's Continuous Service for a
reason other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise such Option as of the date of death) by
the Optionholder's estate, by a person who acquired the right to exercise the
Option by bequest or inheritance or by a person designated to exercise the
Option upon the Optionholder's death pursuant to subsection 6(e) or 6(f), but
only within the period ending on the earlier of (1) the date eighteen (18)
months following the date of death (or such longer or shorter period specified
in the Option Agreement) or (2) the expiration of the term of such Option as set
forth in the Option
8.
<PAGE> 9
Agreement. If, after death, the Option is not exercised within the time
specified herein, the Option shall terminate.
(l) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the Optionholder's
Continuous Service terminates to exercise the Option as to any part or all of
the shares of Common Stock subject to the Option prior to the full vesting of
the Option. Any unvested shares of Common Stock so purchased may be subject to a
repurchase option in favor of the Company or to any other restriction the Board
determines to be appropriate. The Company will not exercise its repurchase
option until at least six (6) months (or such longer or shorter period of time
required to avoid a charge to earnings for financial accounting purposes) have
elapsed following exercise of the Option unless the Board otherwise specifically
provides in the Option.
(m) RE-LOAD OPTIONS.
(i) Without in any way limiting the authority of the Board to make
or not to make grants of Options hereunder, the Board shall have the authority
(but not an obligation) to include as part of any Option Agreement a provision
entitling the Optionholder to a further Option (a "Re-Load Option") in the event
the Optionholder exercises the Option evidenced by the Option Agreement, in
whole or in part, by surrendering other shares of Common Stock in accordance
with this Plan and the terms and conditions of the Option Agreement. Unless
otherwise specifically provided in the Option, the Optionholder shall not
surrender shares of Common Stock acquired, directly or indirectly from the
Company, unless such shares have been held for more than six (6) months (or such
longer or shorter period of time required to avoid a charge to earnings for
financial accounting purposes).
(ii) Any such Re-Load Option shall (1) provide for a number of
shares of Common Stock equal to the number of shares of Common Stock surrendered
as part or all of the exercise price of such Option; (2) have an expiration date
which is the same as the expiration date of the Option the exercise of which
gave rise to such Re-Load Option; and (3) have an exercise price which is equal
to one hundred percent (100%) of the Fair Market Value of the Common Stock
subject to the Re-Load Option on the date of exercise of the original Option.
Notwithstanding the foregoing, a Re-Load Option shall be subject to the same
exercise price and term provisions heretofore described for Options under the
Plan.
(iii) Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board may designate at the time of the grant
of the original Option; provided, however, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred thousand
dollar ($100,000) annual limitation on the exercisability of Incentive Stock
Options described in subsection 9(d) and in Section 422(d) of the Code. There
shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option shall
be subject to the availability of sufficient shares of Common Stock under
subsection 4(a) and the "Section 162(m) Limitation" on the grants of Options
under subsection 5(c) and shall be subject to such other terms and conditions as
the Board may determine which are not inconsistent with the express provisions
of the Plan regarding the terms of Options.
9.
<PAGE> 10
7. NON-EMPLOYEE DIRECTOR STOCK OPTIONS.
Without any further action of the Board, each Non-Employee Director
shall be granted Nonstatutory Stock Options as described in subsections 7(a) and
7(b) (collectively, "Non-Employee Director Options"). Each Non-Employee Director
Option shall include the substance of the terms set forth in subsections 7(c)
through 7(k).
(a) INITIAL GRANTS. After the IPO Date, each person who is elected or
appointed for the first time to be a Non-Employee Director automatically shall,
upon the date of his or her initial election or appointment to be a Non-Employee
Director by the Board or stockholders of the Company, be granted an Initial
Grant to purchase forty thousand (40,000) shares of Common Stock on the terms
and conditions set forth herein. For purposes of the foregoing sentence, on the
IPO Date, each person then serving as a Non-Employee Director and who has not
previously been granted options to acquire Common Stock shall be deemed to have
been initially elected as a Non-Employee Director on such date.
(b) ANNUAL GRANTS. After the IPO Date, each person who is a
Non-Employee Director on the Board on the day after the annual stockholders'
meeting, shall, on that date, be granted an Annual Grant to purchase fifteen
thousand (15,000) shares of Common Stock on the terms and conditions set forth
herein. Notwithstanding the foregoing, the number of shares of Common Stock
subject to an Annual Grant to a Non-Employee Director that has not served in
that capacity for the entire period since the preceding annual stockholders'
meeting shall be reduced, pro rata, for each full quarter the person did not
serve during such period.
(c) TERM. Each Non-Employee Director Option shall have a term of ten
(10) years from the date it is granted.
(d) EXERCISE PRICE. The exercise price of each Non-Employee Director
Option shall be one hundred percent (100%) of the Fair Market Value of the stock
subject to the Non-Employee Director Option on the date of grant.
Notwithstanding the foregoing, a Non-Employee Director Option may be granted
with an exercise price lower than that set forth in the preceding sentence if
such Non-Employee Director Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.
(e) VESTING. Each Initial Grant shall vest one-third (1/3) per year
from the date on which it is granted. Each Annual Grant shall vest one-twelfth
(1/12) per month from the date on which it is granted.
(f) CONSIDERATION. The purchase price of stock acquired pursuant to a
Non-Employee Director Option may be paid, to the extent permitted by applicable
statutes and regulations, in any combination of (i) cash or check, (ii) delivery
to the Company of other Common Stock, (ii) deferred payment or (iv) any other
form of legal consideration that may be acceptable to the Board and provided in
the Non-Employee Director Option Agreement; provided, however, that at any time
that the Company is incorporated in Delaware, payment of the Common Stock's "par
value," as defined in the Delaware General Corporation Law, shall not be made by
deferred payment. In the case of any deferred payment arrangement, interest
shall be
10.
<PAGE> 11
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
(g) TRANSFERABILITY. A Non-Employee Director Option shall not be
transferable except by will or by the laws of descent and distribution and shall
be exercisable during the lifetime of the Non-Employee Director only by the
Non-Employee Director except as otherwise provided in a Stock Award Agreement.
Notwithstanding the foregoing, the Non-Employee Director may, by delivering
written notice to the Company, in a form satisfactory to the Company, designate
a third party who, in the event of the death of the Non-Employee Director, shall
thereafter be entitled to exercise the Non-Employee Director Option.
(h) TERMINATION OF CONTINUOUS SERVICE. In the event a Non-Employee
Director's Continuous Service terminates (other than upon the Non-Employee
Director's death or Disability), the Non-Employee Director may exercise his or
her Non-Employee Director Option (to the extent that the Non-Employee Director
was entitled to exercise it as of the date of termination) but only within such
period of time ending on the earlier of (i) the date three (3) months following
the termination of the Non-Employee Director's Continuous Service, or (ii) the
expiration of the term of the Non-Employee Director Option as set forth in the
Non-Employee Director Option Agreement. If, after termination, the Non-Employee
Director does not exercise his or her Non-Employee Director Option within the
time specified in the Non-Employee Director Option Agreement, the Non-Employee
Director Option shall terminate.
(i) EXTENSION OF TERMINATION DATE. If the exercise of the Non-Employee
Director Option following the termination of the Non-Employee Director's
Continuous Service (other than upon the Non-Employee Director'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 Non-Employee Director Option shall terminate on the earlier of (i) the
expiration of the term of the Non-Employee Director Option set forth in
subsection 7(c) or (ii) the expiration of a period of three (3) months after the
termination of the Non-Employee Director's Continuous Service during which the
exercise of the Non-Employee Director Option would not violate such registration
requirements.
(j) DISABILITY OF NON-EMPLOYEE DIRECTOR. In the event a Non-Employee
Director's Continuous Service terminates as a result of the Non-Employee
Director's Disability, the Non-Employee Director may exercise his or her
Non-Employee Director Option (to the extent that the Non-Employee Director was
entitled to exercise it as of the date of termination), but only within such
period of time ending on the earlier of (i) the date twelve (12) months
following such termination or (ii) the expiration of the term of the
Non-Employee Director Option as set forth in the Non-Employee Director Option
Agreement. If, after termination, the Non-Employee Director does not exercise
his or her Non-Employee Director Option within the time specified herein, the
Non-Employee Director Option shall terminate.
(k) DEATH OF NON-EMPLOYEE DIRECTOR. In the event (i) a Non-Employee
Director's Continuous Service terminates as a result of the Non-Employee
Director's death or (ii) the Non-Employee Director dies within the three-month
period after the termination of the Non-Employee Director's Continuous Service
for a reason other than death, then the Non-Employee
11.
<PAGE> 12
Director Option may be exercised (to the extent the Non-Employee Director was
entitled to exercise the Non-Employee Director Option as of the date of death)
by the Non-Employee Director's estate, by a person who acquired the right to
exercise the Non-Employee Director Option by bequest or inheritance or by a
person designated to exercise the Non-Employee Director Option upon the
Non-Employee Director's death, but only within the period ending on the earlier
of (1) the date eighteen (18) months following the date of death or (2) the
expiration of the term of such Non-Employee Director Option as set forth in the
Non-Employee Director Option Agreement. If, after death, the Non-Employee
Director Option is not exercised within the time specified herein, the
Non-Employee Director Option shall terminate.
8. PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.
(a) STOCK BONUS AWARDS. Each stock bonus agreement shall be in such
form and shall contain such terms and conditions as the Board shall deem
appropriate. The terms and conditions of stock bonus agreements may change from
time to time, and the terms and conditions of separate stock bonus agreements
need not be identical, but each stock bonus agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions:
(i) CONSIDERATION. A stock bonus may be awarded in consideration
for past services actually rendered to the Company or an Affiliate for its
benefit.
(ii) VESTING. Shares of Common Stock awarded under the stock bonus
agreement may, but need not, be subject to a share repurchase option in favor of
the Company in accordance with a vesting schedule to be determined by the Board.
(iii) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. In the event
a Participant's Continuous Service terminates, the Company may reacquire any or
all of the shares of Common Stock held by the Participant which have not vested
as of the date of termination under the terms of the stock bonus agreement.
(iv) TRANSFERABILITY. Rights to acquire shares of Common Stock
under the stock bonus agreement shall be transferable by the Participant only
upon such terms and conditions as are set forth in the stock bonus agreement, as
the Board shall determine in its discretion, so long as Common Stock awarded
under the stock bonus agreement remains subject to the terms of the stock bonus
agreement.
(b) RESTRICTED STOCK AWARDS. Each restricted stock purchase agreement
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. The terms and conditions of the restricted stock
purchase agreements may change from time to time, and the terms and conditions
of separate restricted stock purchase agreements need not be identical, but each
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:
(i) PURCHASE PRICE. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board shall determine and
designate in such restricted stock purchase agreement. The purchase price shall
not be less than eighty-five percent (85%) of
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the Common Stock's Fair Market Value on the date such award is made or at the
time the purchase is consummated.
(ii) CONSIDERATION. The purchase price of Common Stock acquired
pursuant to the restricted stock purchase agreement shall be paid either: (i) in
cash at the time of purchase; (ii) at the discretion of the Board, according to
a deferred payment or other similar arrangement with the Participant; or (iii)
in any other form of legal consideration that may be acceptable to the Board in
its discretion; provided, however, that at any time that the Company is
incorporated in Delaware, then payment of the Common Stock's "par value," as
defined in the Delaware General Corporation Law, shall not be made by deferred
payment.
(iii) VESTING. Shares of Common Stock acquired under the restricted
stock purchase agreement may, but need not, be subject to a share repurchase
option in favor of the Company in accordance with a vesting schedule to be
determined by the Board.
(iv) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. In the event
a Participant's Continuous Service terminates, the Company may repurchase or
otherwise reacquire any or all of the shares of Common Stock held by the
Participant which have not vested as of the date of termination under the terms
of the restricted stock purchase agreement.
(v) TRANSFERABILITY. Rights to acquire shares of Common Stock under
the restricted stock purchase agreement shall be transferable by the Participant
only upon such terms and conditions as are set forth in the restricted stock
purchase agreement, as the Board shall determine in its discretion, so long as
Common Stock awarded under the restricted stock purchase agreement remains
subject to the terms of the restricted stock purchase agreement.
9. COVENANTS OF THE COMPANY.
(a) AVAILABILITY OF SHARES. During the terms of the Stock Awards, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.
(b) SECURITIES LAW COMPLIANCE. The Company shall seek to obtain from
each regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Stock Awards and to issue and sell shares
of Common Stock upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any
such Stock Award. If, after reasonable efforts, the Company is unable to obtain
from any such regulatory commission or agency the authority which counsel for
the Company deems necessary for the lawful issuance and sale of Common Stock
under the Plan, the Company shall be relieved from any liability for failure to
issue and sell Common Stock upon exercise of such Stock Awards unless and until
such authority is obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of Common Stock pursuant to Stock Awards shall
constitute general funds of the Company.
13.
<PAGE> 14
11. MISCELLANEOUS.
(a) ACCELERATION OF EXERCISABILITY AND VESTING. The Board shall have
the power to accelerate the time at which a Stock Award may first be exercised
or the time during which a Stock Award or any part thereof will vest in
accordance with the Plan, notwithstanding the provisions in the Stock Award
stating the time at which it may first be exercised or the time during which it
will vest.
(b) SHAREHOLDER RIGHTS. No Participant shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares of
Common Stock subject to such Stock Award unless and until such Participant has
satisfied all requirements for exercise of the Stock Award pursuant to its
terms.
(c) NO EMPLOYMENT OR OTHER SERVICE RIGHTS. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer upon
any Participant any right to continue to serve the Company or an Affiliate in
the capacity in effect at the time the Stock Award was granted or shall affect
the right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant's agreement with the Company
or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the
Company or an Affiliate, and any applicable provisions of the corporate law of
the state in which the Company or the Affiliate is incorporated, as the case may
be.
(d) INCENTIVE STOCK OPTION $100,000 LIMITATION. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of Common Stock
with respect to which Incentive Stock Options are exercisable for the first time
by any Optionholder during any calendar year (under all plans of the Company and
its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options.
(e) INVESTMENT ASSURANCES. The Company may require a Participant, as a
condition of exercising or acquiring Common Stock under any Stock Award, (i) to
give written assurances satisfactory to the Company as to the Participant's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (ii) to
give written assurances satisfactory to the Company stating that the Participant
is acquiring Common Stock subject to the Stock Award for the Participant's own
account and not with any present intention of selling or otherwise distributing
the Common Stock. The foregoing requirements, and any assurances given pursuant
to such requirements, shall be inoperative if (1) the issuance of the shares of
Common Stock upon the exercise or acquisition of Common Stock under the Stock
Award has been registered under a then currently effective registration
statement under the Securities Act or (2) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with
14.
<PAGE> 15
applicable securities laws, including, but not limited to, legends restricting
the transfer of the Common Stock.
(f) WITHHOLDING OBLIGATIONS. To the extent provided by the terms of a
Stock Award Agreement, the Participant may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of Common
Stock under a Stock Award by any of the following means (in addition to the
Company's right to withhold from any compensation paid to the Participant by the
Company) or by a combination of such means: (i) tendering a cash payment; (ii)
authorizing the Company to withhold shares of Common Stock from the shares of
Common Stock otherwise issuable to the Participant as a result of the exercise
or acquisition of Common Stock under the Stock Award, provided, however, that no
shares of Common Stock are withheld with a value exceeding the minimum amount of
tax required to be withheld by law; or (iii) delivering to the Company owned and
unencumbered shares of Common Stock.
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) CAPITALIZATION ADJUSTMENTS. If any change is made in the Common
Stock subject to the Plan, or subject to any Stock Award, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number of securities subject to the Plan
pursuant to subsection 4(a) and the maximum number of securities subject to
award to any person pursuant to subsection 5(c), and the outstanding Stock
Awards will be appropriately adjusted in the class(es) and number of securities
and price per share of Common Stock subject to such outstanding Stock Awards.
The Board shall make such adjustments, and its determination shall be final,
binding and conclusive. (The conversion of any convertible securities of the
Company shall not be treated as a transaction "without receipt of consideration"
by the Company.)
(b) CHANGE IN CONTROL--DISSOLUTION OR LIQUIDATION. In the event of a
dissolution or liquidation of the Company, then all outstanding Stock Awards
shall terminate immediately prior to such event.
(c) CHANGE IN CONTROL--ASSET SALE, MERGER, CONSOLIDATION OR REVERSE
MERGER. In the event of (i) a sale, lease or other disposition of all or
substantially all of the assets of the Company, (ii) a merger or consolidation
in which the Company is not the surviving corporation or (iii) a reverse merger
in which the Company is the surviving corporation but the shares of Common Stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise, then any surviving corporation or acquiring corporation shall assume
any Stock Awards outstanding under the Plan or shall substitute similar stock
awards (including an award to acquire the same consideration paid to the
Stockholders in the transaction described in this subsection 12(c) for those
outstanding under the Plan). In the event any surviving corporation or acquiring
corporation refuses to assume such Stock Awards or to substitute similar stock
awards for those outstanding under the Plan, then with respect to Stock Awards
held by Participants whose Continuous Service has not terminated, the vesting of
such Stock Awards (and, if applicable, the
15.
<PAGE> 16
time during which such Stock Awards may be exercised) shall be accelerated in
full, and the Stock Awards shall terminate if not exercised (if applicable) at
or prior to such event. With respect to any other Stock Awards outstanding under
the Plan, such Stock Awards shall terminate if not exercised (if applicable)
prior to such event.
13. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) AMENDMENT OF PLAN. The Board at any time, and from time to time,
may amend the Plan. However, except as provided in Section 12 relating to
adjustments upon changes in Common Stock, no amendment shall be effective unless
approved by the Stockholders of the Company to the extent shareholder approval
is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3
or any Nasdaq or securities exchange listing requirements.
(b) SHAREHOLDER APPROVAL. The Board may, in its sole discretion, submit
any other amendment to the Plan for shareholder approval, including, but not
limited to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.
(c) CONTEMPLATED AMENDMENTS. It is expressly contemplated that the
Board may amend the Plan in any respect the Board deems necessary or advisable
to provide eligible Employees with the maximum benefits provided or to be
provided under the provisions of the Code and the regulations promulgated
thereunder relating to Incentive Stock Options and/or to bring the Plan and/or
Incentive Stock Options granted under it into compliance therewith.
(d) NO IMPAIRMENT OF RIGHTS. Rights under any Stock Award granted
before amendment of the Plan shall not be impaired by any amendment of the Plan
unless (i) the Company requests the consent of the Participant and (ii) the
Participant consents in writing.
(e) AMENDMENT OF STOCK AWARDS. The Board at any time, and from time to
time, may amend the terms of any one or more Stock Awards; provided, however,
that the rights under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the Participant and
(ii) the Participant consents in writing.
14. TERMINATION OR SUSPENSION OF THE PLAN.
(a) PLAN TERM. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on the day before the tenth
(10th) anniversary of the date the Plan is adopted by the Board or approved by
the Stockholders of the Company, whichever is earlier. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) NO IMPAIRMENT OF RIGHTS. Suspension or termination of the Plan
shall not impair rights and obligations under any Stock Award granted while the
Plan is in effect except with the written consent of the Participant.
16.
<PAGE> 17
15. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no Stock Award
shall be exercised (or, in the case of a stock bonus, shall be granted) unless
and until the Plan has been approved by the Stockholders of the Company, which
approval shall be within twelve (12) months before or after the date the Plan is
adopted by the Board.
16. CHOICE OF LAW.
The law of the State of Delaware shall govern all questions concerning
the construction, validity and interpretation of this Plan, without regard to
such state's conflict of laws rules.
17.
<PAGE> 18
iPASS INC.
2000 EQUITY INCENTIVE PLAN
NON-EMPLOYEE DIRECTOR STOCK OPTION AGREEMENT
(NONSTATUTORY STOCK OPTION)
Pursuant to your Stock Option Grant Notice ("Grant Notice") and this
Stock Option Agreement, iPass Inc. (the "Company") has granted you an option
under its 2000 Equity Incentive Plan (the "Plan") to purchase the number of
shares of the Company's Common Stock indicated in your Grant Notice at the
exercise price indicated in your Grant Notice. Defined terms not explicitly
defined in this Stock Option Agreement but defined in the Plan shall have the
same definitions as in the Plan.
The details of your option are as follows:
1. VESTING. Subject to the limitations and provisions contained herein,
your option will vest as provided in your Grant Notice, provided that vesting
will cease upon the termination of your Continuous Service.
2. NUMBER OF SHARES AND EXERCISE PRICE. The number of shares of Common
Stock subject to your option and your exercise price per share referenced in
your Grant Notice may be adjusted from time to time for Capitalization
Adjustments, as provided in the Plan.
3. EXERCISE PRIOR TO VESTING ("EARLY EXERCISE"). If permitted in your
Grant Notice (i.e., the "Exercise Schedule" indicates that "Early Exercise" of
your option is permitted) and subject to the provisions of your option, you may
elect at any time that is both (i) during the period of your Continuous Service
and (ii) during the term of your option, to exercise all or part of your option,
including the nonvested portion of your option; provided, however, that:
(a) a partial exercise of your option shall be deemed to cover first
vested shares of Common Stock and then the earliest vesting installment of
unvested shares of Common Stock;
(b) any shares of Common Stock so purchased from installments that
have not vested as of the date of exercise shall be subject to the purchase
option in favor of the Company as described in the Company's form of Early
Exercise Stock Purchase Agreement; and
(c) you shall enter into the Company's form of Early Exercise Stock
Purchase Agreement with a vesting schedule that will result in the same vesting
as if no early exercise had occurred.
4. METHOD OF PAYMENT. Payment of the exercise price is due in full upon
exercise of all or any part of your option. You may elect to make payment of the
exercise price in cash or by check or by one or more of the following:
1
<PAGE> 19
(a) Provided that at the time of exercise the Common Stock is
publicly traded and quoted regularly in The Wall Street Journal, pursuant to a
program developed under Regulation T as promulgated by the Federal Reserve Board
that, prior to the issuance of Common Stock, results in either the receipt of
cash (or check) by the Company or the receipt of irrevocable instructions to pay
the aggregate exercise price to the Company from the sales proceeds.
(b) Provided that at the time of exercise the Common Stock is
publicly traded and quoted regularly in The Wall Street Journal, by delivery of
already-owned shares of Common Stock either that you have held for the period
required to avoid a charge to the Company's reported earnings (generally six
months) or that you did not acquire, directly or indirectly from the Company,
that are owned free and clear of any liens, claims, encumbrances or security
interests, and that are valued at Fair Market Value on the date of exercise.
"Delivery" for these purposes, in the sole discretion of the Company at the time
you exercise your option, shall include delivery to the Company of your
attestation of ownership of such shares of Common Stock in a form approved by
the Company. Notwithstanding the foregoing, you may not exercise your option by
tender to the Company of Common Stock to the extent such tender would violate
the provisions of any law, regulation or agreement restricting the redemption of
the Company's stock.
5. WHOLE SHARES. You may exercise your option only for whole shares of
Common Stock.
6. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary
contained herein, you may not exercise your option unless the shares of Common
Stock issuable upon such exercise are then registered under the Securities Act
or, if such shares of Common Stock are not then so registered, the Company has
determined that such exercise and issuance would be exempt from the registration
requirements of the Securities Act. The exercise of your option must also comply
with other applicable laws and regulations governing your option, and you may
not exercise your option if the Company determines that such exercise would not
be in material compliance with such laws and regulations.
7. TERM. Except as otherwise provided herein, the term of your option
commences on the Date of Grant and expires upon the EARLIEST of the following:
(a) three (3) months after the termination of your Continuous
Service for any reason other than your Disability or death, provided that if
during any part of such three- (3-) month period your option is not exercisable
solely because of the condition set forth in the preceding paragraph relating to
"Securities Law Compliance," your option shall not expire until the earlier of
the Expiration Date or until it shall have been exercisable for an aggregate
period of three (3) months after the termination of your Continuous Service;
(b) twelve (12) months after the termination of your Continuous
Service due to your Disability;
2
<PAGE> 20
(c) eighteen (18) months after your death if you die either during
your Continuous Service or within three (3) months after your Continuous Service
terminates; or
(d) the Expiration Date indicated in your Grant Notice.
8. EXERCISE.
(a) You may exercise your option during its term by delivering a
Notice of Exercise (in a form designated by the Company) together with the
exercise price to the Secretary of the Company, or to such other person as the
Company may designate, during regular business hours, together with such
additional documents as the Company may then require.
(b) By exercising your option you agree that, as a condition to any
exercise of your option, the Company may require you to enter into an
arrangement providing for the payment by you to the Company of any tax
withholding obligation of the Company arising by reason of the exercise of your
option.
(c) TRANSFERABILITY. Your option is not transferable, except (i) by
will or by the laws of descent and distribution, and (ii) to such further extent
as permitted by the Rule as to Use of Form S-8 specified in the General
Instructions of the Form S-8 Registration Statement under the Securities Act.
Your option is exercisable during your life only by you or a transferee
satisfying the above-stated conditions. The right of a transferee to exercise
the transferred portion of your option after termination of your Continuous
Service shall terminate in accordance with your right to exercise your option as
specified in your option. In the event that your Continuous Service terminates
due to your death, your transferee will be treated as a person who acquired the
right to exercise your option by bequest or inheritance. In addition to the
foregoing, the Company may require, as a condition of the transfer of your
option to a trust or by gift, that your transferee enter into an option transfer
agreement provided by, or acceptable to, the Company. The terms of your option
shall be binding upon your transferees, executors, administrators, heirs,
successors, and assigns. Notwithstanding the foregoing, by delivering written
notice to the Company, in a form satisfactory to the Company, you may designate
a third party who, in the event of your death, shall thereafter be entitled to
exercise your option.
9. OPTION NOT A SERVICE CONTRACT. Your option is not an employment or
service contract, and nothing in your option shall be deemed to create in any
way whatsoever any obligation on your part to continue in the employ of the
Company or an Affiliate, or of the Company or an Affiliate to continue your
employment. In addition, nothing in your option shall obligate the Company or an
Affiliate, their respective stockholders, Boards of Directors, Officers or
Employees to continue any relationship that you might have as a Director or
Consultant for the Company or an Affiliate.
10. NOTICES. Any notices provided for in your option or the Plan shall
be given in writing and shall be deemed effectively given upon receipt or, in
the case of notices delivered by mail by the Company to you, five (5) days after
deposit in the United States mail, postage prepaid, addressed to you at the last
address you provided to the Company.
3
<PAGE> 21
11. ACCELERATION OF VESTING AND PERIOD OF EXERCISABILITY FOLLOWING A
CHANGE IN CONTROL. In the event of the occurrence of a Change in Control (as
described in Section 12(c) of the Plan), your option (or any substituted option)
shall, as of the date of such Change in Control vest in full and become fully
exercisable (if applicable) to the extent not previously vested or exercisable,
and shall (notwithstanding Section 8 of this Stock Option Agreement) continue to
be exercisable for a period of twelve (12) months after termination of your
Continuous Service following the Change of Control event or until the Expiration
Date stated in your Grant Notice, whichever period is shorter.
12. GOVERNING PLAN DOCUMENT. Your option is subject to all the
provisions of the Plan, the provisions of which are hereby made a part of your
option, and is further subject to all interpretations, amendments, rules and
regulations which may from time to time be promulgated and adopted pursuant to
the Plan. In the event of any conflict between the provisions of your option and
those of the Plan, the provisions of the Plan shall control.
4
<PAGE> 22
Attachment II
2000 EQUITY INCENTIVE PLAN
5
<PAGE> 23
Attachment III
NOTICE OF EXERCISE
6
<PAGE> 24
iPASS INC.
2000 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
(INCENTIVE AND NONSTATUTORY STOCK OPTIONS)
Pursuant to your Stock Option Grant Notice ("Grant Notice") and this
Stock Option Agreement, iPass Inc. (the "Company") has granted you an option
under its 2000 Equity Incentive Plan (the "Plan") to purchase the number of
shares of the Company's Common Stock indicated in your Grant Notice at the
exercise price indicated in your Grant Notice. Defined terms not explicitly
defined in this Stock Option Agreement but defined in the Plan shall have the
same definitions as in the Plan.
The details of your option are as follows:
1. VESTING. Subject to the limitations and provisions contained
herein, your option will vest as provided in your Grant Notice, provided that
vesting will cease upon the termination of your Continuous Service.
2. NUMBER OF SHARES AND EXERCISE PRICE. The number of shares of
Common Stock subject to your option and your exercise price per share referenced
in your Grant Notice may be adjusted from time to time for Capitalization
Adjustments, as provided in the Plan.
3. EXERCISE PRIOR TO VESTING ("EARLY EXERCISE"). If permitted in
your Grant Notice (i.e., the "Exercise Schedule" indicates that "Early Exercise"
of your option is permitted) and subject to the provisions of your option, you
may elect at any time that is both (i) during the period of your Continuous
Service and (ii) during the term of your option, to exercise all or part of your
option, including the nonvested portion of your option; provided, however, that:
(a) a partial exercise of your option shall be deemed to cover
first vested shares of Common Stock and then the earliest
vesting installment of unvested shares of Common Stock;
(b) any shares of Common Stock so purchased from installments that
have not vested as of the date of exercise shall be subject to
the purchase option in favor of the Company as described in
the Company's form of Early Exercise Stock Purchase Agreement;
(c) you shall enter into the Company's form of Early Exercise
Stock Purchase Agreement with a vesting schedule that will
result in the same vesting as if no early exercise had
occurred; and
(d) if your option is an incentive stock option, then, as provided
in the Plan, to the extent that the aggregate Fair Market
Value (determined at the time of grant) of the shares of
Common Stock with respect to which your option plus all other
incentive stock options you hold are exercisable for the first
time by you during
1.
<PAGE> 25
any calendar year (under all plans of the Company and its
Affiliates) exceeds one hundred thousand dollars ($100,000),
your option(s) or portions thereof that exceed such limit
(according to the order in which they were granted) shall be
treated as nonstatutory stock options.
4. METHOD OF PAYMENT. Payment of the exercise price is due in
full upon exercise of all or any part of your option. You may elect to make
payment of the exercise price in cash or by check or in any other manner
PERMITTED BY YOUR GRANT NOTICE, which may include one or more of the following:
(a) In the Company's sole discretion at the time your option is
exercised and provided that at the time of exercise the Common
Stock is publicly traded and quoted regularly in The Wall
Street Journal, pursuant to a program developed under
Regulation T as promulgated by the Federal Reserve Board that,
prior to the issuance of Common Stock, results in either the
receipt of cash (or check) by the Company or the receipt of
irrevocable instructions to pay the aggregate exercise price
to the Company from the sales proceeds.
(b) Provided that at the time of exercise the Common Stock is
publicly traded and quoted regularly in The Wall Street
Journal, by delivery of already-owned shares of Common Stock
either that you have held for the period required to avoid a
charge to the Company's reported earnings (generally six
months) or that you did not acquire, directly or indirectly
from the Company, that are owned free and clear of any liens,
claims, encumbrances or security interests, and that are
valued at Fair Market Value on the date of exercise.
"Delivery" for these purposes, in the sole discretion of the
Company at the time you exercise your option, shall include
delivery to the Company of your attestation of ownership of
such shares of Common Stock in a form approved by the Company.
Notwithstanding the foregoing, you may not exercise your
option by tender to the Company of Common Stock to the extent
such tender would violate the provisions of any law,
regulation or agreement restricting the redemption of the
Company's stock.
(c) Pursuant to the following deferred payment alternative:
(i) Not less than one hundred percent (100%) of the
aggregate exercise price, plus accrued interest,
shall be due four (4) years from date of exercise or,
at the Company's election, upon termination of your
Continuous Service.
(ii) Interest shall be compounded at least annually and
shall be charged at the minimum rate of interest
necessary to avoid the treatment as interest, under
any applicable provisions of the Code, of any portion
of any amounts other than amounts stated to be
interest under the deferred payment arrangement.
(iii) At any time that the Company is incorporated in
Delaware, payment of the Common Stock's "par value,"
as defined in the Delaware General Corporation Law,
shall be made in cash and not by deferred payment.
2.
<PAGE> 26
(iv) In order to elect the deferred payment alternative,
you must, as a part of your written notice of
exercise, give notice of the election of this payment
alternative and, in order to secure the payment of
the deferred exercise price to the Company hereunder,
if the Company so requests, you must tender to the
Company a promissory note and a security agreement
covering the purchased shares of Common Stock, both
in form and substance satisfactory to the Company, or
such other or additional documentation as the Company
may request.
5. WHOLE SHARES. You may exercise your option only for whole
shares of Common Stock.
6. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the
contrary contained herein, you may not exercise your option unless the shares of
Common Stock issuable upon such exercise are then registered under the
Securities Act or, if such shares of Common Stock are not then so registered,
the Company has determined that such exercise and issuance would be exempt from
the registration requirements of the Securities Act. The exercise of your option
must also comply with other applicable laws and regulations governing your
option, and you may not exercise your option if the Company determines that such
exercise would not be in material compliance with such laws and regulations.
7. TERM. You may not exercise your option before the commencement
of its term or after its term expires. The term of your option commences on the
Date of Grant and expires upon the EARLIEST of the following:
(a) three (3) months after the termination of your Continuous
Service for any reason other than your Disability or death,
provided that if during any part of such three- (3-) month
period your option is not exercisable solely because of the
condition set forth in the preceding paragraph relating to
"Securities Law Compliance," your option shall not expire
until the earlier of the Expiration Date or until it shall
have been exercisable for an aggregate period of three (3)
months after the termination of your Continuous Service;
(b) twelve (12) months after the termination of your Continuous
Service due to your Disability;
(c) eighteen (18) months after your death if you die either during
your Continuous Service or within three (3) months after your
Continuous Service terminates;
(d) the Expiration Date indicated in your Grant Notice; or
(e) the day before the tenth (10th) anniversary of the Date of
Grant.
If your option is an incentive stock option, note that, to obtain the
federal income tax advantages associated with an "incentive stock option," the
Code requires that at all times beginning on the date of grant of your option
and ending on the day three (3) months before the date of your option's
exercise, you must be an employee of the Company or an Affiliate, except in the
event of your death or Disability. The Company has provided for extended
exercisability
3.
<PAGE> 27
of your option under certain circumstances for your benefit but cannot guarantee
that your option will necessarily be treated as an "incentive stock option" if
you continue to provide services to the Company or an Affiliate as a Consultant
or Director after your employment terminates or if you otherwise exercise your
option more than three (3) months after the date your employment terminates.
8. EXERCISE.
(a) You may exercise the vested portion of your option (and the
unvested portion of your option if your Grant Notice so
permits) during its term by delivering a Notice of Exercise
(in a form designated by the Company) together with the
exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular
business hours, together with such additional documents as the
Company may then require.
(b) By exercising your option you agree that, as a condition to
any exercise of your option, the Company may require you to
enter into an arrangement providing for the payment by you to
the Company of any tax withholding obligation of the Company
arising by reason of (1) the exercise of your option, (2) the
lapse of any substantial risk of forfeiture to which the
shares of Common Stock are subject at the time of exercise, or
(3) the disposition of shares of Common Stock acquired upon
such exercise.
(c) If your option is an incentive stock option, by exercising
your option you agree that you will notify the Company in
writing within fifteen (15) days after the date of any
disposition of any of the shares of the Common Stock issued
upon exercise of your option that occurs within two (2) years
after the date of your option grant or within one (1) year
after such shares of Common Stock are transferred upon
exercise of your option.
(d) By exercising your option you agree that the Company (or a
representative of the underwriter(s)) may, in connection with
the first underwritten registration of the offering of any
securities of the Company under the Securities Act, require
that you not sell, dispose of, transfer, make any short sale
of, grant any option for the purchase of, or enter into any
hedging or similar transaction with the same economic effect
as a sale, any shares of Common Stock or other securities of
the Company held by you, for a period of time specified by the
underwriter(s) (not to exceed one hundred eighty (180) days)
following the effective date of the registration statement of
the Company filed under the Securities Act. You further agree
to execute and deliver such other agreements as may be
reasonably requested by the Company and/or the underwriter(s)
that are consistent with the foregoing or that are necessary
to give further effect thereto. In order to enforce the
foregoing covenant, the Company may impose stop-transfer
instructions with respect to your shares of Common Stock until
the end of such period.
9. TRANSFERABILITY.
4.
<PAGE> 28
(a) If your option is an incentive stock option, your option is
not transferable, except by will or by the laws of descent and
distribution, and is exercisable during your life only by you.
Notwithstanding the foregoing, by delivering written notice to
the Company, in a form satisfactory to the Company, you may
designate a third party who, in the event of your death, shall
thereafter be entitled to exercise your option.
(b) If your option is a nonstatutory stock option, your option is
not transferable, except (i) by will or by the laws of descent
and distribution, (ii) with the prior written approval of the
Company, by instrument to an inter vivos or testamentary
trust, in a form accepted by the Company, in which the option
is to be passed to beneficiaries upon the death of the trustor
(settlor) and (iii) with the prior written approval of the
Company, by gift, in a form accepted by the Company, to your
"immediate family" as that term is defined in 17 C.F.R.
240.16a-1(e). The term "immediate family" is defined in 17
C.F.R. 240.16a-1(e) to mean any child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, and includes adoptive
relationships. Your option is exercisable during your life
only by you or a transferee satisfying the above-stated
conditions. The right of a transferee to exercise the
transferred portion of your option after termination of your
Continuous Service shall terminate in accordance with your
right to exercise your option as specified in your option. In
the event that your Continuous Service terminates due to your
death, your transferee will be treated as a person who
acquired the right to exercise your option by bequest or
inheritance. In addition to the foregoing, the Company may
require, as a condition of the transfer of your option to a
trust or by gift, that your transferee enter into an option
transfer agreement provided by, or acceptable to, the Company.
The terms of your option shall be binding upon your
transferees, executors, administrators, heirs, successors, and
assigns. Notwithstanding the foregoing, by delivering written
notice to the Company, in a form satisfactory to the Company,
you may designate a third party who, in the event of your
death, shall thereafter be entitled to exercise your option.
10. RIGHT OF FIRST REFUSAL. Shares of Common Stock that you
acquire upon exercise of your option are subject to any right of first refusal
that may be described in the Company's bylaws in effect at such time the Company
elects to exercise its right. The Company's right of first refusal shall expire
on the Listing Date.
11. RIGHT OF REPURCHASE. To the extent provided in the Company's
bylaws as amended from time to time, the Company shall have the right to
repurchase all or any part of the shares of Common Stock you acquire pursuant to
the exercise of your option.
12. OPTION NOT A SERVICE CONTRACT. Your option is not an
employment or service contract, and nothing in your option shall be deemed to
create in any way whatsoever any obligation on your part to continue in the
employ of the Company or an Affiliate, or of the Company or an Affiliate to
continue your employment. In addition, nothing in your option shall obligate the
Company or an Affiliate, their respective shareholders, Boards of Directors,
Officers
5.
<PAGE> 29
or Employees to continue any relationship that you might have as a Director or
Consultant for the Company or an Affiliate.
13. WITHHOLDING OBLIGATIONS.
(a) At the time you exercise your option, in whole or in part, or
at any time thereafter as requested by the Company, you hereby
authorize withholding from payroll and any other amounts
payable to you, and otherwise agree to make adequate provision
for (including by means of a "cashless exercise" pursuant to a
program developed under Regulation T as promulgated by the
Federal Reserve Board to the extent permitted by the Company),
any sums required to satisfy the federal, state, local and
foreign tax withholding obligations of the Company or an
Affiliate, if any, which arise in connection with your option.
(b) Upon your request and subject to approval by the Company, in
its sole discretion, and compliance with any applicable
conditions or restrictions of law, the Company may withhold
from fully vested shares of Common Stock otherwise issuable to
you upon the exercise of your option a number of whole shares
of Common Stock having a Fair Market Value, determined by the
Company as of the date of exercise, not in excess of the
minimum amount of tax required to be withheld by law. If the
date of determination of any tax withholding obligation is
deferred to a date later than the date of exercise of your
option, share withholding pursuant to the preceding sentence
shall not be permitted unless you make a proper and timely
election under Section 83(b) of the Code, covering the
aggregate number of shares of Common Stock acquired upon such
exercise with respect to which such determination is otherwise
deferred, to accelerate the determination of such tax
withholding obligation to the date of exercise of your option.
Notwithstanding the filing of such election, shares of Common
Stock shall be withheld solely from fully vested shares of
Common Stock determined as of the date of exercise of your
option that are otherwise issuable to you upon such exercise.
Any adverse consequences to you arising in connection with
such share withholding procedure shall be your sole
responsibility.
(c) You may not exercise your option unless the tax withholding
obligations of the Company and/or any Affiliate are satisfied.
Accordingly, you may not be able to exercise your option when
desired even though your option is vested, and the Company
shall have no obligation to issue a certificate for such
shares of Common Stock or release such shares of Common Stock
from any escrow provided for herein.
14. NOTICES. Any notices provided for in your option or the Plan
shall be given in writing and shall be deemed effectively given upon receipt or,
in the case of notices delivered by mail by the Company to you, five (5) days
after deposit in the United States mail, postage prepaid, addressed to you at
the last address you provided to the Company.
15. GOVERNING PLAN DOCUMENT. Your option is subject to all the
provisions of the Plan, the provisions of which are hereby made a part of your
option, and is further subject to all
6.
<PAGE> 30
interpretations, amendments, rules and regulations which may from time to time
be promulgated and adopted pursuant to the Plan. In the event of any conflict
between the provisions of your option and those of the Plan, the provisions of
the Plan shall control.
7.
<PAGE> 1
EXHIBIT 10.8
IPASS INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
ADOPTED BY THE BOARD OF DIRECTORS _______, 2000
APPROVED BY STOCKHOLDERS _____, 2000
1. PURPOSE.
(a) The purpose of the Plan is to provide a means by which Employees of
the Company and certain designated Affiliates may be given an opportunity to
purchase shares of the Common Stock of the Company.
(b) The Company, by means of the Plan, seeks to retain the services of
such Employees, to secure and retain the services of new Employees and to
provide incentives for such persons to exert maximum efforts for the success of
the Company and its Affiliates.
(c) The Company intends that the Rights to purchase shares of the Common
Stock granted under the Plan be considered options issued under an "employee
stock purchase plan," as that term is defined in Section 423(b) of the Code.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f), respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in accordance
with subparagraph 3(c) of the Plan.
(e) "COMMON STOCK" means the Common Stock of iPass Inc..
(f) "COMPANY" means iPass Inc., a Delaware corporation.
(g) "DIRECTOR" means a member of the Board.
(h) "ELIGIBLE EMPLOYEE" means an Employee who meets the requirements set
forth in the Offering for eligibility to participate in the Offering.
(i) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or an Affiliate of the Company. Neither service as a
Director nor payment of a director's fee shall be sufficient to constitute
"employment" by the Company or the Affiliate.
1.
<PAGE> 2
(j) "EMPLOYEE STOCK PURCHASE PLAN" means a plan that grants rights
intended to be options issued under an "employee stock purchase plan," as that
term is defined in Section 423(b) of the Code.
(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(l) "FAIR MARKET VALUE" means the value of a security, as determined in
good faith by the Board. If the security is listed on any established stock
exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market,
then, except as otherwise provided in the Offering, the Fair Market Value of the
security shall be the closing sales price (rounded up where necessary to the
nearest whole cent) for such security (or the closing bid, if no sales were
reported) as quoted on such exchange or market (or the exchange or market with
the greatest volume of trading in the relevant security of the Company) on the
relevant determination date, as reported in The Wall Street Journal or such
other source as the Board deems reliable, or if such date is not a trading day,
then on the next preceding trading day.
(m) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
("Regulation S-K")), does not possess an interest in any other transaction as to
which disclosure would be required under Item 404(a) of Regulation S-K, and is
not engaged in a business relationship as to which disclosure would be required
under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a
"non-employee director" for purposes of Rule 16b-3.
(n) "OFFERING" means the grant of Rights to purchase shares of the
Common Stock under the Plan to Eligible Employees.
(o) "OFFERING DATE" means a date selected by the Board for an Offering
to commence.
(p) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
the Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(q) "PARTICIPANT" means an Eligible Employee who holds an outstanding
Right granted pursuant to the Plan or, if applicable, such other person who
holds an outstanding Right granted under the Plan.
(r) "PLAN" means this iPass Inc. Amended and Restated 1997 Employee
Stock Purchase Plan.
2.
<PAGE> 3
(s) "PURCHASE DATE" means one or more dates established by the Board
during an Offering on which Rights granted under the Plan shall be exercised and
purchases of shares of the Common Stock carried out in accordance with such
Offering.
(t) "RIGHT" means an option to purchase shares of the Common Stock
granted pursuant to the Plan.
(u) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3 as in effect with respect to the Company at the time discretion is
being exercised regarding the Plan.
(v) "SECURITIES ACT" means the Securities Act of 1933, as amended.
3. ADMINISTRATION.
(a) The Board shall administer the Plan unless and until the Board
delegates administration to a Committee, as provided in subparagraph 3(c).
Whether or not the Board has delegated administration, the Board shall have the
final power to determine all questions of policy and expediency that may arise
in the administration of the Plan.
(b) The Board (or the Committee) shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine when and how Rights to purchase shares of the
Common Stock shall be granted and the provisions of each Offering of such Rights
(which need not be identical).
(ii) To designate from time to time which Affiliates of the
Company shall be eligible to participate in the Plan.
(iii) To construe and interpret the Plan and Rights granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan, in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective.
(iv) To amend the Plan as provided in paragraph 14.
(v) To terminate or suspend the Plan as provided in paragraph 16.
(vi) Generally, to exercise such powers and to perform such acts
as it deems necessary or expedient to promote the best interests of the Company
and its Affiliates and to carry out the intent that the Plan be treated as an
Employee Stock Purchase Plan.
(c) The Board may delegate administration of the Plan to a Committee of
the Board composed of two (2) or more members, all of the members of which
Committee may be, in the discretion of the Board, Non-Employee Directors and/or
Outside Directors. If administration is delegated to a Committee, the Committee
shall have, in connection with the administration of the Plan, the powers
theretofore possessed by the Board, including the power to delegate to a
3.
<PAGE> 4
subcommittee of two (2) or more Outside Directors any of the administrative
powers the Committee is authorized to exercise (and references in this Plan to
the Board shall thereafter be to the Committee or such a subcommittee), subject,
however, to such resolutions, not inconsistent with the provisions of the Plan,
as may be adopted from time to time by the Board. The Board may abolish the
Committee at any time and revest in the Board the administration of the Plan.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 13 relating to adjustments
upon changes in securities, the shares of the Common Stock that may be sold
pursuant to Rights granted under the Plan shall not exceed in the aggregate
seven hundred thousand (700,000) shares of the Common Stock (the "Reserved
Shares"). As of each January 1, beginning on January 1, 2002, and continuing
through and including January 1, 2010, the number of Reserved Shares will be
increased automatically by the lesser of (i) one percent (1%) of the total
number of shares of the Common Stock outstanding on such January 1 or (ii) seven
hundred thousand (700,000) shares. Notwithstanding the foregoing, the Board may
designate a smaller number of shares to be added to the share reserve as of a
particular January 1. If any Right granted under the Plan shall for any reason
terminate without having been exercised, the shares of the Common Stock not
purchased under such Right shall again become available for the Plan.
(b) The shares of the Common Stock subject to the Plan may be unissued
shares of the Common Stock or shares of the Common Stock that have been bought
on the open market at prevailing market prices or otherwise.
5. GRANT OF RIGHTS; OFFERING.
The Board may from time to time grant or provide for the grant of Rights
to purchase shares of the Common Stock under the Plan to Eligible Employees in
an Offering on an Offering Date or Dates selected by the Board. Each Offering
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate, which shall comply with the requirements of Section
423(b)(5) of the Code that all Employees granted Rights to purchase shares of
the Common Stock under the Plan shall have the same rights and privileges. The
terms and conditions of an Offering shall be incorporated by reference into the
Plan and treated as part of the Plan. The provisions of separate Offerings need
not be identical, but each Offering shall include (through incorporation of the
provisions of this Plan by reference in the document comprising the Offering or
otherwise) the period during which the Offering shall be effective, which period
shall not exceed twenty-seven (27) months beginning with the Offering Date, and
the substance of the provisions contained in paragraphs 6 through 9, inclusive.
6. ELIGIBILITY.
(a) Rights may be granted only to Employees of the Company or, as the
Board may designate as provided in subparagraph 3(b), to Employees of an
Affiliate. Except as provided in subparagraph 6(b), an Employee shall not be
eligible to be granted Rights under the Plan unless, on the Offering Date, such
Employee has been in the employ of the Company or the Affiliate, as the case may
be, for such continuous period preceding such grant as the Board may require,
but
4.
<PAGE> 5
in no event shall the required period of continuous employment be less than
ninety (90) days or equal to or greater than two (2) years; provided, however,
that Employees who are employed by the Company as of the Effective Date of this
Plan who would otherwise be Eligible Employees if not for the required period of
continuous employment with the Company shall be eligible to participate in the
Plan with respect to the first Offering Period without regard to their period of
prior continuous employment with the Company provided that they remain in
continuous employment through the end of the first Offering Period.
(b) The Board may provide that each person who, during the course of an
Offering, first becomes an Eligible Employee will, on a date or dates specified
in the Offering which coincides with the day on which such person becomes an
Eligible Employee or which occurs thereafter, receive a Right under that
Offering, which Right shall thereafter be deemed to be a part of that Offering.
Such Right shall have the same characteristics as any Rights originally granted
under that Offering, as described herein, except that:
(i) the date on which such Right is granted shall be the
"Offering Date" of such Right for all purposes, including determination of the
exercise price of such Right;
(ii) the period of the Offering with respect to such Right shall
begin on its Offering Date and end coincident with the end of such Offering; and
(iii) the Board may provide that if such person first becomes an
Eligible Employee within a specified period of time before the end of the
Offering, he or she will not receive any Right under that Offering.
(c) No Employee shall be eligible for the grant of any Rights under the
Plan if, immediately after any such Rights are granted, such Employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of this
subparagraph 6(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any Employee, and stock which such Employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such Employee.
(d) An Eligible Employee may be granted Rights under the Plan only if
such Rights, together with any other Rights granted under all Employee Stock
Purchase Plans of the Company and any Affiliates, as specified by Section
423(b)(8) of the Code, do not permit such Eligible Employee's rights to purchase
shares of the Common Stock or any Affiliate to accrue at a rate which exceeds
twenty five thousand dollars ($25,000) of the fair market value of such shares
of the Common Stock (determined at the time such Rights are granted) for each
calendar year in which such Rights are outstanding at any time.
(e) The Board may provide in an Offering that Employees who are highly
compensated Employees within the meaning of Section 423(b)(4)(D) of the Code
shall not be eligible to participate.
5.
<PAGE> 6
7. RIGHTS; PURCHASE PRICE.
(a) On each Offering Date, each Eligible Employee, pursuant to an
Offering made under the Plan, shall be granted the Right to purchase up to the
number of shares of the Common Stock purchasable either:
(i) with a percentage designated by the Board not exceeding
fifteen percent (15%) of such Employee's Earnings (as defined by the Board in
each Offering) during the period which begins on the Offering Date (or such
later date as the Board determines for a particular Offering) and ends on the
date stated in the Offering, which date shall be no later than the end of the
Offering; or
(ii) with a maximum dollar amount designated by the Board that,
as the Board determines for a particular Offering, (1) shall be withheld, in
whole or in part, from such Employee's Earnings (as defined by the Board in each
Offering) during the period which begins on the Offering Date (or such later
date as the Board determines for a particular Offering) and ends on the date
stated in the Offering, which date shall be no later than the end of the
Offering and/or (2) shall be contributed, in whole or in part, by such Employee
during such period.
(b) The Board shall establish one or more Purchase Dates during an
Offering on which Rights granted under the Plan shall be exercised and purchases
of shares of the Common Stock carried out in accordance with such Offering.
(c) In connection with each Offering made under the Plan, the Board may
specify a maximum number of shares of the Common Stock that may be purchased by
any Participant as well as a maximum aggregate number of shares of the Common
Stock that may be purchased by all Participants pursuant to such Offering. In
addition, in connection with each Offering that contains more than one Purchase
Date, the Board may specify a maximum aggregate number of shares of the Common
Stock which may be purchased by all Participants on any given Purchase Date
under the Offering. If the aggregate purchase of shares of the Common Stock upon
exercise of Rights granted under the Offering would exceed any such maximum
aggregate amount, the Board shall make a pro rata allocation of the shares of
the Common Stock available in as nearly a uniform manner as shall be practicable
and as it shall deem to be equitable.
(d) The purchase price of shares of the Common Stock acquired pursuant
to Rights granted under the Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the fair
market value of the shares of the Common Stock on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the fair
market value of the shares of the Common Stock on the Purchase Date.
8. PARTICIPATION; WITHDRAWAL; TERMINATION.
(a) An Eligible Employee may become a Participant in the Plan pursuant
to an Offering by delivering a participation agreement to the Company within the
time specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll
6.
<PAGE> 7
deductions of up to the maximum percentage specified by the Board of such
Employee's Earnings during the Offering (as defined in each Offering). The
payroll deductions made for each Participant shall be credited to a bookkeeping
account for such Participant under the Plan and either may be deposited with the
general funds of the Company or may be deposited in a separate account in the
name of, and for the benefit of, such Participant with a financial institution
designated by the Company. To the extent provided in the Offering, a Participant
may reduce (including to zero) or increase such payroll deductions. To the
extent provided in the Offering, a Participant may begin such payroll deductions
after the beginning of the Offering. A Participant may make additional payments
into his or her account only if specifically provided for in the Offering and
only if the Participant has not already had the maximum permitted amount
withheld during the Offering.
(b) At any time during an Offering, a Participant may terminate his or
her payroll deductions under the Plan and withdraw from the Offering by
delivering to the Company a notice of withdrawal in such form as the Company
provides. Such withdrawal may be elected at any time prior to the end of the
Offering except as provided by the Board in the Offering. Upon such withdrawal
from the Offering by a Participant, the Company shall distribute to such
Participant all of his or her accumulated payroll deductions (reduced to the
extent, if any, such deductions have been used to acquire shares of the Common
Stock for the Participant) under the Offering, without interest unless otherwise
specified in the Offering, and such Participant's interest in that Offering
shall be automatically terminated. A Participant's withdrawal from an Offering
will have no effect upon such Participant's eligibility to participate in any
other Offerings under the Plan but such Participant will be required to deliver
a new participation agreement in order to participate in subsequent Offerings
under the Plan.
(c) Rights granted pursuant to any Offering under the Plan shall
terminate immediately upon cessation of any participating Employee's employment
with the Company or a designated Affiliate for any reason (subject to any
post-employment participation period required by law) or other lack of
eligibility. The Company shall distribute to such terminated Employee all of his
or her accumulated payroll deductions (reduced to the extent, if any, such
deductions have been used to acquire shares of the Common Stock for the
terminated Employee) under the Offering, without interest unless otherwise
specified in the Offering. If the accumulated payroll deductions have been
deposited with the Company's general funds, then the distribution shall be made
from the general funds of the Company, without interest. If the accumulated
payroll deductions have been deposited in a separate account with a financial
institution as provided in subparagraph 8(a), then the distribution shall be
made from the separate account, without interest unless otherwise specified in
the Offering.
(d) Rights granted under the Plan shall not be transferable by a
Participant otherwise than by will or the laws of descent and distribution, or
by a beneficiary designation as provided in paragraph 15 and, otherwise during
his or her lifetime, shall be exercisable only by the person to whom such Rights
are granted.
9. EXERCISE.
(a) On each Purchase Date specified therefor in the relevant Offering, each
Participant's accumulated payroll deductions and other additional payments
specifically
7.
<PAGE> 8
provided for in the Offering (without any increase for interest) will be applied
to the purchase of shares of the Common Stock up to the maximum number of shares
of the Common Stock permitted pursuant to the terms of the Plan and the
applicable Offering, at the purchase price specified in the Offering. No
fractional shares of the Common Stock shall be issued upon the exercise of
Rights granted under the Plan unless specifically provided for in the Offering.
(b) Unless otherwise specifically provided in the Offering, the amount,
if any, of accumulated payroll deductions remaining in any Participant's account
after the purchase of shares of the Common Stock that is equal to the amount
required to purchase one or more whole shares of the Common Stock on the final
Purchase Date of the Offering shall be distributed in full to the Participant at
the end of the Offering, without interest. If the accumulated payroll deductions
have been deposited with the Company's general funds, then the distribution
shall be made from the general funds of the Company, without interest. If the
accumulated payroll deductions have been deposited in a separate account with a
financial institution as provided in subparagraph 8(a), then the distribution
shall be made from the separate account, without interest unless otherwise
specified in the Offering. The amount of accumulated payroll deductions
remaining in any Participant's account that is less than the amount required to
purchase one whole share of Common Stock on the final Purchase Date of the
Offering shall be carried over to the next Offering or shall, if the Participant
requests or does not participate in the next Offering, be refunded.
(c) No Rights granted under the Plan may be exercised to any extent
unless the shares of the Common Stock to be issued upon such exercise under the
Plan (including Rights granted thereunder) are covered by an effective
registration statement pursuant to the Securities Act and the Plan is in
material compliance with all applicable state, foreign and other securities and
other laws applicable to the Plan. If on a Purchase Date in any Offering
hereunder the Plan is not so registered or in such compliance, no Rights granted
under the Plan or any Offering shall be exercised on such Purchase Date, and the
Purchase Date shall be delayed until the Plan is subject to such an effective
registration statement and such compliance, except that the Purchase Date shall
not be delayed more than twelve (12) months and the Purchase Date shall in no
event be more than twenty-seven (27) months from the Offering Date. If, on the
Purchase Date of any Offering hereunder, as delayed to the maximum extent
permissible, the Plan is not registered and in such compliance, no Rights
granted under the Plan or any Offering shall be exercised and all payroll
deductions accumulated during the Offering (reduced to the extent, if any, such
deductions have been used to acquire Shares) shall be distributed to the
Participants, without interest unless otherwise specified in the Offering. If
the accumulated payroll deductions have been deposited with the Company's
general funds, then the distribution shall be made from the general funds of the
Company, without interest. If the accumulated payroll deductions have been
deposited in a separate account with a financial institution as provided in
subparagraph 8(a), then the distribution shall be made from the separate
account, without interest unless otherwise specified in the Offering.
10. COVENANTS OF THE COMPANY.
(a) During the terms of the Rights granted under the Plan, the Company
shall ensure that the number of shares of the Common Stock required to satisfy
such Rights are available.
8.
<PAGE> 9
(b) The Company shall seek to obtain from each federal, state, foreign
or other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of the Common Stock upon
exercise of the Rights granted under the Plan. If, after reasonable efforts, the
Company is unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the lawful issuance
and sale of shares of the Common Stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell shares of the Common
Stock upon exercise of such Rights unless and until such authority is obtained.
11. USE OF PROCEEDS FROM SHARES.
Proceeds from the sale of shares of the Common Stock pursuant to Rights
granted under the Plan shall constitute general funds of the Company.
12. RIGHTS AS A STOCKHOLDER.
A Participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, shares of the Common Stock subject to
Rights granted under the Plan unless and until the Participant's shares of the
Common Stock acquired upon exercise of Rights under the Plan are recorded in the
books of the Company.
13. ADJUSTMENTS UPON CHANGES IN SECURITIES.
(a) If any change is made in the shares of the Common Stock subject to
the Plan, or subject to any Right, without the receipt of consideration by the
Company (through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately adjusted in the
class(es) and maximum number of shares of the Common Stock subject to the Plan
pursuant to subparagraph 4(a), and the outstanding Rights will be appropriately
adjusted in the class(es), number of shares of the Common Stock and purchase
limits of such outstanding Rights. The Board shall make such adjustments, and
its determination shall be final, binding and conclusive. (The conversion of any
convertible securities of the Company shall not be treated as a transaction that
does not involve the receipt of consideration by the Company.)
(b) In the event of: (i) a dissolution, liquidation, or sale of
all or substantially all of the assets of the Company; (ii) a merger or
consolidation in which the Company is not the surviving corporation; or (iii) a
reverse merger in which the Company is the surviving corporation but the shares
of the Common Stock outstanding immediately preceding the merger are converted
by virtue of the merger into other property, whether in the form of securities,
cash or otherwise, then: (1) any surviving or acquiring corporation may assume
Rights outstanding under the Plan or may substitute similar rights (including a
right to acquire the same consideration paid to the Company's stockholders in
the transaction described in this subparagraph 13(b)) for those outstanding
under the Plan, or (2) in the event any surviving or acquiring corporation does
not assume such Rights or substitute similar rights for those outstanding under
the Plan, then, as determined by the Board in its sole discretion, such Rights
9.
<PAGE> 10
may continue in full force and effect or the Participants' accumulated payroll
deductions (exclusive of any accumulated interest which cannot be applied toward
the purchase of shares of the Common Stock under the terms of the Offering) may
be used to purchase shares of the Common Stock immediately prior to the
transaction described above under the ongoing Offering and the Participants'
Rights under the ongoing Offering thereafter terminated.
14. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 13 relating to adjustments upon changes
in securities and except as to minor amendments to benefit the administration of
the Plan, to take account of a change in legislation or to obtain or maintain
favorable tax, exchange control or regulatory treatment for Participants or the
Company or any Affiliate, no amendment shall be effective unless approved by the
stockholders of the Company to the extent stockholder approval is necessary for
the Plan to satisfy the requirements of Section 423 of the Code, Rule 16b-3
under the Exchange Act and any Nasdaq or other securities exchange listing
requirements. Currently under the Code, stockholder approval within twelve (12)
months before or after the adoption of the amendment is required where the
amendment will:
(i) Increase the number of shares of the Common Stock
reserved for Rights under the Plan;
(ii) Modify the provisions as to eligibility for participation in
the Plan to the extent such modification requires stockholder approval in order
for the Plan to obtain employee stock purchase plan treatment under Section 423
of the Code or to comply with the requirements of Rule 16b-3; or
(iii) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to obtain employee stock
purchase plan treatment under Section 423 of the Code or to comply with the
requirements of Rule 16b-3.
(b) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide Employees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Employee Stock Purchase Plans
and/or to bring the Plan and/or Rights granted under it into compliance
therewith.
(c) Rights and obligations under any Rights granted before amendment of
the Plan shall not be impaired by any amendment of the Plan, except with the
consent of the person to whom such Rights were granted, or except as necessary
to comply with any laws or governmental regulations, or except as necessary to
ensure that the Plan and/or Rights granted under the Plan comply with the
requirements of Section 423 of the Code.
15. DESIGNATION OF BENEFICIARY.
(a) A Participant may file a written designation of a beneficiary who
is to receive any shares of the Common Stock and/or cash, if any, from the
Participant's account under the Plan in the event of such Participant's death
subsequent to the end of an Offering but prior to delivery to
10.
<PAGE> 11
the Participant of such shares of the Common Stock and cash. In addition, a
Participant may file a written designation of a beneficiary who is to receive
any cash from the Participant's account under the Plan in the event of such
Participant's death during an Offering.
(b) The Participant may change such designation of beneficiary at any
time by written notice. In the event of the death of a Participant and in the
absence of a beneficiary validly designated under the Plan who is living at the
time of such Participant's death, the Company shall deliver such shares of the
Common Stock and/or cash to the executor or administrator of the estate of the
Participant, or if no such executor or administrator has been appointed (to the
knowledge of the Company), the Company, in its sole discretion, may deliver such
shares of the Common Stock and/or cash to the spouse or to any one or more
dependents or relatives of the Participant, or if no spouse, dependent or
relative is known to the Company, then to such other person as the Company may
designate.
16. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board in its discretion may suspend or terminate the Plan at any
time. Unless sooner terminated, the Plan shall terminate at the time that all of
the shares of the Common Stock subject to the Plan's reserve, as increased
and/or adjusted from time to time, have been issued under the terms of the Plan.
No Rights may be granted under the Plan while the Plan is suspended or after it
is terminated.
(b) Rights and obligations under any Rights granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except as
expressly provided in the Plan or with the consent of the person to whom such
Rights were granted, or except as necessary to comply with any laws or
governmental regulation, or except as necessary to ensure that the Plan and/or
Rights granted under the Plan comply with the requirements of Section 423 of the
Code.
17. EFFECTIVE DATE OF PLAN.
The Plan shall become effective simultaneously with the effectiveness of
the Company's registration statement under the Securities Act with respect to
the initial public offering of shares of the Company's Common Stock (the
"Effective Date"), but no Rights granted under the Plan shall be exercised
unless and until the Plan has been approved by the stockholders of the Company
within twelve (12) months before or after the date the Plan is adopted by the
Board, which date may be prior to the Effective Date.
11.
<PAGE> 1
EXHIBIT 10.9
LEASE AGREEMENT
THIS LEASE, made this 26th day of October, 1999 between WESTPORT JOINT
VENTURE, a California joint venture, hereinafter called Landlord, and IPASS,
INC., a California corporation, hereinafter called Tenant.
WITNESSETH:
Landlord hereby leases to Tenant and Tenant hereby hires and takes from
Landlord those certain premises the "Premises" outlined in red on Exhibit "A",
attached hereto and incorporated herein by this reference thereto more
particularly described as follows:
All of that certain 48,384+ square foot, two-story building located at
3800 Bridge Parkway, Redwood City, California 94065. Said Premises is more
particularly shown within the area outlined in Red on EXHIBIT A attached hereto.
The entire parcel, of which the Premises is a part, is shown within the area
outlined in Green on EXHIBIT A attached. The Premises shall be improved by
Landlord as shown on EXHIBIT B to be attached hereto, and is leased on an
"as-is" basis, in its present condition, and in the configuration as shown in
Red on EXHIBIT B to be attached hereto.
As used herein the Complex shall mean and include all of the land
outlined in Green and described in Exhibit "A", attached hereto, common area
private roads within the Complex, and all of the buildings, improvements,
fixtures and equipment now or hereafter situated on said land.
Said letting and hiring is upon and subject to the terms, covenants and
conditions hereinafter set forth and Tenant covenants as a material part of the
consideration for this Lease to perform and observe each and all of said terms,
covenants and conditions. This Lease is made upon the conditions of such
performance and observance.
1. USE.
Tenant shall use the Premises only in conformance with applicable governmental
laws, regulations, rules and ordinances for the purpose of general office, light
manufacturing, research and development, and storage and other uses necessary
for Tenant to conduct Tenant's business, provided that such uses shall be in
accordance with all applicable governmental laws and ordinances and for no other
purpose. Tenant shall not do or permit to be done in or about the Premises or
the Complex nor bring or keep or permit to be brought or kept in or about the
Premises or the Complex anything which is prohibited by or will in any way
increase the existing rate of (or otherwise affect) fire or any insurance
covering the Complex or any part thereof, or any of its contents, or will cause
a cancellation of any insurance covering the Complex or any part thereof, or any
of its contents. Tenant shall not do or permit to be done anything in, on or
about the Premises or the Complex which will in any way obstruct or interfere
with the rights of other tenants or occupants of the Complex or injure or annoy
them, or use or allow the Premises to be used for any improper, immoral,
unlawful or objectionable purpose, nor shall Tenant cause, maintain or permit
any nuisance in, on or about the Premises or the Complex. No sale by suction
shall be permitted on the Premises. Tenant shall not place any loads upon the
floors, walls, or ceiling, which endanger the structure, or place any harmful
fluids or other materials in the
1.
<PAGE> 2
drainage system of the building, or overload existing electrical or
other mechanical systems. No waste materials or refuse shall be dumped upon or
permitted to remain upon any part of the Premises or outside of the building in
which the Premises are a part, except in trash containers placed inside exterior
enclosures designated by Landlord for that purpose or inside of the building
proper where designated by Landlord. No materials, supplies, equipment, finished
products or semi-finished products, raw materials or article of any nature shall
be stored upon or permitted to remain outside the Premises or on any portion of
common area of the Complex. No loudspeaker or other device, system or apparatus
which can be heard outside the Premises shall be used in or at the Premises
without the prior written consent of Landlord. Tenant shall not commit or suffer
to be committed any waste in or upon the Premises. Tenant shall indemnify,
defend and hold Landlord harmless against any loss, expense, damage, attorneys'
fees, or liability arising out of failure of Tenant to comply with any
applicable law. Tenant shall comply with any covenant, condition, or restriction
("CC&R's") affecting the Premises. The provisions of this paragraph are for the
benefit of Landlord only and shall not be construed to be for the benefit of any
tenant or occupant of the Complex.
2. TERM.*
A. The term of this Lease shall be for a period of ten (10) years, one
(1) month, seventeen (17) days (unless sooner terminated as hereinafter
provided) and, subject to Paragraphs 2(B) and 3, shall commence on the 15th day
of January, 2000 and end on the 28th day February of 2010.
B. Possession of the Premises shall be deemed tendered and the term of
this Lease shall commence when the first of the following occurs:
(a) One day after a Certificate of Occupancy is granted by the proper
governmental agency, or, if the governmental agency having jurisdiction over the
area in which the Premises are situated does not issue certificates of
occupancy, then the same number of days after certification by Landlord's
architect or contractor that Landlord's construction work has been completed,
and Landlord has delivered possession of the Premises to Tenant; or
(b) Upon the occupancy of the Premises by any of Tenant's operating
personnel; or
(c) When the Tenant Improvements have been substantially completed
for Tenant's use and occupancy, in accordance and compliance with Exhibit B of
this Lease Agreement and Landlord has delivered the Premises to Tenant; or
(d) As otherwise agreed in writing.
3. POSSESSION.
- --------
* It is agreed in the event said Lease commences on a date other than the first
day of the month the term of the Lease will be extended to account for the
number of days in the partial month. The Basic Rent during the resulting partial
month will be pro-rated (for the number of days in the partial month) at the
Basic Rent scheduled for the projected commencement date as shown in Paragraph
43.
2.
<PAGE> 3
If Landlord, for any reason whatsoever, cannot deliver possession of
said premises to Tenant at the commencement of the said term, as hereinbefore
specified, this Lease shall not be void or voidable; no obligation of Tenant
shall be affected thereby; nor shall Landlord or Landlord's agents be liable to
Tenant for any loss or damage resulting therefrom; but in that event the
commencement and termination dates of the Lease, and all other dates affected
thereby shall be revised to conform to the date of Landlord's delivery of
possession, as specified in Paragraph 2(b) above. The above is, however, subject
to the provision that the period of delay of delivery of the premises shall not
exceed 60 days from the commencement date herein (except those delays caused by
Acts of God strikes, war, utilities, governmental bodies, weather, unavailable
materials, and delays beyond Landlord's control shall be excluded in calculating
such period) in which instance Tenant, at its option, may, by written notice to
Landlord, terminate this Lease.
4. RENT
A. BASIC RENT. Tenant agrees to pay to Landlord at such place as
Landlord may designate without deduction, offset, prior notice or demand, and
Landlord agrees to accept as Basic Rent for the leased Premises the total sum of
Twenty Five Million Nine Hundred Seventy Two Thousand Eight Hundred Forty three
and 35/100 ($25,972,843.35) Dollars in lawful money of the United States of
America, payable as follows:
See Paragraph 43 for Basic Rent Schedule
B. TIME FOR PAYMENT. In the event that the term of this Lease commences
on a date other than the first day of a calendar month, on the date of
commencement of the term hereof Tenant shall pay to Landlord as rent for the
period from such date of commencement to the first day of the next succeeding
calendar month that proportion of the monthly rent hereunder which the number of
days between such date of commencement and the first day of the next succeeding
calendar month bears to thirty (30). In the event that the term of this Lease
for any reason ends on a date other than the last day of a calendar month, on
the first day of the last calendar month of the term hereof Tenant shall pay to
Landlord as rent for the period from said first day of said last calendar month
to and including the last day of the term hereof that proportion of the monthly
rent hereunder which the number of days between said first day of said last
calendar month and the last day of the term hereof bears to thirty (30).
C. LATE CHARGE. Notwithstanding any other provision of this Lease. If
Tenant is in default in the payment of rental as set forth in this Paragraph 4
when due, or any part thereof, Tenant agrees to pay Landlord. In addition to the
delinquent rental due, a late charge for each rental payment in default ten (10)
days. Said late charge shall equal ten (10%) percent of each rental payment so
in default.
D. ADDITIONAL RENT. Beginning with the commencement date of the term of
this Lease. Tenant shall pay to Landlord in addition to the Basic Rent and as
Additional Rent the following:
(a) Tenant's proportionate share of all Taxes relating to the
Complex as set forth in Paragraph 12, and
3.
<PAGE> 4
(b) Tenant's proportionate share of all insurance premiums and
deductibles relating to the Complex, as set forth in Paragraph 15, and
(c) Tenant's proportionate share of expenses for the operation,
management, maintenance and repair of the Building (including common area of the
Building) and Common Areas of the Complex in which the Premises are located as
set forth in Paragraph 7, and
(d) All charges, costs and expenses, which Tenant is required to pay
hereunder, together with all interest and penalties, costs and expenses
including attorneys' fees and legal expenses, that may accrue thereto in the
event of Tenant's failure to pay such amounts, and all damages, reasonable costs
and expenses which Landlord may incur by reason of default of Tenant or failure
on Tenant's part to comply with the terms of this Lease. In the event of
nonpayment by Tenant of Additional Rent, Landlord shall have all the rights and
remedies with respect thereto as Landlord has for nonpayment of rent.
The Additional Rent due hereunder shall be paid to Landlord or
Landlord's agent (i) within five (5) days for taxes and insurance and within
thirty (30) days for all other Additional Rent items after presentation of
invoice from Landlord or Landlord's agent setting forth such additional Rent
and/or (ii) at the option of Landlord. Tenant shall pay to Landlord monthly, in
advance, Tenant's prorate share of an amount estimated by Landlord to be
Landlord's approximate average monthly expenditure for such Additional Rent
Items, which estimated amount shall be reconciled within 120 days of the end of
each calendar year or more frequently if Landlord so elects to do so at
Landlord's sole and absolute discretion, as compared to Landlord's actual
expenditure for said Additional Rent items, with Tenant paying to Landlord, upon
demand, any amount of actual expenses expended by Landlord in excess of said
estimated amount, or Landlord crediting to Tenant (providing Tenant is not in
default in the performance of any for the terms, covenants and conditions of
this Lease) any amount of estimated payments made by Tenant in excess of
Landlord's actual expenditures for said Additional Rent items. Within thirty
(30) days after receipt of Landlord's reconciliation, Tenant shall have the
right, at Tenant's sole expense, to audit, at a mutually convenient time at
Landlord's office, Landlord's records relating to the foregoing expenses. Such
audit must be conducted by Tenant or an independent nationally recognized
accounting firm that is not being compensated by Tenant or other third party on
a contingency fee basis. Landlord shall be provided a complete copy of said
audit at no expense to Landlord. If such audit reveals that Landlord has
overcharged Tenant and the audit is not challenged by Landlord, the amount
overcharged shall be credited to Tenant's account within thirty (30) days after
the audit is concluded.
The respective obligations of Landlord and Tenant under this paragraph
shall survive the expiration or other termination of the term of this lease, and
if the term hereof shall expire or shall otherwise terminate on a day other than
the last day of a calendar year, the actual Additional Rent incurred for the
calendar year in which the term hereof expires or otherwise terminates shall be
determined and settled on the basis of the statement of actual Additional Rent
for such calendar year and shall be prorated in the proportion which the number
of days in such calendar year pricing such expiration or termination bears to
365.
E. FIXED MANAGEMENT FEE. Beginning with the Commencement Date of the
term of this Lease, Tenant shall pay, in addition to the Basic Rent and
Additional Rent, a fixed monthly
4.
<PAGE> 5
management fee ("Management Fee") equal to two percent (2%) of the Basic Rent
due for each month during the Lease term. Said Management Fee shall be paid by
Tenant to A&P Property Management Company at 2560 Mission College Blvd., Suite
101, Santa Clara, CA 95054.
F. PLACE OF PAYMENT OF RENT AND ADDITIONAL RENT. All Basic Rent
hereunder and all payments hereunder for Additional Rent shall be paid to
Landlord at the office of Landlord at Westport Joint Venture, 2560 Mission
College Blvd., Suite 101, Santa Clara, CA 95054 or to such other person or to
such other place as Landlord may from time to time designated in writing.
G. SECURITY DEPOSIT. Concurrently with Tenant's execution of this Lease,
Tenant shall deposit with Landlord the sum of Four Hundred Ninety Three Thousand
Five Hundred Sixteen and 80/100 ($493,516.80) Dollars. Said sum shall be held by
Landlord as a Security Deposit for the faithful performance by Tenant of all of
the terms, covenants, and conditions of this Lease to be kept and performed by
Tenant during the term hereof. If Tenant defaults with respect to any provision
of this Lease, including, but not limited to, the provisions relating to the
payment of rent and any of the monetary sums due herewith, Landlord may (but
shall not be required to) use, apply or retain all or any part of this Security
Deposit for the payment of any other amount which Landlord may spend by reason
of Tenant's default or to compensate Landlord for any other loss or damage which
Landlord may suffer by reason of Tenant's default. If any portion of said
Deposit is so used or applied. Tenant shall, within ten (10) days after written
demand therefor, deposit cash with Landlord in the amount sufficient to restore
the Security Deposit to its original amount. Tenant's failure to do so shall be
a material breach of this Lease. Landlord shall not be required to keep this
Security Deposit separate from its general funds, and Tenant shall not be
entitled to interest on such Deposit. If Tenant fully and faithfully performs
every provision of this Lease to be performed by it, the Security Deposit or any
balance thereof shall be returned to Tenant (or at Landlord's option, to the
last assignees of Tenant's interest hereunder) at the expiration of the Lease
term and after Tenant has vacated the Premises. In the event of termination of
Landlord's interest in this Lease, Landlord shall transfer said Deposit to
Landlord's successor in interest whereupon Tenant agrees to release Landlord
from liability for the return of such Deposit or the accounting therefor. See
Paragraph 57.
5. RULES AND REGULATIONS AND COMMON AREA.
Subject to the term of conditions of this Lease and such reasonable Rules and
Regulations as Landlord may from time to time prescribe, Tenant and Tenant's
employees, invitees and customers shall, in common with other occupants of the
Complex in which the Premises are located, and their respective employees,
invoices and customers, and others entitled to the use thereof, have the
non-exclusive right to use the access roads, parking areas, and facilities
provided and designated by Landlord for the general use and convenience of the
occupants of the Complex in which the Premises are located, which areas and
facilities are referred to herein as "Common Area". This right shall terminate
upon the termination of this Lease, Landlord reserves the right from time to
time to make changes in the shape, size, location, amount and extent of Common
Area. Landlord further reserves the right to promulgate such reasonable rules
and regulations relating to the use of the Common Area, and any party or parts
thereof, as Landlord may deem appropriate for the best interests of the
occupants of the Complex. The Rules and Regulations shall be binding upon Tenant
upon delivery of a copy of them to Tenant,
5.
<PAGE> 6
and Tenant shall abide by them and cooperate in the observance. Such Rules and
Regulations may be reasonably amended by Landlord from time to time, with or
without advance notice, and all amendments shall be effective upon delivery of a
copy to Tenant, Landlord shall not be responsible to Tenant for the
non-performance by any other tenant or occupant of the Complex of any of said
Rules and Regulations.
Landlord shall operate, manage and maintain the Common Area. The manner
in which the Common Area shall be maintained and the expenditure for such
maintenance shall be at the discretion of Landlord. Landlord's rights pursuant
to this Paragraph 5 shall be subject to the condition that exercise of any such
rights shall not unreasonably interfere with Tenant's use of the Premises.
6. PARKING.
Tenant shall have the right to use with other tenants or occupants of
the Complex 161 parking spaces in the common parking areas of the Complex.
Tenant agrees, that Tenant, Tenant's employees, agents, representatives and/or
invitees shall not use parking spaces in excess of said 161 spaces allocated to
Tenant hereunder. Landlord shall have the right, at Landlord's sole discretion,
to specifically designate the location of Tenant's parking spaces within the
common parking areas of the Complex in the event of a dispute among the tenants
occupying the building and/or Complex referred to herein, in which event Tenant
agrees that Tenant, Tenant's employees, agents, representatives and/or invitees
shall not use any parking spaces other than those parking spaces specifically
designated by Landlord for Tenant's use. Said parking spaces, if specifically
designated by Landlord to Tenant, may be relocated by Landlord at any time, and
from time to time, Landlord reserves the right, at Landlord's sole discretion,
to rescind any specific designation of parking spaces. Tenant shall not, at any
time, park or permit to be parked, any trucks or vehicles adjacent to the
loading area as to interfere in any way with the use of such areas, nor shall
Tenant at any time park, or permit the parking of Tenant's 'trucks or other
vehicles or the trucks and vehicles of Tenant's suppliers or others, in any
portion of the common parking area or other common areas of the Complex. Tenant
agrees to assume responsibility for compliance by its employees with the parking
provision contained herein. If Tenant or its employees park in other than such
designated parking areas, the Landlord may charge Tenant, as an additional
charge, and Tenant agrees to pay, ten ($10.00) Dollars per day for each day or
partial day each such vehicle is parked in any area other than that designated.
Tenant hereby authorizes Landlord at Tenant's sole expense to tow away from the
Complex any vehicle belong to Tenant or Tenant's employees parked in violation
of these provisions, or to attach violation stickers or notices to such
vehicles. Tenant shall use the parking area for vehicle parking only, and shall
not use the parking area for storage.
7. EXPENSES OF OPERATION, MANAGEMENT, AND MAINTENANCE OF THE COMMON AREAS
OF THE COMPLEX.
As Additional Rent and in accordance with Paragraph 4D of this Lease,
Tenant shall pay to Landlord Tenant's proportionate share (calculated on a
square footage or other equitable basis as calculated by Landlord) of all
expense of operations, management, maintenance and repair of the Common Areas of
the Complex including, but not limited to, license, permit, and inspection fees;
security; utility charges associated with exterior landscaping and lighting
(including water
6.
<PAGE> 7
and sewer charges); all charges incurred in the maintenance and replacement of
landscaped areas, private roads within the Complex and roads with reciprocal
easement areas; lakes, parking lots and paved areas (including repairs,
replacement, resealing and restriping), sidewalks, driveways; maintenance,
repair and replacement of all fixtures and electrical, mechanical, and plumbing
systems; structural elements and exterior surfaces of the buildings; salaries
and employee benefits of personnel and payroll taxes applicable thereto;
suppliers, materials, equipment and tools; the cost of capital expenditures
which have the effect of reducing opening expenses, provided, however, that in
the event Landlord makes such capital improvements, Landlord may amortize its
investment in said improvements (together with interest at the rate of fifteen
(15%) percent per annum on the unamortized balance) as an operating expense in
accordance with standard accounting practices, provided, that such amortization
is not at a rate greater than the anticipated savings in the operating expenses.
"Additional Rent" as used herein shall not include Landlord's debt
repayments; interest on changes; expenses directly or indirectly incurred by
Landlord for the benefit of any other tenant; cost for the installation of
partitioning or any other tenant improvements; cost of attracting tenants;
depreciation; interest, or executive salaries.
8. ACCEPTANCE AND SURRENDER OF PREMISES.
By entry hereunder, Tenant accepts the Premises as being in good and sanitary
order, condition and repair and accepts the building and improvements included
in the Premises in the present condition and without representation or warranty
by Landlord as to the condition of such building or as to the use or occupancy
which may be made thereof. Any expectations to the foregoing must be by written
agreement executed by Landlord and Tenant. Tenant agrees on the last day of the
Lease term, or on the sooner termination of this Lease, to surrender the
Premises promptly and peaceably to Landlord in good condition and repair (damage
by Acts of God, fire, normal wear and tear excepted), with all interior walls
painted, or cleaned so that they appear freshly painted, and repaired and
replaced, if damaged; all floors cleaned and waxed; all carpets cleaned and
shampooed; the air conditioning and hearing equipment serviced by a reputable
and licensed service firm and in good operating condition (provided the
maintenance of such equipment has been Tenant's responsibility during the term
of this Lease) together with all alterations, additions, and improvements which
may have been made in, to, or on the Premises (except movable trade fixtures
installed at the expense of Tenant) except that Tenant shall ascertain from
Landlord within thirty (30) days before the end of the term of this Lease
whether Landlord desires to have the Premises or any part or parts thereof
restored to their condition and configuration as when the Premises were
delivered to Tenant and if Landlord shall so desire, the Tenant shall restore
said Premises or such part or parts thereof before the end of the Lease at
Tenant's sole cost and expense. Tenant, on or before the end to the term or
sooner termination of this Lease, shall remove all of Tenant's personal property
and trade fixtures from the Premises, and all property not so removed on or
before the end of the term or sooner termination of this Lease, shall remove all
of Tenant's personal property and trade fixtures from the Premises, and all
property not so remove on or before the end of the term or sooner termination of
this Lease shall be deemed abandoned by Tenant and title to same shall thereupon
pass to Landlord without compensation to Tenant. Landlord may, upon termination
of this Lease, remove all moveable furniture and equipment so abandoned by
Tenant, at Tenant's sole cost, and repair any damage caused by such removal at
Tenant's sole cost. If the Premises be not surrendered at the end of
7.
<PAGE> 8
the term or sooner termination of this Lease, Tenant shall indemnify Landlord
against loss or liability resulting from the delay by Tenant in so surrendering
the Premises including, without limitation, any claims made by any succeeding
tenant founded on such delay. Nothing contained herein shall be construed as an
extension of the term hereof or as a consent of Landlord to any holding over by
Tenant. The voluntary or other surrender of this Lease or the Premises by Tenant
or a mutual cancellation of this Lease shall not work as a merger and, at the
option of Landlord, shall either terminate all or any existing sublease or
subtenancies or operate as an assignment to Landlord of all or any such
subleases or subtenancies.
9. ALTERATIONS AND ADDITIONS.
Tenant shall not make, or suffer to be made, any alteration or addition
to the Premises, or any part thereof, without the written consent (which written
consent will specify whether Landlord shall require removal of said alterations
and/or additions, provided Tenant requests such determination from Landlord), of
Landlord first had and obtained by Tenant (which approval shall not be
unreasonably withheld) but at the cost of Tenant, and any addition to, or
alteration of, the Premises, except moveable furniture and trade fixtures, shall
at once become a part to the Premises and belong to Landlord. Landlord reserves
the right to approve all contractors and mechanics proposed by Tenant to make
such alterations and additions. Tenant shall retain title to all moveable
furniture and trade fixtures placed in the Premises. All heating, lighting,
electrical air conditioning, floor to ceiling partitioning, drapery, carpeting,
and floor installation made by Tenant, together with all property that has
become an integral part of the Premises, shall not be deemed trade fixtures.
Tenant agrees that it will not proceed to make such alteration or additions,
without having obtained consent from Landlord to do so, and until five (5) days
from the receipt of such consent, in order that Landlord may post appropriate
notices to avoid any liability to contractors or material suppliers for payment
for Tenant's improvements. Tenant will at all times permit such notices to be
posted and to remain posted until the completion of work. Tenant shall, if
required by Landlord, secure at Tenant's own cost and expense, a completion and
lien indemnity bond, satisfactory to Landlord, for such work. Tenant further
covenants and agrees that any mechanic's lien filed against the Premises or
against the Complex for work claimed to have been done for, or materials claimed
to have been furnished to Tenant, will be discharged by Tenant, by bond or
otherwise, within ten (10) days after the filing thereof, at the cost and
expense of Tenant. Any exceptions to the foregoing must be made in writing and
executed by both Landlord and Tenant. Notwithstanding anything to the contrary
herein, under no circumstances shall Tenant be authorized to penetrate the soil
to a depth that exceeds three and one-half feet from the uppermost surface of
the soil.
10. TENANT MAINTENANCE.
Tenant shall, at its sole cost and expense, keep and maintain the Premises
(including appurtenances) and every part thereof in a high standard of
maintenance and repair, and in good and sanitary condition. Tenant's maintenance
and repair responsibilities herein referred to include, but are not limited to,
all windows, window frames, plate glass, glazing, truck doors, plumbing systems
(such as water and drain lines, sinks, toilets, faucets, drains, showers and
water fountains), electrical system (such as panels, conduits, outlets, lighting
fixtures, lamps, bulbs, tubes, ballasts), heating and air-conditioning systems
(such as compressors, fans, air handlers, ducts, mixing boxes, thermostats, time
clocks, boilers, heaters, supply and return
8.
<PAGE> 9
grills), store fronts, roofs, downspouts, all interior improvements within the
premises including but not limited to wall coverings, window coverings, carpet,
floor coverings, partitioning, ceilings, doors (both interior and exterior,
including closing mechanisms, latches, locks, skylights (if any), automatic fire
extinguishing systems, and elevators and all other interior improvements of any
nature whatsoever. Tenant agrees to provide carpet shields under all rolling
chairs or to otherwise be responsible for wear and tear of the carpet caused by
such rolling chairs is such wear and tear exceed that caused by normal foot
traffic in surrounding areas. Areas of excessive wear shall be replaced at
Tenant's sole expense upon Lease termination. Tenant hereby waives all rights
under, and benefits of, subsection 1 of Section 1932 and Section 1941 and 1942
of the California Civil Code and under any similar law, statue or ordinance now
or thereafter in effect.
11. UTILITIES.
Tenant shall pay promptly as the same become due, all charges for water,
gas, electricity, telephone, telex and other electronic communications service,
sewer service, waste pick-up and any other utilities, materials or services
furnished directly to or used by Tenant on or about the Premises during the term
of this Lease, including, without limitation, any temporary or permanent utility
surcharge or other exactions whether or not hereinafter imposed.
Landlord shall not be liable for an Tenant shall not be entitled to any
abatement or reduction of rent by reason of any interruption or failure of
utility services to the Premises when such interruption or failure is caused by
accident, breakage, repair, strikes, lockouts, or other labor disturbances or
labor disputes of any nature, or by any other cause, similar or dissimilar,
beyond the reasonable control of Landlord.
12. TAXES.
A. As Additional Rent and in accordance with Paragraph 4 D of this Lease, Tenant
shall pay to Landlord Tenant's proportionate share of all Real Property taxes,
which prorata share shall be allocated to the leased Premises by square footage
or other equitable basis, as calculated by Landlord. The term "Real Property
Taxes", as used herein, shall mean (i) all taxes, assessments, levies and other
charges of any kind or nature whatsoever, general and special, foreseen and
unforeseen (including all installments of principal and interest required to pay
any general or special assessments for public improvements and any increases
resulting from reassessments caused by any change in ownership of the Complex)
now or hereafter imposed by any governmental or quasi-governmental authority or
special district having the direct or indirect power to tax or levy assessments,
which are levied or assessed against, or with respect to the value, occupancy or
use of, all or any portion of the Complex (as now constructed or as may at any
time hereafter be constructed, altered, or otherwise changed) or Landlord's
interest therein; any improvements located within the Complex (regardless of
ownership); the fixtures, equipment and other property of Landlord, real or
personal, that are an integral part of and located in the Complex; or parking
areas, public utilities, or energy within the Complex; (ii) all charges, levies
or fees imposed by reason of environmental regulation or other governmental
control of the Complex; and (iii) all costs and fees (including attorneys' fees)
incurred by Landlord in contesting any Real Property Tax and in negotiating with
public authorities as to any Real Property Tax. If at any time during the term
of this Lease the taxation or assessment of the
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<PAGE> 10
Complex prevailing as of the commencement date of this Lease shall be altered to
that in lieu of or in addition to any Real Property Tax described above there
shall be levied, assessed or imposed (whether by reason of a change in the
method of taxation or assessment, creation of a new tax or charge, or any other
cause) an alternate or additional tax or charge (i) on the value of the
occupancy of the Complex or Landlord's interest therein or (ii) on a measured by
the gross receipts, income or rentals from the Complex, or Landlord's business
of leasing the Complex, or computed in any manner with respect to the operation
of the Complex, then any such tax or charge, however designated, shall be
included within the meaning of the term "Real Property Taxes" for purposes of
this Lease. If any Real Property Tax is based upon property or rents unrelated
to the Complex, then only that part of such real Property tax that is fairly
allocable to the Complex shall be included within the meaning of the term "Real
Property Taxes". Notwithstanding the foregoing, the term "Real Property Taxes"
shall not include estate, inheritance, gift or franchise taxes of Landlord or
the federal or state net income tax imposed on Landlord's income from all
sources. The term "Real Estate Taxes" shall also include supplemental taxes
related to the period of Tenant's Lease Term whenever levied, including any such
taxes that may be levied after the Lease Term has expired.
B. TAXES ON TENANT'S PROPERTY
(a) Tenant shall be liable for and shall pay ten (10) days before
delinquency, taxes levied against any personal property or trade fixtures placed
by Tenant in or about in the Premises. If any such taxes on Tenant's personal
property or trade fixtures are levied against Landlord or Landlord's property or
if the assessed value of the Premises is increased by the inclusion therein of a
value placed upon such personal property or trade fixtures of Tenant and if
Landlord, after written notice to Tenant, pays the taxes based on such increased
assessments, which Landlord shall have the right to do regardless of the
validity thereof, but only under proper protest if requested by Tenant. Tenant
shall upon demand, as the case may be, repay to Landlord the taxes so levied
against Landlord, or the proportion of such taxes resulting from such increase
in the assessment; provided that in any such event Tenant shall have the right,
in the name of Landlord and with Landlord's full cooperation, to bring suit in
any court of competent jurisdiction to recover the amount of any such taxes so
paid under protest, and any amount so recovered shall belong to Tenant.
(b) if the Tenant improvements in the Premises, whether installed,
and/or paid for by Landlord or Tenant and whether or not affixed to the real
property so as to become a part thereto, are assessed for real property tax
purposes at a valuation higher than the valuation to which standard office
improvements in other space in the Complex are assessed, then the real property
taxes and assessments levied against Landlord or the Complex by reason of such
excess assessed valuation shall be deemed to be taxes levied against personal
property of Tenant and shall be governed by the provisions of 12B(a) above. If
the records of the County Assessor are available and sufficiently detailed to
serve as a basis for determining whether said Tenant improvements are assessed
at a higher valuation than standard office improvements in other space in the
Complex, such records shall be binding on both the Landlord and the Tenant. If
the records of the County Assessor are not available or sufficiently detailed to
serve as a basis for making said determination, the actual cost of construction
shall be used.
13. LIABILITY INSURANCE.
10.
<PAGE> 11
Tenant, at Tenant's expenses, agrees to keep in force during the term of
this Lease a policy of commercial general liability insurance with a combined
single limit coverage of not less than Two Million Dollars ($2,000,000) per
occurrence for injuries to or death of persons occurring in, on or about the
Premises or the Complex, and property damage insurance with limits of $500,000.
The policy or policies affecting such insurance, certificates of insurance of
which shall be furnished to Landlord, shall name Landlord as additional
insureds, and shall insure any liability of Landlord, contingent or otherwise,
as respects acts or omissions of Tenant, its agents, employees or invitees or
otherwise by any conduct or transaction of any of said persons in or about or
concerning the Premises, including any failure of Tenant to observe or perform
any of its obligations hereunder, shall be issued by an insurance admitted to
transact business in the State of California and shall provide that the
insurance effected thereby shall not be canceled, expect upon thirty (30) days'
prior written notice to Landlord. If, during the term of this Lease, in the
considered opinion of Landlord's Lender, insurance advisor, or counsel, the
amount of insurance described in this paragraph 13 is not adequate, Tenant
agrees to increase said coverage to such reasonable amount as Landlord's Lender,
insurance advisor, or counsel shall deem adequate.
14. TENANT'S PERSONAL PROPERTY INSURANCE AND WORKMAN'S COMPENSATION INSURANCE.
Tenant shall maintain a policy or policies of fire and property damage
insurance in "all risk" form with a sprinkler leakage endorsements insuring the
personal property, inventory, trade fixtures, and leasehold improvements within
the leased Premises for the full replacement value thereof. The proceeds from
any of such pollicies shall be used for the repair or replacement of such items
so insured.
Tenants shall also maintain a policy or policies of workman's
compensation insurance and any other employee benefit insurance sufficient to
comply with all laws.
15. PROPERTY INSURANCE.
Landlord shall purchase and keep in force and as Additional Rent and in
accordance with Paragraph 4D of this Lease, Tenant shall pay to Landlord (or
Landlord's agent if so direct by Landlord) Tenant's proportionate share
(calculated on a square footage or other equitable basis as calculated by
Landlord) of the deductibles on insurance claims and the cost of policy or
policies of insurance covering loss or damage to the Premises and Complex in the
amount of the full replacement value thereof, providing protection against those
perils included within the classification of "all risks" insurance and flood
and/or earthquake insurance, if available, plus a policy of rental income
insurance in the amount of one hundred (100%) percent of twelve (12) months
Basic Rent, plus sums paid as Additional Rent and any deductibles related
thereto. If such insurance costs is increased due to Tenant's use of the
Premises or the Complex. Tenant agrees to pay to Landlord the full cost of such
increase. Tenant shall have no interest in nor any right to the proceeds of any
insurance procured by Landlord for the Complex.
Landlord and Tenant do each hereby respectively release the other, to the extent
of insurance coverage of the releasing party, from any liability for loss or
damage caused by fire or any of the extended coverage casualties included in the
releasing party's insurance policies,
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<PAGE> 12
irrespective of the cause of such fire or casualty; provided, however, that if
the insurance policy or either releasing party prohibits such waiver, then this
waiver shall not take effect until consent to such waiver is obtained. If such
waiver is so prohibited, the insured party affected shall promptly notify the
other party thereof.
16. INDEMNIFICATION.
Landlord shall not be liable to Tenant and Tenant hereby waives all
claims against Landlord for any injury to or death of any person or damage to or
destruction of property in or about the Premises or the Complex by or from any
cause whatsoever, including, without limitation, gas, fire, oil, electricity or
leakage of any character from the roof, walls, basement or other portion of the
Premises or the Complex but excluding, however; the willful misconduct or
negligence of Landlord, its agents, servants, employees, invitees, or
contractors of which negligence Landlord has knowledge and reasonable time to
correct. Except as to injury to persons or damage to property to the extent
arising from the willful misconduct or the negligence of Landlord, its agents,
servants, employees, invitees, or contractors, Tenant shall hold Landlord
harmless from and defend Landlord against any and all expenses, including
reasonable attorneys' fees, in connection therewith, arising out of any injury
to or death of any person or damage to or destruction of property occurring in,
on or about the Premises, or any part thereof, from any cause whatsoever.
17. COMPLIANCE.
Tenant, at its sole cost and expense, shall promptly comply with all
laws, statues, ordinances and governmental rules, regulations or requirements
now or hereafter in effect; with the requirements of any board of fire
underwriters or other similar body now or hereafter constituted; and with any
direction or occupancy certificate issued pursuant to law by any public officer;
provided, however, that no such failure shall be deemed a breach of the
provisions if Tenant, immediately upon notification, commences to remedy or
rectify said failure. The judgment of any court of competent jurisdictions or
the admission of Tenant in any action against Tenant, whether Landlord be a
party thereto or not, that Tenant has violated any such law, statute, ordinance
or governmental rule, regulation, requirement, direction or provision, shall be
conclusive of that fact as between Landlord and Tenant. This paragraph shall not
be interpreted as requiring Tenant to make structural changes or improvements,
except to the extent such changes or improvements are required as a result of
Tenant's use of the Premises. Tenant shall, at its sole costs and expense,
comply with any and all requirements pertaining to said Premises, of any
insurance organization or company, necessary for the maintenance of reasonable
fire and public liability insurance covering the Premises.
18. LIENS.
Tenant shall keep the Premises and the Complex free from any liens arising out
of any work performed, materials furnished or obligation incurred by Tenant. In
the event that Tenant shall not, within ten (10) days following the imposition
of such lien, cause the same to be released of record. Landlord shall have, in
addition to all other remedies provided herein and by law, the right, but no
obligation, to cause the same to be released by such means as it shall deem
proper, including payment of the claim giving rise to such lien. All sums paid
by Landlord for
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<PAGE> 13
such purpose, and all expenses incurred by it in connection therewith, shall be
payable to Landlord by Tenant on demand with interest at the prime rate of
interest as quoted by the Bank of America.
19. ASSIGNMENT AND SUBLETTING.
Tenant shall not assign, transfer, or hypothecate the leasehold estate under
this Lease, or any interest therein, and shall not sublet the Premises, or any
part thereof, or any right or privilege appurtenant thereto, or suffer any other
person or entity to occupy or use the Premises, or any portion thereof, without,
in each case, the prior written consent of Landlord which consent will not be
unreasonably withheld. As a condition for granting this consent to any
assignment, transfer, or subletting, Landlord shall require Tenant to pay to
Landlord as Additional Rent, seventy-five (75%) percent of all rents and/or
additional consideration due Tenant from its assignees, transferees or
subtenants in excess of the Rent payable by Tenant to Landlord hereunder for the
assigned, transferred and/or subleased space ("Excess Rent"); provided, however,
that before sharing such Excess Rent, Tenant shall first be entitled to recover
from such Excess Rent the amount of any reasonable leasing commissions related
to said transaction paid by Tenant to third party brokers not affiliated with
Tenant. Tenant shall by thirty (30) days written notice, advise Landlord of its
intent to assign or transfer Tenant's interest in the Lease or sublet the
Premises or any portion thereof for any part of the term hereto. Within
thirty(30) days after receipt of said written notice, Landlord may, in its sole
discretion, elect to terminate this Lease as to the portion of the Premises
described in Tenant's notice on the date specified in Tenant's notice by giving
written notice of such election to termination. If no such notice to terminate
is given to Tenant within said thirty (30) day period, Tenant may proceed to
locate an acceptable sublessee, assignee, or other transferee for presentment to
Landlord for Landlord's approval, all in accordance with the terms, covenants,
and conditions of this paragraph 19. If Tenant intends to sublet the entire
Premises and Landlord elects to terminate this Lease, this Lease shall be
terminated on the date specified in Tenant's notice. If, however, this Lease
shall terminate pursuant to the foregoing with respect to less than all the
Premises, the rest, as defined and reserved hereinabove shall be adjusted on a
pro rata basis to the number of square feet retained by Tenant, and this Lease
as so amended shall continue in full force and effect. In the event Tenant is
allowed to assign, transfer or sublet the whole or any part of the Premises,
with the prior written consent of Landlord, no assignee, transferee or subtenant
shall assign or transfer this Lease, either in whole or in part, or sublet the
whole or any part of the Premises, without also having obtained the prior
written consent of Landlord. A consent of Landlord to one assignment, transfer,
hypothecation, subletting, occupation or use by any other person shall not
release Tenant from any of Tenant's obligations hereunder or be deemed to be a
consent to any subsequent similar or dissimilar assignment, transfer,
hypothecation, subletting, occupation or use by any other person. Any such
assignment, transfer, hypothecation, subletting, occupation or use without such
consent shall be void and shall constitute a breach of the Lease by Tenant and
shall, at the option of Landlord exercised by written notice to Tenant,
terminate this Lease. The leasehold estate under this Lease shall not, nor shall
any interest therein, be assignable for any purpose by operation of law without
the written consent of Landlord. As a condition to its consent, Landlord shall
require Tenant to pay all expenses in connection with the assignment, and
Landlord shall require Tenant's assignee or transferee (or other assignees or
transferees) to assume in writing all of the obligations under this Lease and
for Tenant to remain liable to
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<PAGE> 14
Landlord under the Lease. Notwithstanding the above, in no event will Landlord
consent to a sub-sublease.
20. SUBORDINATION AND MORTGAGES.
In the event Landlord's title or leasehold interests is now or hereafter
encumbered by a deed of trust, upon the interest of Landlord in the land and
buildings in which the demised Premises are located, to secure a loan from a
lender (hereinafter referred to as "Lender") to Landlord, Tenant shall, at the
request of Landlord or Lender, execute in writing an agreement subordinating its
rights under this Lease to the lien of such deed of trust, or, if so requested,
agreeing that the lien of Lender's deed of trust shall be or remain subject and
subordinate to the rights to Tenant under this Lease. Notwithstanding any such
subordination, Tenant's possession under this Lease shall not be disturbed if
Tenant is not in default and so long as Tenant shall pay all rent and observe
and perform all of the provisions set forth in this Lease.
21. ENTRY BY LANDLORD.
Landlord reserves, and shall at all reasonable times after at least 24
hours notice (except in emergencies) have, the right to enter the Premises to
inspect them; to perform any services to be provided by Landlord hereunder, to
submit the Premises to prospective purchasers, mortgagers or tenants; to post
notices of nonresponsibility; and to alter, improve or repair the Premise and
any portion of the Complex, all without abatement of rent; and may erect
scaffolding and other necessary structures in or through the Premises where
reasonably required by the character of the work to be performed; provided,
however, that the business of Tenant shall be interfered with to the least
extent that is reasonably practical. For each of the foregoing purposes,
Landlord shall at all times have and retain a key with which to unlock all of
the doors in an emergency in order to obtain entry to the Premises, and any
entry to the Premises obtained by Landlord by any of said means, or otherwise,
shall not under any circumstances be construed or deemed to be a forcible or
unlawful entry into or a detainer of the Premises or an eviction, actual or
constructive, of Tenant from the Premises or any portion thereof. Landlord shall
also have the right at any time to change the arrangement or location of
entrances or passageways, doors and doorways, and corridors, elevators, stairs,
toilets or other public parts of the Complex and to change the name, number or
designation by which the Complex is commonly known, and none of the foregoing
shall be deemed an actual or constructive eviction of Tenant, or shall entitle
Tenant to any reduction of rent hereunder.
22. BANKRUPTCY AND DEFAULT.
The commencement of a bankruptcy action or liquidation action or
reorganization action or insolvency action or an assignment of or by Tenant for
the benefit of creditors, of any similar action undertaken by Tenant, or the
insolvency of Tenant, shall at Landlord's option, constitute a breach of this
Lease by Tenant. If the trustee or receive appointed to serve during a
bankruptcy, liquidation, reorganization, insolvency or similar action elects to
reject Tenant's unexpired Lease, the trustee or receiver shall notify Landlord
in writing of its election within thirty (30) days after an order for relief in
a liquidation action or within thirty (30) days after the commencement of any
action.
14.
<PAGE> 15
Within thirty (30) days after court approval of the assumption of this
Lease, the trustee or receiver shall cure (or provide adequate assurance to the
reasonable satisfaction of Landlord that the trustee or receiver shall cure) any
and all previous defaults under the unexpired Lease and shall compensate
Landlord for all actual pecuniary loss and shall provide adequate assurance of
future performance under said Lease to the reasonable satisfaction of Landlord.
Adequate assurance of future performance, as used herein, include, but shall not
be limited to: (i) assurance of source and payment of rent and other
consideration due under this Lease; (ii) assurance that the assumption or
assignment of this Lease will not breach substantially any provisions, such as
radius, location, use, or exclusivity provision, in any agreement relating to
the above described Premises.
Nothing contained in this section shall affect the existing right of
Landlord to refuse to accept an assignment upon commencement of or in connection
with a bankruptcy, liquidation, reorganization or insolvency action or an
assignment of Tenant for the benefit of creditors or other similar act. Nothing
contained in this Lease shall be construed as giving or granting or creating an
equity in the demised Premises to Tenant. In no event shall the leasehold estate
under this Lease, or any interest therein, be assigned by voluntary or
involuntary bankruptcy proceeding without the prior written consent of Landlord.
In no event shall this Lease or any right or privileges hereunder be an asset of
Tenant under any bankruptcy, insolvency or reorganization proceedings.
The failure to perform or honor any covenant, condition or
representation made under this Lease shall constitute a default hereunder by
Tenant upon expiration of the appropriate grace period hereinafter provided.
Tenant shall have a period of five (5) days from the date of written notice from
Landlord within which to cure any default in the payment of rental or adjustment
thereto. Tenant shall have a period of thirty (30) days from the date of written
notice from Landlord within which to cure any other default under this Lease,
provided, however, that if the nature of Tenant's failure is such that more than
thirty (30) days is reasonably required to cure the same, Tenant shall not be in
default so long as Tenant commences performance within such thirty (30) day
period and thereafter prosecutes the same to completion. Upon an uncured default
of this Lease by Tenant, Landlord shall have the following rights and remedies
in addition to any other rights or remedies available to Landlord at law or in
equity:
(a) The rights and remedies provided for by California Civil Code
Section 1951.2, including but not limited to, recovery of the worth at the time
of award of the amount by which the unpaid rent for the balance of the term
after the time of award exceeds the amount of rental loss for the same period
that Tenant proves could be reasonably avoided as computed pursuant to
subsection(b) of said Section 1951.2. Any proof by Tenant under subparagraph (2)
and (3) of Section 1951.2 of the California Civil Code of the amount of rental
loss that could be reasonably avoided shall be made in the following manner.
Landlord and Tenant shall each select a licensed real estate broker in the
business of renting property of the same type and use as the Premises and in the
same geographic vicinity. Such two real estate brokers shall select a third
licensed real estate broker, and the three licensed real estate brokers so
selected shall determine the amount of the rental loss that could be reasonably
avoided from the balance of the term of this Lease after the time of award. The
decision of the majority of said licensed real estate brokers shall be final and
binding upon the parties hereto.
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<PAGE> 16
(b) The right and remedies provided by California Civil Code Section
which allows Landlord to continue the Lease in effect and to enforce all of its
rights and remedies under this Lease, including the right to recover rent as it
becomes due, for so long as Landlord does not terminate Tenant's right to
possession; acts of maintenance or preservation, efforts to relet the Premises,
or the appointment of a receiver upon Landlord's initiative to protect its
interests under this Lease shall not constitute a termination of Tenant's right
to possession.
(c) The right to terminate this Lease by giving notice to Tenant in
accordance with applicable law.
(d) To the extent permitted by law the right of power, to enter the
Premises and remove therefrom all persons and property, to store such property
in a public warehouse or elsewhere at the cost of and for the account of Tenant,
and to sell such property and apply such proceeds therefrom pursuant to
applicable California law. Landlord, may from time to time sublet the Premises
or any part thereof for such term or terms (which may extend beyond the term of
the Lease) and at such rent and such other terms as Landlord in its sole
discretion may deem advisable, with the right to make alterations and repairs to
the Premises. Upon each subletting, (i) Tenant shall be immediately liable to
pay Landlord, in addition to indebtedness other than rent due hereunder, the
cost of such subletting, including, but not limited to, reasonable attorney's
fees and any real estate commissions actually paid, and the cost of such
alteration and repairs incurred by Landlord and the amount, if any, by which the
rent hereunder for the period of such subletting (to the extent such period does
not exceed the term hereof) exceeds the amount to be paid as rent for the
Premises for such period or (ii) at the option of Landlord, rents received from
such subletting shall be applied first to payment of indebtedness other than
rent due hereunder from Tenant to Landlord; second, to the payment of any costs
of such subletting and of such alterations and repairs; third to payment of rent
due and unpaid hereunder, and the residue, if any, shall be held by Landlord and
applied to payment of future rent as the same becomes due hereunder. If Tenant
has been credited with any rent to be received by such subletting under option
(i) and such rent shall not be promptly paid to Landlord by the subtenant(s), or
if such rentals received from such subletting under option (ii) during any month
by less than that to be paid during the month by Tenant hereunder. Tenant shall
pay any such deficiency to Landlord. Such deficiency shall be calculated and
paid monthly. No taking possession of the Premises by Landlord, shall be
construed as an election on its part to terminate this Lease unless a written
notice of such intention be given to Tenant. Notwithstanding any such subletting
without termination, Landlord may at any time hereafter elect to terminate this
Lease for such previous breach.
(e) The right to have a receiver appointed for Tenant upon
application by Landlord, to take possession of the Premises and to apply any
rental collected from the Premises and to exercise all other rights and remedies
granted to Landlord pursuant to subparagraph (d) above.
23. ABANDONMENT.
Tenant shall not vacate or abandon the Premises at any time during the term of
this Lease and if Tenant shall abandon, vacate or surrender the Premises, or be
dispossessed by the process of law, or otherwise, any personal property
belonging to Tenant and left on the Premises shall be
16.
<PAGE> 17
deemed to be abandoned, at the option of Landlord, except such property as may
be mortgage to Landlord.
24. DESTRUCTION.
In the event the Premises are destroyed in whole or in part form any
cause, except for routine maintenance and repairs and incidental damage and
destruction caused form vandalism and accidents for which Tenant is responsible
for under Paragraph 10, Landlord may, at its option:
(a) Rebuild or restore the Premises to the condition prior to the
damage or destruction; or
(b) Terminate this Lease, (providing that the Premises is damaged to
the extent of 33 1/3% of the replacement cost). If Landlord does not give Tenant
notice in writing within thirty (30) days from the destruction of the Premises
of its election to either rebuild and restore them, or to terminate this Lease,
Landlord shall be deemed to have elected to rebuild or restore them, in which
event Landlord agrees, at its expense, promptly to rebuild or restore the
Premises to their condition prior to the damage or destruction. Tenant shall be
entitled to a reduction in rent while such repair is being made in the
proportion that the area of the Premises rendered untenantable by such damage
bears to the total area of the Premises. If Landlord initially estimates that
the rebuilding or restoration will exceed one hundred eighty (180) days or if
Landlord does not complete the rebuilding or restoration within one hundred
eighty (180) days following the date of destruction (such period of time to be
extended for delays caused by the fault or neglect of Tenant or because of acts
of God, acts of public agencies, labor disputes, strikes, fires, freight
embargoes, rainy or stormy weather, inability to obtain materials, supplies or
fuels, acts of contractors or subcontractors, or delay of the contractors or
subcontractors due to such causes or other contingencies beyond the control of
Landlord), then Tenant shall have the right to terminate this Lease by giving
fifteen (15) days prior written notice to Landlord. Notwithstanding anything
herein to the contrary. Landlord's obligation to rebuild or restore shall be
limited to the building and interior improvements constructed by Landlord as
they existed as of the commencement date of the Lease and shall not include
restoration of Tenant's trade fixtures, equipment, merchandise, or any
improvements, alterations or additions made by Tenant to the Premises, which
Tenant shall forthwith replace or fully repair at Tenant's sole cost and expense
provided this Lease is not cancelled according to the provisions above.
Unless this Lease is terminated pursuant to the foregoing provisions,
this Lease shall remain in full force and effect. Tenant hereby expressly waives
the provisions of Section 1932, Subdivision 2, in Section 1933, Subdivision 4 of
the California Civil Code.
In the event that the building in which the Premises are situated is
damaged or destroyed to the extent of not less than 33 1/8 % of the replacement
cost thereof, Landlord may elect to terminate this Lease, whether the Premises
be injured or not. Notwithstanding anything to the contrary herein, Landlord may
terminate this Lease in the event of an uninsured event or if insurance proceeds
are insufficient to cover one hundred percent of the rebuilding costs net of the
deductible.
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<PAGE> 18
25. EMINENT DOMAIN.
If all or any part of the Premises shall be taken by any public or
quasi-public authority under the power of eminent domain or conveyance in lieu
thereof, this Lease shall terminate as to any portion of the Premises so taken
or conveyed on the date when title vests in the condemnor, and Landlord shall be
entitled to any and all payment, income, rent, award, or any interest therein
whatsoever which may be paid or made in connection with such taking or
conveyance, and Tenant shall have no claim against Landlord or otherwise for the
value of any unexpired term of this Lease. Notwithstanding the foregoing
paragraph, any compensation specifically awarded Tenant for loss of business,
Tenant's personal property, moving cost or loss of goodwill, shall be and remain
the property of Tenant.
If (i) any action or proceeding is commenced for such taking of the
Premises or any part thereof, or if Landlord is advised in writing by any entity
or body having the right or power of condemnation of its intention to condemn
the premises or any portion thereof, or (ii) any of the foregoing events occur
with respect to the taking of any space in the Complex not leased hereby, or if
any spaces so taken or conveyed in lieu of such taking and Landlord shall decide
to discontinue the use and operation of the Complex, or decide to demolish,
alter or rebuild the Complex, then, in any of such events Landlord shall have
the right to terminate this Lease by giving Tenant written notice thereof within
sixty (60) days of the date of receipt of said written advice, or commencement
of said action or proceeding, or taking conveyance, which termination shall take
place as of the first to occur of the last day of the calendar month next
following the month in which such notice is given or the date on which title to
the Premises shall vest in the condemnor.
In the event of such a partial taking or conveyance of the Premises, if
the portion of the Premises taken or conveyed is so substantial that the Tenant
can no longer reasonably conduct its business, Tenant shall have the privilege
of terminating this Lease within sixty (60) days from the date of such taking or
conveyance, upon written notice to Landlord of its intention so to do, and upon
giving of such notice this Lease shall terminate on the last day of the calendar
month next following in which such notice is given, upon payment by Tenant of
the rent form the date of such taking or conveyance to the date of termination.
If a portion of the Premises be taken by condemnation or conveyance in
lieu thereof and neither Landlord nor Tenant shall terminate this Lease as
provided herein, this Lease shall continue in full force and effect as to the
part of the Premises not so taken or conveyed, and the rent herein shall be
apportioned as of the date of such taking or conveyance so that thereafter the
rent to be paid by Tenant shall be in the ratio that the area of the portion of
the Premises not so taken or conveyed bears to the total area of the Premises
prior to such taking.
26. SALE OR CONVEYANCE BY LANDLORD.
In the event of a sale or conveyance of the Complex or any interest therein, by
any owner of the reversion then constituting Landlord, the transferor shall
thereby be released form any further liability upon any of the terms, covenants
or conditions (express or implied) herein contained in favor of Tenant, and in
such event, insofar as such transfer is concerned. Tenant agrees to look solely
to the responsibility of the successor in interest of such transferor in and to
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<PAGE> 19
the Complex and this Lease for all obligations thereafter arising. This Lease
shall not be affected by any such sale or conveyance, and Tenant agrees, upon
recognition, to attorn to the successor in interest of such transferor.
27. ATTORNMENT TO LENDER OR THIRD PARTY.
In the event the interest of Landlord in the land and buildings in which
the leased Premises are located (whether such interest of Landlord is a fee
title interest or a leasehold interest) is encumbered by deed of trust, and such
interest is acquired by the lender or any third party through judicial
foreclosure or by exercise of a power of sale at private trustee's foreclosure
sale. Tenant hereby agrees, upon recognition, to attorn to the purchaser at any
such foreclosure sale and to recognize such purchaser as the Landlord under this
Lease. In the event lien of the deed of trust securing the loan from a Lender to
Landlord is prior and paramount to the Lease, this Lease shall nonetheless
continue in full force and effect for the remainder of the unexpired term
hereof, at the same rental herein reserved and upon all the other terms,
conditions and covenants herein contained.
28. HOLDING OVER.
Any holding over by Tenant after expiration or other termination of the
term of this Lease with the written consent of Landlord delivered to Tenant
shall not constitute a renewal or extension of the Lease or give Tenant any
rights in or to the leased Premises except as expressly provided in this Lease.
Any holding over after the expiration or other termination f the term of this
Lease, with the consent of Landlord, shall be construed to be a tenancy from
month to month, on the same terms and conditions herein specified insofar as
applicable except that the monthly Basic Rent shall be increased to an amount
equal to one hundred fifty (150%) percent of the monthly Basic Rent required
during the last month of the Lease term.
29. CERTIFICATE OF ESTOPPEL.
Tenant shall at any time upon not less than ten (10) days' prior written
notice to Landlord execute, acknowledge and deliver to Landlord a statement in
writing (i) certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of such modification and certifying
that this Lease, as so modified, is in full force and effect) and the date to
which the rent and other charges are paid in advance, if any, and (ii)
acknowledging that there are not, to Tenant's knowledge, any uncured defaults on
the part of Landlord hereunder, or specifying such defaults, if any, are
claimed. Any such statmeent may be conclusively relied upon by any prospective
purchaser or encumbrancer of the Premises. Tenant's failure to deliver such
statement with in such time shall be conclusive upon Tenant that this Lease is
in full force and effect, without modification except as may be represented by
Landlord; that there are no uncured defaults in Landlord's performance, and that
not more than one month's rent has been paid in advance.
30. CONSTRUCTION CHANGES.
It is understood that the description of the Premises and the location of
ductwork, plumbing and other facilities therein are subject to such minor
changes as Landlord or Landlord's architect determines to be desirable in the
course of construction of the Premises, and
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<PAGE> 20
no such changes, or any changes in plans for any other portions of the Complex
shall affect this Lease or entitle Tenant to any reduction of rent hereunder or
result in any liability of Landlord to Tenant. Landlord does not guarantee the
accuracy of any drawings supplied to Tenant and verification for the accuracy of
such drawings rests with Tenant.
31. RIGHT OF LANDLORD TO PERFORM.
All terms, covenants and conditions of this Lease to be performed or
observed by Tenant shall be performed or observed by Tenant at Tenant's sole
cost and expense and without any reduction of rent. If Tenant shall fail to pay
any sum of money, or other rent, required to be paid by it hereunder and such
failure shall continue for five (5) days after written notice thereof by
Landlord, or shall fail to perform any other term or covenant hereunder on its
part to be performed, and such failure shall continue for thirty (30) days after
written notice thereof by Landlord, Landlord, without waiving or releasing
Tenant from any obligation of Tenant hereunder, may, but shall not be obligated
to, make any such payment or perform any such other term or covenant on Tenant's
part to be performed. All sums so paid by Landlord and all necessary costs of
such performance by Landlord together with interest thereon at the rate of the
prime rate of interest per annum as quoted by the Bank of America from the date
of such payment or performance by Landlord, shall be paid (and Tenant covenants
to make such payment) to Landlord on demand by Landlord, and Landlord shall have
(in addition to any other right or remedy of Landlord) the same rights and
remedies in the event of nonpayment by Tenant as in the case of failure by
Tenant in the payment of rent hereunder. See Paragraph 51.
32. ATTORNEYS' FEES.
A. In the event that either Landlord or Tenant should bring suit for the
possession of the Premises, for the recovery of any sum due under this Lease, or
because of the breach of any provision of this Lease, or for any other relief
against the other party hereunder, then all costs and expenses, including
reasonable attorneys' fees, incurred by the prevailing party therein shall be
paid by the other party, which obligation on the part of the other party shall
be deemed to have accrued on the date of the commencement of such action and
shall be enforceable whether or not the action is prosecuted to judgement.
B. Should Landlord be named as a defendant in any suit brought against
Tenant in connection with or arising out of Tenant's occupancy hereunder, Tenant
shall pay to Landlord its costs and expenses incurred in such suit, including a
reasonable attorney's fee.
33. WAIVER.
The waiver by either party of the other party's failure to perform or
observe any term, covenant or condition herein contained to be performed or
observed by such waiving party shall not be deemed to be a waiver of such term,
covenant or condition or of any subsequent failure of the party failing to
perform or observe the same or any other such term, covenant or condition
therein contained, and no custom or practice which may develop between the
parties hereto during the term hereof shall be deemed a waiver of, or in any way
affect, the right of either party to insist upon performance and observance by
the other party in strict accordance with the terms hereof.
20.
<PAGE> 21
34. NOTICES.
All notices, demands, requests, advices or designations which may be or
are required to be given by either party to the other hereunder shall be in
writing. All notices, demands, requests, advices or designations by Landlord to
Tenant shall be sufficiently given, made or delivered if personally served on
Tenant by leaving the same at the Premises or if sent by United States certified
or registered mail, postage prepaid, addressed to Tenant at the Premises. All
notices demands, requests, advices or designations by Tenant to Landlord shall
be sent by United States certified or registered mail, postage prepaid,
addressed to Landlord at its offices at Westport Joint Venture, 2560 Mission
College Blvd., #101, Santa Clara, CA 95054. Each notice, request, demand, advice
or designatin referred to in this paragraph shall be deemed received on the date
of the personal service or mailing thereof in the manner herein provided, as the
case may be.
35. EXAMINATION OF LEASE.
Submission of this instrument for examination or signature by Tenant
does not constitute a reservation of or option for a lease, and this instrument
is not effective as a lease or otherwise until its execution and delivery by
both Landlord and Tenant.
36. DEFAULT BY LANDLORD.
Landlord shall not be in default unless Landlord fails to perform
obligations required of Landlord within a reasonable time, but in no event
earlier than thirty (30) days after written notice by Tenant to Landlord and to
the holder of any first mortgage or deed of trust covering the Premises whose
name and address shall have heretofore been furnished to Tenant in writing,
specifying wherein Landlord has failed to perform such obligations; provided,
however, that if the nature of Landlord's obligations is such that more than
thirty (30) days are required for performance, then Landlord shall not be in
default if Landlord commences performance within such thirty (30) day period and
thereafter diligently prosecutes the same to completion.
37. CORPORATE AUTHORITY.
If Tenant is a corporation, (or a partnership) each individual executing
this Lease on behalf of said corporation (or partnership) represents and
warrants that he is duly authorized to execute and deliver this Lease on behalf
of said corporation (or partnership) in accordance with the by-laws of said
corporation (or partnership in accordance with the partnership agreement) and
that this Lease is binding upon said corporation (or partnership) in accordance
with its terms. If Tenant is a corporation, Tenant shall, within thirty (30)
days after execution of this Lease, deliver to Landlord a certified copy of the
resolution of the Board of Directors of said corporation authorizing or
ratifying the execution of this Lease.
38. LIMITATION OF LIABILITY.
In consideration of the benefits accruing hereunder, Tenant and all
successors and assigns covenant and agree that, in the event of any actual or
alleged failure, breach or default hereunder by Landlord:
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<PAGE> 22
A. The sole and exclusive remedy shall be against Landlord's interest
in the Premises leased herein;
B. No partner of Landlord shall be sued or named as a party in any suit
or action (except as may be necessary to secure jurisdiction of the partnership)
C. No service of process shall be made against any partner of Landlord
(except as may be necessary to secure jurisdiction of the partnership)
A. No partner of Landlord shall be required to answer or otherwise
plead to any service of process;
B. No judgment will be taken against any partner of Landlord;
C. Any judgment taken against any partner of Landlord may be vacated
and set aside at any time without hearing;
D. No writ of execution will ever be levied against the assets of any
partner of Landlord;
E. These covenants and agreements are enforceable both by Landlord and
also by any partner of Landlord.
Tenant agrees that each of the foregoing covenants and agreements shall be
applicable to any covenant or agreement either expressly contained in this Lease
or imposed by statute or at common law.
39. MISCELLANEOUS AND GENERAL PROVISIONS.
A. Tenant shall not, without the written consent of Landlord, use the
name of the building for any purpose other than as the address of the business
conducted by Tenant in the Premises.
B. This Lease shall in all respects be governed by and construed in
accordance with the laws of the State of California. If any provision of this
Lease shall be invalid, unenforceable or ineffective for any reason whatsoever,
all other provisions hereof shall be and remain in full force and effect.
C. The term "Premises" includes the space leased hereby and any
improvements now or hereafter installed therein or attached thereto. The term
"Landlord" or any pronoun used in place thereof includes the plural as well as
the singular and the successors and assigns of Landlord. The term "Tenant" or
any pronoun used in place thereof includes the plural as well as the singular
and individuals, firms, associations, partnerships and corporations, and their
and each of their respective heirs, executors, administrators, successors and
permitted assigns, according to the context hereof, and the provisions of this
Lease shall inure to the benefit of and bind such heirs, executors,
administrators, successors and permitted assigns.
The term "person" includes the plural as well as the singular and
individuals, firms, associations, partnerships and corporations. Words used in
any gender include other genders. If
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there be more than one Tenant the obligations of Tenant hereunder are joint and
several. The paragraph headings of this Lease are for convenience of reference
only and shall have no effect upon the construction or interpretation of any
provision here.
D. Time is of the essence of this Lease and of each and all of its
provisions.
E. At the expiration or earlier termination of this Lease, Tenant shall
execute, acknowledge and deliver to Landlord, within ten (10) days after written
demand from Landlord to Tenant, any quitclaim deed or other document required by
any reputable title company, licensed to operate in the State of California, to
remove the cloud or encumbrance created by this Lease from the real property of
which Tenant's Premises are a part.
F. This instrument along with any exhibits and attachments hereto
constitutes the entire agreement between Landlord and Tenant relative to the
Premises and this agreement and the exhibits and attachments may be altered,
amended or revoked only by an instrument in writing signed by both Landlord and
Tenant, Landlord and Tenant agree hereby that all prior or contemporaneous oral
agreements between and among themselves and their agents or representatives
relative to the leasing of the Premises are merged in or revoked by this
agreement.
G. Neither Landlord nor Tenant shall record this Lease or a short form
memorandum hereof without the consent of the other.
H. Tenant further agrees to execute any amendments required by a lender
to enable Landlord to obtain financing, so long as Tenant's rights hereunder are
not substantially affected.
I. Paragraphs 43 through 59 are added hereto and are included as a part
of this lease.
J. Clauses, plats and riders, if any, signed by Landlord and tenant and
endorsed on or affixed to this Lease are a part hereof.
K. Tenant covenants and agrees that no diminution or shutting off of
light, air or view by any structure which may be hereafter erected (whether or
not by Landlord) shall in any way affect his Lease, entitle Tenant to any
reduction of rent hereunder or result in any liability of Landlord to Tenant.
40. BROKERS.
Tenant warrants that it had dealings with only the following real estate
brokers or agents in connection with the negotiation of this Lease: none and
that it knows of no other real estate broker or agent who is entitled to a
commission in connection with this Lease.
41. SIGNS.
No sign, placard, picture, advertisement, name or notice shall be
inscribed, displayed or printed or affixed on or to any part of the outside of
the Premises or any exterior windows of the Premises without the written consent
of Landlord first had and obtained and Landlord shall have the right to remove
any such sign, placard, picture, advertisement, name or notice without notice
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to and at the expense of Tenant. If Tenant is allowed to print or affix or in
any way place a sign in, on, or about the Premises, upon expiration or other
sooner termination of this Lease, Tenant at Tenant's sole cost and expense shall
both remove such sign and repair all damage in such a manner as to restore all
aspects of the appearance of the Premises to the condition prior to the
placement of said sign.
All approved signs or lettering on outside doors shall be printed,
painted, affixed or inscribed at the expense of Tenant by a person approved of
by Landlord. Tenant shall not place anything or allow anything to be placed near
the glass of any window, door partition or wall which may appear unsightly from
outside the Premises.
IN WITNESS WHEREOF, Landlord and Tenant have executed and delivered this
Lease as of the day and year last written below.
<TABLE>
<S> <C>
LANDLORD: TENANT:
WESTPORT JOINT VENTURE IPASS, INC.,
a California joint venture a California corporation
JOHN ARRILLAGA SURVIVOR'S TRUST
By /s/ John Arrillaga By /s/ Michael Mansouri
---------------------------------------------------- ------------------------------------
John Arrillaga, Trustee
Date 11/24/99 Title Chairman & CEO
------------------------------------------------- ----------------------------------
PEERY PRIVATE INVESTMENT COMPANY WP, L.P.,
a California limited partnership Print or Type Name Michael Mansouri
---------------------
By /s/ Richard Perry Date 11/21/99
-------------------------------------------------- -----------------------------------
Richard T. Peery, Trustee of the Richard T. Peery
Separate Property Trust dated 7/20/77, as its
General Partner
Date 11/24/99
------------------------------------------------
PEERY PUBLIC INVESTMENT COMPANY - WP, L.P.,
a California limited partnership
By: /s/ Richard Perry
-------------------------------------------------
Richard T. Peery, Trustee of the Richard T. Peery
Separate Property Trust dated 7/20/77, as its
General Partner
Date 11/24/99
------------------------------------------------
</TABLE>
24.
<PAGE> 25
Paragraphs 43 through 59 to Lease Agreement dated October 26, 1999, by and
between Westport Joint Venture, a California joint venture, as Landlord, and
iPass, Inc., a California corporation, as Tenant for 48,384+/- Square Feet of
Space Located at 3800 Bridge Parkway, Redwood City, California.
42. BASIC RENT.
In accordance with Paragraph 4A herein, the total aggregate sum of
TWENTY-FIVE MILLION NINE HUNDRED SEVENTY NINE THOUSAND SEVEN HUNDRED FIVE AND
38/100 DOLLARS ($25,979,705.38), shall be payable as follows:
On January 15, 2000, the sum of ONE HUNDRED SIX THOUSAND THREE HUNDRED
SIXTY ONE AND 38/100 DOLLARS ($106,361.30) shall be due, representing the
prorated Basic Rent for the period of January 15, 200 through January 31, 2000.
On February 1, 2000, the sum of ONE HUNDRED EIGHTY-ONE THOUSAND FOUR
HUNDRED FORTY AND NO/100 DOLLARS ($181,440.00) shall be due, and a like sum due
on the first day of each month thereafter, through and including February 1,
2001.
On March 1, 2001, the sum of ONE HUNDRED EIGHTY-EIGHT THOUSAND SIX HUNDRED
NINETY-SEVEN AND 60/100 DOLLARS ($188,697.60) shall be due, and a like sum due
on the first day of each month thereafter, through and including February 1,
2002.
On March 1, 2002, the sum of ONE HUNDRED NINETY-FIVE THOUSAND NINE HUNDRED
FIFTY-FIVE AND 20/100 DOLLARS ($195,955.20) shall be due, and a like sum due on
the first day of each month thereafter, through and including February 1, 2003.
On March 1, 2003, the sum of TWO HUNDRED THREE THOUSAND TWO HUNDRED TWELVE
AND 80/100 DOLLARS ($203,212.80) shall be due, and a like sum due on the first
day of each month thereafter, through and including February 1, 2004.
On March 1, 2004, the sum of TWO HUNDRED TEN THOUSAND FOUR HUNDRED SEVENTY
AND 40/100 DOLLARS ($210,470.40) shall be due, and a like sum due on the first
day of each month thereafter, through and including February 1, 2005.
On March 1, 2005, the sum of TWO HUNDRED SEVENTEEN THOUSAND SEVEN HUNDRED
TWENTY-EIGHT AND NO/100 DOLLARS ($217,728.00) shall be due, and a like sum due
on the first day of each month thereafter, through and including February 1,
2006.
On March 1, 2006, the sum of TWO HUNDRED TWENTY-FOUR THOUSAND NINE HUNDRED
EIGHTY-FIVE AND 60/100 DOLLARS ($224,985.60) shall be due, and a like sum due on
the first day of each month thereafter, through and including February 1, 2007.
On March 1, 2007, the sum of TWO HUNDRED THIRTY-TWO THOUSAND TWO HUNDRED
FORTY-THREE AND 20/100 DOLLARS ($232,243.20) shall be due, and a like sum due on
the first day of each month thereafter, through and including February 1, 2008.
25.
<PAGE> 26
On March 1, 2008, the sum of TWO HUNDRED THIRTY-NINE THOUSAND FIVE HUNDRED
AND 80/100 DOLLARS ($239,500.80) shall be due, and a like sum due on the first
day of each month thereafter, through and including February 1, 2009.
On March 1, 2009, the sum of TWO HUNDRED FORTY-SIX THOUSAND SEVEN HUNDRED
FIFTY-EIGHT AND 40/100 DOLLARS ($246,258.40) shall be due, and a like sum due on
the first day of each month thereafter, through and including February 1, 2010;
or until the entire aggregate sum of TWENTY-FIVE MILLION NINE HUNDRED
SEVENTY-NINE THOUSAND SEVEN HUNDRED FIVE AND 38/100 DOLLARS ($25,979,705.38) has
been paid.
43. "AS-IS BASIS.
Subject only to Paragraph 45 and to Landlord making the improvements shown
on EXHIBIT B to be attached hereto, it is hereby agreed that the Premises leased
hereunder is leased strictly on an "as-is" basis and in its present condition,
and in the configuration as shown on EXHIBIT B to be attached hereto, and by
reference made a part hereof. Except as noted herein, it is specifically agreed
between the parties that after Landlord makes the interior improvements as shown
on EXHIBIT B, Landlord shall not be required to make, nor be responsible for any
cost, in connection with any repair, restoration, and/or improvement to the
Premises in order for this Lease to commence, or thereafter, throughout the Term
of this Lease. Notwithstanding anything to the contrary within this Lease,
Landlord makes no warranty or representation of any kind or nature whatsoever as
to the condition or repair of the Premises, nor as to the use or occupancy which
may be made thereof.
44. TENANT INTERIOR IMPROVEMENTS.
Landlord shall, at its sole cost and expense, construct certain interior
improvements (the "Tenant Improvements") in the Premises, as shown on EXHIBIT B
to be attached to the Lease and Landlord agrees to deliver the Premises leased
hereunder to Tenant, at Landlord's expense, in the configuration shown in Red on
EXHIBIT B to be attached hereto. Notwithstanding anything to the contrary above,
it is specifically understood and agreed that Landlord shall be required to
furnish only a standard air conditioning/heating system, normal electrical
outlets, standard fire sprinkler systems, standard bathroom, standard lobby, 2'
x 4' suspended acoustical tile drop ceiling throughout the entire space leased,
carpeting and/or vinyl-coated floor tile, and standard office partitions and
doors, as shown on EXHIBIT B to be attached hereto; provided, however, that any
special HVAC and/or plumbing and/or electrical requirements over and above that
normally supplied by Landlord shall be 100 percent the responsibility of and be
paid for 100 percent by Tenant.
It is further agreed that Tenant shall furnish Landlord with Tenant's
required specifications and a preliminary space plan showing the layout of the
improvements to be constructed in the Premises by November 15, 1999. At that
time, Landlord shall have the final interior plans drawn by Landlord's
architect. All of the plans and specifications shall be EXHIBIT B to this Lease.
If said preliminary plans and specifications for any items affecting the
interior improvements to be constructed in the building are not received by
Landlord for Landlord's approval (which approval shall not be unreasonably
withheld) by November 15, 1999, then it is
26.
<PAGE> 27
agreed that, notwithstanding anything to the contrary in this Lease, this Lease
and Tenant's obligation to perform all terms, covenants and conditions of this
Lease shall commence February 15, 2000, regardless of whether or not the
building and interior improvements are completed on February 15, 2000, and
Landlord shall complete construction of the interior improvements as soon as
reasonably possible thereafter.
Notwithstanding anything to the contrary, it is agreed that in the event
Tenant makes changes, additions or modifications to the plans and specifications
to be constructed by Landlord as set forth herein, or improvements are installed
for Tenant in excess of those to be provided Tenant by Landlord as set forth on
EXHIBIT B, any increased cost(s) resulting from said changes, additions and/or
modifications and/or improvements in excess of those to be provided Tenant shall
be contracted for with Landlord and paid for one hundred percent (100%) by
Tenant.
The interior shall be constructed in accordance with EXHIBIT B of the
Lease, it being agreed, however, that if the interior improvements constructed
by Landlord relating thereto, do not conform exactly to the plans and
specifications as set forth in the Lease, and the general appearance, structural
integrity, and Tenant's uses and occupancy of the Premises and interior
improvements relating thereto are not materially or unreasonably affected by
such deviation, it is agreed that the commencement date of the Lease, and
Tenant's obligation to pay rental, shall not be affected, and Tenant hereby
agrees, in such event, to accept the Premises and interior improvements as
constructed by Landlord.
Tenant shall have thirty (30) days after the Commencement Date to provide
Landlord with a "punch list" pertaining to Landlord's work with respect to
Tenant's interior improvements. As soon as reasonably possible thereafter,
Landlord, or one of Landlord's representatives (if so approved by Landlord), and
Tenant shall conduct a joint walk-through of the Premises (if Landlord so
requires), and inspect such Tenant Improvements, using their best efforts to
agree on the incomplete or defective construction related to the Tenant
Improvements installed by Landlord. After such inspection has been completed,
Landlord shall prepare, and both parties shall sign, a list of all "punch list"
items which the parties reasonably agree are to be corrected by landlord (but
which shall exclude any damage or defects caused by Tenant, its employees,
agents or parties Tenant has contracted with to work on the Premises). landlord
shall have thirty (30) days thereafter (or longer if necessary, provided
Landlord is diligently pursuing the completion of the same) to complete, at
Landlord's expense, the repairs on the "punch list" without the Commencement
Date of the Lease and Tenant's obligation to pay Rental thereunder being
affected. This Paragraph shall be of no force and effect if Tenant shall fail to
give any such notice to Landlord within thirty (30) days after the Commencement
Date of this Lease.
45. CONSENT.
Whenever the consent of one party to the other is required hereunder, such
consent shall not be unreasonably withheld.
46. CHOICE OF LAW; SEVERABILITY.
This Lease shall in all respects be governed by and construed in
accordance with the laws of the State of California. If any provisions of this
Lease shall be invalid, unenforceable or
27.
<PAGE> 28
ineffective for any reason whatsoever, all other provisions hereof shall be and
remain in full force and effect.
47. AUTHORITY TO EXECUTE.
The parties executing this Lease Agreement hereby warrant and represent
that they are properly authorized to execute this Lease Agreement and bind the
parties on behalf of whom they execute this Lease Agreement and to all of the
terms, covenants and conditions of this Lease Agreement as they relate to the
respective parties hereto.
48. ASSESSMENT CREDITS.
The demised property herein may be subject to a special assessment levied
by the City of Redwood City as part of an Improvement District. As a part of
said special assessment proceedings (if any), additional bonds were or may be
sold and assessments were or may be levied to provide for construction
contingencies and reserve funds. Interest shall be earned on such funds created
for contingencies and on reserve funds which will be credited for the benefit of
said assessment district. To the extent surpluses are created in said district
through unused contingency funds, interest earnings or reserve funds, such
surpluses shall be deemed the property of Landlord. Notwithstanding that such
surpluses may be credited on assessments otherwise due against the Leased
Premises, Tenant shall pay to Landlord, as additional rent if, and at the time
of any such credit of surpluses, an amount equal to all such surpluses so
credited. For example: if (i) the property is subject to an annual assessment of
$1,000.00, and (ii) a surplus of $200.00 is credited towards the current year's
assessment which reduces the assessment amount shown on the property tax bill
from $1,000.00 to $800.00, Tenant shall, upon receipt of notice from Landlord,
pay to Landlord said $200.00 credit as Additional Rent.
49. ASSIGNMENT AND SUBLETTING (CONTINUED).
A. In addition to and notwithstanding anything to the contrary in
Paragraph 19 of this Lease and provided Tenant is not in default of this Lease,
Landlord hereby agrees to consent to: (1) Tenant's assigning or subletting said
Lease to: (i) any parent or subsidiary corporation, or corporation with which
Tenant merges or consolidates provided that the net worth of said parent or
subsidiary corporation, or said corporation has a net worth equal to or greater
than the net worth of Tenant (a) at the time of Lease execution or (b) at the
time of such assignment, merger, or consolidation (whichever is greater); or
(ii) any third party or entity to whom Tenant sells all or substantially all of
its assets; provided, that the net worth of the resulting or acquiring
corporation has a net worth after the merger, consolidation or acquisition equal
to or greater than the net worth of Tenant (a) at the time of Lease execution or
(b) at the time of such merger, consolidation or acquisition, whichever is
greater (collectively "Permitted Transfers"); (2) waive its right to terminate
the Lease due to a Permitted Transfer; and (3) waive any rights to Excess Rent
related to a Permitted Transfer. No such assignment or subletting will release
the Tenant from its liability and responsibility under this Lease to the extend
Tenant continues in existence following such transaction. Notwithstanding the
above, Tenant shall be required to (a) give Landlord written notice prior to
such assignment or subletting to any party as described in (i) and (ii) above,
(b) execute Landlord's consent document prepared by Landlord reflecting the
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assignment or subletting and (c) pay Landlord's costs for processing said
Consent prior to the effective date of said assignment or sublease.
B. Notwithstanding the foregoing, Landlord and Tenant agree that it
shall not be unreasonable for Landlord to refuse to consent to a proposed
assignment, sublease or other transfer ("Proposed Transfer") if the Premises or
any other portion of the Property would become subject to additional or
different Government Requirements as a direct or indirect consequence of the
Proposed Transfer and/or the Proposed Transferee's use and occupancy of the
Premises and the Property. However, Landlord may, in its sole discretion,
consent to such a proposed Transfer where Landlord is indemnified by Tenant and
(i) Subtenant or (ii) Assignee, in form and substance satisfactory to Landlord's
counsel, by Tenant and/or the Proposed Transferee from and against any and all
costs, expenses, obligations and liability arising out of the Proposed Transfer
and/or the Proposed Transferee's use and occupancy of the premises and the
Property.
C. Any and all sublease agreement(s) between Tenant and any and all
subtenant(s) (which agreements must be consent to by Landlord, pursuant to the
requirements of this Lease) shall contain the following language:
"If Landlord and Tenant jointly and voluntarily elect, for any
reason whatsoever, to terminate the Master Lease prior to the scheduled
Master Lease termination date, then this Sublease (if then still in
effect) shall terminate concurrently with the termination of the Master
Lease. Subtenant expressly acknowledges and agrees that (1) the voluntary
termination of the Master Lease by Landlord and Tenant and the resulting
termination of this Sublease shall not give Subtenant any right or power
to make any legal or equitable claim against Landlord, including without
limitation any claim for interference with contract or interference with
prospective economic advantage, and (2) Subtenant hereby waives any and
all rights it may have under law or at equity against Landlord to
challenge such an early termination of the Sublease, and unconditionally
releases and relieves Landlord, and its officers, directors, employees and
agents, from any and all claims, demands, and/or causes of action
whatsoever (collectively, "Claims"), whether such matters are known or
unknown, latent or apparent, suspected or unsuspected, foreseeable or
unforeseeable, which Subtenant may have arising out of or in connection
with any such early termination of this Sublease. Subtenant knowingly and
intentionally waives any and all protection which is or may be given by
Section 1542 of the California Civil Code which provides as follows: "A
general release does not extend to claims which the creditor does not know
or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with
debtor.
The term of this Sublease is therefore subject to early termination.
Subtenant's initials here below evidence (a) Subtenant's consideration of
and agreement to this early termination provision, (b) Subtenant's
acknowledgment that, in determining the net benefits to be derived by
Subtenant under the terms of this Sublease, Subtenant has anticipated the
potential for early termination, and (c) Subtenant's agreement to the
general waiver and release of Claims above.
29.
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Initials: Initials: "
---------------------- --------------------
Subtenant Tenant
50. BANKRUPTCY AND DEFAULT.
Paragraph 22 is modified to provide that with respect to non-monetary
defaults not involving Tenant's failure to pay Basic Rent or Additional Rent,
Tenant shall not be in default of any non-monetary obligation if (i) more than
thirty (30) days is required to cure such non-monetary default, and (ii) Tenant
commences cure of such default as soon as reasonably practicable after receiving
written notice of such default from Landlord and thereafter continuously and
with due diligence prosecutes such cure to completion.
51. ABANDONMENT.
Paragraph 23 is modified to provide that Tenant shall not be in default
under the Lease if it leaves all or any part of Premises vacant so long as (i)
tenant is performing all of its other obligations under the Lease including the
obligation to pay Basic Rent and Additional Rent (ii) Tenant provides on-site
security during normal business hours for those parts of the Premises left
vacant, (iii) such vacancy does not materially and adversely affect the validity
or coverage of any policy of insurance carried by Landlord with respect to the
Premises, and (iv) the utilities and heating and ventilation system are operated
and maintained to the extent necessary to prevent damage to the Premises or its
systems.
52. HAZARDOUS MATERIALS.
Landlord and Tenant agree as follows with respect to the existence or use
of "Hazardous Materials" (as defined herein) on, in, under or about the Premises
and real property located beneath said Premises and the common areas of the
Complex (hereinafter collectively referred to as the "Property"):
A. As used herein, the term "Hazardous Materials," shall mean any
material, waste, chemical, mixture or byproduct which is or hereafter is
defined, listed or designated under Environmental Laws (defined below) as a
pollutant, or as a contaminant, or as a toxic or hazardous substance, waste or
material, or any other unwholesome, hazardous, toxic, biohazardous or
radioactive material, waste, chemical, mixture or byproduct or which is listed,
regulated or restricted by any Environmental Law (including, without limitation,
petroleum hydrocarbons or any distillates or derivatives or fractions thereof,
polychlorinated biphenyls or asbestos). As used herein, the term "Environmental
Laws" shall mean any applicable Federal, State of California or local government
law (including common law), statute, regulation, rule, ordinance, permit,
license, order, requirement, agreement or approval, or any determination,
judgment, directive or order of any executive or judicial authority at any level
of Federal, State of California or local government (whether now existing or
subsequently or promulgated) relating to pollution or the protection of the
environment, ecology, natural resources or public health and safety.
B. Tenant shall obtain Landlord's written consent, which may be
withheld in Landlord's discretion, prior to the occurrence of any Tenant's
Hazardous Materials Activities (defined below); provided, however, that
Landlord's consent shall not be required for normal use in
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compliance with applicable Environmental Laws of customary household and office
supplies (Tenant shall first provide Landlord with a list of said materials
use), such as mild cleaners, lubricants and copier toner. As used herein, the
term "Tenant's Hazardous Materials Activities" shall mean any and all use,
handling, generation, storage, disposal, treatment, transportation, release,
discharge or emission of any Hazardous Materials on, in, beneath, to, from, at
or about the Property, in connection with Tenant's use of the Property, or by
Tenant or by any of Tenant's agents, employees, contractors, vendors, invitees,
visitors or its future subtenants or assignees. Tenant agrees that any and all
Tenant's Hazardous Materials Activities shall be conducted in strict, full
compliance with applicable Environmental Laws at Tenant's expense, and shall not
result in any contamination of the Property or the environment. Tenant agrees to
provide Landlord with prompt written notice of any spill or release of Hazardous
Materials at the Property during the term of the Lease of which Tenant becomes
aware, and further agrees to provide Landlord with prompt written notice of any
violation of Environmental Laws in connection with Tenant's Hazardous Materials
Activities of which Tenant becomes aware. If Tenant's Hazardous Materials
Activities involve Hazardous Materials other than normal use of customary
household and office supplies, Tenant also agrees at Tenant's expense: (i) to
install such Hazardous Materials monitoring, storage and containment devices as
Landlord reasonably deems necessary (Landlord shall have no obligation to
evaluate the need for any such installation or to require any such
installation); (ii) provide Landlord with a written inventory of such Hazardous
Materials, including an update of same each year upon the anniversary date of
the Commencement Date of the Lease ("Anniversary Date"); and (iii) on each
Anniversary Date, to retain a qualified environmental consultant, acceptable to
Landlord, to evaluate whether Tenant is in compliance with all applicable
Environmental Laws with respect to Tenant's Hazardous Materials Activities.
Tenant, at its expense, shall submit to Landlord a report from such
environmental consultant which discusses the environmental consultant's findings
within two (2) months of each Anniversary Date. Tenant, at its expense, shall
promptly undertake and complete any and all steps necessary, and in full
compliance with applicable Environmental Laws, to fully correct any and all
problems or deficiencies in connection with Tenant's Hazardous Materials
Activities identified by the environmental consultant, and promptly provide
Landlord with documentation of all such corrections.
C. Prior to termination or expiration of the Lease, Tenant, at its
expense, shall (i) properly remove from the Property all Hazardous Materials
which come to be located at the Property in connection with Tenant's Hazardous
Materials Activities, and (ii) fully comply with and complete all facility
closure requirements of applicable Environmental Laws regarding Tenant's
Hazardous Materials Activities, including but not limited to (x) properly
restoring and repairing the Property to the extent damaged by such closure
activities, and (y) obtaining from the local Fire Department or other
appropriate governmental authority with jurisdiction a written concurrence that
closure has been completed in compliance with applicable Environmental Laws.
Tenant shall promptly provide Landlord with copies of any claims, notices, work
plans, data and reports prepared, received or submitted in connection with any
such closure activities.
D. If Landlord, in its sole discretion, believes that the Property has
become contaminated as a result of Tenant's Hazardous Materials Activities,
Landlord in addition to any other rights it may have under this Lease or under
Environmental Laws or other laws, may enter upon the Property and conduct
inspection, sampling and analysis, including but not limited to, obtaining and
analyzing samples of soil and groundwater, for the purpose of determining the
nature and
31.
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extent of such contamination. Tenant shall promptly reimburse Landlord for the
costs of such an investigation, including but not limited to, reasonable
attorneys' fees Landlord incurs with respect to such investigation, that
discloses Hazardous Materials contamination for which Tenant is liable under
this Lease. Except as may be required of Tenant by applicable Environmental
Laws, Tenant shall not perform any sampling, testing or drilling to identify the
presence of any Hazardous Materials at the Property, without Landlord's prior
written consent which may be withheld in Landlord's discretion. Tenant shall
promptly provide Landlord with copies of any claims, notices, work plans, data
and reports prepared, received or submitted in connection with any sampling,
testing or drilling performed pursuant to the preceding sentence.
E. Tenant shall indemnify, defend (with legal counsel acceptable to
Landlord, whose consent shall not unreasonably be withheld) and hold harmless
Landlord, its employees, assigns, successors, successors-in-interest, agents and
representatives from and against any and all claims (including but not limited
to third party claims from a private party or a government authority),
liabilities, obligations, losses, causes of action, demands, governmental
proceedings or directives, fines, penalties, expenses, costs (including but not
limited to reasonable attorneys', consultants' and other experts' fees and
costs), and damages, which arise from or relate to: (i) Tenant's Hazardous
Materials Activities; (ii) any Hazardous Materials contamination caused by
Tenant prior to the Commencement Date of the Lease; or (iii) the breach of any
obligation of Tenant under this Paragraph 53 (collectively, "Tenant's
Environmental Indemnification"). Tenant's Environmental Indemnification shall
include but is not limited to the obligation to promptly and fully reimburse
Landlord for losses in or reductions to rental income, and diminution in fair
market value of the Property. Tenant's Environmental Indemnification shall
further include but is not limited to the obligation to diligently and properly
implement to completion, at Tenant's expense, any and all environmental
investigation, removal, remediation, monitoring, reporting, closure activities
or other environmental response action (collectively, "Response Actions").
Tenant shall promptly provide Landlord with copies of any claims, notices, work
plans, data and reports prepared, received or submitted in connection with any
Response Actions.
F. Landlord hereby informs Tenant, and Tenant hereby acknowledges, that
the Premises and adjacent properties overlie a former solid waste landfill site
commonly known as the Westport Landfill ("Former Landfill"). Landlord further
informs Tenant, and Tenant hereby acknowledges, that (i) prior testing has
detected the presence of low levels of certain volatile and semi-volatile
organic compounds and other contaminants in the groundwater, in the leachate
from the landfilled sold waste, and/or in certain surface waters of the
Property, as more fully described in Section 2.3.2 of the report entitled
"Revised Discharge Monitoring Plan, Westport Landfill Site, Redwood City,
California," prepared by Geomatrix Consultants, dated May 1996 ("Discharge
Plan"), (ii) methane gas is or may be generated by the landfilled solid waste
(item "i" immediately preceding and this item "ii" are hereafter collectively
referred to as the "Landfill Contamination"), and (iii) the Premises and the
Former Landfill are subject to the California Regional Water Quality Control
Board's ("Regional Board") Waste Discharge Requirements Order No. 94-181 (the
"Order"). The Order is attached hereto as EXHIBIT C. As evidenced by their
initials set forth immediately below, Tenant acknowledges that Landlord has
provided Tenant with copies of the environmental reports listed on EXHIBIT D,
and Tenant acknowledges that Tenant and Tenant's experts (if any) have had ample
opportunity to review such reports and
32.
<PAGE> 33
that Tenant has satisfied itself as to the environmental conditions of the
Property and the suitability of such conditions for Tenant's intended use of the
Property.
Initials: /s/ MM Initials: /s/ JA
---------------------------- --------------------
Tenant Landlord
G. Landlord shall indemnify, defend and hold harmless Tenant against
any and all claims asserted by third parties (excluding any agents, employees,
contractors, vendors, invitees, visitors, future subtenants and assignees of
Tenant, and excluding any other parties related to Tenant), including all
liabilities, judgments, damages, suits, orders, government directives, costs and
expenses in connection with such claims, which arise from (i) the Landfill
Contamination, or (ii) the Order, as may be amended ("Landlord's Environmental
Indemnity"); provided, however, that Landlord's Environmental Indemnity shall be
subject to the following limitations and conditions:
(a) Landlord's Environmental Indemnity shall not apply to any
economic or consequential damages suffered by Tenant, including but not limited
to loss of business or profits.
(b) Landlord's Environmental Indemnity shall not apply, without
limitation, to any releases caused by Tenant's Hazardous Materials Activities.
(c) Tenant acknowledges that Landlord must comply with the Order,
as may be amended, and with directives of government authorities including the
Regional Board, with respect to the Contamination and the Former Landfill.
Tenant further acknowledges that groundwater monitoring wells, methane recovery
wells and equipment, and other environmental control devices are located on and
about the Premises and may be modified or added to during the term of the Lease
(collectively, "Environmental Equipment"), and that environmental investigation,
monitoring, closure and post-closure activities (collectively, "Environmental
Activities") will be performed on the Premises during the term of the Lease.
Tenant shall allow Landlord, and any other party named as a discharger under the
Order, as may be amended, and their respective agents, consultants and
contractors, and agents of governmental environmental authorities with
jurisdiction ("Government Representatives") to enter the Premises to access the
Environmental Equipment and to perform Environmental Activities during the term
of the Lease, provided that Tenant's use and occupancy of the Premises shall not
unreasonably be disturbed.
(d) Tenant and Landlord shall reasonably cooperate with each other
regarding any Environmental Activities to be performed, and regarding any
Environmental Equipment to be installed, maintained, or removed on the Premises
during the term of the Lease.
(e) Tenant shall be responsible at its expense for repairing any
Environmental Equipment damages due to the negligence of Tenant or Tenant's
agents, employees, contractors, vendors, invitees, visitors, future subtenants
or assignees (such terms "invitees" and "visitors" as used in this Paragraph 53
shall not include Landlord or any other party named as a discharger under the
Order as may be amended, or any of their respective agents, consultants or
contractors, or any Government Representatives).
33.
<PAGE> 34
It is agreed that the Tenant's responsibilities related to Hazardous
Materials will survive the expiration or termination of this Lease and that
Landlord may obtain specific performance of Tenant's responsibilities under this
Paragraph 53.
53. LEASE TERMS CO-TERMINOUS.
It is acknowledged that (i) concurrently with the execution of this Lease,
Landlord and Tenant are also executing a second Lease Agreement dated October
26, 1999 (hereinafter referred to as the "Building 19 Lease") affecting adjacent
property located at 3600 Bridge Parkway, Redwood City and (ii) it is the
intention of the parties that the term of this Lease be co-terminous with the
term of the Building 19 Lease such that the terms of both leases expire on the
same date; provided, however, the termination of this Lease resulting from the
terms and conditions stated under Paragraph 19 "Bankruptcy and Default" (subject
to Landlord's option as stated in the respective leases' "Cross Default"
Paragraph) or Paragraph 21 "Destruction" or Paragraph 22 "Eminent Domain" shall
not result in a termination of the Building 19 Lease, unless Landlord elects, at
its sole and absolute discretion, to terminate both of the leases.
54. CROSS DEFAULT.
As a material part of the consideration for the execution of this Lease by
Landlord, it is agreed between Landlord and Tenant that a default under this
Lease, or a default under said Building 19 Lease may, at the option of Landlord,
be considered a default under both leases, in which event Landlord shall be
entitled (but in no event required) to apply all rights and remedies of Landlord
under the terms of one lease to both leases including, but not limited to, the
right to terminate one or both of said leases by reason of a default under said
Building 19 Lease or hereunder.
55. ADDITIONAL RENT CONTINUED.
The following items shall be excluded from "Additional Rent":
A. Leasing commissions, attorney's fees, costs, disbursements, and
other expenses incurred in connection with negotiations with other tenants, or
disputes between Landlord and other third party not related to Tenant
(hereinafter referred to as "Third Party"), or in connection with marketing,
leasing, renovating, or improving space for other current or prospective tenants
or other current or prospective occupants of the Complex; notwithstanding
anything to the contrary herein, any costs and expenses Landlord is entitled to
be reimbursed for as stated under Paragraph 22 ("Bankruptcy and Default") ARE
NOT excluded Additional Rent items as reflected in this Paragraph 56.
B. The cost of any service sold to any other Third Party or other
occupant whose leased premises are not part of the Premises leased herein and
for which Landlord is entitled to be reimbursed as an additional charge or
rental over and above the basic rent and additional rent payable under the lease
agreement with said other tenant.
C. Any costs, fines, or penalties incurred due to violations by
Landlord of any governmental rule or authority, provided Tenant is not
responsible under the Lease for such
34.
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costs, fines and/or penalties, and/or provided Tenant's actions or inactions did
not cause, in whole or in part, such costs, fines and/or penalties.
D. Wages, salaries, or other compensation paid to executive employees
above the grade of Property Manager.
E. Repairs or other work occasioned by fire, windstorm, or other
insured peril, to the extent that Landlord shall receive proceeds of such
insurance or would have received such proceeds had Landlord maintained the
insurance coverage required under this Lease providing said insurance coverage
was available and Tenant paid its share of the premium as required under the
Lease and any insurance deductible(s) which Tenant is responsible for paying and
provided Tenant is not responsible for the damage to the Premises.
F. Except as otherwise noted in this Lease, any mortgage debt, or
ground rents or any other amounts payable under any ground lease for the
Property.
G. Subject to the terms of Paragraph 53G above, Landlord's costs
related to Lease Paragraphs 53F and 53G.
56. SECURITY DEPOSIT IN THE FORM OF AN IRREVOCABLE STANDBY LETTER OF CREDIT.
The cash Security Deposit provided for in Paragraph 4G of the Lease shall
be deposited by Tenant with Landlord upon execution of this Lease; however,
Tenant shall have the right, at Tenant's sole election, to replace one-half
($246,758.40) of the cash Security Deposit held by Landlord with an irrevocable
letter of credit, drawn upon an institutional lender reasonably acceptable and
accessible to Landlord in form and content reasonably satisfactory to Landlord
and for a term equal to the Term of this Lease plus a period of sixty (60) days,
and said irrevocable letter of credit shall not be subject to annual renewal.
Said financial institution must agree that the presentment for demand may be
made in San Jose, Santa Clara or Palo Alto, California. One half of the cash
Security Deposit ($246,758.40) held by Landlord shall be refunded to Tenant upon
Landlord's receipt of an acceptable irrevocable letter of credit. If Tenant
defaults with respect to any provisions of this Lease, including but not limited
to provisions relating to the payment of Rent, Landlord may (but shall not be
required to) draw down on the irrevocable letter of credit for payment of any
sum which Landlord may spend or become obligated to spend by reason of Tenant's
default, or to compensate Landlord for any loss or damage which Landlord may
suffer by reason of Tenant's default. Landlord and Tenant acknowledge that such
irrevocable letter of credit will be treated as if it were a cash Security
Deposit, and such irrevocable letter of credit may be drawn down upon by
Landlord upon demand and presentation of evidence of the identity of Landlord to
the issuing bank, in the event that Tenant defaults with respect to any
provision of this Lease and such default is not cured within any applicable cure
period. Landlord acknowledges that it is not entitled to draw down such
irrevocable letter of credit unless Landlord would have been entitled to draw
upon a cash Security Deposit pursuant to the terms of Paragraph 4G of the Lease.
Concurrently with the delivery of the required information to the issuing bank,
Landlord shall deliver to Tenant written evidence of the default upon which the
draw down was based, together with evidence that Landlord has provided to Tenant
the written notice of such default which was required under the applicable
provision of the Lease, and evidence of the failure of Tenant to cure such
default
35.
<PAGE> 36
within the applicable grace period following receipt of such notice of default.
If any portion of the irrevocable letter of credit is used or applied pursuant
hereto, Tenant shall, within ten (10) days after receipt of a written demand
therefor from Landlord, restore and replace the value of such security by either
(i) depositing cash with Landlord in the amount equal to the sum drawn down
under the irrevocable letter of credit, or (ii) increasing the irrevocable
letter of credit to its value immediately prior to such application. Tenant's
failure to replace the value of the security as provided in the preceding
sentence shall be a material breach of its obligation under this Lease.
57. ASSIGNMENT OF WARRANTIES.
During the Term of the Lease, Landlord hereby assigns to Tenant all of
Landlord's Contractor's warranties and shall cooperate with Tenant in enforcing
any of such warranties except that Landlord shall not be required to pay any
legal fees or incur any expenses in this regard.
58. BROKERS.
Landlord and Tenant each represent to the other that they have dealt with
no real estate brokers, agents, or finders in connection with this transaction,
except as follows: Cornish & Carey Oncor International ("C&C"), whose commission
shall be paid by Landlord in accordance with Landlord's standard commission
schedule which commission for this Lease is a total of $100,000.00. Each party
agrees to defend, protect, indemnify and hold the other party harmless from and
against all claims for brokerage commissions, finder's fees, and other
compensation made by any broker, agent, or finder as consequence of the
indemnifying party's actions or dealing with such broker, agent or finder. The
parties hereto acknowledge that Landlord will not pay an additional brokerage
fee to C&C or any broker in the event the term of this Lease is extended for any
reason whatsoever.
36.
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WESTPORT OFFICE PARK
REDWOOD CITY, CALIFORNIA
[MAP]
<PAGE> 1
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
EXHIBIT 10.10
BBN PLANET CORPORATION
DIAL UP NETWORK SERVICES AGREEMENT
THIS AGREEMENT (the "Agreement") is made as of October 15, 1996, by and
between BBN PLANET CORPORATION, with a principal business address at 150
CambridgePark Drive, Cambridge, MA 02140 ("BBN Planet") and I-PASS ALLIANCE
INC., 4 Avocet Drive #201, Redwood Shore, CA 94065 ("Customer").
RECITALS
BBN Planet operates and maintains a high-speed dial-up network which is
designed to provide End Users with local telephone connectivity to the Internet
across the continental United States.
Customer desires to offer nationwide dial-up Internet connectivity
services to its employees and to third parties (including both individuals and
corporations) as a part of other services offered to such third parties.
BBN Planet desires to provide to Customer and Customer desires to obtain
from BBN Planet, (1) local dial-up telephone access to BBN Planet's network for
itself and for certain third parties, and (2) a range of related services to
assist Customer in implementing Internet dial-up services, under the terms and
conditions of this Agreement.
NOW, THEREFORE. in consideration of the foregoing and the mutual
covenants set forth in this Agreement, the parties hereto agree as follows:
1. DEFINITIONS
1.1 "BBN BASIC SERVICES" shall mean the dial-up network services offered
by BBN Planet permitting Customer and third parties authorized by Customer to
access the Network (as defined below), all as more fully described in Exhibit A
hereto.
1.2 "COMMENCEMENT DATE" shall mean the earlier of the date upon which
Customer or a End User first connects to the Network via the BBN Basic Services.
1.3 "NETWORK" shall mean the high-speed dial-up network operated and
maintained by BBN Planet which is designed to provide access to the Internet.
1.4 "OPTIONAL SERVICES" shall mean those additional services provided by
BBN Planet and described in Exhibit A which are intended to assist Customer in
using and administering the BBN Basic Services.
1.5 "BBN SERVICES" shall mean BBN Basic Services, together with any
Optional Services selected by Customer.
1.
<PAGE> 2
1.6 "TERM" shall mean the period beginning on the Commencement Date and
extending for a one-year period thereafter.
1.7 "END USER" shall mean (a) any employee of Customer, and/or (b) any
third party which Customer permits to access the Network.
2. BBN PLANET RIGHTS AND RESPONSIBILITIES
2.1 PROVISION OF SERVICES. During the Term, BBN Planet will provide to
Customer the BBN Basic Services and Optional Services as described in EXHIBIT A,
BBN SERVICES attached hereto and incorporated herein by reference, all in
accordance with the terms and conditions set forth in this Agreement.
2.2 BILLING DATA. BBN Planet will transmit (via e-mail or otherwise) to
Customer, generally on a daily basis, the following data:
(a) End User ID;
(b) City the call came to;
(c) Time and date* of initial connect; and
(d) Start time and end time*
*All times in GMT
3. QUALITY COMMITMENT
If at any time Customer is dissatisfied with the quality of BBN
Services, Customer may notify BBN Planet in writing and describe the problem. If
the cause of service quality problem is within BBN Planet's control and service
has not improved to Customer's satisfaction within 30 days of such notice,
Customer may, as its sole and exclusive remedy, terminate this Agreement with no
cancellation penalty, and a pro-rata portion of any pre-paid Service fees
applicable to the terminated BSN Services will be refunded.
Termination under this Section 3 shall not be deemed a termination for
default and, therefore, shall not be subject to the terms of Section 8.4 or 8.6.
4. CUSTOMER RIGHTS AND RESPONSIBILITIES
4.1 THIRD PARTY ACCESS. Subject to the terms and conditions of this
Agreement, Customer shall have the non-exclusive right to provide access
(including the right to sell such access services) to the Network to End Users
in the continental United Stales.
4.2 END USER CONTACT AND BILLING. Customer shall be responsible for all
contacts with End Users, including but not limited to the following:
(a) CONTRACTING/RESULTED FLOWDOWN TERMS. Customer agrees that if
it permits End Users who are not bona fide employees of Customer to access the
Network, it shall
2.
<PAGE> 3
do so only pursuant to a written agreement incorporating terms and conditions
substantially similar to those set forth in EXHIBIT B, REQUIRED FLOWDOWN TERMS,
attached hereto and incorporated herein by reference.
(b) ACCOUNTING AND BILLING. Customer understands and agrees that
it is responsible for all billing and collection from the End Users, and that
Customer shall be responsible for paying BBN Planet on a timely basis as
provided in Section 5 below, regardless of whether Customer actually collects
payment from End Users.
(c) AUTHENTICATION AND AUTHORIZATION. Customer shall be
responsible for authenticating and authorizing Network access by End Users to
the Network. Customer agrees to install, operate, and maintain a dedicated
Radius server computer. BBN's Radius server will prompt each End User seeking
Network access for End User's identification and password information, and poll
customer Radius server for access authorization.
(d) COMMUNICATIONS. Customer shall be responsible for handling
all communication to and business relations with End Users related to access to
the Network
4.3 CUSTOMER BUSINESS AND TECHNICAL SUPPORT. Customer shall be
responsible for providing all technical and business support related to Network
access for End Users, including but not limited to responding to inquiries and
questions, hotline support, problem resolution, providing system configuration,
installation and support, as applicable and other such services and shall
maintain an organization which is highly trained and qualified to provide such
support.
4.4 CONTENT RESPONSIBILITY.
(a) BBN PLANET RESPONSIBILITY. Customer acknowledges and agrees
that BBN Planet has no responsibility for the content of transmissions by
Customer and End Users which may pass through the Network.
(b) CUSTOMER RESPONSIBILITY. Customer agrees that it will not
use Services for illegal purposes, to transmit threatening, obscene or harassing
materials, or to interfere or disrupt network End Users, services, or equipment.
Disruptions include, but are not limited to, distribution of chain letters,
propagation of computer worms and viruses, and using the Service to make
unauthorized entry to any other machine accessible via the Network.
4.5 END USERS/MANDATORY FLOWDOWN TERMS. Prior to providing access to the
Network to a End User, Customer shall enter into written agreements with End
Users in which each End User agrees to terms and conditions substantially
similar to those set forth in EXHIBIT B, REQUIRED FLOWDOWN TERMS, attached
hereto and incorporated herein by reference.
4.6 EQUIPMENT AND TELEPHONE SERVICE. Customer is responsible for
obtaining and providing the telephone services and modems necessary to access
the Network and Services. In no event shall BBN be responsible for End User
telephone charges.
4.7 INACTIVITY. Customer shall be responsible for notifying End Users in
writing that they will be automatically disconnected from the Network after five
minutes of inactivity.
3.
<PAGE> 4
5. PRICES AND PAYMENT.
5.1 PRICES. In connection with the provision of BBN Services hereunder,
Customer agrees to pay BBN Planet the prices set forth in EXHIBIT C, PRICES,
attached hereto and incorporated herein by reference.
5.2 CUSTOMER COMMITTED HOURS. Customer agrees to commit to the minimum
number of hours of Network Access Service as set forth in Exhibit C. ("Customer
Committed Hours"). Based on the Customer Committed Hours, BBN Planet will
invoice Customer for BBN Basic Services at the hourly rate set forth in Exhibit
C, Section A. 1.
5.3 INVOICES AND PAYMENT. BBN Planet will issue invoices to Customer on
a monthly basis. All payments are due net thirty (30) days from date of invoice.
Late payments will be subject to a late payment charge at a rate of one and
one-half percent (1.5%) per month plus any collection costs, including
reasonable attorneys' fees incurred by BBN Planet, or the maximum amount
permitted by law, whichever is less. In addition, BBN Planet reserves the right
to suspend Services to Customer in the event any invoice remain unpaid thirty
(30) days after the invoice due date.
5.4 TAXES. All prices are exclusive of any federal, state, municipal or
other governmental taxes, duties, sales or use taxes, excise taxes,
telecommunications taxes, or tariffs now or hereinafter imposed excluding any
taxes on BBN Planet's net income. All such charges shall be paid by Customer
unless Customer provides an exemption certificate acceptable to BBN Planet and
the applicable taxation authority
6. CONFIDENTIAL RELATIONSHIP.
6.1 CONFIDENTIAL BUSINESS INFORMATION. This Agreement creates a
relationship of confidence and trust between Customer and BBN Planet with
respect to certain business confidential information (`Information'). Each party
may disclose to the other party certain non-public marketing information,
customer Information, leads and other types of non-technical business
information in performance of this Agreement.
6.2 CONFIDENTIALITY REQUIREMENTS. Neither party shall disclose
information received from the other party to any third party and shall not use
that information except in performance of this Agreement. Upon the request of
the disclosing party, the other party shall return any materials received
containing information of disclosing party, and all copies thereof. Both parties
shall use the same care to prevent disclosure of information of the other party
which it uses to safeguard its own most valuable confidential information and/or
trade secrets, but in no event less than a reasonable degree of care for such
information.
6.3 EXCEPTIONS TO CONFIDENTIALITY REQUIREMENTS. The obligations of the
parties hereunder shall not apply to any information which:
(a) Was in the public domain at the time it was disclosed;
(b) Enters the public domain other than by breach of this
Agreement;
4.
<PAGE> 5
(c) Is independently developed by the receiving party without
access to the Information;
(d) Is known at the time of its disclosure to the other party;
or
(e) Is not identified as proprietary information at the time of
its disclosure.
7. WARRANTIES AND LIMITATION OF LIABILITY
7.1 WARRANTY. BBN Planet provides BBN Services hereunder strictly on an
"AS IS" and "AS AVAILABLE" basis without any express guarantee or assurance of
access, quality, reliability or functionality. BBN Planet warrants that it
possesses all necessary rights and corporate authority to provide the BBN
Services as specified in this Agreement and to execute its obligations hereunder
Except as expressly set forth herein, BBN PLANET DISCLAIMS ALL EXPRESS AND
IMPLIED WARRANTIES, INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE. NEITHER BBN PLANET NOR ANY OF ITS SERVICE PROVIDERS,
LICENSORS, EMPLOYEES, OR AGENTS WARRANT THAT THE BBN SERVICES WILL BE
UNINTERRUPTED OR ERROR FREE.
7.2 WARRANTY EXCLUSIONS. BBN Planet does not warrant that the Network
will have the capacity to meet the demand of End Users during specific hours.
BBN Planet will not be liable for any damage that Customer or its End Users may
suffer arising out of use, or inability to use, the BBN Services provided
hereunder. Except for intentional acts by BBN Planet personnel, BBN Planet will
not be liable for unauthorized access to Customer's or End Users' transmission
facilities or premise equipment or for unauthorized access to or alteration,
theft, or destruction of Customer's or End Users' data files, programs,
procedures or information through accident, fraudulent means or devices, or any
other method, regardless of whether such damage occurs as a result of BBN
Planet's negligence.
7.3 LIMITATION OF LIABILITY. NEITHER PARTY SHALL BE LIABLE TO THE OTHER
FOR LOSS OF PROFIT, LOSS OF DATA, LOSS OF BUSINESS, LOSS OF REVENUE, OR FOR ANY
OTHER SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES. IN NO EVENT SHALL
BBN PLANET'S LIABILITY HEREUNDER EXCEED ONE HUNDRED THOUSAND DOLLARS ($100,000).
7.4 THIRD PARTY INDEMNIFICATION. Customer agrees that BBN Planet will
not be liable for any claim or demand against BBN Planet by any End Users.
Customer shall defend BBN Planet from any claims of third parties (including but
not limited to Customer's End Users) to the extent such claims arise out of the
provision of BBN Services under this Agreement, and Customer agrees to indemnify
and hold BBN Planet harmless from and against any and all resulting costs,
damages, and liabilities (including attorneys' fees) arising out of such claims;
provided, however, that (a) BBN Planet promptly notifies Customer in writing of
any such claim; (b) Customer has the opportunity to control the defense and all
related settlement negotiations; and (c) BBN Planet reasonably cooperates in the
defense and uses reasonable efforts to furnish all related evidence in its
control.
5.
<PAGE> 6
8. TERM AND TERMINATION.
8.1 TERM. The Term of this Agreement shall be one (1) year beginning on
the Commencement Data.
8.2 RENEWAL. This Agreement may be renewed for additional one (1) year
terms upon mutual written agreement of the parties
8.3 DEFAULT BY CUSTOMER. An event of default by Customer shall occur
hereunder if Customer:
(a) Fails to pay any Fees as set forth in this Agreement; and/or
(b) Fails to perform or observe any material covenant,
conditions or agreement to be performed or observed by Customer hereunder or
breaches any material representation or provision contained herein.
8.4 EVENT OF DEFAULT BY BBN PLANET. An event of default by BBN Planet
shall occur hereunder if BBN Planet fails to perform or observe any material
covenant, condition or agreement to be performed or observed by BBN Planet
hereunder or breaches any material representation or provision contained herein.
8.5 OTHER DEFAULTS. It shall be an event of default hereunder if a
judgment or decree is entered against either party approving a petition for
bankruptcy, liquidation, dissolution, composition or similar relief and such
Judgment or decree remains unvacated for sixty (60) days; or immediately if:
(a) either party shall file a voluntary petition in bankruptcy
or any petition or answer seeking and bankruptcy, liquidation, dissolution,
composition or similar relief;
(b) either party shall seek, consent, or acquiesce to the
appointment of a trustee or receiver, or the liquidation of such party's
property; or
(c) either party becomes insolvent or unable to pay its debts as
they become due during the ordinary course of business.
8.6 REMEDIES. Upon an event of default by a party, the other party shall
have the right to terminate this Agreement by giving the defaulting party
written notice of the event of default, specifying the nature of such default.
Terminations shall automatically occur thirty (30) days after the receipt of
such written notice if the event of default is not corrected. The rights and
remedies set forth in this Section 8 relating to termination for breach are in
addition to any other rights or remedies which otherwise might be available in
law or in equity.
8.7 EFFECTS OF TERMINATION.
(a) The provisions of Sections 6, 7 and 9 shall survive any
expiration or termination of this Agreement and shall bind the parties and their
legal representatives, successors, heirs and assigns.
6.
<PAGE> 7
(b) Upon any termination or non-renewal of this Agreement,
Customer shall pay BBN all Fees not yet paid but accrued prior to any such
termination or non-renewal.
9. GENERAL PROVISIONS.
9.1 PRESS RELEASES. BBN Planet and Customer agree to mutually review and
approve any press releases or announcements prior to their release with respect
to use of BBN Planet's name, trademarks, or Services being provided by BBN
Planet.
9.2 NO WAIVER. Either party's failure to exercise any right under this
Agreement shall not constitute a waiver of any other terms or conditions of this
Agreement with respect to any other or subsequent breach, nor a waiver by such
party of its right at any time thereafter to require exact and strict compliance
with terms of this Agreement.
9.3 GOVERNING LAW. This Agreement and all attachments, schedules and
exhibits shall be governed and construed in accordance with the laws, statues
and regulations of the Commonwealth of Massachusetts, excluding its choice of
law rules.
9.4 SEVERABILITY. If any provision of this Agreement is declared void,
illegal or unenforceable, the provision shall be deemed amended as necessary to
conform to applicable laws or regulations, or if it cannot be amended without
materially altering the intention of the parties, the remainder of the Agreement
shall continue in full force and effect as if the offending provision were not
contained herein.
9.5 FORCE MAJEURE. If the performance of any obligation is interfered
with by reason of any circumstances beyond the reasonable control of the party
affected, then the party affected shall be excused from such performance to the
extent necessary, provided that the party so affected shall use reasonable
diligent efforts to remove such causes of non-performance.
9.6 HIRING. Customer and BBN Planet agree that during the term of this
Agreement and for one (1) year thereafter they will not, without prior written
consent of the other, employ or offer employment to any employee of the other
who has knowledge or skills relating to the BBN Services provided by BBN Planet
hereunder.
9.7 ASSIGNMENT. Customer may not assign or otherwise transfer its rights
or obligations under this Agreement without BBN Planet's prior consent, which
consent will not be unreasonably denied.
9.8 INDEPENDENT THIRD PARTY. This Agreement creates no relationship of
joint venture, partnership or regency between the parties. Each party agrees and
acknowledges that it is not, and will not hold itself out as, the representative
or agent of the other party for any purpose.
9.9 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
and understanding between both parties and supersedes all previous proposal,
(both oral and written), negotiations, representations, writings and all other
communications between the parties. This Agreement may not be changed or
modified except by a written signed by the parties.
7.
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto execute this Agreement as of the
day and year, first set forth above.
BBN PLANET CORPORATION [CUSTOMER]
By: /s/ M. BRODERICK By: /s/ CHRIS MOORE
--------------------------------- ---------------------------------
Name: Mary Broderick Name: Chris Moore
------------------------------- -------------------------------
Title: Sr. Contract Rep Title: President
------------------------------ ------------------------------
Date: 10/30/96 Date: 10/15/96
------------------------------- -------------------------------
8.
<PAGE> 9
EXHIBIT A
BBN PLANET
DIALINX SERVICES
(VERSION 1.0)
1. OVERVIEW
DiaLinx, a nationwide dial-up Internet access service, provides corporation and
organizations with a reliable means to connect branch offices, "telecommuters",
"roadwarriors" and customers to the Internet from any location in the
continental United States.
2. BBN PLANET BASIC SERVICES
2.1 NETWORK ACCESS. BBN Planet will provide Customer with nationwide
dial up access to the Internet through the BBN Planet DialLinx network. Access
is available through local access ports across the continental United States as
well as through 800 service in locations where local dial access is not
available.
2.2 NETWORK OPERATIONS. The BBN Planet Network Operations Center ("NOC")
monitors the DiaLinx network 24 hours per day, 365 days per year. The NOC
performs proactive operations support and troubleshooting of network and service
infrastructure components Including periodic testing of all DiaLinx access
ports.
2.3 SYSTEM SPECIFICATIONS
2.3.1 USER COMPONENT: To facilitate quality service, BBN Planet
has established the following as the minimum standards for desktop, portable, or
laptop computers used by Users when utilizing DiaLinx.
SUPPORTED PLATFORMS:
A. IBM compatible PC
1. Windows 3.1 and greater
2. Windows for Workgroups 3.11
3. Windows 95
B. Apple Macintosh
1. Macintosh System 7,1 or later
2. Mac OS
3. PowerPC
<TABLE>
<CAPTION>
Supported Processor Memory Memory Disk Space
Platforms (Minimum) (Minimum) (Recommended) (Minimum Install)
- --------- --------- --------- ------------- -----------------
<S> <C> <C> <C> <C>
Windows 3.1+ 486sx 4MB 10MB 12MB
Windows 95 486sx 6MB 10MB 12MB
Macintosh 68030 7MB 10MB 12MB
</TABLE>
9.
<PAGE> 10
2.3.2 CUSTOMER COMPONENT: BBN Planet requires Customers to manage their
user interface, including registration and termination, and to load valid End
Users on a Customer Radius server. Customer must utilize a RADIUS server
sufficient to communicate the anticipated usage volume to the RADIUS servers
deployed by BBN Planet to accomplish user access authentication. To support the
installation and operation of this servers, DiaLinx will provide one day
training of the customer technical staff at our Columbia, MD facility. Users
should be encouraged to use 14.4 Kbps or faster modems.
3. OPTIONAL SERVICES
Optional Services provided under this Agreement are as follows:
3.1 END USER HELP DESK SERVICES. BBN Planet will provide telephone Help
Desk support to Customer's End Users. This support will be answered in
Customer's name and provide assistance with installation and use of supported
desktop connectivity software, including browser and email. Trouble reporting
and escalation to Customer's support operation and/or BBN Planet network
operations is included.
3.2 CONNECTIVITY SUITE. BBN Planet provides software suites containing
the dial up communications package, TCP/IP stack, SLIP/PPP software, PAP,
Netscape(R) web browser, email and new clients. These suites will be private
labeled with Customer's logo, welcome screen, and other agreed to private
labeling features. BBN Planet can additionally provide services to incorporate
Customer unique software applications with connectivity suites, and to design,
reproduce, package and/or distribute software suites for Customer's end users.
3.3 USENET NEWS AND END USER EMAIL ACCOUNTS. BBN Planet will provide
Usenet News, and Individual email accounts hosted on a standard industry POP3
email server. End Users can store up to 5 Mbytes of mail storage.
3.4 BILLING SERVICES. BBN Planet offers two types of billing services.
BBN Planet will provide sorted and summarized user activity files. These records
will be electronically transferred to Customer on a monthly basis. Subject to
mutual agreement, BBN Planet will also provide direct billing to End User's
major credit card. The credit card is validated when BBN Planet receives
Customer's electronic transmission of a registered End User and his or her card
#/expiration date. Using Customer's pre-set rate structure, each End User's
credit card is "charged" Customer established rates, calculated by BBN Planet,
at the end of the billing cycle. All billings are credited to Customer's credit
card Merchant Account, and any End User credit card problems are reported to
Customer. Electronic files of all monthly billings will be forwarded to
Customer.
10.
<PAGE> 11
EXHIBIT B
MANDATORY FLOWDOWN TERMS
PREFACE
This Exhibit B summarizes essential terms to be incorporated into
agreements between Customer and its End Users in accordance with Sections 3.2(a)
and 3.5 of the Agreement. Customer may modify the wording of the essential terms
set forth below, provided, however, that the terms as modified are not
materially different in substance, enforceability, and effect from those terms
set forth below, For purposes of these Mandatory Flowdown Terms, "Network
Services Supplier" shall mean BBN Planet Corporation. Except as otherwise
defined herein, capitalized terms shall have the meeting ascribed in the
attached Agreement.
NO RIGHT OF RESALE
End Users may not resell or redistribute any BBN Services.
CONTENT RESPONSIBILITY
End User acknowledges and agrees that neither Customer nor its Network
Services Supplier is responsible for the content of the transmissions by End
User which may pass through the Network. End User agrees that it will take
reasonable steps to ensure that it will NOT use the BBN Planet Services for
illegal purposes, for transmission of threatening, obscene, or harassing
materials, or to interfere with or disrupt Network End Users, services or
equipment. Disruptions include, but are not limited to, distribution of chain
letters, propagation of computer worms and viruses, and using the Network to
make unauthorized entry to any other machine accessible via the Network.
Violation of the foregoing by Customer or its End Users may result in
termination of Network access rights to the offending party or parties.
WARRANTY AND LIABILITY LIMITATIONS.
Customer does not warrant that the BBN Planet Services will be available
on a specified date or time or that the Network will have the capacity to meet
the demand of End User or its End Users during specific hours. Neither Customer
nor its Network Services Supplier will be liable for any damage that End User or
its End Users may suffer arising out of use, or inability to use, the services
or products provided hereunder. Neither Customer nor its Network Services
Supplier will be liable for unauthorized access to Customer's transmission
facilities or premise equipment or for unauthorized access to or alteration,
theft or destruction of End User's data files, programs, procedures or
information through accident, fraudulent means or devices, or any other method,
regardless of whether such damage occurs as a result of Customer's or its
Network Service Supplier's negligence.
IN NO EVENT WILL CUSTOMER OR ITS NETWORK SERVICES SUPPLIERS BE LIABLE
FOR ANY OTHER DAMAGES, INCLUDING BUT NOT LIMITED TO LOSS OF DATA, LOSS OF
REVENUE OR PROFITS, OR FOR ANY OTHER SPECIAL, INCIDENTAL, INDIRECT OR
CONSEQUENTIAL DAMAGES, ARISING OUT OF OR IN CONNECTION WITH THE USE OF BBN
PLANET SERVICES TO ACCESS THE NETWORK.
11.
<PAGE> 12
NETWORK ACCESS AVAILABILITY
Access to the Network cannot be guaranteed to any Customer or End Users.
End Users may be unable to access the Network at any time, and disconnections
from the Network may occur from time to time.
12.
<PAGE> 13
EXHIBIT C
PRICES
A. BN Planet Basic Services
1. Network Access Service*
<TABLE>
<S> <C>
[*] Up to 10,000 hours from Contract Date to 12/31/96
[*]/hour From 1/1/97 - 3/31/97
[*]/hour 40,000 hrs/month 4/1/97 - 8/31/97
[*]/hour 60,000 hrs/month 9/1/97 - 12/1/97
[*]/hour 125,000 hrs/month 12/2/97 - 3/1/98
[*]/hr. 225,000 hrs./month after 3/1/98
800 Service [*]/hour
All End User Network Access Service Connect time is
rounded up to the next highest minute.
</TABLE>
B. Optional Services
<TABLE>
<S> <C>
1. Help Desk [*]/hour
2. Billing
Pre-billing [*]/subscriber/month
Credit Card [*] initial setup
[*] subscriber setup or change
[*] billed user/month
(all credit card company fees not included and are the
responsibility of Customer)
</TABLE>
3. Usenet News/End User Mail Accounts
<TABLE>
<S> <C>
1 - 4,999 accounts [*]/account/month
5,000 - 19,000 account [*]/account/month
20,000 + [*]/account/month
</TABLE>
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
13.
<PAGE> 14
4. Connectivity Suite (Note: connectivity suite = 3 diskettes)
<TABLE>
<S> <C>
One-time set up fee [*]
1-500 copies [*]
501-5000 copies [*]
5000+ copies [*]
</TABLE>
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
14.
<PAGE> 15
AMENDMENT NO. 1
DIAL UP NETWORK SERVICES AGREEMENT
This amendment (the "Amendment") to the Dial Up Network Services
Agreement between BBN Planet Corporation and i-Pass Alliance Inc. dated October
15, 1996 (the "Agreement") revises certain terms and conditions in the
Agreement.
The parties agree to amend the Agreement as follows:.
1. Delete Section 1.6 "Term" and substitute the following:
1.6 "Term" shall mean the period beginning on the Commencement Date and
extending until December 31, 1997.
2. Delete Section 5.2 Customer Committed Hours and replace with the following:
5.2 Customer Committed Hours. Customer understands and agrees that
it is obligated to pay for the minimum number of hours of
Network Access Service specified as Customer Committed Hours as
set forth in Exhibit C. Section A.2. Based on the Customer
Committed Hours amount, BBN Planet will invoice Customer for BBN
Basic Services at the hourly rate set forth in Exhibit C,
Section A.1. Customer acknowledges and understands that it is
obligated to pay the full amount due for the Customer Committed
Hours notwithstanding the fact that cumulative actual network
access service connect hours during the Term may be less than
the Customer Committed Hours amount. In such event, Customer
agrees to pay an amount which is the difference between (a) the
total amount due for the Customer Committed Hours at the Local
Access Service rate less (c) the amount due for actual network
Access Service connect hours at the Local Access Service rate.
Such amount is due and payable within thirty days of the last
day of the Term.
3. Delete Section 8.1 Term and replace with the following:
8.1 Term. The Term of this Agreement shall begin on the Commencement
Date and extend until December 31, 1997.
4. Delete Exhibit C. Prices and substitute the revised Exhibit C as set forth in
Attachment No. 1 to this Amendment.
5. Change all references to "BBN Planet Corporation" in the Agreement to "BBN
Planet, a division of BBN Corporation.
6. Other Matters
6.1 BBN Planet Engineering Activities. BBN Planet agrees to carry out
the following engineering activities for the benefit of Customer:
15.
<PAGE> 16
6.1.1 BBN Planet agrees to implement additional "redundancy" of
DiaLinx user authentication by adding to BBN Planet's RADIUS
authentication procedure the capability to utilize a second or
backup i-Pass RADIUS Server if Customer's primary RADIUS Server
is unavailable. This capability will be delivered to i-Pass by
4/15/97. Cost: [*]. Until BBN Planet delivers this
"redundancy" capability, BBN Planet and i-Pass will implement a
mutually agreeable interim, low cost solution by 1/31/97.
6.1.2 BBN Planet will identify at the time of user authorization
any user accessing the BBN Planet dial network via the 800
number. BBN Planet will provide a new attribute in the
authentication request packet that will flag the call as an
"800" access call. It will the responsibility of the i-Pass
end-user RADIUS server to use this information in conjunction
with the account name and password to authorize or deny access.
This capability will be delivered to i-Pass by 4/30/97. Cost:
[*]. Until BBN Planet delivers this "800 Identification"
capability, BBN Planet and i-Pass will implement a mutually
agreeable interim, low cost solution by 1/31/97.
6.1.3 i-Pass desires that BBN Planet provide "real-time"
disconnect data for each user. Ascend Communications has advised
BBN Planet that it plans to include an enhancement to track and
pass real-time disconnect data in the next version of the
Ascend software, Version 5.0. BBN Planet will provide the per
user session information in real-time via RADIUS accounting
packets to i-Pass, i-Pass is responsible to modify its RADIUS
servers to support a new accounting server attribute in each
user profile. Expected availability of Ascend software Version
5.0 on our network is April-May `97. BBN Planet will provide the
information on the specification to support this feature to
i-Pass by February 28, 1997. BBN Planet shall have no obligation
to provide "real time" disconnect data in the event that the
next version of Ascend does not include the capability to track
and pass real-time disconnect data as noted above.
6.1.4 BBN Planet and i-Pass agree to limit the number of realms
assigned to i-Pass and to establish a naming convention which
uniquely identifies BBN Planet's customers and i-Pass'
customers. On a reasonable efforts basis, BBN Planet and i- Pass
will implement a mutually agreeable approach for accomplishing
these objectives by 4/1/97. Until this approach is implemented,
BBN Planet will continue to support i-Pass' realm requirements
and its current naming convention.
6.1.5 Consideration. In consideration for BBN Planet's agreement
to undertake the engineering activities as described in
Paragraphs 6.1.1 and 6.1.2 above, Customer agrees to make a
nonrefundable prepayment of [*] (for 6000 hours of Local
Access Service) for the aforementioned engineering activities as
described above (i.e, a total of [*]) which amounts are
due and payable within fifteen days of the completion of each
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
16.
<PAGE> 17
activity. These amounts will be credited against amounts due and
payable under Section 5. for BBN Planet Basic Services.
6.2 Dialinx Pricing Assurance. If BBN Planet agrees to provide BBN
Planet Basic Services to one or more of the following competitors of
Customer ("Competitors") at prices (based on substantially similar
Customer Committed Hours, terms and conditions) which are less than
those granted to Customer under this Agreement, BBN Planet will so
advise Customer. BBN Planet may elect, but shall have no obligation, to
offer revised prices to Customer which are comparable to those offered
to a Competitor. In the event that BBN Planet elects not to offer
revised prices to Customer, Customer shall have the right to terminate
this Agreement at its convenience. If Customer elects to so terminate,
Customer's obligation under Section 5.2 Customer Committed Hours (as set
forth in the Agreement as amended) shall expire.
Competitors of Customer are as follows:
[List no more than two companies]: AimQuest, EUnet AimQuest, EUnet
During the Term Customer shall have the right to add up to four additional
companies to the above list upon delivery of written notice to BBN Planet.
6.3 BBN Planet Marketing Support
6.3.1 To facilitate Customer's sales efforts, BBN Planet will
carry out the marketing support activities as described in
Attachment No. 2.
6.3.2 In the event that BBN Planet fails to complete any of the
Marketing Support activities as described in Attachment No. 2,
BBN Planet will reduce the Customer Committed Hours amount as
set forth in Exhibit C (as revised) by the amount of hours set
listed in Attachment No. 2.
All other terms and conditions in the Agreement remain unchanged.
17.
<PAGE> 18
BBN PLANET I-PASS ALLIANCE INC.
A DIVISION OF BBN CORPORATION
By: /s/ WADE M. CARLL By: /s/ CHRIS MOORE
--------------------------------- ---------------------------------
Name: Wade M. Carll Name: Chris Moore
------------------------------- -------------------------------
Title: Regional Sales VP Title: President & CEO
------------------------------ ------------------------------
Date: 12/31/96 Date: 12/31/96
------------------------------- -------------------------------
18.
<PAGE> 19
ATTACHMENT NO. 1
EXHIBIT C
(REVISED DEC 26, 1996)
PRICES
A. BBN Planet Basic Services
1. Local Access Service
1.1 Up to 10,000 hours through 12./31/96 [ * ]
1.2 January l, 1997 through December 31, 1997. The price for all
Local Access Service is [ * ]/hour except for individual calendar months
in which the actual hours of Local Access Service exceeds the following
amounts in which case the price for all Local Access Service hours
during the month will be as listed.
<TABLE>
<S> <C>
40,000 to 124,999 hours per month [*]/hour
125,000 to 224,999 hours/month [*]/hour
225,000+ hours/month [*]/hour
</TABLE>
1.3 800 Service [*]/hour
All End User Network Access Service Connect time is
rounded up to the next highest minute.
2. Customer Committed Hours 100,000 hours*
*Customer Committed Hours includes End User Access Service Connect time
between January 1, 1997 and December 31, 1997 but excludes all End User
Access Service Connect time before January 1, 1997.
B. Optional Services
In the event that Customer wishes to purchase any Optional Services
during the Term, Customer shall issue a Purchase Order which references
this Agreement, the Optional Services ordered and price.
1. End User Help Desk Service
<TABLE>
<S> <C>
Basic Service Set Up Fee (One Time) [*]
Help Desk Service [*]/hour
</TABLE>
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
19.
<PAGE> 20
2. Billing
<TABLE>
<S> <C>
Pre-sorted call records [*]/subscriber/month
Credit Card [*] initial setup
[*] subscriber setup or change
[*] billed subscriber/month
</TABLE>
(all credit card company fees not included and are the
responsibility of Customer)
3. Usenet News/End User Mail Accounts
<TABLE>
<S> <C>
1 - 4,999 accounts [*]/account/month
5,000 - 19,000 account [*]/account/month
20,000 + [*]/account/month
</TABLE>
4. Connectivity Suite (Note: connectivity suite = 3 diskettes)
<TABLE>
<S> <C>
One-time set up fee [*]
1-500 copies [*]/ copy
501-5000 copies [*]/ copy
5000+ copies [*]/copy
</TABLE>
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
20.
<PAGE> 21
ATTACHMENT NO. 2
BBN PLANET MARKETING SUPPORT
A. BBN Planet agrees to provide the following marketing support for the benefit
of Customer:
1. BBN Planet will brief its Regional Sales Directors on the i-Pass
offering within thirty (30) days of the execution of Amendment No. 1. i-Pass
must provide all necessary and appropriate information (subject to BBN Planet
approval) within ten (10) days of execution of Amendment No. 1.
2. BBN Planet will include a description of the i-Pass offering and a
link to the i-Pass World Wide Web site on the BBN Planet iweb site within
forty-five (45) days of receipt by BBN Planet of i-Pass materials which
materials are acceptable to BBN Planet.
3. BBN Planet will permit i-Pass to send one direct mailing to BBN
Planet's ISP customers. This mailing is at i-Pass expense and will be carried
out by a mutually acceptable third party.
4. BBN Planet will provide i-Pass the opportunity to speak at the BBN
Planet national sales meeting in July 1997.
5. BBN Planet will provide the opportunity for i-Pass to distribute
i-Pass literature from BBN Planet's booth at two trade show at which BBN Planet
will feature its Dial Up Network Service prior to June 30, 1997.
B. In the event that BBN Planet fails to perform one or more of the above
mentioned marketing support activities, The Customer Committed Hours amount as
set forth in Exhibit C (as revised) shall be reduced by 2000 hours for each
marketing support activity not performed.
21.
<PAGE> 22
ATTACHMENT A
TO THE SETTLEMENT AND RELEASE AGREEMENT
AMENDMENT NO. 2
TO THE
DIAL-UP NETWORK SERVICES AGREEMENT
("DIAL-UP AGREEMENT")
BETWEEN
GTE INTERNETWORKING INCORPORATED (FORMERLY BBN PLANET) ("GTE")
AND
i-PASS ALLIANCE, INC., ("i-PASS")
THIS AMENDMENT #2 to the Dial-Up Network Services Agreement dated October 15th
1996 (referred to as "Dial-Up Agreement"), between GTE INTERNETWORKING
INCORPORATED (formerly BBN Planet) a corporation with principal offices at 150
CambridgePark Drive, Cambridge, Massachusetts 02140 ("GTE") and I-PASS ALLIANCE,
INC., a corporation with principal offices 650 Castro Street, Suite 280 Mountain
View, CA 94041, USA ("i-Pass"), ("Customer")
RECITALS
A. The parties agree to incorporate the following provision into the Dial-Up
Agreement as set forth below:
3.1 Service Level Guarantee. GTE shall provide to i-Pass an overall
dial-up network availability of ninety-eight (98%) percent. Should GTE provide
less than ninety-eight (98%) percent availability, then the percentage
difference between ninety-eight (98%) percent commitment and the actual
availability shall be credited to i-Pass' monthly bill provided that i-Pass
exceed a minimum total usage equal to one twelfth (1/12th) of the Yearly
Commitment.
B. The parties agree to modify the following provision of the Dial-Up Agreement
as set forth below.
1.6 Term. Shall mean the period of two (2) years from the effective date
of this agreement.
Exhibit C - "Price". A.1. "Network Access Services"
<TABLE>
<S> <C> <C>
Yearly Commitment 100,000 hours @ [*] per hour
800/888 Service @ [*] per hour
</TABLE>
All End User Network Access Connect time is rounded up to the next
higher minute.
C. The parties agree to change all references to "BBN Planet" in the Dial-Up
Agreement to "GTE Internetworking Incorporated."
D. Except as amended hereby (and by any other Amendments, if applicable), all
other terms and conditions of the Dial-Up Agreement shall remain in full force
and effect.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
25.
<PAGE> 23
These terms and conditions have been read, are understood, and are hereby
accepted.
GTE Internetworking Incorporated i-PASS ALLIANCE INC.
By: By: /s/ G. BRADFORD SOLO
--------------------------------- ---------------------------------
Name: Name: G. Bradford Solo
------------------------------- -------------------------------
Title: Title: Vice President & CFO
------------------------------ ------------------------------
Date: Date: 3/27/98
------------------------------- -------------------------------
26.
<PAGE> 24
ATTACHMENT B
TO THE SETTLEMENT AND RELEASE AGREEMENT
AMENDMENT NO. 1
TO THE
INTERNET ROAMING SERVICES AGREEMENT ("ROAMING AGREEMENT")
BETWEEN
GTE INTERNETWORKING INCORPORATED (FORMERLY BBN PLANET) ("GTE")
AND i-PASS ALLIANCE, INC.,
("i-PASS")
THIS AMENDMENT #1 to the Internet Roaming Services Agreement (referred to as
"Roaming Agreement") dated May 21st 1997, between GTE INTERNETWORKING
INCORPORATED (formerly BBN Planet) a corporation with principal offices at 150
CambridgePark Drive, Cambridge, Massachusetts 02140 ("GTE") ("Customer") and
I-PASS ALLIANCE, INC., a corporation with principal offices 650 Castro Street,
Suite 280 Mountain View, CA 94041, USA ("i-Pass").
RECITALS
A. The parties agree to incorporate the following provision into the Roaming
Agreement as set forth below:
1.4 Preferred Customer. i-Pass shall provide to GTE preferential listing
for all GTE Points of Presence ("POP") by providing GTE the first available
positions in the i-Pass phone book.
Exhibit B "Fees and Credit Limite"
B. The parties agree to charge all references to "BBN Planet" in the Roaming
Agreement to "GTE Internetworking Incorporated."
C. Except as amended hereby (and by any other Amendments, if applicable), all
other terms and conditions of the Roaming Agreement shall remain in full force
and effect.
27.
<PAGE> 25
These terms and conditions have been read, are understood, and are hereby
accepted.
GTE Internetworking Incorporated i-PASS ALLIANCE INC.
By: By: /s/ G. BRADFORD SOLO
--------------------------------- ---------------------------------
Name: Name: G. Bradford Solo
------------------------------- -------------------------------
Title: Title: Vice President & CFO
------------------------------ ------------------------------
Date: Date: 3/27/98
------------------------------- -------------------------------
28.
<PAGE> 26
Amendment for
DiaLinx International Services
(rev. June 1999)
This Amendment for DiaLinx International Services ("DLI Amendment")
together with, either: (i) the Service Schedule - DiaLinx Services and Master
Agreement for Internetworking Services, or (ii) the Dial-up Network Services
Agreement, between the parties (the "Agreement") define the terms and conditions
by which GTE Internetworking Incorporated ("we") will provide the customer
listed below ("you") with the services described herein.
(a) Covered Services. We will provide you with the DiaLinx International
Services ("DLI Services") in accordance with the terms of the Agreement as
amended by this DLI Amendment. These DLI Services are designed to allow you to
access the DiaLinx Network via our international points of presence.
(b) Term. The DLI Services represent an enhanced, optional DiaLinx service. The
DLI Services will be offered concurrently with the Basic Services, unless
earlier cancelled by a party.
(c) DLI Pricing - Rate Schedule. The following prices and terms will apply to
access to the DiaLinx and DLI Services:
DiaLinx International: Access to the Network via any DiaLinx
International access number will be charged as follows.
<TABLE>
<CAPTION>
DiaLinx Zone Code Hourly Rate
----------------- -----------
<S> <C>
Zone 1 ("UK") [*]
Zone 2 ("Europe") [*]
Zone 3 ("Aus./N.Z.") [*]
Zone 4 ("Mexico") [*]
Zone 5 ("Asia") [*]
</TABLE>
A list of dial-in access numbers associated with each DiaLinx
International zone can be found at
http://www.bbn.com/support/docs/intpops.xls. GTE Internetworking expects
the DiaLinx Network to change over time in order to meet the changing
needs of our customers. We reserve the right to add to, delete or change
the dial-in access number associated with a specified zone from time to
time. Geographic references are for convenience only; actual access
numbers may vary from geographic boundaries.
We also reserve the right to add additional services and zones to the
foregoing rate schedule as the DiaLinx network develops (e.g. Canadian
800 Service). These additional services and respective prices will be
made available to you on an on-going basis, and will be deemed added to
the foregoing rate schedule upon notice by us to you that they are
available. For an updated list of services, prices, and dial-up access
number associated with each zone, please consult our Web page or contact
your GTE Internetworking representative.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
29.
<PAGE> 27
All Network connect time is rounded up the next highest minute and
billed in one minute increments. Invoices are issued monthly and due net
thirty days. All pricing is listed as U.S. dollars.
(d) CURRENCY AND TAXES. All payments shall be in U.S. Dollars. You are
responsible for the payment of all taxes (including without limitation
applicable VAT or withholding taxes but excluding taxes based solely on our net
income), import duties, or other applicable telecommunications or regulatory
fees (collectively, "Taxes"). You shall not deduct any such Taxes from the
amounts owed to us. In the event you are required to withhold Taxes from any
payment due to us, then the amount of such payment shall be automatically
increased to totally offset such Taxes, so that the amount actually remitted to
us, net of all Taxes, equals the amount invoiced or otherwise due.
(e) COMPLIANCE WITH APPLICABLE EXPORT AND LOCAL LAWS. You agree that you shall
use the DLI Service in full compliance with (i) all applicable export laws
(including without limitation any U.S. export laws) and (ii) local laws and
regulations of the jurisdiction in which the DLI Service is provided, including
without limitation any laws governing the import of the DLI Service, or
governing the access of content which may be available via the DLI Service. We
reserve the right to suspend or terminated the DLI Service (or any portion
thereof) without notice in the event that we believe that your use (or any of
your user's use) of the DLI Service may be in violation of any applicable export
law, local law, regulation, or ordinance. You acknowledge that we have no
control over or liability for the actions of local jurisdictions which may
restrict or block DLI Services.
(f) DISPUTES. Any dispute arising out of or in connection with the DLI Services
in a country other than the United States, shall be referred to and finally
resolved by arbitration in accordance with the Rules of the International
Chamber of Commerce then in force; provided, however, that either party may, at
its sole discretion, seek injunctive relief in the courts of any jurisdiction as
may be necessary and appropriate to protect its proprietary or confidential
information. The language used in the arbitral proceedings, and the governing
language of the Agreement, shall be English. Unless otherwise mutually agreed
upon in writing by the parties, the site of the arbitration shall be Boston,
Massachusetts, U.S.A. Judgment upon the award of the arbitration may be entered
in any court having jurisdiction thereof.
(g) GOVERNING LAW. The governing law in any dispute shall be the substantive law
of the Commonwealth of Massachusetts, U.S.A. without regard to conflicts of law.
The parties expressly agree that the U.N. Convention no Contracts for the
International Sale of Goods shall not apply to the Agreement.
(h) AMENDMENTS; SEVERABILITY. This DLI Amendment may only be modified by a
written amendment duly executed by other parties. If any provision of this DLI
Amendment shall be invalid or enforceable, the remainder of this DLI Amendment
shall not be affected.
Except as expressly modified by this DLI Amendment, all terms and conditions of
the Agreement shall remain in full force and effect. The terms and conditions of
the Agreement (including, but not limited to, any disclaimers and limitations on
liability) will continue to apply to the services described herein. Any terms
defined in the Agreement and not defined in the DLI
30.
<PAGE> 28
Amendment shall have the meaning given in the Agreement. In the event of any
conflict between the terms of the Agreement and the terms of this DLI Amendment,
the terms of this DLI Amendment shall control.
Accepted and Agreed to:
- --------------------------------------------------------------------------------
Company (Type or Print Full Customer Name): iPass
-------------------------------------
Signature: /s/ Michael Mansouri Date: July 2, '99
---------------------------------- ------------------------
Print Name: Michael Mansouri Title: CEO
--------------------------------- ------------------------
GTE Internetworking Incorporated
Signature: Date:
---------------------------------- ------------------------
Print Name: Title:
--------------------------------- -----------------------
- --------------------------------------------------------------------------------
(1) Any payments under this Amendment will be credited under the Master
Agreement.
31.
<PAGE> 29
Quotation
DiaLinx Services (Version 2.3)
EXHIBIT C FOR DIALINX SERVICE FOR IPASS
- --------------------------------------------------------------------------------
This Exhibit C shall supercede the Exhibit C in the Dial-Up Network Services
Agreement dated December 21, 1998 ("Agreement") and any amendment thereto,
provided, however, that all fees for services delivered prior to the execution
of this revised Exhibit C are still due.
1. Pricing Summary: This section highlights the general elements of pricing
and commitments:
1.1 Network Access. You will be billed for each end user that may access the
GTE Internetworking DiaLinx network ("North American Network") in
accordance with the pricing options set forth herein. You will be
charged for Network Access, which, for each calendar month, shall be the
greater of either (a) Access charges due in accordance with Section 5
"Rates and Charges" or (b) Monthly Customer Commitment as set forth in
Section 2 "Minimum Monthly Commitment".
1.2 Monthly Customer Commitment: In return for volume discounts
(inherent in the prices stated below) you have agreed to use a
minimum dollar volume of network access in each month of the
agreement ("Monthly Customer Commitment"). In the event that
your actual network access charges do not meet the Monthly
Customer Commitment, you will be billed for the applicable
Monthly Customer Commitment (the difference between you actual
network access usage and the Monthly Customer Commitment is the
"Commitment Payment")
1.3 Term Commitment: The aggregate of the Monthly Customer
Commitment is [*] ("Term Commitment"). In the event your
actual network access charges exceeds the Term Commitment all
subsequent Monthly Customer Commitment obligations shall be
suspended.
1.4 If, at the end of each twelve (12) month period, your actual
network access charges exceeds [*] ("Annual Commitment") and you
have paid a Commitment Payment, you will be credited either (a)
the amount Customer has exceeded the Annual Commitment or (b)
the applicable Commitment Payment, whichever is less.
For example:
If Customer's actual network access charges reached [*] in month
12 and during that same period Customer made one Commitment
Payment of [*], then Customer shall be issued a credit equal
to [*]. (Example One)
If Customer's actual network access charges reached [*] in month
12 and Customer had never made a Commitment Payment, then
Customer shall not be issued a credit in this example. (Example
Two)
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
32.
<PAGE> 30
2. Minimum Customer Commitment. During the Service Period, in return for
discounts inherent in the pricing outlined therein, you have agreed to
use a minimum dollar volume of network access in the amount of
two-hundred-thousand-dollars ([*] per month, after discounts, of
the agreement ("Minimum Customer Commitment"). In the event that Network
access charges do not meet the Minimum Customer Commitment you will be
billed for the difference between the amount actually charged within the
given month and the Minimum Customer Commitment.
3. Commencement Date: The terms and conditions of this Exhibit C shall be
applied to charges assessed in the month of December (1999) if the
Agreement is executed on or before December 17, 1999. In the event this
Agreement is executed after December 15, 1999, the terms and conditions
of this Exhibit C shall be applied to charges assessed in the month of
January (2000).
4. Service Period. The Service Period shall be thirty-six (36) full
calendar months.
5. Rates and Charges: All rates and charges for the services defined in
this Section 5. All network connect time is rounded up to the next
highest minute and billed in one minute increments. Invoices are issued
monthly, and are due net 30 days. All pricing is listed as U.S. dollars.
For a complete listing of the all DiaLinx Access Numbers are associated
rates, a list of all access numbers can be obtained from your local
account representative, or downloaded from the following URL:
http://www.bbn.com/support/DiaLinx.htm.
5.1 North American Per-User Rates: In any month where the number of
Users accessing the DiaLinx Network exceeds the thresholds in
the table below, the applicable Rates for that month will be
reduced to the corresponding Rates.
Per-User Rates are available on a thirty (30) hour plan, based
on the average use of all active users in any given month. For
example: If Customer has 200 users access the DiaLinx Network
the total allowable hours is [*] (or 200 Users x 30 Hour Plan).
<TABLE>
<CAPTION>
UNITED STATES RATE CANADIAN RATE
------------------ -------------
PER PER
PER OVERAGE PER USER OVERAGE USER OVERAGE USER OVERAGE
USER US US US US CANADA CANADA CANADA CANADA ______
ANALOG ANALOG USDN ISDN ____ ANALOG ANALOG ISDN USDN CANADIAN
30 HOUR (PER 30 HOUR (PER US (PER 30 HOUR (PER 30 HOUR 30 HOUR (PER
PLAN HOUR) PLAN HOUR) HOUR) PLAN HOUR) PLAN PLAN HOUR)
# USERS (___) (___) (___) (___) (___) (___) (___) (___) (___) (___)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0-25,000 [*] [*] [*] [*]
25,000+ [*] [*] [*] [*] [*] [*] [*] [*] [*] [*]
50,000+ [*] [*] [*] [*]
100,000+ [*] [*] [*] [*]
</TABLE>
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
33.
<PAGE> 31
5.1.1 Overage Rates: If the average total hours of access by
Users exceed thirty (30) hours/user, then the Rates will
be adjusted upwards by the corresponding rate listed
above for each hour, or partial hour, that the user
exceeds 30 hours/user. (e.g. If the total number of
hours of network access by U.S. Flat Rate Analog Users
divided by the number of such users equals 31.5 hours,
the Base Rate will be adjusted upwards by [*] per Flat
Rate Analog User.)
5.1.2 800/888Charge: In addition to any other applicable
charges under Section 5, you will be charged the 800/888
charge for each hour that an End User accesses the
Network via the 800/888 access number.
5.1.3 ISDN Charge: In addition to any other applicable charges
under Section 5, you will be charged twenty-five percent
(25%) over the published analog prices in Section 5.
Please note that ISDN access will not be consistently
available on an International basis.
5.2 North American Hourly Rates: In any month where the number of
hours accessing the DiaLinx Network exceeds the thresholds in
the table below, the applicable Hourly Rate for that month will
be reduced to the corresponding Hourly Rate.
<TABLE>
<CAPTION>
UNITED STATES RATES CANADIAN RATES
---------------------------------------- -----------------------------
HOURLY 800/888 HOURLY HOURLY 800/888
US HOURLY US CANADIAN CANADIAN CANADA
MONTHLY ANALOG US ISDN (PER HR) ANALOG ISDN (PR. HR)
HOURS (_____) (_____) (_____) (______) (______) (______)
<S> <C> <C> <C> <C> <C> <C>
0-300,000 [*] [*] [*] [*] [*] [*]
300,000+ [*] [*] [*] [*]
500,000+ [*] [*] [*] [*]
1,000,000+ [*] [*] [*] [*]
3,000,000+ [*] [*] [*] [*]
5,000,000+ [*] [*] [*] [*]
</TABLE>
5.2.1 ISDN: We will provide you with ISDN / PRI (single
channel) service in cities where such service is
available. The cost of this service per hour, according
to the table above, is for a single "B" channel.
Currently, ISDN is not offered on the 800/888 line.
5.2.2 800/888 Charge: In addition to any other applicable
charges under Section 5, you will be charged the 800/888
charge for each hour that an End User accesses the
Network via the 800/888 access number.
5. Spamming: GTE Internetworking reserves the right, at our discretion, to
prohibit incidences of unacceptable use of electronic mail (as defined
in our Acceptable Use
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
34.
<PAGE> 32
Policy which is available http://www.bbn.com/aup/) by restricting all
outbound IP data packets using port 25 to single IP address. This IP
address would be an SMTP mail relay-post office controlled by the
customer.
6. Credit Policy: Our acceptance of the pricing and commitments set forth
in this Quotation is subject to GTE Internetworking's current credit
approval policy. We reserve the right to modify the terms of this
Quotation, require additional assurances, or reject the Quotation
following credit review if terms satisfactory to both parties cannot be
agreed upon.
7. Additional Realms: GTE Internetworking will support five (5) RADIUS
Authentication realms to you. Customers who require additional realms
will be charged a monthly fee of [*] for a block of five (5) additional
realms.
8. Help Desk Support
8.1 Level 1 (End-User) Help Desk Support: Customer shall be
responsible for providing Level 1 Help Desk Services.
8.2 Level II and III (Network) Support. Every GTE Internetworking
customer is provided with second-level help desk support
designed to work with either your own or out-sourced help desk,
you project administrator or you IS Department. This help desk
is integrate with our Networking Operations center and is the
first point of contract for opening new trouble tickets, getting
updates on existing ones, or simply asking information
questions.
9. Right of First Refusal: Customer will grant GTE a right of first refusal
to match or beat any offer for nationwide flat rate access service in
the United States from another Qualified Vendor before entering into a
contract with the Vendor. A Qualified Vendor shall mean a facilities
based nationwide dial-up Internet Service Provider with at least 300
local dial access number and the services must be substantially similar
in (i) quality and scope, (ii) availability on a geographic basis; and
(iii) commitment levels and remaining term of the Service Period.
Customer may not terminate this Agreement in the event that GTE fails to
meet such offer.
10. The terms and conditions of the attached Service Level Agreement ("SLA")
are made part of and incorporated into this Agreement (Attachment No.
3).
- --------------------------------------------------------------------------------
PLEASE SIGN BELOW TO INDICATED YOUR UNDERSTANDING AND ACCEPTANCE OF THE TERMS OF
THIS QUOTATION:
COMPANY (TYPE OR PRINT FULL CUSTOMER NAME):
-------------------------------------
SIGNATURE: /s/ MICHAEL MANSOURI DATE: Dec. 17 1999
------------------------------- -------------------------------
PRINT NAME: Michael Mansouri TITLE: Chairman & CEO
------------------------------- -------------------------------
- --------------------------------------------------------------------------------
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
35.
<PAGE> 33
AMENDMENT NUMBER TWO (2)
TO THE
DIAL UP NETWORK SERVICES AGREEMENT
BETWEEN
GTE INTERNETWORKING INCORPORATED AND I-PASS ALLIANCE, INC.
THIS AMENDMENT NUMBER TWO (2) to the executed Dial Up Network Service Agreement
("Dial Up Agreement") is entered into this 17th day of December, 1999, between
GTE Internetworking, Incorporated ("GTE," "us" "we" or "ours") and i-Pass
Alliance, Inc. ("i-Pass," "customer," "you" or "your").
1) The parties desire to amend the Dial Up Agreement such the following
paragraphs shall read as set forth:
Delete Section
a) Delete Section 1.6 "Term" and substitute the following:
1.6 "TERM" shall mean the period beginning on Commencement Date
and extending until December 31, 2002.
b) Delete Section 1.7 "End User" and substitute the following:
1.7 "END USER" shall mean (a any employee of Customer, and/or (b)
any third party which Customer permits (either directly or
indirectly through subdistributors) to access the Network.
c) Delete Section 4.1 Third Party Access and replace with the
following:
4.1 THIRD PARTY ACCESS. Subject to the terms and conditions of
this Agreement, Customer shall have the non-exclusive right to
provide access (including the right to sell such access
services) to the Network to End Users through one or more
tiers of subdistributors, and to grant the right to its
customers to do the same under circumstances whereby a
contractual obligation exists.
d) Delete Section 4.5 End Users/Mandatory Flowdown Terms and replace
with the following:
4.5 END USERS/MANDATORY FLOWDOWN TERMS. Prior to allowing access
to the Network to an End User, Customer shall enter into
written agreements with End Users or its subdistributors, as
applicable, the terms of such agreements shall require that
each End User agree to terms and conditions substantially
similar to those set forth in Exhibit B, Mandatory Flow Down
Terms, attached hereto and incorporated herein by reference.
1
<PAGE> 34
e) Delete Section 8.1 Term and replace with the following:
8.1 TERM. The Term of this Agreement shall begin on the
Commencement Date and extend until December 31, 2002 unless
and until terminated earlier in accordance with this
Agreement.
f) Delete Section 8.6 Remedies and replace with the following:
8.6 REMEDIES. The following remedies shall be incorporated as set
forth below:
8.6.1 This Agreement may not be terminated by either party
prior to the end of the Term except that either party
may terminate this Agreement in the event of default by
the other party by giving the defaulting party written
notice of the event of default, specifying the nature of
such default. Termination shall automatically occur
ninety (90) days after the receipt of such written
notice if the event of default is not corrected. Upon
termination or expiration for any reason, both parties
shall continue to perform all of their obligations under
this Agreement for a phase-out period of ninety (90)
days, and GTE shall cooperate and assist Customer in
phasing out the Service and reasonably assist Customer
in transferring to a new service provider.
8.6.2 We reserve the right, but assume no obligation, to
terminate performance immediately if you are more than
30 days overdue in payments. Additionally, we reserve
the right to terminate performance if you have violated
(a) any laws concerning the transmission of technical
data and/or other regulated material or 9b) our
acceptable use of policy which is attached hereto as
Exhibit D ("Acceptable Use Policy"). Prior to
termination of the Service (or any portion thereof) for
said violation, we shall provide you with written
notification and a ten (10) day cure period from your
receipt of such notification. If the violation has not
been rectified by the end of the third day of the ten
(10) day cure period, we reserve the right to suspend
service for the remainder of the ten (10) day cure
period. If, the violation has not been rectified after
the ten (10) day cure period, we reserve the right to
terminate performance. Notwithstanding the foregoing, if
the violation is of a nature that disrupts the network
in a technical and/or operational manner ("Operational
Violation"), we reserve the right to immediately suspend
or terminate performance; provided however that
performance due to an Operational Violation will be
suspended for no more than 10 days in any three (3)
month period. GTE may modify the Acceptable-Use Policy
only to accommodate (i) the standard business practices
and social policies of the internet community; (ii)
compliance with administrative directives, legal
precedent and/or applicable legislation; or (iii) the
reasonable business and economic concerns of GTE
Internetworking. If, at any time, we change the
Acceptable Use Policy in a material manner which we
attempt to
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enforce against you pursuant to this Agreement, you may
terminate the Service by us with thirty (30) day written
notice of your intent to cancel. Should you terminate Service
under the conditions described herein this Provision 8.6.2,
you will be responsible for fees accrued through the date of
cancellation and will not be subject to an early cancellation
fee.
2) Exhibit B "MANDATORY FLOW DOWN TERMS" shall be replace with the revised
Exhibit B, dated December, 1999.
3) Capitalized terms used and not defined herein shall have the meanings
ascribed thereto in applicable Agreement.
4) Except as amended hereby (and by any other Addendum, if applicable), all
other terms and conditions of the Agreement shall remain in full force and
effect.
These terms and conditions have been read, are understood, and are hereby
accepted.
GTE INTERNETWORKING INCORPORATED i-PASS ALLIANCE INC.
By: /s/ CHRISTI KNOCH By: /s/ RONALD CALANDRA
-------------------------------- ------------------------------------
Name: Christi Knoch Name: Ronald Calandra
------------------------------ ----------------------------------
Title: Contract Representative Title: Vice President
----------------------------- ---------------------------------
Date: 12-17-99 Date: 12/17/99
------------------------------ ---------------------------------
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK]
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EXHIBIT B
MANDATORY FLOW DOWN TERMS
DECEMBER 1999
PREFACE
This Exhibit B summarizes essential terms to be incorporated into agreements
between Customer and its End Users or its subdistributors, as applicable, in
accordance with Sections 4.2(a) and 4.5 of the Agreement. Customer may modify
the wording of the essential terms set forth below, provided, however, that the
terms as modified are not materially different in substance, enforceability, and
effect from those terms set forth below. For purposes of the Mandatory Flow Down
Terms. "Network Services Supplier" shall mean GTE Internetworking, Incorporated,
successor to the business interest of BBN Planet Corporation.
1) Neither iPass nor its suppliers of network services ("Network Services
Suppliers") exercise and control whatsoever over the content of the information
passing through their systems, and access to the Internet is provided solely on
an "as is" basis. Neither iPass nor its Network Services Suppliers shall be
liable for any consequences suffered by any person as a result of Internet
access including, without limitation, the possibility of contracting computer
viruses and accessing information with offensive, inaccurate, or inappropriate
content. Neither iPass nor its Network Services Suppliers shall be liable for
any damages suffered by any person as a result of obtaining Internet access. You
acknowledge and agree that all End Users must exercise their own due diligence
before relying on any information available on the Internet, and must determine
that they have all necessary rights to copy, publish, or otherwise distribute
any such information available on the Internet under copyright and other
applicable laws.
2) End User agrees that it will take reasonable steps to ensure that it will
NOT use the service for illegal purposes, for transmission of threatening,
obscene, or harassing material, or to interfere with or disrupt Network End
Users, services or equipment. Disruptions include, but are not limited to,
distribution of unsolicited chain letters, propagation of computer worms and
viruses, and using the Network to make unauthorized entry to any other machine
accessible via the Network. Violation of the foregoing may result in termination
or suspension of Network access rights to the offending party or parties.
3) Neither iPass nor its Network Services Suppliers warrant that the Services
will be available on a specified date or time or that the network will have the
capacity to meet your demand during specific hours. You may be unable to access
the network at any time, and disconnection from the network may occur from time
to time. Neither iPass nor its Network Services Suppliers will be liable for
unauthorized access to or alteration, theft or destruction of any data files,
programs, procedures, or information through accident, fraudulent means or
devices, or any other method, regardless of whether such damage occurs as a
result of iPass's or its Network Service Suppliers' negligence.
4) IPASS AND ITS NETWORK SERVICES SUPPLIERS DISCLAIM ALL WARRANTIES AND
CONDITIONS OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING WITHOUT
LIMITATION THE IMPLIED WARRANTIES OF
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TITLE, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT.
NEITHER IPASS NOR ITS NETWORK SERVICES SUPPLIERS SHALL BE LIABLE FOR ANY
THIRD-PARTY NETWORK FAILURE.
5) IN NO EVENT SHALL IPASS OR ITS NETWORK SERVICES SUPPLIERS BE LIABLE FOR
ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES, OR FOR INTERRUPTED
COMMUNICATIONS, LOST DATA OR LOST PROFITS, ARISING OUT OF OR IN CONNECTION WITH
THE SERVICE.
6) iPass and its Network Services Suppliers shall be deemed to be third-party
beneficiaries of this agreement, with the right to enforce the terms of this
agreement.
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EXHIBIT D
GTE INTERNETWORKING INCORPORATED
ACCEPTABLE USE POLICY
Version 1.1
Release Date: February 11, 1998
http://www.bbn.com/aup/
I. Introduction and Coverage
II. Compliance
III. Consequences of Non-Compliance
IV. Prohibited Use
V. Legal
VI. Complaints and Contact Information For GTEI (bbnplanet)
VII. Complaints and Contact Information For GTE.NET
I. INTRODUCTION AND COVERAGE
GENERAL
This Acceptable Use Policy sets forth guidelines for acceptable use of the GTE
Internetworking Network. All users of the GTE Internetworking Network are
required to comply with this policy. Users must also comply with all terms and
conditions of applicable agreements, and with any additional policies that may
be applicable to a specific service offered by GTE Internetworking.
DEFINITIONS
As used in this Acceptable Use Policy, the terms shall have the respective
meanings set forth below:
"GTE" Internetworking" includes, without limitation, GTE Internetworking
Incorporated, GTE Intelligent Network Services Incorporated, BBN Corporation
(successor-in-interest to BBN Planet Corporation and Genuity, Inc.), and any
division, subsidiary, affiliate, or parent corporation of any of the foregoing.
"GTE Internetworking Network" includes, without limitation, GTE
Internetworking's networks, and all systems, services, and products that
utilize, or are utilized in connection with, GTE Internetworking's Networks.
CONFORMANCE WITH POLICIES OF OTHER ISPs
In situations where data communications are carried across networks of other
Internet Service Providers (ISPs), users of the GTE Internetworking Network must
also conform to the applicable acceptable use policies of such other ISPs.
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QUESTIONS, COMMENTS, OR COMPLAINTS
If you are unsure whether any contemplated use or action is permitted, please
send questions or comments to GTE Internetworking at: mailto:[email protected]
Any complaints regarding prohibited use or other abuse of the GTE
Internetworking Network, Including violations of this Acceptable Use Policy,
should be sent to GTE Internetworking at: [email protected].
REVISIONS
GTE Internetworking reserves the right to modify this Acceptable Use Policy at
any time without notice.
II. COMPLIANCE
GENERAL
All users of the GTE Internetworking Network are required to comply with this
Acceptable Use Policy, as well as all applicable laws and regulations.
GOALS
GTE Internetworking seeks to promote a high level of responsible behavior in
connection with the Internet, and has formulated this Acceptable Use Policy to
accomplish the following goals:
o To protect the reputation and resources of GTE Internetworking, its
customers, and the Internet community at large, from irresponsible or
illegal activities.
o To ensure the privacy, security, and reliability of the GTE
Internetworking Network, the network and systems of GTE Internetworking"
customers, and (as much as GTE Internetworking is reasonably able to do
so) the Internet at large.
o To establish guidelines for the acceptable use of the GTE Internetworking
Network.
o To define generally those actions which GTE Internetworking considers
abusive and prohibited.
o To outline procedures for handling and reporting abuse to GTE
Internetworking.
RESPONSIBILITIES
GTE Internetworking provides an unfiltered connection to the Internet. No data,
documents, materials, or information that enters the GTE Internetworking Network
is reviewed before being transmitted to users. Accordingly, GTE Internetworking
neither controls nor accepts responsibility for the content of any
communications that are transmitted or make available to users, regardless of
whether they originated from users of the GTE Internetworking Network. In
addition, GTE Internetworking expressly disclaims any responsibility for the
accuracy or quality
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of information provided by third parties that may be obtained through the use of
the GTE Internetworking Network.
Each user is responsible for complying with this Acceptable Use Policy, and for
providing reasonable assistance to GTE Internetworking in investigating and
resolving issues, problems, and/or complaints arising out of the services
provided to such user.
FILTERS
Filters against particular networks or traffic types are generally available
from a variety of sources. For information about some commercial filters that
are currently available for residential use, see http://www.gte.net. In
addition, in certain circumstances and for an applicable fee, GTE
Internetworking may be able to install other filters upon the customer's
request.
CONFIGURATION
All users of the GTE Internetworking Network are responsible for configuring
their own systems to provide the maximum possible accountability. For example,
users should ensure there are clear "path" lines in news headers so that the
originator of a post may be identified. Users should also configure their Mail
Transport Agents (MTA) to authenticate (by look-up or the name or similar
procedures) any system that connects to perform a mail exchange, and should
generally present header data as clearly possible. As another example, users
should maintain logs of dynamically assigned IP addresses.
REPORTING VIOLATIONS
Customers of GTE Internetworking are responsible for immediately reporting to
GTE Internetworking (via e-mail or phone) any network issue which could
compromise the stability, service or security of any use by GTE Internetworking
or its customers of the GTE Internetworking Network.
RESELLERS AND DOWNSTREAM SERVICE PROVIDERS
Some users may be customers of Internet Service Provider (ISPs) that receive
Internet connectivity through GTE Internetworking. Such ISPs (also known as
resellers or downstream service providers) are responsible for informing their
customers of this Acceptable Use Policy and for enforcing its restrictions with
regard to their customers' actions.
Complaints about customers of any such reseller or downstream service provider
shall be forwarded to such reseller or downstream service provider for
resolution. If at time GTE Internetworking determines that such reseller or
downstream service provider is not taking appropriate action in accordance with
this Acceptable use Policy, GTE Internetworking shall work with such reseller or
downstream service provider to review their policies and enforcement procedures.
If the reseller or downstream service provider continues to fail to take
appropriate action, GTE Internetworking will take such further action as it
deems appropriate, up to and including termination proceedings.
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Violations of this Acceptable Use Policy by a customer or end-user of a reseller
or downstream service provider shall be considered violations of this Acceptable
Use Policy by such reseller or downstream service provider.
III. CONSEQUENCES OF NON-COMPLIANCE
Violation of this Acceptable Use Policy is strictly prohibited. In the event of
any actual or potential violation. GTE Internetworking reserved the right to
suspend or terminate either temporarily or permanently, any or all services
provided by GTE Internetworking to block any abusive activity, or to take any
other actions as deemed appropriate by GTE Internetworking in its sole
discretion. Users who violate this Acceptance Use Policy may incur criminal or
civil liability. GTE Internetworking may refer violators to civil or criminal
authorities for prosecution and will cooperate fully with applicable government
authorities in connection with the civil or criminal investigations of
violations.
IV. PROHIBITED USE
The examples of prohibited use set forth below and throughout this Acceptable
Use Policy are non-exclusive, and are provided as guidelines to customers and
other users of the GTE Internetworking Network.
A. ILLEGAL USE
The GTE Internetworking Network may be used only for lawful purposes. The
transmission, distribution, or storage of any information, data, or material in
violation of any applicable law or regulation is prohibited. Without limitation
of the foregoing, it is strictly prohibiting to create, transmit, distribute, or
store any information, data, or material which:
o Infringes any copyright, trademark, trade secret, or other intellectual
property right.
o Is obscene or constitutes child pornography.
o Is libelous, defamatory, hateful, or constitutes and illegal threat or
abuse.
o Violates export control laws or regulations.
o Encourages conduct that would constitute a criminal offense or give rise
to civil liability.
In the event of suspected, alleged, or actual illegal activity, GTE
Internetworking will notify or cooperate with applicable law enforcement
authorities for potential civil or criminal investigation or prosecution.
B. ABUSE
The following general actions are considered "abuse" and are strictly
prohibited:
Any conduct which violates the accepted norms and expectations of the Internet
community at large (whether or not detailed in this Acceptable Use Policy). GTE
Internetworking reserves the
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right, in its sole discretion, to make a determination whether any particular
conduct violates such norms and expectations.
Resale of GTE Internetworking's services or products, unless expressly
authorized in a separate written agreement with GTE Internetworking.
o Any conduct that restricts or inhibits any other user, whether a
customer of GTE Internetworking or a user of any other system or
network, from using or enjoying any of GTE Internetworking's services or
products, as determined by GTE Internetworking in its sole discretion.
o Harassment, whether through language, frequency, or size of messages.
o Creating, forwarding, posting, or distribution of chain messages of any
type (also known as "pyramid" or "Ponzi" schemes).
o Forging of message headers or a sender's identity, or taking any similar
action with the intent of bypassing restrictions or limits on access to
a specific service or site (such as a moderated newsgroup or a site
utilizing filters). This prohibition does not restrict the legitimate
use of aliases or anonymous re-mailers.
o Falsifying identity or contact information (whether given to GTE
Internetworking, to the InterNIC, or put in a message header) to
circumvent this Acceptable Use Policy. This prohibition does not
restrict the legitimate use of aliases or anonymous re-mailers.
o Furnishing false or incorrect data to GTE Internetworking on written or
online applications, contracts, or other materials or formation provided
to GTE Internetworking, including fraudulent use of credit card numbers
or "bill to" telephone numbers.
o Attempting to circumvent or alter the processes or procedures to measure
time, bandwidth utilization, or other methods to document use of GTE
Internetworking's products and services.
C. SECURITY
Violations of system or network security are prohibited, and may result in
criminal and civil liability. GTE Internetworking will investigate potential
security violations, and may notify applicable law enforcement agencies if
violations are suspected.
It is strictly prohibited to attempt to circumvent the authentication procedures
or security of any host, network, network component, or account (i.e.,
"cracking") to access data, accounts, or servers which the user is not expressly
permitted or authorized to access. This prohibition applies whether or not the
attempted intrusion is successful, and includes unauthorized probes or scans
performed with the intent to gather information on possible security weaknesses
or exploitable configurations.
Users of the GTE Internetworking Network are responsible for educating
themselves and configuring their systems with at least basic security. Should
systems at a user's site be violated,
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the user is responsible for reporting the violation and then fixing the
exploited system. For instance, should a site be abused to distribute unlicensed
software due to a poorly configured FTP (File Transfer Protocol) Server, the
user is responsible for re-configuring the system to stop the abuse.
Users are prohibited from interfering or attempting to interfere with service to
any other user, host, or network on the Internet ("denial of service attacks").
Examples of such prohibited activity include without limitation (a) sending
massive quantities of data (i.e., "flooding" with ICMP, SMTP, or any other type
of traffic that exceeds accepted norms of size and/or frequency) with the intent
of filling circuits, overloading systems, and/or crashing hosts, (b) attempting
to attack or disable any user, host, or site, or (c) using, distributing, or
propagating any type of program, script, or command designed to interfere with
the use, functionality, or connectivity of any Internet user, host, system, or
site (for example, by propagating messages, via e-mail, ______ posting, or
otherwise, that contain computer worms, viruses, control characters or Trojan
horses).
Users are prohibited from intentionally or negligently injecting false data into
the Internet, for instance in the form of bad routing information (including but
not limited to the announcing of networks owned by someone else or reserved by
the Internet Assigned Numbers Authority) or incorrect DNS information.
D. E-MAIL
User are prohibited from engaging in improper use or distribution of electronic
mail ("e-mail") over the Internet. Without limitation of the foregoing, it is
strictly prohibited to engage in any of the following activities:
o Sending unsolicited bulk e-mail ("UBE", or "spamming"). This includes, but
is not limited to, the distribution of UBE for commercial, informational,
advertising, political, or religious purposes.
o Setting up "mailback" or "drop box" addresses in order to receive
responses from UBE, either directly by the user or by a third party on
behalf of the user.
o Using a mail transport agent (MTA) outside of a user's own site to relay
mail (unless a user has received express permission to do so). Even if
permission has been received, users are prohibited from forging their
identities to make it appear as though the e-mail sourced from the relay.
o Sending UBE, or posting news, to advertise or promote resources whose
connectivity depends in any way on the GTE Internetworking Network,
regardless of whether such UBE or news posting is made using the GTE
Internetworking Network. For example, using another ISP's services to send
UBE which advertises a web page hosted by or via the GTE Internetworking
Network is prohibited.
o Hiring or using any third party service for the purpose of distributing
UBE or excessively "multi-posting" or "cross-posting" any ______ posting
in the name of a user. Users will be
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held responsible for the actions of any third party agent that acts on
behalf of or for the benefit of the user, and such users shall be held
directly accountable for any violations of this Acceptable User Policy by
such third party agent.
o Bulk e-mail may be sent only to recipients who have expressly requested
receipt of such e-mail. Users that send solicited bulk e-mail are required
to maintain records of all bulk e-mail subscription requests, and to
provide GTE Internetworking with such records upon request of GTE
Internetworking, to enable GTE Internetworking to investigate complaints
from third parties. The sender of any solicited bulk e-mail shall, upon
the request of a recipient, immediately remove such recipient from all
applicable mailing lists and refrain from further transmissions of e-mail
to such recipient.
o Use of any auto-responder messages, mailing lists, or any other programs
or scripts run by a user to handle or re-distribute e-mail is the sole
responsibility of the user, and shall be operated in a reasonable manner.
This responsibility includes, but is not limited to, maintaining
up-to-date mailing lists to minimize mail bouncing and to facilitate the
processing of removal requests, configuring auto-responders so that they
do not create mail loops, and the prompt handling of any complaints
regarding UBE re-distributed through a mailing list onsite.
E. UNSENET (ALSO KNOWN AS NETNEWS OR NEWSGROUPS)
GTE Internetworking recommends that users not post to any newsgroup until they
have familiarized themselves with the subjects, established guidelines, and
restrictions of such newsgroup. All Usenet guidelines and restrictions are
incorporated herein by reference, and users of the GTE Internetworking Network
agree to adhere to such guidelines unconditionally.
Without limitation of the foregoing, it is strictly prohibited to engage in any
of the following activities:
o Making any posting for commercial purposes (including without limitation
the pointing to specific URLs for commercial purposes), except where such
postings are expressly permitted under the charter and/or Frequently Asked
Questions (FAQ) of an applicable newsgroup.
o Posting binary files to newsgroups whose charter or name does not include
allowances for such files.
o Posting via GTE Internetworking's newsfeed any solicitation for mailback
to an e-mail address (including addresses of non-GTE Internetworking
users) networks with the intention of bypassing this Acceptable Use
Policy.
o Canceling newsgroup posting other than their own, or using auto-responders
or cancel-bots (or similar automated or manual routines) which generate
excessive network traffic or disrupt Usenet newsgroup/e-mail use by others
(except in cases of official newsgroup moderators performing their
duties).
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o Engaging in "Excessive Cross-Posting" (ECP) or "Excessive Multi-Posting"
(EMP) or "Usenet spam" (no matter what the content might be) as defined by
the Internet community and expressed in the news.admin.net-abuse."
Newsgroups and FAQs.
o Disrupting newsgroups with materials, postings, or activities that are (as
determined by GTE Internetworking in its sole discretion) frivolous,
unlawful, obscene, threatening, abusive, libelous, hateful, excessive, or
repetitious, unless such materials or activities are expressly allowed or
encouraged under the newsgroup's name, FAQ, or charter.
o Using filtering messages (e.g., NoCoM) in an intrusive manner, or at other
than the user's server level. Generally, filtering messages are considered
normal Usenet traffic and are treated as such by GTE Internetworking.
Complaints regarding filter use or abuse should be directed either to the
source generating them or the sites utilizing them.
o Performing any authorized creation, cancellation, or removal of
newsgroups.
The legitimacy of a given post or cancellation is determined by the official
newsgroup or mailing-list moderator. Therefore, GTE Internetworking defers to
their judgment on these issues. If no such official entity exists, it is at GTE
Internetworking's discretion to determine whether any post or cancellation is
complaint with this Acceptable Use Policy and Internet community standards for
that newsgroup.
F. WORLD WIDE WEB
GTE Internetworking strictly prohibits users from engaging in any of the
following web-related activities:
o The exploitation or attempted exploitation of any scripts presented on web
pages (e.g., forms for answering questions or for entering data).
o Excessive use of bandwidth by utilizing programs, scripts, or commands to
abuse a web site (for example, by connecting for an excessive amount of
time, repeatedly engaging site-local scripts, or related behavior).
o "Walking" a database for the purpose of collecting data contained therein
(whether or not this behavior requires that the reader of the page must
knowingly ignore files such as "robot.txt" which is designed to guide
cataloguing robots/programs).
o Operating a robot on a site's page after the site has asked that the
behavior cease.
o Configuring a web page to act maliciously against users that visit that
web page.
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V. LEGAL
ADDITIONAL TERMS AND CONDITIONS
The use of the GTE Internetworking Network by a customer of GTE Internetworking
is subject to the terms and conditions of any agreements entered into by such
customer with GTE Internetworking. This Acceptable Use Policy is incorporated
into such agreements by reference.
LIMITATION OF LIABILITY
GTE INTERNETWORKING SHALL NOT BE LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL,
CONSEQUENTIAL, OR PUNITIVE DAMAGES, INCLUDING BUT NOT LIMITED TO LOSS OF
PROFITS, LOSS OR BUSINESS OR BUSINESS OPPORTUNITY, LOSS OF USE, ETC., EVEN IF
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. GTE INTERNETWORKING SHALL NOT BE
LIABLE FOR ANY DIRECT OR ACTUAL DAMAGES, EXCEPT TO THE EXTENT SPECIFIED IN A
WRITTEN OR ELECTRONIC AGREEMENT ENTERED INTO BETWEEN GTE INTERNETWORKING AND ITS
CUSTOMER.
GTE INTERNETWORKING MAKES NO WARRANTIES OR REPRESENTATIONS HEREIN, EITHER
EXPRESS OR IMPLIED, CONCERNING THE GTE INTERNETWORKING NETWORK, AND EXPRESSINGLY
DISCLAIMS WARRANTIES OF FITNESS FOR A PARTICULAR USE OR PURPOSE THE WARRANTY OF
MERCHATABILITY OR ANY OTHER WARRANTY IMPLIED BY LAW.
VI. COMPLAINTS AND CONTACT INFORMATION FOR GTE (BBNPLANET) CUSTOMERS
Any complaints regarding prohibited use or other abuse of the GTE
Internetworking Network, including violations of this Acceptable Use Policy,
should be sent via e-mail to GTE Internetworking at: [email protected]. Please
include all applicable information that will assist GTE Internetworking in
investigating the complaint, including all applicable headlines of forwarded
messages.
Sites experiencing live attacks from GTE Internetworking customers should call
into our Customer Care Center (telephone 617-873-8601) to submit a complaint as
quickly as possible. Describe the urgency of the situation should you need
immediate attention.
If you are unsure whether any contemplated use or action is permitted, please
send questions or comments to GTE Internetworking at: [email protected].
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For further information about this Acceptable Use Policy, please contact GTE
Internetworking at:
GTE Internetworking
150 Cambridge Park Drive
Cambridge, MA 02140
Attention: Network Operations Center - Internet Security Officer
Telephone: 1-800-632-7638 or 1-617-873-8601
http://www.bbn.com
[email protected] - Reports of Network Abuse or Complaints about Unsolicited
Commercial E-mail/Mass E-mail
[email protected] - Operational Issues and Requests
Information Request Form - Sales Inquiries
VII. COMPLAINTS AND CONTACT INFORMATION FOR GTE.NET CUSTOMERS
Any complaints regarding prohibited use or other abuse of the GTE
Internetworking Network, including violations of this Acceptable Use Policy,
should be sent via e-mail to GTE Internetworking at: [email protected]. Please
include all applicable information that will assist GTE Internetworking in
investigating the complaint, including all applicable headlines of forwarded
messages.
Sites experiencing live attacks from GTE Internetworking customers should call
into our Customer Care Center (telephone 800-927-3000) to submit a complaint as
quickly as possible. Describe the urgency of the situation should you need
immediate attention.
If you are unsure whether any contemplated use or action is permitted, please
send questions or comments to GTE Internetworking at:
[email protected]
For further information about this Acceptable Use Policy, please contact GTE
Internetworking at:
GTE Internetworking
P.O. Box 152212
Irving, TX 75015-2212
Attention: Electronic Abuse - Messaging Services
http://www.gte.net
[email protected] - Reports of Network Abuse or Complaints about Unsolicited
Commercial E-mail/Mass E-mail and News abuse.
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[email protected] - Reports of hacking, suspected criminal activity, child
pornography, copyright infringements, electronic harassment.
[email protected] - Operational Issues and Requests
[email protected] - Sales Information
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CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS,
HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
EXHIBIT 10.14
IPASS, INC.
SOLUTION PARTNER RESELLER AGREEMENT
THIS SOLUTION PARTNER RESELLER AGREEMENT ("Agreement") is made as of the
date on the signature page of this agreement ("Effective Date"), by and between
IPASS, INC. ("iPass") and the SOLUTION PARTNER (the "SP"), both as defined on
the signature page of this Agreement.
1. DEFINITIONS.
1.1 "ACCESS UNIT PACKAGES" means packages of access units which may be
purchased by Customers to prepay use of the Services by individual registered
users within Customer's organization.
1.2 "CUSTOMER" means the purchaser of access to the Services.
1.3 "CUSTOMER SERVICE START-UP PLAN" means the Software (or a license to
download the Software from SP's website), Access Unit Packages, documentation
and the other materials described in EXHIBIT A, that enable Customers to use the
Services.
1.4 "SP LAUNCH KIT" means the Software, operations manual, documentation,
marketing collateral and other materials described in EXHIBIT B, (including
future new releases or upgrades that iPass makes generally available to its
customers during the term of this Agreement), that is intended to provide the SP
with the tools to market, install, activate and support the Software and
Services directly to and for Customers. The SP Launch Kit may contain materials
proprietary to and owned by third parties ("iPass Suppliers"): these materials
shall be subject to the terms and conditions of this Agreement and any iPass
Supplier Addendum.
1.5 "SERVICES" means the iPass Internet connection services as offered to
Customers from time to time in accordance with iPass' then-current policies.
1.6 "SERVICE LEVEL" means the level of Service selected by a Customer. The
Service Levels available as of the Effective Date of this Agreement are
described in EXHIBIT I ("Service Levels").
1.7 "SERVICE UPGRADE" means a Customer selection to move from one of the
Service Levels to another Service Level.
1.8 "SOFTWARE" means the iPass RoamServer and Dial Wizard software, in
object code form, and associated documentation, described in EXHIBIT D.
1.9 "TERRITORY" means the geographical areas specified in EXHIBIT C.
2. APPOINTMENT OF SP. iPass hereby appoints SP as a direct, nonexclusive
reseller of the Services to Customers in the Territory and grants SP
certain rights to the components of
1.
<PAGE> 2
the SP Launch Kit as specified below. SP will not undertake any obligation
inconsistent or incompatible with its obligations hereunder.
3. INTERNAL USE AND DISTRIBUTION RIGHTS AND RESTRICTIONS.
3.1 INSTALLATION OF SOFTWARE FOR INTERNAL USE. Subject to the terms and
conditions of this Agreement, iPass grants SP the nonexclusive, nontransferable
right to install and use the Software on servers at SP's location ("Site")
solely for support, training demonstration and marketing purposes. SP may make a
reasonable number of backup and archival copies of the Software.
3.2 DISTRIBUTION OF CUSTOMER SERVICE START-UP PLANS AND ACCESS UNITS
PACKS. Subject to the terms and conditions of this Agreement, iPass grants SP
the right to distribute copies of the Customer Service Start-up Plan directly to
Customers located in the Territory which have entered into a written agreement
with SP which contains the minimum terms and conditions set forth in EXHIBIT E
("Customer Agreement") by enabling such Customers to download such copies and to
order Access Unit Packages from SP's website. SP will use diligent care to avoid
accepting orders from or making delivery to Customers outside of the Territory.
3.3 DOMESTIC AND INTERNATIONAL VERSIONS OF SOFTWARE. iPass has designated
one version of the RoamServer component of the Software as suitable for domestic
use inside the United States only (the "U.S. Version"), and one version of the
RoamServer component of the Software as suitable for international distribution
only (the "International Version"). SP shall ensure that the U.S. Version is
distributed to all Customers located in the United States and the International
Version is distributed to all Customers located outside the United States. SP
will indemnify and hold iPass harmless against any liability arising from SP's
failure to comply with this requirement.
3.4 LICENSE ONLY. This Agreement grants SP a license only, and only the
license rights specifically granted in this Agreement. No other right, title or
interest in the Software, SP Launch Kit components or Customer Service Start-up
Plan components is conveyed to SP. Title and ownership of all proprietary rights
in the Software, including any copyright, patent, trade secret, trademark or
other intellectual property right, will at all times remain the property of
iPass and the iPass Suppliers.
3.5 GENERAL RESTRICTIONS. SP shall not adapt, modify, translate or create
derivative works of the Software, SP Launch Kit components and Customer Service
Start-up Plan components, or assign, pledge, lease, loan or timeshare the
Software or reverse compile, disassemble or otherwise attempt or allow attempts
to reconstruct the source code for the Soft--are. SP will not obfuscate, alter
or remove any copyright, trademark or other proprietary notice or legend on or
in the Software and associated documentation and will include all such markings
in all copies of such materials. SP may not use or permit use of the Software
for any purpose not authorized in the associated documentation or in any manner
designed to access the functionality of any portion of the Software other than
as enabled in the form delivered to SP by iPass.
2.
<PAGE> 3
4. SP RESPONSIBILITIES.
4.1 STOCKING ORDER. Waived.
4.2 CUSTOMER INFORMATION. SP shall complete the iPass web site order form
for each new customer Service Start-up Plan order, in each case including
appropriate customer contact information (such as designated contact, mailing
address, telephone and fax number and e-mail address). Such information shall be
SP's Confidential Information; however, iPass may, upon notifying SP of its
intentions, use such information to market and promote the procurement of
Services, provided iPass will not publicly disclose the names of any customers
without written permission of the customer. SP will exercise best efforts to
obtain the right to disclose customers as reference accounts.
4.3 ENFORCEMENT OF SUBLICENSE AGREEMENTS. SP shall use commercially
reasonable efforts to enforce each Customer Agreement with at least the same
degree of diligence used in enforcing similar agreements covering Customers of
SP's own products. SP shall promptly notify iPass of any material breach under a
Customer Agreement and will cooperate with iPass and/or iPass Suppliers in any
legal action to prevent or stop unauthorized use, reproduction or distribution
of the Software.
4.4 MARKETING. SP shall use reasonable efforts to market the Services and
to cooperate with iPass' marketing and public relations programs, which may
include activities such as joint press releases, demonstrations, marketing
collateral, sales tools, cooperative presentations to large accounts,
advertisements in trade press, participation in trade shows and seminars, and
the like. In marketing the Services, SP will at all times intend to maintain and
enforce the minimum terms and conditions as set forth in Exhibit E ("Customer
Agreement").
4.5 CUSTOMER SUPPORT. SP shall be responsible for providing "first level"
technical support to SP's Customers. iPass will provide "second level" technical
support to SP as further described below, but will not provide support directly
to SP's Customers. iPass will refer any direct request for support request from
SP's Customers to SP.
4.6 TRAINING. SP will sign up for initial training upon the Effective Date
of this Agreement. SP will send, at a minimum, one (1) employee to iPass'
technical training program within ninety (90) days of the Effective Date, or if
no training class is available during such ninety (90) day period, as soon as
such class becomes available. At all times during the term of this Agreement
following the initial ninety (90) day period, SP shall maintain employment of at
least one (1) employee who has received such training and who has attended any
refresher courses mandated by iPass. Training shall be charged to SP as
specified in EXHIBIT F.
4.7 UPDATES. iPass shall make updates of the Software available to SP,
free of charge, through iPass' website, iPass shall notify SP by electronic mail
upon each update posting. SP shall be required to use diligent efforts to ensure
distribution to its Customers of any Software updates within forty-five (45)
days of notification by iPass, iPass reserves the right to notify customers
directly of any applicable update after forty-five (45) days notice to SP.
4.8 UPGRADES. iPass shall make upgrades of the Software available to SP
through iPass' website, iPass shall notify SP by electronic mall upon each
upgrade posting. SP shall
3.
<PAGE> 4
notify its Customers of any Software upgrades within forty-five (45) days of
notification by iPass, iPass reserves the right to notify customers directly of
any applicable upgrade after the forty-five (45) days notice to SP. The price
for upgrades will be determined by iPass in its sole discretion.
4.9 ORDERING AND USAGE MONITORING. SP will be responsible for ordering all
Customer Service Start-up Plans and Access Unit Packages for distribution to
Customers. SP is solely responsible for setting the prices for Customer Service
Start-up Plans and Access Unit Packages which it supplies to Customers. SP is
responsible for monitoring all of its Customers' usage of Services, and for
notifying Customers when a Customer's Access Units Package has been drawn down
below fifty percent (50%) of the original number of access units and
accomplishing the re-ordering of additional Access Unit Packages by such
Customer in a timely manner that will prevent any interruption of the Customer's
access to Services. Upon notifying SP of its intention, iPass reserves the right
to contact a Customer directly if the Customer's Access Units Package is drawn
down to twenty-five percent (25%) or less of the original number of access
units.
5. IPASS RESPONSIBILITIES.
5.1 SP LAUNCH KIT. iPass will make an SP Launch Kit available to SP as of
the Effective Date, and will provide SP with reasonable amounts of additional
hard copies of marketing collateral and related promotional materials at SP's
request.
5.2 USAGE DATA. To assist SP in managing Customers' reordering of Access
Units Kits, iPass will provide detailed Customer usage records to SP on a
monthly basis, and will also make usage information available on iPass' website
for inspection by SP on a daily basis, iPass will inform SP when a Customer's
Access Units Package reaches the reorder stage as set forth in Section 4.9
("Ordering and Usage Monitoring").
5.3 MARKETING SUPPORT. iPass will provide ongoing marketing and sales
support to SP, including sales tools, as described in EXHIBIT H.
5.4 TECHNICAL SUPPORT. iPass will (a) assist SP in installing the Software
on SP's website at SP's request; (b) provide all error corrections and updates
to the Software, including updates to the Dial Wizard phone book, at no charge
to SP on an as-available basis; and (c) provide telephone and email support to
answer installation, configuration and operation questions during iPass' normal
business hours.
6. PAYMENTS; ORDERING.
6.1 PRICE LIST. The prices to be paid to iPass by SP for Customer Startup
Kits and Access Unit Packages are set forth in EXHIBIT F, which iPass may revise
on thirty (30) days written notice to SP. In the event of an aggregate price
increase of 60% or more in any 6 month period, SP will have the right to
terminate the Agreement. Furthermore, iPass agrees in the event of SP
termination due to such a price increase, iPass will not market to, nor accept
new orders from, any of SP's current iPass Customer base for a period of 3
months.
4.
<PAGE> 5
6.2 TIMELY PAYMENT. SP's initial stocking fee be due pursuant to the
invoice delivered on the Effective Date of this Agreement. SP will pay all
additional mounts payable to iPass hereunder within thirty (30) days from the
date of iPass' applicable invoice, which shall be rendered monthly in hard copy
or electronic form (via posting on iPass' website) at iPass' discretion, iPass
may terminate or modify the terms of credit payments, when, in its sole
discretion, iPass reasonably believes that its payments may be at risk. All
rights of SP are expressly made conditional upon timely payment, without right
of set off, for all Customer Starter Packages and Access Unit Packages ordered
by SP. All late payments shall be subject to a late fee at the rate of eighteen
percent (18%) per annum or the highest rate permitted by applicable law,
whichever is less.
6.3 ORDER PROCEDURE. All orders issued by SP shall be deemed subject to
this Agreement and shall specify the applicable Customer. SP understands and
agrees that any additional terms and conditions of the SP's order shall be void
and of no effect. No orders shall be binding until the earlier of iPass' written
confirmation or shipment. All shipments shall be FOB shipping point. All orders
delivered shall be deemed accepted by SP upon delivery.
6.4 ACTIVATING SERVICE. iPass may decline to accept orders to provide
Services to Customers in its sole discretion without any liability to SP.
6.5 TAXES. All fees stated herein exclude, and SP shall pay, any sales,
use, property, license, value added, excise or similar tax, federal, state or
local, related to the parties' performance of its obligations or exercise of its
rights under this Agreement and any related duties, tariffs, imposts and similar
charges, exclusive of taxes based on iPass' net income.
6.6 PRICE INCREASE. In the event of a price increase, iPass shall give
notice of the increase to SP no less than thirty (30) days prior to the
effective date of the increase. Purchase orders that iPass accepts after giving
notice of the increase but prior to the effective date of the increase, will be
invoiced at the lower price, as long as SP submits the purchase orders to iPass
no later than the effective date of increase.
6.7 PRICE DECREASE. In the event of a price decrease, iPass will notify SP
of the price decrease and effective date ("Decrease Date"). No more than thirty
(30) days after the Decrease Date, iPass will credit to SP an amount equal to
the product of (i) the difference between the former price and the new price for
Customer Starter Kits, Access Unit Packages or other Services and (ii) the
number of such products then in SP's inventory or in transit to the SP for which
SP has paid the higher price.
7. NO WARRANTY.
7.1 NO WARRANTY. THE SP LAUNCH KIT, THE CUSTOMER STARTER KIT, ACCESS UNIT
PACKAGES, THE SOFTWARE AND ALL ASSOCIATED DOCUMENTATION ARE PROVIDED "AS IS."
IPASS AND ALL IPASS SUPPLIERS DISCLAIM ALL WARRANTIES AND REPRESENTATIONS OF ANY
KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF
TITLE, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT.
IPASS SPECIFICALLY DOES NOT WARRANT THAT THE IPASS
5.
<PAGE> 6
SOFTWARE IS ERROR FREE, WILL OPERATE WITHOUT INTERRUPTION OR PROVIDE SECURE
OPERATIONS.
7.2 NO OTHER WARRANTY OR REPRESENTATION. SP acknowledges that it has not
entered into this Agreement in reliance upon any warranty or representation
except those specifically set forth herein.
8. LIMITATIONS OF LIABILITY.
8.1 DISCLAIMER. IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR LOST PROFITS
OR SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN CONNECTION
WITH THIS AGREEMENT (WHETHER FROM BREACH OF CONTRACT OR WARRANTY OR FROM
NEGLIGENCE OR STRICT LIABILITY), EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES. THIS LIMITATION OF LIABILITY SHALL APPLY
NOTWITHSTANDING THE FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY HEREIN.
IN NO EVENT SHALL IPASS' SUPPLIERS HAVE ANY LIABILITY WHATSOEVER ARISING OUT OF
OR IN CONNECTION WITH THIS AGREEMENT.
8.2 LIMIT. IN NO EVENT SHALL IPASS' LIABILITY ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT EXCEED AN AMOUNT EQUAL TO THE FEES ACTUALLY PAID
BY SP TO IPASS DURING THE TWELVE (12) MONTHS PRECEDING THE CLAIM. THIS
LIMITATION IS CUMULATIVE, WITH ALL PAYMENTS FOR ALL CLAIMS BEING AGGREGATED TO
SATISFY THE LIMIT. THE EXISTENCE OF ONE OR MORE CLAIMS WILL NOT ENLARGE THE
LIMIT.
9. TRADEMARKS.
9.1 TRADEMARK LICENSE. iPass hereby grants to SP a royalty-free,
non-exclusive, non-transferable, non-sublicenseable license to use the
trademarks enumerated in EXHIBIT G (the "Marks") in SP's advertising and
promotion of the Services in the Territory. SP acknowledges iPass' ownership and
exclusive rights in the Marks, and SP's use of the Marks shall inure to the
benefit of iPass. SP shall not attempt to register the Marks or adopt, use or
attempt to register any confusingly similar marks, iPass may immediately
terminate this trademark license if SP's use of the Marks does not conform to
iPass' usage policy as may be promulgated from time to time. SP shall state at
the first instance of each use of a Mark that the Mark is iPass' trademark and
include the symbols TM and (R) as appropriate. SP shall not use any trademark,
word, symbol, letter or design in a manner that would create a combination mark.
SP shall provide, at its own expense, samples of usage of the Marks for iPass to
inspect prior to usage, iPass may reject any use of the Marks if iPass believes
in good faith that SP's use of the Marks will damage the recognition value or
reputation for quality associated with the Marks. SP shall either modify
nonconforming uses to conform to iPass' required level of quality within thirty
(30) days of notice or, at iPass' request, immediately cease any further use of
the Marks.
9.2 INFRINGEMENT PROCEEDINGS. SP will use reasonable efforts to inform
iPass of any unauthorized use of the Marks by others if it comes to SP's
attention, iPass has the sole right and discretion to bring legal or
administrative proceedings to enforce iPass' trademark rights.
6.
<PAGE> 7
10. CONFIDENTIAL INFORMATION.
10.1 DEFINITION. A party's "Confidential Information" is defined as any
confidential or proprietary information of a party which is disclosed to the
other party in a writing marked confidential or, if disclosed orally, is
identified as confidential at the time of disclosure and is subsequently reduced
to a writing marked confidential and delivered to the other party within thirty
(30) days of disclosure.
10.2 OBLIGATIONS. Each party shall hold the other party's Confidential
Information in confidence and shall not disclose such Confidential Information
to third parties nor use the other party's Confidential Information for any
purpose other than the purposes of this Agreement. Such restrictions shall not
apply to Confidential Information which (a) is already known by the recipient,
(b) becomes, through no act or fault of the recipient, publicly known, (c) is
received by recipient from a third party without a restriction on disclosure or
use, (d) is independently developed by recipient without reference to the
Confidential Information, or (e) is required to be disclosed by a court or
government agency.
11. INDEMNITY.
11.1 SP INDEMNITY. SP shall defend and indemnify iPass and iPass Suppliers
against any and all claims, losses, liabilities, damages, costs and expenses,
including reasonable attorneys' fees, which iPass or iPass Suppliers may incur
as a result of claims in any form by third parties, including Customers, related
to SP's acts, omissions or misrepresentations (including without limitation any
unauthorized statements made by SP or its agents to Customers), provided iPass
provides prompt written notice of the claim, gives SP control of defense and
settlement of any such claim, and provides reasonable assistance at SP's expense
and request.
11.2 IPASS INDEMNITY. Subject to the limit of liability in Section 8
("Limitation of Liability"), iPass agrees to defend SP against any claim that
the Services or Software provided by iPass infringe any U.S. copyright or any
U.S. trade secret recognized as such under the Uniform Trade Secrets Act or that
the Marks infringe any U.S. trademark or service mark, provided that iPass is
given prompt written notice of any such claim and the right to control the
defense and settlement of any such claim. SP will cooperate with iPass at iPass'
request and expense in connection with any such claim. Subject to the limitation
of liability in Section 8 ("Limitation of Liability"), iPass will pay all
damages and costs (including reasonable attorneys' fees) finally awarded by a
court of competent jurisdiction. If use of the Services or Software is enjoined
or in iPass' reasonable judgment is threatened to be enjoined, iPass may, at
iPass' option and expense, procure for SP the right to continue distributing the
Services or Software, replace or modify the Services or Software so they are no
longer infringing, or terminate the license for the applicable .component of the
Services or Software and refund any applicable fees to SP. iPass shall have no
liability hereunder for any claims arising from (a) improper or unauthorized use
of the Services or Software; (b) the combination of the Services or Software
with hardware, software or data not provided by iPass where the combination is
the subject of the claim; or (c) resulting from any modification of any
deliverable of iPass by any party other than iPass. THE FOREGOING STATES THE
SOLE AND EXCLUSIVE LIABILITY OF
7.
<PAGE> 8
IPASS, AND THE SOLE AND EXCLUSIVE REMEDIES OF SP, FOR ANY CLAIM OF ANY
INFRINGEMENT OF ANY INTELLECTUAL PROPERTY RIGHTS.
12. TERM AND TERMINATION.
12.1 TERM. This Agreement shall remain in full force and effect unless and
until terminated in accordance with this Section.
12.2 TERMINATION FOR BREACH. Either party may terminate this Agreement
upon the material breach of the other party of the terms of this Agreement, if
such default continues for thirty (30) days after written notice.
12.3 TERMINATION FOR CONVENIENCE. At any time six (6) months after the
Effective Date, either party shall be entitled to terminate this Agreement for
its convenience, for any reason or for no reason, upon six months prior written
notice.
12.4 EFFECTS OF TERMINATION. Upon termination, SP shall immediately cease
representing itself as a SP of the Software and Services, all licenses granted
hereunder shall immediately terminate, each party shall return ail copies of the
other party's Confidential Information, and SP's obligations to make any
payments pursuant to Section 6 ("Payments; Ordering") shall survive . The
obligations of each party under Sections 7 ("No Warranty"), 8 ("Limitation of
Liability"), 10 ("Confidential Information"), 11.1 ("SP Indemnity"), 12 ("Term
and Termination") and 13 ("General") shall survive termination or expiration of
this Agreement.
12.4.1 SP shall return at SP's cost ail products and copies of
promotional materials, marketing literature, written information and reports
pertaining to literature, written information and reports pertaining to the
Services that have been supplied by iPass. Any products returned by SP will be
eligible for full refund of the purchase price or any part there of previously
paid by the SP for such purchases.
12.4.2 Upon termination or expiration, SP shall no longer have the
right to order, reproduce or distribute any Software, Customer Service Start-up
Plans or Access Unit Packages, all open orders shall automatically terminate and
iPass shall have no obligation to fill such orders. In such event, SP shall
immediately cease using, marketing, reproducing and distributing the Software
and shall return all copies thereof to iPass along with a certification signed
by an officer of SP that no copies have been retained by SP for any purpose
whatsoever. However, if the Agreement terminates or expires for any reason other
than iPass' termination for cause, SP shall have the right to distribute
Customer Service Start-up Plans and Access Unit Packages for which SP has
already paid for on the effective date of termination; and SP shall have the
right to continue to use the Software internally upon execution of iPass'
then-current applicable end user agreement to support Customers who have valid
Customer Agreements in effect on the effective date of termination.
12.4.3 Neither party shall incur any liability whatsoever for any
damage, loss or expenses of any kind suffered or incurred by the other arising
from or incident to any termination of this Agreement that complies with the
terms of the Agreement. Without limiting the foregoing, neither party shall be
entitled to any damages on account of prospective profits or anticipated sales.
SP and iPass agree to waive, to the extent permitted by applicable law, the
8.
<PAGE> 9
benefit of any law or regulation providing compensation to either party arising
from the termination or failure to renew this Agreement.
13. GENERAL PROVISIONS.
13.1 EXPENSES. Except as provided in this Agreement, both parties shall be
solely responsible for their respective expenses in performing under this
Agreement, which include without limitation personnel compensation, bonuses and
benefits; costs and expenses of running its sales organization and offices; and
advertising and promotion expenses.
13.2 REVERSE ENGINEERING. SP agrees to notify iPass promptly of any
circumstance of which SP has knowledge relating to any unauthorized use,
copying, de-compilation or modification of the Software and to give reasonable
cooperation's (at iPass' expense) to iPass' efforts to eliminate such conduct.
13.3 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of California, USA, without reference to conflict of laws
principles. Both parties consent to jurisdiction in California and further agree
that any cause of action arising out of or relating to this Agreement may be
brought in a court in Santa Clara County, California. This Agreement expressly
excludes the application of the United Nations Convention on Contracts for the
International Sale of Goods.
13.4 SEVERABILITY; WAIVER. If any provision of this Agreement is held to
be invalid or unenforceable for any reason, the remaining provisions will
continue in full force without being impaired or invalidated in any way. The
parties agree to replace any invalid provision with a valid provision that most
closely approximates the intent and economic effect of the invalid provision.
The waiver by either party of a breach of any provision of this Agreement will
not operate or be interpreted as a waiver of any other or subsequent breach.
13.5 COMPLIANCE WITH LAWS. At its sole expense, SP shall comply with all
applicable laws and regulations regarding its activities related to this
Agreement. If required, SP shall obtain any governmental authorizations, and SP
shall provide proof of such compliance upon request.
13.6 HEADINGS. Headings are for reference purposes only and in no way
define, limit, construe or describe the scope or extent of such section or in
any way affect this Agreement.
13.7 SUCCESSORS AND ASSIGNS. SP may not assign its rights or delegate its
duties under this Agreement without iPass' written consent, iPass' written
consent is not to be unreasonably withheld. Any attempted assignment in
violation of the foregoing shall be void and of no effect.
13.8 FORCE MAJEURE. If performance of this Agreement, or any obligation
hereunder (other than the obligation to pay), is prevented, restricted or
interfered with by any act or condition whatsoever beyond the reasonable control
of the affected party (including without limitation the failure of any suppliers
to perform), the party so affected, upon giving prompt notice to the other
party, will be excused from such performance to the extent of such prevention,
restriction or interference.
9.
<PAGE> 10
13.9 INDEPENDENT CONTRACTORS. The parties to this Agreement are
independent contractors, and no agency, partnership, joint venture,
employee-employer or franchiser, franchisee relationship is intended or created
by this Agreement. Neither party may take any actions that are binding on the
other party.
13.10 NOTICE. Any notices required or permitted hereunder shall be given
at the address specified in the first paragraph or at such other address as a
party shall specify in writing. Notice shall be deemed given: upon personal
delivery or by domestic or international courier service; if sent by confirmed
facsimile, upon confirmation of receipt; or, if sent by certified or registered
air mail, postage prepaid, upon confirmation of receipt.
13.11 ENTIRE AGREEMENT. This Agreement, including the exhibits hereto, is
the entire understanding and agreement of the parties, and supersedes any and
all oral or written agreements or understandings between the parties, as to the
subject matter of this Agreement. SP acknowledges that it has not entered into
this Agreement in reliance upon any warranty or representation except those
specifically set forth herein. In the event of any conflict between this
Agreement and an Exhibit, the terms of the Exhibit shall control. Except as
expressly set forth herein, this Agreement may be changed only by a writing
signed by both parties.
13.12 PUBLICITY. Neither party shall publicize the existence of this
Agreement without the consent of the other. In the event of such agreement, all
press release materials shall be jointly reviewed and approved before
distribution.
13.13 GOVERNMENT END USERS. Any distribution to or use of the Software by
the U.S. Government is conditioned upon the Government agreeing that the
Software is comprised of "commercial computer software" and "commercial computer
software documentation" as such terms are used in 48 CFR 12.212 (SEPT 1995) and
is provided to the Government (a) for acquisition by or on behalf of civilian
agencies, consistent with the policy set forth in 48 CFR 12.212; or (b) for
acquisition by or on behalf of units of the Department of Defense, consistent
with the policies set forth in 48 CFR 227.7202-1 (JUN 1995) and 227.7202-3 (JUN
1995). SP shall also be responsible for ensuring that the Software and related
documentation is correctly marked as required by the applicable Government
regulations governing such materials when delivered to the Government.
13.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which shall
be taken together and deemed to be one instrument.
10.
<PAGE> 11
IN WITNESS WHEREOF, the parties have executed this SOLUTION PARTNER
RESELLER AGREEMENT as of the date first written above.
IPASS SP: Fiberlink
By: /s/ CHRISTOPHER MOORE By: /s/ JAMES SHEWARD
------------------------------------ -----------------------------------
Name: Christopher W. Moore Name: James Sheward
---------------------------------- ---------------------------------
Title: President & CEO Title: President/CEO
--------------------------------- --------------------------------
Date: September 4, 1998 Date: 8/28/98
---------------------------------- ---------------------------------
Address: 650 Castro Street, Suite 500 Address: 488 Norristowa Rd.
Mountain View, CA 94041 #240
USA Blue Bell, PA 19922
Attn: Contracts Department Attn: Finance
Phone: +1 (650) 237-7300 Phone: 610-941-2030
Fax: +1 (650) 237-7321 Fax: 610-941-2069
Email: [email protected] Email:
--------------------------------
11.
<PAGE> 12
EXHIBIT A
CUSTOMER SERVICE START-UP PLAN
1. RoamServer Software
2. Dial Wizard Software
3. Dial Wizard user documentation
4. Access units, in Access Unit Packages of varying sizes depending on order
1.
<PAGE> 13
EXHIBIT B
SP LAUNCH KIT
1. RoamServer Software
2. Dial Wizard Software
3. Dial Wizard customization kit
4. Partner Handbook
5. Installation documentation
1.
<PAGE> 14
EXHIBIT C
TERRITORY
1.
<PAGE> 15
EXHIBIT D
SOFTWARE
1. RoamServer Software, for the following platforms:
RoamServer Software for Linux
ipass3.0-QSK-Linux2.0.18.tar.Z
RoamServer Software for Digital UNIX/Alpha 4.0
ipass3.0-QSK-OSF1V4.0-alpha.tar.Z
RoamServer Software for BSDI
ipass3.0-QSK-bsdi.tar.Z
RoamServer Softyware for FreeBSD
ipass3.0-QSK-freebsd.tar.Z
RoamServer Software for SUN
ipass3.0-QSK-sun.tar.Z
RoamServer Software for Windows NT 4.0
ipassNT-int.zip
2. Dial Wizard Software, version 1.0.
1.
<PAGE> 16
EXHIBIT E
CUSTOMER AGREEMENT MINIMUM TERMS AND CONDITIONS
1. iPass and its suppliers exercise no control whatsoever over the content of
the information passing through their systems. By its very nature, the
Internet contains offensive or harmful material, in some cases under
descriptions that have been mislabeled or are otherwise deceptive. We
expect that you will use caution and common sense in using the Internet.
2. iPASS AND ITS SUPPLIERS DISCLAIM ALL WARRANTIES AND CONDITIONS OF ANY
KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE IMPLIED
WARRANTIES OF TITLE, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND
NONINFRINGEMENT. Use of any information obtained via the service is at
your own risk. iPass and its suppliers specifically deny any
responsibility for the accuracy or quality of information obtained through
their services, iPass and its suppliers also do not guarantee continuous,
uninterrupted or secure access to the Internet or to your home account.
Some jurisdictions do not allow the disclaimer of implied warranties, so
the foregoing disclaimer may not apply to you. This warranty gives you
specific legal rights and you may also have other legal rights that vary
from jurisdiction to jurisdiction.
3. IN NO EVENT SHALL IPASS OR ITS SUPPLIERS BE LIABLE FOR ANY SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES, OR FOR INTERRUPTED COMMUNICATIONS,
LOST DATA OR LOST PROFITS, ARISING OUT OF OR IN CONNECTION WITH THE
SERVICE. Some states do not allow the limitation of liability, so the
foregoing limitation may not apply to you.
4. You shall not use the services to take any actions or make any
statements that: (a) infringe on any third party's copyright, patent,
trademark, trade secret or other proprietary rights or rights of
publicity or privacy; (b) violate any applicable law, statute,
ordinance or regulation (including without limitation those regarding
export control); (c) are defamatory, trade libelous or unlawfully
threatening; (d) are pornographic or obscene; (e) violate any laws
regarding unfair competition, antidiscrimination or false advertising,
or (f) result in the distribution of viruses, trojan horses, worms,
time bombs, cancelbots or other similar harmful or deleterious
programming routines. You may not use the services to distribute any
bulk unsolicited e-mails or otherwise cause an excessive or
disproportionate load on iPass suppliers' infrastructure.
5. You may not transfer or share your account with anyone. You may not
disclose your password to any third parties.
6. Given the current regulatory and technical environment you should not have
an expectation of privacy in your online activities.
1.
<PAGE> 17
EXHIBIT F
PRICE LIST FOR SOFTWARE, SERVICES AND TRAINING
SERVICE START-UP PLANS
iPass Service Start-up Plans are the introductory service activation packages to
introduce corporations to iPass Corporate Access. Features include:
- Three service levels based on number of unique remote access users
- Introductory access units based on the service level
- RoamServer software, at no charge, for the corporate site
- iPass Dial Wizard or Microsoft Connection Manager the client software
featuring an international phone book of access points, at no charge
- Ongoing phone book updates to provide users with the current listing of
access points Administration and user documentation for the server and
client software
- Monthly detailed billing listing access locations, users and connect
time
- Technical support provided by reseller
<TABLE>
<CAPTION>
NUMBER OF UNITS MASTER
DESCRIPTION UNIQUE IDS INCLUDED PRICE S RP
- ----------- ------------------ -------- ------ ------
<S> <C> <C> <C> <C>
Basic Connect [*] users [*] $[*] $[*]
Standard Connect [*] users [*] $[*] $[*]
Premium Connect [*] unlimited [*] $[*] $[*]
</TABLE>
USAGE PRICING
Usage pricing is based on:
- Five rate groups based on access point location
- Rate groups converted to access units for universal measurement
- Sold in bulk access packs
- Monthly detailed billing listing access points, users and connect time
<TABLE>
<CAPTION>
MASTER MASTER
RATE GROUPS PRICE/UNIT PRICE/HOUR SRPF/UNIT SRP/HOUR
- ----------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
A=[*] Units $[*] $[*] $[*] $[*]
B=[*] Units $[*] $[*] $[*] $[*]
C=[*] Units $[*] $[*] $[*] $[*]
D=[*] Units $[*] $[*] $[*] $[*]
E=[*] Units $[*] $[*] $[*] $[*]
</TABLE>
ACCESS UNIT PACKAGES
AccessPacks are bulk access unit packages created as a billing option for
customers wishing to pay in advance for Corporate Access to eliminate monthly
billing and receive volume discounts. Detailed monthly usage reports will be
provided for monitoring and controlling the account, so customers can still
manage the expense and usage by departments or individuals.
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
1.
<PAGE> 18
<TABLE>
<CAPTION>
NUMBER MASTER SRP
DESCRIPTION OF UNITS PRICE PER UNIT SRP
- ----------- -------- ------- -------- -------
<S> <C> <C> <C> <C>
AccessPack 5 [*] [*] [*] [*]
AccessPack 10 [*] [*] [*] [*]
AccessPack 25 [*] [*] [*] [*]
AccessPack 50 [*] [*] [*] [*]
AccessPack 100 [*] [*] [*] [*]
</TABLE>
UPGRADE PLANS
After the initial purchase of the Service Start-up Plan, corporations may add
additional users through the purchase of an Upgrade Plan. Features include:
- Additional access units based on the service level
- Monthly detailed billing listing access locations, users and connect
time
- Technical support provided by reseller
<TABLE>
<CAPTION>
NUMBER OF UNITS MASTER
DESCRIPTION UNIQUE IDS INCLUDED PRICE SRP
- ----------- ---------- -------- ------ ------
<S> <C> <C> <C> <C>
Basic to Standard [*] [*] [*] [*]
Standard to Premium [*] [*] [*] [*]
Basic to Premium [*] [*] [*] [*]
</TABLE>
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
2.
<PAGE> 19
EXHIBIT G
IPASS TRADEMARKS
The following are iPass trademarks, iPass may revise this list from time to
time. Usage guidelines for the marks are available on the iPass "Partners Only"
web site: a user name and password is required for access.
iPass(TM)
iPass Alliance(TM)
iPass Alliance(TM) logo
1.
<PAGE> 20
EXHIBIT H
IPASS SALES AND MARKETING TOOLS AND SUPPORT
Please refer to the iPass "Partners Only" web site for channel partners. You
will need to know your unique partner code as well as your password to access
this site.
1.
<PAGE> 21
EXHIBIT I
SERVICE LEVELS
<TABLE>
<CAPTION>
PART NUMBER DESCRIPTION NO. OF UNIQUE IDS UNITS INCL
- ----------- ----------- ----------------- ----------
<S> <C> <C> <C>
0001 Basic Connect [*] [*]
0002 Standard Connect [*] [*]
0003 Premium Connect [*] [*]
</TABLE>
UPGRADE PRICING
<TABLE>
<CAPTION>
PART NUMBER DESCRIPTION NO. OF UNIQUE IDS UNITS INCL
- ----------- ----------- ----------------- ----------
<S> <C> <C> <C>
0101 Basic to Standard [*] [*]
0102 Standard to Premium [*] [*]
0103 Basic to Premium [*] [*]
</TABLE>
[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
1.
<PAGE> 1
EXHIBIT 10.15
IPASS INC.
EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement") is made effective as of the 10th day of
May, 1999, between IPASS INC., a California corporation ("Company"), and MICHAEL
MANSOURI ("Executive").
WHEREAS, the Company desires to secure the services of Executive as the
Company's President and Chief Executive Officer, and Executive desires to
perform such services for the Company, on the terms and conditions as set forth
herein;
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements set forth below, it is mutually agreed as follows:
1. EFFECTIVE DATE, TERM, AND DUTIES. The employment of Executive by the
Company hereunder shall commence upon the date on which Executive commences
employment with the Company and shall continue thereafter on the same terms and
conditions until terminated pursuant to Section 4. Executive shall have such
duties as the Board of Directors of the Company (the "Board of Directors") may
from time to time prescribe consistent with his position as President and Chief
Executive Officer of the Company. Executive shall report directly to the Board
of Directors. Executive shall devote his full time, attention, energies and best
efforts to the business of the Company. The Company shall maintain an office for
Executive at the Company's corporate headquarters, which is currently located in
Mountain View, California. The Board of Directors will elect Executive to the
Board of Directors and the Company shall use its best efforts to have Executive
elected and re-elected to the Board at each Annual Stockholder Meeting held
during his period of service as Chief Executive Officer of the Company.
2. COMPENSATION. The Company shall pay and Executive shall accept as
full consideration for the Services, compensation consisting of the following:
2.1 BASE SALARY. $275,000 per year base salary, payable in
installments in accordance with the Company's normal payroll practices, less
such deductions or withholding required by law.
2.2 BONUS. Opportunity to receive a cash incentive bonus (the
"Bonus") at an annual target bonus of $175,000 per anniversary year. An
anniversary year shall run from May 10 to May 9. The Bonus for a given
anniversary year shall be paid in quarterly installments, and the amount of each
installment payment shall be determined by the Board of Directors based upon the
Board's assessment of Executive's performance compared to the business
objectives determined by the Board. For the anniversary year ending on May 9,
2000, Executive shall be guaranteed a minimum Bonus of $100,000, which shall be
paid to Executive within thirty (30) days of the date on which Executive
commences employment with the Company. For purposes of determining Executive's
Bonus for the anniversary year ending May 9, 2000, the minimum Bonus shall be
applied as if Executive had received $25,000 of such minimum Bonus with
1.
<PAGE> 2
respect to each quarter in such anniversary year, and Executive shall receive
such amount as shall be determined by the Board of Directors in excess of
$25,000.
In addition, upon commencement of employment Executive shall receive a
sign-on bonus in the amount of $110,000, less such deductions or withholding
required by law.
2.3 STOCK OPTIONS. Executive shall be entitled to a grant of an
incentive stock option for seven percent (7%) or 706,012 shares of the Company's
common stock under the Company's 1997 Stock Option Plan (the "Stock Option
Plan") to be awarded by the Company's Board of Directors as of the date on which
Executive commences employment. Such option shall be granted at the fair market
value of the Company's common stock on the date of grant, shall be exercisable
in full on the date of grant, and shall vest (i.e., no longer be subject to the
Company's repurchase right) as to twenty-five percent (25%) of the shares
subject to the option on the first anniversary date of the date of grant and
2.0833% of the shares subject to the option each month thereafter, so long as
Executive has been continuously performing services for the Company from the
date of grant to the appropriate vesting date or as otherwise provided in
Section 4 hereof. All calculations of vested shares shall be rounded to the
nearest whole share and Executive shall not vest in a total number of shares
which is greater than the number of shares subject to the option. Executive will
be able to purchase any or all of the shares subject to the option with a
promissory note to the maximum extent permitted by state corporate law in effect
on the date of exercise. The interest rate shall be the minimum rate allowable
under the Internal Revenue Code (the "Code") for a mid-term loan and shall be
subject to annual compounding in order to avoid imputed interest, original issue
discount, or treatment of the loan as a below market loan. The note shall be
non-recourse debt as to seventy percent (70%) of the principal amount and
recourse debt as to thirty percent (30%) of the principal amount and all accrued
but unpaid interest. The maximum term shall be five years, with acceleration of
all indebtedness upon Executive's termination of service with the Company. To
the extent that the aggregate exercise price of the option exceeds the limits of
Section 422(d) of the Code, the option shall be an incentive stock option to the
maximum extent permitted by law and shall be a non-qualified stock option as to
the remainder. Other terms and conditions shall be the same as the standard
terms of other options issued by the Company under the terms of the Stock Option
Plan.
In addition, should Executive commence employment with the Company at its
Mountain View headquarters on a part-time basis of an average of at least ten
(10) hours per week during the week of May 10, 1999, and should Executive be
working exclusively for the Company on a full-time basis on or before June 21,
1999, Executive shall be entitled to an additional grant of an incentive stock
option for one half of one percent (0.5%) or 50,429 shares of the Company's
common stock under the Stock Option Plan to be awarded by the Board of Directors
as of the date on which Executive commences employment. Such option shall be
granted at the fair market value of the Company's common stock on the date of
grant and shall otherwise have the same terms and conditions as the option
described in the preceding paragraph.
2.4 PREFERRED STOCK PURCHASE. Executive shall be entitled to
purchase up to a maximum of one million dollars ($1,000,000) worth of preferred
stock of the Company upon the next occasion at which the Company issues shares
of its preferred stock. The terms and
2.
<PAGE> 3
conditions of such purchase shall be the same as those agreed to with all other
investors as part of such issuance.
2.5 INDEMNIFICATION. In the event Executive is made, or threatened
to be made, a party to any legal action or proceeding, whether civil or
criminal, by reason of the fact that Executive is or was a director or officer
of the Company, Executive shall be indemnified by the Company, and the Company
shall pay Executive's related expenses when and as incurred, all to the fullest
extent permitted by law, as more fully described in that Indemnification
Agreement attached as Exhibit A.
3. BENEFITS. Executive shall receive such pension, profit sharing,
vacation, health and welfare, and fringe benefits as the Board of Directors may,
from time to time, determine to provide for the key executives of the Company.
In addition, Executive shall receive relocation benefits as follows: (1) a
maximum of $75,000 for moving expenses and for travel expenses incurred by
Executive to visit his immediate family or vice versa prior to the time that
Executive's immediate family joins him in California, and (2) a maximum of
$75,000 for expenses incurred by Executive to identify and occupy temporary
housing through the date of Executive's first anniversary of employment. All
such amounts paid to Executive or to third parties for costs related to
Executive's relocation shall be reduced by applicable deductions and
withholding. Upon the execution of this Agreement by both parties, the Company
shall pay Executive an amount equal to $100,000, less applicable deductions and
withholding. For purposes of this Agreement, moving costs shall include, but not
be limited to, costs for packing and moving household goods, closing costs
related to sale of Executive's principal residence in Maryland and purchase of a
new residence in California, and transportation costs incurred by Executive and
members of Executive's household in moving to California. The Company will not
include in Executive's taxable income any amount which is treated as a
"qualified moving expense reimbursement" under the Code, which Executive
acknowledges shall require that Executive substantiate such expenses to the
Company.
Finally, Executive shall receive a non-transferable relocation "bridge"
loan with the following material terms and conditions: (1) principal of
$400,000; (2) maximum interest rate of 6%; (3) treatment as recourse debt and
secured by any securities of the Company purchased by Executive and Executive's
new principal residence in California; (4) maximum term of the earliest of the
following: (a) sale of Executive's current principal residence, (b) six months
following the date of a Change in Control (as defined below) in the ownership of
the Company, or (c) three years from the date that Executive commences
employment with the Company; and other terms and conditions as shall be
determined by the Company. The proceeds of this loan may only be used to
purchase Executive's new principal residence.
4. BENEFITS UPON TERMINATION OF EMPLOYMENT OR CHANGE IN CONTROL.
Executive's employment by the Company shall terminate immediately upon
Executive's receipt of written notice of termination by the Company, upon the
Company's receipt of notice of termination by Executive, or upon Executive's
death or Disability. "Disability" shall mean any medically determinable physical
or mental impairment which can be expected to result in death or which has
lasted or can be expected to last for a continuous period of not less than 4
months and which renders Executive unable to perform effectively the duties and
responsibilities of his
3.
<PAGE> 4
office with or without reasonable accommodation as determined by the
circumstances. Except in connection with a termination for Cause (as defined in
Section 4.2), or on account of death or Disability (as defined above), or a
voluntary termination by Executive other than for Good Reason (as defined in
Section 4.6), upon execution by Executive of an effective release of claims
substantially in the form attached as Exhibit B as shall be finally determined
by the Company, the Company shall provide Executive with termination benefits
upon termination of employment, as follows:
4.1 TERMINATION BENEFITS. An amount equal to one year's base salary and
target bonus at the time of termination shall be paid by the Company in twelve
equal monthly installments following termination of employment. All such amounts
shall be paid by the Company as soon as administratively possible at or
following the time such amount becomes due and payable and following the first
point in time that the Company is entitled to deduct such payments for income
tax purposes in compliance with applicable law, including but not limited to the
provisions of Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"). All of the unvested shares subject to option held by Executive on
the date of such termination that would have vested over the succeeding twelve
month period shall vest on the dates on which such shares would have become
vested had Executive remained employed with the Company for such twelve month
period. The options shall remain exercisable for the period specified in such
options following Executive's termination of employment.
4.2 CIRCUMSTANCES UNDER WHICH TERMINATION BENEFITS WOULD NOT BE PAID.
The Company shall not be obligated to pay Executive the termination benefits or
provide the additional option vesting described in Section 4.1 above if
Executive's employment is terminated for Cause, on account of Executive's death
or Disability, or on account of Executive's voluntary termination other than for
Good Reason (as defined in Section 4.6). For purposes of this Agreement, "Cause"
shall be limited to (1) Executive's gross misconduct or fraud in the performance
of his employment, including the appropriation or attempted appropriation of a
material business opportunity or funds or property of the Company or the
securing or attempt to secure any personal profit in connection with any
transaction entered into on behalf of the Company which is not approved by the
Board of Directors, (2) Executive's conviction or guilty plea with respect to
any felony (except for motor vehicle violations); or (3) Executive's material
breach of this Agreement (or any other agreement incorporated by reference into
this Agreement) after written notice delivered to Executive of such breach and a
reasonable opportunity (which in any event shall not exceed thirty (30) days) to
cure such breach.
In addition, the Company's obligation to provide any further benefits
under Section 4.1 shall immediately cease in the event that Executive either (a)
violates the terms of the Company's standard form of Employee Confidentiality
and Assignment of Inventions Agreement signed by Executive or (b) competes with
the Company during the term of his employment or within twelve (12) months
following termination of employment. For purpose of this Agreement, Executive
"competes" with the Company if he engages in (whether as an employee,
consultant, proprietor, partner, director or otherwise), or has any ownership
interest in, or participates in the financing, operation, management or control
of, any person, firm, corporation or business which sells products or services
which directly compete with the products or services either offered by the
Company at the time or at the termination of Executive's employment were, and at
that time are, are being developed for offering by the
4.
<PAGE> 5
Company (a "Competing Company'). In the event that the Competing Company has one
or more lines of business which do not compete with the Company, Executive will
not be in violation of this provision if he is involved only with the line or
lines of business which do not compete with the Company and he has no managerial
or ownership control over any competing line of business. It is agreed that
ownership of no more than 2% of the outstanding voting stock of a publicly
traded corporation shall not constitute a violation of this provision.
4.3 CHANGE IN CONTROL BENEFITS. Should there occur a Change in
Control (as defined below) and either Executive's employment is terminated
without "Cause" (as defined above) upon or within 13 months after the Change in
Control (as defined below) or Executive terminates his employment for "Good
Reason" (as defined below) upon or within 13 months after the Change in Control,
then all of the unvested shares and options held by Executive on the date of
such Change in Control that are scheduled to vest over the succeeding twenty
four month period shall immediately vest and any unexercised options shall
remain exercisable for the period specified in such options.
4.4 DEFINITION OF CHANGE IN CONTROL. For purposes of this
Agreement, the term "Change in Control" shall have the following definition: (a)
any consolidation or merger of the Company with or into any other corporation or
other entity or person, or any other corporate reorganization, in which the
shareholders of the Company prior to such consolidation, merger or
reorganization shall own less than fifty percent (50%) of the voting securities
of the controlling continuing or surviving entity of such consolidation, merger
or reorganization, or (b) any transaction or series of related transactions in
which in excess of fifty percent (50%) of the Company's voting power is
transferred to a person unrelated to the transferor(s). For purposes of
determining whether the shareholders of the Company prior to the occurrence of a
transaction described above own less than fifty percent (50%) of the voting
securities of the relevant entity afterwards, only the lesser of the voting
power held by a person either before or after the transaction shall be counted
in determining that person's ownership afterwards.
4.5 HANDLING OF GOLDEN PARACHUTE PAYMENTS. In the event that any
severance or other benefits provided to Executive (i) constitute "parachute
payments" within the meaning of Section 280G of the Code and (ii) but for this
Section 4.5, such severance and/or benefits would be subject to the excise tax
imposed by Section 4999 of the Code ("Excise Tax"), then Executive's benefits
under this Section 4.5 shall be payable either:
(A) in full,
(B) as to such lesser amount which would result in no
portion of such benefits being subject to excise tax under Section 4999 of the
Code,
whichever of the foregoing amounts, taking into account the applicable federal,
state and local income employment taxes, the excise tax imposed by Section 4999,
and all other applicable taxes, results in the receipt by Executive on an
after-tax basis, of the greatest amount of benefits under Section 4.5. Unless
the Company and Executive otherwise agree in writing, any determination required
under this Section 4.5 shall be made in writing by independent public
accountants agreed to by the Company and Executive (the "Accountants"), whose
determination shall be conclusive and binding upon Executive and the Company for
all purposes. For purposes
5.
<PAGE> 6
of making the calculations required by this Section 4.5, the Accountants may
make reasonable assumptions and approximations concerning applicable taxes and
may rely on reasonable, good faith interpretations concerning the application of
Sections 280G and 4999 of the Code. The Company and Executive shall furnish to
the Accountants such information and documents as the Accountants may reasonably
request in order to make a determination under this Section 4.5. The Company
shall bear all costs the Accountants may reasonably incur in connection with any
calculations contemplated by this Section 4.5.
If, notwithstanding any reduction described in this Section 4.5, the IRS
determines that Executive is liable for the Excise Tax as a result of the
receipt of the payment of benefits as described above, then Executive shall be
obligated to pay back to the Company, within thirty (30) days after a final IRS
determination or in the event that Executive challenges the final IRS
determination, a final judicial determination, a portion of the payment equal to
the "Repayment Amount." The Repayment Amount with respect to the payment of
benefits shall be the smallest such amount, if any, as shall be required to be
paid to the Company so that Executive's net after-tax proceeds with respect to
any payment of benefits (after taking into account the payment of the Excise Tax
and all other applicable taxes imposed on such payment) shall be maximized. The
Repayment Amount with respect to the payment of benefits shall be zero if a
Repayment Amount of more than zero would not result in Executive's net after-tax
proceeds with respect to the payment of such benefits being maximized. If the
Excise Tax is not eliminated pursuant to this paragraph, Executive shall pay the
Excise Tax.
Notwithstanding any other provision of this Section 4.5, if (i) there is a
reduction in the payment of benefits as described in this Section 4, (ii) the
IRS later determines that Executive is liable for the Excise Tax, the payment of
which would result in the maximization of Executive's net after-tax proceeds
(calculated as if Executive's benefits had not previously been reduced), and
(iii) Executive pays the Excise Tax, then the Company shall pay to Executive
those benefits which were reduced pursuant to this Section 4.5 contemporaneously
or as soon as administratively possible after Executive pays the Excise Tax so
that Executive's net after-tax proceeds with respect to the payment of benefits
is maximized.
4.6 DEFINITION OF GOOD REASON. For purposes of this Agreement,
"Good Reason" means (i) reduction of Executive's base salary in effect upon
commencement of employment, immediately prior to the occurrence of a Change in
Control, or immediately prior to the occurrence of Executive's termination of
employment, whichever is greatest, (ii) failure to provide a package of welfare
benefit plans which, taken as a whole, provides substantially similar benefits
to those in which the Executive is entitled to participate immediately prior to
the occurrence of termination of employment (except that employee contributions
may be raised to the extent of any cost increases imposed by third parties) or
any action by the Company which would adversely affect Executive's participation
or reduce Executive's benefits under any of such plans, (iii) change in
Executive's responsibilities or authority (which will not necessarily be
triggered by a change in title or reporting relationships unless such change
occurs prior to the occurrence of a Change in Control) resulting in a material
diminution of Executive's scope of responsibilities and span of control,
excluding for this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith which is remedied by the Company promptly after notice
thereof is given by Executive, (iv) request that Executive relocate to a
worksite that is more than 35 miles from his prior worksite, unless Executive
accepts such relocation
6.
<PAGE> 7
opportunity, (v) material reduction in Executive's duties, (vi) failure or
refusal of a successor to the Company to assume the Company's obligations under
this Agreement, or (vii) material breach by the Company or any successor to the
Company of any of the provisions of this Agreement.
5. DISPUTE RESOLUTION. The Company and Executive agree that any dispute
regarding the interpretation or enforcement of this Agreement or any dispute
arising out of Executive's employment or the termination of that employment with
the Company, except for disputes regarding the interpretation of those
agreements referred to in Section 7 and disputes involving the protection of the
Company's intellectual property, shall be decided by confidential, final and
binding arbitration conducted by Judicial Arbitration and Mediation Services
("JAMS") under the then-existing JAMS rules, rather than by litigation in court,
trial by jury, administrative proceeding, or in any other forum.
6. COOPERATION WITH THE COMPANY AFTER TERMINATION OF EMPLOYMENT.
Following termination of Executive's employment for any reason, Executive shall
fully cooperate with the Company in all matters relating to the winding up of
his pending work on behalf of the Company and the orderly transfer of any such
pending work to other employees of the Company as may be designated by the
Company, which transition period shall not exceed sixty (60) days following
Executive's termination of employment.
7. CONFIDENTIALITY; RETURN OF PROPERTY. As a condition of Executive's
employment, Executive agrees to execute and be bound by the Company's standard
form of Employee Confidentiality and Assignment of Inventions Agreement in the
form attached hereto as Exhibit C.
8. GENERAL.
8.1 WAIVER. Neither party shall, by mere lapse of time, without
giving notice or taking other action hereunder, be deemed to have waived any
breach by the other party of any of the provisions of this Agreement. Further,
the waiver by either party of a particular breach of this Agreement by the other
shall neither be construed as, nor constitute, a continuing waiver of such
breach or of other breaches by the same or any other provision of this
Agreement.
8.2 SEVERABILITY. If for any reason a court of competent
jurisdiction or arbitrator finds any provision of this Agreement to be
unenforceable, the provision shall be deemed amended as necessary to conform to
applicable laws or regulations, or if it cannot be so amended without materially
altering the intention of the parties, the remainder of the Agreement shall
continue in full force and effect as if the offending provision were not
contained herein.
8.3 NOTICES. All notices and other communications required or
permitted to be given under this Agreement shall be in writing and shall be
considered effective either (a) upon personal service, or (b) upon delivery
either by facsimile or e-mail and upon depositing such notice or communication
in the U.S. Mail, postage prepaid, return receipt requested and addressed to the
Chairman of the Board of the Company at its principal corporate address, and to
Executive at his most recent address shown on the Company's corporate records,
or at any other
7.
<PAGE> 8
address which he may specify in any appropriate notice to the Company, or (c)
upon only depositing such notice in the U.S. Mail as described in (b) above.
8.4 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original and all of which taken
together constitutes one and the same instrument and in making proof hereof it
shall not be necessary to produce or account for more than one such counterpart.
8.5 ENTIRE AGREEMENT. The parties hereto acknowledge that each has
read this Agreement, understands it, and agrees to be bound by its terms. The
parties further agree that this Agreement and any documents attached hereto or
incorporated by reference constitute the complete and exclusive statement of the
agreement between the parties and supersedes all proposals (oral or written),
understandings, representations, conditions, covenants, and all other
communications between the parties relating to the subject matter hereof.
Notwithstanding anything to the contrary, the terms of this Agreement shall
govern all options issued to Executive by the Company on and after the effective
date of this Agreement, and the Company shall use its best efforts to place
appropriate language describing the relevant terms of this Agreement in all
options issued or to be issued to Executive by the Company.
8.6 GOVERNING LAW. This Agreement shall be governed by the law of
the State of California.
8.7 ASSIGNMENT AND SUCCESSORS. The Company shall have the right to
assign its rights and obligations under this Agreement to an entity which
acquires all or substantially all of the assets of the Company. The rights and
obligation of the Company under this Agreement shall inure to the benefit and
shall be binding upon the successors and assigns of the Company. Executive shall
not have any right to assign his obligations under this Agreement and shall only
be entitled to assign his rights under this Agreement by will, the laws of
descent and distribution, or any method of transfer approved by the Company.
8.8 DURATION. This Agreement is for no specific term, and either
Executive or Company may terminate this Agreement in writing at any time, for
any reason, or for no reason. Notwithstanding the foregoing, the Company's
obligations to make severance payments, pay vested pension and other benefits,
unpaid accrued vacation, unemployment compensation claims, workers' compensation
claims, and provide accelerated stock vesting to Executive and Executive's
obligations to the Company pursuant to Section 4 and the Employee
Confidentiality and Assignment of Inventions Agreement, as well as any
provisions relating to the determination or enforcement of such obligations,
shall survive termination of this Agreement.
8.9 AMENDMENTS. This Agreement and the terms and conditions of the
matters addressed in this Agreement may only be amended in writing executed both
by the Executive and a duly authorized representative of the Company.
8.
<PAGE> 9
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
IPASS INC. EXECUTIVE
By: By: /s/ MICHAEL MANSOURI
---------------------------------- -----------------------------------
Michael Mansouri
Name:
--------------------------------
Title:
-------------------------------
<PAGE> 1
EXHIBIT 10.16
Michael Mansouri
President and CEO
iPass Inc.
650 Castro Street, Suite 500
Mountain View, CA 94041
August 19, 1999
Chris Moore
850 Center Drive
Palo Alto, CA 94301
Dear Chris:
This letter is to confirm your ending full-time employment with the
Company and beginning the previously agreed severance.
1. SEPARATION. Your last day of employment with the Company will be
August 1, 1999 (the "Separation Date"). The Company will pay you all accrued
salary and incentive compensation and all accrued and unused vacation earned
through the Separation Date. In addition, you will receive severance
compensation (as stated and limited in Exhibit A). For a period of no more than
one year, the Company will continue to provide you use of voice-mail, e-mail, a
computer as well as health coverage until such time that you become covered by
another plan.
2. INDEMNIFICATION. In the event you are made, or threatened to be made,
a party to any legal action or proceeding, whether civil or criminal, by reason
of the fact that you were a director or officer of the Company, you shall be
indemnified by the Company, and the Company shall pay your related expenses when
and as incurred, all to the fullest extent permitted by law and in accordance
with the Company's Amended and Restated Bylaws.
Sincerely,
IPASS INC.
By: /s/ Michael Mansouri
-----------------------------------
MICHAEL MANSOURI
Chief Executive Officer
UNDERSTOOD AND AGREED:
/s/ Christopher Moore
- -----------------------------------
CHRIS MOORE
CONFIDENTIAL
<PAGE> 2
EXHIBIT A
TERMINATION BENEFITS
Upon execution by you ("Executive") of an effective release of claims as
attached as Exhibit B, the Company shall provide Executive with termination
benefits upon termination of employment, as follows:
An amount equal to one year's base salary and target bonus at the time
of termination shall be paid by the Company in twelve equal monthly installments
following termination of employment. All such amounts shall be paid by the
Company as soon as administratively possible at or following the time such
amount becomes due and payable and following the first point in time that the
Company is entitled to deduct such payments for income tax purposes in
compliance with applicable law, including but not limited to the provisions of
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code").
All of the unvested shares subject to option held by Executive on the date of
such termination that would have vested over the succeeding twelve month period
shall vest on the dates on which such shares would have become vested had
Executive remained employed with the Company for such twelve month period. The
options shall remain exercisable for the period specified in such options
following Executive's termination of employment.
In addition, the Company's obligation to provide any further benefits
under Section 4.1 shall immediately cease in the event that Executive either (a)
violates the terms of the Company's standard form of Employee Confidentiality
and Assignment of Inventions Agreement signed by Executive or (b) competes with
the Company during the term of his employment or within twelve (12) months
following termination of employment. For purpose of this Agreement, Executive
"competes" with the Company if he engages in (whether as an employee,
consultant, proprietor, partner, director or otherwise), or has any ownership
interest in, or participates in the financing, operation, management or control
of, any person, firm, corporation or business which sells products or services
which directly compete with the products or services either offered by the
Company at the time or at the termination of Executive's employment were, and at
that time are, are being developed for offering by the Company (a "Competing
Company'). In the event that the Competing Company has one or more lines of
business which do not compete with the Company, Executive will not be in
violation of this provision if he is involved only with the line or lines of
business which do not compete with the Company and he has no managerial or
ownership control over any competing line of business. It is agreed that
ownership of no more than 2% of the outstanding voting stock of a publicly
traded corporation shall not constitute a violation of this provision.
CONFIDENTIAL
3
<PAGE> 3
EXHIBIT B
RELEASE
Certain capitalized terms used in this Release are defined in the
Separation Agreement to which this Exhibit is attached and which I have
reviewed.
I acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: "A GENERAL RELEASE DOES NOT EXTEND
TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT
THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR." I hereby expressly waive and
relinquish all rights and benefits under that section and any law of any
jurisdiction of similar effect with respect to my release of any claims I may
have against the Company.
Except as otherwise set forth in this Release, I hereby release, acquit
and forever discharge the Company, its parents and subsidiaries, and their
officers, directors, agents, servants, employees, shareholders, successors,
assigns and affiliates, of and from any and all claims, liabilities, demands,
causes of action, costs, expenses, attorneys fees, damages, indemnities and
obligations of every kind and nature, in law, equity, or otherwise, known and
unknown, suspected and unsuspected, disclosed and undisclosed, arising out of or
in any way related to claims and demands directly or indirectly arising out of
my employment with the Company or the termination of that employment, including
but not limited to, claims of intentional and negligent infliction of emotional
distress, any and all tort claims for personal injury, claims or demands related
to salary, bonuses, commissions, or any other ownership interests in the
Company, vacation pay, fringe benefits, expense reimbursements, severance pay,
or any other form of disputed compensation; claims pursuant to any federal,
state or local law or cause of action including, but not limited to, the federal
Civil Rights Act of 1964, as amended; the federal Age Discrimination in
Employment Act of 1967, as amended ("ADEA"); the federal Employee Retirement
Income Security Act of 1974, as amended; the federal Americans with Disabilities
Act of 1990; the California Fair Employment and Housing Act, as amended; tort
law; contract law; statutory law; common law; wrongful discharge;
discrimination; fraud; defamation; and breach of the implied covenant of good
faith and fair dealing; provided, however, that nothing in this paragraph shall
be construed in any way to release the Company from its obligation to indemnify
me from any third party action brought against me based on my employment with
the Company, pursuant to any applicable agreement or applicable law, or to
reduce or eliminate any coverage I may have under the Company's director and
officer liability policy, if any, or to release the Company from any obligations
which it has to pay termination benefits upon certain types of termination of my
employment with the Company as set forth and determined in the Executive
Employment Agreement.
I acknowledge that I am knowingly and voluntarily waiving and releasing
any rights I may have under ADEA. I also acknowledge that the consideration
given under
CONFIDENTIAL
4
<PAGE> 4
the Agreement for the waiver and release in the preceding paragraph hereof is in
addition to anything of value to which I was already entitled. I further
acknowledge that I have been advised by this writing, as required by the ADEA,
that: (A) my waiver and release do not apply to any rights or claims that may
arise on or after the date I execute this Release; (B) I should consult with an
attorney prior to executing this Release; (C) I have twenty-one (21) days to
consider this Release (although I may choose to voluntarily execute this Release
earlier); (D) I have seven (7) days following the execution of this Release to
revoke this Release; and (E) this Release shall not be effective until the date
upon which the revocation period has expired, which shall be the eighth day
after this Release is executed by me.
CHRISTOPHER W. MOORE
Date: /s/ Christopher W. Moore
------------- ---------------------------------
CONFIDENTIAL
5
<PAGE> 5
[IPASS LETTERHEAD]
August 19, 1999
Chris Moore
850 Center Drive
Palo Alto, CA 94301
Dear Chris:
This letter is to clarify the consulting arrangement we have previously
discussed:
1. CONSULTING. The Company will engage you as a consultant under the
following terms.
a. CONSULTING PERIOD. The consulting relationship commences on
September 1, 1999 and ends on January 1, 2000 (the "Consulting Period"). This
agreement may be continued by mutual agreement between you and the Company's
CEO ("CEO").
b. CONSULTING DUTIES. You will make yourself available to provide
consulting services to accomplish goals mutually agreed by yourself and the
CEO. Duties shall be to support the completion of the following goals:
(i) By December 1, 1999:
- Complete acquisition of the HomeGate patent (40%).
- Oversight of Jay Farhat's completion of his MBOs
(20%)
- Continued support in the completion of the Series E
financing (40%).
(ii) By January 1, 2000 goals as mutually agreed with the CEO.
c. CONSULTING FEES. During the Consulting Period as noted in (i),
the Company will pay you $68,750 (one quarter of your base and incentive pay),
and for the consulting period as noted in (ii) above, at an hourly rate
equivalent to your base and incentive pay. The Company will not withhold or
make payments for taxes, social security, or other payroll deductions, make
unemployment insurance or disability insurance contributions, or obtain
worker's compensation insurance on your behalf. The Company will issue an IRS
1099-MISC form with respect to the Consulting Fees. You acknowledge that you
are an independent contractor and not an employee of the Company. You agree to
accept exclusive liability for complying with all applicable state and federal
laws governing self-employed individuals, including obligations such as payment
of taxes, social security, disability and other contributions based on fees
paid to Contractor. You hereby agree to indemnify the Company and hold it
harmless from any liability for any taxes, contributions,
CONFIDENTIAL
<PAGE> 6
penalties, and interest that may be assessed by any taxing or governmental
authority with respect to the Consulting Fees.
d. Other Work Activities. During the Consulting Period, you may
engage in employment, consulting or other work relationships in addition to
your consulting for the Company. The Company agrees to make reasonable
arrangements to enable you to perform your work for the Company at such times
and in such a manner so that it does not interfere with other work activities
in which you may engage.
e. Confidentiality and Work Product. During the Consulting Period and
afterwards, you will keep all of the Company's confidential and proprietary
information in confidence in accordance with the confidentiality provisions of
the Employee Confidentiality and Assignment of Inventions Agreement between you
and the Company [a copy of which is attached to this letter]. All of the work
product that you create during the Consulting Period will be the exclusive
property of the Company unless you and the Company otherwise agree in writing,
and you hereby assign all right, title and interest in such work product
(including all intellectual property rights) to the Company.
2. EXPENSE REIMBURSEMENTS. During the Consulting Period, upon your
provision of proper documentation, the Company will reimburse you for reasonable
expenses pre-approved by the Company and incurred by you in performing
consulting services at the Company's request. Recognizing that you have agreed
to perform consulting services from your home office, the following expenses
shall be considered pre-approved: costs of mobile and home-office telephone
service and internet access services from your home office.
Sincerely,
iPass Inc.
By: /s/ MICHAEL MANSOURI
-----------------------------
MICHAEL MANSOURI
Chief Executive Officer
Undersigned and Agreed:
/s/ CHRISTOPHER MOORE
- ------------------------------------
Chris Moore
Date:______________________________
CONFIDENTIAL
<PAGE> 1
EXHIBIT 10.17
[INSERT date]
NAME
STREET ADDRESS
CITY, STATE ZIP
Dear [INSERT name],
I am pleased to offer you the position of [INSERT title] at iPass Inc. Your base
salary will be [INSERT semi-monthly salary] semi-monthly, plus benefits,
including the option of participating in our 401(k) Plan. If annualized, this
amount equals [INSERT annualized salary]. [INSERT this sentence if adding annual
bonus: "In addition, there will be an annual bonus of $?, paid on a quarterly
basis upon successful completion of quarterly objectives".] [INSERT this
sentence if adding a sign-on bonus: "In addition, there is a sign on bonus of $?
that is reimbursable to iPass if you leave within the first year".] [In
addition, you shall receive a lump-sum payment of $X (minus the appropriate
taxes) to assist with relocation expenses.]
Pending the approval of the Board of Directors of iPass, you will receive
options to purchase [INSERT number of shares] shares of iPass' common stock,
subject to a four-year vesting schedule and other restrictions, as described in
the employee shareholder documents you will receive. To offer you potential
substantial tax savings and maximum flexibility in tax planning, you may elect
to exercise your unvested options provided that they remain subject to
repurchase by the company. The company will provide a loan to cover the exercise
costs at the minimum legally required interest rate.
Also, in the event that the company undergoes a change of control and you are
subsequently terminated, other than for cause, or leave for "Good Reason" as
defined in the attachment to this letter, within 12 months of the change of
control, the vesting of the above stock options shall be accelerated by 24
months from the change of control. All acceleration shall be subject to the 280G
provisions attached to this letter.
iPass offers its employees health, dental, vision, life, AD&D, and short term
and long term disability insurance. The health & dental plans provide you with
several options regarding your care. Please read the enclosed information about
the options available to you. You may call Levie Tarantino with any questions
about health insurance or any other iPass benefits (650-318-0428).
If you accept this offer, the terms described in this letter shall be the terms
of your employment. Any additions or modifications of these terms must be in
writing and signed by yourself and the Chairman of iPass. Your employment
pursuant to this offer is contingent on you executing the enclosed Proprietary
Information and Inventions Agreement, the Employment Agreement, and upon you
providing iPass with the legally required proof of your identity and
authorization to work in the United States.
<PAGE> 2
Employment with iPass is at the will of each party and is not for a specific
term and can be terminated by you or by the company at any time for any reason,
with or without cause. Any contrary representations which may have been made or
which may be made to you are superseded by this offer. This offer is valid until
[INSERT day, month] at 5:00 pm. Please signify your acceptance by signing and
dating below and returning this offer letter to Levie Tarantino or myself. This
offer can be faxed to (650) 237-7322.
[INSERT name], your acceptance of our offer represents a unique opportunity for
us both to grow and succeed. We all want to thank you in advance for your faith
in us, and for the commitment you have made to our common vision. Finally, we
all look forward to working and building iPass with you!
<TABLE>
<S> <C>
Welcome aboard, Accepted
- -------------------------------- --------------------------------
Michael H. Mansouri, Chairman & CEO [INSERT name]
- -------------------------------- ----------------- --------------
[INSERT hiring manager name, title] Date Start Date 0/0/00
</TABLE>
2
<PAGE> 1
EXHIBIT 10.18
Michael Mansouri
President and CEO
iPass Inc.
650 Castro Street, Suite 500
Mountain View, CA 94041
October 29, 1999
CONFIDENTIAL
Robert C. Schoettle
c/o iPass Inc.
650 Castro Street, Suite 500
Mountain View, CA 94041
Dear Bob:
This letter sets forth the substance of the separation agreement (the
"Agreement") that iPass Inc. (the "Company") is offering to aid you with your
employment transition.
1. SEPARATION. Your last day of employment with the Company will be
February 11, 2000 (the "Separation Date"). On the Separation Date, the Company
will pay you all accrued salary and all accrued and unused vacation earned
through the Separation Date, subject to standard payroll deductions and
withholdings. You are entitled to this payment regardless of whether you sign
this Agreement.
It is important to understand that, effective immediately, you are not
authorized to make any representations or take any actions on behalf of the
Company. Further, effective immediately your position will change to Assistant
to the Vice President and Chief Financial Officer. The roles and
responsibilities of this position will be set forth to you by the Vice President
and Chief Financial Officer.
2. SEVERANCE PAYMENT. Although the Company has no policy or procedure
requiring payment of any severance benefits, on or about February15, 2000, the
Company will pay you a single lump-sum payment equal to 3 month's current base
pay, or $51,250, subject to standard payroll deductions and withholdings.
3. HEALTH INSURANCE. To the extent provided by the federal COBRA law or,
if applicable, state insurance laws, and by the Company's current group health
insurance policies, you will be eligible to continue your group health insurance
benefits at your own expense. Later, you may be able to convert to an individual
policy through the provider of the Company's health insurance, if you wish. If
you elect continuing health care insurance coverage through COBRA, the Company
will make the payments necessary for you to continue your current health
insurance benefits for a period of three (3) months after the Separation Date.
1
<PAGE> 2
4. OTHER COMPENSATION OR BENEFITS. You acknowledge that, except as
expressly provided in this Agreement, you will not receive any additional
compensation, severance or benefits from the Company after the Separation Date.
You also understand and agree that the vesting of any incentive stock options
granted to you shall cease on the Separation Date. The Company makes no
representations regarding the tax treatment of your incentive stock options.
Your rights with regard to your incentive stock options will be determined in
accordance with the applicable stock option agreement(s) and related plan
document(s).
5. EXPENSE REIMBURSEMENTS. You agree to submit your final documented
expense reimbursement statement within ten (10) days of the Separation Date,
reflecting any and all business expenses you incurred through the Separation
Date for which you seek reimbursement. The Company will reimburse you for such
expenses pursuant to its regular business practice.
6. RETURN OF COMPANY PROPERTY. By the Separation Date, you agree to
return to the Company all Company documents (and all copies thereof) and other
Company property and materials in your possession or control, including but not
limited to: Company files, notes, memoranda, correspondence, lists, drawings,
records, plans and forecasts, financial information, personnel information,
customer and customer prospect information, sales and marketing information,
product development and pricing information, specifications, computer-recorded
information, tangible property, credit cards, entry cards, identification badges
and keys; and any materials of any kind which contain or embody any proprietary
or confidential information of the Company (and all reproductions thereof). You
agree that, after the Separation Date, you will neither use nor possess Company
property.
7. PROPRIETARY INFORMATION. You acknowledge your continuing obligations
under your Proprietary Information and Inventions Agreement (a copy of which is
attached hereto as Exhibit A), which include, but are not limited to: your
assignment to the Company of all right, title, and interest to any intellectual
property obtained, developed or invented by you related to the business of the
Company during your employment with the Company, and your obligation not to use
or disclose confidential or proprietary information of the Company except as
expressly authorized by the Company.
8. CONFIDENTIALITY. The provisions of this Agreement will be held in
strictest confidence by you and the Company and will not be publicized or
disclosed in any manner whatsoever; provided, however, that: (a) you may
disclose this Agreement to your immediate family; (b) the parties may disclose
this Agreement in confidence to their respective attorneys, accountants,
auditors, tax preparers, and financial advisors; (c) the Company may disclose
this Agreement as necessary to fulfill standard or legally required corporate
reporting or disclosure requirements; and (d) the parties may disclose this
Agreement insofar as such disclosure may be necessary to enforce its terms or as
otherwise required by law. In particular, and without limitation, you agree not
to disclose the terms of this Agreement to any current or former Company
employee or independent contractor.
2
<PAGE> 3
9. NONDISPARAGEMENT. Both you and the Company's officers and directors
agree not to disparage the other party, and the other party's officers,
directors, employees, shareholders and agents, in any manner likely to be
harmful to them or their business, business reputation or personal reputation;
provided that both you and the Company will respond accurately and fully to any
question, inquiry or request for information when required by legal process.
10. NONSOLICITATION. You agree that for one year following the Separation
Date, you will not, directly or indirectly, induce or encourage, or attempt to
induce or encourage, any employee of the Company to terminate his or her
relationship with the Company in order to become an employee, consultant, or
independent contractor to or for any other person or entity.
11. RELEASE. In exchange for the payments and other consideration under
this Agreement to which you would not otherwise be entitled, and except as
otherwise set forth in this Agreement, you release, acquit and forever discharge
the Company, its parents and subsidiaries, and their respective officers,
directors, agents, servants, employees, attorneys, shareholders, predecessors,
successors, assigns and affiliates, of and from any and all claims, liabilities,
demands, causes of action, costs, expenses, attorneys fees, damages, indemnities
and obligations of every kind and nature, in law, equity, or otherwise, known
and unknown, suspected and unsuspected, disclosed and undisclosed, arising out
of or in any way related to agreements, events, acts or conduct at any time
prior to and including the date you sign this Agreement, including but not
limited to: all such claims and demands directly or indirectly arising out of or
in any way connected with your employment with the Company or the termination of
that employment; claims or demands related to salary, bonuses, commissions,
stock, stock options, or any other ownership interests in the Company, vacation
or other time off pay, fringe benefits, expense reimbursements, severance pay,
or any other form of compensation; claims pursuant to any federal, state or
local law, statute, or cause of action including, but not limited to, the
federal Civil Rights Act of 1964, as amended; the federal Americans with
Disabilities Act of 1990; the federal Age Discrimination in Employment Act of
1967, as amended ("ADEA"); the California Fair Employment and Housing Act, as
amended; tort law; contract law; wrongful discharge; discrimination; harassment;
fraud; defamation; emotional distress; and breach of the implied covenant of
good faith and fair dealing.
12. RELEASE OF ADEA CLAIMS. You acknowledge that you are knowingly and
voluntarily waiving and releasing any rights you may have under the ADEA. You
also acknowledge that the consideration given for the waiver and release in the
preceding paragraph hereof is in addition to anything of value to which you are
already entitled. You further acknowledge that you have been hereby advised, as
required by the ADEA, that: (a) your waiver and release do not apply to any
rights or claims that may arise after the execution date of this Agreement; (b)
you should consult with an attorney prior to executing this Agreement; (c) you
have twenty-one (21) days to consider this Agreement (although you may choose to
voluntarily execute this Agreement earlier); (d) you have seven (7) days
following the execution of this Agreement by the parties to revoke the
Agreement; and (e) this Agreement will not be effective until the date upon
which the revocation period has expired, which will be the eighth day after this
Agreement is executed by you ("Effective Date").
13. SECTION 1542 WAIVER. In granting the releases herein, you acknowledge
that you have read and understand California Civil Code section 1542:
3
<PAGE> 4
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT
KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR.
You expressly waive and relinquish all rights and benefits under that section
and any law of any jurisdiction of similar effect with respect to the release of
any unknown or unsuspected claims contained in this Agreement.
14. ADDITIONAL RELEASE. You also agree that you will execute the release
set forth as Exhibit B hereto on or about the Separation Date.
15. ARBITRATION. To provide a mechanism for rapid and economical dispute
resolution, you and the Company agree that any and all disputes, claims, or
causes of action, in law or equity, arising from or relating to this Agreement
or its enforcement, performance, breach, or interpretation, with the sole
exception of disputes that may arise from your Proprietary Information and
Inventions Agreement, will be resolved by final and binding confidential
arbitration held in San Francisco, California and conducted by Judicial
Arbitration & Mediation Services/Endispute ("JAMS"), under its then-existing
rules and procedures. Nothing in this paragraph is intended to prevent either
you or the Company from obtaining injunctive relief in court to prevent
irreparable harm pending the conclusion of any such arbitration.
16. MISCELLANEOUS. This Agreement, including exhibits, constitutes the
complete, final and exclusive embodiment of the entire agreement between you and
the Company with regard to this subject matter. It is entered into without
reliance on any promise or representation, written or oral, other than those
expressly contained herein, and it supersedes any other such promises,
warranties or representations. This Agreement may not be modified or amended
except in a writing signed by both you and a duly authorized officer of the
Company. This Agreement will bind the heirs, personal representatives,
successors and assigns of both you and the Company, and inure to the benefit of
both you and the Company, their heirs, successors and assigns. If any provision
of this Agreement is determined to be invalid or unenforceable, in whole or in
part, this determination will not affect any other provision of this Agreement
and the provision in question will be modified by the trier of fact so as to be
rendered enforceable insofar as possible consistent with the intent of the
parties. This Agreement will be construed and enforced in accordance with the
laws of the State of California as applied to contracts made and to be performed
entirely within California.
4
<PAGE> 5
If this Agreement is acceptable to you, please sign below and return the
signed original to me.
I wish you success in your future endeavors.
Sincerely,
IPASS INCORPORATED
By: /s/ MICHAEL MANSOURI
-------------------------------------
Michael Mansouri, President & CEO
UNDERSTOOD AND AGREED:
/s/ ROBERT C. SCHOETTLE
- -----------------------------------
ROBERT C. SCHOETTLE
DATE: 1/24/2000
Exhibit A - Proprietary Information and Inventions Agreement
Exhibit B - Employment Release
5
<PAGE> 6
EXHIBIT A
PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
<PAGE> 7
EXHIBIT B
EMPLOYMENT RELEASE
I hereby release, acquit and forever discharge the Company, its parents and
subsidiaries, and its officers, directors, agents, servants, employees,
attorneys, shareholders, successors, assigns and affiliates, of and from any and
all claims, liabilities, demands, causes of action, costs, expenses, attorneys
fees, damages, indemnities and obligations of every kind and nature, in law,
equity, or otherwise, known and unknown, suspected and unsuspected, disclosed
and undisclosed, arising out of or in any way related to agreements, events,
acts or conduct at any time prior to and including the execution date of this
Agreement, including but not limited to: all such claims and demands directly or
indirectly arising out of or in any way connected with my employment with the
Company or the termination of that employment; claims or demands related to
salary, bonuses, commissions, stock, stock options, or any other ownership
interests in the Company, vacation pay, fringe benefits, expense reimbursements,
severance pay, or any other form of compensation; claims pursuant to any
federal, state or local law, statute, or cause of action including, but not
limited to, the federal Civil Rights Act of 1964, as amended; the federal
Americans with Disabilities Act of 1990; the federal Age Discrimination in
Employment Act of 1967, as amended ("ADEA"); the California Fair Employment and
Housing Act, as amended; tort law; contract law; wrongful discharge;
discrimination; harassment; fraud; defamation; emotional distress; and breach of
the implied covenant of good faith and fair dealing.
I acknowledge that I am knowingly and voluntarily waiving and releasing any
rights I may have under the ADEA, as amended. I also acknowledge that the
consideration given for the waiver and release in the preceding paragraph hereof
is in addition to anything of value to which I was already entitled. I further
acknowledge that I have been advised by this writing, as required by the ADEA,
that: (a) my waiver and release do not apply to any rights or claims that may
arise after the execution date of this Agreement; (b) I have been advised hereby
that I have the right to consult with an attorney prior to executing this
Agreement; (c) I have twenty-one (21) days to consider this Agreement (although
I may choose to voluntarily execute this Agreement earlier); (d) I have seven
(7) days following the execution of this Agreement by the parties to revoke the
Agreement; and (e) this Agreement will not be effective until the date upon
which the revocation period has expired, which will be the eighth day after this
Agreement is executed by me, provided that the Company has also executed this
Agreement by that date ("Effective Date").
I UNDERSTAND THAT THIS AGREEMENT INCLUDES A RELEASE OF ALL KNOWN AND
UNKNOWN CLAIMS. In giving this release, which includes claims which may be
unknown to me at present, I acknowledge that I have read and understand Section
1542 of the California Civil Code which reads as follows: "A GENERAL RELEASE
DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST
IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST
HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR." I hereby expressly
waive and relinquish all rights and benefits under that section and any law of
any jurisdiction of similar effect with respect to my release of any unknown or
unsuspected claims I may have against the Company.
By: /s/ Robert C. Schoettle
-------------------------------------
Robert C. Schoettle
Date:
-----------------------------------
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.
Arthur Andersen LLP
San Jose, California
March 1, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEETS AND STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 15,178 5,166
<SECURITIES> 0 0
<RECEIVABLES> 5,530 1,422
<ALLOWANCES> 782 285
<INVENTORY> 0 0
<CURRENT-ASSETS> 20,804 6,337
<PP&E> 1,948 618
<DEPRECIATION> 538 226
<TOTAL-ASSETS> 24,257 6,949
<CURRENT-LIABILITIES> 9,455 2,663
<BONDS> 2,820 628
0 0
37,087 16,223
<COMMON> 21,023 140
<OTHER-SE> (46,128) (12,904)
<TOTAL-LIABILITY-AND-EQUITY> 24,257 6,949
<SALES> 14,319 3,895
<TOTAL-REVENUES> 14,319 3,895
<CGS> 8,697 2,680
<TOTAL-COSTS> 8,697 2,680
<OTHER-EXPENSES> 23,513 7,706
<LOSS-PROVISION> 587 114
<INTEREST-EXPENSE> (103) (259)
<INCOME-PRETAX> (18,374) (6,342)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (18,374) (6,342)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (18,374) (6,342)
<EPS-BASIC> (2.46) (1.12)
<EPS-DILUTED> (2.46) (1.12)
</TABLE>
